Japan Real Estate Investment Corporation

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

The Strengths ofJapan Real Estate Investment Corporation

Steady GrowthofDividends

Collaboration
withSponsors

 ctual dividend per unitA
for the March 2020 period:

JPY 10,610

 orecast dividend per unitF
for the September 2020 period:

JPY 10,800

Expertise of

Mitsubishi Estate Co., Ltd. and
Mitsui & Co., Ltd.

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

1

Japan Real Estate Investment Corporation

Steady GrowthofQuality Portfolio
As of March 31, 2020

Total acquisition price:73 properties

JPY 1.053 trillion

The first listed J-REIT in 2001

	Highest credit ratings for a J-REIT:

Sound
Financial Base
As of March 31, 2020

A+ from S&P, A1 from Moody’s, AA from R&I
Long-term interest-bearing debt ratio*: 92.8%
LTV (Interest-bearing debt / Total assets): 40.9%* ‌(Long-term loans [including current portion of long-term loans] + Investment corporation bonds) /Total interest-bearing debt

Contents 
P. 1	The Strengths of Japan Real
Estate Investment Corporation
P. 3

To Our Unitholders

P. 7

Asset Management SummaryP. 9

Financial Highlights

P. 9

Top 10 Unitholders

P. 9

Unit Price Performance

P. 10 Portfolio Highlights

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

Japan Real Estate Investment Corporation

2

To Our Unitholders
We would like to express our condolences for those who have lost their lives due to COVID-19 and ourwish for a full recovery to all those affected by the disease.
In the fiscal period ended March 31, 2020, Japan Real Estate Investment Corporation (the “Company”)
realized strong internal growth and recorded a gain on sale of real estate properties. The Company successfully raised rental revenue through upward rent revisions, since the office leasing market continued to befavorable owing to corporate demand for comfortable and productive office environments. As a result, theCompany was able to offer dividends per unit of JPY 10,610, an increase of JPY 413, significantly exceeding

Business Performance for the March 2020 Period 
Summary of Financial Results and Cash Dividends

global economic slowdown and volatility in the financial and capital

During the March 2020 period (October 1, 2019 to March 31, 2020),

markets against the background of the spread of the coronavirus dis-Japan Real Estate Investment Corporation operating revenues

ease (“COVID-19”).

increased 2.4% compared with the previous period, to JPY 35.9 bil-The office leasing market was strong not only in the Tokyo metro-lion. On the earnings front, operating profit increased 5.2%, to JPY

politan area but also nationwide. The Company steadily accumulated

17.3 billion. After deducting expenses for interest payments on loans

the increasing income and earnings, as a result of the improvement of
99.7%), proactive upward rent revisions, andand other costs, ordinary profit increased 6.1%, to JPY 16.3 billion,

occupancy rate (99.3%

and profit increased 5.4%, to JPY 15.7 billion.

the realization of higher rents upon tenant replacements due to theTurning to dividends, the Company will make cash distributions

favorable market until recently. While the supply-demand balance con-using accounting profits based on the dividend policy outlined intinues to be tight, the Company considers it necessary to give close

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

attention to the domestic and overseas economic impacts brought byamount that exceeds 90% of earnings available for dividends as

COVID-19.

required by Article 67-15 of the Special Taxation Measures Act. BasedIn the investment market, favorable financing environment con-on this policy, the Company decided that the total amount of divi-tinued until recently, and cap rates were still at a very low level against

dends, under the application of Article 65-7 “Exceptions of thethe backdrop of domestic and overseas investors’ desire to actively

Taxation in case of the Replacement by Purchase of Specific Assets” ofinvest in the competitive acquisition environment. Even under thisthe Special Taxation Measures Act, making reduction entries, and also

environment, the Company was able to acquire properties from ato secure retained earnings brought forward, is JPY 14,697,078,100 forsponsor at reasonable prices. At the same time, the Company disposed

the period under review, which is a multiple of 1,385,210—the number

a couple of assets at favorable prices to bullish investors.

of units outstanding as of March 31, 2020. Accordingly, the dividend
per investment unit is JPY 10,610.

As for property acquisitions and dispositions, on December 20,
2019, the Company disposed of a 50.0% quasi-co-ownership interest of
the trust beneficiary right of Kawasaki Isago Building (Kawasaki-shi,

3

Operating Environment and Performance

Kanagawa) for JPY 3.078 billion. The disposition of the interest took

During the March 2020 period (October 1, 2019 to March 31, 2020),

place in two steps, and the other 50.0% quasi-co-ownership interest of

the Japanese economy implied the weakness of the exports, due to thethe trust beneficiary right of the same building was disposed of for JPY

long-term trade friction between the United States of America and3.078 billion on September 30, 2019. On January 31, 2020, theChina in addition to the slowdown of the global economy; however,Company acquired a 13.45% business interest of Seavans S Building

the recovery of Japan’s employment and income environments contin-(Minato-ku, Tokyo) for JPY 5.40 billion, and disposed of the trustued, and corporate revenues showed steady growth. On the otherbeneficiary interest of Kodenmacho Shin-Nihonbashi Building

hand, the economic outlook is uncertain due to concerns about the(Chuo-ku, Tokyo) for JPY 3.45 billion as a mutual trade. On MarchJapan Real Estate Investment Corporation

the previous period. On the other hand, the Company predicts a slowdown in the pace of rent revisions andan increase in vacancy rates from the fiscal period ending September 30, 2020 onward, due to the spread of
COVID-19. As the Company forecasts that an uncertain business environment will continue for the foreseeable future, it intends to respond appropriately.
Meanwhile, in terms of ESG, the Company has clearly disclosed its key performance indicator (KPI)
targets for 2030, including for reducing CO2 emissions. The Company will continue its efforts to sustainable growth through ESG activities.

24, 2020, the Company acquired a 2.91% share of building ownership

Finance Activitiesof the trust beneficiary interest of Otemachi Park Building

According to its financial policy, the Company aims to maintain the(Chiyoda-ku, Tokyo), which is a large, state-of-the-art complex located

LTV ratio (ratio of interest-bearing debt to total assets) at 30% toin the greater Marunouchi area, for JPY 10.18 billion. In addition, on

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

March 27, 2020, as additional acquisition of the existing property hold-by staggering maturities, extension of durations and diversification ofings, the Company acquired a 9.91% building ownership interest of

stable lenders among other possibilities, taking into consideration the

Shinjuku Front Tower (Shinjuku-ku, Tokyo) for JPY 10.10 billion, andborrowing costs and existing relationships with lenders.

a 4% co-ownership interest of Shinjuku Eastside Square (Shinjuku-ku,

During the March 2020 period, the Company executed loans toTokyo) for JPY 8.46 billion. Accordingly, the co-ownership interests ofallocate funds for the repayments of existing loans. In addition, thethe two properties of the Company as stated above were increased from

Company executed a short-term loan of JPY 15.0 billion to apply it to

27.25% to 37.16% (building ownership interest) and from 31.0% topart of the additional acquisition fund of Shinjuku Front Tower and35.0%, respectively.

