Japan Real Estate Investment Corporation

SEMIANNUAL REPORT
September 2021
For the period from April 1, 2021 to September 30, 2021

Contents
P. 2	The Strengths of Japan Real Estate Investment Corporation
P. 3

To Our Unitholders

P. 6

JRE’s Portfolio Property Replacement

P. 7

Asset Management SummaryP. 9

Financial Highlights

P. 9

Top 10 Unitholders

P. 9

Unit Price Performance

P. 10 Portfolio Highlights
P. 11 Approach to ESG
P. 15	Asset Size, Property Acquisitions, and Performance Trends
P. 18	Overview of Portfolio Properties
P. 24 Financial Section
P. 55 Other Information
P. 58 Corporate Data

ProfileJapan Real Estate Investment Corporation (the “Company”) wasestablished as one of the first real estate investment corporations inJapan following revisions to the Act on Investment Trusts andInvestment Corporations of Japan, as amended, or the ITA. Its investments focus primarily on office buildings, and it is aiming to maintain­geographic diversity while seeking stable growth and dividends in themedium- to long-term. The Company was listed on the Tokyo Stock
Exchange (TSE) on September 10, 2001 (Securities Code: 8952).
Note: I nvestment corporations, including the Company, are special legal entities
incorporated and operated under the ITA. Accordingly, the “units” of suchinvestment 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 andreaders are specifically reminded to pay attention to such differences when reviewing
this semiannual report and making any investment decision on or in respect of theunits 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 theunits 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.

1

Japan Real Estate Investment Corporation

The Strengths ofJapan Real Estate Investment Corporation
01 Steady Growth of Dividends
Actual dividend per unit for the September 2021 period:

JPY 11,356
Forecast dividend per unit for the March 2022 period:

JPY 11,400

02 Collaboration with Sponsor
Expertise of Mitsubishi Estate Co., Ltd.

03 Steady Growth of Quality Portfolio (As of September 30, 2021)
Total acquisition price: JPY 1.06 trillion 72 properties

The first listed J-REIT in 2001

04 Sound Financial Base (As of September 30, 2021)
Highest credit ratings for a J-REIT: A+ from S&P, A2 from Moody’s, AA from R&I
Long-term interest-bearing debt ratio*: 95.7%
LTV (Interest-bearing debt / Total assets): 41.8%* ‌(Long-term loans [including current portion of long-term loans] + Investment corporation bonds) / Total interest-bearing debt

Japan Real Estate Investment Corporation

2

To Our Unitholders
Despite the impact of the COVID-19 pandemic, Japan Real Estate Investment Corporation (“JRE”)
increased dividends per unit (“DPU”) by JPY 36 to JPY 11,356 in the fiscal period ended September 2021,
marking the 15th consecutive period of DPU growth. This was largely thanks to the gain from the disposition of a property that took place as its strategic property replacement in the portfolio. We also worked hardto accumulate upward rent revisions and conduct appropriate cost management.
In Tokyo, where JRE has the largest market exposure, office demand stayed lower than usual due to theprolonged state of emergency, which has led to the higher market vacancy rate and the downward pressurein the market rent. Although JRE anticipates sluggish internal growth for a few periods ahead, we will focus

Business Performance for the September 2021 Period 
Summary of Financial Results and Cash Dividends

non-manufacturing industries remain weak. The Company considers it

In the September 2021 period (April 1, 2021 to September 30, 2021),

necessary to continue to monitor the domestic and international devel-

Japan Real Estate Investment Corporation recorded operating revenues

opment of the pandemic and the impact of fluctuations in financial

increased 5.6% compared with the previous period, to JPY 36.9 bil-and capital markets.

lion. On the income front, operating profit increased 11.6%, to JPY

In the office leasing market, vacancy rates have continued to rise

18.3 billion. After deducting expenses for interest payments on loans

moderately against the backdrop of the penetration of telework, which

and other costs, ordinary profit increased 12.7%, to JPY 17.4 billion,

accelerated in the wake of COVID-19. Rents have turned to a down-

and profit increased 8.4%, to JPY 16.8 billion.

ward trend, but slightly. Against the backdrop of such leasing market

Turning to dividends, the Company will make cash distributions

trends, the Company strived to secure stable income and occupancy

using earnings based on the dividend policy outlined in Article 32-1(2)rates for the entire portfolio, attracting new tenants through strategicof the Company’s Articles of Incorporation, in an amount that exceeds

leasing activities and further increasing the satisfaction level of existing

90% of profit available for dividends as required by Article 67-15 oftenants by improving the added value of the properties.

the Special Taxation Measures Act. Based on this policy, the Company

In the real estate investment market, property prices remained

made a reduction entry under the application of Article 65-7

in a high price range due to the continued favorable financing environ-“Exceptions of the Taxation in case of the Replacement by Purchase ofment against the backdrop of continued monetary easing policy. While

Specific Assets” of the Special Taxation Measures Act, and secured

domestic and overseas investors are highly motivated to acquire prop-

retained earnings brought forward and decided that the total amounterties, the number of prime office buildings for sale is limited, and theof dividends is JPY 15,730,444,760 for the period under review, which

acquisition environment continues to be challenging.

is a multiple of 1,385,210—the number of units outstanding as ofUnder such market conditions, the Company made sound invest-

September 30, 2021. Accordingly, the dividend per investment unit isments under the Investment Guideline of providing stable dividends to

JPY 11,356.

unitholders, which was set forth at the time of the Company’s listing on
the TSE and remains unchanged to date. Accordingly, the Company

Operating Environment and Performance

was able to provide a dividend per investment unit at JPY 11,356, which

During the September 2021 period (April 1, 2021 to September 30,

is an increase by JPY 36 compared with the previous period.

2021), the impact of the new coronavirus disease (“COVID-19”)

3

In the office leasing market in the fiscal period under review, thesignificantly restricted economic activities in some industries as in themarket was in the above-mentioned environment, and although someprevious period. However, the Japanese economy as a whole has

new contracts were concluded to improve the location and officecontinued to recover, although corporate income, etc. in someenvironment, the occupancy rate at the end of the fiscal period underJapan Real Estate Investment Corporation

on leasing activities taking advantage of its high quality, competitive properties. Furthermore, JRE will alsosteadily continue strategic portfolio replacement in pursuit of office buildings of choice and a portfolio of
choice over the long-term, as you can see from the examples of the already announced acquisitions anddispositions in the next fiscal period.
On the environmental front, JRE will introduce renewable electricity into all of its properties which
JRE has 100% operational control. Thanks to this, JRE will accomplish its 2030 CO2 emissions reduction
target significantly ahead of schedule. Going forward, JRE will continue to pioneer asset management thattakes sustainability into consideration.

review decreased by 1.4% from the end of the previous fiscal period toFinance Activities

96.5% due to the impact of an increase in the number of tenancy

According to its financial policy, the Company aims to maintain theterminations and extended downtime, but still remained high.

LTV ratio (ratio of interest-bearing debt to total assets) at 30% toAs for property acquisitions and dispositions, on August 31, 2021,

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

the Company disposed of the trust beneficiary interest in Otsuka

by staggering maturities, extension of durations and diversification ofHigashi-Ikebukuro Building (Toshima-ku, Tokyo) for JPY 6,025 million.

stable lenders among other possibilities, taking into consideration the

As a result of the above, the Company’s portfolio at the end of theborrowing costs and existing relationships with lenders.

fiscal period under review, September 30, 2021, consisted of 72 prop-

Concerning new loans related to property acquisition and the refi-erties, with a total acquisition price of JPY 1.06 trillion. Net rentablenancing of existing loans, the Company carries out loans strategicallyfloor area stood at 866,577 m2 with 1,465 tenants in total.

and flexibly after giving close consideration to the above-mentioned

On October 1, 2021, the Company acquired a 49% co-ownershipinterest in a trust beneficiary interest pertaining to a 10% co-ownershipmeans, as well as the possibility of repayment with funds procured
from issuing new investment units.

interest in GRAND FRONT OSAKA (Note 2) (Osaka-shi, Osaka),

In the fiscal period under review, the Company borrowed to funda large-scale complex consisting of offices, retail stores and a hotel

the repayment of existing loans and also extended the contract term oflocated in the Umeda area which contains the largest terminal in west-

commitment line totaling JPY 60 billion for one year.

ern Japan for JPY 21,000 million (a 4.9% co-ownership interest in the

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

entire property). In addition, on November 30, 2021, the Company

2021, the Company’s total interest-bearing debt was JPY 419.4 billion,acquired a trust beneficiary interest in a 12.5% co-ownership interest

the same level as the previous fiscal period. This amount consists ofpertaining to sectional ownership interests of office and retail sections

long-term loans totaling JPY 358.5 billion (including the current por-in Otemachi Financial City North Tower (Chiyoda-ku, Tokyo), ation of long-term loans totaling JPY 51.0 billion), short-term loans

large-scale complex facility located in “Otemachi,” the central businesstotaling JPY 18.0 billion, and investment corporation bonds totaling

district of Tokyo, for JPY 6,380 million (additional acquisition of

JPY 42.9 billion. The current LTV ratio stands at 41.8%.

1.42% share of ownership of building). Furthermore, the Company
will dispose of Nagoya Misono Building (Nagoya-shi, Aichi Prefecture)
for JPY 2,629 million on March 1, 2022.
Note 1: S hibuya Cross Tower (land with leasehold interest), whose building ownership was disposed of on January 18, 2018, is included in the above numberof properties and total acquisition price, but is not included in net rentablefloor area or total number of tenants.
Note 2: “GRAND FRONT OSAKA” refers collectively to the properties to beacquired, namely “GRAND FRONT OSAKA (Umekita Plaza and South
Building)” and “GRAND FRONT OSAKA (North Building).”

The Company’s credit ratings as of September 30, 2021 were as follows:
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: A2; Outlook: Stable

Rating and Investment Information, Inc.

Rating: AA; Outlook: Stable

Japan Real Estate Investment Corporation

4

Outlook 
Operating Environment
During the September 2021 period (April 1, 2021 to September 30, 2021), although someindustries will continue to face severe conditions due to the impact of COVID-19, theJapanese economy is expected to recover in the future thanks to the effects of various policies
and improvements in overseas economies, as Japan’s vaccine rollout progressed. On the other
hand, the Company considers it is necessary to pay close attention to the impact of there-emergence of the infectious disease in Japan and abroad, the risk of a global economic
downturn due to trade issues between the United States and China, and fluctuations infinancial and capital markets.
In the office leasing market, the Company will pay close attention to the recovery of officedemand that will be brought by the progress of vaccination and the containment of the pandemic, as well as to how office buildings of choice should be in line with the review of work
styles, and at the same time, the Company strives to secure stable income and maintain andimprove asset values over the medium- to long-term while carefully monitoring trends in the

Yutaka Yanagisawa

office leasing market and the business conditions of tenants managed by the Company.

Executive Director of Japan Real Estate
Investment Corporation

Regarding the real estate investment market, it is important to continue to be proactive insearching for new properties in order to promote more strategic replacement of our portfolio
while paying close attention to future market trends due to changes in social conditions.

Performance Forecasts for the March 2022 and September 2022 Periods
The Company’s forecasts for the March 2022 period (October 1, 2021 to March 31, 2022) are as
follows: operating revenues totaling JPY 36.2 billion, operating profit totaling JPY 17.1 billion,
ordinary profit totaling JPY 16.2 billion, and profit totaling JPY 16.0 billion. The Company
plans to declare a per-unit cash dividend of JPY 11,400.
The Company’s forecasts for the September 2022 period (April 1, 2022 to September 30,2022) are as follows: operating revenues totaling JPY 33.7 billion, operating profit totaling JPY
14.8 billion, ordinary profit totaling JPY 14.0 billion, and profit totaling JPY 14.6 billion. The
Company plans to declare a per-unit cash dividend of JPY 11,500.
Note: O perating revenues, operating profit, ordinary profit, profit, and cash dividend per unit might varydepending on changes that could occur in the market situation.

