JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）

FINANCIAL RESULTS FOR THE 25TH FISCAL PERIOD ENDED MARCH 31, 2014
(REIT)
May 19, 2014
Japan Real Estate Investment Corporation
Tokyo Stock Exchange8952
http://www.j-re.co.jp/english
Noritada Terasawa, Executive Director
Japan Real Estate Asset Management Co., Ltd.
Hiroshi Katayama, CEO & President
Ryuta Yoshida, Executive officer, General Manager, Planning Department
Contact:/ TEL +81-3-3211-7921
Scheduled Date of Filling Securities Report: June 25, 2014
June 13, 2014
Scheduled date of dividend payment:
Supplementary materials for financial results: Yes
Holding of a briefing on financial results:
Yes (primarily for institutional investors and analysts)
Name of Issuer:
Stock Exchange Listing:
Securities Code:
URL:
Representative:
Asset Management Company:
Representative:(Amounts are rounded down to the nearest million yen)

１. Financial Results for the 25th fiscal period ended March 31, 2014 (October 1, 2013 to March 31, 2014)(Percentages represent increases/decreases compared with results for the previous fiscal period)(1) Operating Results

Operating Revenues
Period ended

March 31, 2014
September 30, 2013

Millions of yen

Operating Income%

26,582
26,225

Millions of yen

1.4
3.4

10,831
10,781%Millions of yen

%

0.5
1.4

9,083
9,143

(0.7)
4.5

9,070
9,129

(0.7)
3.5

ROE

ROA
(Ordinary Income toTotal Assets Ratio)

Yen

7,633
7,683

2.2
2.3

Period ended

Net Income

Millions of yen(Net Income toUnitholders’ Equity Ratio)%

Net Income per Unit
March 31, 2014
September 30, 2013

Ordinary Income%

Operating Revenues toOrdinary Income Ratio
%

%

1.1
1.2

34.2
34.9

Note: The Company implemented a 2-for-1 split of each investment unit with an effective date of January 1, 2014. Net income per unit is calculated
as if the split had occurred at the start of the fiscal period ended September 30, 2013.

(2) Dividends
Dividend per Unit
Excluding Excess of
Accounting Profits

Period ended

March 31, 2014
September 30, 2013

Dividend in Excess
Total Cash Dividends of Accounting Profits
per Unit

Total Dividends in
Excess of
Accounting Profits

Payout Ratio

Ratio of Dividends
to Net Assets

Yen

Millions of yen

Yen

Millions of yen

%

%

7,633
15,366

9,070
9,129

0
0

0
0

99.9
99.9

2.2
2.3

Note 1: The payout ratio is rounded down to the first decimal place.
Note 2: The Company implemented a 2-for-1 split of each investment unit with an effective date of January 1, 2014. Dividend per unit for the Period
ended March 31, 2014 would be 7,683 yen as if the split had occurred at the start of the fiscal period ended September 30, 2013.

(3) Financial Standing
Total Assets
As ofMarch 31, 2014
September 30, 2013

Net Assets

Equity Ratio

Net Assets per Unit

Millions of yen

Millions of yen%

Yen

817,130
775,066

405,355
405,41549.6
52.3

341,128
341,178

Note: The Company implemented a 2-for-1 split of each investment unit with an effective date of January 1, 2014. Net assets per unit is calculated as if
the split had occurred at the start of the fiscal period ended September 30, 2013.
Reference: Total unitholders’ equity was 405,355 million yen for the period ended March 31, 2014 and 405,415 million yen for the period ended
September 30, 2013.

(4) Cash Flows
Cash Flows fromOperating Activities
Period ended

March 31, 2014
September 30, 2013

Cash Flows from
Investing Activities

Cash Flows from
Financing Activities

Cash and Cash Equivalents
at End of Period

Millions of yen

Millions of yen

Millions of yen

Millions of yen

14,364
16,653(37,541)(16,228)

29,623(104)

21,043
14,598- 1 -JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）

２. Performance Forecasts for the 26th Fiscal Period ended September 30, 2014 and the 27th Fiscal Period
ended March 31, 2015
(Percentages represent projected increases/decreases compared with the results for the preceding fiscal period)

Period ending
September 30, 2014
March 31, 2015

Operating Revenues

Operating Income

Millions of yen

Millions of yen%

27,610 3.9
27,600 (0.0)

11,200
11,240Ordinary Income

Dividend per Unit Dividend in Excess
Excluding Excess ofof Accounting
Accounting Profits
Profits per Unit

Net Income% Millions of yen% Millions of yen

%

Yen

Yen

3.4
0.4

4.9
0.5

5.0
0.5

7,600
7,650

0
0

9,530
9,580

9,520
9,570

Reference: Net income per unit forecast = Net income forecast ÷ Number of total investment units forecast for the end of the period(Period ending September 30, 2014): 7,600 yen; (Period ending March 31, 2015): 7,650 yen.

*Other(1) Changes in Accounting Policy/Changes in Accounting Estimates/Restatements
Changes in accounting policy following revisions to accounting standards, etc.:
Other changes in accounting policy:
Changes in accounting estimates:
Restatements:

None
None
None
None

(2) Number of Units Outstanding
Number of Units Outstanding at End of Period (Including Treasury Units)
As of March 31, 2014
1,182,280 units
As of September 30, 2013
594,140 units
Number of Treasury Units at End of Period
As of March 31, 2014
0 units
As of September 30, 2013
0 units
Note: The Company implemented a 2-for-1 split of investment units with an effective date of January 1, 2014.
Please refer to the notes regarding per unit information on page 22 and 23 for the number of investment units on which thecalculations of net income per unit are based.

* Explanation regarding the appropriate use of business operations forecasts, and other special remarks
1. Estimates for the Company’s future operating results contained in this financial results are forward-looking statements andare based on information currently available to the Company and certain assumptions deemed reasonable. Actual results may
differ substantially from the projections depending on a number of factors. In addition, these forecasts do not guarantee thestated dividends. As for assumptions underlying performance forecasts, please refer to the table entitled “Assumptions
Underlying Performance Forecasts for the 26th Fiscal Period (April 1, 2014 to September 30, 2014) and the 27th Fiscal
Period (October 1, 2014 to March 31, 2015)” on pages 8 and 9.
2. The Company implemented a 2-for-1 split of each investment unit with a record date of December 31, 2013 and an effective
date of January 1, 2014.
3. At the Board of Directors meetings held on March 27, 2014, and April 8, 2014, The Company decided to issue newinvestment units through public offering and third-party allocation. Payment was completed for the new investment units
issued through public offering on April 15, 2014 and for the new investment units issued through third-party allocation on
May 15, 2014.
As for the above-mentioned table entitled “2. Performance Forecasts for the 26th Fiscal Period (April 1, 2014 toSeptember 30, 2014) and the 27th Fiscal Period (October 1, 2014 to March 31, 2015)”, it is assumed that the number ofinvestment units issued stands at 1,251,530 units with the addition of the 57,500 new investment units issued through public
offering and the 5,750 new investment units issued through third-party allocation to the number of investment units issued of
1,188,280 units after the completion of the 2-for-1 split.

- 2 -JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）

1. Business Operations
a. Business Operations(1) Overview of the Period under Review
Japan Real Estate Investment Corporation (“the Company”) was established on May 11, 2001, following revisions to the
Law Concerning Investment Trusts and Investment Corporations of Japan, or the Investment Trust Law. The Company was
listed on the real estate investment trust market of the Tokyo Stock Exchange (“TSE”) on September 10, 2001. (Securities
Code: 8952) The size of the Company’s assets (total acquisition price) have grown about sevenfold over the about 10 years
since its IPO (September 10, 2001), expanding from 92.8 billion yen to 657.8 billion yen, as of September 31, 2011. In thesame period, the Company has continued to grow steadily with the number of properties in its portfolio growing from 20 to
64 properties.
During the 25th fiscal period (six months ended March 31, 2014), the Japanese economy saw solid gains in householdincome and investments coupled with improvement in corporate earnings due to the peak in demand before the consumption
tax increase in April 2014 and the support of government policies geared toward the upswing in the economy, although there
remain concerns about the impact from the economic slowdown in overseas markets.
In the market for leased office space, vacancy rates in the Tokyo metropolitan are on a downward trend as tenant
numbers pick up in conjunction with the recovering economic conditions. Highly competitive buildings also experienced
improving occupancy rates and the rental market is recovering. However, many companies looking to change premises
remained very cautious about office costs and rent levels as the market as a whole has not been rising strongly enough to see
a rebound. And while there is still some regional variation in areas outside of the Tokyo metropolitan area, overall rent levels
remained persistently low, even though some regions have started to see a bottoming out.
In the property market, an opportune fund-raising environment has sparked a flurry of buying and selling. Prices are
beginning to rise, with some sellers seeing prices beginning to approach hoped-for levels.
Under such market conditions, the Company has delivered on its commitment to provide stable dividend for the current
period under review, in line with the Investment Guideline, which was set forth at the time of listing at TSE and remains
unchanged to date, to achieve the stated goal of providing stable dividends to unitholders.
*Note: The part of the Jingumae Media Square Building (acquisition price: 614 million yen) site that was expropriated by
the Tokyo Metropolitan Government on October 30, 2009, is included in the total acquisition price. The total acquisition
price in the subsequent sections follows the same convention.
(2) Results of Operations① Property Management and Acquisition
In the market for leased office space during the period under review, while the downward pressure on rent levels
continued to weaken, it did not disappear, and property-related revenues, excluding those from properties that have
newly begun operations, declined further compared with the previous period. On the other hand, as a result of anaggressive yet flexible leasing approach, the Company's occupancy rate edged up from 96.3% as of September 30,
2013 to 96.7% as of March 31, 2014.
As for external growth, the Company strives to bolster its portfolio through acquisitions of highly convenient
properties that are built to high specifications in prime locations and that also boast both stability and competitiveness.
The Company acquired part of Queen’s Tower A (Yokohama City) on January 31, 2014 for 17,200 million yen, an
additional portion of Ebisu Neonato (Shibuya-ku, Tokyo) on February 18, 2014 for 10,512 million yen, and part ofOtemachi Financial City North Tower (Chiyoda-ku, Tokyo) on March 31, 2014 for 15,462 million yen.
As a result of the above, the Company’s portfolio at the end of the fiscal period under review, March 31, 2014,
consisted of 64 properties with a total acquisition price of 837,405 million yen. Total leasable space stood at 750,956
m2, with a total of 1,223 tenants.

*Note: The Nippon Brunswick Building (Land with leasehold interest), whose building ownership was transferred on
August 23, 2013, is included in the above number of properties and total acquisition price, but is not included in total
leasable space or total number of tenants.

