Japan Real Estate Investment Corporation

SEMIANNUAL REPORT
September 2018
For the period from April 1, 2018 to September 30, 2018

Profile
Japan Real Estate Investment Corporation (the “Company”) was established as one of the first real estate investment corporations inJapan following revisions to the Act on Investment Trusts and Investment Corporations of Japan, as amended, or the ITA. Its investments focus primarily on office buildings, and it is aiming to maintain g­ eographic diversity while seeking stable growth and dividends
in the medium to long term. The Company was listed on the Tokyo Stock Exchange on September 10, 2001 (Securities Code: 8952).
Note: Investment‌corporations, including the Company, are special legal entities incorporated and operated under the ITA. Accordingly, the “units” of such investment corporations, including the units of the Company, are governed by the ITA and represent the equity interests in such investment corporations, which may differ in certain material
respects from the “shares” governed by the Corporation Law of Japan and representing the equity interests in Japanese ordinary corporations incorporated and operated
under the Corporation Law 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 units of the Company. “Unitholders” of the Company may be construed accordingly. Each investor and reader should
consult their own legal, tax, and other advisors regarding all Japanese legal, tax, and other consequences of an investment in the units of the Company, with specific reference to their own legal, tax, and other situations, and any recent changes in applicable laws and guidelines or their interpretation.

The Strengths of Japan Real Estate
Stable Dividends
Actual dividend per unit
for the September 2018 period:

JPY 9,495
Forecast dividend per unit
for the March 2019 period:

JPY 9,550

1Japan Real Estate Investment Corporation

Collaboration
with Sponsors

1 2
Expertise of

Mitsubishi Estate Co., Ltd.
and Mitsui & Co., Ltd.
is being fully utilized

Contents
The Strengths of Japan Real Estate Investment Corporation

p. 1

Approach to ESG

p. 11

To Our Unitholdersp. 3

Asset Size, Property Acquisitions, and Performance Trends

p. 15

Financial Highlights

p. 7

The Portfolio of Japan Real Estate Investment Corporation

p. 17

Top 10 Unitholders

p. 7

Overview of Portfolio Properties

p. 22

Unit Price Performancep.7

Financial Section

p. 28

Portfolio Highlights

p. 8

Other Information

p. 55

Asset Management Summaryp. 9

Corporate Datap. 58

Investment Corporation
Steady Growthwith Quality
Portfolio
As of September 30, 2018

Total acquisition price:

3 4

JPY 1.014
71

Maintainsproperties

The first listed
J-REIT,Sound
Financial Baseshowing steady performancefor 34 consecutive periods

As of September 30, 2018

Highest level of credit ratings for a J-REIT:

A+
AA

from S&P,

trillion

A1

from Moody’s,

from R&I

Long-term interest-bearing debt ratio*1:

94.4%

LTV (Interest-bearing debt / Total assets)*2:

40.2%*1 ‌(Long-term loans [including current portion of Long-term loans] + Investment corporation bonds) / Total interest-bearing debt
*2 ‌Rough estimate after public offering (PO) 40.5%

Japan Real Estate Investment Corporation

2

To Our Unitholders

In the fiscal period ended September 30, 2018, in addition to realizing solid internal growth,

Japan Real Estate Investment Corporation (the “Company”) achieved significant external
growth with the public offering of units. As a result, the Company was able to increase dividends per unit for the ninth consecutive periods, offering a dividend of JPY 9,495, up JPY 159
compared with the previous period. The occupancy rate for our portfolio remained at 99.2%,
the highest number ever since the Company’s IPO. In the very strong office leasing market, werealized an extremely favorable performance owing to the strong demand for office space inBusiness Performance for the September 2018 Period 
Summary of Financial Results and Cash Dividends

proactive negotiations of rents in not only the Tokyo metropolitan

In the September 2018 period (April 1, 2018 to September 30, 2018),

areas but also the urban and rural areas.

Japan Real Estate Investment Corporation (the “Company”) recorded

In the investment market for real estate, favorable conditions for

operating revenues increased 3.5% compared with the previous period,

the financing environment continued, based on the continuous mone-to JPY 33.0 billion. On the earnings front, operating profit increased

tary easing policy. Transaction yields were still at a low level against the

7.2%, to JPY 14.5 billion. After deducting expenses for interest

backdrop of domestic and overseas investors’ desire to actively invest

payments on loans and other costs, ordinary profit increased 8.0%,

with the strict acquisition environment.

to JPY 13.3 billion, and profit increased 8.0%, to JPY 13.2 billion.
Turning to dividends, the Company will make cash distributions

Under such market conditions, the Company made sound investments under the Investment Guideline of providing stable dividends

using accounting profits based on the dividend policy outlined in

to unitholders, which was set forth at the time of the Company’s list-

Article 32-1(2) of the Company’s Articles of Incorporation, in an

ing on the TSE and remains unchanged to this date. Accordingly, theamount that exceeds 90% of earnings available for dividends as

Company was able to provide a dividend at JPY 9,495, which is anrequired by Article 67-15 of the Special Taxation Measures Act. Basedincrease by JPY 159 compared with the previous period.

on this policy, the Company made a reduction entry by applying

In the market for leased office space in the fiscal period under“Exceptions of the Taxation in case of the Replacement by Purchase ofreview, as a result of our efforts to maintain and improve occupancy

Specific Assets” under Article 65-7 of the Special Taxation Measures

rates through meticulous property leasing, the Company successfully

Act and reserving the retained earnings brought forward, the total

maintained and achieved the same level of occupancy rate of 99.2% asamount of dividends that the Company has determined to pay out isof September 30, 2018 and March 31, 2018 which achieved the record

JPY 13,152,568,950 for the period under review, which is a multiple ofbreaking in the previous period.

1,385,210–the number of units outstanding as of September 30, 2018.
Accordingly, the dividend per investment unit is JPY 9,495.

As for external growth, on April 17, 2018, the Company acquired
Shinjuku Front Tower (Shinjuku-ku, Tokyo) with 27.24798% ofshare of ownership of the building at JPY 25.0 billion. In addition, theOperating Environment and Performance

Company disposed the retail units of Lit City Building (Okayama-city,

During the September 2018 period, the Japanese economy continued

Okayama) with 3.15% of share of ownership of the building at JPY 650

to follow a moderate yet steady recovery, following the previous period,

million and thus, the Company’s current share of ownership of thewith the upward trend of corporate revenue and employment, capitalbuilding has become 24.60% from 27.75%.

investments, and income environment.
In the market for leased office space, high occupancy rates weremaintained due to the continuous demands of new tenants and expan-

ties, with a total acquisition price of JPY 1.014 trillion. Total ­leasable

sion for office space based on the improvement of corporate earnings.

floor area stood at 847,905m2 with 1,480 tenants in total.

Additionally, rent increases steadily accumulated as a result of the3

As a result of the above, the Company’s portfolio at the end of the
fiscal period under review, September 30, 2018, consisted of 71 proper-

Japan Real Estate Investment Corporationcentral Tokyo, which has been brought about by new working styles and the war for talent.
Capitalizing on these favorable market conditions, we expect to continue steady internal growththrough the proactive rent revisions.
We are focusing our efforts on ESG. In the 2018 GRESB Real Estate Assessment, we received
the highest rating of “5 Stars.” In addition, Japan Real Estate Asset Management Co., Ltd.
(the Company’s asset manager) became a signatory to the Principles for Responsible Investment(“PRI”) and the United Nations Environment Programme Finance Initiative (“UNEP FI”).

Notes: 1. Th e acquisition price includes the selling price (JPY 614 million) of the partof Jingumae Media Square Building disposed on October 30, 2009. The
total acquisition price in the subsequent sections follows the same convention.
2. S hinjuku South Gate Project (tentative name) (Land with leasehold interest),
whose building ownership was disposed on August 23, 2013, and Shibuya
Cross Tower (land with leasehold interest), whose building ownership was
disposed on January 18, 2018, are included in the above number of properties and total acquisition price, but are not included in total leasable floorarea or total number of tenants.

With the funds procured from the above public offerings of new
investment units, the Company acquired Shinjuku Front Tower, andmade a prepayment of short-term loans (JPY 13.0 billion). In addition,with the funds procured from the above third-party allocation, theCompany made a prepayment of short-term loans (JPY 3.0 billion).
As well, the Company made loans in order to fund redemptions of
the Japan Real Estate Investment Corporation Ninth Unsecured Bondof JPY 10 billion, and made repayments of short-term loans of JPY 3.5

Finance Activities

billion. As a result of the above financing activities, as of September 30,

According to its financial policy, the Company aims to operate the2018, the Company’s total interest-bearing debt was JPY 384.4 billion,

LTV ratio (ratio of interest-bearing debt to total assets) at 30% toa JPY 19.5 billion decrease from the end of the previous period. This

40%, and strives to maintain a sound and conservative financial profile

amount consists of long-term loans totaling JPY 340.0 billion (including

by staggering maturities, extension of durations and diversification of

the current portion of long-term loans totaling JPY 25.0 billion),stable lenders among other possibilities, taking into consideration the

short-term loans totaling JPY 21.5 billion, and investment corporation

borrowing costs and existing relationships with lenders.

bonds totaling JPY 22.9 billion. The current LTV ratio stands at 40.2%.

Concerning new loans related to property acquisition and the

In order to secure flexible and stable financing for the purposes ofrefinancing of existing loans, the Company carries out loans strategicallyacquiring specific properties and repayments of existing loans, theand flexibly after giving close consideration to the above-mentioned

amount for commitment line agreements was increased from JPY 50.0

means, as well as the possibility of repayment with funds procured

billion to JPY 60.0 billion effective on September 20, 2018.

from issuing new investment units.
During the September 2018 period, the Company decided on the

The Company’s credit ratings as of September 30, 2018 were as follows:

issuance of new investment units (69,000 issued by public offering,and 6,900 issued by third-party allocation) at the Board of Directors’
meetings held on March 28 and April 9, 2018. By issuing the newinvestment units, the Company procured the funds, JPY 35.6 billion
by public offering on April 16, 2018, and JPY 3.5 billion by third-party
allocation on May 9, 2018.

Rating Agency

Credit Rating

S&P Global Ratings Japan Inc.

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

Moody’s Japan K.K.

Rating: A1; Outlook: Stable

Rating and Investment
Information, Inc.

Rating: AA; Outlook: Stable

Japan Real Estate Investment Corporation

4

Outlook 
Operating Environment(iii) Stabilize revenues and earnings

The Japanese economy in the future is expected to follow a course of	With the aim of stabilizing revenues and earnings, the Company

moderate recovery as a result of further improving conditions for employ-will endeavor to promote fixed lease agreements and secure long-ment and income, as well as various financial policies in force. However,term leasing with its large-scale tenants.

as to the downward risks due to the uncertainty of the overseas economy and the influence of changes in the financial capital market, the(iv) Reduce management costs

Company considers that it is necessary to pay enough attention to them.

	The Company has introduced sound competitive principles to

In the market for leased office space, especially regarding thea number of property management companies so that they per­increase in office space supply in the Tokyo metropolitan areas, to pay

petually review and improve their management systems and costa close attention in the future including indirect effects on the sur-structures. Along with this, the Company endeavors to ensure androunding areas is required. However, the tenant leasing of the newenhance tenant satisfaction.

supply properties has progressed steadily, and business performance is
expected to be steady in the future. The Company expects that theProperty Acquisitions and Dispositions

occupancy rates will maintain a high level for the time being, and the

The Company has adopted the following policies for acquiring

gentle upward trend in rents will continue.

properties.

Regarding the investment market for real estate, fierce competition
in property acquisitions and transactions carried out at stronger valua-(i)	To access property information quickly, the Company continues

tion are anticipated to continue. Therefore, it is important to continue

to enhance its property information channels while working toto be proactive in searching for new properties while paying closedevelop new channels.

attention to market trends.
(ii)	In its acquisition activities, the Company continues to meticulously

Property Managementmonitor and examine economic, physical, and legal factors, includ-

Based on the conditions stated above, the Company will adhere to

ing rights-related issues, when selecting properties. In particular,

the following management policies in order to maintain and improvewith regard to the structure of buildings, the Company requires

profitability.

buildings to meet or exceed new earthquake-resistant standards,
verifies the need for renovations by capturing current conditions(i) Strengthen relationships of trust with existing tenants

accurately based on engineering reports, and exclusively targets

	The Company has contracts with numerous property management

properties capable of maintaining a competitive edge in terms ofcompanies. Each property management company has developed

the facilities they offer over the medium to long term.

relationships of trust with their tenants through their daily diligence in managing their respective properties over the years.

(iii) In accordance with its acquisition policies, the Company shall

The Company will work to further solidify these relationships

maintain its portfolio so that 70% or more of the portfolio prop-by anticipating tenants’ needs and providing tailored services toerties are located within the Tokyo metropolitan area, with thebolster tenant satisfaction, thereby maintaining and improving

remaining 30% or fewer located in other major cities.

occupancy rates and raising the rent levels.
Under these policies, the Company will continue to acquire highly(ii) Fill vacancies promptly

competitive properties. At the same time, in order to further improve	In cooperation with the property management companies men-the quality of its portfolio, the Company will remain open to thetioned above and their leasing brokers, the Company will actively

replacement of portfolio properties with due consideration at theseek the most appropriate tenants for each property, based onright time.

location and features, in order to fill current and anticipatedvacancies without delay. Furthermore, the Company will work to
identify additional needs for floor area among the existing tenants.

5

Japan Real Estate Investment Corporation

Hiroshi Nakajima (Left)
Executive Director of Japan Real Estate Investment Corporation

Naoki Umeda (Right)
President & CEO of Japan Real Estate Asset Management Co., Ltd.

Financial Policy

JPY 32.8 billion, operating profit totaling JPY 14.3 billion, ordinary

The Company has adopted the following financial policies.

profit totaling JPY 13.2 billion, and profit totaling JPY 13.2 billion.
The Company plans to declare a per-unit cash dividend of JPY 9,550.

(i)	In principle, the Company shall maintain an LTV ratio (including

The Company’s forecasts for the September 2019 period (April 1,

investment corporation bonds) below 65%. To ensure an even2019 to September 30, 2019) are as follows: operating revenues totaling

lower interest-bearing debt ratio, the Company adopts the conser-

JPY 33.1 billion, operating profit totaling JPY 14.4 billion, ordinary

vative target level of 30% to 40%.

profit totaling JPY 13.3 billion, and profit totaling JPY 13.3 billion.
The Company plans to declare a per-unit cash dividend of JPY 9,620.

(ii)	The Company shall set the ceiling for the combined total of loans
and investment corporation bonds at JPY 1 trillion.

Operating revenues, operating profit, ordinary profit, profit, andcash dividend per unit might vary depending on changes that could
occur in the market situation.

(iii)	When obtaining a loan, the Company shall only negotiate withqualified institutional investors (limited to those defined under
Article 67-15 of the Special Taxation Measures Act) before executing a loan agreement.
(iv)	With the purpose of maintaining liquidity at an appropriate level,
the Company may establish preliminary borrowing frameworks
such as overdraft agreements and commitment line agreements,

Hiroshi Nakajima
Executive Director of Japan Real Estate Investment Corporationor may conclude preliminary contracts for loans, as needed.
(v)	The Company aims for the best possible execution of financialtransactions by negotiating with numerous financial institutions.

Performance Forecasts for the March 2019 and September
2019 Fiscal Periods

Naoki Umeda
President & CEO of Japan Real Estate Asset Management Co., Ltd.

The Company’s forecasts for the March 2019 period (October 1, 2018
to March 31, 2019) are as follows: operating revenues totaling

Japan Real Estate Investment Corporation

6

Financial Highlights
In millions of JPY
For the period from
April 1, 2018 toSeptember 30, 2018

For the period from
October 1, 2017 toMarch 31, 2018

For the period from
April 1, 2017 to
September 30, 2017

For the period from
October 1, 2016 to
March 31, 2017

For the period from
April 1, 2016 to
September 30, 2016

Operating revenues

33,066

31,95531,71830,81830,773Operating profit

14,57813,596

13,17812,567

12,368

Ordinary profit

13,34812,362

11,921

11,197

10,958

Profit13,273

12,291

11,90911,186

10,947

Net operating income (NOI) (Note 1)

22,401

21,566

21,275

20,372

20,182

Funds from operations (FFO) (Note 2)

19,451

18,652

18,466

17,67917,447

21.3

19.3

19.2

21.8

22.8

Cash distribution

13,152

12,223

11,90911,186

10,947

Number of units

1,385,210

1,309,310

1,309,310

1,309,310

1,309,310

9,495

9,336

9,096

8,544

8,361

FFO multiple (Times) (Note 3)

Dividend per unit (JPY)

Notes: 1. NOI = Property-related revenues – Property-related expenses (excluding Depreciation)
2. FFO = Profit + Depreciation – Gain (Loss) on sales of real estate properties
3. FFO multiple = Unit price at end of the respective term / FFO per unit (Annualized)(Annualized portion of the calculation given in Note 2 and Note 3 assumes a fiscal period of 183 days for the period ended September 30, 2016, 182 days for the period
ended March 31, 2017, 183 days for the period ended September 30, 2017, 182 days for the period ended March 31, 2018, and 183 days for the period ended
September 30, 2018.)

Top 10 Unitholders As of September 30, 2018
Units

% of total units
outstanding

Japan Trustee Services Bank, Ltd. (Shintaku Acc.).......................................................................................................................................
The Master Trust Bank of Japan, Ltd. (Shintaku Acc.).................................................................................................................................

269,325

19.44%

208,346

15.04%The Nomura Trust and Banking Co., Ltd. (Shintaku Acc.)..........................................................................................................................
Trust & Custody Services Bank, Ltd. (Toshin Acc.).....................................................................................................................................

57,338

4.14%

53,686

3.88%

STATE STREET BANK WEST CLIENT-TREATY 505234.....................................................................................................................
JP MORGAN CHASE BANK 385628.......................................................................................................................................................

38,0772.75%

18,9301.37%

The Chugoku Bank Ltd. .............................................................................................................................................................................
Mitsubishi Estate Co., Ltd. ........................................................................................................................................................................

17,445

1.26%

17,1201.24%

JP MORGAN CHASE BANK 385771.......................................................................................................................................................
DFA INTERNATIONAL REAL ESTATE SECURITIES PORTFOLIO..................................................................................................