5

Japan Real Estate Investment Corporation

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

JRE’s Portfolio Property Replacement
Strategic property replacement in pursuit of “office buildings of choice and a portfolio of choice”

Property Replacement
Properties of Acquisition

GRAND FRONT OSAKA (North Building, Umekita Plaza and South Building)Transfer date: October 1, 2021
Acquisition Price: JPY 21,000 million

Otemachi Financial City North Tower
Transfer date: November 30, 2021
Acquisition Price: JPY 6,380 million

Acquisition equivalent to

JPY 27,380 million
Disposition equivalent to

JPY 8,654 million
Properties of Disposition

Otsuka Higashi-Ikebukuro Building (left)
Transfer date: August 31, 2021
Disposition Price: JPY 6,025 million
Nagoya Misono Building (right)
Transfer date: March 1, 2022
Disposition Price: JPY 2,629 million

Effect Brought by the Replacement
Realize gain on disposition

Grow asset size

3,846 million

JPY 1.07 trillion

Lower average building age

Increase NOI

Average age of disposed properties: 32.5 years

+ JPY

+ JPY

   Average age of acquired properties:

8.6 years

JPY

1.09 trillion

545 million a year

Note: Calculated on the basis of the actual NOIs of the disposed ofproperties for the most recent one year and the estimated NOIsof the acquired properties

Japan Real Estate Investment Corporation

6

Asset Management Summary
For the period from April 1, 2021 to September 30, 2021

Disposed Property

Property to be Disposed

Otsuka Higashi-Ikebukuro Building

Nagoya Misono Building

Location2-32-22 Higashi-Ikebukuro,
Toshima-ku, Tokyo

Location1 -10-21 Sakae, Naka-ku, Nagoya City,
Aichi Prefecture

Site area

2,121.39m2

Site area

805.04m2

Floor area of building

9,531.28m2

Floor area of building

5,348.00m2

Structure

Steel-framed reinforced concrete
structure, flat roof

Structure

Steel-framed structure, flat roof

FloorsFloorsAbove ground: 8 floors
Below ground: 1 floor

 bove ground: 7 floors
A
Below ground: 1 floor

Completion

September 1991

Completion

November 1987

Acquisition date / Acquisition priceAugust 8, 2003 / JPY 1,865 million

Acquisition date / Acquisition price

September 25, 2001 / JPY 3,541 million

Disposition date / Disposition priceMarch 1, 2022 / JPY 2,629 million

Disposition date / Disposition priceAugust 31, 2021 / JPY 6,025 million

Type of ownership

Type of ownership

Land: Ownership
Building: OwnershipLand: Ownership
Building: Ownership

Buyer

Undisclosed

Buyer

Tosei Corporation

Property to be Acquired

Otemachi Financial City North Tower (Additional acquisition)
Location

1-9-5 Otemachi, Chiyoda-ku, Tokyo

Site area

14,108.16m2(Temporary substitute lots area)

Floor area of building

239,769.07m2(Floor area in land registry)

StructureS teel-framed, Steel-framed reinforced
concrete structure, flat roof

Floors bove ground: 35 floors
A
Below ground: 4 floors

Completion

October 2012

Acquisition date / Acquisition priceNovember 30, 2021 / JPY 6,380 million

Type of ownershipLand: Ownership
Building: Ownership

SellerSankei Building Co., Ltd.

Otemachi Financial City North Tower
OtemachiInn
Financial
er C
City GrandRo ircu
ute larCube
SouthTower Hanzomon
OtemachiLine
Park Bldg. Otemachi Bldg.

Otem
achi Sta.
Mitsubishi UFJ
Trust andBanking Bldg.

7

Japan Real Estate Investment Corporationuchi Line

Mita Line
Chiyo
da Line

Palace Hotel
Tokyo

Marun
o

Ote-monGate To
zai L

ineTokyo Fire
Department

ShinMarunouchi
Bldg.

Marunouchi
Oazo

Eitai D
ori

Tokyo Sta.

Property to be Acquired

GRAND FRONT OSAKA / North Building, Umekita Plaza and South Building

GRAND FRONT OSAKA(South Building)(North Building)

GRAND
FRONT
OSAKA

to Line

GRAND FRONT
OSAKA

uka
r az
aka eso, T Linyot ainuK eM
nky obine
Ha and K
suji LMido

GRAND FRONT OSAKA(North Building)

Nakatsu Sta.

Sta.

ShinMidosuji

JR KyoNakatsuaOsak p
Loo e
LinInterContinental
Osaka

Ta
n

im

ac

hi

Li
ne

aOsaka Sta.
d
Ume
ta.
aS
.
Sta medaka
UsO
Umekita 2nd Project
aka ta.
JR
Os eda S
Development Area
HigashiUmeda Sta.
Um
Umekita (Osaka)
Umeda Square
Underground Sta.
(Scheduled to open Nishi- Buildingin spring 2023) Umeda Sta.
Kitashinchi Sta.
JR Kobe Line Hanshin Main Line
JR Tozai Line

(Umekita Plaza /South Building)

Umekita Plaza

North Building

Umekita Plaza and South Building

Location3-1 Ofukacho, Kita-ku, Osaka City, Osaka Prefecture

Site area

22,680.03m2

4-1 (Umekita Plaza) and 4-20 (South) Ofukacho, Kita-ku,
Osaka City, Osaka Prefecture
20,488.08m2

Floor area of building

290,030.59m2

10,226.10m2 (Umekita Plaza) 181,371.39m2 (South)

StructureS teel-framed, Steel-framed reinforced concrete structure,flat roof

Steel-framed, Reinforced concrete structure,flat roof (Umekita Plaza)
Steel-framed, Steel-framed reinforced concrete structure,flat roof (South)

FloorsAbove ground: 38 floors
Below ground: 3 floors

Above ground: 2 floors (Umekita Plaza) / 38 floors (South)
Below ground: 2 floors (Umekita Plaza) / 3 floors (South)

Completion

February 2013

February 2013 (Umekita Plaza) March 2013 (South)

Acquisition date / Acquisition price

October 1, 2021 / JPY 9,750 million

October 1, 2021 / JPY 11,250 million

Type of ownershipLand: Ownership
Building: Ownership and: Ownership (partial leasehold)L
Building: Ownership

SellerMitsubishi Estate Co., Ltd

Mitsubishi Estate Co., Ltd.

Japan Real Estate Investment Corporation

8

Financial Highlights
In millions of JPY
For the period from
April 1, 2021 toSeptember 30, 2021

For the period from
October 1, 2020 toMarch 31, 2021

For the period from
April 1, 2020 to
September 30, 2020

For the period from
October 1, 2019 toMarch 31, 2020

For the period from
April 1, 2019 to
September 30, 2019

Operating revenues

36,901

34,94434,96635,99635,164

Operating profit

18,394

16,47916,49817,354

16,494

Ordinary profit

17,477

15,50815,60816,326

15,390

Profit16,865

15,56015,59815,755

14,945

Net operating income (NOI) (Note 1)

24,204

24,82524,943

23,413

23,104

Funds from operations (FFO) (Note 2)

20,58322,08922,22519,986

19,795

22.5

20.4

16.8

22.0

25.4

Cash distribution

15,73015,68015,60014,697

14,124

Number of units

1,385,210

1,385,210

1,385,210

1,385,210

1,385,210

11,356

11,32011,262

10,61010,197

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, 2019, 183 days for theperiod ended March 31, 2020, 183 days for the period ended September 30, 2020, 182 days for the period ended March 31, 2021 and 183 days for the period ended
September 30, 2021.)

Top 10 Unitholders As of September 30, 2021
Units

% of total units
outstanding

Custody Bank of Japan, Ltd. (Shintaku Acc.) ��������������������������������������������������������������������������������������������������������������������������������������������

319,260

23.05%The Master Trust Bank of Japan, Ltd. (Shintaku Acc.) �������������������������������������������������������������������������������������������������������������������������������

207,946

15.01%The Nomura Trust and Banking Co., Ltd. (Toshin Acc.) ���������������������������������������������������������������������������������������������������������������������������

59,696

4.31%

Custody Bank of Japan, Ltd. (Toshin Acc.) �����������������������������������������������������������������������������������������������������������������������������������������������

44,817

3.24%

STATE STREET BANK WEST CLIENT - TREATY 505234 �����������������������������������������������������������������������������������������������������������������

25,1891.82%

SSBTC CLIENT OMNIBUS ACCOUNT ����������������������������������������������������������������������������������������������������������������������������������������������

18,651

1.35%

Mitsubishi Estate Co., Ltd. �����������������������������������������������������������������������������������������������������������������������������������������������������������������������

17,120

1.24%

STATE STREET BANK AND TRUST COMPANY 505103�������������������������������������������������������������������������������������������������������������������

16,796

1.21%

JP MORGAN CHASE BANK 385781 �����������������������������������������������������������������������������������������������������������������������������������������������������

16,622

1.20%

The Chugoku Bank, Limited ���������������������������������������������������������������������������������������������������������������������������������������������������������������������

15,001

1.08%

Company

Unit Price Performance
350%

TSE REIT Index   

TOPIX   The Company

300%

250%

200%

150%

100%

50%
Sep.
2001

9

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

Sep.
2019

Sep.
2020

Sep.
2021

Portfolio Highlights
Trends in the state of portfolio management

Rentable office area (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

March 2019

73

1,506

855,902

99.5

March 2020

73

1,515

864,014

99.7

March 2021

73

1,497

873,873

97.9

April 2021

73

1,486

873,916

97.3

May 2021

73

1,487

873,916

97.1

June 2021

73

1,484

873,916

96.7

July 2021

73

1,482

873,831

96.5

August 2021

72

1,463

866,57796.3

September 2021

72

1,465

866,577

96.5

Note: The number of tenants is the gross number of tenants by building.

0200,000

400,000

600,000

800,000

1,000,000

Sep.
2021
period

50.0

60.0

70.0

80.0

90.0

100.0
Occupancy rate (%)

Portfolio breakdown As of September 30, 2021
Properties by geographic region

Tenants by industry type

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

Nagoya city 2.9%

Other areas 7.1%

Electricity andheat supply services

1.5%

Osaka city and
Kyoto city 5.8%
Tokyo metropolitan area
(excluding
Tokyo 23 wards) 6.3%

Tokyo 23 wards

77.9%

72.1%

5.8%

Information services

12.7%

Public services andassociations 1.9%

Tokyo 5 central wards*

Tokyo 23 wards(excluding Tokyo 5 central wards)

Others 10.3%
Ceramics 1.3%

Finance10.2%

Medical 2.1%
Construction 3.1%

Service industries

10.0%

Insurance 3.5%

Real estate

Machinery 3.8%

8.4%

Retail and restaurants

Communications

6.7%

4.2%

Specialist services(Consulting, etc.) 4.5%

Electric devices 6.2%
Media and advertisement 5.0%
Pharmaceuticals 4.6%

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

Japan Real Estate Investment Corporation

10

Approach to ESG
Sustainability Policy

Sustainability Policy

Japan Real Estate Asset Management Co., Ltd. (JRE-AM), which manages the Company’s assets,
believes that asset management focused on ESG is essential to the sustainable improvement ofasset value.
The ESG Office, a dedicated team for ESG, is driving the Company’s ESG initiatives in accordance with its Sustainability Policy.
Such initiatives include the enhancement of disclosure of the Company’s ESG-related information, the acquisition of environmental certifications and evaluations from external organizations,participation in international initiatives, and other efforts.
We disclose ESG-related information on our company website in a timely manner.

WEB e refer to GRI (Global Reporting Initiative) standards and the SASB (Sustainability Accounting
W
Standards Board) Real Estate Standard for the disclosure of a wide range of ESG information on our website.

Please refer to our ESG website
for further information.
https://jre-esg.com/en/esg/
information.html#anchor03

GRI STANDARDS Content Index
https://jre-esg.com/en/pdf/
en-esg_gri.pdf

SASB Framework
https://jre-esg.com/en/pdf/sustainability_report2021.pdf#page=24

1

Contribution to creating
a low-carbon society

2

Contribution to creatinga recycling-oriented society

3

Contribution to creatinga society in harmony with nature

4

Enhancement of safety andsecurity

5

Initiatives aimed at officers
and employees

6

Collaboration with external
stakeholders

7

Information disclosure
and obtaining environmental
certifications

External Evaluation and Certification
Commitment to GRESB 
Received the highest evaluations in both GRESB Real Estate
Assessment and GRESB Public Disclosure in the 2021 GRESB
results as shown on the right●● RESB Real Estate Assessment 5 StarsGGRESB Public Disclosure
A

MSCI ESG Ratings 
Received a rating of “A” (AAA-CCC tier rating) in the MSCI ESG Ratings assessment
Disclaimer	
The use by JRE of any MSCI ESG Research LLC or its affiliates (“MSCI”) data, and the use of MSCI logos, trademarks,
service marks or index names herein, do not constitute a sponsorship, endorsement, recommendation, or promotion of JRE by
MSCI. MSCI services and data are the property of MSCI or its information providers and are provided “as-is” and without
warranty. MSCI names and logos are trademarks or service marks of MSCI.

Participation in the CDP’s Climate Change Program 
DISCLOSURE INSIGHT ACTION

Received an “A-” score and recognized at the highest Leadership Level in the 2021 Carbon Disclosure Project (CDP) Climate
Change ProgramAwarded “Prime” Status in the ISS ESG Corporate Rating Awarded “Prime” status in the ISS’s sustainability rating in March 2020

Green Building-Certified Properties in Our Portfolio 
We are focusing on improving the sustainability of the Company’s entire portfolio. As of the end of September 2021, 76.5%of the Company’s portfolio is green certified. Going forward, the Company will continue to acquire environmental certifications and evaluations, such as the DBJ Green Building Certification.

WEB

11

 lease refer to our ESG website for further information.
Phttps://jre-esg.com/en/external/

Japan Real Estate Investment Corporation

International Initiatives
In 2018, JRE-AM became a signatory to the following international initiatives:
Became Signatory in April 2018

United Nations Global Compact (UNGC) 
Mitsubishi Estate Co., Ltd., JRE-AM’s parent company, became a signatory to the UNGC. Accordingly, JRE-AM has
participated in this i­nitiative as a member of the Mitsubishi Estate Group.
Became Signatory in August 2018

Principles for Responsible Investment (PRI) 
PRI signatories are required to report on the status of their ESG integration practices to PRI each year. JRE-AM has received
the highest score of “A+”* in both categories for which we made the report in 2020, as shown below. This was the highest
result among all signatories around the world.
ModuleStrategy & Governance

Property

Score

A+

A+

* The rating system is a 6-rank scale (A+, A, B, C, D, E).

Environment ccelerated Use of Electricity Made from Renewable
A
Energy (RE100 Compatible)

the switch by the end of September 2022. Thanks to this, JRE will accomplish its fiscal 2030 CO2 emissions reduction target ahead of schedule.
Also, the reduction of CO2 emissions will further accelerate as JRE proactively introduces renewable electricity into the buildings other than 100%
operational control.