Shinjuku Eastside Square.

As a result of the above, the Company’s portfolio at the end of the

In addition to debt finance, the Company strategically consideredfiscal period under review, March 31, 2020, consisted of 73 properties,

equity finance for the property acquisitions. In light of the current vola-

with a total acquisition price of JPY 1.053 trillion. Net rentable floor

tile capital market affected by COVID-19, the Company decided it wasarea stood at 864,014 m2 with 1,515 tenants in total.

not a good timing to issue new investment units, but instead it filed a

In addition, on April 20, 2020, the Company acquired a 37.34%
building ownership interest of LINK SQUARE SHINJUKUshelf registration statement relating to the public offering with the
Director-General of the Kanto Local Finance Bureau on March 25, 2020.

(Shibuya-ku, Tokyo), which was completed in August 2019 and is alarge-scale redevelopment building with the latest and advanced fea-

The overview of the shelf registration statement relatingtures, for JPY 17.3 billion.

to the public offering is as follows:

Note: LINK SQUARE SHINJUKU (land with leasehold interest), whose building
ownership was disposed of on August 23, 2013, and Shibuya Cross Tower(land with leasehold interest), whose building ownership was disposed of on
January 18, 2018, are included in the above number of properties and totalacquisition price, but are not included in net rentable floor area or total number of tenants.
	The name of LINK SQUARE SHINJUKU (land with leasehold interest) waschanged from Shinjuku South Gate Project (tentative name) (land with leasehold interest) on August 26, 2019. Furthermore, it has been changed to LINKSQUARE SHINJUKU since the acquisition on April 20, 2020.

Type of domestic
investment securities

Investment units of the Company

Effective period of
the shelf registration

April 2, 2020 to April 1, 2021

Proposed offering
amountUp to JPY 20 billion

Use of the proceeds

Repayment of loans pertaining to acquisitions of specified assets, which is defined in Article 2 (1) of the Act
on Investment Trusts and Investment Corporations

Japan Real Estate Investment Corporation

4

As a result of the above financing activities, as of March 31, 2020,

The Company’s credit ratings as of March 31, 2020 were as follows:

the Company’s total interest-bearing debt increased by JPY 12 billion
compared with the previous period, to JPY 401.9 billion. This amountconsists of long-term loans totaling JPY 340.0 billion (including theRating Agency

Credit Rating

S&P Global Ratings Japan Inc.

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

Moody’s Japan K.K.

Rating: A1; Outlook: Stable

Rating and Investment Information, Inc.

Rating: AA; Outlook: Stablecurrent portion of long-term loans totaling JPY 41.0 billion), short-termloans totaling JPY 29.0 billion, and investment corporation bonds
totaling JPY 32.9 billion. The current LTV ratio stands at 40.9%.

Outlook 
Operating Environment
On April 7, 2020, a state of emergency, targeting the seven prefectures including Tokyo, wasdeclared based on Article 32-1 of “the Act on Special Measures for Pandemic Influenza andNew Infections Diseases Preparedness and Response” (Law No. 31, 2012, including amendments thereafter), and the target areas were expanded to all over the country on April 16,
2020. As investment properties of the Company are mainly office buildings, we do not consider that the pandemic will take an immediate toll on our business. However, due to the declaration of the emergency and the following measures and requests, economic activities
including the businesses of tenants are restricted, which may adversely affect the business performance of the Company in the future.
In this situation, the Company intends to carefully watch the office market while paying
attention to the domestic and overseas economic impacts due to the expansion of COVID-19
infections, and ascertain the trends of the leased office market and the business situations of
its tenants.
Regarding the investment market, we think it is important to continue to be proactive insearching for new properties because we may have opportunities to acquire good properties at

Yutaka Yanagisawa
Executive Director of Japan Real Estate
Investment Corporation

reasonable prices.

Performance Forecasts for the September 2020 and March 2021 periods
The Company’s forecasts for the September 2020 period (April 1, 2020 to September 30, 2020)are as follows: operating revenues totaling JPY 35.0 billion, operating profit totaling JPY 16.3
billion, ordinary profit totaling JPY 15.3 billion, and profit totaling JPY 15.3 billion. DPU is
expected to be JPY 10,800.
The Company’s forecasts for the March 2021 period (October 1, 2020 to March 31, 2021)
are as follows: operating revenues totaling JPY 35.1 billion, operating profit totaling JPY 16.2
billion, ordinary profit totaling JPY 15.2 billion, and profit totaling JPY 15.2 billion. DPU is
expected to be JPY 10,750.
Note: O perating revenues, operating profit, ordinary profit, profit, and cash dividend per unit might varydepending on changes that could occur in the market situation.

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

5

Japan Real Estate Investment Corporation

LINK SQUARE SHINJUKUOtemachi Park Building

Seavans S Building

Japan Real Estate Investment Corporation

6

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

Disposed Property

Kawasaki Isago Building (50% of the interest)

Kodenmacho Shin-Nihonbashi Building

Location	1-2-4, Isago, Kawasaki-ku, Kawasaki-shi,
Kanagawa
Site area	1,594.50m2
Floor area of building	9,623.83m2
Structure	Steel-framed, Reinforced concrete structure,flat roof
Floors	Above ground: 12 floors,
Below ground: 1 floor
Completion	December 1990
Acquisition date / Acquisition price	September 25, 2001 / JPY 1,687 million
Disposition date / Disposition price	December 20, 2019 / JPY 3,078 million
Type of ownership	Land: Ownership
Building: Ownership
Buyer	Undisclosed

Location	4‐9, Nihonbashi-Kodenmacho, Chuo-ku,
Tokyo
Site area	773.28m2
Floor area of building	5,822.88m2
Structure	Steel-framed reinforced concrete structure,flat roof
Floors	Above ground: 9 floors,
Below ground: 1 floor
Completion	November 1991
Acquisition date / Acquisition price	September 25, 2001 / JPY 3,173 million
Disposition date / Disposition price	January 31, 2020 / JPY 3,450 million
Type of ownership	Land: Ownership(with partial leasehold included)
Building: Ownership
Buyer	Undisclosed

Line
Seibu ShinjukueLinToei Oedo Line
Shokuan St.