3

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）② Finance Activities
To fund the repayment of existing loans, the Company procured short-term loans totaling 1,000 million yen on October
7, 2013; 8,000 million yen on January 7, 2014: 5,000 million yen on January 15, 2014; and 10,000 million yen on
March 24, 2014; as well as long-term loans amounting to 3,000 million yen on March 24, 2014.
Moreover, the Company procured 17,000 million yen in long-term loans on January 31, 2014 to partially fundthe acquisition of Queen's Tower A, 7,000 million yen in short-term loans on February 18, 2014 to partially fund theacquisition of Ebisu Neonato, and 14,800 million yen in short-term loans on March 31, 2014 to partially fund theacquisition of Otemachi Financial City North Tower.
The Company concluded interest-rate swap contracts to hedge against interest-rate fluctuation risk for the 12,000
million yen portion of the 17,000 million yen procured in long-term loans on January 31, 2014, and the 3,000 million
yen procured in long-term loans on March 24, 2014.
As a result of these financing activities, as of March 31, 2014, the Company’s total interest-bearing debt
amounted to 358,900 million yen. This amount consists of long-term loans totaling 247,100 million yen (including thecurrent portion of long-term loans totaling 5,100 million yen), short-term loans totaling 56,800 million yen, andinvestment corporation bonds totaling 55,000 million yen (including the current portion of investment corporation
bonds totaling 15,000 million yen).
As of March 31, 2014, the Company’s long-term, fixed-interest bearing debt ratio (ratio of long-term,
fixed-interest bearing debt (including the current portion of long-term loans and investment corporation bonds) to totalinterest-bearing debt) stood at 84.2%, and the LTV ratio (ratio of interest-bearing debt to total assets) was 43.9%.
In addition, at the Board of Directors meetings held on March 27, 2014, and April 8, 2014, the Company decided
to issue new investment units (57,500 units through public offering, 5,750 units through third-party allocation). As aresult, the Company procured 27,968 million yen on April 15, 2014, from the public offering and 2,796 million yen on
May 14, 2014, from the third-party allocation portion.
The Company has been able to maintain a sound and conservative financial standing through such measures asusing the funds procured by issuing new investment units through public offering and cash reserves to makerepayments of 31,900 million yen in short-term loans by May 7, 2014 and lowering the LTV ratio. As for the funds
procured by issuing new investment units through third-party allocation, a portion was used to supplement cash
reserves allocated to the repayment of short-term loans.
The Company’s credit ratings as of March 31, 2014 were as follows:
Rating Agency

Credit RatingStandard & Poor’s Ratings Japan K.K.

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

Moody’s Japan K.K.

Rating: A1; Outlook: Negative

Rating and Investment Information, Inc.

Rating: AA; Outlook: Stable③ General Meeting of Unitholders
The Company held the Eighth General Meeting of Unitholders on February 19, 2014.
At the meeting, three partial amendments to the Articles of Incorporation were deliberated on seperately, and all
the proposals were approved in their original form.
④ 2-for-1 Split of Investment Units
The Company’s Board of Directors met on November 18, 2013 and decided to implement a 2-for-1 split of each
investment unit with a record date of December 31, 2013 and an effective date of January 1, 2014.
(i) Purpose of the Split
Through this split of investment units, the Company hopes to broaden its investor base by providing a wide
range of private investors the opportunity to invest from their NISA* accounts, as well as to increase long-termholdings.
*Nippon version Individual Savings Account.

4

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）(ii)

Method of Split
With December 31, 2013 as the record date, and January 1, 2014 as the effective date, the Company implemented a2-for-1 split of the investment units held by unitholders stated or recorded on that date’s final unitholders registry.

(iii) Increase in Number of Investment Units through the Split, etc.
Number of the Company investment units outstanding before the split:
Increase in number of investment units through the split:
Number of the Company investment units outstanding after the split:
Total number of investment units issuable after the split:

594,140 units
594,140 units
1,188,280 units
4,000,000 units(3) Summary of Financial Results
As a result of the above operations, in the period under review, the Company recorded operating revenues totaling 26,582
million yen, up 1.4% compared with the previous period. On the earnings front, operating income increased 0.5% to 10,831
million yen. After deducting expenses for interest payments on loans and other costs, ordinary income decreased 0.7% to9,083 million yen and net income fell 0.7% to 9,070 million yen.
Turning to dividends, the Company will make cash distributions using accounting profits based on the dividend
policy outlined in Article 32-2 of the Company’s Articles of Incorporation, in an amount that exceeds 90% of earnings
available for dividends as required by Article 67-15 of the Special Taxation Measures Law of Japan. Based on this policy,
the Company was able to maintain retained earnings as the amount did not exceed earnings available for distribution at theend of the period. Therefore, the total amount of dividends that the Company has determined to pay out is 9,070,141,240 yen
for the period under review, which must be divisible by 1,188,280—the number of units outstanding as of March 31, 2014.
Accordingly, the per-unit cash dividend totaled 7,633 yen.
b. Outlook(1) Operating Environment
In the Japanese economy, although there is a worry that the reactionary drop in household sector spending due to theconsumption tax hike will impact economic conditions, a gradual, self-sustaining recovery is expected thanks mainly tovarious economic measures and policies supporting corporate activities, improving export conditions owing to firm
economic trends in the United States and other overseas markets, and an improving household sector bolstered by better
hiring conditions.
In the market for leased office space, there is not expected to be large-scale supply that could greatly impact markets,
especially in central Tokyo, and with the recovering economy and solid office demand, some competitive areas are expected
to see a rebound in rent levels. However, it is anticipated that it will take some more time before the market as a whole picks
up steam.
Regarding property markets, while there is currently hope for real recovery in the market for leased office space andan opportune fund raising environment is expected to spur aggressive trading, looking solely at large-scale prime properties,
there are very few competitors in a position to consider making acquisitions. So, before the market begins to heat up, we aregathering data and working hard to ensure the further acquisition of prime properties.
① Property Management
As stated above, conditions in the market for leased office space include the fall in overall market rent levels having
almost, but not yet completely, bottomed out with some building owners looking to raise rent levels while others needto maintain current levels. In line with these expectations, the Company will adhere to the following management
policies in order to keep improving profitability.
(i) Strengthen relationships of trust with existing tenants
As of March 31, 2014, the Company had contracts with 12 property management companies. Most of thesecompanies were already handling the management of their buildings before the Company acquired them and hadthus built relationships of trust with their tenants. The Company will work to further strengthen these relationships
by anticipating tenants’ needs and providing tailored services to increase tenant satisfaction, thereby maintaining
occupancy rates, disincentivizing rent reduction requests and pursuing to raise rent levels.

5

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）(ii) Fill vacancies promptly
In cooperation with the property management companies mentioned above, the Company will actively seek the mostappropriate tenants for each property, based on location and features, in order to fill current and anticipated vacancies
as rapidly as possible. Furthermore, the Company will work to uncover additional needs for floor space among
existing tenants.
(iii) Stabilize revenues and earnings
With the aim of stabilizing revenues and earnings, the Company will endeavor to secure fixed- and long-term leasing
agreements with its large-scale tenants.
(iv) Reduce management costs
The Company has introduced sound competitive principles for its multiple property management companies tofollow and is revamping their management systems and cost structures on an ongoing basis.
②Property Acquisitions and Sales
The Company has adopted the following policies for acquiring properties.
(i) To access information quickly, the Company continues to enhance its property information channels whileworking to develop new channels.
(ii) In its acquisition activities, the Company continues to meticulously monitor and examine economic, physical andlegal factors, including rights-related issues, when selecting properties. In particular, with regard to the structureof buildings, the Company requires buildings to meet or exceed new earthquake-resistance standards, making
appropriate renovations based on engineering reports, and exclusively targets properties capable of maintaining acompetitive edge in terms of the facilities they offer over the medium to long term.
(iii) In accordance with its acquisition policies, the Company shall maintain its portfolio so that 70% or more of theportfolio properties are located within the Tokyo metropolitan area, with the remaining 30% or fewer located inother major cities.
Under these policies, the Company will continue to acquire highly competitive properties. At the same time, in order tofurther enhance the quality of its portfolio, the Company will remain open to the replacement of portfolio properties
with due consideration given to timing.
③Financial Strategy
In principle, the Company shall maintain an LTV ratio that does not exceed 65%. To ensure an even lower
interest-bearing debt ratio, the Company adopts the conservative target level of 30% to 40%. As for the financing ofproperty acquisitions, the Company shall use, in a flexible manner, a variety of funding schemes—including the issue
of investment corporation bonds—while maintaining a sound and conservative financial standing and closely
monitoring trends in financial markets. When obtaining a loan, the Company shall strictly adhere to its financial
policies. More specifically, with the aim of minimizing funding costs, the Company shall negotiate with several
qualified institutional investors (limited to those defined under the Special Taxation Measures Law of Japan) before
executing a loan agreement.
(2) Performance Forecasts
For the 26th fiscal period (April 1, 2014 to September 30, 2014), the Company forecasts operating revenues totaling
27,610 million yen, operating income totaling 11,200 million yen, ordinary income totaling 9,530 million yen, and net
income totaling 9,520 million yen. The Company plans to declare a cash dividend totaling 7,600 yen per unit.
For the 27th fiscal period (October 1, 2014 to March 31, 2015), the Company forecasts operating revenues totaling
27,600 million yen, operating income totaling 11,240 million yen, ordinary income totaling 9,580 million yen, and net
income totaling 9,570 million yen. The Company plans to declare a cash dividend totaling 7,650 yen per unit.
Regarding the assumptions set for these forecasts, please see the following table entitled “Assumptions Underlying
Performance Forecasts for the 26th Fiscal Period (April 1, 2014 to September 30, 2014) and the 27th Fiscal Period(October 1, 2014 to March 31, 2015)”. Operating revenues, operating income, ordinary income, net income, and cash
dividend per unit may vary depending on changes in the situation.

6

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）(3) Issuance of New Investment Units
As stated in the following table entitled “Assumptions Underlying Performance Forecasts for the 26th Fiscal Period (April
1, 2014 to September 30, 2014) and the 27th Fiscal Period (October 1, 2014 to March 31, 2015)”, as approved by the
Board of Directors on March 27, 2014 and April 8, 2014, the Company decided to issue new investment units, completingthe following public offerings and third-party allocation.
Public offerings of new investment units
Number of units newly issued:
Offer price (subscription price):
Aggregate amount of offer price (subscription price):Issue price (paid-in price):
Aggregate amount of issue price (paid-in price):
Payment date:

57,500 units
501,760 yen per unit
28,851,200,000 yen
486,400 per unit
27,968,000,000 yen
April 15, 2014

Secondary offering of investment units (Over-allotment)
Number of units offered:
Offer price:
Aggregate amount of offer price:

5,750 units
501,760 per unit
2,885,120,000 yen

Issuance of new investment units through third-party allocation
Number of units newly issued:
Issue price (paid-in price):
Aggregate amount of issue price (paid-in price):
Payment date:
Allottee:

5,750 units
486,400 yen per unit
2,796,800,000 yen
May 14, 2014
SMBC Nikko Securities Inc.