16,5661.20%

16,507

1.19%

Company

Unit Price Performance
350%

TSE REIT Index   

TOPIX   The Company

300%

250%

200%

150%

100%

50%
Sep.
2001

7

Sep.
2002

Sep.
2003

Sep.
2004

Japan Real Estate Investment Corporation

Sep.
2005

Sep.
2006

Sep.
2007

Sep.
2008

Sep.
2009

Sep.
2010

Sep.
2011

Sep.
2012

Sep.
2013

Sep.
2014

Sep.
2015

Sep.
2016

Sep.
2017

Sep.
2018

Portfolio Highlights
Trends in the state of portfolio management

Leasable office space (m2)

Number ofproperties

Number oftenants

Leasable officespace (m2)Occupancy
rate (%)

September 2001

20

213

133,927

94.6

March 2002

24

353

201,884

94.0

March 2003

30

383

236,693

94.4

March 2004

36

477

273,157

94.8

March 2005

46

669

336,026

97.6

March 2006

52

866

400,090

98.7

March 2007

50

887

397,928

97.8

March 2008

53

931

479,877

95.9

March 2009

55

993

516,411

95.5

March 2010

55

979

566,277

93.0

March 2011

57

1,004

588,984

93.2

March 2012

57

1,058

629,761

94.7

March 2013

60

1,131

700,759

96.7

March 2014

64

1,223

750,956

96.7

March 2015

68

1,350

793,976

97.8

March 2016

68

1,420

820,38198.3

March 2017

69

1,482

835,069

98.8

March 2018

70

1,449

833,335

99.2

April 2018

71

1,490

848,966

99.0

May 2018

71

1,487

848,966

99.2

June 2018

71

1,486

848,966

99.3

July 2018

71

1,482

848,966

99.3

August 2018

71

1,484

848,964

99.3

September 2018

71

1,480

847,905

99.2

Notes: 1. The number of tenants is the gross number of tenants by building.
2.	Shinjuku South Gate Project (tentative name) (Land with leasehold interest)
and Shibuya Cross Tower (Land with leasehold interest) are not included.

0

200,000

400,000

600,000

800,000

1,000,000

Sep. 2018
period

50.0

60.0

70.0

80.0

90.0

100.0
Occupancy rate (%)

Portfolio breakdown As of September 30, 2018
Properties by geographic region

Tenants by industry type

(Percentage based on acquisition price)(Percentage based on leased office space)

Nagoya city 3.0%

Other areas 7.3%

Electricity andheat supply services

1.4%

Osaka city and
Kyoto city 6.1%
Tokyo metropolitan area
(excluding
Tokyo 23 wards) 6.9%

Tokyo 23 wards

76.6%

70.1%

6.5%

11.0%

Finance10.5%

Medical 2.2%
Machinery 3.4%

Real estate

9.2%

Insurance 3.4%
Service industries

Construction 3.7%

9.1%

Electric devices

7.1%

Specialist services(Consulting, etc.) 4.2%
Communications

4.3%* Chiyoda-ku, Chuo-ku, Minato-ku, Shinjuku-ku, Shibuya-ku

Information services

Public services andassociations 2.1%

Tokyo 5 central wards*

Tokyo 23 wards(excluding Tokyo 5 central wards)

Others 9.8%
Ceramics 1.3%

Retail and restaurants 6.8%
Pharmaceuticals 5.4%
Media and advertisement 5.1%

Note:‌Shinjuku South Gate Project (tentative name) (Land with leasehold interest)
and Shibuya Cross Tower (Land with leasehold interest) are not included.

Japan Real Estate Investment Corporation

8

Asset Management Summary
For the period from April 1, 2018 to September 30, 2018

Acquired Property

Shinjuku Front Tower
Property and Transaction Summary●●

Location:	2-21-1, Kita-Shinjuku,
Shinjuku-ku, Tokyo
Site area:	9,628.17m2 (Total land area for the building site)●

Floor area of building: 92,092.30m2 (Total area for the building)●

Structure:	Steel-framed, Steel-framed reinforced concrete structure, flat roof

● Floors:		

Above ground: 35 floors
Below ground: 2 floors●

Completion:

August 2011●

Acquisition date:

April 17, 2018●

Acquisition price:

JPY 25,025 million

Type of ownership:	Land: Freehold (27.20234/100 co-ownership) (Note)
Building: Co-ownership of compartmentalized building units		- Office units: 52,713.71m2 out of 53,248.09m2, from the fourth floor to
the thirty-fourth floor excluding units owned by other co-owners: 27.5/100
		- Retail units: 4,298.89m2, from the first floor to the third floor: 27.5/100
		*Share of ownership of the building: 27.24798%●●

Seller:Mitsubishi Estate Co., Ltd.

Note: Share of registered right of site: 27.5/100 of co-ownership of 98,917,614,500/100,000,000,000.

SeibuShinjuku
Sta.

Tok
Nis
Maruyo Metro hi-Shin
nouch
juku
i Lin
Sta.
e
Tokyo Medical
University Hospital

Hilton Tokyo

ShinjukuNishiguchi Sta.

Line
Shinjuku
ei Oedo
Chuo Park To
Sta.
Tochomaem9Japan Real Estate Investment Corporation

Tokyo Metropolitan
Government Building

Seibu
Shinjuku Line

Shinjuku Front Tower

Shinjuku Sta.
Shinjuku Sta.

injukuToei ShLine

Disposed Property

Lit City Building(retail units)
Property and Transaction Summary●

Location:	15-1 Ekimoto-machi, Kita-ku, Okayama City, Okayama Prefecture●

Site area:	7,596.44m2 (total land area for the building site)●

Floor area of building:	52,653.19m2 (total floor space for the entire building)●

Structure:	Steel-framed, reinforced concrete structure, flat roof●

Floors:	Above ground: 20 floors
Below ground: 2 floors●

Completion:

June 2005●

Acquisition date:February 2006●

Acquisition price:	JPY 555 million (Acquisition price of the retail units)● Type of ownership:	
Land: Freehold (share of co-ownership: 27,911/1,000,000)		Building: Compartmentalized building units (retail units)		●

Buyer:* Share of ownership of the building: 3.15%

Domestic business corporation

Note: JRE continues to have ownership of the office part (the 3rd through the 7th floor) of the building.

Japan Real Estate Investment Corporation

10

Approach to ESG

Dedicated

Sustainability Policy
1  Contribution to creating a low-carbon societyTeam for ESG

2  Contribution to creating a recycling-oriented society
3  Contribution to creating a society in harmony with nature
4  Enhancement of safety and security(Environmental, Social, and Governance)

5  Initiatives aimed at officers and employees
6  Collaboration with external stakeholders

Japan Real Estate Asset Management Co., Ltd. (JRE-AM), which

7  Information disclosure and obtaining

manages the Company’s assets, believes that asset management

environmental certifications

focused on ESG is essential to the sustainable improvement ofasset value. In April 2018, JRE-AM has established ESG Officewith the intention of further strengthening its ESG initiatives.
Such initiatives include an enhancement of disclosure of the Please refer to our website for further information.

Company’s ESG related information, an acquisition of environmental certifications and evaluations from external organizations,

URLhttps://www.j-re.co.jp/en/esg/index.html

a participation in the international initiatives and etc.
The Company has added an ESG section on the Company’s
corporate website to disclose ESG-related information in atimely manner.

International
Initiatives

In August 2018, JRE-AM has become a signatory to the followinginternational initiatives.
● 

Principles for Responsible Investment (PRI)● 

United Nations Environment Programme Finance Initiative(UNEP FI)
Also, JRE-AM participates in the United Nations Global
Compact (UNGC) as part of Mitsubishi Estate Group sinceApril 2018.
To further contribute to the development of sustainability,
JRE-AM participates in discussions held by international initiatives
and evaluation organizations such as the PRI Japan Network Property
Working Group, the UNEP FI Property Working Group, and the
GRESB Benchmark Committee.

11

Japan Real Estate Investment Corporation

External Evaluation and Certifications“5 Star” Rating under the
GRESB Real Estate Assessment

Points highly EvaluatedI nformation disclosure regarding sustainability on
our website

The Global Real Estate Sustainability Benchmark (GRESB) is anannual benchmark evaluation that assesses the ESG performance ofthe real estate sector. In the GRESB Real Estate Assessment Survey

Continuous efforts for energy conservation

conducted in 2018, the Company received the “Green Star” designa-

 first J-REIT obtaining third-party assurance (byThe
Ernst & Young ShinNihon LLC) on energy consumption, greenhouse gas emissions and water usage datation. Additionally, the Company received five stars (the highest rating
possible) in the GRESB Rating based on a relative assessment of its
Increase
the number of properties with environmental
certifications, such as DBJ Green Building certifications

total score. The Company also received an “A” (the highest rating
possible) in the GRESB Public Disclosure, which evaluates the levelof ESG disclosure by corporations.

 nhancement of a cooperative relationship with tenantsE(e.g., promoting green lease programme and conducting
tenant satisfaction surveys)

Green Building - Certified Properties in the Portfolio

DBJ Green Building Certification

Going forward, the Company will continue to acquire environmental
certifications and evaluations, such as DBJ Green Building Certifications.

 Green buildingcertified properties

September 2018

57.6

%*2

Number ofproperties*1 :March 201724.8%*

BELS Certification

34

2

Number ofproperties*1 :6*1 I ncludes DBJ Green Building certification and BELS certification.
*2 B
 ased on acquisition price. Excludes duplication of DBJ Green
Building and BELS for the same property

Front Place Nihonbashi

Japan Real Estate Investment Corporation

12

JRE’s Proactive
Initiatives

Water-7.35%

Energy-6.74%(m3/m2)(MWh/m2)

Environmental Performance
To improve the environmental performance of our real estate
portfolio, we have established targets for reducing our energy
consumption and greenhouse gas emissions. Specifically, thesetargets call for a 5% reduction in unit energy consumption andCO2 emissions per unit across the Company’s entire portfolio overa five-year period. We are moving forward with various initiatives
to reach these targets.

CO2 emissions(Scope 1 & 2)

-4.35%

  Intensity
FY2017 vs. FY2013(MWh/m2)

Tenant Safety and Health
We have formulated identification criteria for earthquake damage
and introduced systems and tools for identifying such damage.
stranded commuters in the event of a disaster. In these ways, we are

Developing Employee Skills and Providing
Productive Workplace

actively promoting initiatives that contribute to the safety and health

JRE-AM implements various kinds of training and programs forof our tenants.

developing skills and careers in order to cultivate human resources

We have also established guidelines for actions to be taken to assist

As part of our efforts to strengthen our relationship with local

that have a high level of ethics and expertise as well as extensive

communities, we have established systems to host stranded commut-

know-how. In addition, JRE-AM strives to create an employee-

ers in the event of a disaster. These systems have been put in place atfriendly workplace from the perspective of securing outstanding

such properties as Akasaka Park Building. In addition, we have con-talent. Coinciding with its relocation to Otemachi Park Building included an agreement with Chiyoda Ward to establish a system for

December 2017, JRE-AM adopted a free address workspace, thereby

hosting stranded commuters at Otemachi Financial City North

promoting an atmosphere that facilitates strong internal communi-

Tower. Furthermore, we have designated a water well and regional

cation. Going forward, JRE-AM will leverage this system and otherwarehouse for disaster control. We also participate in disaster control

efforts to reform working styles and improve productivity.

drills. Through these efforts,
we are contributing to local
communities by offering locations to help people in theevent of disasters.

13

Japan Real Estate Investment Corporation

Green Bond

Main Criteria for Eligible Green Projects●

Acquisition●

Positive Impact
We will promote “Positive Impact” by ESG investments such as refurbishment works to conserve energy, improve tenant satisfaction andreceive better green building certifications.

More than 10% reduction in CO2 emissions orenergy consumption● More than 10% reduction in water consumption● More than one level of star/rank improvement in thegreen building certifications listed below● Conservation & recovery of biodiversity● Upgrade of public open space & disaster resilience

Refurbishments

3 , 4 or 5 Stars under the DBJ Green Building Certification
3, 4 or 5 Stars under BELS
● B+, A or S Rank under CASBEE●

Green Bond Framework
Our green bond framework was developed in accordance with theGreen Bond Principles 2018, as administered by the International

Reporting

Capital Market Association (ICMA). The green bond framework was

On our corporate website, we disclose the allocation information ofreviewed by Sustainalytics.

net proceeds from green bonds at the end of March each year. We also

For more details, please refer to Framework Overview and SecondParty Opinion issued by Susatainalytics.

annually disclose the progress and levels of certifications of Eligible
Green Projects that have been funded by green bonds, in addition to
the three energy-related indicators we use for these projects (energy

URL

https://www.sustainalytics.com/wp-content/uploads/2018/09/Japan-Real-EstateInvestment_Green-Bond-Framework-and-SPO_Final.pdf

Refurbishmentsof Shiba 2Chome
Daimon Building

consumption, water usage, and CO2 emissions).

This project was designed withMain contents of the refurbishments

reference to the idea of the UN(i) Replacement of building equipment

Environment Finance Initiative’s

to reduce environmental impacts

Principles for Positive Impact

Energy reduction of entire

Finance. Among the above criteria,building resulting from installing

the project meets “refurbishments

highly efficient air conditioning

with more than 10% reduction in
CO2 emissions or energy consumption” and “3 Stars under the
DBJ Green Building Certification”. Additionally, in regard to
DBJ Green Building Certification, this project received highpraise for not only the installation of highly efficient air
conditioning and LED lighting inside the building but also thepromotion of efforts that contribute to disaster prevention
and business continuity planning.

(ii) Improvement of work environ--17.4%*
2016

After

* Electricity and gas consumption

ments for tenant satisfaction(iii) Consideration for the healthand well-beings of tenants’
employees(iv) Value enhancement with ESG
conscious design

Japan Real Estate Investment Corporation

14

Asset Size, Property Acquisitions, and Performance Trends
Occupancy rate (%)

94.6 94.0 95.3 94.4 95.1 94.8 93.6 97.6 98.6 98.7 98.2 97.8 98.7 95.9 96.1 95.5 93.3

In September 2001, the Company became the first J-REIT in Japan listed on the Tokyo Stock
Exchange. Since then, the Company has targeted stable management to fulfill its goal of maintaining or increasing dividend per unit over the medium to long term. The Company’s growth is basedon external growth strategies that aim to increase earnings through the acquisition and transfer ofproperties, as well as internal growth strategies that seek to optimize earnings from properties alreadyheld. The size of the Company’s assets (total acquisition price) has grown from JPY 92.8 billion at IPO
to JPY 1.014 trillion as of the period ended September 30, 2018 due to the steady achievement of
external growth strategies. However, in terms of internal growth strategies, ongoing efforts are being
made in such areas as maintaining stable occupancy rates and reducing building management costs.

518

Total acquisition price (JPY billion)542

564 564(Number of properties)

First J-REIT listed on
TSE began with
JPY 92.8 billion in assets

144

164

290

183

192

218

412

418

441 446

326

239

92
(20)

(24)

(27)

(30)

(32)

(36)

(39)

(46)

(50)

(52)

(49)

(50)

(50)

(53)

(54)

(55)

(55)

Sep.
2001

Mar.
2002

Sep.
2002

Mar.
2003

Sep.
2003

Mar.
2004

Sep.
2004

Mar.
2005

Sep.
2005

Mar.
2006

Sep.
2006

Mar.
2007

Sep.
2007

Mar.
2008

Sep.
2008

Mar.
2009

Sep.
2009

7,491 6,426 7,227 7,558 7,301

7,355

7,912 7,975 8,086 8,651 8,760 9,250 14,611 9,536 9,510 9,599

At IPO

Dividend per unit* (JPY )Listing and issuance of units
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

Oct. 2006
Fourth Follow-On

Mar. 2008
Fifth Follow-On

Dec. 2009
Sixth Follow-On* The Company implemented a 2-for-1 split of each investment unit as of January 1, 2014. The figures for the March 2002 through September 2013 periods have taken the split into account.

15

Japan Real Estate Investment Corporation

93.0 92.4 93.2 94.6 94.7 95.5 96.7 96.3 96.7 97.8 97.8 97.7 98.3 98.7 98.8 99.1 99.2 99.2
As of Sep. 30, 2018:
71 properties; JPY 1,014 billion

718

740

782 794

837 838883

927 923 923

944 955

990

1,014

641 643 660 657

(55)

(55)

(57)

(56)

(57)

(58)

(60)

(62)

(64)

(64)

(68)

(70)

(68)

(68)

(69)

(69)

(70)

(71)

Mar.
2010

Sep.
2010

Mar.
2011

Sep.
2011

Mar.
2012

Sep.
2012

Mar.
2013

Sep.
2013

Mar.
2014

Sep.
2014

Mar.
2015

Sep.
2015

Mar.
2016

Sep.
2016

Mar.
2017

Sep.
2017

Mar.
2018

Sep.
2018

(End of fiscal period)

9,021

8,314

7,821 7,925 8,095 7,850 7,570 7,683 7,633 7,648 7,681
Feb. 2012
Seventh Follow-On

Oct. 2012
Eighth Follow-On

Apr. 2014
Ninth Follow-On

8,001

8,121

Apr. 2015
Tenth Follow-On

8,361 8,544 9,096 9,336 9,495
Apr. 2018
Eleventh
Follow-On

Japan Real Estate Investment Corporation

16

The Portfolio of Japan Real Estate Investment Corporation
As of September 30, 2018

Property roster
NumberName of building

Location

Type ofspecified asset

Acquisition date

Acquisition price(JPY million)

Tokyo 23 wards
I-1
I-2
● I-3
● I-4
● I-5
● I-6
● I-7
● I-8

Kitanomaru Square
MD Kanda Building
Kandabashi Park Building
Otemachi Financial City North Tower
Nibancho Garden
Mitsubishi UFJ Trust and Banking Building
Burex Kojimachi Building
Sanno Grand Building

Kudan-Kita, Chiyoda-ku
Kanda-Mitoshirocho, Chiyoda-ku
Kanda-Nishikicho, Chiyoda-ku
Otemachi, Chiyoda-ku
Nibancho, Chiyoda-ku
Marunouchi, Chiyoda-ku
Kojimachi, Chiyoda-ku
Nagatacho, Chiyoda-ku

Real property
Real property
Real property
Real property
Real property
Real property
Real property
Real property

I-9● I-10● I-11● I-12● I-13● I-14● I-15● I-16

Yurakucho Denki Building
Kodenmacho Shin-Nihonbashi Building
Front Place Nihonbashi
Kyodo Building (Kayabacho 2Chome)
Burex Kyobashi Building
Ginza 1Chome East Building
Ginza Sanwa Building
Ryoshin Ginza East Mirror Building

Yurakucho, Chiyoda-ku
Nihonbashi-Kodenmacho, Chuo-ku
Nihonbashi, Chuo-ku
Nihonbashi-Kayabacho, Chuo-ku
Kyobashi, Chuo-ku
Ginza, Chuo-ku
Ginza, Chuo-ku
Ginza, Chuo-ku

Real property
Trust
Real property
Trust
Real property
Trust
Real property
Real property

I-17● I-18● I-19● I-20● I-21● I-22Harumi Front
Harumi Center Building
Akasaka Park Building
Aoyama Crystal Building
Clover Shiba-koen
Shiodome Building

Harumi, Chuo-ku
Harumi, Chuo-ku
Akasaka, Minato-ku
Kita-Aoyama, Minato-ku
Shibakoen, Minato-ku
Kaigan, Minato-ku

Real property
Real property
Real property
Real property
Trust
Trust

I-23
● I-24● I-25● I-26

Shiba 2Chome Daimon Building
Cosmo Kanasugibashi Building
Tamachi Front Building
Shinjuku Eastside Square

Shiba, Minato-ku
Shiba, Minato-ku
Shiba, Minato-ku
Shinjuku, Shinjuku-ku

Trust
Trust
Real property
Trust

I-27
● I-28● I-29Shinjuku Front Tower
Shinwa Building
Tokyo Opera City Building

Kita-Shinjuku, Shinjuku-ku
Nishi-Shinjuku, Shinjuku-ku
Nishi-Shinjuku, Shinjuku-ku