JRE accelerates the use of electricity made from renewable energy recognized by RE100* (“renewable electricity”). Doing so reduces a building’s
CO2 emissions to zero, including the CO2 emissions of tenant areas. JRE
plans to introduce renewable electricity into more than 80% of its properties of 100% operational control by the end of April 2022 and complete all* RE100 is the global corporate renewable energy initiative bringing together hundreds of large and ambitious businesses committed to 100% renewable electricity.

JRE’s Switch to Renewable Electricity (Outline)

Retailelectricity
companies

Renewable electricity supply

CO2
reduction

Renewable electricity

Electricity
supply contract
JRE

Contributing to the reductionof CO2 emissions and therealization of a decarbonizedsociety hand in hand withtenant companies

CO2
reduction
Tenant A

WIN-WIN

Tenant B

Tenant C

KPIs for 2030 and Our Performance
KPIs for 2030●

Carbon Intensity●

CO2 Emissions*1●

Water Usage*2●

Waste Recycling Rate●Zero Energy Buildings*3

Fiscal 2013 (base year)

60 kg/m or lower
35% reduction
20% reduction
90% or higher
Own 5–10
2*1 Carbon intensity basis *2 Intensity (m3/m2) basis*3 Includes ZEB Ready and ZEB Oriented buildings

Fiscal 2020

Fiscal 2030 targets

68.9kg-CO2/m

60kg-CO2/m2 or lower

Reduce by 25.2%

Reduce by 35%

2

Carbon Intensity

92.1kg-CO2/m

2

Water Usage

0.793m3/m2

Reduce by 38.9%

Reduce by 20%

Waste Recycling Rate

—

56.6%

90% or higher

ZEB Ownership

—

1 ZEB

5–10 ZEBs

Japan Real Estate Investment Corporation

12

Climate Change Initiatives
Examination of Financial Impact Based on Scenario Analysis
Using scenarios published by international organizations and other entities that predict the impact of global warming and climate change, JRE examined
the magnitude of the financial impact of risks and opportunities that it identified for scenarios in which average global temperatures rise by 4℃ and 1.5℃.
We have examined the impact of each scenario for 2030 (medium-term prospects) and 2050 (long-term prospects).
Note: Approach to financial impact (minor/moderate/major): Quantitative and qualitative analysis carried out to assess the relative impact.
Financial Impact
Category

Risk and
Opportunity
Factors

4°C Scenario
Changes in Cash Flow

1.5°C Scenario

JRE Initiatives

Classification Medium- Long- Medium- LongTerm
Term
Term
Term
2030
2050
2030
2050
●

Introduction of
CO2 emission
regulations
Adoption of carbon
taxes

●

Increase in cost of complying
with laws and regulations(e.g., carbon taxes, carbon
credit purchases)

●

risks

Minor

Minor

Moderate

Major
●

●

●

Policy and
LegalTransition
Risks and
Opportunities

Rise in expense of acquiring
environmental certification
Introduction ofcarbon emissionrelated regulations
Introduction ofhealth and wellbeing regulations
Strengthening ofenergy regulations

risks

Minor

Minor

Minor

●

●

●

●

Enhancement of property
competitiveness thanks tocomplying with laws andregulations

opportunities

Minor

Minor

Moderate

Major

●

●

●

●

●

Increase in costs incurred in
procuring ZEB properties andin conducting research on
converting properties to ZEBs
and installing new technology

risks

Spread of lowcarbon technology Rise in retrofit costs associ(Improvement of
ated with introducing energy
Technology
environmental per- efficient equipment andformance of existing renewable energy andproperties)
promoting the carbon
neutralization of real estate
Reduction in utility costs
thanks to ZEB conversion
and green refurbishments

WEB

Minor

Minor

Minor

Moderate Moderate

●

●

●

●

risks

Minor

Minor

Minor

Moderate●●●

opportunities

 or the full version of the Examination of Financial Impact
F
Based on Scenario Analysis, please refer to our ESG website.

Minor

Minor

Moderate

Major●

Set CO2 reduction target (35% reduction compared with FY2013)
Reduce energy intensity in a planned manner
Proactively conduct resource efficiency-related capital improvements using
internal carbon pricing (in cooperation with external experts)
Replace existing properties with those with good environmental performance
Manage energy consumption using our proprietary EMS
Introduce renewable energy cquire environmental certifications and energy-efficiency ratings based on aA
medium- to long-term GHG emissions reduction planS et CO2 reduction target (35% reduction compared with FY2013)
Reduce energy intensity in a planned manner
Proactively conduct resource efficiency-related capital improvements using
internal carbon pricing (in cooperation with external experts)
Acquire ZEB properties
Convert existing properties to ZEBs in a proactive and planned manner
Manage energy consumption using our proprietary EMS
Introduce renewable energy
Acquire environmental certifications and energy-efficiency ratings based on a
medium- to long-term GHG emissions reduction plan cquire ZEB properties
AConvert existing properties to ZEBs in a proactive and planned manner ooperate with external experts
CProvide support for technical assessments and equipment, such as those forenergy efficiency
Review lifecycle costs
Formulate medium- to long-term refurbishment plans based on achieving net
zero emissions
Promote a switch to the use of power from renewable energy sourcesImplement planned equipment retrofitting at JRE-owned buildings

ESG website
https://jre-esg.com/en/environment/climate.html

Sustainability Report 2021
https://jre-esg.com/en/pdf/sustainability_report2021.pdf

SocietyFor Tenants and Partners
Sustainability Guide to Promote Owner and Tenant Collaboration
JRE has created a Sustainability Guide and distributed it to its tenants, aiming to promote close collaboration with them.
This Sustainability Guide introduces the activities that we can do in the office, mainly from theviewpoints of the “environment” and “tenant well-being.”
We will team up with our tenants and endeavor to co-create a sustainable society with them.

Raising ESG Awareness of Our Stakeholders
JRE offers ESG seminars for our business partners, master lessees, and property managers, among
others, for the purpose of raising stakeholder awareness. We invite ESG experts from outside theCompany to cover global ESG trends and discuss specialized fields such as GRESB and ZEB.
We believe that raising sustainability awareness not only within JRE, but among all our stakeholders, will benefit sustainability efforts at each asset level.

Sustainability Guide VOL. 1
Theme

Work Style Reform

Sustainability Guide VOL. 2
Theme 1
Theme 2

Offices in the “New Normal” Era
Waste Recycling

SUSTAINABILITY
GUIDE
VOL. 2

MITSUBISHI ESTATE CO., LTD.

Japan Real Estate Investment Corporation

Society

Tenants/
Customers

Co-creation
EconomyBuilding
OwnersEnvironment

Our Thoughts
In 2020, the COVID-19 pandemic completelychanged the way we live.

The pandemic has prompted us to evolve into

a “non-contact” society where contact is avoided
to prevent infection from airborne droplets.

This transformation has resulted in a steep increasein the use of delivery and take-out services,which in turn has led to more plastic bottle andlunch box waste in homes and offices. Consequently,
the pandemic has had a significant impact
on the problem of waste.

What can we do to help create a sustainable society?

This Sustainability Guide mainly focuses on steps that,
as office workers, all of us can take to enhanceenvironmental and employee friendliness.

WEB

13

 lease refer to the following link for the Sustainability Guide.
P
https://jre-esg.com/en/society/society.html

Japan Real Estate Investment Corporation

In partnership with our tenants,

we will co-create a sustainable society.

2

Sustainability Guide VOL. 2

For Communities

For Employees

Resilience for Communities

Learning and Development for All Employees

As part of our efforts to strengthen our relationship with local communities,
we have established systems to host stranded commuters in the event of a disaster. These systems have been put in place at such properties as Akasaka Park
Building. In addition, we have concluded an agreement with Chiyoda Ward to
establish a ­system for hosting stranded commuters at Otemachi Financial City
North Tower. Furthermore, we havedesignated a water well and regional
warehouse for disaster control. We
also participate in disaster control
drills. Through these efforts, we arecontributing to local communities byoffering locations to help people in
the event of disasters.

Based on the idea that all employees should be professionals with a highdegree of specialization, JRE-AM encourages all our employees, i.e., permanent employees, contract employees, and seconded employees, to participate
in a variety of training programs.
JRE-AM provides its own training programs that are associated with the
REIT industry, compliance, etc., and designed to develop employee skills anddeepen their professionalism. In addition, JRE-AM encourages its employees
to participate in a variety of training programs offered by our sponsor.
For more details on JRE-AM’s sponsor’s personnel development
system, please refer to the following website.

Supporting Cultural and Artistic Activities

Support for Career Enrichment, Qualifications, and Licenses

Tokyo Opera City has two museums, six theatres/halls, and an art
gallery. It includes a concert hall with a wooden interior and one of the world’s
best acoustic systems as well as the New
National Theatre, where operas, plays, modern
dances, dramas, and other contemporary performing arts are performed for ­the public.
We support the Tokyo Opera City
Cultural Foundation, which plans and organizes
the musical performances and art exhibitions
that take place at the Concert Hall, the RecitalHall, and the Art Gallery of Tokyo Opera City.

For all of its employees, JRE-AM subsidizes the expenses of various training programs or sessions such as fund management, logical thinking skills,
financial accounting, organizational management, coaching, compliance,and more. In addition, JRE-AM also subsidizes the expenses of obtaining
qualifications and licenses such as ARES Certified Master, Certified
Building Administrator, Real Estate Transaction Agent, among others.

WEB lease refer to our website for further information.
Phttps://jre-esg.com/en/society/society.html
https://www.j-rea.co.jp/en/employee/index.html

WEB itsubishi Estate:Mhttp://www.mec.co.jp/e/csr/employees/index.html

Creating a Productive and Employee-friendly Workplace
JRE-AM moved to its new office,Otemachi Park Building, in
December 2017.
We promoted workplacereform by relocating our office. As aresult, we accelerated work efficiency
and improved productivity.
Free-address work environment

GovernanceOur basic policy as an investment corporation and asset management company is not only to comply with laws and regulations, but to meet social
demands as well. Taking care to have each employee perform his or her duties with high ethical standards and strict self-discipline raises our reputation
among investors and garners the trust of the greater society.
Basic Principle of Compliance for the Investment Corporation (JRE)
JRE’s basic principle of compliance is to thoroughly observe legal and other relevant norms in regard to the business operation as well as to respond to
the requirements from society. This means that the investment corporation administers and oversees the outsourcing companies from the same standpoint, while complying with legal and other relevant norms in its decision-making.
Basic Principle of Compliance for the Asset Management Company (JRE-AM)
Basic Principle
 nsuring thorough compliance is one of its top priority issues, since JRE-AM understands that any insufficiency in compliance would affect even
1 E
its management base.
2 As an asset management company, JRE-AM recognizes that it bears the responsibility for realizing the values that are required by society in its
business operation, and makes proactive and continuous efforts for full compliance to enhance the value of its business operation both qualitatively and quantitatively.
3 JRE-AM is determined to achieve a reputation for quality among its investors by promoting compliance activities, and thereby gains the trust of awide spectrum of society.

WEB or more information on our environmental, social, and governance initiaF
tives, please visit our ESG website or see our Sustainability Report 2021.

ESG website
https://jre-esg.com/en/

Sustainability Report 2021
https://jre-esg.com/en/pdf/sustainability_report2021.pdf
Japan Real Estate Investment Corporation

14

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

94.6

96.1

95.5

93.3

93.0

92.4

93.2

94.6

94.7

95.5

96.7

96.3

96.7

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 overthe medium- to long-term. The Company’s growth is based on external growth strategies that aim to increase earnings
through the acquisition and transfer of properties, as well as internal growth strategies that seek to optimize earnings
from properties already held. The size of the Company’s assets (total acquisition price) has grown from JPY 92.8 billion
at IPO to JPY 1.06 trillion as of the period ended September 30, 2021 due to the steady achievement of external growthstrategies. 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.

Total acquisition price (JPY billion)(Number of properties)

542

718

564

564

641

643

660

657

740

782

794

97.8

837

838

First J-REIT listed
on TSE, beganwith JPY 92.8
billion in assets

92
(20)

(54)

(55)

(55)

(55)

(55)

(57)

(56)

(57)

(58)

(60)

(62)

(64)

(64)

Sep.
2001

Sep.
2008

Mar.
2009

Sep.
2009

Mar.
2010

Sep.
2010

Mar.
2011

Sep.
2011

Mar.
2012

Sep.
2012

Mar.
2013

Sep.
2013

Mar.
2014

Sep.
2014

9,599

9,021

8,314

7,821

7,925

8,095

7,850

7,570

7,683

7,633

7,648

At IPO

Dividend per unit* (JPY )

9,536

9,510

Listing and issuance of units
Sep. 2001
Listed on TSE
as first J-REIT
Sep. 2001
IPO

Dec. 2009
Sixth Follow-On

Feb. 2012
SeventhFollow-On

Oct. 2012
EighthFollow-On

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

15

Japan Real Estate Investment Corporation

97.8

97.7

98.3

98.7

98.8

99.1

99.2

99.2

99.5

99.3

99.7

99.0

97.9

96.5

As of Sep. 30, 2021:
72 properties;
JPY 1,067 billion

944

955

990

1,014 1,025 1,023

1,053 1,070 1,070 1,067

927

923

923

(68)

(70)

(68)

(68)

(69)

(69)

(70)

(71)

(73)

(73)

(73)

(73)

(73)

(72)

Mar.
2015

Sep.
2015

Mar.
2016

Sep.
2016

Mar.
2017

Sep.
2017

Mar.
2018

Sep.
2018

Mar.
2019

Sep.
2019

Mar.
2020

Sep.
2020

Mar.
2021

Sep.
2021

883

(End of fiscal period)

7,681

8,001

Apr. 2015
Tenth Follow-On

8,121

8,361

8,544

9,096

9,336

9,495

9,697

10,197

10,61011,262

11,32011,356

Apr. 2018
Eleventh
Follow-On

Japan Real Estate Investment Corporation16

Major tenant roster
Name of tenant

Leased officearea (m2)Name of property% of total leased
office area

MUFG Bank, Ltd.