HigashiShinjuku

Shinjuku Front Tower

Sta.

Seibu Shinjuku Sta.

SHINJUKU EASTSIDE SQUARE

7

etro

hi-S

hin

Maru

nou

Tokyo Medical
University Hospital

juku

Sta. ShinjukuNishiguchi Sta.
ine

chi L

SeibuShinjuku
Sta.

Hilton Tokyo
ni St.

nejuku Li

Shinjukugyoenmae Sta.

ta.
uS

Nis

yo M

YasukuShinjuku 3-Chome Sta.
Ma
ru
Shin nouc
in
hi L
juk
Toei Sh
ine
uS
Kaido
hu
t.
Kos

Shinjuku Sta.

juk

Tok

e

Alta

Me
iji S
Fuk
t.
uto
shin
Lin

Shinjukuchi Sta.
Nishigu

Shinjuku Culture Center
Shinjuku Ward Office

IsetanShin

Seibu
Shinjuku Lineuo

Ch

Yamanote Line

Acquired Property

Shinjuku
Chuo Parko Line.

Shinjuku Sta

Toei Oedae Sta.

Toei kuju
ShinineL

TochomTokyo Metropolitan
Government Building

Shinjuku Sta.

Shinjuku Eastside Square (Additional acquisition)

Shinjuku Front Tower (Additional acquisition)

Location	6-27-30 Shinjuku, Shinjuku-ku, Tokyo
Site area	25,320.28m2
Floor area of building	167,245.46m2
Structure	Steel-framed, Reinforced concrete structure,flat roof
Floors	Above ground: 20 floors
Below ground: 2 floors
Completion 	March 2012
Acquisition date	March 27, 2020
Acquisition price	JPY 8,460 million
Type of ownership	Land: Ownership
Building: Ownership
Seller	Mitsubishi Estate Co., Ltd.

Location	2-21-1, Kita-Shinjuku, Shinjuku-ku, Tokyo
Site area	9,628.17m2
Floor area of building	92,092.30m2
Structure	Steel-framed, Steel-framed reinforced
concrete structure, flat roof
Floors	Above ground: 35 floors
Below ground: 2 floors
Completion 	August 2011
Acquisition date	March 27, 2020
Acquisition price	JPY 10,100 million
Type of ownership	Land: Ownership
Building: Compartmentalized building units
Seller	Mitsubishi Estate Co., Ltd.

Japan Real Estate Investment Corporation

Seavans S Building

Hamamatsu

Shiodome Bldg.

Kyu-Shiba-rikyu
Onshi
Garden

xpre
ssw
ay H
ane
Yuri
da R
kam
oute
ome

Yok
osuk
a Lin
e

Seavans
North Bldg.

Seavans South Bldg.

Met.
E

a LineYamanKeih ote L
in-to ine .
hok
u Lin
e

ircular R
outeAsakuse
Mita Lin

Inner
C

Hibiya Do
ri

Shibakoen Sta.

cho Sta.

Daimon Sta.
Shiba
Park

Tokaido Shinkansen

Oedo Line

Amall

Hinode
Sta.

To

ky
oM
on
or

ail

Mita Sta.

Location	1-2-3 Shibaura, Minato-ku, Tokyo
Site area
26,468.48m2
Floor area of building	166,405.36m2
Structure	Steel-framed, Reinforced concrete,
Steel-framed reinforced concrete structure, flat roof
Floors	Above ground: 24 floors
Below ground: 2 floors
Completion 	January 1991
Acquisition date	January 31, 2020
Acquisition price	JPY 5,400 million
Type of ownership	Land: Ownership
Building: Compartmentalized building units
Seller	Undisclosed

Li
ne
Ro
ute
Tokyo Fire
Department

Kanda Sta.

Marunoucita

Takeba
shi
Sta.

Line

M

Inner Circular

ChiyodaLocation	1-1-1 Otemachi, Chiyoda-ku, Tokyo
Site area	9,338.74m2
Floor area of building	146,611.42m2
Structure	Steel-framed, Steel-framed reinforced concrete structure,flat roof
Floors	Above ground: 29 floors
Below ground: 5 floors
Completion 	January 2017
Acquisition date	March 24, 2020
Acquisition price	JPY 10,175 million
Type of ownership	Land: Ownership
Building: Compartmentalized building units
Seller	Mitsubishi Estate Co., Ltd.

hi LineOtemachi Park Building

OtemachiFinancial
City

Otemachi Park Building

Imperial
Hanzo
mon
Palace Ote-mon
Otemachi Sta.
Line
Gate
Marunouchi
Oazo
Palace HotelTokyo
Mitsubishi UFJ
Tozai
Trust and Banking
Line
Bldg.
Shin-Marunouchi
Bldg.
Marunouchi
Bldg.

Imperial Palace
Front Gardens

Tokyo Sta.

Property to be Acquired

LINK SQUARE SHINJUKU
Shinjuk
Yasu u Ward O
kuni
ffice
Dori
run
ouc
hi L
ine

u
Shinjuk chi Sta.
Nishigu

Ma

Shinjuku 3chome Sta.

ku
hinju

S

Shinjuku Sta.

Line

Fu
Lin kuto
e shinOedo Line

Shinjuku Sta.

Shinjuku Takashimaya
ine

Front PlaceMinami-Shinjuku

LdoShinjuku Gyoen

ineO
Li dak
ne y
u

io L

Ke

Oe

Location	5-27-5 Sendagaya, Shibuya-ku, Tokyo
Site area	3,852.34m2
Floor area of building	42,049.96m2
Structure	Steel-framed, Steel-framed reinforced concrete structure,flat roof
Floors	Above ground: 16 floors
Below ground: 2 floors
Completion 	August 2019
Acquisition date	April 20, 2020
Acquisition price	JPY 17,300 million
Type of ownership	Land: Ownership
Building: Compartmentalized building units
Seller	Mitsubishi Estate Co., Ltd.

LINK SQUARESHINJUKU
Yoyogi Sta.