Trust
Real property
Real property

I-30● I-31● I-32● I-33● I-34TIXTOWER UENO
Higashi-Gotanda 1Chome Building
Osaki Front Tower
Omori-Eki Higashiguchi Building
Shinjuku South Gate Project (tentative name)(Land with leasehold interest)

Higashi-Ueno, Taito-ku
Higashi-Gotanda, Shinagawa-ku
Osaki, Shinagawa-ku
Omori-Kita, Ota-ku
Sendagaya, Shibuya-ku

Real property
Real property
Real property
Trust
Real property

I-35● I-36● I-37● I-38

Yoyogi 1Chome Building
Jingumae Terrace
Jingumae Media Square Building
Shibuya Cross Tower (Land with leasehold interest)

Yoyogi, Shibuya-ku
Jingumae, Shibuya-ku
Jingumae, Shibuya-ku
Shibuya, Shibuya-ku

Real property
Real property
Real property
Real property

●
●

●

●

●

●

●

●

●

I-39

Ebisu Neonato

Ebisu, Shibuya-ku

Real property

●

I-40

Harmony Tower

Honcho, Nakano-ku

Real property

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

Higashi-Ikebukuro, Toshima-ku
Ikebukuro, Toshima-ku
Minami-Ikebukuro, Toshima-ku

Trust
Trust
Real property

I-41● I-42● I-43●

17

Japan Real Estate Investment Corporation

02/24/2006
05/31/2002
08/15/2002
03/31/2014
04/01/2005
03/28/2007
07/29/2005
01/31/2005
04/03/2006
Total
08/01/2003
09/25/2001
01/19/2018
03/01/2011
07/22/2002
03/02/2015
03/10/2005
03/15/2005
05/24/2010
Total
01/07/2013
12/18/2007
11/15/2011
03/14/2003
01/20/2015
12/19/2008
01/15/2010
05/01/2015
03/30/2017
09/01/2017
Total
09/10/2001
09/25/2001
03/30/2017
10/01/2014
01/25/2017
03/30/2018
Total
04/17/2018
09/01/2004
09/13/2005
03/24/2010
Total
06/15/2012
11/01/2004
02/01/2011
09/10/2001
03/24/2004
08/23/2013
Total
04/01/2004
11/22/2002
10/09/2003
11/30/2001
01/18/2018
Total
11/14/2003
04/01/2004
02/18/2014
Total
02/28/2005
12/19/2012
03/27/2015
Total
09/25/2001
09/25/2001
08/02/2004

81,555
9,520
4,810
15,462
14,70044,7007,000
10,20010,70020,9007,200
3,173
17,560
4,410
5,250
6,459
16,830
5,353
2,645
7,999
31,30026,80060,8007,680
4,500
21,25054,60010,10010,45010,530106,930
4,859
2,808
6,210
23,1006,660
25,46055,22025,0257,830
9,350
22,426
31,77622,0005,500
12,3005,123
6,670(1,170)
5,500
8,700
4,885
12,20034,600(8,076)
26,5243,740
360
10,512
14,612
8,500
520
2,100
11,120
3,541
1,728
4,500

(8.0%)(0.9%)(0.5%)(1.5%)(1.4%)(4.4%)(0.7%)(2.1%)(0.7%)(0.3%)(1.7%)(0.4%)(0.5%)(0.6%)(1.7%)(0.8%)(3.1%)(2.6%)(6.0%)(0.8%)(0.4%)(10.5%)(0.5%)(0.3%)(0.6%)(5.4%)(2.5%)(0.8%)(3.1%)(2.2%)(0.5%)(1.2%)(0.5%)(0.5%)(0.9%)(0.5%)(1.2%)(2.6%)(1.4%)(1.1%)(0.3%)(0.2%)(0.4%)

Percentage of ownershipof the building

Completion

Appraisal value atthe end of period (JPY million)

Leasable
office space

Leased office space

Occupancy rate

Number of tenants

100.0%
100.0%
56.76%
3.3852192%
31.345%19.38402%
100.0%
99.0%

2006
1998
1993
2012
2004
2003
2005
1966

85,2008,410
4,700
20,30019,00055,6007,520
33,20025,678m2
6,269m2
3,687m2
5,121m2
9,316m2
11,904m2
4,495m2
20,595m2

25,678m2
6,269m2
3,687m2
5,121m2
9,316m2
11,904m2
4,495m2
20,526m2

100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
99.7%

5
9
10
2
1
10
1
43

1,732
231
119
350
478
994
153
953

(5.3%)(0.7%)(0.4%)(1.1%)(1.5%)(3.0%)(0.5%)(2.9%)

10.78%
100.0%
100.0%
100.0%
100.0%
100.0%
70.95%
100.0%

1975
1991
2014
1991
2002
2008
1982
1998

8,670
2,940
18,600
5,030
7,740
7,780
18,7006,530

4,697m2
3,897m2
8,468m2
4,464m2
4,279m2
4,513m2
4,326m2
4,255m2

4,697m2
3,897m2
8,468m2
3,893m2
4,279m2
4,513m2
4,326m2
4,255m2

100.0%
100.0%
100.0%
87.2%
100.0%
100.0%
100.0%
100.0%

12
11
2
9
1
8
11
11

265
118
389
141
158
180
401
158

(0.8%)(0.4%)(1.2%)(0.4%)(0.5%)(0.6%)(1.2%)(0.5%)

100.0%
100.0%
100.0%
100.0%
100.0%
55.0%

2012
2006
1993
1982
2006
2007

40,50020,30076,0009,230
4,740
122,000

33,369m2
20,812m2
44,999m2
4,898m2
2,550m2
44,213m2

33,369m2
20,439m2
44,999m2
4,419m2
2,550m2
44,213m2

100.0%
98.2%
100.0%
90.2%
100.0%
100.0%

8
12
29
7
9
37

1,228
570
2,230
191
109
2,437

(3.7%)(1.7%)(6.8%)(0.6%)(0.3%)(7.4%)

100.0%
100.0%
100.0%
31.0%

1984
1992
2014
2012

7,080
3,340
6,720
60,5009,606m2
4,062m2
3,792m2
36,237m2

9,606m2
4,062m2
3,792m2
36,237m2

100.0%
100.0%
100.0%
100.0%

23
8
8
41

272
115
156
1,502

(0.8%)(0.4%)(0.5%)(4.6%)

27.24798%
100.0%
31.325%

2011
1989
1996

25,8008,080
36,10015,705m2
5,997m2
34,951m2

15,240m2
5,997m2
34,775m2

97.0%
100.0%
99.5%

43
13
99

585
217
1,584

(1.8%)(0.7%)(4.8%)

94.040229%
100.0%
100.0%
100.0%
—

2010
2004
2005
1989
—

25,7006,700
17,1005,990
5,500

15,016m2
5,205m2
16,856m2
7,706m2—

15,016m2
5,205m2
16,856m2
7,706m2—

100.0%
100.0%
100.0%
100.0%
—

17
5
1
26
—

654
189
710
234
85

(2.0%)(0.6%)(2.2%)(0.7%)(0.3%)

100.0%
100.0%
100.0%
—

2003
1987
1998
—

12,3007,300
10,60039,0007,745m2
3,147m2
5,558m2—

7,745m2
3,147m2
5,558m2—

100.0%
100.0%
100.0%
—

7
6
5
—

316
180
293
540

(1.0%)(0.5%)(0.9%)(1.6%)

44.718394%

1994

18,8008,659m2

8,659m2

100.0%

5486(1.5%)

38.382307%

1997

14,50014,340m2

14,340m2

100.0%

22480(1.5%)

100.0%
100.0%
100.0%

1987
1990
1989

4,590
1,830
5,500

7,224m2
2,186m2
5,932m2

7,224m2
2,186m2
5,932m2

100.0%
100.0%
100.0%

5
9
9

195
69
193

(0.6%)(0.2%)(0.6%)

Revenues fromleasing operations (JPY million)

Japan Real Estate Investment Corporation

18

NumberName of building

Location

Type ofspecified asset

Acquisition date

Acquisition price(JPY million)

Tokyo metropolitan area, excluding Tokyo 23 wards●

II-1

Hachioji First Square

Hachioji, Tokyo

Real property

●

II-2

Saitama Urawa Building

Saitama, Saitama Prefecture

Real property

MM Park Building
Queen’s Tower A
Kawasaki Isago Building
Musashi Kosugi STM Building

Yokohama, Kanagawa Prefecture
Yokohama, Kanagawa Prefecture
Kawasaki, Kanagawa Prefecture
Kawasaki, Kanagawa Prefecture

II-3● II-4● II-5● II-6●

Real property
Trust
Trust
Real property

03/31/2005
03/19/2008
Total
09/25/2001
10/11/2001
Total
03/24/2008
01/31/2014
09/25/2001
03/25/2008

3,300
2,379
5,679
1,232
1,342
2,574
37,40017,2003,375
4,000(0.6%)(0.3%)(3.7%)(1.7%)(0.3%)(0.4%)

Other major cities
●

III-1

8•3 Square Kita Building

Sapporo, Hokkaido

Real property

06/01/2007

7,100(0.7%)●

III-2

Jozenji Park Building

Sendai, Miyagi Prefecture

Real property

01/31/2005

1,000(0.1%)●

III-3

Higashi Nibancho Square

Sendai, Miyagi Prefecture

Real property

01/07/2013

9,950(1.0%)●

III-4

Sendai Honcho Honma Building

Sendai, Miyagi Prefecture

Trust

09/25/2001

2,924
250

Total

3,174

(0.3%)(1.8%)

●

III-5

AER

Sendai, Miyagi Prefecture

Real property

09/01/2015

18,640●

III-6

Kanazawa Park Building

Kanazawa, Ishikawa Prefecture

Real property

02/28/2002

2,880

03/03/2003

1,700

Total

4,580

(0.5%)●

III-7

Kanazawa Kamitsutsumicho Building

Kanazawa, Ishikawa Prefecture

Real property

10/03/2016

2,780(0.3%)●

III-8

Nishiki Park Building

Nagoya, Aichi Prefecture

Real property

10/02/2006

3,850

11/01/2006

1,300

06/09/2014

650

04/01/2016

175

Total

5,975

(0.6%)●

III-9

Nagoya Hirokoji Place

Nagoya, Aichi Prefecture

Trust

07/31/2013

8,567(0.8%)●

III-10

Nagoya Hirokoji Building

Nagoya, Aichi Prefecture

Real property

09/10/2001

14,533(1.4%)●

III-11

Nagoya Misono Building

Nagoya, Aichi Prefecture

Real property

08/08/2003

1,865(0.2%)●

III-12

Shijo Karasuma Center Building

Kyoto, Kyoto Prefecture

Real property

09/03/2013

4,400(0.4%)●

III-13

Umeda Square Building

Osaka, Osaka Prefecture

Trust

04/01/2015

15,523(1.5%)●

III-14Shin-Fujita Building

Osaka, Osaka Prefecture

Trust

09/01/2008

24,000(2.4%)●

III-15

Sakaisujihonmachi Building

Osaka, Osaka Prefecture

Real property

09/25/2001

2,264

12/26/2003

1,900

Total

4,164

09/25/2001

6,934

●

●
●

●

●
●
●

III-16

Midosuji Daiwa Building

Osaka, Osaka Prefecture

Trust

7,380

Total

14,314(1.4%)(0.9%)

III-17

Amagasaki, Hyogo Prefecture

Trust

03/25/2015

9,300

III-18

Lit City Building

Okayama, Okayama Prefecture

Real property

02/01/2006

4,650

III-19NHK Hiroshima Broadcasting Center Building

Hiroshima, Hiroshima Prefecture

Real property(0.4%)

02/28/2002
Amagasaki Front Building

09/28/2018

(555)

Total

4,094

03/25/2004

1,320

03/03/2008

1,450

Total

(0.4%)

2,770(0.3%)

III-20Tosei Tenjin Building

Fukuoka, Fukuoka Prefecture

Real property

09/25/2001

1,550(0.2%)

III-21

Tenjin Crystal Building

Fukuoka, Fukuoka Prefecture

Real property

06/01/2005

5,000(0.5%)

III-22

Hinode Tenjin Building

Fukuoka, Fukuoka Prefecture

Trust

09/10/2001

3,657(0.4%)

1,014,667(100.0%)

Total

19

06/28/2006

Japan Real Estate Investment Corporation

Percentage of ownershipof the building

Completion

Appraisal value atthe end of period (JPY million)

Leasable
office space

Leased office space

Occupancy rate

Number of tenants

80.4%

1996

5,050

10,068m2

10,068m2

100.0%

48

240(0.7%)

100.0%

1990

2,480

4,510m2

4,510m2

100.0%

18

113(0.3%)

100.0%
11.11481%
100.0%
34.32%

2007
1997
1990
1990

40,40022,5003,170
4,580

38,426m2
26,669m2
6,831m2
5,378m2

36,574m2
26,410m2
6,831m2
5,378m2

95.2%
99.0%
100.0%
100.0%

34
51
14
27

1,180
1,025
154
163

(3.6%)(3.1%)(0.5%)(0.5%)

100.0%

2006

9,160

12,265m2

12,265m2

100.0%

8330(1.0%)

50.0%

1993

1,030

2,518m2

2,518m2

100.0%

1764(0.2%)

100.0%

2008

14,00020,526m2

19,997m2

97.4%

21

558

(1.7%)

100.0%

1991

2,620

6,234m2

5,882m2

94.4%

26

128

(0.4%)

55.35443%

1998

20,00023,612m2

23,612m2

100.0%

65671(2.0%)

89.0%

1991

6,000

20,942m

2

20,828m2

99.5%

81

507

(1.5%)

100.0%

2009

3,110

7,206m2

7,206m2

100.0%

27

132(0.4%)

71.74301%

1995

5,300

10,338m

2

10,233m2

99.0%

62

288

(0.9%)

100.0%

2004

11,50013,200m2

13,200m2

100.0%

34376(1.1%)

100.0%

1987

13,00021,425m2

21,359m2

99.7%

38

563

(1.7%)

100.0%

1991

1,460

3,448m2

3,448m2

100.0%

16

72(0.2%)

100.0%

2010

5,630

6,634m2

6,634m2

100.0%

13

208(0.6%)

100.0%

1995

16,90010,370m2

9,581m2

92.4%

41

469

(1.4%)

100.0%

1995

19,70028,403m2

28,038m2

98.7%

49

709

(2.2%)

100.0%

1992

3,470

11,520m2

11,520m2

100.0%

23

233(0.7%)

100.0%

1991

14,90020,450m2

20,450m2

100.0%

42542(1.7%)

100.0%

2008

10,10015,500m2

15,500m2

100.0%

29442(1.3%)

24.60%

2005

4,160

8,906m2

8,906m2

100.0%

27

260(0.8%)

48.753%

1994

3,210

9,860m2

9,860m2

100.0%

12267(0.8%)

100.0%

1992

1,460

3,995m2

3,995m2

100.0%

24

84(0.3%)

100.0%

1993

3,050

5,964m2

5,964m2

100.0%

31

160(0.5%)

74.4844%

1987

4,480

5,944m2

5,944m2

100.0%

2

183(0.6%)

1,158,140

847,905m2

841,341m2

99.2%

1,480

32,795(100.0%)

Revenues fromleasing operations (JPY million)

Japan Real Estate Investment Corporation20

Major tenant roster
Name of tenant

Leased officespace (m2)Name of property% of total leased
office space

MUFG Bank, Ltd.

Harumi Front (also includes 3 other properties)

33,9124.0%

Not disclosed (Note)

Kitanomaru Square (also includes 3 other properties)

22,581

2.7%

Not disclosed (Note)

Osaki Front Tower (also includes 2 other properties)

21,672

2.6%

NTT Communications Corporation

Shiodome Building

16,243

1.9%

HAKUHODO DY HOLDINGS INCORPORATED

Akasaka Park Building (also includes 1 other property)

13,403

1.6%

SQUARE ENIX HOLDINGS CO., LTD.

Shinjuku Eastside Square

11,8791.4%

Mitsubishi UFJ Trust and Banking Corporation

Mitsubishi UFJ Trust and Banking Building

10,5981.3%

JGC Corporation

MM Park Building (also includes 1 other property)

10,246

1.2%

TOTO LTD.

Shiodome Building (also includes 1 other property)

9,694

1.2%

Minato Mirai 21 District Heating and Cooling Co., Ltd.

Queen’s Tower A

9,536

1.1%

Note: Not disclosed due to tenant’s request

Location of portfolio properties
II-1 to II-6:
Tokyo metropolitan area, excluding Tokyo 23 wards

III-1

II-2

II-1

III-1 to III-22:
Other major cities

III-6
III-7

II-6
II-5
II-3
II-4

III-2
III-3
III-4
III-5

III-12
III-17

III-20
III-21
III-22

III-19

III-18
III-13
III-14
III-15
III-16

III-8
III-9
III-10
III-11
I-42

I-41

I-43
I-30
I-40

I-1

I-27 I-26

I-29
I-35

I-28
I-34

I-36
I-37
I-38

I-4
I-7 I-6

I-5

I-20
I-39

I-2, I-3
I-10
I-11
I-12
I-14
I-13

I-8

I-9

I-19

I-15 I-16

I-21

I-22
I-23, I-24
I-25

Tokyo Station

I-17, I-18

I-31
I-32

I-33

I-1 to I-43:
Tokyo 23 wards

21

Japan Real Estate Investment Corporation

Overview of Portfolio Properties
As of September 30, 2018

Kitanomaru
Square●MD Kanda
Building

I-1●

Kandabashi Park
Building

I-2

●

I-3

Location:

Chiyoda-ku, Tokyo

Location:

Chiyoda-ku, Tokyo

Location:

Chiyoda-ku, Tokyo

Site area:

5,821.03m2

Site area:

1,085.83m2

Site area:

1,218.56m2

Floor area of building:

57,279.20m2

Floor area of building:

8,185.11m2

Floor area of building:

9,370.25m2

Structure:		Above ground: 26 floors
Below ground: 2 floors

Structure:

Above ground: 10 floors

Completion:

February 1998

Structure:		Above ground: 10 floors
Below ground: 1 floor

Completion:

January 2006

Completion:

July 1993

OtemachiFinancial City
North Tower●

Nibancho
Garden●Mitsubishi UFJ
Trust andBanking Building

I-5

I-4

●

I-6

Location:

Chiyoda-ku, Tokyo

Location:

Chiyoda-ku, Tokyo

Location:

Chiyoda-ku, Tokyo

Site area:

14,108.16m2

Site area:

10,992.13m2

Site area:

8,100.39m2

Floor area of building:239,769.07m2

Floor area of building:

57,031.06m2

Floor area of building:

108,171.67m2

Structure:		Above ground: 35 floors
Below ground: 4 floors

Structure:		Above ground: 14 floors
Below ground: 2 floors

Structure:		Above ground: 29 floors
Below ground: 4 floors

Completion:

October 2012

Completion:

April 2004

Completion:

February 2003

Burex Kojimachi
Building●

Sanno Grand
Building

I-7●

Yurakucho Denki
Building

I-8

●

I-9

Location:

Chiyoda-ku, Tokyo

Location:

Chiyoda-ku, Tokyo

Location:

Chiyoda-ku, Tokyo

Site area:

967.67m2

Site area:

3,663.93m2

Site area:

5,749.91m2

Floor area of building:

6,526.64m2

Floor area of building:

33,875.95m2

Floor area of building:

70,287.65m2

Structure:		Above ground: 11 floors
Below ground: 1 floor

Structure:		Above ground: 10 floors
Below ground: 3 floors

Structure:		Above ground: 20 floors
Below ground: 4 floors

Completion:

January 2005

Completion:

September 1966

Completion:

September 1975

Kodenmacho
Shin-Nihonbashi
Building●

Front Place
Nihonbashi●

Kyodo Building(Kayabacho
2Chome)

I-11

I-10

●

I-12

Location:

Chuo-ku, Tokyo

Location:

Chuo-ku, Tokyo

Location:

Chuo-ku, Tokyo

Site area:

773.28m2

Site area:

1,381.52m2

Site area:

754.26m2

Floor area of building:

5,822.88m2

Floor area of building:

11,672.55m2

Floor area of building:

5,505.80m2

Structure:		Above ground: 9 floors
Below ground: 1 floor

Structure:		Above ground: 10 floors
Below ground: 1 floor

Structure:		Above ground: 9 floors
Below ground: 1 floor

Completion:

November 1991

Completion:

February 2014

Completion:

April 1991

Japan Real Estate Investment Corporation

22

Burex Kyobashi
Building●

Ginza 1Chome
East Building

I-13

●

Ginza Sanwa
Building

I-14●

Location:

Chuo-ku, Tokyo

Location:

Chuo-ku, Tokyo

Location:

Chuo-ku, Tokyo

Site area:

756.03m2

Site area:

702.41m2

Site area:

1,119.27m2

Floor area of building:

5,470.54m2

Floor area of building:

4,976.85m2

Floor area of building:

8,851.00m2

Structure:		Above ground: 8 floors
Below ground: 1 floor

Structure:		Above ground: 9 floors
Below ground: 1 floor

Structure:		Above ground: 9 floors
Below ground: 2 floors

Completion:

February 2002

Completion:

May 2008

Completion:

October 1982

Ryoshin Ginza
East Mirror
Building●

Harumi Front●

Harumi Center
Building

I-17

●

I-18

I-16

Location:

Chuo-ku, Tokyo

Location:

Chuo-ku, Tokyo

Location:

Chuo-ku, Tokyo

Site area:

864.91m2

Site area:

7,250.15m2

Site area:

4,664.63m2

Floor area of building:

5,751.68m2

Floor area of building:

45,458.90m2

Floor area of building:

26,447.27m2

Structure:		Above ground: 8 floors
Below ground: 1 floor

Structure:		Above ground: 17 floors
Below ground: 1 floor

Structure:

Above ground: 10 floors

Completion:

October 1998

Completion:

November 2006

Completion:

February 2012

Akasaka Park
Building●

Aoyama Crystal
Building

I-19●

CloverShiba-koen

I-20

●

I-21

Location:

Minato-ku, Tokyo

Location:

Minato-ku, Tokyo

Location:

Minato-ku, Tokyo

Site area:

14,198.20m2

Site area:

989.30m2

Site area:

528.58m2

Floor area of building:

97,489.16m2

Floor area of building:

8,094.36m2

Floor area of building:

3,496.01m2

Structure:		Above ground: 30 floors
Below ground: 2 floors

Structure:		Above ground: 10 floors
Below ground: 4 floors

Structure:		Above ground: 9 floors
Below ground: 1 floor

Completion:

July 1993

Completion:

December 1982

Completion:

February 2006

Shiodome
Building●

Shiba 2Chome
Daimon Building

I-22

●

Cosmo
Kanasugibashi
Building

I-23

●

23

I-15

I-24

Location:

Minato-ku, Tokyo

Location:

Minato-ku, Tokyo

Location:

Minato-ku, Tokyo

Site area:

12,054.22m2

Site area:

2,820.90m2

Site area:

758.54m2

Floor area of building:

115,930.83m2

Floor area of building:

16,235.10m2

Floor area of building:

5,420.93m2

Structure:		Above ground: 24 floors
Below ground: 2 floors

Structure:		Above ground: 8 floors
Below ground: 2 floors

Structure:		Above ground: 9 floors
Below ground: 1 floor

Completion:

December 2007

Completion:

March 1984

Completion:

March 1992

Japan Real Estate Investment Corporation

Tamachi Front
Building●

Shinjuku Eastside
SquareI-25

Shinjuku Front
Tower

I-26

●

I-27

●

Location:

Minato-ku, Tokyo

Location:

Shinjuku-ku, Tokyo

Location:

Shinjuku-ku, Tokyo

Site area:

747.31m2

Site area:

25,320.28m2

Site area:

9,628.17m2

Floor area of building:

5,747.80m2

Floor area of building:

167,245.46m2

Floor area of building:

92,092.30m2

Structure:		Above ground: 9 floors
Below ground: 1 floor

Structure:		Above ground: 20 floors
Below ground: 2 floors

Structure:		Above ground: 35 floors
Below ground: 2 floors

Completion:

July 2014

Completion:

March 2012

Completion:

August 2011

Shinwa Building●

Tokyo Opera
City Building

I-28

●

TIXTOWER
UENO

I-29

I-30

●

Location:

Shinjuku-ku, Tokyo

Location:

Shinjuku-ku, Tokyo

Location:

Taito-ku, Tokyo

Site area:

822.00m2

Site area:

18,236.94m2

Site area:

2,412.80m2

Floor area of building:

8,291.69m2

Floor area of building:

232,996.81m2

Floor area of building:

23,727.48m2

Structure:		Above ground: 10 floors
Below ground: 1 floor

Structure:		Above ground: 54 floors
Below ground: 4 floors

Structure:		Above ground: 18 floors
Below ground: 1 floor

Completion:

November 1989

Completion:

July 1996

Completion:

July 2010

Higashi-Gotanda
1Chome Building●

Osaki Front
Tower

I-31

●

Omori-Eki
Higashiguchi
Building

I-32

●

I-33

Location:

Shinagawa-ku, Tokyo

Location:

Shinagawa-ku, Tokyo

Location:

Ota-ku, Tokyo

Site area:

1,539.95m2

Site area:

3,684.38m2

Site area:

2,199.30m2

Floor area of building:

6,460.39m2

Floor area of building:

23,673.92m2

Floor area of building:

14,095.34m2

Structure:

Above ground: 8 floors

Structure:

Above ground: 15 floors

Completion:

July 2004

Completion:

June 2005

Structure:		Above ground: 11 floors
Below ground: 2 floors

Completion:

July 1989

Shinjuku South Gate Project(tentative name)(Land with leasehold interest)●

Yoyogi 1Chome
Building●

Jingumae
Terrace

I-35

●

I-36

I-34

Location:

Shibuya-ku, Tokyo

Location:

Shibuya-ku, Tokyo

Location:

Shibuya-ku, Tokyo

Site area:

1,497.52m2

Site area:

1,755.75m2

Site area:

839.66m2

Floor area of building:—Floor area of building:

10,778.10m2

Floor area of building:

4,359.20m2

Structure:—

Completion:—

Structure:		Above ground: 14 floors
Below ground: 1 floor

Structure:		Above ground: 7 floors
Below ground: 2 floors

Completion:

October 2003

Completion:

December 1987

Japan Real Estate Investment Corporation24

Jingumae Media
Square Building●

I-37

Shibuya Cross Tower(Land with leasehold interest)
●

●

I-39

I-38

Location:

Shibuya-ku, Tokyo

Location:

Shibuya-ku, Tokyo

Location:

Shibuya-ku, Tokyo

Site area:

2,124.59m2

Site area:

5,153.45m2

Site area:

5,005.70m2

Floor area of building:

9,420.42m2

Floor area of building:—Floor area of building:

36,598.38m2

Structure:		Above ground: 9 floors
Below ground: 2 floors

Structure:—

Completion:—

Structure:		Above ground: 18 floors
Below ground: 2 floors

Completion:

March 1998

Completion:

October 1994

Harmony Tower●

Otsuka HigashiIkebukuro
Building

I-40●

Ikebukuro
2Chome Building
●

I-42

I-41

Location:

Nakano-ku, Tokyo

Location:

Toshima-ku, Tokyo

Location:

Toshima-ku, Tokyo

Site area:

10,020.52m2

Site area:

2,121.39m2

Site area:

397.26m2

Floor area of building:

72,729.31m2

Floor area of building:

9,531.28m2

Floor area of building:

3,157.51m2

Structure:		Above ground: 29 floors
Below ground: 2 floors

Structure:		Above ground: 8 floors
Below ground: 1 floor

Structure:		Above ground: 9 floors
Below ground: 1 floor

Completion:

March 1997

Completion:

November 1987

Completion:

May 1990

Ikebukuro YS
Building●

Hachioji First
Square

I-43●

Saitama Urawa
Building

II-1

●

II-2

Location:

Toshima-ku, Tokyo

Location:

Hachioji, Tokyo

Location:

Saitama, Saitama Prefecture

Site area:

1,384.56m2

Site area:

2,989.33m2

Site area:

1,533.06m2

Floor area of building:

7,464.64m2

Floor area of building:

18,329.98m2

Floor area of building:

6,258.59m2

Structure:		Above ground: 8 floors
Below ground: 1 floor

Structure:		Above ground: 12 floors
Below ground: 1 floor

Structure:

Above ground: 8 floors

Completion:

March 1990

Completion:

December 1989

Completion:

July 1996

MM Park
Building●

25

Ebisu Neonato

Queen’s Tower A●

Kawasaki Isago
Building

II-4

II-3

●

II-5

Location:

Yokohama, Kanagawa Prefecture

Location:

Yokohama, Kanagawa Prefecture

Location:

Kawasaki, Kanagawa Prefecture

Site area:

6,825.77m2

Site area:

44,406.40m2

Site area:

1,594.50m2

Floor area of building:

49,037.51m2

Floor area of building:

498,282.77m2

Floor area of building:

9,623.83m2

Structure:		Above ground: 15 floors
Below ground: 1 floor

Structure:		Above ground: 37 floors
Below ground: 5 floors

Structure:		Above ground: 12 floors
Below ground: 1 floor

Completion:

December 2007

Completion:

June 1997

Completion:

December 1990

Japan Real Estate Investment Corporation

Musashi Kosugi
STM Building●

8∙3 Square Kita
Building

II-6●

Jozenji Park
Building

III-1

●

III-2

Location:

Kawasaki, Kanagawa Prefecture

Location:

Sapporo, Hokkaido

Location:

Sendai, Miyagi Prefecture

Site area:

3,552.15m2

Site area:

5,541.60m2

Site area:

1,566.68m2

Floor area of building:

22,839.61m2

Floor area of building:

16,096.97m2

Floor area of building:

7,648.33m2

Structure:		Above ground: 8 floors
Below ground: 2 floors

Structure:		Above ground: 11 floors
Below ground: 1 floor

Structure:		Above ground: 8 floors
Below ground: 1 floor

Completion:

October 1990

Completion:

December 2006

Completion:

January 1993

HigashiNibancho Square●

Sendai Honcho
Honma Building

III-3

●

AER
●

III-5

III-4

Location:

Sendai, Miyagi Prefecture

Location:

Sendai, Miyagi Prefecture

Location:

Sendai, Miyagi Prefecture

Site area:

3,191.27m2

Site area:

1,437.47m2

Site area:

6,591.05m2

Floor area of building:

27,680.45m2

Floor area of building:

8,247.50m2

Floor area of building:

73,186.57m2

Structure:		Above ground: 14 floors
Below ground: 1 floor

Structure:

Above ground: 11 floors

Completion:

November 1991

Structure:		Above ground: 31 floors
Below ground: 3 floors

Completion:

July 2008

Completion:

March 1998

Kanazawa Park
Building●

Kanazawa
Kamitsutsumicho
Building

III-6●

Nishiki Park
Building
●

III-8

III-7

Location:

Kanazawa, Ishikawa Prefecture

Location:

Kanazawa, Ishikawa Prefecture

Location:

Nagoya, Aichi Prefecture

Site area:

6,642.71m2

Site area:

1,561.80m2

Site area:

2,170.45m2

Floor area of building:

43,481.20m2

Floor area of building:

9,619.96m2

Floor area of building:

25,091.91m2

Structure:		Above ground: 12 floors
Below ground: 2 floors

Structure:

Above ground: 11 floors

Completion:

August 2009

Structure:		Above ground: 22 floors
Below ground: 4 floors

Completion:

October 1991

Completion:

August 1995

Nagoya Hirokoji
Place●

Nagoya Misono
Building

Nagoya Hirokoji
Building

III-9●

III-10●

III-11

Location:

Nagoya, Aichi Prefecture

Location:

Nagoya, Aichi Prefecture

Location:

Nagoya, Aichi Prefecture

Site area:

2,401.43m2

Site area:

4,095.81m2

Site area:

805.04m2

Floor area of building:

15,947.29m2

Floor area of building:

33,377.73m2

Floor area of building:

5,348.00m2

Structure:

Above ground: 10 floors

Completion:

December 2004

Structure:		Above ground: 18 floors
Below ground: 2 floors

Structure:		Above ground: 7 floors
Below ground: 1 floor

Completion:

May 1987

Completion:

September 1991

Japan Real Estate Investment Corporation

26

Shijo Karasuma
Center Building●

Umeda Square
Building

III-12●

III-13●

III-14

Location:

Kyoto, Kyoto Prefecture

Location:

Osaka, Osaka Prefecture

Location:

Osaka, Osaka Prefecture

Site area:

1,371.16m2

Site area:

1,652.88m2

Site area:

6,159.61m2

Floor area of building:

9,185.98m2

Floor area of building:

18,673.28m2

Floor area of building:

45,411.31m2

Structure:		Above ground: 8 floors
Below ground: 1 floor

Structure:		Above ground: 17 floors
Below ground: 3 floors

Structure:		Above ground: 21 floors
Below ground: 2 floors

Completion:

January 2010

Completion:

July 1995

Completion:

April 1995

Sakaisujihonmachi
Building●

Midosuji Daiwa
Building

III-15●

Amagasaki Front
Building

III-16●

III-17

Location:

Osaka, Osaka Prefecture

Location:

Osaka, Osaka Prefecture

Location:

Amagasaki, Hyogo Prefecture

Site area:

2,036.22m2

Site area:

3,044.65m2

Site area:

3,975.20m2

Floor area of building:

17,145.59m2

Floor area of building:

31,213.27m2

Floor area of building:

24,055.58m2

Structure:		Above ground: 13 floors
Below ground: 2 floors

Structure:		Above ground: 15 floors
Below ground: 2 floors

Structure:

Above ground: 10 floors

Completion:

October 2008

Completion:

October 1992

Completion:

September 1991

Lit City Building●

NHK Hiroshima
Broadcasting
Center Building

III-18●

Tosei Tenjin
Building●

III-20

III-19Location:

Okayama, Okayama Prefecture

Location:

Hiroshima, Hiroshima Prefecture

Location:

Fukuoka, Fukuoka Prefecture

Site area:

7,596.44m2

Site area:

3,296.46m2

Site area:

1,221.31m2

Floor area of building:

52,653.19m2

Floor area of building:

35,217.28m2

Floor area of building:

5,588.57m2

Structure:		Above ground: 20 floors
Below ground: 2 floors

Structure:		Above ground: 23 floors
Below ground: 2 floors

Structure:

Above ground: 8 floors

Completion:

March 1992

Completion:

June 2005

Completion:

August 1994

Tenjin Crystal
Building●

27

Shin-Fujita
Building

Hinode Tenjin
Building

III-21●

III-22

Location:

Fukuoka, Fukuoka Prefecture

Location:

Fukuoka, Fukuoka Prefecture

Site area:

1,835.17m2

Site area:

1,452.15m2

Floor area of building:

10,432.04m2

Floor area of building:

12,527.07m2

Structure:		Above ground: 14 floors
Below ground: 1 floor

Structure:

Above ground: 10 floors
Below ground: 2 floors

Completion:

August 1993

Completion:

August 1987

Japan Real Estate Investment Corporation

Note:	Concerning real estate or trust beneficiaryrights of real estate of which the Company isa partial owner through co-ownership, orcompartmentalized building units, or quasico-ownership, the fi­ gures for “Site area” and“Floor area of building” represent total sitearea and total floor area for the entire building.

Financial Section
Selected Financial Data ........................................................................................................................ p.28
Balance Sheets ................................................................................................................................................ p.29
Statements of Income and Retained Earnings ........................................................... p.31
Statements of Changes in Unitholders’ Equity ......................................................... p.32
Statements of Cash Distributions ............................................................................................ p.33
Statements of Cash Flows ................................................................................................................. p.34
Notes to Financial Statements ...................................................................................................... p.35
Independent Auditor’s Report ..................................................................................................... p.54

Selected Financial Data
Millions of yen

Operating revenues
Operating expenses
Operating profit
Ordinary profit
Profit before income taxes
ProfitTotal assets
Interest-bearing debt
Net assets
Unitholders’ capital
Number of units
Net assets per unit (Yen)
Cash distribution
Dividend payout ratio (Note 1)
Dividend per unit (Yen)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 (Times)
Debt service coverage ratio (Times) (Note 6)

For the period
from April 1, 2018 toSeptember 30, 2018

For the period
from October 1, 2017
to March 31, 2018

For the period
from April 1, 2017
to September 30, 2017

For the period
from October 1, 2016
to March 31, 2017

For the period
from April 1, 2016
to September 30, 2016

33,06618,487
14,57813,34813,34813,273
956,645
384,493510,978
497,241
1,385,210
368,881
13,152
99.1%
9,495
22,401
19,451
1.4%(2.8% annualized)
2.6%(5.2% annualized)
53.4%

31,955
18,35813,596
12,362
12,362
12,291
935,560
403,993
470,703
458,016
1,309,310
359,505
12,22399.5%
9,336
21,566
18,652
1.3%(2.7% annualized)
2.6%(5.2% annualized)
50.3%

31,71818,53913,178
11,921
11,921
11,909906,507375,500
470,321458,016
1,309,310
359,213
11,909100.0%
9,096
21,275
18,466
1.3%(2.6% annualized)
2.5%(5.1% annualized)
51.9%

30,81818,251
12,567
11,197
11,197
11,186898,306
369,000
469,598
458,016
1,309,310
358,661
11,186100.0%
8,544
20,372
17,6791.3%(2.5% annualized)
2.4%(4.8% annualized)
52.3%

30,773
18,405
12,368
10,958
10,958
10,947
883,633
356,350
469,359
458,016
1,309,310
358,478
10,94799.9%
8,361
20,182
17,4471.2%(2.5% annualized)
2.3%(4.7% annualized)
53.1%

40.2%
21.3
18.5

43.2%
19.3
16.9

41.4%
19.2
16.1

41.1%
21.8
14.3

40.3%
22.8
13.5

Notes:1. Dividend payout ratio = Dividend per unit / Profit per unit × 100
		 For the period ended September 30, 2018, as new investment units were issued, the ratio was calculated as follows:		 Cash distribution / Profit × 100
2. ROA = Ordinary profit / Average of Total assets during the period × 100
3. ROE = Profit / Average of Net assets during the period × 100		(Annualized portion of the calculation given in Note 2 and Note 3 assumes a fiscal period of 183 days for the period ended September 30, 2016, 182 days for theperiod ended March 31, 2017, 183 days for the period ended September 30, 2017, 182 days for the period ended March 31, 2018 and 183 days for the period ended
September 30, 2018.)
4. EOP equity ratio = (Net assets at the end of period / Total assets at the end of period) × 100
5. EOP interest-bearing debt ratio on total assets = (Interest-bearing debt at the end of period / Total assets at the end of period) × 100
6. Debt service coverage ratio = Profit before Interest, Taxes, Depreciation and Amortization / Interest expenses
7.	The Company has applied “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28 on February 16, 2018) from the period
ended September 30, 2018, and the reclassified amount due to the change was reflected to the total assets for the period ended March 31, 2018.