With the funds procured from the above public offerings of new investment units and cash reserves, the Company has
made repayments of 31,900 million yen in short-term loans as listed below. In addition, approximately 2,796 million
yen in funds procured from the issuance of new investment units through third-party allocation was applied to cash
reserves to make up for their decrease, as the part of the cash reserves was applied toward the repayment of short-termloans.
Repayment before maturity
April 15, 2014
April 18, 2014
April 24, 2014
April 30, 2014
May 2, 2014
May 7, 2014

5,000 million yen
7,000 million yen
7,700 million yen
5,000 million yen
1,200 million yen
3,000 million yen

Scheduled repayment
April 30, 2014

3,000 million yen

7

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）

Assumptions Underlying Performance Forecasts for the 26th Fiscal Period (April 1, 2014 to September 30, 2014)
and the 27th Fiscal Period (October 1, 2014 to March 31, 2015)
Item

Assumption

・The 26th period: April 1, 2014 to September 30, 2014 (183 days)
・The 27th period: October 1, 2014 to March 31, 2015 (182 days)
・The Company assumes that its property portfolio consists of the 64 properties that it held as of April 1, 2014.
Number of
The actual portfolio may differ from this assumption due to additional property acquisitions anddispositions.
properties held by・The
Company does not have any forward or other commitments, as of May 19, 2014, as set forth in the
the Company
Financial Services Agency’s Guidelines for Supervision.
・The number of units outstanding is under the assumption that 1,251,530 units are comprised of 1,188,280
Number of units
units after the 2-for-1 split implemented with a record date of December 31, 2013 and an effective date ofJanuary 1, 2014 and 57,500 units issued through public offering and 5,750 units issued through third-party
outstanding
allocation as decided at the Board of Directors meetings held on March 27, 2014, and April 8, 2014.
・The Company assumes as an operational guideline, an LTV ratio in the 30% to 40% range.
・Using the funds procured from the above public offering of new investment units in line with Board of
Directors meetings held on March 27, 2014, and April 8, 2014 and cash reserves, the Company has maderepayments of the short-term loans before maturity on April 15, 2014 in the amount of 5,000 million yen, on
April 18, 2014 in the amount of 7,000 million yen, on April 24, 2014 in the amount of 7,700 million yen, on
April 30, 2014 in the amount of 5,000 million yen, on May 2, 2014 in the amount 1,200 million yen, and on
May 7, 2014 in the amount of 3,000 million yen in addition to scheduled repayments of short-term loans on
April 30, 2014 in the amount of 3,000 million yen. As a result, the balance for interest-bearing debt was
327,000 million yen as of May 19, 2014.
In addition, approximately 2,796 million yen in funds procured from the issuance of new investment units
through third-party allocation was applied to cash reserves to make up for their decrease, as the part of theInterest-bearing debt
cash reserves was applied toward the repayment of short-term loans.
・ In the 26th fiscal period, the Company presumes that, as of May 19, 2014, it will refinance the remainder ofshort-term loans totaling 3,800 million yen (repayment date: September 2, 2014). The Company presumes
that the funds procured from such sources as loans and newly issued investment corporation bonds will be
used to repay the investment corporation bonds totaling 15,000 million yen set to mature on June 18, 2014.
・In the 27th fiscal period, the Company presumes that, as of May 19, 2014, it will refinance the remainder oflong-term loans totaling 5,000 million yen (repayment dates: November 17, 2014, December 15, 2014, andMarch 24, 2015) and short-term loans totaling 21,100 million yen (repayment dates: January 7, 2015, March24, 2015 and March 31, 2015). There are no investment corporation bonds set to mature in the 27th fiscal
period.
・Revenues from portfolio properties held by the Company are calculated by taking into consideration newcontract conclusions and existing contract cancellations fixed as of May 19, 2014, and by factoring in
Operating revenues
potential variables, such as a risk of decrease in revenues due to returned space and reduced rent levels,
taking into account recent market conditions for leased office space.
・Of the taxes the Company is subject to, property taxes, city planning taxes and depreciable property taxes
corresponding to the relevant fiscal period have been recorded as property-related expenses. However, whena property is acquired at a point during the period used for the calculation of property tax, a property tax
adjustment is levied that takes into account the date of the transfer of the new acquisition. The amount of theadjustment is factored into the acquisition price and therefore not recorded as an expense in the relevant
fiscal period. In addition, the Company assumes that the 2014 property taxes, city planning taxes anddepreciable property taxes for Queen’s Tower A, the additional portion of Ebisu Neonato, and Otemachi
Financial City North Tower will be 226 million yen, 53 million yen, and 71 million yen respectively.
Operating expenses
・The Company assumes that property and other taxes will be 2,530 million yen in the 26th fiscal period and2,530 million yen in the 27th fiscal period.
・The Company assumes that depreciation will be 5,870 million yen in the 26th fiscal period and 5,800 million
yen in the 27th fiscal period.
・Property management expenses are assumed to take past operational results into consideration.
・Repair expenses may vastly differ from the projected amounts as there may be large differences in costs
incurred from one fiscal period to another and because such costs are not recurring.
・The Company assumes that non-operating expenses, such as interest expense and interest expense on
Non-operating
investment corporation bonds, will be 1,690 million yen in the 26th fiscal period and 1,660 million yen in
expensesthe 27th fiscal period.
Accounting period

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JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）

Assumption

Item

・The Company presumes that dividends in excess of accounting profits will not be distributed. Reflecting this,under the Company’s Articles of Incorporation, the Company assumes that it will make cash distributions
using accounting profits, distributing said profit in an amount in excess of 90% of earnings available fordividends.
・The Company assumes that dividend amounts in the 26th and 27th fiscal periods will not be appropriatedfrom internal reserves.**Internal reserves (projected for the 25th fiscal period) shall comprise the residual amount of 390 million
Amount of dividend
yen, reflecting a dividend payout of 519 million yen for the 22nd and 23rd fiscal periods subtracted fromthe balance of internal reserves at the end of the 21st fiscal period (as of March 31, 2012), which totaled 909
million yen, comprising retained earnings brought forward of 30 million yen and the amount apportioned tointernal reserves from the gain on sale of land as a result of the sale of the Takanawadai Building as of April
1, 2011, under the application of the Special Provisions for Taxation in the case of Advanced Acquisition ofLand, etc., in 2009 and 2010 (total of 878 million yen which consists of reserve for reduction entry andassociated income taxes deferred).
・The Company presumes that revisions that could impact the abovementioned forecasts will not be made insuch areas as laws, tax systems, accounting standards, and listing rules as well as regulations of theInvestment Trusts Association, Japan.
・The Company assumes that there will be no unprecedented significant changes in general market trends or
Otherreal estate market conditions or other factors.
・ In addition to the abovementioned income taxes deferred, the Company calculates the amount of its
corporate and other taxes, taking into consideration asset retirement obligations as well as the amortizationof term leasehold interest for buildings.

9

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）

2. Financial Statements(1) Balance Sheet
Thousands of yen
As ofSeptember 30, 2013
AssetsCurrent assets
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Prepaid expenses
Deferred tax assets
Consumption taxes receivable
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
LandConstruction 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
Total property, plant and equipment
Intangible assets
Leasehold rightLeasehold rights in trust
Easement
Total intangible assets

10

As of
March 31, 2014

20,404,340
4,193,848
188,185
116,763
1,037－
133,944
25,038,118

20,633,688
4,409,989
134,048
139,959
1,039
398,464
24,36025,741,550

241,797,498(56,131,055)
185,666,442
2,758,460(452,820)
2,305,640
2,868,276(1,393,733)
1,474,542
282,447(105,932)
176,514399,537,150
181,638
51,642,189(11,701,912)
39,940,276
566,396(91,531)474,865
831,402(560,510)
270,891
25,833(8,072)
17,760110,818,182
740,863,906

249,745,895(60,666,845)
189,079,049
2,798,970(494,082)
2,304,887
2,896,723(1,479,416)
1,417,307
304,053(122,610)
181,442420,000,107
361,593
62,239,080(12,626,618)
49,612,462
579,704(102,230)
477,473840,044(575,077)
264,966
30,297(9,298)20,999118,445,649
782,165,939

6,120,966
444,160
828,095
7,393,222

6,105,136
444,160
828,095
7,377,392

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）

Thousands of yen
As ofSeptember 30, 2013
Investments and other assets
Investment securities
Lease and guarantee deposits
Long-term prepaid expenses
Total investments and other assets
Total non-current assets
Deferred assets
Investment corporation bond issuance costs
Total deferred assets
Total assets
Liabilities
Current liabilities
Operating accounts payable
Short-term loans payable
Current portion of investment corporation bonds
Current portion of long-term loans payable
Accounts payable - otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Other
Total current liabilities
Non-current liabilities
Investment corporation bondLong-term loans payable
Deposits received from tenants
Deferred tax liabilities
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Unitholders' equity
Unitholders' capital
Surplus
Voluntary retained earnings
Reserve for reduction entry
Total voluntary retained earnings
Unappropriated retained earnings (undisposed loss)
Total surplus
Total unitholders' equity
Total net assets
Total liabilities and net assets

11

As of
March 31, 2014

577,168
1,071,830
23,206
1,672,205
749,929,334

577,168
1,071,830
119,267
1,768,265
791,311,597

99,161
99,161775,066,613

77,182
77,182
817,130,330

1,128,949
25,000,000
15,000,000
13,100,000
1,026,389
786,011
7,951
601,862
2,840,696
9,986
59,501,848

1,396,469
56,800,000
15,000,000
5,100,000
1,234,453
800,158
11,551－
3,288,284
259,81383,890,731

40,000,000
227,050,000
42,634,207
122,812309,420
32,969310,149,410
369,651,258

40,000,000
242,000,000
45,418,762
122,812
312,538
29,532
327,883,645
411,774,376

396,018,317

396,018,317

236,709236,7099,160,328
9,397,037
405,415,354
405,415,354
775,066,613

236,709236,7099,100,926
9,337,636
405,355,953
405,355,953
817,130,330

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）(2) Statement of Income
Thousands of yen
For the period
From April 1, 2013
to September 30, 2013
Operating revenue
Rent revenue - real estate
Other lease business revenue
Gain on sales of real estate properties
Total operating revenue
Operating expenses
Expenses related to rent business
Asset management fee
Asset custody fee
Administrative service fees
Directors' compensations
Commission fee
Other operating expenses
Total operating expenses
Operating income
Non-operating income
Interest income
Dividend income
Reversal of Distribution Payable
Income on settlement of management association accounts
Other
Total non-operating income
Non-operating expenses
Interest expenses
Interest expenses on investment corporation bonds
Amortization of investment corporation bond issuance costs
Other
Total non-operating expenses
Ordinary income
Income before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
Net income
Retained earnings brought forward
Unappropriated retained earnings (undisposed loss)

12

For the period
From October 1, 2013
to March 31, 2014

26,116,177
90,73918,603
26,225,520

26,357,478
225,489－
26,582,967

14,509,238
621,540
56,231
135,264
7,800
64,69549,246
15,444,016
10,781,503

14,750,867
675,187
57,164137,480
7,800
58,22264,37315,751,096
10,831,870

5,824
19,724
3,220
104,761
2,080
135,612

6,658
－
2,261
－
－
8,920

1,337,230
392,323
17,49827,0091,774,062
9,143,053
9,143,053
13,308(11)
13,2969,129,757
30,571
9,160,328

1,297,612
410,928
21,97826,951
1,757,470
9,083,320
9,083,320
13,169(2)
13,166
9,070,153
30,7739,100,926

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）(3) Statement of Unit Holders’ Equity
For the period from April 1, 2013 to September 30, 2013
Thousands of yen
Unitholders' equity
SurplusTotal
surplusTotal
unitholders'equityTotal net
assetsReserve for
reduction
entry

Voluntary
retainedearnings

Unappropria
ted retained
earnings(undisposed
loss)

407,278

407,2788,855,281

9,262,560

405,280,877

405,280,877(170,569)(170,569)

170,569－－－

Dividends of surplus(8,995,279)(8,995,279)(8,995,279)(8,995,279)

Net income

9,129,757

9,129,757

9,129,757

9,129,757

Unitholders'
capitalBalance at beginningof current period
Changes of items
during period
Reversal of reserve
for reduction entry

Total changes of items
during period
Balance at end ofcurrent period

396,018,317

Voluntary retained earnings－(170,569)(170,569)

305,046

134,477

134,477

134,477

396,018,317

236,709236,7099,160,328

9,397,037

405,415,354

405,415,354

For the period from October 1, 2013 to March 31, 2014
Thousands of yen
Unitholders' equity
SurplusTotal
surplusTotal
unitholders'equityTotal net
assetsReserve for
reduction
entry

Voluntary
retainedearnings

Unappropria
ted retained
earnings(undisposed
loss)

236,709236,7099,160,328

9,397,037

405,415,354

405,415,354

Dividends of surplus(9,129,555)(9,129,555)(9,129,555)(9,129,555)

Net income

9,070,153

9,070,153

9,070,153

9,070,153

Unitholders'
capitalBalance at beginningof current period
Changes of items
during period

Total changes of items
during period
Balance at end ofcurrent period

396,018,317

Voluntary retained earnings

－

－

－

(59,401)(59,401)(59,401)(59,401)

396,018,317

236,709236,7099,100,926

9,337,636

405,355,953

405,355,953

13

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）(4) Basis of Calculations Used to Determine Cash Distributions

Item

For the period
From April 1, 2013
to September 30, 2013

For the period
From October 1, 2013
to March 31, 2014

Amount (Yen)Amount (Yen)I Retained Earnings

9,160,328,385

9,100,926,837

II Cash Distribution

9,129,555,240

9,070,141,240(15,366)(7,633)30,773,145

30,785,597(Dividend per Investment Unit)
III Retained Earnings Brought
ForwardComputation Method for Determining
Dividends

Turning to dividends, the Company will
make cash distributions using accounting
profits based on the cash distribution policy
outlined in Article 32-2 of the Company’s
Articles of Incorporation, in an amount thatexceeds 90% of the “amount of
distributable profit” as set forth in Article
67-15 of the Act on Special Measures
Concerning Taxation. Based on this policy,
the Company was able to maintain retained
earnings brought forward as the amount did
not exceed retained earnings at the end of
the period. Therefore, the total amount ofdividends that the Company has determined
to pay out is 9,129,555,240 yen for theperiod under review, which must be
divisible by 594,140 — the number of units
outstanding as of September, 2013.
Furthermore, the Company does not pay out
dividends that exceed accounting profits asoutlined in Article 32-3 of the Company’s
Articles of Incorporation.