Harumi Front (and 3 other properties)

33,912

4.1%

Undisclosed*

Kitanomaru Square (and 3 other properties)

22,681

2.7%

Undisclosed*

Osaki Front Tower (and 3 other properties)

21,892

2.6%

NTT Communications Corporation

Shiodome Building

16,243

1.9%

SQUARE ENIX HOLDINGS CO., LTD.

Shinjuku Eastside Square

15,172

1.8%

HAKUHODO DY HOLDINGS INCORPORATED

Akasaka Park Building (and another property)

12,817

1.5%

JSOL Corporation

Harumi Center Building

10,7091.3%

Mitsubishi UFJ Trust and Banking Corporation

Mitsubishi UFJ Trust and Banking Building

10,598

1.3%

TOTO LTD.

Shiodome Building (and another property)

9,923

1.2%

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

Queen’s Tower A

9,536

1.1%

* Undisclosed due to tenant’s request

Location of portfolio properties
II-1 to II-5:
Tokyo metropolitan area, excluding Tokyo 23 wards

III-1

II-2

II-1

III-1 to III-23:
Other major cities

III-7
III-8

III-2
III-3
III-4
III-5
III-6

II-5
II-3
II-4

III-13
III-18

III-21
III-22
III-23

III-20

III-19
III-14
III-15
III-16
III-17

III-9
III-10
III-11
III-12
I-43
I-44
I-38
I-42

I-1

I-28 I-27
I-29
I-31
I-32
I-33

I-30

I-34
I-35
I-36

I-6

I-20
I-37

I-9

I-2, I-3

I-4
I-5
I-8 I-7
I-10

I-19
I-21
I-26

Tokyo Station
I-14

I-11
I-12
I-13

I-15 I-16
I-22
I-23, I-24
I-25

I-17, I-18

I-39
I-40

I-41

I-1 to I-44:
Tokyo 23 wards

17Japan Real Estate Investment Corporation

Overview of Portfolio Properties
As of September 30, 2021

Tokyo 23 wards

Kitanomaru
Square●Location:
Site area:
Floor area of building:
Ownership:Completion:

MD Kanda
Building

I-1

Chiyoda-ku, Tokyo
5,821.03m2
57,279.20m2
100.0%
January 2006●

Location:
Site area:
Floor area of building:
Ownership:Completion:

OtemachiFinancial City
North Tower●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Location:
Site area:
Floor area of building:
Ownership:Completion:●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Chiyoda-ku, Tokyo
1,218.56m2
9,370.25m2
56.76%
July 1993

Nibancho
GardenI-5●

Chiyoda-ku, Tokyo
9,338.74m2
146,611.42m2
2.91%
January 2017

Location:
Site area:
Floor area of building:
Ownership:Completion:

Burex Kojimachi
Building●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Yurakucho Denki
Building

Sanno Grand
Building

I-8●

Chiyoda-ku, Tokyo
967.67m2
6,526.64m2
100.0%
January 2005

Location:
Site area:
Floor area of building:
Ownership:Completion:

Front Place
Nihonbashi

I-10

Chiyoda-ku, Tokyo
5,749.91m2
70,287.65m2
10.78%
September 1975●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Location:
Site area:
Floor area of building:
Ownership:Completion:

I-9

Chiyoda-ku, Tokyo
3,663.93m2
33,875.95m2
99.0%
September 1966

Kyodo Building(Kayabacho
2Chome)

I-11

I-13

Chuo-ku, Tokyo
756.03m2
5,470.54m2
100.0%
February 2002

Chuo-ku, Tokyo
1,381.52m2
11,672.55m2
100.0%
February 2014

Location:
Site area:
Floor area of building:
Ownership:Completion:

Ginza 1Chome
East Building

Burex Kyobashi
Building●

I-6

Chiyoda-ku, Tokyo
10,992.13m2
57,031.06m2
31.35%
April 2004●

Location:
Site area:
Floor area of building:
Ownership:Completion:

I-3

I-7

Chiyoda-ku, Tokyo
8,100.39m2
108,171.67m2
19.38%
February 2003●

Chiyoda-ku, Tokyo
1,085.83m2
8,185.11m2
100.0%
February 1998●

OtemachiPark Building

Mitsubishi UFJ
Trust and Banking
Building

Location:
Site area:
Floor area of building:
Ownership:Completion:

I-2

I-4

Chiyoda-ku, Tokyo
14,108.16m2
239,769.07m2
3.39%
October 2012●

Kandabashi Park
Building●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Chuo-ku, Tokyo
754.26m2
5,505.80m2
100.0%
April 1991

Ginza Sanwa
Building

I-14

Chuo-ku, Tokyo
702.41m2
4,976.85m2
100.0%
May 2008

I-12●

Location:
Site area:
Floor area of building:
Ownership:Completion:

I-15

Chuo-ku, Tokyo
1,119.27m2
8,851.00m2
70.95%
October 1982

Japan Real Estate Investment Corporation

18

Ryoshin Ginza
East Mirror
Building●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Harumi Front●●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Akasaka Park
Building

Location:
Site area:
Floor area of building:
Ownership:Completion:

Chuo-ku, Tokyo
7,250.15m2
45,458.90m2
100.0%
February 2012

Location:
Site area:
Floor area of building:
Ownership:Completion:

Aoyama Crystal
Building

I-19

Minato-ku, Tokyo
14,198.20m2
97,489.16m2
100.0%
July 1993●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Shiodome
Building●

CloverShiba-koen

I-20

Minato-ku, Tokyo
989.30m2
8,094.36m2
100.0%
December 1982●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Shiba 2Chome
Daimon Building

I-22

●

Chuo-ku, Tokyo
4,664.63m2
26,447.27m2
100.0%
November 2006

Minato-ku, Tokyo
12,054.22m2
115,930.83m2
55.0%
December 2007

Location:
Site area:
Floor area of building:
Ownership:Completion:

Cosmo
Kanasugibashi
Building

I-23

I-25

●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Minato-ku, Tokyo
26,468.48m2
166,405.36m2
13.45%
January 1991

Location:
Site area:
Floor area of building:
Ownership:Completion:

Shinjuku Front
Tower●

Location:
Site area:
Floor area of building:
Ownership:Completion:

19

Location:
Site area:
Floor area of building:
Ownership:Completion:

Tamachi Front
Building

Seavans S Building●

Minato-ku, Tokyo
2,820.90m2
16,235.10m2
100.0%March 1984

Location:
Site area:
Floor area of building:
Ownership:Completion:

Japan Real Estate Investment Corporation

Shinjuku-ku, Tokyo
25,320.28m2
167,245.46m2
35.0%
March 2012

I-29

●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Shinjuku-ku, Tokyo
822.00m2
8,291.69m2
100.0%
November 1989

I-27

Tokyo Opera City
Building

I-28

Shinjuku-ku, Tokyo
9,628.17m2
92,092.30m2
37.16%
August 2011

Minato-ku, Tokyo
758.54m2
5,420.93m2
100.0%March 1992●

Shinwa Building●

I-24

Shinjuku Eastside
Square

I-26

Minato-ku, Tokyo
747.31m2
5,747.80m2
100.0%
July 2014

I-21

Minato-ku, Tokyo
528.58m2
3,496.01m2
100.0%
February 2006●

Location:
Site area:
Floor area of building:
Ownership:Completion:

I-18

I-16

Chuo-ku, Tokyo
864.91m2
5,751.68m2
100.0%
October 1998●

Harumi Center
Building

I-17

Location:
Site area:
Floor area of building:
Ownership:Completion:

I-30

Shinjuku-ku, Tokyo
18,236.94m2
232,996.81m2
31.33%
July 1996

Link Square
Shinjuku

Front PlaceMinami-Shinjuku●

Location:
Site area:
Floor area of building:
Ownership:Completion:

I-31

Shibuya-ku, Tokyo
1,040.80m2
5,982.36m2
100.0%
September 2015●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Jingumae
Terrace●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Shibuya-ku, Tokyo
839.66m2
4,359.20m2
100.0%
December 1987

Shibuya-ku, Tokyo
3,852.34m2
42,049.96m2
37.34%
August 2019●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Ebisu Neonato●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Osaki Front
Tower●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Ikebukuro
2Chome Building●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Shibuya-ku, Tokyo
1,755.75m2
10,778.10m2
100.0%
October 2003

●

I-36

Location:
Site area:
Floor area of building:
Ownership:Completion:

Shibuya-ku, Tokyo
5,153.45m2———

Higashi-Gotanda
1Chome Building●

Location:
Site area:
Floor area of building:
Ownership:Completion:

I-39

Shinagawa-ku, Tokyo
1,539.95m2
6,460.39m2
100.0%
July 2004

Harmony Tower
●

I-42

I-41

Ota-ku, Tokyo
2,199.30m2
14,095.34m2
100.0%
July 1989

Location:
Site area:
Floor area of building:
Ownership:Completion:

Nakano-ku, Tokyo
10,020.52m2
72,729.31m2
38.38%March 1997

Ikebukuro YS
Building

I-43

Toshima-ku, Tokyo
397.26m2
3,157.51m2
100.0%
May 1990

I-33

Shibuya Cross Tower(Land with leasehold interest)

Omori-Eki
Higashiguchi
Building

I-40

Shinagawa-ku, Tokyo
3,684.38m2
23,673.92m2
100.0%
June 2005

Location:
Site area:
Floor area of building:
Ownership:Completion:

I-38

Taito-ku, Tokyo
2,412.80m2
23,727.48m2
94.04%
July 2010●

Location:
Site area:
Floor area of building:
Ownership:Completion:●

TIXTOWER
UENO

I-37

Shibuya-ku, Tokyo
5,005.70m2
36,598.38m2
44.72%
October 1994

I-35

Shibuya-ku, Tokyo
2,124.59m2
9,420.42m2
100.0%March 1998●

Location:
Site area:
Floor area of building:
Ownership:Completion:

I-32

Jingumae Media
Square Building

I-34

Yoyogi 1Chome
Building●

Location:
Site area:
Floor area of building:
Ownership:Completion:

I-44

Toshima-ku, Tokyo
1,384.56m2
7,464.64m2
100.0%
December 1989

Japan Real Estate Investment Corporation20

Tokyo metropolitan area, excluding Tokyo 23 wards

Hachioji First
Square●Location:
Site area:
Floor area of building:
Ownership:Completion:

Saitama Urawa
Building

II-1

Hachioji, Tokyo
2,989.33m2
18,329.98m2
80.40%
July 1996●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Queen’s Tower A●●

Location:
Site area:
Floor area of building:
Ownership:Completion:

II-3

Yokohama, Kanagawa Prefecture
6,825.77m2
49,037.51m2
100.0%
December 2007

Musashi Kosugi
STM Building

II-4

Yokohama, Kanagawa Prefecture
44,406.40m2
498,282.77m2
11.11%
June 1997

II-2

Saitama, Saitama Prefecture
1,533.06m2
6,258.59m2
100.0%March 1990●

Location:
Site area:
Floor area of building:
Ownership:Completion:

MM Park
Building

Location:
Site area:
Floor area of building:
Ownership:Completion:

II-5

Kawasaki, Kanagawa Prefecture
3,552.15m2
22,839.61m2
34.32%
October 1990

Other major cities

8∙3 Square Kita
Building●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Jozenji Park
Building

III-1

Sapporo, Hokkaido
5,541.60m2
16,096.97m2
100.0%
December 2006●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Sendai Honcho
Honma Building●

Location:
Site area:
Floor area of building:
Ownership:Completion:

21

Higashi Nibancho
SquareIII-2

Sendai, Miyagi Prefecture
1,566.68m2
7,648.33m2
50.0%
January 1993●

Location:
Site area:
Floor area of building:
Ownership:Completion:

AER●

Japan Real Estate Investment Corporation

Sendai, Miyagi Prefecture
3,191.27m2
27,680.45m2
100.0%
July 2008

Daido Seimei
Niigata Building

III-5

III-4

Sendai, Miyagi Prefecture
1,437.47m2
8,247.50m2
100.0%
November 1991●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Sendai, Miyagi Prefecture
6,591.05m2
73,186.57m2
55.35%March 1998

III-3

Location:
Site area:
Floor area of building:
Ownership:Completion:

III-6

Niigata, Niigata Prefecture875.05m2
5,327.23m2
100.0%
October 1998

Kanazawa Park
Building●

Kanazawa
Kamitsutsumicho
Building

III-7●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Kanazawa, Ishikawa Prefecture
6,642.71m2
43,481.20m2
89.0%
October 1991

Location:
Site area:
Floor area of building:
Ownership:Completion:

Nagoya Hirokoji
Place●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Location:
Site area:
Floor area of building:
Ownership:Completion:

Location:
Site area:
Floor area of building:
Ownership:Completion:

Kyoto, Kyoto Prefecture
1,371.16m2
9,185.98m2
100.0%
January 2010

Location:
Site area:
Floor area of building:
Ownership:Completion:

Location:
Site area:
Floor area of building:
Ownership:Completion:●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Lit City Building●

Okayama, Okayama Prefecture
7,596.44m2
52,653.19m2
24.60%
June 2005

Location:
Site area:
Floor area of building:
Ownership:Completion:

Nagoya, Aichi Prefecture
805.04m2
5,348.00m2
100.0%
September 1991●

Location:
Site area:
Floor area of building:
Ownership:Completion:

III-15

Osaka, Osaka Prefecture
6,159.61m2
45,411.31m2
100.0%
April 1995

Amagasaki Front
Building●

Location:
Site area:
Floor area of building:
Ownership:Completion:

NHK Hiroshima
Broadcasting
Center Building

III-19

III-12Shin-Fujita
Building

III-17

Osaka, Osaka Prefecture
3,044.65m2
31,213.27m2
100.0%
September 1991●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Location:
Site area:
Floor area of building:
Ownership:Completion:

Midosuji Daiwa
Building

III-16

Osaka, Osaka Prefecture
2,036.22m2
17,145.59m2
100.0%
October 1992●

III-14

Osaka, Osaka Prefecture
1,652.88m2
18,673.28m2
100.0%
July 1995

Nagoya, Aichi Prefecture
2,170.45m2
25,091.91m2
71.74%
August 1995

Nagoya Misono
Building

III-11

Nagoya, Aichi Prefecture
4,095.81m2
33,377.73m2
100.0%
May 1987●

Sakaisujihonmachi
Building●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Umeda Square
Building

III-13

III-9

III-8

Kanazawa, Ishikawa Prefecture
1,561.80m2
9,619.96m2
100.0%
August 2009●

Shijo Karasuma
Center Building●●

Nagoya Hirokoji
Building

III-10

Nagoya, Aichi Prefecture
2,401.43m2
15,947.29m2
100.0%
December 2004

Nishiki Park
Building

III-18Amagasaki, Hyogo Prefecture
3,975.20m2
24,055.58m2
100.0%
October 2008

Tosei Tenjin
Building●

III-21

III-20Hiroshima, Hiroshima Prefecture
3,296.46m2
35,217.28m2
48.75%
August 1994

Location:
Site area:
Floor area of building:
Ownership:Completion:

Fukuoka, Fukuoka Prefecture
1,221.31m2
5,588.57m2
100.0%March 1992

Japan Real Estate Investment Corporation

22

Tenjin Crystal
Building●

Location:
Site area:
Floor area of building:
Ownership:Completion:

Hinode Tenjin
Building

III-22

Fukuoka, Fukuoka Prefecture
1,835.17m2
10,432.04m2
100.0%
August 1993●

Location:
Site area:
Floor area of building:
Ownership:Completion:

III-23

Fukuoka, Fukuoka Prefecture
1,452.15m2
12,527.07m2
74.48%
August 1987

Note:	Concerning real estate or trust beneficiary rights of real estate of which the Company is a partial owner through co-ownership, or compartmentalized building units,or quasi-co-ownership, the ­figures for “Site area” and “Floor area of building” represent total site area and total floor area for the entire building.

23

Japan Real Estate Investment Corporation

Financial Section
Selected Financial Data ........................................................................................................................ p.24
Balance Sheets ................................................................................................................................................ p.25
Statements of Income and Retained Earnings ........................................................... p.27
Statements of Changes in Unitholders’ Equity ......................................................... p.28
Statements of Cash Distributions ............................................................................................ p.29
Statements of Cash Flows ................................................................................................................. p.30
Notes to Financial Statements ...................................................................................................... p.31
Independent Auditor’s Report ..................................................................................................... p.52

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 (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, 2021
to September 30, 2021

For the period
from October 1, 2020
to March 31, 2021

For the period
from April 1, 2020
to September 30, 2020

For the period
from October 1, 2019
to March 31, 2020

For the period
from April 1, 2019
to September 30, 2019

36,901
18,507
18,394
17,477
17,477
16,865
1,003,583
419,493
516,447
497,241
1,385,210
372,829
15,73093.3%
11,35624,204
20,583
1.7%(3.5% annualized)
3.3%(6.5% annualized)
51.5%

34,944
18,464
16,47915,50815,50815,5601,001,734
419,493515,262497,241
1,385,210
371,974
15,680100.8%
11,32024,82522,0891.5%(3.1% annualized)
3.0%(6.1% annualized)
51.4%

34,966
18,46816,49815,60815,60815,5981,000,254
418,993515,302497,241
1,385,210
372,002
15,600100.0%
11,262
24,94322,2251.6%(3.1% annualized)
3.0%(6.0% annualized)
51.5%

35,996
18,641
17,354
16,326
16,32615,755
982,607
401,993
514,400
497,241
1,385,210
371,351
14,697
93.3%
10,61023,413
19,986
1.7%(3.3% annualized)
3.1%(6.1% annualized)
52.4%

35,164
18,66916,494
15,39015,39014,945966,390389,993
512,770
497,241
1,385,210
370,174
14,124
94.5%
10,197
23,104
19,795
1.6%(3.2% annualized)
2.9%(5.8% annualized)
53.1%

41.8%
22.5
27.7

41.9%
20.4
24.8

41.9%
16.8
24.2

40.9%
22.0
24.3

40.4%
25.4
21.4

Notes: 1. Dividend payout ratio = Dividend per unit / Profit per unit × 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, 2019, 183 days for theperiod ended March 31, 2020, 183 days for the period ended September 30, 2020, 182 days for the period ended March 31, 2021 and 183 days for the period ended
September 30, 2021.)
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

Japan Real Estate Investment Corporation24

Balance Sheets
As of March 31, 2021 and September 30, 2021

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   Land leasehold interests   Easement   Other    Total intangible assets   Investments and other assets   Investment securities    Leasehold 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

25

Japan Real Estate Investment Corporation

As of March 31, 2021

As of September 30, 2021

27,205,981
7,147,852
521,760
135,511
20,94835,032,055

37,566,086
6,870,954
339,110245,256
94,06045,115,468

265,776,388(111,950,847)
153,825,541
3,232,451(1,127,789)
2,104,661
3,480,509(2,683,808)
796,701
483,514(320,897)
162,617474,256,178
60,380107,362,525(34,437,955)
72,924,570
1,029,596(396,294)
633,302814,862(584,870)
229,991
72,983(48,399)
24,584
251,658,301
11,316956,688,146

266,582,140(116,042,747)
150,539,392
3,232,451(1,181,006)
2,051,445
3,489,256(2,730,756)
758,499
500,471(334,218)
166,252474,256,178
67,259104,744,019(35,064,476)
69,679,542
1,015,676(415,707)
599,968
847,147(597,799)
249,348
72,866(49,422)
23,444250,042,009
15,760948,449,102

5,611,725
828,095
33,1606,472,981

5,595,895
828,095
29,153
6,453,144

577,168
1,573,847
61,736
1,226,601
3,439,354
966,600,481

577,168
1,573,847
25,585
1,299,141
3,475,742
958,377,989

102,101
102,101
1,001,734,637

89,67389,673
1,003,583,130

Thousands of yen

As of March 31, 2021

As of September 30, 2021

LIABILITIESCurrent liabilities   Operating accounts payable

1,424,904

1,325,773  Short-term borrowings

18,000,000

18,000,000   Current portion of long-term borrowings

51,700,000

51,000,000   Accounts payable - other

1,874,124

2,248,639  Accrued expenses

347,827

340,846   Income taxes payable

11,6128,590   Accrued consumption taxes

1,145,093

1,133,236  Advances received

3,172,578

3,065,332  Other   Total current liabilities

14,142

14,103

77,690,282

77,136,522

Non-current liabilities   Investment corporation bonds

42,993,175

42,993,175  Long-term borrowings

306,800,000

307,500,000   Deposits received from tenants

57,385,322

57,302,592   Deferred tax liabilities

1,217,307

1,817,721   Asset retirement obligations

359,628

363,251  Other

26,345

22,128

408,781,778

409,998,869

486,472,061

487,135,392

497,241,216

497,241,216

2,424,282

2,303,775   Total non-current liabilities
Total Liabilities
NET ASSETS
Unitholders’ equity  Unitholders’ capital  Surplus    Voluntary retained earnings     Reserve for tax purpose reduction entry     Total voluntary retained earnings

2,424,282

2,303,775   Unappropriated retained earnings

15,597,077

16,902,746   Total surplus

18,021,360

19,206,522   Total unitholders’ equity

515,262,576

516,447,738

515,262,576

516,447,738

1,001,734,637

1,003,583,130

Total Net Assets
Total Liabilities and Net Assets

Japan Real Estate Investment Corporation

26

Statements of Income and Retained Earnings
For the six months ended March 31, 2021 and September 30, 2021

Thousands of yen

For the period
from October 1, 2020
to March 31, 2021

For the period
from April 1, 2021
to September 30, 2021

34,666,758

34,209,880

Operating revenues
Rent revenues

277,319

145,110—2,546,518

34,944,078

36,901,509

Expenses related to lease business

16,648,001

16,415,368

Asset management fees

1,433,297

1,719,993

Other lease business revenues
Gain on sales of real estate properties
Total operating revenues
Operating expenses

Asset custody fees

64,70564,717Administrative service fees

134,140

134,827

Directors’ compensations

7,800

7,800

Commission expenses

105,520

89,352Other operating expenses

71,20375,003

Total operating expenses
Operating profit

18,464,669

18,507,062

16,479,409

18,394,447

Non-operating income
Interest income

140

156

Dividend income—

12,149

1,501

1,883

—

9,346

9,166

—

Reversal of distributions payable
Income on settlement of management association accounts
Gain on receipt of donated non-current assets—

010,80723,535Interest expenses

754,704

717,408

Interest expenses on investment corporation bonds

172,899

172,681

Amortization of investment corporation bond issuance costs

11,642

12,427

Other

42,35538,216

Other
Total non-operating income
Non-operating expenses

981,602940,734

Ordinary profit

15,508,613

17,477,248

Profit before income taxes

15,508,613

17,477,248

Total non-operating expenses

Income taxes – current

11,633

11,095

Income taxes – deferred(63,799)

600,413

Total income taxes
Profit27(52,165)

611,50915,560,779

16,865,739

Retained earnings brought forward

36,29737,007

Unappropriated retained earnings

15,597,077

16,902,746

Japan Real Estate Investment Corporation

Statements of Changes in Unitholders’ Equity
For the six months ended March 31, 2021 and September 30, 2021

For the period from October 1, 2020 to March 31, 2021
Thousands of yen

Unitholders’ equity
Surplus
Voluntary retained earnings

Total
net assets

Total surplus

Totalunitholders’equity15,634,440

18,060,815

515,302,031

515,302,031

2,092

—

—

—

Dividends of surplus(15,600,235)(15,600,235)(15,600,235)(15,600,235)

Profit15,560,779

15,560,779

15,560,779

15,560,779

Unitholders’capitalBalance at beginning of the period

497,241,216

Reserve fortax purpose
reduction entry

Totalvoluntary
retainedearnings

Unappropriatedretainedearnings

2,426,375

2,426,375(2,092)(2,092)

Changes during the period Reversal of reserve for tax
purpose reduction entry

Total changes during the period
Balance at end of the period—(2,092)(2,092)(37,363)(39,455)(39,455)(39,455)

497,241,216

2,424,282

2,424,282

15,597,077

18,021,360

515,262,576

515,262,576

For the period from April 1, 2021 to September 30, 2021
Thousands of yen

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

497,241,216

Voluntary retained earnings

Total
net assets

Total surplus

Totalunitholders’equity15,597,077

18,021,360

515,262,576

515,262,576

120,506———(15,680,577)(15,680,577)(15,680,577)(15,680,577)

Reserve fortax purpose
reduction entry

Totalvoluntary
retainedearnings

Unappropriatedretainedearnings

2,424,282

2,424,282(120,506)(120,506)

Changes during the period Reversal of reserve for tax
purpose reduction entry
Dividends of surplus
ProfitTotal changes during the period
Balance at end of the period

16,865,739

16,865,739

16,865,739

16,865,739—(120,506)(120,506)

1,305,668

1,185,162

1,185,162

1,185,162

497,241,216

2,303,775

2,303,775

16,902,746

19,206,522

516,447,738

516,447,738

Japan Real Estate Investment Corporation

28

Statements of Cash Distributions
For the six months ended March 31, 2021 and September 30, 2021

	 
	 I Retained earnings

For the period
from October 1, 2020 to March 31, 2021

For the period
From April 1, 2021 to September 30, 2021

Amount (Yen)Amount (Yen)

15,597,077,487

16,902,746,371

II Reversal of voluntary retained earnings
	  Reversal of reserve for tax purpose reduction entry
III Cash distribution(Dividend per investment unit)

120,506,758—

15,680,577,200

15,730,444,760(11,320)(11,356)—

1,135,294,566

37,007,045

37,007,045

The Company will make cash distributions using earnings based on the cash
distribution policy outlined in Article
32-1(2) of the Company’s Articles ofIncorporation, in an amount that exceeds
90% of the “amount of distributableprofit” as set forth in Article 67-15 of theSpecial Taxation Measures Act. Based on
this policy, the Company has decided thatthe total amount of dividends, which is
calculated by adding the reversal of reserve
for tax purpose reduction entry to theunappropriated retained earnings and also
securing retained earnings brought
forward, is ¥15,680,577,200
for the period, which is a multipleof 1,385,210 — the number of units
outstanding as of March 31, 2021.
Furthermore, the Company does not pay
out dividends that exceed earnings as
outlined in Article 32-1(3) of the Company’s Articles of Incorporation.