Japan Real Estate Investment Corporation

8

Financial Highlights
In millions of JPY
For the period from
October 1, 2019
to March 31, 2020

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

For the period from
October 1, 2018 toMarch 31, 2019

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

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

Operating revenues

35,99635,16433,02233,066

31,955

Operating profit

17,354

16,494

14,548

14,57813,596

Ordinary profit

16,326

15,39013,441

13,34812,362

Profit15,755

14,945

13,431

13,273

12,291

Net operating income (NOI) (Note 1)

23,413

23,10422,60322,401

21,566

Funds from operations (FFO) (Note 2)

19,986

19,795

19,831

19,451

18,652

22.0

25.4

22.7

21.3

19.3

Cash distribution

14,697

14,124

13,432

13,152

12,223

Number of units

1,385,210

1,385,210

1,385,210

1,385,210

1,309,310

10,61010,197

9,697

9,495

9,336

FFO multiple (Times) (Note 3)

Dividend per unit (JPY)

Notes: 1. NOI = Property-related revenues – Property-related expenses (excluding Depreciation)
2. FFO = Profit + Depreciation – Gain (Loss) on sales of real estate properties
3. FFO multiple = Unit price at end of the respective term / FFO per unit (Annualized)(Annualized portion of the calculation given in Note 2 and Note 3 assumes a fiscal period of 182 days for the period ended March 31, 2018, 183 days for the period
ended September 30, 2018, 182 days for the period ended March 31, 2019, 183 days for the period ended September 30, 2019, and 183 days for the period ended
March 31, 2020.)

Top 10 Unitholders As of March 31, 2020
Units

% of total units
outstanding

Japan Trustee Services Bank, Ltd. (Shintaku Acc.) �������������������������������������������������������������������������������������������������������������������������������������

285,524

20.61%The Master Trust Bank of Japan, Ltd. (Shintaku Acc.) �������������������������������������������������������������������������������������������������������������������������������

230,799

16.66%The Nomura Trust and Banking Co., Ltd. (Toshin Acc.) ���������������������������������������������������������������������������������������������������������������������������

66,466

4.80%

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

46,807

3.38%

Trust & Custody Services Bank, Ltd. (Toshin Acc.) �����������������������������������������������������������������������������������������������������������������������������������

45,538

3.29%

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

19,6481.42%

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

17,1201.24%

JP MORGAN CHASE BANK 385771 �����������������������������������������������������������������������������������������������������������������������������������������������������

16,336

1.18%

DFA INTERNATIONAL REAL ESTATE SECURITIES PORTFOLIO ������������������������������������������������������������������������������������������������

16,122

1.16%

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

16,021

1.16%

Company

Unit Price Performance
350%

TSE REIT Index   

TOPIX   The Company

300%

250%

200%

150%

100%

50%
Sep. Mar.
2001 2002

9

Mar.
2003

Mar.
2004

Japan Real Estate Investment Corporation

Mar.
2005

Mar.
2006

Mar.
2007

Mar.
2008

Mar.
2009

Mar.
2010

Mar.
2011

Mar.
2012

Mar.
2013

Mar.
2014

Mar.
2015

Mar.
2016

Mar.
2017

Mar.
2018

Mar.
2019

Mar.
2020

Portfolio Highlights
Trends in the state of portfolio management

Rentable office area (m2)

Number ofproperties

Number oftenants

Leasable officespace (m2)Occupancy
rate (%)

September 2001

20

213

133,927

94.6

March 2002

24

353

201,884

94.0

March 2003

30

383

236,693

94.4

March 2004

36

477

273,157

94.8

March 2005

46

669

336,026

97.6

March 2006

52

866

400,090

98.7

March 2007

50

887

397,928

97.8

March 2008

53

931

479,877

95.9

March 2009

55

993

516,411

95.5

March 2010

55

979

566,277

93.0

March 2011

57

1,004

588,984

93.2

March 2012

57

1,058

629,761

94.7

March 2013

60

1,131

700,759

96.7

March 2014

64

1,223

750,956

96.7

March 2015

68

1,350

793,976

97.8

March 2016

68

1,420

820,38198.3

March 2017

69

1,482

835,069

98.8

March 2018

70

1,449

833,335

99.2

March 2019

73

1,506

855,902

99.5

October 2019

73

1,504

852,509

99.6

November 2019

73

1,504

852,491

99.8

December 2019

72

1,489

849,075

99.8

January 2020

72

1,493

851,252

99.7

February 2020

72

1,492

851,252

99.7

March 2020

73

1,515

864,01499.7

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

0200,000

400,000

600,000

800,000

1,000,000

Mar. 2020
period

50.0

60.0

70.0

80.0

90.0

100.0
Occupancy rate (%)

Portfolio breakdown As of March 31, 2020
Properties by geographic region

Tenants by industry type

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

Nagoya city 2.9%

Other areas 7.2%

Electricity andheat supply services

1.4%

Osaka city and
Kyoto city 5.9%
Tokyo metropolitan area
(excluding
Tokyo 23 wards) 6.3%

Tokyo 23 wards

77.6%

71.4%

6.2%

Information services

12.2%

Public services andassociations 1.9%

Tokyo 5 central wards*

Tokyo 23 wards(excluding Tokyo 5 central wards)

Others 9.7%
Ceramics 1.3%

Finance10.4%

Medical 2.2%
Insurance 3.4%

Service industries

9.7%

Machinery 3.5%

Real estate

Construction 3.8%

8.9%

Electric devices

6.8%

Communications

4.1%

Specialist services(Consulting, etc.) 4.4%

Retail and restaurants 6.4%
Pharmaceuticals 5.1%
Media and advertisement 4.9%

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

Japan Real Estate Investment Corporation

10

Approach to ESG

Sustainability Policy
Japan Real Estate Asset Management Co., Ltd. (JRE-AM), which manages the Company’s assets, believes that asset management focused on
ESG is essential to the sustainable improvement of asset value.
The ESG Office, a dedicated team for ESG, is driving theCompany’s ESG initiatives in accordance with its Sustainability Policy.
Such initiatives include an enhancement of disclosure of theCompany’s ESG-related information, an acquisition of environmental
certifications and evaluations from external organizations, participation ininternational initiatives, and more.
We disclose ESG-related information on our Company website in atimely manner.
Please refer to our website for further information
https://www.j-re.co.jp/en/esg/index.html

Sustainability Policy
1. C ontribution to creating a low-carbon society
2. Contribution to creating a recycling-oriented society
3. C ontribution to creating a society in harmony with nature
4. Enhancement of safety and security
5. Initiatives aimed at officers and employees
6. Collaboration with external stakeholders
7. I nformation disclosure and obtaining environmental
certifications

External Evaluation and Certification
Ranked 1st among the office sector inJapan under the GRESB Real Estate
Assessment

Green Building-Certified Properties in the Portfolio
We are focusing on improving the sustainability of the Company’s
entire portfolio. As of the end of March 2020, about three-quartersof the Company’s portfolio is green certified. Going forward, theCompany will continue to acquire environmental certifications
and evaluations, such as the DBJ Green Building Certification.