Japan Real Estate Investment Corporation

28

Balance Sheets
As of March 31, 2018 and September 30, 2018

Thousands of yen

ASSETS
Current assets   Cash and deposits   Cash and deposits in trust   Operating accounts receivable  Prepaid expenses  Other   Total current assets
Non-current assets   Property, plant and equipment   Buildings    Accumulated depreciation    Buildings, net   Structures    Accumulated depreciation    Structures, net   Machinery and equipment    Accumulated depreciation    Machinery and equipment, net    Tools, furniture and fixtures    Accumulated depreciation     Tools, furniture and fixtures, net   Land   Construction in progress   Buildings in trust    Accumulated depreciation    Buildings in trust, net   Structures in trust    Accumulated depreciation    Structures in trust, net    Machinery and equipment in trust    Accumulated depreciation     Machinery and equipment in trust, net    Tools, furniture and fixtures in trust    Accumulated depreciation     Tools, furniture and fixtures in trust, net   Land in trust    Construction in progress in trust    Total property, plant and equipment  Intangible assets   Leasehold rights    Leasehold rights in trust   Easement   Other    Total intangible assets   Investments and other assets   Investment securities    Lease and guarantee deposits   Long-term prepaid expenses   Other    Total investments and other assets   Total non-current assets
Deferred assets   Investment corporation bond issuance costs   Total deferred assets
Total Assets

29Japan Real Estate Investment Corporation

As of March 31, 2018

As of September 30, 2018

17,804,047
5,837,847
341,439
352,401
89,86524,425,601

17,835,899
6,731,684
369,098
336,00732,31025,304,999

250,111,909(86,253,809)
163,858,100
2,974,180(828,367)
2,145,812
3,227,707(2,148,127)
1,079,579
440,338(288,173)
152,164
449,950,825
7,958
95,656,870(24,227,651)
71,429,218
956,849(246,755)
710,094
1,030,081(737,361)
292,720
69,175(30,373)
38,801
210,930,979
1,583
900,597,839

250,703,183(90,392,605)
160,310,577
2,972,255(877,184)
2,095,070
3,241,271(2,245,875)
995,395
446,611(301,603)
145,008
449,920,389
3,317
101,992,788(26,099,836)
75,892,951
998,400(272,067)
726,333
1,050,506(763,039)
287,466
69,201(34,525)
34,676
230,532,021
1,583
920,944,791

5,706,705
444,160
828,095
11,372
6,990,333

5,690,875
444,160
828,095
9,655
6,972,786

577,168
1,573,847
350,381997,164
3,498,562
911,086,735

577,168
1,573,847
224,778
1,005,707
3,381,501
931,299,080

48,64948,649935,560,986

41,71041,710956,645,790

Thousands of yen

As of March 31, 2018

As of September 30, 2018

LIABILITIESCurrent liabilities   Operating accounts payable

2,657,292

2,169,097   Short-term loans payable

32,000,000

21,500,000   Current portion of investment corporation bonds

10,000,000—   Current portion of long-term loans payable

27,500,000

25,000,000  Accounts payable – other

1,871,072

1,648,904  Accrued expenses

480,090

440,744   Income taxes payable

11,4789,159   Accrued consumption taxes

708,577

139,791

3,248,413

3,200,129

9,261

78,36478,486,186

54,186,192   Investment corporation bonds

22,993,175

22,993,175   Long-term loans payable311,500,000

315,000,000   Deposits received from tenants

51,308,538

52,853,494   Deferred tax liabilities

226,452

290,234   Asset retirement obligations

338,635

342,047

4,453

2,226

386,371,255

391,481,177

464,857,441

445,667,369

458,016,096

497,241,216

363,261

413,528—

16,307  Advances received  Other   Total current liabilities
Non-current liabilities  Other   Total non-current liabilities
Total Liabilities
NET ASSETS
Unitholders’ equity  Unitholders’ capital  Surplus    Voluntary retained earnings    Reserve for reduction entry     Reserve for special account for reduction entry     Total voluntary retained earnings

363,261

429,835   Unappropriated retained earnings

12,324,186

13,307,368   Total surplus

12,687,448

13,737,204   Total unitholders’ equity

470,703,544

510,978,420

470,703,544

510,978,420

935,560,986

956,645,790

Total Net Assets
Total Liabilities and Net Assets

Japan Real Estate Investment Corporation

30

Statements of Income and Retained Earnings
For the six months ended March 31, 2018 and September 30, 2018

Thousands of yen

For the period
from October 1, 2017
to March 31, 2018

For the period
from April 1, 2018
to September 30, 2018

31,505,394

32,676,423

Other lease business revenues

311,111

119,158

Gain on sales of real estate properties

138,723

270,871

31,955,230

33,066,453

Expenses related to rent business

16,749,989

16,843,215

Asset management fee

1,238,158

1,294,322

Operating revenues
Rent revenues

Total operating revenues
Operating expenses

Asset custody fee

60,72861,769Administrative service fees

128,617

131,335

7,800

7,800

Commission fee

103,505

82,685

Other operating expenses

69,784

66,365

Directors’ compensations

Total operating expenses
Operating profit

18,358,583

18,487,493

13,596,647

14,578,960

Non-operating income
Interest income

187

194

Dividend income

—

9,832

2,745

3,002

13

—

2,945

13,029

1,013,270

957,594

176,960

172,816

7,576

6,938

—

61,685

Reversal of distribution payable
Other
Total non-operating income
Non-operating expenses
Interest expenses
Interest expenses on investment corporation bonds
Amortization of investment corporation bond issuance costs
Investment unit issuance expenses
Other
Total non-operating expenses

44,471

1,236,771

1,243,505

Ordinary profit

12,362,821

13,348,484

Profit before income taxes

12,362,821

13,348,484

Income taxes – current

11,496

11,228

Income taxes – deferred

60,26563,781

Total income taxes

71,76275,00912,291,059

13,273,474

Retained earnings brought forward

33,12733,894

Unappropriated retained earnings

12,324,186

13,307,368

Profit31

38,964

Japan Real Estate Investment Corporation

Statements of Changes in Unitholders’ Equity
For the six months ended March 31, 2018 and September 30, 2018

For the period from October 1, 2017 to March 31, 2018
Thousands of yen

Unitholders’ equity
Surplus
Unitholders’capitalVoluntary retained earnings

Unappropriatedretainedearnings

Total
net assets

Total surplus

Totalunitholders’equityReservefor reduction
entry

Total voluntary
retainedearnings

363,330

363,330

11,942,542

12,305,873

470,321,969

470,321,969

(69)

(69)

69

—

—

—

Dividends of surplus(11,909,483) (11,909,483)(11,909,483)(11,909,483)

Profit12,291,059

12,291,059

12,291,059

Balance at beginning of the period

458,016,096

Changes of items during the period
Reversal of reserve for reduction entry

—

(69)

(69)

381,644381,575

381,575

381,575

458,016,096

363,261

363,261

12,324,186

12,687,448

470,703,544

470,703,544

Total changes of items during the period
Balance at end of the period

12,291,059

For the period from April 1, 2018 to September 30, 2018
Thousands of yen

Unitholders’ equity
Surplus
Unitholders’capitalBalance at beginning of the period

458,016,096

Voluntary retained earnings
Reservefor reduction
entry

363,261

UnappropriatedReserve for
Total voluntary
retained
special accountretainedearnings
for reduction
earnings
entry—363,261

12,324,186

Total surplus

Totalunitholders’equityTotal
net assets

12,687,448 470,703,544 470,703,544

Changes of items during the period
Issuance of new investment units

39,225,120 Provision of reserve for
reduction entry
Reversal of reserve for reduction entry

39,225,120

39,225,120

50,33550,335(50,335)

—

—

—

(69)

(69)

69

—

—

—

16,307(16,307)——— Provision of reserve for
special account for reduction entry

16,307

Dividends of surplus(12,223,718) (12,223,718) (12,223,718) (12,223,718)

Profit13,273,474

13,273,474

13,273,474

13,273,474

Total changes of items during the period

39,225,120

50,266

16,307

66,574

983,1811,049,756

40,274,876

40,274,876

Balance at end of the period

497,241,216

413,528

16,307429,835

13,307,368

13,737,204 510,978,420 510,978,420

Japan Real Estate Investment Corporation

32

Statements of Cash Distributions
For the six months ended March 31, 2018 and September 30, 2018	 
	 I Retained earnings

For the period
from October 1, 2017 to March 31, 2018

For the period
from April 1, 2018 to September 30, 2018

Amount (Yen)Amount (Yen)

12,324,186,848

13,307,368,817

II Reversal of voluntary retained earnings
Reversal of reserve for special account for reduction entry
Reversal of reserve for reduction entry
III Cash distribution(Dividend per investment unit)—

16,307,490

69,182

1,657,580

12,223,718,160

13,152,568,950(9,336)(9,495)

IV Voluntary retained earnings
Reserve for special account for reduction entry

16,307,490—

Reserve for reduction entry

50,335,883

138,488,759

33,894,497

34,276,178

The Company will make cash distributions using accounting profits based on
the cash distribution policy outlined in
Article 32-1(2) of the Company’s Articles
of Incorporation, in an amount thatexceeds 90% of the “amount of distributable profit” as set forth in Article 67-15 of
the Special Taxation Measures Act. Basedon this policy, the Company has decided
that the total amount of dividends, under
the applications of Article 65-7 “Exceptions of the Taxation in case of theReplacement by Purchase of Specific
Assets” of the Special Taxation Measures
Act, and of Article 47 “Inclusion in
Deductible Expenses of DepreciatedAmount of Fixed Assets, etc. Acquiredwith Insurance Money etc.” of Corporation Taxation Act, making reduction
entries, and also which is set not to exceed
the unappropriated retained earnings andto secure retained earnings brought
forward, is ¥12,223,718,160 for theperiod under review, which is a multipleof 1,309,310 — the number of units
outstanding as of March 31, 2018.
Furthermore, the Company does not pay
out dividends that exceed accounting
profits as outlined in Article 32-1(3) ofthe Company’s Articles of Incorporation.

The Company will make cash distributions using accounting profits based on
the cash distribution policy outlined in
Article 32-1(2) of the Company’s Articles
of Incorporation, in an amount thatexceeds 90% of the “amount of distributable profit” as set forth in Article 67-15
of the Special Taxation Measures Act.
Based on this policy, the Company has
decided that the total amount of dividends, under the application of Article65-7 “Exceptions of the Taxation in caseof the Replacement by Purchase ofSpecific Assets” of the Special Taxation
Measures Act, making reduction entries,
and also which is set not to exceed theunappropriated retained earnings and tosecure retained earnings brought
forward, is ¥13,152,568,950 for theperiod under review, which is a multipleof 1,385,210 — the number of units
outstanding as of September 30, 2018.
Furthermore, the Company does not pay
out dividends that exceed accounting
profits as outlined in Article 32-1(3) ofthe Company’s Articles of Incorporation.

V Retained earnings brought forward

Computation Method for Determining Dividends

33Japan Real Estate Investment Corporation

Statements of Cash Flows
For the six months ended March 31, 2018 and September 30, 2018

Thousands of yen

For the period
from October 1, 2017
to March 31, 2018

For the period
from April 1, 2018
to September 30, 2018

Profit before income taxes

12,362,821

13,348,484

Depreciation

6,501,329

6,450,870

7,576

6,938

Investment unit issuance expenses—

61,685

Dividend income—(9,832)

Interest income

(187)

(194)

Interest expenses

1,190,230

1,130,410(60,998)(27,659)

Cash flows from operating activities

Amortization of investment corporation bond issuance costs

Decrease (increase) in operating accounts receivable

(352)

(544)

17,465

16,394

Decrease due to sale of property, plant and equipment

9,761,574

370,182
578,559

Decrease (increase) in supplies
Decrease (increase) in prepaid expenses
Increase (decrease) in operating accounts payable(658,275)

Increase (decrease) in accounts payable – other536,322

16,811

Increase (decrease) in accrued consumption taxes(155,427)(568,786)

Increase (decrease) in accrued expenses

136

(197)

Increase (decrease) in advances received(146,057)(48,283)

Decrease (increase) in long-term prepaid expenses

160,525

125,602

Other, net(192,334)(133,760)

Subtotal

29,324,349

21,316,679

Interest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities

114

10,228(1,195,545)(1,169,558)(8,911)(13,547)

28,120,007

20,143,802

Cash flows from investing activities
Purchase of property, plant and equipment(18,627,767)(1,738,652)

Purchase of property, plant and equipment in trust(26,517,865)(26,500,164)

(719)

—

Purchase of intangible assets
Payments for lease and guarantee deposits
Repayments of tenant leasehold and security deposits—(42,000)(3,807,534)(863,090)

Proceeds from tenant leasehold and security deposits

3,571,563

2,485,440

Net cash provided by (used in) investing activities(45,382,322)(26,658,466)

Cash flows from financing activities
Proceeds from short-term loans payable

32,000,000

18,500,000

Repayments of short-term loans payable(34,500,000)(29,000,000)

Proceeds from long-term loans payable

46,000,000

19,000,000

Repayments of long-term loans payable(18,000,000)(18,000,000)

Proceeds from issuance of investment corporation bonds
Redemption of investment corporation bonds
Payments of investment corporation bond issuance costs
Proceeds from issuance of investment units

2,993,175——(10,000,000)(36,141)——

39,225,120—(61,685)

Dividends paid

(11,908,419)(12,223,082)

Net cash provided by (used in) financing activities

16,548,613

7,440,352

Net increase (decrease) in cash and cash equivalents(713,701)925,688

Cash and cash equivalents at beginning of the period

24,355,596

23,641,894

Cash and cash equivalents at end of the period

23,641,894

24,567,583

Payments for investment unit issuance expenses

Japan Real Estate Investment Corporation

34

Notes to Financial Statements
March 31, 2018 and September 30, 2018

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 90% by Mitsubishi Estate Co., Ltd. (“MEC”) and 10% by Mitsui & Co., Ltd.
On May 11, 2001, the Company was incorporated with ¥200 million of original capital contribution by MEC, Tokio Marine &Nichido Fire Insurance Co., Ltd. and The Dai-ichi Life Insurance Company, Limited under the ITA.
On September 10, 2001, the Company commenced operations when the Company was listed on the Tokyo Stock Exchange as oneof the first real estate investment corporations in Japan (“J-REITs”). The Company issued 160,000 units at a price of ¥506,625 per unit,
generating gross proceeds of ¥81,060 million.
The Company completed the 12th public offering of 69,000 units at a price of ¥516,800 per unit on April 16, 2018 and third-party
allocation of 6,900 units at a price of ¥516,800 per unit on May 9, 2018, generating gross proceeds of ¥35,659 million and ¥3,565 million,
respectively. As of September 30, 2018, the Company had unitholders’ capital of ¥497,241 million with 1,385,210 units outstanding.
As of September 30, 2018, the Company owned a portfolio of 71 office properties with an aggregate of approximately 847,905 m2
of leasable space.
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 ITA, the Japanese Financial Instruments and Exchange Law
and related regulations, which are different in certain respects as to the application and disclosure 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
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.
As permitted under the Japanese Financial Instruments and Exchange Law, amounts of less than one million yen have been omitted.
As a result, the totals shown in the accompanying financial statements do not necessarily agree with the sum of the individual amounts.

2. Summary of Significant Accounting Policies
Investment securities

Non-marketable securities classified as other securities are carried at cost. Cost of securities sold is determined by the moving average method.
Property and equipment, depreciation and impairment (except for leased assets)

Property and equipment is stated at cost, less accumulated depreciation. The cost of land, buildings and building improvements includes
the purchase price of property and acquisition costs. Depreciation is calculated on a straight-line basis over the estimated useful lives of theassets ranging as stated below:
Buildings ................................................................................................................................... 2 – 61 years
Structures ................................................................................................................................. 2 – 60 years
Machinery and equipment ................................................................................ 2 – 18 years
Tools, furniture and fixtures ............................................................................. 2 – 29 years
Expenditures for repairing expenses are charged to income as incurred. Significant renewals and betterments are capitalized.
The Company reviews fixed assets for impairment whenever events or changes in circumstances indicate that the carrying amount of
its fixed assets may not be recoverable. According to the standard set by the Accounting Standards Board of Japan, companies are required

35

Japan Real Estate Investment Corporation

to recognize an impairment loss in their statement of income if certain indicators of asset impairment exist and the book value of an asset
exceeds the undiscounted sum of future cash flows of the asset. The standard states that impairment losses should be measured as the excessof the book value over the higher of (i) the fair market value of the asset, net of disposition costs, and (ii) the present value of future cash
flows arising from ongoing utilization of the asset and from disposal after asset use. The standard covers land, factories, buildings and otherforms of property, plant and equipment as well as intangible assets. Fixed assets are grouped at the lowest level for which there is identifiable
cash flows that are independent of cash flows of other groups of assets.
Intangible assets

Intangible assets primarily consist of leasehold rights and easement, which are stated at cost. Amortization of a term leasehold interest forbusiness use is calculated by the straight-line method based on the period of agreement.
Leased assets

Leased assets under finance lease transactions that do not transfer ownership of the leased assets to the lessees are capitalized and depreciated by the straight-line method over the lease term with no residual value.
Deferred charges

Investment corporation bond issuance costs are amortized using the straight-line method over the redemption periods.
Investment unit issuance expenses are charged to income as incurred. The underwriters’ economic remunerations for underwriting theoffering are not recognized as investment unit issuance expenses in the financial statements since such costs are not paid by the Company
as commission under the so-called “spread-method”.
Under the spread-method, the difference between the offer price (the price paid by the unitholder) and the issue price (the price received
by the Company) is retained by the underwriters as remuneration.
Revenue recognition

Revenues from leasing of office space are recognized as rent accrues 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 toincome during the period. The sellers of the properties are liable for property taxes for the calendar year including the period from the dateof purchase by the Company through the end of the year since the taxes are imposed on the owner registered on the record as of January
1 based on the assessment made by the local government. The Company pays the amount equivalent to the property taxes to the sellers
applicable to the period since acquisition and includes the amount equivalent to the taxes in the purchase price of each property and­capitalizes it as a 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 incurrent assets and the excess of amounts withheld over payments are included in current liabilities.
Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, deposits with banks 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.
Hedge accounting

The Company enters into derivative transactions to hedge against interest-rate risk and other forms of risk based on the risk management
policies outlined in the Company’s Articles of Incorporation. The Company uses interest-rate swap transactions for hedging fluctuations ininterest rates on floating-rate loans. The Company has also executed currency swap transactions as a method of hedging against currency
exchange fluctuation risks. Deferred hedge accounting is generally used for such interest-rate swaps and currency swap transactions, and theeffectiveness of hedging is measured by comparing the total cash flow fluctuation of the hedged item and that of the hedging instrument
since the inception of the hedge.
Japan Real Estate Investment Corporation

36

For interest-rate swaps and currency swaps that qualify for hedge accounting and meet certain criteria provided under Japanese GAAP,
however, the Company applies special accounting treatment. Under such special accounting treatment, the differentials paid or received
under the swap agreements are recognized and included in interest expense of the hedged loans, and the interest-rate swaps and currency
swaps are not required to be separately valued. For interest-rate swaps and currency swaps that meet the specific criteria for such special
accounting treatment, ongoing assessments of hedge effectiveness are not required and hence not performed.

