May 18, 2005
JAPAN REAL ESTATE INVESTMENT CORPORATIONANNOUNCEMENT OF SEVENTH FISCAL PERIOD RESULTS
1. Summary of Financial Results
In the seventh fiscal period (six months ended March 31, 2005), Japan Real Estate
Investment Corporation (“JRE”) recorded operating revenues of 10,747 million yen, up
5.9 percent from the previous period. Operating profits rose 7.9 percent, to 4,701
million yen. After deducting expenses for interest payments on borrowings, asset
management fees and other administrative costs, recurring profit increased 7.6 percent,to 4,121 million yen and net income advanced 7.6 percent to 4,120 million yen.
JRE’s policy with regard to profit appropriation is to distribute dividends ofapproximately 100 percent of taxable income, in order to enjoy the tax benefit available
under Article 67-15 of the Special Taxation Measures Law of Japan applicable toJ-REITs. For the period under review, we declared a cash dividend of 15,824 yen perunit.
As of March 31, 2005, JRE’s total asset balance was 322,358 million yen andits net worth was 137,569 million yen, or 528,299 yen per unit. On its balance sheet,
JRE had interest-bearing debt of 159,000 million yen.

2. Results of Operations(1) Property Management and Acquisition1During the period under review, the Japanese economy remained on track for a recovery,
as capital investment was on an uptrend amid improved corporate earnings, and resilient
consumer spending supported by ongoing improvement in employment conditions,despite signs of the economy heading toward a landing with inventory adjustments in
IT-related fields.
In the market for leased office space, there was a market improvement invacancy rates as the balance of supply and demand turned favorable and this led to anincrease in rents at some office buildings in central Tokyo. In regional urban centers,
however, despite signs of improvement in some major cities such as Nagoya, overallbusiness conditions remained difficult.
JRE maintained a high occupancy rate of 97.6 percent (as of March 31, 2005)by (1) acquiring top-level properties and upgrading building facilities through optimalrefurbishment in order to maintain and improve functions; (2) developing finely tuned
building management policies from the perspective of tenants while undertaking
vigorous sales activities; and (3) raising its emphasis on fixed-term and long-term lease
contracts. JRE is working to reduce costs with a view to further enhancing profit
stability. Our basic policy is to lower property management fees and utility expenses by
5 percent within the first three years of new property acquisition. Of the total number ofproperties acquired up to the end of the fifth fiscal period (six months ended March 31,2004), twenty-nine properties are subject to this cost reduction program. Despite being
midway through the program period, we have already reduced costs of those properties
by 12.6 percent per year, based on the results of our sixth and seventh fiscal periods(April 2004 to March 2005).
Regarding the property market, bad-debt write-offs by financial institutions and2the adoption of asset-impairment accounting have helped sustain active property sales.
At the same time, in the face of difficult fund-management conditions stemming from
low interest rates, such entities as private funds, pension funds, and institutional
investors are stepping up their acquisition of real estate, in addition to Japanese Real
Estate Investment Trusts (J-REITs).
In an increasingly competitive market, JRE uses its own information network
to collect data on the sales of numerous properties. We have made acquisitions based on
meticulous examination of these data, and after determining optimal prices from many
perspectives, including profit stability of the entire company and expected rate of return.
During the period under review, JRE concentrated on leveraging its own information
network and engage in one-on-one transactions to avoid participating in fierce bidding
competitions. As of March 31, 2005, JRE’s assets consisted of 46 office buildings, witha total value of 290,510 million yen, net rentable floor area of 336,026 m2(approximately 102,000 tsubo), and a total of 609 tenants.
As a new framework for acquiring prime properties, JRE acquired preferred
capital contribution certificates—a first for a J-REIT—on March 29, 2005. The
certificates were issued by the Harumi Front Special Purpose Company for thedevelopment of the Harumi Center Building (tentative name). On March 24, 2005, JRE
and Harumi Front Special Purpose Company signed a preferred capital contribution
certificates underwriting agreement for underwriting the three issues of certificates,
including the acquisition of the aforementioned certificates. In accordance with theunderwriting agreement, JRE has obtained the right (preemptive purchase right) to be
the first to acquire real estate and other assets in the Harumi Center Building.