JRE received the following
evaluations under the GRESB Real
Estate Assessment and GRESB Public
Disclosure conducted in 2019.

Rating5 Star(Highest rating)

GRESB Public Disclosure

A (Highest rating)

GRESB Membership

Benchmark Committee Member

Green building-certified properties in the portfolio

Participation in the CDP’s Climate
Change Program
Received the “B” in the 2019 Carbon
Disclosure Project (CDP) Climate
Change ProgramAwarded “Prime” status
in the ISS ESG corporate ratingAwarded “Prime” status in ISS’s sustainability rating in March 201973.9%*

73.6%*DISCLOSURE INSIGHT ACTION

53.6%*
Number ofproperties

24.8%*
6
Mar. 17

27
Mar. 18

Mar. 19

11

Japan Real Estate Investment Corporation

Mar. 20* Based on acquisition price.

Winning the first ESG Finance Award
Won bronze at the Ministry of theEnvironment’s inaugural ESG FinanceAwards in February 2020

48

47

Please refer to our website for further information
https://www.j-re.co.jp/en_cms/esg/external.html

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

Became Signatory in August 2018

Principles for Responsible
Investment (PRI)

United Nations Global
Compact (UNGC)

United Nations Environment
Programme Finance Initiative(UNEP FI)* Mitsubishi Estate Co., Ltd., JRE-AM’s parent
company became a signatory of the UNGC.
Accordingly, JRE-AM has participated in this­initiative as a member of the Mitsubishi Estate Group.

2019 PRI Assessment Result
JRE-AM reported on the status of its ESG integration practice andhas received the following assessment result as below.

ModuleScore

Strategy & GovernanceA+

PropertyA

Note: The rating system has 6 ranks (A+, A, B, C, D, and E)

CO2 Reduction Targets and KPIs for 2030
KPIs to Reduce CO2 Emissions

JRE established KPIs in linewith SDGs to help realize
a sustainable society

CO2 Emissions

35

KPIs for Water and Waste Management

Water

20

%

Reduction*1
Own

%*3

Reduction

5-10

Zero Energy
Buildings*2

Waste
Recycling Rate

Carbon Intensity

60

90

kg-CO2 / m2%
or moreor below

JRE has set KPIs to reduce energy and CO2
emissions generated from our portfolio by
2030 from a 2013 base year. We will continue to proactively address climate change.
*1 Carbon intensity basis Base year: 2013

*2 Includes ZEB Ready and ZEB Oriented building

JRE supports the “SDGs (Sustainable
Development Goals)” adopted by theUnited Nations and has establishedrelated KPIs for 2030.
*3 Intensity (m³/ m²) basis Base year: 2013

Japan Real Estate Investment Corporation

12

Supporting the TCFD Recommendations
To enhance the sustainability of our future business, JRE evaluates therisks and opportunities that climate change presents, and reflect themin our operational policies and asset management accordingly.

For more information, please visit “Climate Change Initiatives” on JRE’s website
https://www.j-re.co.jp/en/esg/climate.html

Social Responsibility
For

Tenants and Partners

Raising ESG Awareness of Our Stakeholders
We offer ESG training for our business partners, master lessees, andproperty managers, among others, for the purpose of raising stakeholder awareness.

Sustainability Guide to Promote Owner andTenant Collaboration
JRE has created a Sustainability Guide and distributed it to tenants,
aiming to promote close collaboration with them.
This Sustainability Guide introduces the activities that we can doin the office, mainly from the viewpoints of the “environment” and“tenant well-being.”
We will team up with our tenants and endeavor to co-create asustainable society with them.

Sustainability Guide
Contents
●

●

●

●

●

●

Implemented in May 2019 oward a Sustainable Society
TOur Thoughts
Case 1: Example of a Large-scale OfficeCase 2: Small and Medium-sized OfficeCase 3: C reating New Spaces in the Current Office
What We Can Do Now

Number of participating companies
Number of participants ForSocietySUSTAINABILITY
GUIDE

Tenants/
Customers

Co-creation
EconomyEnvironment

Our Thoughts
What can we do to help create a sustainable society?
MITSUBISHI ESTATE CO., LTD.

Japan Real Estate Investment Corporation

For example, one of the goals of
the SDGs is “decent work and economic growth.”
If we were to realize this philosophy in our offices inJapan, it would be to create an environment that
respects the individuality of employees, enables each
employee to fully demonstrate his or her capabilities,
and creates new value and business momentum.
This will enhance the sustainability of the wayorganizations and individuals work. In recent years,
the phrase “work style reform” has become popular, andthese efforts are based on the SDGs. This Sustainability
Guide provides tenants with various tips on what they
can do in the office, mainly from the viewpoints of the“environment” and “tenant well-being”.
We will team up with our tenants and endeavor toco-create a sustainable society with them.

2

Please refer to the following link for the Sustainability Guide
https://www.j-re.co.jp/assets/pdf/en-sustainability_guide.pdf

13

Japan Real Estate Investment Corporation

Building
Owners20
167

Communities

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

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

For

Employees

Learning and Development for All Employees
Based on the idea that all employees should be professionals with ahigh degree of specialization, JRE-AM encourages all our employees,i.e., permanent employees, contract employees, and seconded employees, to participate in a variety of training programs.
JRE-AM provides its own training programs that are associatedwith the REIT industry, compliance, etc. and designed to develop
employee skills and deepen their professionalism. In addition,
JRE-AM encourages its employees to participate in a variety of training programs offered by sponsors.
For more details on JRE-AM’s sponsors’ personnel development
systems, please refer to the following websites.

Support for Career Enrichment,
Qualifications, and Licenses
For all of its employees, JRE-AM subsidizes the expenses of various
training programs or sessions such as fund management, logicalthinking skills, financial accounting, organizational management,coaching, compliance, and more. In addition, JRE-AM also subsidizes
the expenses of obtaining qualifications and licenses such as ARES
Certified Master, Certified Building Administrator, Real EstateTransaction Agent, among others.