3. Changes in the Presentation(Change due to the application of “Partial Amendments to Accounting Standard for Tax Effect Accounting”)
The Company has applied “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28 on February
16, 2018) from the period ended September 30, 2018, and the deferred tax assets are classified in the investments and other assets, thedeferred tax liabilities are classified as non-current liabilities.
As a result, on the balance sheet as of March 31, 2018, “Deferred tax assets” of ¥952 thousand, which was previously presented as“Current assets”, was included and reclassified as part of “Deferred tax liabilities” of ¥226,452 thousand in “Non-current liabilities”.

4. New Accounting Standards Issued but not Yet Effective
New accounting standard and implementation guidance to be adopted in the future are as follows:• Accounting Standards Board of Japan (“ASBJ”) Statement No.29, Accounting Standard for Revenue Recognition, issued at March 30, 2018
• ASBJ Guidance No.30, Implementation Guidance on Accounting Standard for Revenue Recognition, issued at March 30, 2018
(1) Overview
		The International Accounting Standard Board (“IASB”) and the Financial Accounting Standards Board (“FASB”) have jointly developed
the new and comprehensive accounting standard for revenue recognition, and have published “Revenue from Contracts with Customers”(IFRS 15 by IASB and Topic 606 by FASB) in May 2014. As IFRS 15 shall be adopted in the IFRS-based financial s­ tatements for periods
beginning on or after January 1, 2018, and in the U.S. GAAP-based financial statements for periods beginning after December 15,
2017, ASBJ has developed and published the comprehensive accounting standard and implementation guidance for revenue
recognition accordingly.
		  As the basic policy of ASBJ for the development of new accounting standard for revenue recognition, from the point of view of thecomparability between the financial statements based on IFRS or U.S. GAAP and Japanese GAAP as a benefit for the consistency withIFRS 15, the accounting standard in Japan has been established while adopting the basic principle of IFRS 15, and in the case that
there is an item that the actual practice conducted in Japan is considered, the alternate treatment are added within the scope not to failthe comparability.
(2) Date of the adoption		The Company will adopt the accounting standard and implementation guidance for the period ending September 30, 2021.
(3) Impact of the adoption of the respective accounting standard		The Company is currently evaluating the effect of the adoption of this accounting standard and implementation guidance on its­financial statements.

37

Japan Real Estate Investment Corporation

5. Commitment Line Agreement
As of March 31, 2018 and September 30, 2018
The Company has signed commitment line agreements with three banks.
Total amount of commitment line agreement
Debt financing balance
BalanceThousands of yen

As of March 31, 2018

As of September 30, 2018

50,000,000

60,000,000——

50,000,000

60,000,000

6. Financial Instruments
1. Status of financial instruments(1) Policies for dealing financial instruments
		Concerning the financing of property acquisitions, the Company shall use several funding sources including bank loans, the issuance ofinvestment corporation bonds and the issuance of investment units. When executing such financing activities, the Company endeavors
to retain the ability to secure stable and low-cost financing by maintaining high credit ratings and thereby limiting the financial covenants that may restrict the financial flexibility of the Company. To achieve these goals, the Company intends to further develop andreinforce the confidence of debt holders and rating agencies in the Company by bolstering the capital base and controlling the loan-tovalue ratio (“LTV”) at an adequate level.
		  In order to hedge against future interest-rate fluctuations, the Company may enter into derivative transactions, which shall be
executed solely for the purpose of hedging against interest-rate fluctuation and other risks, and not for speculative purposes.
		  With respect to management of excess funds, as a matter of policy the Company uses time deposits as its main vehicle, while securities
and monetary claims are also eligible for such investment.
(2) Characteristics and risk profile of each financial instrument and risk management system		The Company regularly re-evaluates the appropriateness and effectiveness of its risk management system in order to improve on it.
		The characteristics and risk profile of financial instruments and the system in place to manage such risks are as follows:		The deposits, which are typically large time deposits used to manage excess funds, are exposed to the credit risk of the deposit-taking
financial institutions. The Company manages credit risk by restricting the tenor of the deposit to relatively short periods and setting
a minimum credit rating requirement for the deposit-taking financial institutions.
		  The funding proceeds from borrowings and issues of investment corporation bonds are applied mainly to acquire real estate properties
and repay outstanding loans and bonds. While floating-rate short-term and long-term loans are exposed to the risk of interest-rate hikes,
such risk is mitigated by the Company’s low LTV and relatively high percentage of long-term fixed-rate debts within the total borrowing.
The Company may also exercise hedging by means of derivative transactions (interest-rate swap transactions) in order to mitigate the riskof fluctuation concerning the floating-rate long-term loans, thereby effectively stabilizing the overall interest rates on the loans. Foreign
currency-denominated loans are also exposed to currency exchange and interest-rate fluctuation risk. However, the Company uses derivative transactions as a method of hedging against these risks (interest-rate and currency swap transactions). Foreign currency investment
corporation bonds are also exposed to currency exchange risk. However, the Company uses derivative transactions as a method of hedging
against the risks (currency swap transactions). For more detailed information on the hedge accounting method, please refer to the previous
Section 2. “Summary of Significant Accounting Policies: Hedge accounting”.
		  Loans and investment corporation bonds involve liquidity risk at the time of maturity. To manage such liquidity risk, the Company
implements measures such as (i) maintaining and strengthening its ability to access equity markets to secure funds, (ii) maintaining
commitment lines with major financial institutions (There is no amount outstanding under the facility as of March 31, 2018 and September 30, 2018) and (iii) preparing monthly financial plans.

Japan Real Estate Investment Corporation38

(3) Supplementary note regarding fair value of financial instruments		The fair values of financial instruments presented in this report are based on their market value, and in cases where market values
are not available, reasonably calculated values are presented. Since calculation of fair value is based on certain assumptions, the fairvalue could differ depending on the assumptions used. In addition, the contract value of derivative transactions, which is presented
in Section 7. “Derivative Transactions”, is not an exact representation of market risk attributable to derivative transactions.
2. Fair value of financial instruments

Fair value of financial instruments, their values carried on the balance sheets and the differences between them as of March 31, 2018 and
September 30, 2018 are as follows.
The financial instruments whose fair values are extremely difficult to estimate are excluded from the following schedule (Note 2):
Thousands of yen

As of March 31, 2018
Book value*

Fair value*

Difference*(1) Cash and deposits

17,804,047

17,804,047—(2) Cash and deposits in trust

5,837,847

5,837,847—(3) Short-term loans(32,000,000)(32,000,000)—(4) Current portion of investment corporation bonds(10,000,000)(10,015,100)(15,100)(5) Current portion of long-term loans(27,500,000)(27,572,338)(72,338)(6) Investment corporation bonds(22,993,175)(24,453,774)(1,460,599)(7) Long-term loans(311,500,000)(315,017,496)(3,517,496)

—

—

—

(8) Derivative transactions* Liabilities are shown in parentheses.
Thousands of yen

As of September 30, 2018
Book value*(1) Cash and deposits(2) Cash and deposits in trust

17,835,899

Fair value*

Difference*

17,835,899——

6,731,684

6,731,684(21,500,000)(21,500,000)

—

—

—

—

(5) Current portion of long-term loans(25,000,000)(25,072,838)(72,838)(6) Investment corporation bonds(22,993,175)(24,282,380)(1,289,205)(7) Long-term loans(315,000,000)(317,364,017)(2,364,017)

—

—

—

(3) Short-term loans(4) Current portion of investment corporation bonds(8) Derivative transactions* Liabilities are shown in parentheses.
Notes:1. Measurement of fair value of financial instruments and matters concerning derivative transactions
		 (1)	Cash and deposits and (2) Cash and deposits in trust
Due to short tenor, the book values of these assets are reasonable approximations of the present value of these assets and hence used as their fair value.
		(3)	Short-term loans
Since these loans’ tenor is short and rates are reset at a short interval, the book values of these liabilities are reasonable approximations of their present value andhence used as their fair values.
		 (4)	Current portion of investment corporation bonds and (6) Investment corporation bonds
Their fair values are based on reference prices published by a financial data provider where available. When reference prices are not available, their fair values arecalculated by discounting the aggregate of the principal and interest by nominal rates assumed applicable if the loans were refinanced for the duration of the current maturity. (However, the fair values of investment corporation bonds (please refer to Section 7. “Derivative Transactions, (2) Derivatives designated as hedging
instruments”) hedged by a currency swap subject to allocation treatment are calculated by discounting the aggregate of the principal and interest integrated withthe currency swap by nominal rates assumed applicable if the loans were refinanced for the duration of the current maturity.)		 (5)	Current portion of long-term loans and (7) Long-term loans
For loans with floating interest rates, since the interest rates on such loans reflect market rates reasonably well over the short term and their book values are good
approximations of their fair values, the book values are presented as their fair values. (However, the fair values of floating-rate long-term loans (please refer to Section 7. “Derivative Transactions, (2) Derivatives designated as hedging instruments”) hedged by an interest-rate and currency swap subject to integrated treatment
or by an interest-rate swap subject to special accounting treatment are calculated by discounting the aggregated principal and interest on such loans using reasonable estimates of the rates that would be applicable if the Company were to refinance the existing loans for the remaining period to maturity under the prevailingmarket condition.) The fair values of long-term loans with fixed interest rates are calculated by discounting the aggregated amounts of the principal and the interestof the loans by the rates that are reasonably estimated to be applicable if the Company were to refinance the existing loans for the remaining period to maturity.
		 (8) Derivative transactions
			 Please refer to Section 7. “Derivative Transactions”.

39

Japan Real Estate Investment Corporation

2. Financial instruments whose fair values cannot be reliably measured
Thousands of yen(1) Non-listed stock *1(2) Deposits received from tenants *2

As of March 31, 2018

As of September 30, 2018577,168
51,308,538

577,168
52,853,494*1. With regard to non-listed stock, which does not have a quoted market price in an active market and whose cash flows are not reasonably estimated, fair value cannot
be reliably measured and it is therefore presented at book value.
*2. With regard to deposits received from tenants, which do not have a quoted market price in an active market and reasonably estimated tenor, their cash flows cannot
be reliably measured and they are therefore presented at their book value.
3. Redemption schedule for monetary claims after the closing dateThousands of yen

As of March 31, 2018

Cash and deposits
Cash and deposits in trust
Total

1 year or less
17,804,047
5,837,847
23,641,894

1 to 2 years———

2 to 3 years———

3 to 4 years———

4 to 5 years———

Over 5 years———

Thousands of yen

As of September 30, 2018

Cash and deposits
Cash and deposits in trust
Total

1 year or less

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

Over 5 years

17,835,899
6,731,684
24,567,583

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

4 to 5 years——
48,500,000
48,500,000

Over 5 years—
22,993,175
121,300,000
144,293,175

4. Repayment schedule for investment corporation bonds, long-term loans and other interest-bearing debt after the closing dateThousands of yen

As of March 31, 2018

Short-term loans
Investment corporation bonds
Long-term loans
Total

1 year or less
32,000,000
10,000,000
27,500,000
69,500,000

1 to 2 years——
49,000,000
49,000,000

2 to 3 years——
41,000,000
41,000,000

3 to 4 years——
51,700,000
51,700,000

Thousands of yen

As of September 30, 2018

Short-term loans
Investment corporation bonds
Long-term loans
Total

1 year or less

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

Over 5 years

21,500,000—
25,000,000
46,500,000——
46,500,000
46,500,000——
52,200,000
52,200,000——
51,000,000
51,000,000——
42,500,000
42,500,000—
22,993,175
122,800,000
145,793,175

Japan Real Estate Investment Corporation40

7. Derivative Transactions(1) Derivatives not designated as hedging instruments
		 As of March 31, 2018		  “Not applicable”
		As of September 30, 2018		  “Not applicable”(2) Derivatives designated as hedging instruments
		 As of March 31, 2018			The contract amount or the equivalent principal amount set out in the contract as of the closing date for each derivative designated asa hedging instrument is as follows.
Thousands of yen

Contract value

Fair value

Measurementof fair value

63,300,000*1—

10,000,000

10,000,000*1—2,993,175

2,993,175*2—

Derivative accounting method

Type of derivative transaction

Hedged item

Special Treatment for interest-rate swap

Receive floating, pay fixed interest-rate
swap transactions

Long-term loans

64,300,000

Integrated Treatment (Special Treatment
and Allocation Treatment) for interestrate and currency swap

Receive floating USD, pay fixed JPY,
interest-rate and currency swap transactions (with initial and final exchange)

Long-term loans

Allocation Treatment for currency swap

Receive fixed USD, pay fixed JPY, curInvestment
rency swap transactions (with initial andcorporation bonds
final exchange)

Over one year

		 As of September 30, 2018			The contract amount or the equivalent principal amount set out in the contract as of the closing date for each derivative designated asa hedging instrument is as follows.
Thousands of yen

Contract value

Fair value

Measurementof fair value

63,300,000*1—

10,000,000

10,000,000*1—2,993,175

2,993,175*2—

Derivative accounting method

Type of derivative transaction

Hedged item

Special Treatment for interest-rate swap

Receive floating, pay fixed interest-rate
swap transactions

Long-term loans

64,300,000

Integrated Treatment (Special Treatment
and Allocation Treatment) for interestrate and currency swap

Receive floating USD, pay fixed JPY,
interest-rate and currency swap transactions (with initial and final exchange)

Long-term loans

Allocation Treatment for currency swap

Receive fixed USD, pay fixed JPY,
Investment
currency swap transactions (with initialcorporation bonds
and final exchange)

Over one year

*1. The derivative transactions eligible for Special Treatment for interest-rate swap and Integrated Treatment (Special Treatment for interest-rate swap and Allocation Treatment
for currency swap) are accounted for as integral parts of the hedged loans, and the fair value of those derivative transactions is included in that of the underlying long-termloans as of March 31, 2018 and September 30, 2018. Please refer to the measurement of fair value of financial instruments in Note 1 of “2. Fair value of financial
instruments” under Section 6. “Financial Instruments” as well as subheadings (5) and (7) of Note 1 concerning derivative transactions.
*2. Currency swap transactions eligible for allocation treatments are accounted for as integrated parts of the hedged investment corporation bonds, and the fair value of thecurrency swap transactions is included in that of the underlying investment bonds as of March 31, 2018 and September 30, 2018. Please refer to the measurement of fairvalue of financial instruments in Note 1 of “2. Fair value of financial instruments” under Section 6. “Financial Instruments” as well as subheadings (4) and (6) of Note 1
concerning derivative transactions.

41

Japan Real Estate Investment Corporation

8. Property, Plant and Equipment and Intangible Assets
Changes in Property, plant and equipment and Intangible assets for the six months ended September 30, 2018 are as follows:
Thousands of yen
Accumulated depreciation
Accumulated amortization

Balance at the
beginning of
the period

Increase during
the period

Decrease during
the period

Balance at the endof the period

Net balanceat the endof the period

Remarks

Buildings

250,111,909

1,048,034

456,761

250,703,183

90,392,605

4,340,770

160,310,577—

Structures

2,974,180

2,607

4,532

2,972,255

877,184

50,264

2,095,070—

Machinery and equipment

3,227,707

13,564—

3,241,271

2,245,875

97,748995,395—

Tools, furniture and fixtures

440,338

7,427

1,155

446,611

301,603

13,801145,008—

449,950,825

81,091

111,527449,920,389——

449,920,389

—

7,958

3,053

7,695

3,317

—

—

3,317

—

Buildings in trust

95,656,870

6,335,918—

101,992,788

26,099,836

1,872,185

75,892,951—

Structures in trust

956,849

41,550—998,400

272,067

25,312

726,333—

Machinery and equipment in trust

1,030,081

20,424—

1,050,506

763,039

25,678287,466—

Tools, furniture and fixtures in trust

69,17526—

69,201

34,525

4,151

34,676—

210,930,979

19,601,042—

230,532,021——

230,532,021

*1

1,583

—

—

1,583

—

—

1,583

—

1,015,358,459

27,154,741

581,670

1,041,931,530

120,986,738

6,429,911

920,944,791

5,933,601——

5,933,601

242,726

15,8295,690,875—

Leasehold rights in trust

444,160——

444,160——

444,160—

Easement

828,095——

828,095——

828,095—

Other

17,169——17,169

7,514

1,716

9,655

—

7,223,027——

7,223,027

250,240

17,546

6,972,786

1,022,581,487

27,154,741

581,670

1,049,154,557

121,236,979

6,447,458

927,917,578

Type of Asset

Property, plant and equipment

Land
Construction in progress

Land in trust
Construction in progress in trust
Subtotal
Leasehold rights
Intangible assets

Subtotal
Total

Depreciation andamortization*1. The increase of the land in trust was mainly due to the acquisition of Shinjuku Front Tower.

Japan Real Estate Investment Corporation42

9. Loans
The condition of loans by financial institutions as of September 30, 2018 is as follows.

Drawdown date

Balance at
beginning ofcurrent period(¥ thousand)

Balance at
end ofcurrent period(¥ thousand)Averageinterest
rate*2(%)

Repayment dateMizuho Bank, Ltd.

April 3, 2017

5,500,000—

0.0954

April 3, 2018

MUFG Bank, Ltd.

March 30, 2018

8,000,000—

0.0754

April 27, 2018
*4

Mizuho Bank, Ltd.

March 30, 2018

5,000,000—

0.0754

April 27, 2018
*5

Sumitomo Mitsui Trust Bank, Limited

March 30, 2018

3,000,000—

0.0754

April 27, 2018

Sumitomo Mitsui Trust Bank, Limited

April 27, 2018——

0.0736

May 28, 2018
*6

Shinsei Bank, Limited

June 15, 2017

2,500,000—

0.09396

June 15, 2018

Shinkin Central Bank

September 1, 2017

1,000,000—

0.0954September 3, 2018
*7

Resona Bank, Limited

September 1, 2017

1,000,000—

0.09395

September 3, 2018

December 26, 2017

1,300,000

1,300,000

0.09446

December 26, 2018

Classification
Lender*1

Short-term loans

Sumitomo Mitsui Trust Bank, Limited
Resona Bank, Limited

March 26, 2018

3,000,000

3,000,000

0.09446

March 26, 2019

Sumitomo Mitsui Trust Bank, Limited

March 30, 2018

1,700,000

1,700,000

0.09578

March 29, 2019

Mizuho Bank, Ltd.

April 3, 2018—

5,500,000

0.09562

April 3, 2019

Mizuho Bank, Ltd.