The Company will make cash distributions using earnings based on the cash
distribution policy outlined in Article
32-1(2) of the Company’s Articles ofIncorporation, in an amount that exceeds
90% of the “amount of distributableprofit” as set forth in Article 67-15 of theSpecial Taxation Measures Act. Based on
this policy, the Company has decided
that the total amount of dividends,
under the application of Article 65-7
“Exceptions of the Taxation in case of theReplacement by Purchase of Specific Assets”
of the Special Taxation Measures Act,making reduction entries, and securingretained earnings brought forward, is¥15,730,444,760 for the period, which
is a multiple of 1,385,210 — the numberof units outstanding as of September 30,
2021. Furthermore, the Company does
not pay out dividends that exceed earnings as outlined in Article 32-1(3) of theCompany’s Articles of Incorporation.

IV Voluntary retained earnings	 Provision of reserve for tax purpose reduction entry
V Retained earnings brought forward

Computation Method for Determining Dividends

29Japan Real Estate Investment Corporation

Statements of Cash Flows
For the six months ended March 31, 2021 and September 30, 2021

Thousands of yen

For the period
from October 1, 2020
to March 31, 2021

For the period
from April 1, 2021
to September 30, 2021

Profit before income taxes

15,508,613

17,477,248

Depreciation

6,530,798

6,265,006

Gain on receipt of donated non-current assets(9,166)—

Amortization of investment corporation bond issuance costs

11,642

12,427—(12,149)

Cash flows from operating activities

Dividend income
Interest income

(140)

(156)

Interest expenses

927,604

890,089

Decrease (increase) in operating accounts receivable(91,109)

182,650

Decrease (increase) in supplies
Decrease (increase) in prepaid expenses
Decrease in property, plant and equipment in trust due to sale

(129)

191

92,535(109,744)—

3,245,381

Increase (decrease) in operating accounts payable(94,763)

262,177

Increase (decrease) in accounts payable - other(19,649)

372,241

Increase (decrease) in accrued consumption taxes

676,967(11,857)

131

(131)

Increase (decrease) in advances received

1,771(107,245)

Decrease (increase) in long-term prepaid expenses

33,291

36,151Other, net(104,128)(130,155)

Subtotal

23,464,270

28,372,125

Increase (decrease) in accrued expenses

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

140

12,306(947,405)(896,939)(8,269)(14,117)22,508,736

27,473,375(1,431,157)(1,168,607)(353,107)(484,779)

—

(550)

Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of property, plant and equipment in trust
Purchase of intangible assets
Payments of leasehold and guarantee deposits
Refund of leasehold and guarantee deposits received—(7,610)(1,340,413)(2,038,400)

Proceeds from leasehold and guarantee deposits received

1,423,621

1,986,200

Net cash provided by (used in) investing activities(1,701,056)(1,713,747)

Cash flows from financing activities
Proceeds from short-term borrowings

27,500,000

29,000,000

Repayments of short-term borrowings(40,500,000)(29,000,000)

Proceeds from long-term borrowings

31,500,000

24,200,000

Repayments of long-term borrowings(28,000,000)(24,200,000)

Proceeds from issuance of investment corporation bonds

10,000,000—

Payments of investment corporation bond issuance costs(50,315)—

Distributions paid

(15,599,398)(15,676,421)

Net cash provided by (used in) financing activities(15,149,713)(15,676,421)

Net increase (decrease) in cash and cash equivalents

5,657,966

10,083,207

Cash and cash equivalents at beginning of the period

28,695,867

34,353,833

Cash and cash equivalents at end of the period

34,353,833

44,437,040

Japan Real Estate Investment Corporation30

Notes to Financial Statements
March 31, 2021 and September 30, 2021

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. (“JRE-AM”).
On May 11, 2001, the Company was incorporated with ¥200 million of original capital contribution by Mitsubishi Estate Co., Ltd.
(“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.
On February 9, 2021, the transfer of 28,571 JRE-AM shares owned by Mitsui & Co., Ltd. (10.0% of outstanding shares) to MEC wasapproved by the board of directors. Upon the completion of the share transfer on April 16, the percentage of JRE-AM’s shares held by
MEC increased from 90.0% to 100.0%.
As of September 30, 2021, the Company owned a portfolio of 72 office properties with an aggregate of approximately 866,577 m2 ofleasable 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 (“IFRS”).
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, which have no market prices, classified as other securities are carried at cost. Cost of securities sold is determinedby 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 – 75 years
Machinery and equipment ................................................................................ 2 – 18 years
Tools, furniture and fixtures ............................................................................. 2 – 29 years

31Japan Real Estate Investment Corporation

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 (“ASBJ”), companies are
required to recognize an impairment loss in their statements of income if certain indicators of asset impairment exist and the book valueof an asset exceeds the undiscounted sum of future cash flows of the asset. The standard states that impairment losses should be measured
as the excess of the book value over the higher of (i) the fair market value of the asset, net of disposition costs, and (ii) the present valueof future cash flows arising from ongoing utilization of the asset and from disposal after asset use. The standard covers land, factories,
buildings and other forms of property, plant and equipment as well as intangible assets. Fixed assets are grouped at the lowest level forwhich 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

The content of main performance obligations related to revenue arising from contracts with customers of the Company and the normal
timing for satisfying such performance obligations (the normal timing for recognizing revenue) are as follows:(i) Sales of real estate properties
The Company recognizes revenue from the sale of real estate properties when the purchaser, as the customer, obtains control of the realestate property by fulfilling the delivery obligations stipulated in the contract for the sale of real estate property.
(ii) Utilities income
The Company recognizes utilities income based on the supply of electricity, water, etc. to the lessee as the customer, in accordance with theterms of the real estate lease contract and related agreements. Of utilities income, in the case that the Company determines it is an agent
for utilities income, the utilities income is recognized as income at the net amount received as charges for electricity, gas, etc. supplied byother parties, less the amount paid to such other parties.
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.

Japan Real Estate Investment Corporation

32

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.
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. Notes on Changes in Accounting Policies
Application of Accounting Standard for Fair Value Measurement

The Company has applied the “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019) from the
beginning of the fiscal period ended September 30, 2021, and in accordance with the transitional treatments outlined in Paragraph 19 of
Accounting Standard for Fair Value Measurement and Paragraph 44-2 of Accounting Standard for Financial Instruments (ASBJ Statement
No. 10, July 4, 2019), the new accounting policies outlined by Accounting Standard for Fair Value Measurement will be applied prospectively.
The effect of this change on the financial statements is immaterial.
Application of Accounting Standard for Revenue Recognition

The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020) and the“Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, March 26, 2021) from the beginning of the fiscal
period ended September 30, 2021, and recognized revenue at the amount expected to be received in exchange for the promised goods orservices when control of the goods or services is transferred to the customer. The effect of this change on the financial statements is immaterial.
In accordance with the transitional treatment outlined in Paragraph 89-3 of Accounting Standard for Revenue Recognition, the note related
to the Revenue Recognition for the previous fiscal period is not presented.

33

Japan Real Estate Investment Corporation

4. Commitment Line Agreement
As of March 31, 2021 and September 30, 2021
The Company has signed commitment line agreements with three banks.
Total amount of commitment line agreements
Debt financing balance
BalanceThousands of yen

As of March 31, 2021

As of September 30, 2021

60,000,000

60,000,000——

60,000,000

60,000,000

5. Reserve for Tax Purpose Reduction Entry
As of March 31, 2021 and September 30, 2021
Thousands of yen

As of March 31, 2021

As of September 30, 2021

Reserve for tax purpose reduction entry

2,424,282

2,303,775

Deferred tax liability for the reserve for tax purpose reduction entry

1,218,278

1,818,643

Total

3,642,561

4,122,419

Note: Reduction entry is made based on the reserve method, where the requirements of the tax law are met, and deferred tax liability is recorded in the liabilities section
for the future taxable temporary difference related to the amount of the reserve for reduction entry, and the net amount after deducting the deferred tax liability isrecorded in the net assets section as the reserve for tax purpose reduction entry. This deferred tax liability is recorded (or reversed) as a counterpart account of income
taxes-deferred in the statements of income.

Japan Real Estate Investment Corporation

34

6. Financial Instruments
1. Status of financial instruments(1) Policies for dealing with 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 aminimum 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 totalborrowing. The Company may also exercise hedging by means of derivative transactions (interest-rate swap transactions) in order tomitigate the risk of 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, theCompany 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 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, 2021 and
September 30, 2021) and (iii) preparing monthly financial plans.
(3) Supplementary note regarding fair value of financial instruments
		Since the fair value of financial instruments is calculated based on certain assumptions, the fair value could differ depending on theassumptions 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.

35

Japan Real Estate Investment Corporation

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, 2021
and September 30, 2021 are as follows. Since “Cash and deposits”, “Cash and deposits in trust”, and “Short-term borrowings” are cash
and due to be settled in a short period, and their fair values approximate their book values, the notes are omitted.
Thousands of yen

As of March 31, 2021
Book value*

Fair value*(1) Current portion of long-term borrowings(51,700,000)(51,806,789)(106,789)(2) Investment corporation bonds(42,993,175)(44,094,756)(1,101,581)(3) Long-term borrowings(306,800,000)(307,182,235)(382,235)(4) Deposits received from tenants(57,385,322)

—

—

—

—

—

(5) Derivative transactions

Difference** Liabilities are shown in parentheses.
Thousands of yen

As of September 30, 2021
Book value*

Fair value*(1) Current portion of long-term borrowings(51,000,000)(51,136,724)(136,724)(2) Investment corporation bonds(42,993,175)(43,883,557)(890,382)(3) Long-term borrowings(307,500,000)(308,539,593)(1,039,593)(4) Deposits received from tenants(57,302,592)(56,544,390)(-758,201)

—

—

—

(5) Derivative transactions

Difference** Liabilities are shown in parentheses.
Notes: 1. Measurement of fair value of financial instruments and matters concerning derivative transactions
		 (1) Current portion of long-term borrowings and (3) Long-term borrowings			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 reasonableestimates of the rates that would be applicable if the Company were to refinance the existing loans for the remaining period to maturity under the prevailing market
condition.) The fair values of long-term loans with fixed interest rates are calculated by discounting the aggregated amounts of the principal and the interest of theloans 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.
		 (2) 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 with thecurrency swap by nominal rates assumed applicable if the loans were refinanced for the duration of the current maturity.)		 (4) Deposits received from tenants			The fair value of these deposits as of September 30, 2021 is the discounted present value by estimated period until the deposits are returned and discount rate
reflected credit risk of the Company.
		 (5) Derivative transactions
			 Please refer to Section 7. “Derivative Transactions”.

Japan Real Estate Investment Corporation

36

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

As of March 31, 2021

Investment corporation bonds
Long-term borrowings
Total

1 year or less—
51,700,000
51,700,000

1 to 2 years—
48,500,000
48,500,000

2 to 3 years
10,000,000
39,500,000
49,500,000

3 to 4 years—
54,800,000
54,800,000

4 to 5 years
20,000,000
47,500,000
67,500,000

Over 5 years
12,993,175
116,500,000
129,493,175

Thousands of yen

As of September 30, 2021

Investment corporation bonds
Long-term borrowings
Total

37

Japan Real Estate Investment Corporation

1 year or less

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

Over 5 years—
51,000,000
51,000,000—
48,500,000
48,500,000

10,000,000
42,300,000
52,300,000

10,000,000
57,000,000
67,000,000

10,000,000
36,700,000
46,700,000

12,993,175
123,000,000
135,993,175

7. Derivative Transactions(1) Derivatives not designated as hedging instruments
		 As of March 31, 2021
		  “Not applicable”
		As of September 30, 2021
		  “Not applicable”(2) Derivatives designated as hedging instruments
		 As of March 31, 2021
			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

26,300,000*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
borrowings

46,800,000

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
borrowings

Allocation Treatment for currency swap

Receive fixed USD, pay fixed JPY,
currency swap transactions (with initialand final exchange)

Investment
corporation bonds

Over one year

		 As of September 30, 2021
			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

16,800,000*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
borrowings

46,800,000

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
borrowings

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-termborrowings as of March 31, 2021 and September 30, 2021. Please refer to Note 1 of “2. Fair value of financial instruments” under Section 6. “Financial Instruments”,
as well as subheadings (1) and (3) concerning derivative transactions.
*2. Currency swap transactions eligible for allocation treatment 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, 2021 and September 30, 2021. Please refer to Note 1 of “2. Fair valueof financial instruments” under Section 6. “Financial Instruments”, as well as subheading (2) concerning derivative transactions.