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

Office Design Promoting Internal Communication
Coinciding with its office relocation, JRE-AM has shifted to ­­­­
a free-address work environment. The new office features a spacious
communal area and various types of furniture such as standing desks
and balance chairs. JRE-AM aims to create an environment that facilitates communication and work-style reforms as we believe they are
key to improving productivity. JRE-AM’s office was selected for the“DSA Design Space Award 2018” by the Japan Design Space
Association.
For more details on the DSA Design Space Award, please refer tothe following website.
Japan Design Space Association

http://www.dsa.or.jp/design/english/award/index_en.html

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

M itsui & Co.:https://www.mitsui.com/jp/en/sustainability/social/resources/
rearing/index.html

Standing desks

Employee-friendly workplace

Free-address work environment

Conference rooms where table tennis
can be played

Japan Real Estate Investment Corporation

14

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

94.6

97.8

98.7

95.9

96.1

95.5

93.3

93.0

92.4

93.2

94.6

94.7

95.5

96.7

In September 2001, the Company became the first J-REIT in Japan listed on the Tokyo Stock Exchange. Since
then, the Company has targeted stable management to fulfill its goal of maintaining or increasing dividend perunit over the medium-to-long term. The Company’s growth is based on external growth strategies that aim toincrease earnings through the acquisition and transfer of properties, as well as internal growth strategies that seek
to optimize earnings from properties already held. The size of the Company’s assets (total acquisition price) has
grown from JPY 92.8 billion at IPO to JPY 1.053 trillion as of the period ended March 31, 2020 due to thesteady achievement of external growth strategies. However, in terms of internal growth strategies, ongoing efforts
are being made in such areas as maintaining stable occupancy rates and reducing building management costs.

718
Total acquisition price (JPY billion)(Number of properties)

518

542

564

564

641

643

660

657

740

782

441

446

(20)

(50)

(50)

(53)

(54)

(55)

(55)

(55)

(55)

(57)

(56)

(57)

(58)

(60)

Sep.
2001

Mar.
2007

Sep.
2007

Mar.
2008

Sep.
2008

Mar.
2009

Sep.
2009

Mar.
2010

Sep.
2010

Mar.
2011

Sep.
2011

Mar.
2012

Sep.
2012

Mar.
2013

14,611

9,536

9,510

9,599

9,021

8,314

7,821

7,925

8,095

7,850

7,570

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

92

At IPO

Dividend per unit* (JPY )

8,760

9,250

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

Mar. 2008
Fifth Follow-On

Dec. 2009
Sixth Follow-On

Feb. 2012
SeventhFollow-On

Oct. 2012
EighthFollow-On* The Company implemented a 2-for-1 split of each investment unit as of January 1, 2014. The figures for the March 2002 through September 2013 periods have taken the split into account.

15

Japan Real Estate Investment Corporation

96.3

96.7

97.8

97.8

97.7

98.3

98.7

98.8

99.1

99.2

99.2

99.5

99.3

99.7

As of Mar. 31, 2020:
73 properties; JPY
1,053 billion

883

927

923

923

944

955

990

1,014 1,025 1,023

1,053

837

838

(62)

(64)

(64)

(68)

(70)

(68)

(68)

(69)

(69)

(70)

(71)

(73)

(73)

(73)

Sep.
2013

Mar.
2014

Sep.
2014

Mar.
2015

Sep.
2015

Mar.
2016

Sep.
2016

Mar.
2017

Sep.
2017

Mar.
2018

Sep.
2018

Mar.
2019

Sep.
2019

Mar.
2020

794

(End of fiscal period)

7,683

7,633

7,648

Apr. 2014
Ninth Follow-On

7,681

8,001

Apr. 2015
Tenth Follow-On

8,121

8,361

8,544

9,096

9,336

9,495

9,697

10,197

10,610

Apr. 2018
Eleventh
Follow-On

Japan Real Estate Investment Corporation16

Major tenant roster
Name of tenant

Rented officearea (m2)Name of property% of total rented
office area

MUFG Bank, Ltd.

Harumi Front (also includes 3 other buildings)

33,912

3.9%

Not disclosed*

Kitanomaru Square (also includes 3 other buildings)

22,681

2.6%

Not disclosed*

Osaki Front Tower (also includes 2 other buildings)

22,021

2.6%

NTT Communications Corporation

Shiodome Building

16,243

1.9%

SQUARE ENIX HOLDINGS CO., LTD.

Shinjuku Eastside Square

15,172

1.8%

HAKUHODO DY HOLDINGS INCORPORATED

Akasaka Park Building (also includes 1 other building)

13,403

1.6%

Mitsubishi UFJ Trust and Banking Corporation

Mitsubishi UFJ Trust and Banking Building

10,5981.2%

JGC HOLDINGS CORPORATIONMM Park Building (also includes 1 other building)

10,246

1.2%

TOTO LTD.

Shiodome Building (also includes 1 other building)

9,694

1.1%

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

Queen’s Tower A

9,536

1.1%

* Not disclosed due to tenant’s request

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

III-1

II-2

II-1

III-1 to III-23:
Other major cities

III-7
III-8

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

II-5
II-3
II-4

III-13
III-18

III-21
III-22
III-23

III-20

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

III-9
III-10
III-11
III-12
I-44

I-43

I-45
I-38
I-42

I-1

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

I-30

I-34
I-35
I-36

I-6

I-20
I-37

I-9

I-2, I-3

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

I-19
I-21
I-26

Tokyo Station
I-14

I-11
I-12
I-13

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

I-17, I-18

I-39
I-40

I-41

I-1 to I-45:
Tokyo 23 wards

17Japan Real Estate Investment Corporation

Overview of Portfolio Properties
As of March 31, 2020

Tokyo 23 wards

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

MD Kanda
Building

I-1

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

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

OtemachiFinancial City
North Tower●

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

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

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

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

Nibancho
GardenI-5●

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

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

Burex Kojimachi
Building●

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

Yurakucho Denki
Building

Sanno Grand
Building

I-8●

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

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

Front Place
Nihonbashi

I-10

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

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

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

I-9

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

Kyodo Building(Kayabacho
2Chome)