3

(2) Fund-Raising Activities
During the fiscal period under review, JRE raised funds through borrowings to acquire
properties. The acquisition price of the eight properties JRE purchased during the fiscal
period under review and on April 1, 2005, totaled 65,383 million yen. Of this amount,
55,000 million yen was raised through short-term loans with the intention of repayment
with funds from the additional issue of investment units. On March 31, 2005, JRE had
total borrowings of 159 billion yen, including 63 billion yen in short-term loans (up 53
billion yen from the previous fiscal period), 51 billion yen in long-term loans (up 7billion yen from the previous fiscal period), and outstanding corporate bonds valued at45 billion yen (unchanged from previous fiscal period).
On December 20, 2004, JRE received a new credit rating of ‘AA’ from Ratingand Investment Information, Inc.

JRE has received the following credit ratings.
Rating AgencyIssuer Credit RatingStandard & Poor’sLong-term: A+; Short-term: A-1; Outlook: Stable

Moody’s Investors ServiceRating: A1; Outlook: Stable

Rating and Investment

Rating: AAInformation, Inc.
* On November 11, 2004, Moody’s Investors Service raised its rating on JRE’s issuer credit rating
and rating for unsecured corporate bonds from A2 to A1.

3. Outlook(1) Operating Environment
Despite expectations for a strong recovery in the Japanese economy after a prolonged
4

weak period, there are some concerns relating to high crude oil prices and the impact on
the global economy. Accordingly, optimism is untenable at this time.
In the office building leasing market, though vacancy rates are improving incentral Tokyo, conditions remain severe in regional urban centers, except for somemajor cities such as Nagoya. These trends toward a bipolarization of the market arelikely to grow stronger.
Meanwhile, tenants have stringent demands not only with respect to location,building quality, and facilities, but also for high-quality building management andvalue-added services. For these reasons, tenants have become more and more
discriminating when selecting buildings. To meet these needs, suppliers must provide
services that correctly and promptly reflect the needs of tenants and deliver added valuethat differentiates their buildings from the competition.
In the real estate market, properties will continue being sold to settle
non-performing loans and due to asset impairment accounting measures. In light ofrecent increases in demand, JRE believes that competition will further intensify for theacquisition of prime properties.

(2) Property Management
In accordance with the aforementioned, we expect conditions in the office building
leasing market to soften, despite expectation for some improvement. JRE is adopting
the following management policies in order to maintain and improve earnings.

(i) Strengthen relationships of trust with existing tenants
As of March 31, 2005, JRE had contracts with nine property management companies.

5

Most of these companies were already managing their respective buildings before they
were acquired by JRE, and so have built relationships of trust with their tenants.
Strengthening these relationships by anticipating tenants’ needs and providing tailoredservices helps increase tenant satisfaction, prevent cancellation of contracts, reduceturnover, and curb demands for reduced rents.

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

(iii) Promote fixed-term and long-term lease contracts
While considering overall balance, JRE is gradually shifting to fixed-term andlong-term contracts.

(iv) Reduce management costs
JRE has introduced sound competitive principles for its nine property managementcompanies to follow. Those companies are also revamping their management systems
and cost structures. Our target is to reduce the sum of property management fees andutility expenses by 5 percent within three years of acquisition.

(3) Property Acquisition
JRE has adopted the following policies for acquiring properties in order to improve6

earnings through steady asset expansion and growth.

(i) To access important information quickly, JRE is enhancing its property information
channels, including strengthening its relationship with building owners, with whom it
has previously conducted business. We are also working to develop new channels.

(ii) In its acquisition activities, JRE will continue to meticulously monitor and examine
economic, physical, and legal factors, including rights-related issues. We will also takebusiness conditions into account when selecting properties. With regard to the structureof buildings, we require buildings to meet or exceed new earthquake-resistancestandards, and we are targeting properties capable of maintaining a competitive edge
over the medium and long terms.

(iii) JRE’s general target for regional diversity of property ownership, in accordancewith its acquisition policies, is for 60 percent to 80 percent of properties to be locatedwithin the Tokyo metropolitan area, with the remaining 20 percent to 40 percent locatedin regional urban centers. It is possible, however, that future trends in office demand
may prompt JRE to temporarily depart from these ratios and increase the proportion ofits holdings in the greater Tokyo area.

