November19, 2002

JAPAN REAL ESTATE INVESTMENT CORPORATIONANNOUNCEMENT OF SECOND FISCAL PERIOD RESULTS

1. Summary of Financial Results
On November 19, 2002, Japan Real Estate Investment Corporation (“JRE”, TSE: 8952) has
announced financial results of its second fiscal period ended September 30, 2002.
For the second fiscal period, JRE reported gross revenues of 7,910 million yen, operating
profits of 3,386 million yen, recurring profits of 2,898 million yen and net income of 2,897
million yen, or 12, 853 yen per unit.
As of September 30, 2002, JRE’s total asset balance was 185, 397 million yen and its net
worth was 115,049 million yen, or 510,424 yen per unit. On its balance sheet, JRE boreinterest bearing debt of 54, 000 million yen.
2. Current Status(1) General Overview of the Current Period
JRE was listed on the Tokyo Stock Exchange (“TSE”) on September 10, 2001, and as ofthe end of its first fiscal period on March 31, 2002 had acquired 24 properties at a totalacquisition price of 144,697 million yen, laying the foundation for its portfolio of realestate assets. During the six-month period under review, ended September 30, 2002, JRE
issued additional shares and corporate bonds, and continued its acquisition of properties inorder to ensure steady growth.
(2) Results of Operations① Issuance of Additional Shares and Corporate Bonds
The Japanese economy during the period under review showed signs of further stagnation
due to such factors as the slowdown in the U.S. economy and the delays in resolving thebad debt problem in Japan. In the market for leased office space as well, the demand forexisting floor space weakened owing to continued corporate integration. In such a market
environment, the general expectation is that increased competition will allow those withrelative merit in the market to stand out, and the profitability gap between properties will
widen. More information on properties being put up for sale is therefore expected to comefrom individuals and companies that do not specialize in office space leasing.
With this state of affairs in mind, JRE determined that making financial preparations forproperty acquisition was an urgent matter in terms of its growth over the medium term. Asa result, JRE became the first J-REIT to make an additional public share offering (65,000shares) after its initial listing. This generated approximately 30.9 billion yen on May 8,2002, increasing JRE’s capital to a level in line with expectations for the growth of JRE’sportfolio of real estate assets. With this base JRE’s financing options such as borrowings
have been enhanced. JRE also became the first J-REIT to issue corporate bonds for
qualified investors (June 21, 2002). While further diversifying JRE’s methods of financing,1