14

Turning to dividends, the Company will
make cash distributions using accounting
profits based on the cash distribution policy
outlined in Article 32-2 of the Company’s
Articles of Incorporation, in an amount thatexceeds 90% of the “amount of
distributable profit” as set forth in Article
67-15 of the Act on Special Measures
Concerning Taxation. Based on this policy,
the Company was able to maintain retained
earnings brought forward as the amount did
not exceed retained earnings at the end of
the period. Therefore, the total amount ofdividends that the Company has determined
to pay out is 9,070,141,240 yen for theperiod under review, which must be
divisible by 1,188,280 — the number ofunits outstanding as of March, 2014.
Furthermore, the Company does not pay out
dividends that exceed accounting profits asoutlined in Article 32-3 of the Company’s
Articles of Incorporation.

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）(5) Statement of Cash Flows
Thousands of yen
For the period
From April 1, 2013
to September 30, 2013
Cash flows from operating activities
Income before income taxes
Depreciation
Amortization of investment corporation bond issuance costs
Dividend income
Interest income
Interest expenses
Decrease (increase) in operating accounts receivable
Decrease (increase) in consumption taxes refund receivable
Decrease (increase) in supplies
Decrease (increase) in prepaid expenses
Decrease in sales of property, plant and equipment
Increase (decrease) in operating accounts payable
Increase (decrease) in accounts payable - other
Increase (decrease) in accrued consumption taxes
Increase (decrease) in accrued expenses
Increase (decrease) in advances received
Decrease (increase) in long-term prepaid expenses
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Purchase of property, plant and equipment in trust
Repayments of tenant leasehold and security deposits
Proceeds from tenant leasehold and security deposits
Net cash provided by (used in) investing activities
Cash flows from financing activities
Increase in short-term loans payable
Decrease in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of investment corporation bonds
Payments of investment corporation bond issuance costs
Dividends paid
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

15

For the period
From October 1, 2013
to March 31, 2014

9,143,053
5,507,945
17,498(19,724)(5,824)
1,729,553(83,319)472,497－
5,692
1,200,748
307,202108,948
601,862(117)(405,075)(8,661)(158,618)
18,413,663
26,269(1,769,481)(16,460)
16,653,990

9,083,320
5,649,556
21,978(6,658)
1,708,541
54,136(398,464)
3(23,195)(107,934)
185,815(601,862)
117
447,588(96,060)
143,373
16,060,256
7,965(1,694,512)(9,569)14,364,139(12,237,000)
11,237,000(5,899,112)(9,005,061)(2,048,695)
1,724,542(16,228,325)(9,486,000)
15,486,000(28,482,929)(17,843,444)(1,207,724)
3,992,279(37,541,820)

11,000,000(4,000,000)
13,000,000(21,050,000)
10,000,000(55,277)(8,998,782)(104,059)
321,605
14,276,582
14,598,188

45,800,000(14,000,000)
20,000,000(13,050,000)(9,126,830)
29,623,169
6,445,489
14,598,188
21,043,677

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）(6) Notes Concerning Going Concerns Assumption
None(7) Summary of Significant Accounting Policies
Investment securities
Non-marketable securities classified as other securities are carried at cost. Cost of securities sold is determined by the moving averagemethod.
Property and equipment, depreciation and impairment (except for leased assets)
Property and equipment is stated at cost, less accumulated depreciation. The costs of land, buildings and building improvements
include the purchase price of property, legal fees and acquisition costs. Depreciation is calculated on a straight-line basis over theestimated useful lives of the assets ranging as stated below:
Buildings....................................................................... 2-61 years
Structures...................................................................... 3-60 years
Machinery and equipment............................................ 2-18 years
Tools, furniture and fixtures......................................... 2-29 years
Expenditures for repairing expenses are charged to income as incurred. Significant renewals and betterments are capitalized.
The Company reviews fixed assets for impairment whenever events or changes in circumstances indicate that the carrying
amount of its fixed assets may not be recoverable. According to the standard set by the Accounting Standards Board of Japan,
companies are required to recognize an impairment loss in their statement of income if certain indicators of asset impairment exist andthe book value of an asset exceeds the undiscounted sum of future cash flows of the asset. The standard states that impairment losses
should be measured as the excess of the book value over the higher of (1) the fair market value of the asset, net of disposition costsand (2) the present value of future cash flows arising from ongoing utilization of the asset and from disposal after asset use. The
standard covers land, factories, buildings and other forms of property, plant and equipment as well as intangible assets. Fixed assets
are grouped at the lowest level for which there is identifiable cash flows that are independent of cash flows of other groups of assets.
Intangible assets
Intangible assets primarily consist of leasehold rights and easement, which are started at cost. Amortization of a term leasehold interestfor business 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 anddepreciated 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.
New unit issuance costs are charged to income as incurred. The underwriters’ economic remunerations for underwriting theoffering are not recognized as new unit issuance costs in the financial statements since such costs are not paid by the Company ascommission 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 (theprice received by the Company) is retained by the underwriters as remuneration.
Revenue recognition
Revenues from leasing of office space are recognized as rent accrues over the lease period.
Taxes on property and equipment
Property and equipment is subject to property taxes and city planning taxes on a calendar year basis. These taxes are generally charged
to income during the period. The sellers of the properties were liable for property taxes for the calendar year including the period fromthe date of purchase by the Company through the end of the year since the taxes are imposed on the owner registered in the record asof January 1 based on the assessment made by the local government. The Company paid the amount equivalent to the property taxes tothe sellers applicable to the period since acquisition and included the amount equivalent to the taxes in the purchase price of each
property and capitalized as cost of the property.
Consumption taxes
Consumption taxes withheld and consumption taxes paid are not included in the statements of income. The consumption taxes paid are
generally offset against the balance of consumption taxes withheld. As such, the excess of payments over amounts withheld areincluded in the current assets and the excess of amounts withheld over payments are included in the 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 based on the risk management policies outlined in
the Company’s Articles of Incorporation. The Company uses interest-rate swap transactions for hedging fluctuations in interest rates
16

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）

on floating-rate loans. Deferred hedge accounting is generally used for such interest-rate swaps and the effectiveness of hedging ismeasured by comparing the total cash flow fluctuation of the hedged item and that of the hedging instrument since the inception of thehedge.
For interest-rate swaps that qualify for hedge accounting and meet certain criteria provided under Japanese GAAP, however, theCompany applies special accounting treatment. Under such special accounting treatment, the differentials paid or received under theswap agreements are recognized and included in interest expense of the hedged loans, and the interest-rate swaps are not required to bemeasured at fair value separately. For interest-rate swaps that meet the specific criteria for such special accounting treatment,
assessments of hedge effectiveness are not performed.
(8) Notes to Financial Statement(Notes to Balance Sheet)a. Compressed amount of tangible assets with government grants
Thousands of yen
As of September 30, 2013

Buildingsb.

As of March 31, 2014

50,08650,086

Commitment line agreement
The Company has signed commitment line agreements with five banks.
Thousands of yen
As of September 30, 2013c.

As of March 31, 2014

Total amount of commitment line agreement
Debt financing balance

43,000,000―

43,000,000—

Balance

43,000,000

43,000,000

Minimum net assets required by Article 67, Paragraph 4 of the Investment Trust and Investment Corporation Act of Japan
Thousands of yen
As of September 30, 2013

As of March 31, 2014

50,00050,000(Breakdown of Property-Related Revenues and Expenses)
Thousands of yen
For the period from April 1, 2013
to September 30, 2013

For the period from October 1, 2013
to March 31, 2014

Property-Related Revenues
Rental Revenues
Rental revenues
Common service charges
Parking revenues
Other rental revenues
Non-Rental Revenues
Cancellation charges
Gain on donation of non-current assets
Other miscellaneous revenues

26,206,916
26,116,177
20,088,252
3,554,993
600,511
1,872,419
90,7396,929
44,967
38,842

26,582,967
26,357,478
20,301,286
3,445,407
627,183
1,983,600
225,489
86,664
91,57247,252

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

14,509,238
3,080,614
2,433,257
2,356,725
57,095866,369
5,507,945
207,229
11,697,678

14,750,867
3,247,634
2,414,132
2,335,593
53,792887,210
5,649,556
162,947
11,832,100

17

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）(Breakdown of Gain on Sale of Properties)
Thousands of yen
For the period from April 1, 2013
to September 30, 2013

Nippon Brunswick Building (building)
Revenue from sale of property
Cost of property
Other sales expenses
Gain on sale of property

For the period from October 1, 2013
to March 31, 2014

1,220,000
1,200,748
647
18,603————(Changes in Unitholders’ Equity)
Total number of investment units issuable
and number of units outstanding

For the period from April 1, 2013
to September 30, 2013

Total number of investment units issuable
Number of units outstanding

For the period from October 1, 2013
to March 31, 2014

2,000,000 units

4,000,000 units

594,140 units

1,188,280 units(Supplemental Cash flow Information)
Cash and cash equivalents
The following table represents a reconciliation of cash and cash equivalents at March 31, 2014 and September 30, 2013:
Thousands of yen
As of September 30, 2013
As of March 31, 2014

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

20,404,340
4,193,848(10,000,000)
14,598,188

20,633,688
4,409,989(4,000,000)
21,043,677(Financial Instruments)
For the six months ended March 31, 2014 and September 30, 2013
a. Status of financial instruments(i) Policies for dealing financial instruments
Concerning the financing of property acquisitions, the Company shall use several funding sources including bank loans, issuanceof investment corporation bonds and 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 thefinancial covenants which may restrict the financial flexibility of the Company. To achieve these goals, the Company intends tofurther develop and reinforce the confidence of debt holders and rating agencies in the Company by bolstering the capital base andcontrolling the loan-to-value 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 controlling 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.
(ii) 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.
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 credit the risk of thedeposit-taking financial institutions. The Company manages credit risk by restricting the tenor of the deposit to relatively shortperiods and setting a minimum credit rating requirement for the deposit-taking financial institutions.
The funding proceeds from borrowings and issues of investment corporation bonds are applied mainly to acquire realestate properties and repay outstanding loans and bonds. While floating-rate short-term and long-term loans are exposed to the riskof interest rate hike, such risk is mitigated by the Company’s low LTV and relatively high percentage of long-term fixed-rate debts
within the total borrowing. The Company also utilizes derivative transactions (interest-rate swap transactions) as a hedge againstinterest-rate risk derived from floating-rate long-term loans, thereby maintaining the overall interest rates on the loans at aneffectively fixed level. For more detailed information on the hedge accounting method, hedging instruments, hedged items, hedge
policies and the evaluation method of hedge effectiveness, please refer to the previously section 1. Summary of significant
accounting policies: Hedge accounting.
18