The appropriate timing for property acquisition cannot be ascertained in advance. Whenfunding property acquisition, therefore, JRE's policy is to take out short-term loans at
the time of purchase and later select various options for capital procurement, including
corporate unit issues, according to trends in financial markets. When effecting a loan,7our policy is to minimize funding costs by negotiating with several qualified
institutional investors before settling on a lender.

4. Performance Forecasts
In the six-month period from April 1, 2005, to September 30, 2005, we forecast
operating revenues of 12,800 million yen, recurring profits of 5,400 million yen, and net
income of 5,400 million yen. We plan to declare a dividend of 15,800 yen per unit.
These estimates are based on conservative assumptions of the portfolio of 46
properties as of March 31, 2005, and the Nibancho Garden newly acquired on April 1,2005. These estimates are also based on 345,000 investment units outstanding,representing the 260,000 units outstanding as of March 31, 2005, and the additional
issue of 85,000 units decided by the Board of Directors on April 4, 2005.
Under the same scenario, our forecasts for the ninth fiscal period (October 1,2005 to March 31, 2006) are operating revenues of 12,800 million yen, recurring profitof 5,400 million yen, net income of 5,400 million yen, and cash dividends of 15,900 yen
per unit.
After March 31, 2005, JRE acquired the following office building.

Nibancho Garden

Transaction Summary
Acquired asset: Real estate (ownership rights for land and building)Acquisition price: 14,700 million yen
Acquisition date: April 1, 2005

8

Property Summary
Location: 8-8, Nibancho, Chiyoda-ku, Tokyo
Use: Offices, stores and residences
Land area: 11,003.87 m2 (land area) (Note 2)
Floor area: 57,031.06 m2 (total floor area) (Note 2)
Structure: Steel-framed reinforced concrete structure with flat roof, 14 floors above
ground and two floors below groundConstruction completed: April 2004
Tenants: Offices: 1, Residences: 1
Net rentable area: Offices: 9,316 m2, Residences: 1,686 m2
Net rented area: Offices: 9,316 m2, Residences: 1,686 m2
Occupancy rate: Offices: 100%, Residences: 100%

Notes:
1. The above figures for the number of tenants, net rentable area, net rented area, and occupancy rate are current as ofthe date of acquisition. The figures are based on data provided by the vendor.
2. Ownership rights for seven lots of land with total area of 3,554.33 m2
Co-ownership of compartmentalized building units (31.345% of the entire building)On April 4, 2005, JRE decided to issue 85,000 additional investment units throughpublic offering to procure funds for acquiring new specific assets and the repayment ofloans. As a result, JRE raised 68,024 million yen from the additional issue of investment
units on April 26, 2005 (investment security exchange date: April 27, 2005).

9

In addition, JRE held its third general meeting of investors on May 10, 2005.
Investors who assembled at the meeting approved of the Company’s proposals in theiroriginal form for amendments to the Articles of Incorporation and the election ofexecutive directors and supervisory directors.

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

10Income Statement for the 7th Period(In millions of yen)
7th Period (182 days)
Item

39
Newly acquired
existing
properties*
properties

6th Period
Total

Change % Change(183 days)

Operating Revenue

10,339408

10,747

10,151

Rental revenue

10,299408

10,708

10,104

Other rental revenues

39

039

47

3,539

77

3,616

3,478

1,224

53

1,277

1,234

Utility charges

846

9855

878

Property and other taxes

937

0937

936

Insurance expenses

26127

27

Maintenance expenses

458

13471

363

Operating Expenses
Property management fees

Other operating expenses
NOI
Depreciation and amortization
Operating Profit
Administrative expenses

5.9%

138

4.0%

458

6.9%

460

46

38

6,800

330

7,131

6,672

1,536

105

1,641

1,657

5,264

225

5,489

5,015

474

9.5%

131

20.0%

7.9%

787

656

Asset management fees

476

362

Other administrative expenses

310293

Net Operatng Profit

596

4,701

4,358

342

Non-Operating Revenue

522Interest received

00

Other non-operating revenues

52

Non-Operating Expenses

585

529

Interest expenses

315

221

Bond interest expenses

248

248

Deferred bond-issuance cost

00

Other non-operating expenses

2159

55

10.5%

Recurring Profit

4,121

3,831

289

7.6%

Gross Income

4,121

3,831

289

7.6%

289

7.6%

274

5.0%

10

Net Income

Taxes

4,120

3,830

Retained Earnings

4,120

3,830

FFO (Net Income＋Depreciation)

5,762

5,488

Dividends per Unit

15,824

14,711*

Newly acquired properties are Higashi Gotanda 1-Chome Building, Sanno Grand Building, Jozenji Park Building, Harmony Tower,
Ginza Sanwa Building, Ryoshin Ginza East Mirror Building and Hachioji Dai-ichi-Seimei Building.