this also raised 25 billion yen in capital. These corporate bonds received credit ratings of
A+ from Standard & Poor’s, and A2 from Moody’s Investors Service.
JRE has used this capital to repay 40 billion yen in short-term borrowings made for theacquisition of properties during the previous term, (full amount repaid on June 24, 2002),
and efforts to acquire new properties.
② Property Management and Administration
JRE, during the period under review, conducted a meticulous examination of manydifferent properties being offered for sale, considering them from all angles in terms ofearnings stability and returns in order to assess their value. JRE then acquired those
properties that it determined on the whole would be worthy investments. The threeproperties acquired during the term are the MD Kanda Building (May 31; 9,520 millionyen), the Burex Kyobashi Building (June 22; 5,250 million yen), and the Kandabashi Park
Building (August 15; 4,810 million yen).
As a result, at the end of the period under review on September 30, 2002 JRE’s portfolio
consisted of 27 office buildings, acquired for a total of 164,277 million yen, with total
leasable floor space of 215,928m2 and a total of 339 tenants. For the purchase of theadditional properties JRE made short-term borrowings of 5.0 billion yen on August 15,
bringing its total borrowings to 29.0 billion yen (24.0 billion yen in long-term borrowings),
with outstanding issues of corporate bonds totaling 25.0 billion yen.
In terms of operations, in addition to the highly competitive strength of the properties
acquired, systematic management has allowed us to maintain an average occupancy rate ofalmost 94% for the period (95.3% at the end of the term).
(3) Performance
The operations outlined above resulted in gross revenues of 7,910 million yen, andoperating profits of 3,386 million yen. Recurring profits, excluding interest expenses,operating and administrative costs, and amortization expenses related the issuing ofadditional shares and corporate bonds, was 2,898 million yen. Net income was 2,897
million yen. JRE’s policy with regard to cash distributions is to issue dividends ofapproximately 100% of taxable income, in accordance with Article 67-15 of the Special
Taxation Measures Law of Japan applicable to J-REITs. The dividend for the period underreview was 12,853 yen per share.
3. Outlook for the Next Period(1) General Operational Outlook
There is concern that demand in the market for leased office space in the greater Tokyo
metropolitan area (which includes Tokyo, Kanagawa Prefecture, Chiba Prefecture andSaitama Prefecture) will be adversely affected as businesses respond to the lack of
economic recovery by continuing to consolidate offices and otherwise reduce their officespace utilization. On the supply side, it is predicted that the so-called “year 2003problem”—which refers to an expected increase in supply of new, large-scale buildings,
particularly in central Tokyo—will gradually elicit a general downturn in the market.
Demand is also weakening in regional urban centers, as the centralization of commerce inTokyo continues.
Worsening conditions in the market for leased office space also underscore the relative
merits of the market, in that an increasing polarization between office buildings with rising
occupancy rates and those with falling occupancy rates is expected to emerge. It is thought2that these factors, combined with the movement toward the adoption of impairment
accounting, will lend renewed strength to the trend toward the contraction of corporate
assets. This leads to forecasts that the market will see a large and continuous flow of officebuildings offered for sale.
① Property Acquisition
In light of the above analysis, JRE has adopted the following policies to guide its
acquisition of properties to improve both profitability and stability of earnings.
i. Because the early acquisition of information is vital, JRE is strengthening its existing
real estate information channels, and is developing new channels through which to obtain
information on available properties.
ii. In its acquisition activities, JRE will conduct due diligence, being meticulous in its
investigation and consideration of the economic factors, physical condition, and legal statusof potential acquisitions. Through this heightened attention to the utility of potentialacquisitions, JRE will be highly selective in its investments. JRE is targeting buildings thatmeet or exceed new earthquake-resistance standards and which will be able to remaincompetitive over the medium to long term.
iii. The general target for regional diversity of property ownership, in accordance withJRE’s property-acquisition policies, is for 60% to 70% to be located in the greater Tokyo
metropolitan area, with the remainder located in other regional urban centers. It is possible,
however, that future trends in office demand may cause us to diverge from the above ratio,
and increase the proportion of JRE’s holdings in the greater Tokyo metropolitan area.
The timing of property acquisition cannot be ascertained in advance. Therefore, JRE’s
policy is to fund property acquisition with short-term loans, then to refinance utilizing
various funding methods, including corporate bonds, taking into account trends in financial
markets at the time. When effecting such a loan, it is JRE’s policy to minimize funding
costs by negotiating with several qualified institutional investors before settling on a lender.
② Property Administration
Because a weakening in the market for leased office space is forecast, it is also predictedthat it will be difficult for JRE to increase its rental revenues. Further, occupancy rates insome properties may decline. In response to these business conditions, JRE has adopted thefollowing policies:
i. Strengthen JRE’s relationship of trust with existing tenants
At September 30, 2002, JRE had contracts with seven property management companies forthe administration of its properties. In almost all cases, these firms were managing theirrespective buildings before JRE acquired them, and so they have long-establishedrelationships with the tenants. Further strengthening these relationships will allow us toanticipate tenant needs, heightening tenant satisfaction and reducing turnover.
ii. Fill vacancies promptly
In cooperation with the property management companies mentioned above, JRE seeks thebest tenants for its properties in consideration of their location and other characteristics,
working energetically to fill vacancies as rapidly as possible. JRE is also working to
uncover latent demand for expansion of floor space among JRE’s existing tenants.