I-11

I-13

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

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

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

Ginza 1Chome
East Building

Burex Kyobashi
Building●

I-6

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

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

I-3

I-7

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

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

OtemachiPark Building

Mitsubishi UFJ
Trust and Banking
Building

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

I-2

I-4

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

Kandabashi Park
Building●

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

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

Ginza Sanwa
Building

I-14

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

I-12●

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

I-15

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

Japan Real Estate Investment Corporation

18

Ryoshin Ginza
East Mirror
Building●

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

Harumi Front●●

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

Akasaka Park
Building

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

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

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

Aoyama Crystal
Building

I-19

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

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

Shiodome
Building●

CloverShiba-koen

I-20

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

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

Shiba 2Chome
Daimon Building

I-22

●

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

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

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

Cosmo
Kanasugibashi
Building

I-23

I-25

●

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

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

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

Shinjuku Front
Tower●

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

19

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

Tamachi Front
Building

Seavans S Building●

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

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

Japan Real Estate Investment Corporation

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

I-29

●

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

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

I-27

Tokyo Opera City
Building

I-28

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

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

Shinwa Building●

I-24

Shinjuku Eastside
Square

I-26

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

I-21

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

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

I-18

I-16

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

Harumi Center
Building

I-17

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

I-30

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

Front PlaceMinami-Shinjuku●

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

I-31

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

LINK SQUARE SHINJUKU(Land with leasehold interest)●

I-32

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

Jingumae
Terrace●

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

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

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

Ebisu Neonato●●

Jingumae Media
Square Building

I-34

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

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

Osaki Front
Tower●

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

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

Otsuka HigashiIkebukuro
Building●

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

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

Shibuya-ku, Tokyo
5,153.45m2———

Higashi-Gotanda
1Chome Building●

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

I-39

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

Harmony Tower
●

I-42

I-41

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

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

Ikebukuro
2Chome Building●

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

I-36

Omori-Eki
Higashiguchi
Building

I-40

I-33

Shibuya Cross Tower(Land with leasehold interest)

I-38

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

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

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

TIXTOWER
UENO

I-37

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

I-35

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

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

Yoyogi 1Chome
Building

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

Ikebukuro YS
Building

I-44

●

I-45

I-43

Toshima-ku, Tokyo
2,121.39m2
9,531.28m2
100.0%
November 1987

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

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

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

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

Japan Real Estate Investment Corporation20

Tokyo metropolitan area, excluding Tokyo 23 wards

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

Saitama Urawa
Building

II-1

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

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

Queen’s Tower A●●

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

II-3

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

Musashi Kosugi
STM Building

II-4

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

II-2

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

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

MM Park
Building

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

II-5

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

Other major cities

8∙3 Square Kita
Building●

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

Jozenji Park
Building

III-1

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

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

Sendai Honcho
Honma Building●

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

21

Higashi Nibancho
SquareIII-2

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

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

AER●

Japan Real Estate Investment Corporation

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

Daido Seimei
Niigata Building

III-5

III-4

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

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

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

III-3

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

III-6

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

Kanazawa Park
Building●

Kanazawa
Kamitsutsumicho
Building

III-7●

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

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

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

Nagoya Hirokoji
Place●

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

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

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

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

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

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

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

Lit City Building●

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

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

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

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

III-15

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

Amagasaki Front
Building●

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

NHK Hiroshima
Broadcasting
Center Building

III-19

III-12Shin-Fujita
Building

III-17

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

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

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

Midosuji Daiwa
Building

III-16

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

III-14

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

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

Nagoya Misono
Building

III-11

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

Sakaisujihonmachi
Building●

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

Umeda Square
Building

III-13

III-9

III-8

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

Shijo Karasuma
Center Building●●

Nagoya Hirokoji
Building

III-10

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

Nishiki Park
Building

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

Tosei Tenjin
Building●

III-21

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

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

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

Japan Real Estate Investment Corporation

22

Tenjin Crystal
Building●

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

Hinode Tenjin
Building

III-22

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

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

III-23

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

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

23

Japan Real Estate Investment Corporation

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

Selected Financial Data
Millions of yen

Operating revenues
Operating expenses
Operating profit
Ordinary profit
Profit before income taxes
ProfitTotal assets
Interest-bearing debt
Net assets
Unitholders’ capital
Number of units
Net assets per unit (Yen)
Cash distribution
Dividend payout ratio (Note 1)
Dividend per unit (Yen)Net operating income (NOI)
Funds from operations (FFO)
Return on assets (ROA) (Note 2)
Return on equity (ROE) (Note 3)
EOP equity ratio (Note 4)
EOP interest-bearing debt ratio
on total assets (Note 5)
FFO multiple (Times)
Debt service coverage ratio (Times) (Note 6)

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

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

For the period
from October 1, 2018
to March 31, 2019

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

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

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

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

33,022
18,473
14,54813,441
13,441
13,431
963,676
389,993511,256
497,241
1,385,210
369,082
13,432100.0%
9,697
22,603
19,831
1.4%(2.8% annualized)
2.6%(5.3% annualized)
53.1%

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

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

40.9%
22.0
24.3

40.4%
25.4
21.4

40.5%
22.7
19.6

40.2%
21.3
18.5

43.2%
19.3
16.9

Notes: 1. Dividend payout ratio = Dividend per unit / Profit per unit × 100
		 For the period ended September 30, 2018, as new investment units were issued, the ratio was calculated as follows:		 Cash distribution / Profit × 100
2. ROA = Ordinary profit / Average of Total assets during the period × 100
3. ROE = Profit / Average of Net assets during the period × 100		(Annualized portion of the calculation given in Note 2 and Note 3 assumes a fiscal period of 182 days for the period ended March 31, 2018, 183 days for the period
ended September 30, 2018, 182 days for the period ended March 31, 2019, 183 days for the period ended September 30, 2019 and 183 days for the period ended
March 31, 2020.)
4. EOP equity ratio = (Net assets at the end of period / Total assets at the end of period) × 100
5. EOP interest-bearing debt ratio on total assets = (Interest-bearing debt at the end of period / Total assets at the end of period) × 100
6. Debt service coverage ratio = Profit before Interest, Taxes, Depreciation and Amortization / Interest expenses
7.	The Company has applied “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28 on February 16, 2018) from the period
ended September 30, 2018, and the reclassified amount due to the change was reflected to the total assets for the period ended March 31, 2018.