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）(iii) Supplementary note regarding fair value of financial instruments
The fair values of financial instruments presented in this report are based on their market value, and in cases where market values
are not available, reasonably calculated values are presented. Since calculation of fair value is based on certain assumptions, thefair value could differ depending on the assumptions used. In addition, the contract value of derivative transactions, which ispresented in the following section entitled Derivative Transactions, is not an exact representation of market risk attributable toderivative transactions.

b. Fair value of financial instruments
Fair value of financial instruments, their values carried on the balance sheet and the difference between them as of March 31, 2014 and
September 30, 2013 are as follows.
The financial instruments whose fair values are extremely difficult to estimate are excluded from the following schedule (Note 2):
Thousands of yen
As of September 30, 2013

Book value
20,404,340
4,193,848
25,000,000
15,000,000
13,100,000
40,000,000
227,050,000(1) Cash and bank deposits(2) Cash and bank deposits in trust(3) Short-term loans(4) Current portion of investment corporation bonds(5) Current portion of long-term loans(6) Investment corporation bonds(7) Long-term loans

Fair value
20,404,340
4,193,848
25,000,000
15,173,400
13,158,190
41,508,300
230,703,880

Difference———
173,400
58,1901,508,300
3,653,880

Thousands of yen
As of March 31, 2014

Book value
20,633,688
4,409,989
56,800,000
15,000,000
5,100,000
40,000,000
242,000,000－(1) Cash and bank deposits(2) Cash and bank deposits in trust(3) Short-term loans(4) Current portion of investment corporation bonds(5) Current portion of long-term loans(6) Investment corporation bonds(7) Long-term loans(8) Derivative transactions

Fair value
20,633,688
4,409,989
56,800,000
15,056,550
5,129,403
41,632,000
246,544,239－

Difference———
56,55029,403
1,632,000
4,544,239－

Note 1: Measurement of fair value of financial instruments and matters concerning derivative transactions(1) Cash and bank deposits and (2) Cash and bank deposits in trust
Due to short tenor, the book values of these assets are reasonable approximations of the present value of these assets and hence
used as their fair value.
(3) Short-term loans
Since these loans’ tenor is short and rates are reset at a short interval, the book values of these liabilities are reasonableapproximations of their present value and hence used as their fair values.
(4) Current portion of investment corporation bonds and (6) Investment corporation bonds
Their fair values are based on the values published by a financial data provider.
(5) Current portion of long-term loans and (7) Long-term loans
For loans with floating interest rates, since the interest rates on such loans reflect market rates reasonably well over the shortterm 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 hedged by interest-rate swap subject to the special treatment asinterest-rate swaps are calculated by discounting the aggregated principal and the interest on such loans, after taking into
account the effect of said interest-rate swaps, using reasonable estimates of the rates that would be applicable if the Company
were to refinance the existing loans for the remaining period to maturity under the prevailing market conditions as of March 31,
2014. Such floating-rate long-term loans are presented in the following section entitled Derivative Transactions.) The fairvalues of the liabilities with fixed interest rates are calculated by discounting the aggregated amounts of the principals and theinterests of the loan by the rates that are reasonably estimated to be applicable if the Company refinances the existing loans forthe remaining periods to maturity under the prevailing market conditions as of March 31, 2014 and September 30, 2013.
(8) Derivative Transactions
Please refer to the following section entitled Derivative Transactions.
Note 2: Financial instruments whose fair values cannot be reliably measured.

(1) Non-listed stock (*1)
(2) Deposits received from tenants (*2)

Thousands of yen
As of September 30, 2013
As of March 31, 2014
577,168
577,168
42,634,207
45,418,762(*1) With regard to non-listed stocks which do not have a quoted market price in an active market and whose cash flows are notreasonably estimated, their fair value cannot be reliably measured and they are therefore presented at their book value.
(*2) With regard to deposits received from tenants, which do not have a quoted market price in an active market, and their tenor cannot
be reasonably estimated, their cash flows cannot be reliably measured and they are therefore presented at their book value.

19

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）

Note 3: Redemption schedule for monetary claims after the closing dateThousands of yen
As of September 30, 2013
1 year or less

Cash and bank deposits
Cash and bank deposits in trust
Total

20,404,340
4,193,848
24,598,188

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

Over 5 years

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

Thousands of yen
As of March 31, 2014
1 year or less

Cash and bank deposits
Cash and bank deposits in trust
Total

20,633,688
4,409,989
25,043,677

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

Over 5 years

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

Note 4: Repayment schedule for investment corporation bonds, long-term loans and other interest-bearing debt after the closing dateThousands of yen
As of September 30, 2013
1 year or less

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

25,000,000
15,000,000
13,100,000
53,100,000

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

Over 5 years—
20,000,000
19,600,000
39,600,000——
32,100,000
32,100,000——
42,850,000
42,850,000—
10,000,000
36,000,000
46,000,000—
10,000,000
96,500,000
106,500,000

Thousands of yen
As of March 31, 2014
1 year or less

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

56,800,000
15,000,000
5,100,000
76,900,000

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

Over 5 years—
20,000,000
16,600,000
36,600,000——
44,400,000
44,400,000——
46,500,000
46,500,000—
10,000,000
25,000,000
35,000,000—
10,000,000
109,500,000
119,500,000(Derivative Transactions)a. Derivatives not designated as hedging instruments
For the period from April 1, 2013 to September 30, 2013
The Company did not conduct any derivative transactions.
For the period from October 1, 2013 to March 31, 2014
None
b. Derivatives designated as hedging instruments
For the period from April 1, 2013 to September 30, 2013
The Company did not conduct any derivative transactions.
For the period from October 1, 2013 to March 31, 2014
The contract amount or the equivalent principal amount set out in the contract as of the closing date for each
derivative designated as a hedging instrument is as follows.
(Thousands of yen)

Derivative
accounting method

Type of derivativetransaction

Hedge accounting

Receive-variable,
pay-fixed interest-rate
swap transactions

Hedged item

Contract valueOver one year

Long-term loans

15,000,000

15,000,000

Measurement

Fair value of fair value*―*Because the transactions based on the special treatment of interest-rate swaps and the hedged long-term loans are treated as one
item, the fair value is included under the fair value of long term loans at the end of the fiscal period ended March 31, 2014.
Please refer to the measurement of fair value of financial instruments in Note 1 of the section entitled “b. Fair value of financial
instruments” under “Financial Instruments” as well as subheadings (5) and (7) of Note 1, which are related to derivativetransactions.

20

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）(Income Taxes)
The Company is subject to Japanese corporate income taxes on all of its taxable income. However, under the Special Taxation
Measures Law of Japan (hereinafter the STML), an investment corporation is allowed to deduct dividends of accounting profits, ordividend distributions, paid to investors from its taxable income if certain tax requirements are satisfied. Such tax requirements include
dividend distributions in excess of 90% of its earnings available for dividends for the fiscal period as stipulated by Article 67-15 of the
STML. Based on the distribution policy provided by Article 32-2 of the Articles of Incorporation, the Company made a dividend
distribution in the amount of ¥9,070 million subsequent to March 31, 2014, which is the multiple number of units up to 100% of theunappropriated retained earnings after deducting therefrom ¥30 million of retained earnings to be carried forward. The Company will
not distribute dividends in excess of retained earnings under Article 32-3 of the Articles of Incorporation. The significant components
of deferred tax assets and liabilities as of March 31, 2014 and September 30, 2013 were as follows;
Thousands of yen
For the period from April 1, 2013
For the period from October 1, 2013
to September 30, 2013
to March 31, 2014

Deferred tax assets:
Accrued enterprise tax
Amortization of a term leasehold interest
Asset retirement obligations
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserve for advanced depreciation of non-current assets
Total deferred tax liabilities
Net deferred tax liabilities

1,037
28,8405,503
35,381(34,343)
1,037

1,039
34,247
6,568
41,856(40,816)
1,039

122,812
122,812
121,775

122,812
122,812
121,772

The reconciliation of tax rate difference between the adjusted statutory tax rate and the effective tax rate for the six months ended
March 31, 2014 and September 30, 2013 were as follows:
For the period from April 1, 2013
to September 30, 2013

For the period from October 1, 2013
to March 31, 201439.43%(39.37%)
0.08%
0.01%
0.15%

39.43%(39.37%)
0.08%
0.01%
0.14%

Statutory tax rate
Deductible dividend distribution
Change in valuation allowance
Others
Effective tax rate

Adjustment in deferred tax assets and deferred tax liabilities due to tax rate change
The “Act for Partial Revision of Income Tax Act, etc.” (Act No. 10 of 2014) promulgated on March 31, 2014 partially revised the“Special Measures to Secure the Funds to Realize the Restoration of the Damages following the Great East Japan Earthquake” (ActNo. 117 of 2011) to limit the taxation period of the special corporate tax for restoration to March 31, 2014, resulting in a change of thestatutory tax rate applicable to the deferred tax assets and deferred tax liabilities arising from the temporary differences that are
expected to reverse in the period ending September 31, 2014 (the 26th fiscal period) through the period ending March 31, 2015 (the27th fiscal period), which shall be 37.11% on a nominal tax rate basis. The impact of this change is minimal.

(Asset Retirement Obligations)
For the six months ended March 31, 2014 and September 30, 2013
Asset retirement obligations reported on balance sheet
The Company acquired Osaki Front Tower on February 1, 2011 under the term leasehold for business use agreement which, at the
expiry of the leasehold, obligates the Company to restore the leased land to its original state. At the inception of a lease with suchobligation, the Company recognized an asset retirement obligation and a corresponding capital asset in an amount equal to the present
value of the estimated demolition cost required for the removal of the properties located on the leased land. The present value iscalculated using 2.015% as the discount rate over 42 years, which is the term of the leasehold.
Change in the amount of the asset retirement obligations as of March 31, 2014 and September 30, 2013 consisted of the following:Thousands of yen

Balance at the beginning of the period
Increase in the tangible fixed assets
Adjustment required over the period
Balance at the end of the period

For the period from April 1, 2013
to September 30, 2013

For the period from October 1, 2013
to March 31, 2014

306,334—
3,086
309,420

309,420—
3,117
312,538

Asset retirement obligations other than those reported on balance sheet
Under the Road Act of Japan, the Company is obligated to remove the cable lines and the accompanying equipment originallyinstalled for preventing analog TV interference under the public roads close to Shibuya Cross Tower and to restore the public roads to
21

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）

their original states because analog TV broadcasting was discontinued.
Since the removal involves public roads currently in service and some of the location of the underground structures ispotentially affected by the ongoing redevelopment projects near Shibuya station, it is difficult to initiate such removal unilaterally
without involving other interested parties. Therefore, a reasonable estimate of the present value of asset retirement obligations cannot
be made because the method, the cost and the timing of the removal remains uncertain.
In consideration of such uncertainty, the asset retirement obligation is not reported in the financial statements, and instead
noted herein.