3

iii. Promote fixed and long-term lease contracts
To assure future revenues, JRE is working to gradually shift to fixed lease contracts andlong-term lease contracts.
iv. Reduce administrative costs
JRE promotes healthy competition among the seven property management companies it
employs, encouraging them to improve their administrative structures and re-evaluate costs.
JRE’s target is to achieve a 5% reduction in management fees and utility expenses for allproperties within three years of their acquisition.
(2) Performance Forecasts
In JRE’s third six-month period (ending March 31, 2003), gross revenues are forecast at
8,300 million yen, recurring profits at 3,200 million yen, and net income at 3,200 million
yen. JRE also expects to pay cash dividends of 14,300 yen per share. Actual figures forgross revenues, recurring profits, net income and cash dividends may vary due to changes
in these operating conditions.
The forecasts for the six-month period ending September 30, 2003 are for gross revenuesof 8,300 million yen, recurring profits of 3,000 million yen, and net income of 3,000
million yen. Cash dividends for the same period are forecast at 13,600 yen
Per share.
JRE has acquired or has agreed to acquire two additional properties after the end of
September. Details on these properties are as follows:
Kokusai Iidabashi Building
Transaction Summary
Type of Ownership: Land: Fee Simple/Leasehold, Building: Fee Simple
Acquisition price: 5,000 million yen
Acquisition date: October 31, 2002
Property Summary
Location: 3-6-5, Iidabashi, Chiyoda-ku, Tokyo
Area: <Land>: 1,052.80m2, <Building>: 6,722.02m2
Structure: One floor below ground, eight above
Built in: September 1985
Net Rentable area: 4,791m2
Occupancy rate: 100%da Vinci Harajuku
Transaction Summary
Type of Ownership: Fee Simple
Acquisition price: 4,885 million yen
Acquisition date: November 22, 2002
Property SummaryLocation: 3-25-15, Jingu-mae, Shubuya-ku, Tokyo22
Area: <Land>: 839.66m , <Building>: 4,359.20m
Structure: Two floors below ground, seven above
Built in: December 1987
Net Rentable area: 3,051m2
Occupancy rate: 100%

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Contact Information:
Japan Real Estate Asset Management Co., Ltd.
Planning Department
Takuro Yamanaka+813-3211-7921

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JAPAN REAL ESTATE INVESTMENT CORPORATIONSTATEMENT OF INCOME AND RETAINED EARNINGSFor the Period from April 1, 2002 to September 30, 2002
(In millions of yen)nd2 Period (183 days)

stItem1 Period(203 days)

Operating Revenues
Rental revenues
Other rental revenues
Operating Expenses
Property management fees
Utility charges
Property and other taxes
Insurance expenses
Maintenance expenses
Other operating expenses
NOIDepreciation
Operating Profits
Administrative expenses
Asset management fees
Other administrative expenses
Net Operating Profits
Non-Operating Revenues
Interest received
Other non-operating revenues
Non-Operating Expenses
Interest expenses
Bond interest expenses
Deferred start-up costs
Deferred bond-issuance costs
New unit-issuance costs
Unit-listing expenses
Other non-operating expenses
Recurring Profits
Gross IncomeTaxes
Net Income
Retained Earnings

6,492
6,427
65
1,759
915
493
415321
10
4,732
1,100
3,632
671
389
281
2,961
220559
241
−
90−
121
74
31
2,405
2,405
1
2,403
2,403

FFO (Net Income＋Depreciation）
Dividend per unit

Existing 24
properties

Additional 3
properties

7,553
7,532
21
2,672
1,105
759
628
20
152
7
4,881
1,126
3,755

357
357
−
27
16
10−
000330
68262

Total

Change% Change

7,910
7,889
21
2,699
1,121769
628
20
152
7
5,211
1,194
4,017
630
382
247
3,386
202491
224
91
−70
70−
33
2,898
2,898
1
2,897
2,897

1,417

21.8%

940

53.4%

479

10.1%

385
△ 4110.6%▲ 6.1%

425

14.4%

△ 68

▲ 12.2%

493
493

20.5%
20.5%

493

20.5%

3,503

4,091

588

16.8%

¥14,983¥12,853

6

JAPAN REAL ESTATE INVESTMENT CORPORATIONBALANCE SHEETAs of September 30, 2002
(In millions of yen)

ASSETS
Item

As of March31, 2002

As of Sept.
30, 2002

Change over Previous PeriodCurrent Assets
Cash and entrusted cash

15,32319,990

4,667

838

175

△ 663

16,162

20,165

4,003

Buildings

45,41351,8926,479

Structures

262

279

17Machinery and equipment

944

1,036

92

Land

99,614

113,727

14,113

Accumulated depreciation△ 1,100△ 2,294△ 1,194

Total Property and Equipment

145,135

164,644

19,509Entrusted lease hold rights

444

444

0

Total Intangible Assets

444

444

067

71

467

71

4

145,647

165,160

19,513

070

70

0

70

70

161,809

185,397

23,587

Other current assets
Total Current Assets
Fixed Assets
Property and equipment (Includingentrusted property and equipment)

Intangible Assets

Investments and Others
Long-term prepaid expenses, etc.
Total Investments and Others
Total Fixed Assets
Deferred Assets
Bond issuance expenses
Total Deferred Assets
Total Assets