Balance Sheet for the 7th Period（In millions of yen）
7th Period-end

6th Period-end（ Mar 31, 05)（ Sep 30, 04)

Item

ChangeReason for Change

Current Assets
Cash and entrusted cash

29,361

16,847

12,514

657

351

305

30,01917,19912,820

Buildings

90,40977,094

13,314Structures

576

478

98

1,556

1,417

139

Land

206,679

167,381

39,298

Accumulated depreciation△ 9,783△ 8,149△ 1,634

Total Property and equipment

289,439

238,222

51,216

Leasehold rights

1,912

1,912

0

Total Intangible Assets

1,912

1,912

0

Investments in securities

9560956

Long-term prepaid expenses, etc.

3138

△6987

38949

Total Fixed Assets

292,339

240,173

52,165

Total Assets

322,358

257,372

64,985

Other current assets
Total current assets

Intentionally increased in preparation for
acquisition of Nibancho Garden

Fixed Assets
Property and equipment

Machinery and equipment

Increased due to acquisition ofseven buildings including Higashi
Gotanda 1-Chome Building andcapital expenditure

Intangible Assets

Investments and Others

Total Investments and Others

Increased due to acquisition of preferred
equity securities (Harumi)

（In millions of yen）
7th Period-end

6th Period-end(Mar 31, 05)（ Sep 30, 04)

Item

ChangeReason for Change

Liabilities
Current Liabilities
Short-term borrowing

63,00010,00053,000Rent received in advance

2,460

2,195

265

Other current liabilities

1,745

1,232

512

67,206

13,42853,778Investment Corporation Bonds

45,00045,000－Long-term borrowing

51,00044,0007,000

Deposits from tenants

20,994

16,782

4,211

588

882

△ 294

117,582

106,664

10,917

184,789

120,093

64,696Unitholder capital

133,448

133,448－

Retained earnings

4,120

3,830

289

Total Unitholder Equity

137,569

137,279289

Total Liabilities and Unitholder Equity

322,358

257,372

64,985

Total Current Liabilities

Increased due to borrowing from
Mitsubishi Trust and Banking Corp., etc.

Lont-term Liabilities

Other Long-term liabilities
Total Long-term Liabilities
Total Liabilities

Unitholder EquityIncreased due to borrowing from
Mitsui Life Insurance Co., Ltd., etc.

Property Summary(In millionsof yen)Name

6th Period
AppraisalValue(Sep 30, 04)(Mar 31, 05)

Genki Medical Plaza

5,890

5,700

5,225

5,000,000

1985

4,791

100.0%MD Kanda Building

8,140

8,130

9,375

9,520,000

1998

6,269

100.0%Area

23 WardsTokyo
Metropolitan
Area

RentableYear Built

Area (m )Occupancy
Rate(Mar 31, 05)(Mar 31, 05)