(Investment and Rental Property)
For the six months ended March 31, 2014 and September 30, 2013
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, 2014 and as of September 30, 2013 and the fair values as of March 31,
2014 and as of September 30, 2013 are as follows:
Thousands of yen

As of March 31, 2013
739,901,194

Book value
Change during period(*1)
8,355,934

As of September 30, 2013
748,257,128

Book value
Change during period(*2)
41,286,203

As of September 30, 2013
748,257,128

Fair value
As of September 30, 2013
775,147,000

Thousands of yen

As of March 31, 2014
789,543,332

Fair value
As of March 31, 2014
829,152,000

Note 1: Book value on balance sheet means the acquisition cost less accumulated depreciation.
Note 2: Significant changes(*1) For the period ended September 30, 2013, the major reasons for the increase are the acquisition of Nagoya Hirokoji Place (¥8,729,181 thousand
and Shijo Karasuma Center Building (¥4,451,165 thousand). The major reasons for the decrease are the sale of Nippon Brunswick Building(building) (¥1,200,748 thousand) and the depreciation.
(*2) For the period ended March 31, 2014, the major reasons for the increase are the acquisition of Queen’s Tower A (¥17,520,660 thousand) andOtemachi Financial City North Tower (¥15,623,199 thousand) as well as the additional acquisition of Ebisu Neonato (¥10,978,467 thousand). The
major reason for the decrease is depreciation.
Note 3: Fair values as of March 31, 2014 and as of September 30, 2013 are defined as the appraised values provided by an external qualified professional
appraiser.

(Segment Information)
For the six months ended March 31, 2014 and September 30, 2013
Since the Company has been engaged in real-estate leasing business using a single segment, segment information has been omitted.
Information about products and services
Since revenues from external customers for single segment of similar products and services accounted for more than 90% of total
operating revenues, information about products and services has been omitted.
Information about geographic area
a. Revenues
Since 100% of the total operating revenues were generated from external customers within Japan, geographical breakdown ofrevenues has been omitted.
b. Property and equipment
Since 100% of total property and equipment on the balance sheet are located within Japan, geographical breakdown of suchproperty and equipment has been omitted.
Information about major clients
Since no single external client represents 10% or more of the Company’s total operating revenues, information about major clients has
been omitted.

(Per Unit Information)
The following table summarizes information about net assets per unit and net income per unit at March 31, 2014 and September 30,
2013 and for the periods then ended, respectively:
Yen

Net assets at period end per unit
Net income per unit

For the period from April 1, 2013
to September 30, 2013

For the period from October 1, 2013
to March 31, 2014

341,178
7,683

341,128
7,633

22

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）
Note 1: Net income per unit is computed by dividing net income by the weighted average number of units outstanding during each period.
Diluted net income per unit has not been presented since no warrants or convertible bonds were outstanding during the period.
Note 2: The Company implemented a 2-for-1 split of each investment unit with an effective date of January 1, 2014. Net income per unit iscalculated as if the split had occurred at the start of the period ended September 30, 2013.
Note 3: The basis for the computation of net income per unit is as follows.
Thousands of yen
For the period from April 1, 2013
to September 30, 2013

Net income
Amount not attributable to normal
units holders
Net income applicable to normal
investment units
Average number of units

For the period from October 1, 2013
to March 31, 2014

9,129,757

9,070,153――

9,129,757

9,070,153

1,188,280 units

1,188,280 units(Subsequent Events)
For the six months ended March 31, 2014
Issuance of new investment units
As approved by the Board of Director’s meetings on March 27, 2014 and April 8, 2014, the Company decided to issue new investment
units, completing the public offering on April 15, 2014 and the third-party allocation on May 14, 2014. As a result of the issuance ofadditional units, the unitholders’ capital increased to ¥426,783,117 thousand, and the units issued and outstanding increased to
1,251,530 units as of May 14, 2014.
Summary of the issuance of units
A. Public offerings of new investment units
1. Subscription method:
2. Number of units newly issued:
3. Offer price (subscription price):
4. Aggregate amount of offer price (subscription price):
5. Issue price (paid-in price):
6. Aggregate amount of issue price (paid-in price):
7. Payment date:
8. Initial date subject to distribution:

Public offering (subscription by book-building and spread method)
57,500 units¥501,760 per unit
¥28,851,200 thousand¥486,400 per unit
¥27,968,000 thousand
April 15, 2014
April 1, 2014

B.

Issuance of new investment units by third-party allocation
1. Subscription method:
Third-party allocation
2. Number of units newly issued:
5,750 units
3. Issue price (paid-in price):¥486,400 per unit
4. Aggregate amount of issue price (paid-in price):¥2,796,800 thousand
5. Payment date:
May 14, 2014
6. Initial date subject to distribution:
April 1, 2014
7. Allottee:
SMBC Nikko Securities Inc.

C.

Use of proceeds
The net proceeds raised through the public offering were partially appropriated for repayment of short-term loans. The net
proceeds raised through third-party allocation were appropriated for supplementing cash reserves used for the repayment ofshort-term loans.

23

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）(9) Increase/Decrease in Total Number of Units Outstanding
The Company implemented a 2-for-1 split of each investment unit with a record date of December 31, 2013 and an effective dateof January 1, 2014
Changes in the number of units outstanding and total unitholders’ capital for the previous period and earlier are as follows.

Date

Number of Units Outstanding

Total Unitholders’ Capital(Million Yen)

Increase/Decrease Balance

Increase/Decrease Balance

400

400

200

200

*1

Remarks

Notes

May 11, 2001

Private placement

September 8, 2001

Issuance of new investment
units (public offering)

160,000

160,400

81,06081,260*2

May 8, 2002

Issuance of new investment
units (public offering)

65,000225,400

30,892

112,152*3

October 25, 2003

Issuance of new investment
units (public offering)

35,000260,400

21,295

133,448*4

April 26, 2005

Issuance of new investment
units (public offering)

85,000345,400

68,024201,472*5

October 24, 2006

Issuance of new investment
units (public offering)

64,600410,000

63,211

264,683*6

March 12, 2008

Issuance of new investment
units (public offering)

33,000443,000

32,917

297,601*7

December 8, 2009

Issuance of new investment
units (public offering)

42,000485,000

24,319321,921*8

December 22, 2009

Issuance of new investment
units (third-party allocation)

4,200

489,200

2,431

324,353*9

February 28, 2012

Issuance of new investment
units (public offering)

54,400543,600

35,471

359,824*10

March 27, 2012

Issuance of new investment
units (third-party allocation)

5,440

549,040

3,547

363,371*11

October 29, 2012

Issuance of new investment
units (public offering)

41,000590,040

29,678393,050*12November 28, 2012

Issuance of new investment
units (third-party allocation)

4,100

594,140

2,967

396,018*13

January 1, 2014

Split of investment units

594,140 1,188,280－

396,018

＊

*1.

14

The Company was established by the following three companies investing in 500,000 yen per unit: Mitsubishi Estate Co., Ltd.
(160 units); Tokio Marine & Nichido Fire Insurance Co., Ltd. (Previously The Tokio Marine & Fire Insurance Co., Ltd.) (120units); and The Dai-ichi Life Insurance Company, Limited (Previously Dai-ichi Mutual Life Insurance Company) (120 units).
*2. New investment units were issued at 525,000 yen per unit (underwriting price of 506,625 yen) with the purpose of funding theacquisition of real estate or other assets and asset management was initiated.
*3. New investment units were issued at 490,980 yen per unit (underwriting price of 475,268 yen) with the purpose of funding therepayment of a portion of loans or the acquisition of real estate or other assets.
*4. New investment units were issued at 629,000 yen per unit (underwriting price of 608,456 yen) with the purpose of funding theacquisition of new specified assets and the repayment of loans.
*5. New investment units were issued at 826,000 yen per unit (underwriting price of 800,288 yen) with the purpose of funding theacquisition of new specified assets and the repayment of loans.
*6. New investment units were issued at 1,009,400 yen per unit (underwriting price of 978,500 yen) with the purpose of funding therepayment of loans and acquisition of new specified assets.
*7. New investment units were issued at 1,029,000 yen per unit (underwriting price of 997,500 yen) with the purpose of funding theacquisition of new specified assets and the repayment of loans.
*8. New investment units were issued at 597,520 yen per unit (underwriting price of 579,040 yen) with the purpose of funding theacquisition of new specified assets and the repayment of loans.
*9. New investment units were issued at 579,040 yen per unit with the purpose of funding the repayment of loans.
*10. New investment units were issued at 672,750 yen per unit (underwriting price of 652,050 yen) with the purpose of funding therepayment of short-term loans used to acquire new specified assets and, in the event there is any remaining, the repayment ofother loans.
24

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）*11. New investment units were issued at 652,050 yen per unit with the purpose of funding the repayment of short-term loans used toacquire new specified assets and, in the event there is any remaining, the repayment of other loans.
*12. New investment units were issued at 746,850 yen per unit (underwriting price of 723,870 yen) with the purpose of funding therepayment of loans and the acquisition of new specified assets.
*13. New investment units were issued at 723,870 yen per unit with the purpose of funding the acquisition of new specified assets.
*14. With December 31, 2013 as the date of record, and January 1, 2014 as the effective date, the Company implemented a 2-for-1
split of the investment units held by unitholders stated or recorded on that date’s final unitholders registry.

3. Changes in Officers
Change in officers shall be disclosed in a timely manner once the decision is made.

4. Reference Dataa.

Composition of the Company’s Assets
24th Period
25th Period
April 1, 2013 to September 30, 2013 October 1, 2013 to March 31, 2014
As of September 30, 2013
As of March 31, 2014

Asset type

Real property

Region, etc.

Total ofnet book value*1(¥ mil)Ratio to total
assets(%)

Tokyo 23 wards

483,17662.3

507,364

62.1

Tokyo metropolitan area (excluding
Tokyo 23 wards)*2

45,7695.945,493

5.6

Regional cities

67,345

8.7

67,4198.3

596,29076.9

620,277

75.9

Tokyo 23 wards

98,492

12.7

98,190

12.0

Tokyo metropolitan area (excluding
Tokyo 23 wards)*2

2,850

0.4

20,3402.5

Regional cities

50,623

6.5

50,7346.2

151,966

19.6

169,265

20.7

26,8093.5

27,586

3.4

(–)

(–)

(－)

(－)

775,066

100.0

817,130100.0(748,257)(96.5)(789,543)(96.6)

Total

Trust

Total
Savings and other assets

Total ofnet book value*1(¥ mil)Ratio to total
assets(%)

Total amount of assets*1. Total of net book value for the 24th period (April 1, 2013 to September 30, 2013) are based on total amounts from the balance
sheets as of September 30, 2013, and total of net book value for the 25th period (October 1, 2013 to March 31, 2014) are based on
total amounts from the balance sheets as of March 31, 2014. Real property and real property held in trust are the book values after
depreciation and amortization.
*2. Here, and throughout this document, Tokyo metropolitan area encompasses the prefectures of Tokyo, Kanagawa, Chiba andSaitama.
*3. The figures in parentheses indicate the value of real property held. Ratios are rounded to the first decimal place.

25

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）b.

Real Estate Investment Property and Trust Beneficiary Rights in Trust of Real Estatei) Outline of real estate and other assets included in the Company's holdings (quick reference guide)
The table below is a quick reference guide outlining the real estate and other assets included in the Company’s holdings as ofMarch 31, 2014.