August 29, 2018—

7,000,000

0.09631

August 29, 2019

Sumitomo Mitsui Trust Bank, Limited

August 29, 2018—

3,000,000

0.09631

August 29, 2019

32,000,000

21,500,000

SubtotalLong-term loans

43

Shinkin Central Bank

April 24, 2013

5,000,000—

0.52775

April 24, 2018

MUFG Bank, Ltd.

June 1, 2011

10,000,000—

1.31125

June 1, 2018

Shinsei Bank, Limited

August 31, 2011

3,000,000—

1.0475

August 31, 2018

Sumitomo Mitsui Trust Bank, Limited

November 15, 2011

3,000,000

3,000,000

0.98375

November 15, 2018*8

Sumitomo Mitsui Banking Corporation

November 15, 2011

3,000,000

3,000,000

0.98375

November 15, 2018*8

Mizuho Bank, Ltd.

September 1, 2015

2,500,000

2,500,000

0.17

March 1, 2019
*8

The Gunma Bank, Ltd.

March 24, 2014

1,000,000

1,000,000

0.4105

March 25, 2019*8

Sumitomo Mitsui Trust Bank, Limited

May 29, 2015

5,000,000

5,000,000

0.2075

May 29, 2019*8

MUFG Bank, Ltd.

September 1, 2015

5,000,000

5,000,000

0.2

September 2, 2019*8

Sumitomo Mitsui Trust Bank, Limited

September 26, 2011

5,500,000

5,500,000

1.16

September 26, 2019*8

The Hiroshima Bank, Ltd.

October 1, 2014

3,000,000

3,000,000

0.31575

October 1, 2019

Mizuho Bank, Ltd.

November 1, 2011

6,000,000

6,000,000

1.2075

November 1, 2019

Mizuho Bank, Ltd.

November 15, 2011

3,000,000

3,000,000

1.13875

November 15, 2019

MUFG Bank, Ltd.

November 15, 2011

3,000,000

3,000,000

1.13875

November 15, 2019

MUFG Bank, Ltd.

November 15, 2011

3,000,000

3,000,000

1.13875

November 15, 2019

The Gunma Bank, Ltd.

November 17, 2014

1,000,000

1,000,000

0.316

November 18, 2019

The Yamanashi Chuo Bank, Ltd.

December 15, 2014

2,000,000

2,000,000

0.266

December 16, 2019Japan Real Estate Investment Corporation

Repayment
methodUse ofproceeds

Notes

Bullet*3

Unsecured
Unguaranteed
UnsubordinatedBullet*3

Unsecured
Unguaranteed
UnsubordinatedDrawdown date

Balance at
beginning ofcurrent period(¥ thousand)

Balance at
end ofcurrent period(¥ thousand)Averageinterest
rate*2(%)

Shinkin Central Bank

January 7, 2013

2,000,000

2,000,000

0.71375

January 7, 2020

MUFG Bank, Ltd.

January 15, 2013

5,500,000

5,500,000

0.71

January 15, 2020

Shinkin Central Bank

January 15, 2013

5,000,000

5,000,000

0.71

January 15, 2020

Classification
Lender*1

Repayment date

MUFG Bank, Ltd.

June 15, 2012

4,000,000

4,000,000

0.9525June 15, 2020

Sumitomo Mitsui Trust Bank, Limited

June 15, 2012

4,000,000

4,000,000

0.9525June 15, 2020

Sumitomo Mitsui Trust Bank, Limited

June 15, 2015

3,000,000

3,000,000

0.3425June 15, 2020

Tokio Marine &Nichido Fire Insurance Co., Ltd.

July 3, 2017

2,000,000

2,000,000

0.1

July 3, 2020

The Yamaguchi Bank, Ltd.

October 29, 2012

2,000,000

2,000,000

0.8

October 29, 2020

MUFG Bank, Ltd.

December 21, 2012

5,000,000

5,000,000

0.80125

December 21, 2020

MUFG Bank, Ltd.

December 21, 2012

5,000,000

5,000,000

0.80125

December 21, 2020

MUFG Bank, Ltd.

January 15, 2013

5,500,000

5,500,000

0.83625

January 15, 2021

MUFG Bank, Ltd.

January 31, 2014

4,000,000

4,000,000

0.64225

January 29, 2021

The Bank of Fukuoka, Ltd.

January 31, 2014

2,500,000

2,500,000

0.63849

January 29, 2021

Sumitomo Mitsui Trust Bank, Limited

January 31, 2014

2,000,000

2,000,000

0.62575

January 29, 2021

The Iyo Bank, Ltd.

March 24, 2014

2,000,000

2,000,000

0.6035

March 24, 2021

MUFG Bank, Ltd.

April 4, 2017

5,000,000

5,000,000

0.03342

April 5, 2021

Long-term loans

MUFG Bank, Ltd.

April 24, 2013

5,000,000

5,000,000

0.775

April 26, 2021

Mizuho Bank, Ltd.

June 15, 2012

4,000,000

4,000,000

1.07375

June 15, 2021

Sumitomo Mitsui Trust Bank, Limited

December 26, 2016

3,700,000

3,700,000

0.1913June 28, 2021

Sumitomo Mitsui Banking Corporation

January 19, 2018

5,000,000

5,000,000

0.16255

July 20, 2021

The Bank of Fukuoka, Ltd.

August 31, 2017

1,500,000

1,500,000

0.1325

August 31, 2021

The Iyo Bank, Ltd.

October 1, 2014

1,000,000

1,000,000

0.46525

October 1, 2021

The Chugoku Bank, Limited

October 1, 2014

1,000,000

1,000,000

0.4725October 1, 2021

0.463

November 15, 2021

The Daishi Bank, Ltd.

1,800,000

1,800,000

Sony Bank Incorporated

1,400,000

1,400,000

The Toho Bank, Ltd.

1,400,000

1,400,000

The Hokuetsu Bank, Ltd.

1,400,000

1,400,000

The Shinkumi Federation Bank

1,000,000

1,000,000

900,000

900,000

900,000

900,000

The Akita Bank, Ltd.
The Gunma Bank, Ltd.

November 14, 2014

The 77 Bank, Ltd.

900,000

900,000

The Tochigi Bank, Ltd.

900,000

900,000

The Fukui Bank, Ltd.

900,000

900,000

The Bank of Iwate, Ltd.

500,000

500,000

The Higo Bank, Ltd.

500,000

500,000

500,000

500,000

The Nishi-Nippon City Bank, Ltd.

The Yamagata Bank, Ltd.
June 17, 2014

2,000,000

2,000,000

0.621

December 17, 2021

Sumitomo Mitsui Banking Corporation

January 7, 2013

2,000,000

2,000,000

0.98

January 7, 2022

Repayment
methodUse ofproceeds

Notes

Bullet*3

Unsecured
Unguaranteed
UnsubordinatedJapan Real Estate Investment Corporation

44

Drawdown date

Balance at
beginning ofcurrent period(¥ thousand)

Balance at
end ofcurrent period(¥ thousand)Averageinterest
rate*2(%)

Repayment dateMizuho Bank, Ltd.

January 15, 2013

5,000,000

5,000,000

0.96625

January 17, 2022

The Norinchukin Bank

January 31, 2014

3,500,000

3,500,000

0.757

January 31, 2022

Mizuho Bank, Ltd.

April 24, 2013

3,000,000

3,000,000

0.87375

April 25, 2022

MUFG Bank, Ltd.

June 15, 2012

4,000,000

4,000,000

1.1975June 15, 2022

MUFG Bank, Ltd.

June 15, 2012

2,500,000

2,500,000

1.2725June 15, 2022

Shinsei Bank, Limited

June 15, 2012

2,500,000

2,500,000

1.2725June 15, 2022

The Norinchukin Bank

June 17, 2014

3,000,000

3,000,000

0.6785June 17, 2022

The Gunma Bank, Ltd.

1,000,000

1,000,000

The Shinkumi Federation Bank

1,000,000

1,000,000

The Daishi Bank, Ltd.

1,000,000

1,000,000
0.3925

August 10, 2022

Classification
Lender*1

The Chugoku Bank, Limited

1,000,000

1,000,000

The Toho Bank, Ltd.

1,000,000

1,000,000

The Fukui Bank, Ltd.

1,000,000

1,000,000

The Tochigi Bank, Ltd.

500,000

500,000

MUFG Bank, Ltd.

September 1, 2015

2,000,000

2,000,000

0.47125

September 1, 2022

The Hachijuni Bank, Ltd.

December 20, 2017

1,000,000

1,000,000

0.1863

December 20, 2022

Development Bank of Japan Inc.

January 7, 2013

3,000,000

3,000,000

1.115

January 6, 2023

The Daishi Bank, Ltd.

January 7, 2016

1,500,000

1,500,000

0.2802January 10, 2023

Long-term loans

The 77 Bank, Ltd.

January 10, 2018

1,000,000

1,000,000

0.205

January 10, 2023

The Hachijuni Bank, Ltd.

January 15, 2016

1,000,000

1,000,000

0.265

January 16, 2023

The Iyo Bank, Ltd.

January 15, 2016

1,000,000

1,000,000

0.265

January 16, 2023

Sumitomo Mitsui Trust Bank, Limited

January 17, 2018

3,000,000

3,000,000

0.21January 17, 2023

Development Bank of Japan Inc.

January 31, 2014

5,000,000

5,000,000

0.9325January 31, 2023

The Yamaguchi Bank, Ltd.

March 25, 2013

1,000,000

1,000,000

0.945

March 24, 2023

The Bank of Fukuoka, Ltd.

March 24, 2015

2,000,000

2,000,000

0.5125

March 24, 2023

The Norinchukin Bank

March 25, 2015

3,500,000

3,500,000

0.46825

March 27, 2023

The Chugoku Bank, Limited

March 26, 2018

2,000,000

2,000,000

0.1988March 27, 2023

MUFG Bank, Ltd.

June 1, 2017

12,000,000

12,000,000

0.03263

June 1, 2023

The Chugoku Bank, Limited

June 15, 2015

3,000,000

3,000,000

0.61175

June 15, 2023

The Bank of Fukuoka, Ltd.

June 15, 2017

2,500,000

2,500,000

0.2388June 15, 2023

10,000,000

0.42375*9December 19, 2023

MUFG Bank, Ltd.

45

August 10, 2015

December 19, 2014

10,000,000

MUFG Bank, Ltd.

March 26, 2018

5,000,000

5,000,000

0.04335

March 26, 2024

The Hachijuni Bank, Ltd.

March 26, 2018

1,000,000

1,000,000

0.2338March 26, 2024

The Iyo Bank, Ltd.

June 15, 2017

2,500,000

2,500,000

0.275

June 17, 2024

The Hachijuni Bank, Ltd.

June 15, 2017

1,000,000

1,000,000

0.275

June 17, 2024

MUFG Bank, Ltd.

September 1, 2015

3,500,000

3,500,000

0.63

September 2, 2024

Sumitomo Mitsui Trust Bank, Limited

September 2, 2015

3,800,000

3,800,000

0.536

September 2, 2024

The Norinchukin Bank

September 1, 2017

5,000,000

5,000,000

0.24

September 2, 2024

Taiyo Life Insurance Company

October 1, 2014

2,000,000

2,000,000

0.7825October 1, 2024

Mizuho Bank, Ltd.

October 1, 2015

2,500,000

2,500,000

0.5575October 1, 2024

MUFG Bank, Ltd.

June 1, 2018—

10,000,000

0.2544

December 2, 2024

Japan Real Estate Investment Corporation

Repayment
methodUse ofproceeds

Notes

Bullet*3

Unsecured
Unguaranteed
UnsubordinatedDrawdown date

Balance at
beginning ofcurrent period(¥ thousand)

Balance at
end ofcurrent period(¥ thousand)Averageinterest
rate*2(%)

Repayment date

January 9, 2018

1,000,000

1,000,000

0.285January 9, 2025

Mizuho Trust & Banking Co., Ltd.

March 2, 2015

3,000,000

3,000,000

0.5585

March 3, 2025

MUFG Bank, Ltd.

March 26, 2018

2,000,000

2,000,000

0.2725

March 26, 2025

Development Bank of Japan Inc.

March 30, 2017

5,000,000

5,000,000

0.315

March 31, 2025

Taiyo Life Insurance Company

May 29, 2015

1,500,000

1,500,000

0.7375

May 29, 2025

Classification
Lender*1
The Ashikaga Bank, Ltd.

Long-term loans

Sumitomo Mitsui Trust Bank, Limited

August 31, 2018—

3,000,000

0.32

August 29, 2025

Development Bank of Japan Inc.

September 1, 2015

7,000,000

7,000,000

0.7175September 1, 2025

Mizuho Bank, Ltd.

December 26, 2016

5,000,000

5,000,000

0.3625

December 26, 2025

MUFG Bank, Ltd.

February 26, 2018

6,500,000

6,500,000

0.3413February 26, 2026

Mizuho Bank, Ltd.

March 27, 2018

5,500,000

5,500,000

0.3

March 27, 2026

Shinkin Central Bank

March 30, 2017

5,000,000

5,000,000

0.36

March 30, 2026

Shinkin Central Bank

September 1, 2017

5,000,000

5,000,000

0.3188September 1, 2026

MUFG Bank, Ltd.

October 31, 2016

3,000,000

3,000,000

0.24

October 30, 2026

Mizuho Bank, Ltd.

December 21, 2016

5,000,000

5,000,000

0.415

December 21, 2026

Shinkin Central Bank

April 24, 2018—

6,000,000

0.3675

April 26, 2027

The Joyo Bank, Ltd.

January 9, 2018

1,000,000

1,000,000

0.4188January 11, 2028

Sumitomo Mitsui Banking Corporation

January 19, 2018

3,000,000

3,000,000

0.4338January 19, 2028

Mizuho Bank, Ltd.

March 30, 2018

4,000,000

4,000,000

0.3963

March 30, 2028

MUFG Bank, Ltd.

March 30, 2018

4,000,000

4,000,000

0.3963

March 30, 2028

Taiyo Life Insurance Company

March 30, 2018

1,000,000

1,000,000

0.3963

March 30, 2028

Subtotal

339,000,000

340,000,000

Total

371,000,000

361,500,000

Repayment
methodUse ofproceeds

Notes

Bullet*3

Unsecured
Unguaranteed
Unsubordinated*1.	On April 1, 2018, the commercial name of The Bank of Tokyo-Mitsubishi UFJ, Ltd. was changed to MUFG Bank, Ltd. In addition, on April 16, 2018, Mitsubishi UFJ
Trust and Banking Corporation transferred the corporation lending division and its lending balances to MUFG Bank, Ltd.
*2.	The average for floating interest rates is recorded as the weighted average during the period. The average is rounded off to the fifth decimal place. The weighted average forinterest rates of loans for which floating interest rates were swapped to fixed rates in order to hedge the risk of interest rate fluctuations is calculated taking the effect of thisswap into consideration.
*3.	The purposes of executing these loans are to purchase real properties or beneficiary right of real estate in trust, to repay existing loans, and to fund the redemption of
investment corporation bonds.
*4. The Company made a full repayment (¥8,000 million) before maturity on April 17, 2018.
*5. The Company made a full repayment (¥5,000 million) before maturity on April 17, 2018.
*6. The Company made a full repayment (¥3,000 million) before maturity on May 9, 2018.
*7. The Company made a full repayment (¥1,000 million) before maturity on April 24, 2018.
*8. At the end of the period under review, these loans are accounted for under current liabilities on the balance sheets as the current portion of long-term loans payable.
*9.	In order to hedge the risk of exchange rate and interest rate fluctuations related to foreign currency-denominated loans, the Company conducted an interest-rate andcurrency swap transaction, which substantially secured exchange and interest rates. Accordingly, the balance and the weighted average for interest rates during the period are
calculated taking the effect of this interest-rate and currency swap into consideration.

Japan Real Estate Investment Corporation46

10. Investment Corporation Bonds including Current Portion of Investment Corporation Bonds
Outstanding investment corporation bonds as of September 30, 2018 are as follows.

Date of issue

Balance at
beginning ofcurrent period(¥ thousand)

Balance at
end ofcurrent period(¥ thousand)Interest rate(%)

Repayment period

Repayment
methodUse ofproceeds

Notes

September 29, 2005

10,000,000

10,000,0002.56

September 29, 2025

Bullet*1*2

August 30, 2013

10,000,000

—

0.497

August 30, 2018

Bullet*1*2

March 30, 2017

10,000,000

10,000,000

0.3975

March 30, 2027

Bullet*1*2 *3

2,993,175

2,993,175

0.2788October 26, 2027

Bullet*1*2 *3 *4

32,993,175

22,993,175

Securities

4th unsecured investment
corporation bond
9th unsecured investment
corporation bond10th unsecured investment
corporation bond11th unsecured investment
corporation bond
Total

October 26, 2017

*1. The investment corporation bonds are primarily used to fund the acquisition of real properties or beneficiary right of real estate in trust, and to repay existing loans.
*2. Financial covenants, such as a negative pledge, are not included in these bonds.
*3. Bond issuance was limited to qualified institutional investors by a private placement.
*4.	For the purpose of avoiding foreign currency risk with respect to foreign currency investment corporation bonds, the Company engages in currency swap transactions to fix
the exchange rates. Considering the effects of the currency swap transactions, the balances and interest rates are reflected in the schedule.

11. Net Assets
The Company is required to maintain net assets of at least ¥50 million, as required pursuant to the ITA.

12. Income Taxes
The Company is subject to Japanese corporate income taxes on all of its taxable income. However, under the Special Taxation Measures
Act, an investment corporation is allowed to deduct dividends of accounting profits, or dividend distributions, paid to unitholders from its
taxable income if certain tax requirements are satisfied. Such tax requirements include dividend distributions in excess of 90% of its earnings available for dividends for the fiscal period as stipulated by Article 67-15 of the Special Taxation Measures Act. The significant
components of deferred tax assets and liabilities as of March 31, 2018 and September 30, 2018 were as follows:
Thousands of yen

As of March 31, 2018

As of September 30, 2018

Deferred tax assets:
Accrued enterprise tax

952

934

Amortization of a term leasehold interest

78,506

83,983

Asset retirement obligations

117,167

118,348

196,626

203,266

Valuation allowance(94,189)(100,846)

Total deferred tax assets

102,437

102,419

Asset retirement obligations

101,484

101,484

Reserve for advanced depreciation of non-current assets

227,405

291,168

Total deferred tax liabilities

328,890392,653

226,452

290,234

Deferred tax liabilities:

Net deferred tax liabilities

47

Japan Real Estate Investment Corporation

The reconciliation of tax rate difference between the adjusted statutory tax rate and the effective tax rate as of March 31, 2018 and
September 30, 2018 was as follows:
As of March 31, 2018

As of September 30, 2018

Statutory tax rate

34.81%

34.59%

Deductible dividend distribution(34.42%)(34.08%)Change in valuation allowance

0.05%

0.05%

Others

0.13%

0.00%

Effective tax rate

0.58%

0.56%

13. Related Party Transactions
For the six months ended March 31, 2018 and September 30, 2018
Transactions with related parties defined under the Financial Instruments and Exchange Act are listed below.
(1) Parent Company and Major Corporation Unitholders
		 For the period from October 1, 2017 to March 31, 2018
			“Not applicable”
		For the period from April 1, 2018 to September 30, 2018
			“Not applicable”(2) Affiliated Companies
		 For the period from October 1, 2017 to March 31, 2018
			“Not applicable”
		For the period from April 1, 2018 to September 30, 2018
			“Not applicable”(3) Sister Companies
		 For the period from October 1, 2017 to March 31, 2018
			“Not applicable”
		For the period from April 1, 2018 to September 30, 2018
			“Not applicable”(4) Directors and Major Individual Unitholders
		 For the period from October 1, 2017 to March 31, 2018
			“Not applicable”
		For the period from April 1, 2018 to September 30, 2018
			“Not applicable”

Japan Real Estate Investment Corporation48

Transactions with related parties defined under the ITA are listed below.
In addition to controlling unitholders, major unitholders, subsidiary corporations, subsidiary companies of controlling unitholders, andofficers and their close relatives, the definition of a “related party” under the ITA also includes the asset management company and its
interested parties (parent and subsidiary corporations, specified individual shareholders, and major shareholders of the asset managementcompany defined as interested parties under Article 201 of the ITA and Article 123 of the enforcement order of the ITA), as well as theasset custody company.
For the period from October 1, 2017 to March 31, 2018 (Unaudited)Type of relationship

Interested party

Name oftransaction partner

Mitsubishi EstateCo., Ltd.