2

4,890

4,840

4,748

4,810,000

1993

3,687

100.0%

30,40030,40027,02527,267,000

1970

18,006100.0%Yurakucho Denki Building

7,030

6,820

7,599

7,200,000

1975

4,694

100.0%

Kodenmacho Shin-Nihonbashi Building

3,240

3,240

3,009

3,173,000

1991

3,897

100.0%
100.0%

Burex Kyobashi Building

5,450

5,290

5,289

5,250,000

2002

4,279

Aoyama Crystal Building

7,720

7,330

7,707

7,680,000

1982

4,916

100.0%

Shiba 2-Chome Daimon Building

5,410

5,250

5,017

4,859,000

1984

9,643

100.0%

Cosmo Kanasugibashi Building

3,020

2,920

2,693

2,808,000

1992

4,062

95.5%

Shinwa Building

7,800

7,800

7,938

7,830,000

19896,197

100.0%

Takanawadai Building

2,530

2,530

2,639

2,738,000

1991

4,067

100.0%JAL Travel Building

1,460

1,420

1,288

1,362,000

1991

3,383

100.0%

Omori-Eki Higashiguchi Building

5,200

5,180

4,786

5,123,000

1989

7,708

100.0%

Nippon Brunswick Building

7,180

7,170

6,711

6,670,000

1974

7,347

98.7%

Yoyogi 1-Chome Building

8,850

8,710

8,739

8,700,000

2003

7,772

100.0%da Vinci Harajuku

5,370

5,140

5,001

4,885,000

1987

3,109

100.0%

Jingumae Media Square Building

13,11012,67012,273

12,200,000

1998

5,558

100.0%

Shibuya Cross Tower

35,50034,40035,65534,600,000

1976

29,828100.0%

Ebisu Neonato

4,350

4,220

4,067

4,100,000

1994

2,462

100.0%

Otsuka Higashi-Ikebukuro Building

3,410

3,410

3,333

3,541,000

1987

7,114

91.0%

Ikebukuro 2-Chome Building

1,420

1,420

1,677

1,728,000

1990

2,186

100.0%

Ikebukuro YS Building

4,460

4,450

4,556

4,500,000

1989

5,797

100.0%

Saitama Urawa Building

2,360

2,360

2,496

2,574,000

1990

4,510

98.0%

1,620

1,620

3,003

3,000,000

1992

6,925

81.0%

3,150

3,140

3,112

3,375,0001990

6,831

93.4%

2,930

2,930

2,747

2,924,000

1991

5,829

98.8%
96.6%

741

755

1,009

1,010,000

1984

4,383

5,420

5,390

4,603

4,580,000

1991

21,343

94.3%

992

1,010

1,287

1,331,000

1987

3,782

85.4%

Nagoya Hirokoji Building

15,00014,60014,165

14,533,000

1987

21,641100.0%

Nagoya Misono Building

1,860

1,840

1,786

1,865,000

1991

3,470

100.0%

Kyoto Shijo Kawaramachi Building

2,020

2,050

2,958

2,650,000

1982

6,800

100.0%

Niigata Ishizuecho Nishi-bandaibashi Building

Kanazawa Park BuildingKanazawa Minamicho Building

Sakaisuji-honmachi Building

4,170

4,170

4,158

4,164,000

1992

11,574

96.7%

Midosuji Daiwa Building

13,80013,50013,93814,314,000

1991

20,450100.0%
100.0%

Kobe Itomachi Building

949

966

1,380

1,436,000

1989

3,478

NHK Hiroshima Broadcasting Center Building

1,390

1,350

1,355

1,320,000

1994

5,477

98.6%

Tosei Tenjin Building

1,340

1,370

1,480

1,550,000

1992

4,000

100.0%

3,480

3,470

3,488

3,657,000

1987

5,882

89.2%

243,052

238,961
95.0%

Hinode Tenjin Building
Subtotal
Sanno Grand Building

10,300-10,527

10,200,000

1966

10,666

Ginza Sanwa Building

16,900-17,066

16,830,000

1982

4,329

97.1%

Ryoshin Ginza East Mirror Building

4,410

-

5,586

5,353,500

1998

2,875

73.8%

Higashi Gotanda 1-Chome Building

5,710

-

5,532

5,500,000

2004

5,205

100.0%

Harmony Tower

8,670

-

8,931

8,500,000

1997

10,929100.0%

Hachioji Dai-ichi-Seimei Building

3,300

-

3,319

3,300,000

1996

6,336

90.0%

Jozenji Park Building

1,000

-

1,051

1,000,000

1993

2,518

93.1%

293,342

238,961

291,350

290,510,500

336,026

97.6%Total (46 properties)

Area

Property to be acquired in
the 8th Period

Acquisition
Price

Mitsubishi Soken Building

Sendai Honcho Honma Building

Properties acquired in the7th Period

7th Period
Book Value

Kandabashi Park Building

Excluding 23
Shin-Yokohama First Building
Wards
Kawasaki Isago Building

Other Major Cities(In thousandsof yen)

7th Period
Appraisal
Value(Mar 31, 05)

Name

Nibancho Garden
Total

Rentable

Appraisal
Value

AcquisitionPrice(beforeacquisition)
14,80014,800--14,700,000
14,700,0002)

Year Built

2004

Occupancy
Rate

Area (m(AcquisitionDate)(AcquisitionDate)

9,316

100.0%

9,316-*The Rentable area of Nibancho Garden includes the residential space, 1,686m2, in addition to the above figures for office space.