Harumi Front
Harumi Center
Building
Akasaka Park
Building
Aoyama Crystal
Building
Shiodome Building
Shiba 2Chome
Daimon Building
Cosmo
Kanasugibashi
Building

RealpropertyRealpropertyRealpropertyRealproperty

4,791 100.0％

6,510

4,889

5,000,000

0.6％

4*5

25,678 100.0%*5*574,20075,20081,555,500

9.7％

8

6,269 100.0％

7,480

8,800

9,520,000

1.1％

10

3,687 100.0％

4,100

4,551

4,810,000

0.6％

25,112 100.0％

16,60015,60815,462,900

1.8％

1*5

9,316 100.0%*5*517,30013,096

14,700,000

1.8％

10

11,904 100.0％

44,60029,43944,700,000

5.3％

1

4,495 100.0％

6,220

6,042

7,000,000

0.8％

2.5％

(¥ thousand)Ratio*2

Ratio by region*2

Ryoshin Ginza East Real
Mirror Building property

Book value at theend of period(¥ mil)Yurakucho Denki
Real
Building
property
Kodenmacho
Shin-Nihonbashi
Trust
Building
Kyodo Building(Kayabacho
Trust
2Chome)Burex Kyobashi
Real
Building
property
Ginza Sanwa
Real
Building
property

Appraisal value
at the end of
period (¥ mil)*3

Tokyo metropolitan area

Tokyo 23
wards

Real
property

Occupancy rate*2

Sanno Grand
Building

1

Leasable space
(m2)

Real
property
Real
Kitanomaru Square
propertyRealMD Kanda Building
property
Kandabashi Park
Real
Building
property
Otemachi Financial Real
City North Tower property
Real
Nibancho Garden
property
Mitsubishi UFJ
Real
Trust and Banking
property
Building
Burex Kojimachi
Real
Building
property

Number oftenants*1

Type of specified
asset

Name of building

RegionGenki Medical
Plaza

Acquisition price*4

34

20,855

97.3％

29,60021,198

10,200,000
10,700,000
Total:
20,900,000

12

4,697

89.1％

7,220

7,805

7,200,000

0.9％

11

3,897 100.0％

2,910

2,836

3,173,000

0.4％

84,513 100.0％

5,030

4,316

4,410,000

0.5％ 76.7％

14,279 100.0％

6,400

4,646

5,250,000

0.6％

10

4,329 100.0％

15,40017,158

16,830,000

2.0％

1.0%

11

4,255

91.1％

5,390

7,554

5,353,500
2,645,922*6
Total:
7,999,422

5

33,36999.4％

36,600*730,94031,300,000

3.7％

9

20,812 100.0％

20,50023,87126,800,000

3.2％

26
*5

45,013
*5

93.1％
*5

62,90061,11360,800,000

7.3％

8

4,898 100.0％

6,980

7,253

7,680,000

0.9％

9.1％

Trust

35

32,15598.2％

78,80073,727

21,250,000
54,600,000
Total:
75,850,000

Trust

22

9,606

98.5％

6,060

5,054

4,859,000

0.6％

Trust

6

4,062 100.0％

2,780

2,596

2,808,000

0.3％

26

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）

Type ofspecified asset

Number oftenants*1

Leasable space(m2)

Occupancy
rate*2

Appraisal value
at the end of
period (¥ mil)*3

Book value atthe end of
period (¥ mil)Realproperty

13

5,997

92.1％

5,500

7,565

Real
Tokyo Opera City
property
Building*8
Realproperty
Higashi-Gotanda
Real
1Chome Building property
Real
Osaki Front Tower*9
property
Omori-Eki
Higashiguchi
Trust
Building
Nippon Brunswick
Real
Building (Land withproperty
leasehold interest)
Yoyogi 1ChomeReal
Building
property
Tokyo 23Realwards
da Vinci Harajuku
property
Jingumae MediaReal
Square Building property
Shibuya Cross
Real
Tower
property
TIXTOWER UENOTokyo metropolitan area

metropolitan

Ratio*2

7,830,000

0.9％

3.8％

97

35,05095.3％

29,50029,5349,350,000
22,426,831
Total:
31,776,831

18

15,02098.9％

23,70021,42522,000,000

2.6％

4

5,205 100.0％

5,570

4,735

5,500,000

0.7％

1

16,856 100.0％

15,500*7

11,121

12,300,000

1.5％

23

7,756 100.0％

5,170

4,518

5,123,000

0.6％

*10

5,360

5,572

6,670,000(1,170,000)*11
Total: 5,500,000

0.7%

9

7,745 100.0％

9,940

7,406

8,700,000

1.0％

43,147 100.0％

6,280

4,913

4,885,000

0.6％

55,558 100.0％

9,560

10,78012,200,000*12

1.5%

64

30,53242,50038,25934,600,000

4.1％

*10

*10

94.3％

3,740,000
360,000
14,425
10,512,000
Total:
14,612,000
8,500,000
8,145
520,000
Total: 9,020,000

Ebisu Neonato

Realproperty

5

8,700 100.0％

14,100Harmony Tower

Realproperty

18

11,998 100.0％

10,8006

7,224 100.0％

3,960

3,541

3,541,000

0.4％

92,186 100.0％

1,610

1,599

1,728,000

0.2％

11

5,932 100.0％

4,310

4,308

4,500,000

0.5％

5,059

OtsukaHigashi-Ikebukuro Trust
Building
Ikebukuro 2Chome
Trust
Building
Ikebukuro YS
RealBuilding
propertyTokyo(¥ thousand)

3,300,000
2,379,112
Total: 5,679,112
1,232,000
1,342,000
2,486
Total:
2,574,000

1.7％

1.1%

Hachioji First
SquareRealproperty

47

10,068 100.0％

4,440

Saitama Urawa
Building

Realproperty

19

4,510

93.1％

2,090

25

38,42692.3％

35,50034,03437,400,000

4.5％

52

26,66798.8％

17,500*14

17,466

17,200,000

2.1％

Trust

13

6,831 100.0％

2,390

2,874

3,375,000

0.4％

Real
property

25

5,378 100.0％

3,840

3,913

4,000,000

0.5％

area,
Real
excluding MM Park Building
property
Tokyo 23
wards
Queen’s Tower A
Trust
Kawasaki Isago
Building
Musashi Kosugi
STM Building

27

Ratio by region*2

Name ofbuilding

RegionShinwa Building

Acquisition price*4

0.7%

0.3%
8.4％

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）

Appraisal value
at the end of
period (¥ mil)*3

Book value at theend of period(¥ mil)

98.5％

6,770

6,394

7,100,000

0.8％

17

2,518

98.0％

892

1,003

1,000,000

0.1％

17

20,526

79.7％

11,700*7

9,897

9,950,000

1.2％

Ratio
*2

2,924,000
250,000
Total:
3,174,000
2,880,000
1,700,000
Total:
4,580,000
3,850,000
1,300,000
Total:
5,150,000

0.5％

8,612

8,567,000

1.0％

1,550

1,694

1,680,000

0.2％

98.5％

11,80015,452

14,533,000

1.7％

16

3,448 100.0％

1,110

1,389

1,865,000

0.2％

6

6,634 100.0％ 4,540*14

4,400

4,400,000

0.5％

Real
property

32

6,805

85.4％

1,760

2,591

2,650,000

0.3％

Trust

41

28,41492.4％

16,70022,50424,000,000

2.9％

22

6,234

96.0％

2,240

2,942

Kanazawa Park
Building

Realproperty

72

20,889

96.4％

4,350

4,330

Nishiki Park
Building*13

Realproperty

58*5 8,033*5

96.3％
*5

3,690

4,480

Trust

22

13,200

91.3％

9,250
*14

12

3,911

79.8％

31

21,624

Nagoya Hirokoji
Place
Hirokoji Sakae
Building
Nagoya Hirokoji
Building
Nagoya Misono
Building
Shijo Karasuma
Center Building
Kyoto Shijo
Kawaramachi
Building
Shin-Fujita
Building(¥ thousand)RealpropertyRealpropertyRealpropertyRealproperty

2,264,000
1,900,000
Total:
4,164,000
6,934,000
7,380,000
Total:
14,314,000

0.4%

0.6%

Sakaisujihonmachi Real
Building
property

20

11,556

96.7％

3,150

3,752

Midosuji Daiwa
Building

Trust

42

20,45098.8％

12,80013,226

Lit City Building

Realproperty

41

9,965 100.0％

4,230

3,602

4,650,000

0.6％

0.3%

1.7％

12

9,860 100.0％

2,470

2,621

19

4,000 100.0％

1,300

1,406

1,550,000

0.2％

30

5,973 100.0％

2,490

4,403

5,000,000

0.6％

Trust

4

5,841 100.0％

3,650

3,448

3,657,000

0.4％

Total

1,223

96.7％ 829,152 789,543

837,405,766

750,956

14.9％

0.5%

1,320,000
1,450,000
Total:
2,770,000

Real
propertyRealproperty

Ratio by region*2

Occupancy rate*2

12,265

Trust

Tosei Tenjin
Building
Tenjin Crystal
Building
Hinode Tenjin
Building*2.

6

Sendai Honcho
Honma Building

NHK Hiroshima
Real
Broadcasting Center
property
Building*1.

Leasable space(m2)

Other major cities

Number oftenants*1

Type of specified
asset

Name of building

Region8.3 Square Kita
Real
Building
property
Jozenji Park
Real
Building
property
Higashi Nibancho RealSuqareproperty

Acquisition price*4

100.0％The total number of tenants is based on the gross number of tenants in each building. Each instance of occupancy of a single
tenant leasing space is considered separately on a per property basis even if said tenant leases space in multiple properties.
Occupancy rate, ratio of acquisition price and ratio by region are rounded to the nearest first decimal place.

28

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）*3.

Appraisal value at the end of period is, as a rule, the value assessed by real estate appraisers based on the Company's Articles ofIncorporation and the Cabinet Office Ordinance on Accountings of Investment Corporations. The book closing date is used as
the appraisal date and the appraisal value is calculated by Daiwa Real Estate Appraisal Co., Ltd.
*4. Incidental expenses arising from acquisitions are not included in the acquisition price.
*5. Residential portions are not included in the total number of tenants, the occupancy rate or the leasable space for Kitanomaru
Square, Nibancho Garden, Akasaka Park Building or Nishiki Park Building. The residential portions for these properties are as
follows: Kitanomaru Square, leasable space: 11,694m2, occupancy rate: 94.7%; Nibancho Garden, leasable space: 1,686m2,
occupancy rate: 100%; Akasaka Park Building, leasable space: 10,780m2, occupancy rate: 93.2%; Nishiki Park Building,leasable space: 954m2, occupancy rate: 92.4%.
*6. This includes the acquisition price of the land and building adjacent to Ryoshin Ginza East Mirror Building dated July 4, 2008,
the cost of the adjacent building’s demolition and the total expense of the construction and expansion of the Ryoshin Ginza East
Mirror Building (excluding brokerage fees and other acquisition-related expenses) after its completion on May 24, 2010.
*7. Appraisal values by Chuo Real Estate Appraisal Co., Ltd.
*8. Accompanying the acquisition of Tokyo Opera City Building on September 13, 2005, the Company acquired 33 shares of Tokyo
Opera City Building Co., Ltd. (the business that maintains, services and operates the building) at a total acquisition price of
2,797,000 yen and inherited the 874,000 yen deposit made to Tokyo Opera City Building Co., Ltd. by the seller. In an additional
acquisition, on March 24, 2010, the Company acquired 91 shares of Tokyo Opera City Building Co., Ltd. at a total acquisition
price of 7,539,000 yen. Concurrently, the Company acquired 4,931 shares of Tokyo Opera City Heat Supply Co., Ltd. (thesupplier of heat to the building) at a total acquisition price of 566,831,000 yen, inheriting the 2,360,000 yen deposit made toTokyo Opera City Building Co., Ltd. by the seller.
Regarding the appraisal value dated March 31, 2014 of the above-mentioned shares and deposits, the 4,931 shares of Tokyo
Opera City Heating Co., Ltd. are valued at 566,831,00 yen, the total deposits of 3,235,000 yen are valued at 3,235,000 yen, andthe 124 shares of Tokyo Opera City Building Co., Ltd. are valued at 10,336,000 yen.
*9. On acquiring Osaki Front Tower, the Company inherited the land renter’s lease deposit of 1,040 million yen held by the seller ofthe building. The value of the lease deposit was appraised on March 31, 2014 and remained unchanged.
*10. Because the building portion of the Nippon Brunswick Building was transferred on August 23, 2013, no total number of tenants,
leasable space or occupancy rate are provided. Furthermore, the 1,497m2 portion of land still held is being rented to thetransferee of the building, Mitsubishi Estate Co., Ltd.
*11. Because the building was transferred on August 23, 2013, the acquisition price of the building at the time of the land andbuilding purchase dated March 24, 2004, has been deducted.
*12. This is the acquisition price dated October 9, 2003, and includes a portion of the site transferred on October 30, 2009 (cost ofinvestment sold, 614 million yen).
*13. On acquiring Nishiki Park Building, the Company inherited the 9 million yen lease deposit made by the land renters held by theseller of the building. The value of the lease deposit was appraised on March 31, 2014 and remained unchanged.
*14. Appraisal values by Japan Real Estate Institute.
*15. In the above quick reference guide, if the real estate or other assets are classified as shared ownership or compartmental
ownership, only the real estate or other assets owned by the Company are presented and the portions owned by the other sharedowners or compartmental owners are excluded.
*16. The properties presented in the above quick reference guide do not include properties that have falsified structural calculation
reports as reported by the local government authorities and the Ministry of Land, Infrastructure, Transport and Tourism.