Type of business

Real estate

Percentage ofunits held

1.307%

Transaction details

Real estate
management—

Asset custodycompany

Sumitomo Mitsui
Trust Bank, Limited

Bank

—

Interested party

Nihonbashi 2 Chome
Kaihatsu Tokutei
Mokuteki Kaisha

Real estate—

Balance at
end of the period(¥ thousand)

11,998,644——

Real estate sales

10,000,000——

Real estate beneficiaryrights in trust purchase25,460,000——

Security deposit return
Mitsubishi Jisho
Property Management
Co., Ltd.

Accounting item

Rent revenue

Security deposit increase

Interested party

Transaction amount(¥ thousand)

1,219,798 Deposits received
from tenants
584,201

Property management
expenses

2,214,533

Long-term loans
borrowing

3,000,000

Long-term loans
repayment

3,000,000

Real estate purchase

17,560,000—

Long-term loans
payable—18,521,201—

33,000,000—

Notes: 1. Consumption tax is not included in the above amounts.
2. Transaction terms were decided based on market conditions at the time the transaction was made.

For the period from April 1, 2018 to September 30, 2018 (Unaudited)Type of relationship

Interested party

Name oftransaction partner

Mitsubishi EstateCo., Ltd.

Type of business

Real estate

Percentage ofunits held

1.235%

Transaction details

Accounting item

13,929,943——

Real estate beneficiaryrights in trust purchase25,025,000——

Security deposit increase

283,080 Deposits received
from tenants
139,526

Interested party

Mitsubishi Jisho
Property Management
Co., Ltd.

Real estate
management—

Property management
expenses

2,125,700—

Asset custodycompany

Sumitomo Mitsui
Trust Bank, Limited

Bank

—

Long-term loans
borrowing

3,000,000

Long-term loans
payableNotes: 1. Consumption tax is not included in the above amounts.
2. Transaction terms were decided based on market conditions at the time the transaction was made.

Japan Real Estate Investment Corporation

Balance at
end of the period(¥ thousand)Rent revenue

Security deposit return

49

Transaction amount(¥ thousand)

18,664,756—

36,000,000

14. Segment Information
For the six months ended March 31, 2018 and September 30, 2018
Since the Company has been engaged in the real estate leasing business using a single segment, segment information has been omitted.
Information on products and services

Since revenues from external customers for a single segment accounted for more than 90% of total operating revenues, segment information on products and services has been omitted.
Information on geographic area

(1) Revenue		Since 100% of total operating revenues was generated from external customers within Japan, a geographical breakdown of revenues has
been omitted.
(2) Property and equipment
		Since 100% of total property and equipment on the balance sheets was located within Japan, a geographical breakdown of such property and equipment has been omitted.
Information on major clients

Since no single external client represents 10% or more of the Company’s total operating revenues, information on major clients has
been omitted.

15. Asset Retirement Obligations
For the six months ended March 31, 2018 and September 30, 2018
Asset retirement obligations reported on balance sheets

The Company acquired Osaki Front Tower on February 1, 2011 under the term leasehold for business use agreement which, at the expiryof the leasehold, obligates the Company to restore the leased land to its original state. At the inception of a lease with such an obligation,
the Company recognized an asset retirement obligation and a corresponding capital asset in an amount equal to the present value of theestimated demolition cost required for the removal of the properties located on the leased land. The present value is calculated using
2.015% as the discount rate over 42 years, which is the term of the leasehold.
Change in the asset retirement obligations for the six months ended March 31, 2018 and September 30, 2018 consisted of the following:Thousands of yen

Balance at the beginning of the period
Increase in tangible fixed assets
Accretion expense
Balance at the end of the period

For the period from October 1, 2017
to March 31, 2018

For the period from April 1, 2018
to September 30, 2018335,257

338,635

—

—

3,377

3,411

338,635

342,047

Japan Real Estate Investment Corporation50

16. Investment and Rental Property
For the six months ended March 31, 2018 and September 30, 2018
The Company owns primarily a portfolio of office properties in Tokyo and other prefectures in order to gain rental revenue from them.
The book values on balance sheets as of March 31, 2018 and September 30, 2018 and the fair values as of March 31, 2018 and
September 30, 2018 are as follows:
Thousands of yen

Book value

Fair value

As of September 30, 2017

Change during the period *1

As of March 31, 2018

As of March 31, 2018877,837,957

29,739,840

907,577,798

1,122,210,000

Thousands of yen

Book value

Fair value

As of March 31, 2018

Change during the period *2

As of September 30, 2018

As of September 30, 2018

907,577,798

20,331,006

927,908,805

1,158,140,000

Notes: 1. Book value on balance sheets means the acquisition cost less accumulated depreciation.
2. Significant changes
		 *1. As for increases/decreases for the period, the major reasons for the increases were the acquisition of Front Place Nihonbashi (¥17,728,795 thousand) and the
additional acquisition of Shinjuku Eastside Square (¥25,614,798 thousand), and the decreases were accounted for by the disposition of the building section of
Shibuya Cross Tower (¥9,763,596 thousand) and by depreciation.
		 *2. As for increases/decreases for the period, the major reason for the increase was the acquisition of Shinjuku Front Tower (¥25,270,812 thousand), and the decreases
were accounted for by the disposition of Lit City Building (retail units) (¥370,182 thousand) and by depreciation.
3. Fair values as of March 31, 2018 and September 30, 2018 are defined as the appraised values provided by an external qualified professional appraiser.

Profits and losses related to investment and rental property are listed in Section 18. “Breakdown of Property-Related Revenues and Expenses”.

17. Per Unit Information
The following table summarizes information about net assets per unit and profit per unit at March 31, 2018 and September 30, 2018 andfor the periods then ended, respectively:
Yen

Net assets at period end per unit
Profit per unit

For the period from October 1, 2017
to March 31, 2018

For the period from April 1, 2018
to September 30, 2018359,505

368,881

9,387

9,631

Notes: 1.	Profit per unit is computed by dividing profit by the weighted average number of units outstanding during each period. Diluted profit per unit has not been presented
since no warrants or convertible bonds were outstanding during the period.
2.	‌The basis for the computation of profit per unit is as follows.
Thousands of yen

ProfitAmount not attributable to normal unitholders
Profit applicable to normal investment units
Average number of units

51

Japan Real Estate Investment Corporation

For the period from October 1, 2017
to March 31, 2018

For the period from April 1, 2018
to September 30, 201812,291,059—
12,291,059
1,309,310 units

13,273,474—
13,273,474
1,378,121 units18. Breakdown of Property-Related Revenues and Expenses
For the six months ended March 31, 2018 and September 30, 2018
Thousands of yen

For the period from October 1, 2017
to March 31, 2018

For the period from April 1, 2018
to September 30, 2018

31,816,506

32,795,582

Rent revenues

31,505,394

32,676,423  Rental revenues

25,075,685

26,061,390   Common service charges

3,313,969

3,068,163

797,712774,438

2,318,026

2,772,431

311,111

119,158  Cancellation charges

42,20648,854   Other miscellaneous revenues

268,904

70,304

16,749,989

16,843,215

Property-Related Revenues  Parking revenues   Other rental revenues
Other lease business revenues

Property-Related Expenses
Expenses related to rent business

16,749,989

16,843,215   Property management expenses

3,623,270

3,518,291  Utilities expenses

2,388,245

2,676,997   Property and other taxes

2,916,777

3,026,949  Casualty insurance

55,48953,645  Repairing expenses

1,093,855

933,693  Depreciation

6,499,765

6,449,268   Other rental expenses

172,584

184,369

Property-Related Profits

15,066,517

15,952,366

19. Breakdown of Gain on Sales of Real Estate Properties
For the period from October 1, 2017 to March 31, 2018
Thousands of yen

Shibuya Cross Tower
Revenue from sale of real estate property

10,000,000

Cost of real estate property sold9,763,596

Other sales expenses

97,679Gain on sales of real estate properties

138,723

For the period from April 1, 2018 to September 30, 2018
Thousands of yen

Lit City Building
Revenue from sale of real estate property

650,000

Cost of real estate property sold

370,182

Other sales expenses
Gain on sales of real estate properties

8,945
270,871

Japan Real Estate Investment Corporation52

20. Changes in Unitholders’ Equity
For the six months ended March 31, 2018 and September 30, 2018
Total number of investment units issuable
and number of units outstanding

As of March 31, 2018

As of September 30, 2018

Total number of investment units issuable

4,000,000 units

4,000,000 units

Number of units outstanding

1,309,310 units

1,385,210 units

21. Supplemental Cash Flow Information
Cash and cash equivalents

The following table represents a reconciliation of cash and cash equivalents at March 31, 2018 and September 30, 2018:
Thousands of yen

As of March 31, 2018

As of September 30, 2018

Cash and deposits

17,804,047

17,835,899

Cash and deposits in trust

5,837,847

6,731,684——

23,641,894

24,567,583

Time deposits with maturities of more than three months
Cash and cash equivalents

22. Leases
1. Leased assets under finance lease transactions that do not transfer ownership of the leased assets to the lessees are capitalized anddepreciated by the straight-line method over the lease term with no residual value. Such capitalized leased assets primarily consist oftools, furniture and fixtures.
2. The Company, as a lessor, owns office buildings under leases and earns rent income. As of March 31, 2018 and September 30, 2018,
the future lease revenues under the non-cancelable operating leases are as follows:
Thousands of yen

As of March 31, 201823,206,521

21,666,235

Due after one year

47,799,241

45,183,710

Total

71,005,762

66,849,945

23. Subsequent Events
For the six months ended September 30, 2018
“Not applicable”

53

As of September 30, 2018

Due within one year

Japan Real Estate Investment Corporation

Japan Real Estate Investment Corporation

54

Other Information
1. Risk Factors
The principal risks with respect to investment in JRE are as follows:• any adverse conditions in the Japanese economy could adversely affect JRE;
• JRE may not be able to acquire properties to execute the growth and investment strategy in a manner that is accretive to earnings;• illiquidity in the real estate market may limit the ability to grow or adjust the portfolio;• the past experience of the asset manager (the “AIFM”) in the Japanese real estate market is not an indicator or guarantee of future results;• JRE’s reliance on its sponsor companies, the AIFM, and other third party service providers could have a material adverse effecton business;• there are potential conflicts of interest between JRE and its sponsor companies as well as the AIFM;• JRE’s revenues largely comprise leasing revenues from the portfolio properties, which may be negatively affected by vacancies, decreases
in rent, and late or missed payments by tenants;• JRE faces significant competition in seeking tenants and it may be difficult to find replacement tenants;• increases in interest rates may increase the interest expense and may result in a decline in the market price of the units;• JRE may suffer large losses if any of the properties incurs damage from a natural or man-made disaster;• most of the properties in the portfolio are concentrated in Tokyo and the Tokyo metropolitan area;• any inability to obtain financing for future acquisitions could adversely affect the growth of the portfolio;• JRE’s failure to satisfy a complex series of requirements pursuant to Japanese tax regulations would disqualify JRE from certain taxation
benefits and significantly reduce the cash distributions to the unitholders; and• ownership rights in some of JRE’s properties may be declared invalid or limited.
In addition, JRE is subject to the following risks:• risks related to increasing operating costs;• risks related to JRE’s dependence on the efforts of the AIFM’s key personnel;• risks related to the restrictive covenants under debt financing arrangements;• risks related to entering into forward commitment contracts;• risks related to third party leasehold interests in the land underlying JRE properties;• risks related to holding the property in the form of stratified ownership (kubun shoyū) interests or co-ownership interests(kyōyū-mochibun);• risks related to holding the property through trust beneficiary interests;• risks related to properties not in operation (including properties under development);• risks related to the defective title, design, construction, or other defects or problems in the properties;• risks related to impairment losses related to the properties;• risks related to tenant leasehold deposits and/or security deposits;• risks related to tenant’s default as a result of financial difficulty or insolvency;• risks related to the insolvency of master lessee;• risks related to the insolvency of a property seller following the purchase of a property by AIF;
• risks related to relying on expert appraisals and engineering, environmental and seismic reports as well as industry and market data;• risks related to the presence of hazardous or toxic substances in the properties, or the failure to properly remediate such substances;• risks related to strict environmental liabilities for the properties;• risks related to the amendment of applicable administrative laws and local ordinances;• risks related to infringing a third party’s intellectual property rights;• risks related to holding interests in properties through preferred shares of special purpose companies (tokutei mokuteki kaisha);• risks related to holding Japanese anonymous association (tokumei kumiai) interests;• risks related to investments in trust beneficiary interests;• risks related to the tight supervision by regulatory authorities and compliance with applicable rules and regulations;

55

Japan Real Estate Investment Corporation• risks related to tax authority disagreement with the AIFM’s interpretations of Japanese tax laws and regulations;• risks related to being unable to benefit from reductions in certain real estate taxes enjoyed by qualified J-REITs;• risks related to changes in Japanese tax laws; and• risk of dilution as a result of further issuances of units.

2. Information Required under Article 22(2)(d) of the EU Alternative Investment Fund Managers
Directive (AIFMD)(1) ‌Material Changes in Information Listed in Article 23 of AIFMD during the Financial Period covered by the Report (six-month fiscal
period ended September 30, 2018)
None.

3. Remuneration Policy for the Asset Manager’s Directors, Corporate Auditors, and Employees
Beginning April 1, 2017 and ending March 31, 2018
1. Remuneration for Asset Manager Directors

	The total amount of remuneration, bonuses, and other property benefits received by Asset Management Directors from the Asset Management Company as compensation for their duties, as well as the individual amounts each Asset Management Director receives, is decided bya resolution of a general meeting of unitholders. The policy for Asset Manager Director remuneration and bonuses is as follows.
(1) The remuneration table is determined by the Director’s position.
(2) Remuneration will be paid to full-time Directors but will not be paid to part-time Directors.
(3) Bonuses will not be paid to Directors, regardless of whether they occupy a full-time or part-time position.
2. Remuneration for Asset Manager Corporate Auditors

	The total amount of remuneration, bonuses, and other property benefits received by Corporate Auditors from the Asset Management
Company as compensation for their duties, as well as the individual amounts each Corporate Auditor receives, is decided by a resolutionof a general meeting of unitholders. The policy for Corporate Auditor remuneration and bonuses is as follows.
(1) Remuneration will not be paid to part-time Corporate Auditors.
(2) Bonuses will not be paid to Corporate Auditors, regardless of whether they occupy a full-time or part-time position.
Directors

Remuneration based on resolutions of
the General Meeting of Shareholders ofAsset Manager

Number of
person(s)remunerated

2

Corporate Auditors

Remuneration

Number of
person(s)remunerated

JPY 36 million

0

Total

Remuneration

Number of
person(s)remunerated

Remuneration

JPY 0 million

2

JPY 36 million

Japan Real Estate Investment Corporation

56

3. Remuneration for Asset Manager Employees(1)	Remuneration for employees of the Asset Management Company (payment period, payment method, pay raises, promotions, etc.) isstipulated by pay regulations and personnel evaluation regulations, and decided by objective evaluation of the process as well as achievements that take into account the overall corporate performance.
(2) Monthly pay consists of base pay, work allowance, executive allowance, and overtime pay. Pay raises are based on the results of performance evaluations that take into account management results from the previous fiscal year, and are carried out in April every year.
Promotions are dealt with in the same way.
(3) As for bonuses, the base number of multiples of monthly pay as bonuses is determined in advance by qualifications of the employee.
Increases (or decreases) in the amount paid are based on the results of performance evaluations, which take into account corporate
performance in the previous fiscal year.
All employees
Number of employees

Remuneration based on compensation rules

36

Remuneration
Total

Fixed

Variable

JPY 345 million

JPY 220 million

JPY 125 million

4. Conflicts of Interest

There are potential conflicts of interest between the Company and the Asset Management Company with respect to remuneration for the
Directors, Corporate Auditors, and employees of the Asset Management Company. The Company believes that the above remuneration
policy mitigates such potential conflicts. In addition, the Asset Management Company has adopted an internal set of rules that apply to
all related party transactions, such as transactions between the Company and the Asset Management Company. These rules require strict
compliance by the Asset Management Company with laws and regulations regarding related-party transactions. They also contain specificprocedures to be followed in the event of a transaction that involves a related party, in order to implement arm’s length terms.

57Japan Real Estate Investment Corporation

Corporate Data
As of September 30, 2018

Executives
Executive Director: 	Hiroshi Nakajima
Supervisory Directors: ‌Tomohiro Okanoya
Hiroaki Takano
Paid-in Capital
JPY 497,241,216,000
Number of Units Outstanding
1,385,210
Number of Unitholders
16,190Stock Listing
Tokyo Stock Exchange
Securities Code8952
LEI (Legal Entity Identifier)3538003YAIR3CBGJJ928

Type of Investment Corporation
Closed-end corporate type fundTransfer Agent
Mitsubishi UFJ Trust and Banking Corporation
1-4-5, Marunouchi, Chiyoda-ku, Tokyo 100-8212, Japan
AuditorErnst & Young ShinNihon LLC
Hibiya Mitsui Tower
Tokyo Midtown Hibiya
1-1-2 Yurakucho, Chiyoda-ku, Tokyo 100-0006, Japan
Incorporation
May 11, 2001
Executive Office
Japan Real Estate Investment Corporation
1-1-1, Otemachi, Chiyoda-ku, Tokyo 100-0004, JapanFor further information, please contact:
Japan Real Estate Asset Management Co., Ltd.
Planning Department
Tel: 81-3-3211-7951
Fax: 81-3-3212-8886
E-mail: j-rea-inquiry@j-rea.co.jp

This semiannual report includes translations of documents originally filed under the Japanese Financial Instruments and Exchange Law ofJapan. This report was prepared in English solely for the convenience of readers outside Japan and should not be considered as a disclosurestatement. 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 the Company’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 the Company. Actual results may differ substantiallyfrom the projections depending on a number of factors.

Japan Real Estate Investment Corporation

58

Japan Real Estate Investment Corporation
SEMIANNUAL REPORT

September 2018https://www.j-re.co.jp/en/

Printed in Japan