Japan Real Estate Investment Corporation

38

8. Property, Plant and Equipment and Intangible Assets
Changes in Property, plant and equipment and Intangible assets for the six months ended September 30, 2021 are as follows:
Thousands of yen
Type of Asset

Increase during
the period

Decrease during
the period

Balance at endof the period

Depreciation andamortization

Net balanceat end ofthe period

Remarks

Property, plant and equipment

Buildings

265,776,388

805,751—

266,582,140

116,042,747

4,091,899

150,539,392—

Structures

3,232,451——

3,232,451

1,181,006

53,216

2,051,445—

Machinery and equipment

3,480,509

8,746

—

3,489,256

2,730,756

46,948758,499—

Tools, furniture and fixtures

483,514

16,956—500,471334,218

13,321

166,252—474,256,178——

474,256,178——

474,256,178—

60,38011,4394,560

67,259——67,259—Buildings in trust

107,362,525

362,2822,980,788

104,744,019

35,064,476

1,989,102

69,679,542—

Structures in trust

1,029,596

751

14,671

1,015,676

415,707

26,795599,968—

Machinery and equipment in trust

814,862

39,095

6,810

847,147

597,799

16,824249,348—

Tools, furniture and fixtures in trust

72,983

2,426

2,543

72,86649,422

2,887

23,444—

251,658,301—

1,616,291

250,042,009——

250,042,009—

11,316

10,133

5,689

15,760——15,760—Subtotal

1,108,239,008

1,257,584

4,631,355

1,104,865,237

156,416,135

6,240,996

948,449,102

Land leasehold interests

5,933,601——

5,933,601

337,706

15,8295,595,895—

Easement

828,095——

828,095——

828,095—

Other

55,677550—

56,227

27,074

4,556

29,153—

6,817,374

550—

6,817,924

364,780

20,386

6,453,144

1,115,056,383

1,258,134

4,631,355

1,111,683,162

156,780,915

6,261,383

954,902,247

LandConstruction in progress

Land in trust
Construction in progress in trust

Intangible assets

Subtotal
Total

39

Balance at
beginning of
the period

Accumulated depreciation
Accumulated amortization

Japan Real Estate Investment Corporation

9. Borrowings
The condition of loans by financial institutions as of September 30, 2021 is as follows.

Drawdown date

Balance at
beginning ofcurrent period(¥ thousand)

Balance at
end ofcurrent period(¥ thousand)Averageinterest
rate*1(%)

Repayment date

Sumitomo Mitsui Trust Bank, Limited

April 20, 2020

2,000,000—

0.1172

April 20, 2021

Mizuho Bank, Ltd.

April 20, 2020

5,000,000—

0.1172

April 20 2021

MUFG Bank, Ltd. *3

February 18, 2021

11,000,000*3—0.11909

May 18, 2021

MUFG Bank, Ltd. *4

May 18, 2021——

0.10909

August 18, 2021

MUFG Bank, Ltd. *5

August 18, 2021—

11,000,000*50.09727

November 18, 2021

Mizuho Bank, Ltd.

April 20, 2021—

5,000,000

0.12524

April 20, 2022

Sumitomo Mitsui Trust Bank, Limited

April 20, 2021—

2,000,000

0.12524

April 20, 2022

18,000,000

18,000,000
0.000
*6

April 5, 2021

Classification
LenderShort-term borrowings

Subtotal
MUFG Bank, Ltd.

April 4, 2017

5,000,000—

MUFG Bank, Ltd.

April 24, 2013

5,000,000

—

0.775

April 26, 2021

Mizuho Bank, Ltd.

June 15, 2012

4,000,000—

1.07375

June 15, 2021
June 28, 2021

Sumitomo Mitsui Trust Bank, Limited

December 26, 2016

3,700,000—

0.1913

Sumitomo Mitsui Banking Corporation

January 19, 2018

5,000,000—

0.16255

July 20, 2021

The Bank of Fukuoka, Ltd.

August 31, 2017

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
*7

The Chugoku Bank, Limited

October 1, 2014

1,000,000

1,000,000

0.4725October 1, 2021
*7

Daishi Hokuetsu Bank, Ltd.

3,200,000

3,200,000

Sony Bank Incorporated

1,400,000

1,400,000

Long-term borrowings

The Toho Bank, Ltd.

1,400,000

1,400,000

The Shinkumi Federation Bank

1,000,000

1,000,000

The Akita Bank, Ltd.

900,000

900,000

The Gunma Bank, Ltd.

900,000

900,000

900,000

900,000

The Tochigi Bank, Ltd.

900,000

900,000

The 77 Bank, Ltd.

November 14, 2014

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

The Yamagata Bank, Ltd.

500,000

500,000

0.463

November 15, 2021
*7

The Nishi-Nippon City Bank, Ltd.

June 17, 2014

2,000,000

2,000,000

0.621

December 17, 2021
*7

Sumitomo Mitsui Banking Corporation

January 7, 2013

2,000,000

2,000,000

0.980

January 7, 2022
*7

Mizuho Bank, Ltd.

January 15, 2013

5,000,000

5,000,000

0.96625

January 17, 2022
*7

The Norinchukin Bank

January 31, 2014

3,500,000

3,500,000

0.757

January 31, 2022
*7

Mizuho Bank, Ltd.

April 24, 2013

3,000,000

3,000,000

0.87375

April 25, 2022
*7

Repayment
methodUse ofproceeds

Notes

Bullet*2

Unsecured
Unguaranteed
UnsubordinatedBullet*2

Unsecured
Unguaranteed
UnsubordinatedJapan Real Estate Investment Corporation

40

Drawdown date

Balance at
beginning ofcurrent period(¥ thousand)

Balance at
end ofcurrent period(¥ thousand)Averageinterest
rate*1(%)

Repayment date

MUFG Bank, Ltd.

June 15, 2012

4,000,000

4,000,000

1.1975June 15, 2022
*7

MUFG Bank, Ltd.

June 15, 2012

2,500,000

2,500,000

1.2725June 15, 2022
*7

Shinsei Bank, Limited

June 15, 2012

2,500,000

2,500,000

1.2725June 15, 2022
*7

The Norinchukin Bank

June 17, 2014

3,000,000

3,000,000

0.6785June 17, 2022
*7

0.3925

August 10, 2022
*7

Classification
Lender

The Gunma Bank, Ltd.

1,000,000

1,000,000

The Shinkumi Federation Bank

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

1,000,000

Daishi Hokuetsu Bank, Ltd
The Chugoku Bank, Limited

Long-term borrowing

41

August 10, 2015

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

2,000,000

2,000,000

0.47125

September 1, 2022
*7

MUFG Bank, Ltd.

September 1, 2015

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

Daishi Hokuetsu Bank, Ltd.

January 7, 2016

1,500,000

1,500,000

0.2802January 10, 2023

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

0.210January 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

Sumitomo Mitsui Banking Corporation

November 29, 2018

3,000,000

3,000,000

0.1694

May 29, 2023

Sumitomo Mitsui Trust Bank, Limited

November 29, 2018

3,000,000

3,000,000

0.1694

May 29, 2023
June 1, 2023

MUFG Bank, Ltd.

June 1, 2017

12,000,000

12,000,000

0.02035*6

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

MUFG Bank, Ltd.

December 19, 2014

10,000,000

10,000,000

0.42375*8

December 19, 2023

MUFG Bank, Ltd.

March 26, 2018

5,000,000

5,000,000

0.01374*6

March 26, 2024

The Hachijuni Bank, Ltd.

March 26, 2018

1,000,000

1,000,000

0.2338March 26, 2024

Sumitomo Mitsui Trust Bank, Limited

May 29, 2019

5,000,000

5,000,000

0.075

May 29, 2024

The Iyo Bank, Ltd.

June 15, 2017

2,500,000

2,500,000

0.275

June 17, 2024

Japan Real Estate Investment Corporation

Repayment
methodUse ofproceeds

Notes

Bullet*2

Unsecured
Unguaranteed
UnsubordinatedDrawdown date

Balance at
beginning ofcurrent period(¥ thousand)

Balance at
end ofcurrent period(¥ thousand)Averageinterest
rate*1(%)

Repayment date

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

0.630

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

0.240

September 2, 2024

Sumitomo Mitsui Trust Bank, Limited

September 26, 20195,500,000

5,500,000

0.105

September 26, 2024

Classification
LenderTaiyo 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
November 18, 2024

The Gunma Bank, Ltd.

November 18, 2019

1,000,000

1,000,000

0.11894*6

MUFG Bank, Ltd.

June 1, 2018

10,000,000

10,000,000

0.2544

December 2, 2024

Shinkin Central Bank

January 7, 2020

2,000,000

2,000,000

0.2075January 7, 2025

The Ashikaga Bank, Ltd.

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

Sumitomo Mitsui Trust Bank, Limited

June 15, 2020

7,000,000

7,000,000

0.2075June 16, 2025

Long-term borrowin

Sumitomo Mitsui Banking Corporation

July 20, 2021—

5,000,000

0.15375

July 22, 2025

Sumitomo Mitsui Trust Bank, Limited

August 31, 2018

3,000,000

3,000,000

0.320

August 29, 2025

Development Bank of Japan Inc.

September 1, 2015

7,000,000

7,000,000

0.7175September 1, 2025

Sumitomo Mitsui Trust Bank, Limited

September 23, 2020

5,000,000

5,000,000

0.1475September 24, 2025

Mizuho Bank, Ltd.

December 26, 2016

5,000,000

5,000,000

0.3625

December 26, 2025

Sumitomo Mitsui Trust Bank, Limited

January 29, 2021

2,000,000

2,000,000

0.1625January 29, 2026

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

0.300

March 27, 2026

Shinkin Central Bank

March 30, 2017

5,000,000

5,000,000

0.360

March 30, 2026

Sumitomo Mitsui Trust Bank, Limited

June 28, 2021—

3,700,000

0.17875

June 29, 2026

The Norinchukin Bank

January 23, 2019

4,000,000

4,000,000

0.1988July 23, 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

0.240

October 30, 2026

Mizuho Bank, Ltd.

December 21, 2016

5,000,000

5,000,000

0.415

December 21, 2026

Shinkin Central Bank

January 23, 2019

5,000,000

5,000,000

0.2213January 25, 2027

Shinkin Central Bank

April 24, 2018

6,000,000

6,000,000

0.3675

April 26, 2027

The Norinchukin Bank

July 3, 2020

2,000,000

2,000,000

0.24375

July 5, 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

The Bank of Fukuoka, Ltd.

January 29, 2021

2,500,000

2,500,000

0.21875

January 31, 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

Repayment
methodUse ofproceeds

Notes

Bullet*2

Unsecured
Unguaranteed
UnsubordinatedJapan Real Estate Investment Corporation

42

Drawdown date

Balance at
beginning ofcurrent period(¥ thousand)

Balance at
end ofcurrent period(¥ thousand)Averageinterest
rate*1(%)

Repayment date

March 30, 2018

1,000,000

1,000,000

0.3963

March 30, 2028

Classification
LenderTaiyo Life Insurance Company
The Bank of Fukuoka, Ltd.

August 31, 2021—

1,500,000

0.20625

August 31, 2028

Mizuho Bank, Ltd.

November 15, 20198,500,000

8,500,000

0.34875

November 15, 2028

Shinkin Central Bank

January 15, 2020

5,000,000

5,000,000

0.325

January 15, 2029

Mizuho Bank, Ltd.

November 1, 2019

6,000,000

6,000,000

0.35125

November 1, 2029

Long-term borrowings

MUFG Bank, Ltd.

January 15, 2020

5,500,000

5,500,000

0.3625January 15, 2030

MUFG Bank, Ltd.

April 27, 2020

5,000,000

5,000,000

0.35875

April 26, 2030

Mizuho Bank, Ltd.

April 27, 2020

5,000,000

5,000,000

0.35875

April 26, 2030

MUFG Bank, Ltd.

June 15, 2020

4,000,000

4,000,000

0.36125

June 14, 2030

MUFG Bank, Ltd.

October 20, 2020

5,000,000

5,000,000

0.2925October 18, 2030

MUFG Bank, Ltd.

December 21, 2020

10,000,000

10,000,000

0.2825

December 20, 2030

The Iyo Bank, Ltd.

March 24, 2021

2,000,000

2,000,000

0.17335*6

March 24, 2031

The Yamanashi Chuo Bank, Ltd.

March 26, 2019

2,000,000

2,000,000

0.3688March 26, 2031

MUFG Bank, Ltd.

April 5, 2021—

5,000,000

0.41875

April 4, 2031

MUFG Bank, Ltd.

April 26, 2021—

5,000,000

0.35625

April 25, 2031

Mizuho Bank, Ltd.

June 15, 2021—

4,000,000

0.28875

June 16, 2031

The Norinchukin Bank *9January 29, 2021

5,000,000

5,000,000

0.34625

July 31, 2031

The Norinchukin Bank *10

January 29, 2021

5,000,000

5,000,000

0.3675January 30, 2032

Sumitomo Life Insurance Company

March 26, 2019

1,000,000

1,000,000

0.505

March 27, 2034

Sumitomo Life Insurance Company

December 16, 2019

2,000,000

2,000,000

0.490

December 18, 2034

Subtotal

358,500,000

358,500,000

Total

376,500,000

376,500,000

Repayment
methodUse ofproceeds

Notes

Bullet*2

Unsecured
Unguaranteed
Unsubordinated*1.	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.
*2.	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.
*3. As of February 18, 2021, MUFG Bank, Ltd. transferred its loan receivable of ¥10,400 million to Mitsubishi UFJ Trust and Banking Corporation.
*4. As of May 18, 2021, MUFG Bank, Ltd. transferred its loan receivable of ¥9,800 million to Mitsubishi UFJ Trust and Banking Corporation.
*5. As of August 18, 2021, MUFG Bank, Ltd. transferred its loan receivable of ¥11,000 million to Mitsubishi UFJ Trust and Banking Corporation.
*6. These are floating rate borrowings which are not swapped into fixed rates.
*7. At the end of the period, these loans are accounted for under current liabilities on the balance sheets as the current portion of long-term borrowings.
*8.	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 and currency 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.
*9.	The applicable interest rate will be lowered by 0.01% from the original rate of 0.35625% for a corresponding period pursuant to the loan agreement on the condition thateither one of the targets set for CO2 emissions reduction or the number of ZEB-certified buildings the Company owns, respectively, is achieved. Since the target wasachieved at the time of confirmation at the end of July 2021, the interest rate for the period until the next confirmation was 0.34625%.
*10.	The applicable interest rate will be lowered by 0.01% from the original rate of 0.3775% for a corresponding period pursuant to the loan agreement on the condition thateither one of the targets set for CO2 emissions reduction or the number of ZEB-certified buildings the Company owns, respectively, is achieved. Since the target wasachieved at the time of confirmation at the end of July 2021, the interest rate for the period until the next confirmation was 0.3675%.