7JAPAN REAL ESTATE INVESTMENT CORPORATIONBALANCE SHEETAs of September 30, 2002
(In millions of yen)

LIABILITIES
Item

As of March
31, 2002

As of Sept.
30, 2002

Change over Previous Period

Liabilities
Current Liabilities
40,0005,000△ 35,000

Rent received in advance998

1,219221

Other current liabilities

730873143

Total Current Liabilities

41,728

7,092△ 34,636

24,00024,000025,00025,000

Short-term borrowing

Long-term Liabilities
Long-term borrowings
Investment Corporation Bond
Deposits from tenants

12,41814,255

1,837

Total Long-term Liabilities

36,41863,255

26,837

Total Liabilities

78,14670,347△ 7,799

Unitholders' capital

81,260112,152

30,892Retained earnings

2,403

2,897

494

Total Unitholders' Equity

83,663

115,049

31,386

Total Liabilities and Unitholders' Equity

161,809

185,397

23,587

Unitholders' Equity

8JAPAN REAL ESTATE INVESTMENT CORPORATIONPORTFOLIO SUMMARY
As of September 30, 2002

AreaTokyo
Metropolitan
Area

23 Wards

Excluding 23Wards

Appraisal Valueat End of Period

NameYear
Built

Net
RentableAreas（㎡）Occupancy
Rate

Mitsubishi Soken Building

28,100 million

27,267 million

1970

18,006

96.3%

Kodenmacho Shin-Nihonbashi Building

3,170 million

3,173 million

1991

3,897

100.0%
89.9%

Shiba 2-chome Daimon Building

4,890 million

4,859 million

1984

9,622

Cosmo Kanasugibashi Building

2,760 million

2,808 million

1992

4,06283.2%

Takanawadai Building

2,970 million

2,738 million

1991

4,091

100.0%JTS Building

1,330 million

1,362 million

1991

3,383

100.0%

Omori-Eki Higashiguchi Building

4,980 million

5,123 million

1989

7,708

95.7%

Otsuka Higashi-Ikebukuro Building

3,480 million

3,541 million

1987

7,114

98.6%

Ikebukuro 2-chome Building

1,570 million

1,728 million

1990

2,186

88.9%

Shibuya Cross Tower

34,500 million

34,600 million

1976

28,547100.0%
91.1%

Urawa Dai-Ichi-Seimei Life Dowa Kasai Building

2,690 million

2,574 million

1990

4,510

Kawasaki Isago Building

3,370 million

3,375 million

1990

6,831

93.1%

Ericsson Shin-Yokohama Building

3,100 million

3,000 million

1992

6,964

100.0%

Sendai Honcho Honma Building

2,900 million

2,924 million

1991

5,829

100.0%

911 million

1,010 million

1984

4,383

82.9%

Kanazawa Minamicho Building

1,310 million

1,331 million

1987

3,773

88.4%

Kanazawa Park Building

3,090 million

2,880 million

1991

13,03093.3%

Nagoya Hirokoji Building

14,900 million

14,533 million

1987

21,59099.7%

Kyoto Shijo Kawaramachi Building

2,470 million

2,650 million

1982

6,800

70.9%

Midosuji Daiwa Building

14,400 million

14,314 million

1991

20,449100.0%

Fukusuke Sakaisujihonmachi Building

2,330 million

2,264 million

1992

5,337

91.6%

Kobe Itomachi Building

1,310 million

1,436 million

1989

3,478

73.8%

Hinode Tenjin Building

3,640 million

3,657 million

1987

5,944

100.0%

Tosei Tenjin Building

1,530 million

1,550 million

1992

4,080

80.4%

MD Kanda Building

9,590 million

9,520 million

1998

6,334

100.0%

Niigata Ishizuecho Nishi-Bandaibashi Building

Other Major Cities

Acquisition
Price

Properties Acquired in theBurex Kyobashi Building
2nd Period
Kandabashi Park Building
TotalProperties to be Acquired in Kokusai Iidabashi Building
the 3rd Periodda Vinci Harajuku

95,040 million

5,250 million

2002

4,279

100.0%

4,920 million
165,251 million

4,810 million
164,277 million

1993

3,687
215,928100.0%
95.3%

5,450million

5,000million

1985

4,791

100.0%

4,950million

4,885million

1987

3,051

100.0%