29

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）

ii) Breakdown of property-related revenues and expenses for real estate and other assets included in the Company's
holdings
The table below is a quick reference guide outlining the revenues and expenses on each real estate and other asset for the
25th period (October 1, 2013 to March 31, 2014). Furthermore, the income summary is presented based on the previously
mentioned “Summary of significant accounting policies.”(Millions of Yen)
Revenues / Expenses (October 1, 2013 to March 31, 2014)
Property- Propertyrelated related
revenues expenses
Property and other
taxes

226

79

15

18

16

0

5

20

2

147

168

-

168

Kitanomaru Square

1,686

769

155

77

94

2

9

428

-

917

1,346

12

1,333

221

94

14

22

20

0

12

25

-

126

151

139

12

116

34

1

-

16

0

-

16

-

82

98

-

98

1

14

0

-

-

0

-

14

-

ᇞ 13

1

-

1

480

239

58

28

53

0

7

90

-

240

331

7

324

993

396

54

65

131

1

36

106

1

597

703

53

650

150

76

-

-

13

0

0

61

-

73

135

16

119

914

406

103

67

105

1

50

77

0

508

585

52

533

241

146

33

19

41

0

20

31

-

94

125

24

101

118

55

16

9

11

0

1

12

3

63

76

-

76

145

60

10

11

11

0

2

24

-

84

108

1

107

151

52

-

-

11

0

2

37

-

99

137

6

130

375

135

28

22

59

0

5

19

-

239

258

39

219

159

97

16

15

14

0

2

47

0

61

109

1

108

1,235

597

109

125

0

2

0

359

-

637

997

9

987

Mitsubishi UFJ
Trust and Banking
Building
Burex Kojimachi
Building
Sanno Grand
Building
Yurakucho Denki
Building
Kodenmacho
Shin-Nihonbashi
Building
Kyodo Building(Kayabacho
2Chome)Burex Kyobashi
Building
Ginza Sanwa
Building
Ryoshin Ginza East
Mirror Building
Harumi Front

Depreciation①

Nibancho Garden

Casualty insurance

MD Kanda
Building
Kandabashi Park
Building
Otemachi Financial
City North Tower

Other expenses

Utilities expenses

Genki Medical
Plaza

Name of building

Repairing expenses

Property management
expenses

PropertyCapital NCF
related③－④
NOI
expendit
profitsures③(①+②)②④*2

Harumi Center
Building
Akasaka Park
Building
Aoyama Crystal
Building

645

401

77

48

48

1

1

224

0

244

468

-

468

2,265

1,264

241

225

278

4

102

411

0

1,001

1,412

144

1,268

201

99

13

16

28

0

1

29

8

102

131

29

102

Shiodome Building

1,740

676

136

117

120

2

4

292

3

1,063

1,355

2

1,353

281

138

37

30

36

0

2

30

0

142

172

51

121

108

47

11

8

12

0

1

12

-

61

74

1

72

Shiba 2Chome
Daimon Building
Cosmo
Kanasugibashi
Building

30

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）

Revenues / Expenses (October 1, 2013 to March 31, 2014)
Property- Propertyrelated related
revenues expenses
Property and other
taxes

20

19

*1

*1

*1

384

56

47

40

1

0

237

155

92

14

18

14

0

0

665

515

66

51

28

0

216

105

30

23

25

60

20

-

-

286

140

20

191

60

309

45

44

196

*1

67

*1

-

315

552

0

552

43

-

63

107

-

107

1

275

91

150

425

2

422

0

1

23

-

111

134

20

114

20

-

-

-

-

39

39

-

39

23

23

0

3

68

-

146

214

0

214

10

11

16

0

7

14

-

130

145

-

145

134

23

33

36

0

3

36

-

175

212

3

209

1,291

905

158

138

125

2

65

413

2

385

799

172

626

Ebisu Neonato

178

92

23

6

10

0

6

45

-

86

131

1

130

Harmony Tower

373

227

117

-

48

1

10

49

-

146

196

-

196

196

103

20

27

12

0

6

36

-

93

129

53

76

70

32

8

6

5

0

3

7

-

38

45

6

38

177

82

16

17

14

0

3

30

-

94

125

0

124

236

121

50

0

26

0

5

38

-

115

153

16

137

104

53

16

10

9

0

1

15

-

50

66

9

56

MM Park Building

1,242

735

135

184

54

2

21

336

0

506

843

24

818

Queen’s Tower A

403

191

67

0

0

1

0

121

0

211

333

0

333

136

79

25

17

13

0

4

18

-

57

75

42

33

158

70

21

2

10

0

12

22

-

88

111

86

24

309

185

28

52

21

0

2

79

-

123

202

-

202

71

42

9

8

6

0

7

9

-

28

38

35

2

531

237

60

43

0

0

4

127

0

294

422

-

422

127

100

16

16

15

0

40

11

0

26

38

214

(176)

464

430

102

57

63

1

152

52

0

33

85

270

ሺ 184)

Omori-Eki
Higashiguchi
Building
Nippon Brunswick
Building
Yoyogi 1Chome
Buildingda Vinci Harajuku
Jingumae Media
Square Building
Shibuya Cross
Tower

OtsukaHigashi-Ikebukuro
Building
Ikebukuro 2Chome
Building
Ikebukuro YS
Building
Hachioji First
SquareSaitama Urawa
Building

Kawasaki Isago
Building
Musashi Kosugi
STM Building
8.3 Square Kita
Building
Jozenji Park
Building
Higashi Nibancho
SuqareSendai Honcho
Honma Building
Kanazawa Park
Building

1,315

1,118

699

0

Depreciation①

90

Osaki Front Tower

94

Casualty insurance

66

Tokyo Opera City
Building*1
TIXTOWER
UENO
Higashi-Gotanda
1Chome Building

160

*1

6

PropertyCapital NCF
relatedNOI
expendit ③－④
profits③(①+②) ures②④*2

Other expenses

Utilities expenses

Shinwa Building

Repairing expenses

Property management
expenses23

Name of building

*1

31

24
*1

0
*1

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）

Revenues / Expenses (October 1, 2013 to March 31, 2014)
Property- Propertyrelated related
revenues expenses
Property and other
taxes

Repairing expenses

Depreciation
①

44

18

19

0

15

41

6

59

101

3

97

352

165

36

36

0

0

9

82

-

186

268

6

262

85

50

12

11

11

0

5

9

0

35

44

0

44

584

387

91

61

61

1

42

128

0

196

325

211

113

66

47

11

7

6

0

1

20

0

19

40

4

35

195

100

25

15

0

0

0

59

-

94

153

-

153

115

75

19

14

10

0

2

27

0

39

67

19

47

696

519

92

89

77

1

53

204

-

176

381

231

149

230

137

43

29

36

0

4

22

-

92

114

10

104

527

287

64

44

75

1

47

54

-

240

295

14

280

Lit City Building
NHK Hiroshima
Broadcasting
Center Building
Tosei Tenjin
Building
Tenjin Crystal
Building
Hinode Tenjin
Building

259

147

30

24

19

1

5

65

-

111

177

-

177

262

190

50

28

23

0

29

33

24

72

106

160

(54)

85

46

13

8

7

0

6

10

-

38

48

-

48

146

134

24

17

19

0

13

59

-

11

70

86

ሺ 15)

170

68

21

14

14

0

0

18

-

101

119

14

104

Total

14,750 3,247 2,414 2,335

53

887 5,649

162

11,832

17,481

2,433

15,04826,582Other expenses

Utilities expenses

146

Casualty insurance

Property management
expenses

205

Name of building

Nishiki Park
Building
Nagoya Hirokoji
Place
Hirokoji Sakae
Building
Nagoya Hirokoji
Building
Nagoya Misono
Building
Shijo Karasuma
Center Building
Kyoto Shijo
Kawaramachi
Building
Shin-Fujita
Building
Sakaisujihonmachi
Building
Midosuji Daiwa
Building

PropertyCapital NCF
relatedNOI
expendit ③－④
profits③(①+②) ures②④*2

*1. Disclosure of NOI and NCF in the breakdown of the expenses of the property leasing business for Tokyo Opera City Building has
been withheld at the request of the joint owners of the real estate.
*2. Construction expenses that correspond to capital expenditures incurred during the period under review are listed under capital
expenditures. This does not include expenses capitalized as construction in progress, expenses capitalized as furniture, etc., or such
expenses included in the book value as brokerage fees for acquiring real estate or other assets, real estate acquisition taxes or otheracquisition-related expenses.

32

JAPAN REAL ESTATE INVESTMENT CORPORATION（8952）

c. Capital Expenditures
Capital expenditures during the period under review
For acquired real estate and other assets, capital expenditures incurred in the period under review totaled 2,433 million yen and repair,maintenance and renovation expenses classified as expenses in the period under review totaled 887 million yen, for a total of 3,320
million yen worth of construction has been carried out.
One of the significant capital expenditures for the period under review was the upgrading of air conditioners for the Sendai Honcho
Honma Building.
Construction carried out on other real estate and other assets includes the upgrading of disaster prevention facilities in addition toregular maintenance upgrades.

Name of real property, etc.
(Location)
Sendai Honcho Honma Building(Sendai, Miyagi Prefecture)
MD Kanda Building(Chiyoda-ku, Tokyo Prefecture)
Kanazawa Park Building(Kanazawa, Ishikawa Prefecture)
Tenjin Crystal Building(Fukuoka, Fukuoka Prefecture)
NHK Hiroshima Broadcasting
Center Building(Hiroshima, Hiroshima Prefecture)
Musashi Kosugi STM Building(Kawasaki, Kanagawa Prefecture)
Otsuka Higashi-Ikebukuro Building(Toshima-ku, Tokyo Prefecture)
Kanazawa Park Building(Kanazawa, Ishikawa Prefecture)
Jozenji Park Building(Sendai, Miyagi Prefecture)

PurposeSchedule

Maintenance (Upgrade of air
conditioners)
Maintenance (Upgrade of air
conditioners)
Maintenance (Upgrade ofdisaster prevention
facilities)
Maintenance (Upgrade of air
conditioners)

From November, 2013
To March, 2014
From October, 2013
To February, 2014

Expenditures forconstruction (¥ million)
214
103

From September, 2013
To February, 201499

From November, 2013
To February, 201485

Maintenance (Upgrade of air
conditioners)

From September, 2013
To January, 201482

Maintenance (Upgrade of air
conditioners)
Maintenance (Upgrade of air
conditioners)
Maintenance (Upgrade of air
conditioning facilities)
Maintenance (Upgrade of air
conditioning facilities)

From April, 2013
To March, 2014
From October, 2013
To November, 2013
From July, 2013
To February, 2014
From September, 2013
To January, 2014

74
53
50
29

Other real estate

1,640

Total

2,433

33