43

Japan Real Estate Investment Corporation

10. Investment Corporation Bonds including Current Portion of Investment Corporation Bonds
Outstanding investment corporation bonds as of September 30, 2021 are as follows.

Securities

4th unsecured investment
corporation bond10th unsecured investment
corporation bond11th unsecured investment
corporation bond12th unsecured investment
corporation bond (Japan Real
Estate Investment Green Bonds)
13th unsecured investment
corporation bond
Total

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

March 30, 2017

10,000,000

10,000,000

0.3975

March 30, 2027

Bullet*1*2 *3

October 26, 2017

2,993,175

2,993,175

0.2788October 26, 2027

Bullet*1*2 *3 *4

November 1, 2018

10,000,000

10,000,000

0.23

November 1, 2023

Bullet*1*2

October 26, 2020

10,000,000

10,000,000

0.2

October 24, 2025

Bullet*1*2

42,993,175

42,993,175*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.

Japan Real Estate Investment Corporation

44

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 earnings 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 profit available
for dividends for the fiscal period as stipulated by Article 67-15 of the Special Taxation Measures Act. The significant components ofdeferred tax assets and liabilities as of March 31, 2021 and September 30, 2021 were as follows:
Thousands of yen

As of March 31, 2021

As of September 30, 2021

Deferred tax assets:
Accrued enterprise tax

971

921

Amortization of a term leasehold interest

111,337

116,812

Asset retirement obligations

124,395

125,648236,703

243,383

Valuation allowance(134,276)(141,005)

Total deferred tax assets

102,426

102,377

101,455

101,455

Reserve for advanced depreciation of non-current assets

1,218,278

1,818,643

Total deferred tax liabilities

1,319,734

1,920,098

1,217,307

1,817,721

Deferred tax liabilities:
Asset retirement obligations

Net deferred tax liabilities

The reconciliation of tax rate difference between the adjusted statutory tax rate and the effective tax rate as of March 31, 2021 and
September 30, 2021 was as follows:45

As of March 31, 2021

As of September 30, 2021

Statutory tax rate

34.59%

34.59%

Deductible dividend distribution(34.97%)(31.13%)

Change in valuation allowance

0.04%

0.04%

Others

0.00%

0.00%

Effective tax rate

(0.34%)

3.50%

Japan Real Estate Investment Corporation

13. Related Party Transactions
For the six months ended March 31, 2021 and September 30, 2021
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, 2020 to March 31, 2021
			“Not applicable”
		For the period from April 1, 2021 to September 30, 2021
			“Not applicable”(2) Affiliated Companies
		 For the period from October 1, 2020 to March 31, 2021
			“Not applicable”
		For the period from April 1, 2021 to September 30, 2021
			“Not applicable”(3) Sister Companies
		 For the period from October 1, 2020 to March 31, 2021
			“Not applicable”
		For the period from April 1, 2021 to September 30, 2021
			“Not applicable”(4) Directors and Major Individual Unitholders
		 For the period from October 1, 2020 to March 31, 2021
			“Not applicable”
		For the period from April 1, 2021 to September 30, 2021
			“Not applicable”

Japan Real Estate Investment Corporation46

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, 2020 to March 31, 2021 (Unaudited)Type of relationship

Name oftransaction partner

Interested party

Mitsubishi EstateCo., Ltd.

Type of business

Percentage ofunits held

Transaction details

Rent revenue
Real estate

1.24%

Security deposit increase
Security deposit return

Interested party

Mitsubishi Jisho
Property Management
Co., Ltd.

Asset custodycompany

Sumitomo Mitsui
Trust Bank, Limited

Real estate
management

Bank

—

—

Transaction amount(¥ thousand)

15,718,057

Accounting item—

237,326 Deposits received
from tenants
302,401

Property management
expenses

2,431,521

Proceeds fromlong-term borrowings

2,000,000

Repayments oflong-term borrowings

2,000,000—

Long-term
borrowings

Balance at
end of the period(¥ thousand)—
20,743,119—

41,000,000

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, 2021 to September 30, 2021 (Unaudited)Type of relationship

Name oftransaction partner

Type of business

Percentage ofunits held

Transaction details

Interested party

Mitsubishi EstateCo., Ltd.

Real estate

1.24%

Security deposit increase

Rent revenue

Security deposit return
Interested party

Mitsubishi Jisho
Property Management
Co., Ltd.

Asset custodycompany

Sumitomo Mitsui
Trust Bank, Limited

Real estate
management

Bank

—

—

Japan Real Estate Investment Corporation

15,408,925

Accounting item—

270,280 Deposits received
from tenants
867,437

Property management
expenses

2,421,279

Proceeds fromlong-term borrowings

3,700,000

Repayments oflong-term borrowings

3,700,000

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.

47

Transaction amount(¥ thousand)—Long-term
borrowings

Balance at
end of the period(¥ thousand)—
20,145,963—

41,000,000

14. Segment Information
For the six months ended March 31, 2021 and September 30, 2021
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, 2021 and September 30, 2021
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, 2021 and September 30, 2021 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, 2020
to March 31, 2021

For the period from April 1, 2021
to September 30, 2021

356,041

359,628

—

—

3,587

3,623

359,628

363,251

Japan Real Estate Investment Corporation48

16. Investment and Rental Property
For the six months ended March 31, 2021 and September 30, 2021
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, 2021 and September 30, 2021 and the fair values as of March 31, 2021 and
September 30, 2021 are as follows:
Thousands of yen

Book value

Fair value

As of September 30, 2020

Change during the period *1

As of March 31, 2021

As of March 31, 2021

967,442,207(4,281,843)

963,160,363

1,255,095,000

Thousands of yen

Book value

Fair value

As of March 31, 2021

Change during the period *2

As of September 30, 2021

As of September 30, 2021

963,160,363(8,258,298)

954,902,065

1,247,489,000

Notes: 1. Book value on balance sheets means the acquisition cost less accumulated depreciation.
2. Significant changes
		 *1. As for the increases/decreases for the period, the major reason for the decreases was by depreciation.
		 *2. As for the increases/decreases for the period, the major reasons for the decreases were the disposition of Otsuka Higashi-Ikebukuro Building (¥3,245,381 thousand)and by depreciation.
3. Fair values as of March 31, 2021 and September 30, 2021 are defined as the appraised values provided by an external qualified professional appraiser. As of March 31,
2021, Otsuka Higashi-Ikebukuro Building, for which the disposition agreement was made dated March 31, 2021, was valued at the disposition price and asof September 30, 2021, Nagoya Misono Building, for which the disposition agreement was made dated November 15, 2021, was valued at the disposition price.

Profits and losses related to investment and rental property are listed in Section 19. “Breakdown of Property-Related Revenues and Expenses”.

17. Revenue Recognition
Breakdown information on revenue from contracts with customers
For the period from April 1, 2021 to September 30, 2021
Thousands of yen

Revenue from contracts with customers *1

Sales of real estate properties

6,025,000

Utilities income

1,484,652 *3

OthersTotal

Revenue from external customers

2,546,518 *2
1,484,652—

32,870,339

7,509,652

36,901,509*1.	Rent revenues subject to Accounting Standard for Lease Transactions (ASBJ Statement No. 13) is excluded from “Revenue from contracts with customers” as it is
not subject to Accounting Standard for Revenue Recognition. The revenue from contracts with customers is mainly revenues from the sale of real estate and utilities.
*2	Sales of real estate properties are recorded as gains or losses on sales of real estate properties in the statements of income in accordance with Article 48-2 of the Regulations
on Accounting of Investment Corporation (Cabinet Office Ordinance No. 47 of 2006), and therefore the amount is the proceeds from sales of real estate properties, less thecost of real estate properties sold and other sales expenses.
*3	Utilities income is the amount of income recognized in proportion to the supply of electricity, water, etc. to the lessee as the customer, in accordance with the terms of thereal estate lease contract and related agreements.

49

Japan Real Estate Investment Corporation

18. Per Unit Information
The following table summarizes information about net assets per unit and profit per unit as of March 31, 2021 and September 30, 2021
and for the periods then ended, respectively:
Yen

For the period from October 1, 2020
to March 31, 2021

For the period from April 1, 2021
to September 30, 2021

Net assets per unit

371,974

372,829

Profit per unit

11,233

12,175

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

For the period from October 1, 2020
to March 31, 2021

For the period from April 1, 2021
to September 30, 2021

15,560,779—
15,560,779
1,385,210 units

16,865,739—
16,865,739
1,385,210 units

19. Breakdown of Property-Related Revenues and Expenses
For the six months ended March 31, 2021 and September 30, 2021
Thousands of yen

For the period from October 1, 2020
to March 31, 2021

For the period from April 1, 2021
to September 30, 2021

Property-Related Revenues
Rent revenues  Rental revenues   Common service charges  Parking revenues   Other rental revenues
Other lease business revenues  Cancellation charges   Other miscellaneous revenues

34,944,078

34,354,991

34,666,758

34,209,880

29,084,031

28,798,594

2,501,546

2,404,480

98,60022,883

178,719

122,226

Property-Related Expenses
Expenses related to lease business   Property management expenses  Utilities expenses   Property and other taxes  Casualty insurance  Repairing expenses  Depreciation   Other rental expenses
Property-Related Profits

16,648,001

16,415,368

16,648,001

16,415,368

3,792,045

3,653,419

1,959,967

2,106,626

3,295,526

3,384,587

722,895

702,272

2,358,284

2,304,533

277,319

145,11045,983

46,624

823,623

776,505

6,529,196

6,264,424

201,658

183,179

18,296,076

17,939,622

Japan Real Estate Investment Corporation50

20. Breakdown of Gain on Sales of Real Estate Properties
For the period from October 1, 2020 to March 31, 2021
“Not applicable”
For the period from April 1, 2021 to September 30, 2021
Thousands of yen

Otsuka Higashi-Ikebukuro Building

Revenue from sale of real estate property
Cost of real estate property sold
Other sales expenses
Gain on sales of real estate properties

6,025,000
3,245,381
233,100
2,546,518

21. Changes in Unitholders’ Equity
For the six months ended March 31, 2021 and September 30, 2021
Total number of investment units issuable
and number of units outstanding

Total number of investment units issuable
Number of units outstanding

As of March 31, 2021

As of September 30, 2021

4,000,000 units
1,385,210 units

4,000,000 units
1,385,210 units

22. Supplemental Cash Flow Information
Cash and cash equivalents

The following table represents a reconciliation of cash and cash equivalents as of March 31, 2021 and September 30, 2021:
Thousands of yen

As of March 31, 2021

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

As of September 30, 2021

27,205,981
7,147,852—
34,353,833

37,566,086
6,870,954—
44,437,040

23. Leases
1. L eased assets under finance lease transactions that do not transfer ownership of the leased assets to the lessees are capitalized and depreciated by thestraight-line method over the lease term with no residual value. Such capitalized leased assets primarily consist of tools, furniture and fixtures.
2. The Company, as a lessor, owns office buildings under leases and earns rent income. As of March 31, 2021 and September 30, 2021, thefuture lease revenues under the non-cancelable operating leases are as follows:
Thousands of yen

As of March 31, 2021

Due within one year
Due after one year
Total

24. Subsequent Events
For the six months ended September 30, 2021
“Not applicable”

51

Japan Real Estate Investment Corporation

28,645,305
44,882,616
73,527,922

As of September 30, 2021

27,261,909
44,318,496
71,580,405

Japan Real Estate Investment Corporation

52

53

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 company, 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 company 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 and construction, other defects, non-conformity to the agreement or problems in theproperties;• 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 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 the 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;• risk of dilution as a result of further issuances of units;• risks related to unexpected repair costs; and• risks related to pandemics, including the COVID-19 pandemic, and natural disasters.

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, 2021)
As Mitsui & Co., Ltd. was no longer a sponsor of JRE as of April 16, 2021, we revised the description of JRE’s sponsors under theheadings “Investment strategy” (Article 23(1)(a)), “Techniques it may employ and all associated risks” (Article 23(1)(a)) and “Descriptionof the main legal implications of the contractual relationship entered into for the purpose of investment, including jurisdiction,
applicable law, and the existence or not of any legal instruments providing for the recognition and enforcement of judgments in the
territory where the AIF is established” (Article 23(1)(c)).

3. Remuneration Policy for Asset Manager Directors, Corporate Auditors and Employees
Beginning April 1, 2020 and ending March 31, 2021
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(in millions of JPY)

Number of
person(s)remunerated

36

0

Total

Remuneration(in millions of JPY)

Number of
person(s)remunerated

Remuneration(in millions of JPY)

0

2

36

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.)
is stipulated 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

45

Remuneration (in millions of JPY)
Total

Fixed

Variable

385

253

132

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, 2021

Executives
Executive Director: Yutaka Yanagisawa
Supervisory Directors: ‌Tomohiro Okanoya
Hiroaki Takano
Paid-in Capital
JPY 497,241,216,000
Number of Units Outstanding
1,385,210
Number of Unitholders
13,932
Stock 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
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 of Japan.
This report was prepared in English solely for the convenience of readers outside Japan and should not be considered as a disclosure statement.
The original Japanese documents shall take precedence in the event of any discrepancies arising from the translations or interpretations containedin this report.
Estimates for the Company’s future operating results contained in this semiannual report are forward-looking statements and are based on
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 substantially from the projections
depending on a number of factors.

Japan Real Estate Investment Corporation

58

Japan Real Estate Investment Corporation
SEMIANNUAL REPORT

September 2021

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

Printed in Japan