Japan Real Estate Investment Corporation24

Balance Sheets
As of September 30, 2019 and March 31, 2020

Thousands of yen

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

25

Japan Real Estate Investment Corporation

As of September 30, 2019

As of March 31, 2020

26,723,523
6,881,014
324,798
310,203
42,66434,282,203

16,996,570
6,442,270
271,518
179,764
22,422
23,912,546

254,826,921(98,967,794)
155,859,126
2,987,203(973,424)
2,013,779
3,358,886(2,437,315)
921,570
468,865(326,598)
142,266
458,682,518
6,527
102,939,399(29,445,798)
73,493,601
991,213(319,524)
671,688
1,041,321(772,373)
268,947
72,594(41,559)
31,035
229,768,734
28,540921,888,337

256,854,393(103,245,716)
153,608,677
2,998,915(1,021,770)
1,977,144
3,386,077(2,529,346)
856,730
483,511(339,690)
143,821463,484,636
24,280106,513,777(30,411,289)
76,102,488
1,021,112(341,674)
679,437
802,094(552,253)
249,841
70,292(42,281)
28,010251,592,514
9,360
948,756,943

5,659,215
444,160
828,095
6,221
6,937,692

5,643,385—
828,095
4,504
6,475,985

577,168
1,573,847
61,263
991,6033,203,883
932,029,913

577,168
1,573,847
132,917
1,107,318
3,391,252
958,624,180

78,18878,188966,390,305

70,80870,808982,607,535

Thousands of yen

As of September 30, 2019

As of March 31, 2020

LIABILITIESCurrent liabilities   Operating accounts payable

1,600,860

2,278,748  Short-term borrowings

13,500,000

29,000,000   Current portion of long-term borrowings

46,500,000

41,000,000   Accounts payable - other

1,801,587

2,070,587

429,676

369,182  Accrued expenses   Income taxes payable   Accrued consumption taxes  Advances received  Other   Total current liabilities

8,895

11,473

991,141

574,122

3,295,905

3,363,910

7,924

6,064

68,135,991

78,674,089

Non-current liabilities   Investment corporation bonds

32,993,175

32,993,175  Long-term borrowings

297,000,000

299,000,000   Deposits received from tenants

54,419,220

55,905,313   Deferred tax liabilities

722,903

1,282,153   Asset retirement obligations

348,974

352,489   Total non-current liabilities

385,484,272

389,533,131

453,620,264

468,207,221

497,241,216

497,241,216     Reserve for tax purpose reduction entry

548,259

1,368,194     Total voluntary retained earnings

548,259

1,368,194   Unappropriated retained earnings

14,980,566

15,790,904   Total surplus

15,528,825

17,159,098   Total unitholders’ equity

512,770,041

514,400,314

512,770,041

514,400,314

966,390,305

982,607,535

Total Liabilities
NET ASSETS
Unitholders’ equity  Unitholders’ capital  Surplus    Voluntary retained earnings

Total Net Assets
Total Liabilities and Net Assets

Japan Real Estate Investment Corporation

26

Statements of Income and Retained Earnings
For the six months ended September 30, 2019 and March 31, 2020

Thousands of yen

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

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

33,522,024

33,746,218

Operating revenues
Rent revenues

58,18964,352Gain on sales of real estate properties

1,583,993

2,185,638

Total operating revenues

35,164,207

35,996,210

Expenses related to lease business

16,909,983

16,813,977

Asset management fee

1,409,620

1,452,064

Other lease business revenues

Operating expenses

Asset custody fee

63,12063,401

Administrative service fees

132,329

132,189

Directors’ compensations

7,800

7,800

Commission expenses

83,212

89,971Other operating expenses

63,90082,326

18,669,967

18,641,731

16,494,240

17,354,479

Interest income

134

146

Dividend income

11,681—

Reversal of distributions payable

1,347

1,479

0

61

13,163

1,688Interest expenses

907,457

813,737

Interest expenses on investment corporation bonds

Total operating expenses
Operating profit
Non-operating income

Other
Total non-operating income
Non-operating expenses

163,799

164,298

Amortization of investment corporation bond issuance costs

7,379

7,379

Other

38,14744,747

1,116,783

1,030,163

Ordinary profit

15,390,620

16,326,004

Profit before income taxes

Total non-operating expenses

15,390,620

16,326,004

Income taxes – current

11,30911,495

Income taxes – deferred

433,798559,249

Total income taxes

445,107

570,744

14,945,513

15,755,259

Profit27

Retained earnings brought forward

35,05335,645

Unappropriated retained earnings

14,980,566

15,790,904

Japan Real Estate Investment Corporation

Statements of Changes in Unitholders’ Equity
For the six months ended September 30, 2019 and March 31, 2020

For the period from April 1, 2019 to September 30, 2019
Thousands of yen

Unitholders’ equity
Surplus
Voluntary retained earnings

Total
net assets

Total surplus

Totalunitholders’equity13,465,334

14,015,693

511,256,909

511,256,909

2,100

—

—

—

Dividends of surplus(13,432,381)(13,432,381)(13,432,381)(13,432,381)

Profit14,945,513

14,945,513

14,945,513

14,945,513

Unitholders’capitalBalance at beginning of the period

Reserve fortax purpose
reduction entry

Totalvoluntary
retainedearnings

Unappropriatedretainedearnings

550,359

550,359(2,100)(2,100)497,241,216

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

Total changes during the period
Balance at end of the period—(2,100)(2,100)1,515,232

1,513,131

1,513,131

1,513,131

497,241,216

548,259548,259

14,980,566

15,528,825

512,770,041

512,770,041

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

Unitholders’ equity
Surplus
Unitholders’capitalVoluntary retained earnings

Total
net assets

Total surplus

Totalunitholders’equity14,980,566

15,528,825

512,770,041

512,770,041

822,033(822,033)———(2,099)

2,099

—

—

—

(14,124,986)(14,124,986)(14,124,986)(14,124,986)

Reserve fortax purpose
reduction entry

Totalvoluntary
retainedearnings

Unappropriatedretainedearnings

548,259548,259 Provision of reserve for tax
purpose reduction entry

822,033 Reversal of reserve for tax
purpose reduction entry(2,099)Balance at beginning of the period

497,241,216

Changes during the period

Dividends of surplus
ProfitTotal changes during the period
Balance at end of the period

15,755,259

15,755,259

15,755,259

15,755,259—

819,934

819,934

810,338

1,630,272

1,630,272

1,630,272

497,241,216

1,368,194

1,368,194

15,790,904

17,159,098

514,400,314

514,400,314

Japan Real Estate Investment Corporation

28

Statements of Cash Distributions
For the six months ended September 30, 2019 and March 31, 2020	 
	 I Retained earnings

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

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

Amount (Yen)Amount (Yen)

14,980,566,219

15,790,904,336

II Reversal of voluntary retained earnings
2,099,020

2,092,798

14,124,986,370

14,697,078,100(10,197)(10,610)

	  Provision of reserve for tax purpose reduction entry

822,033,757

1,060,273,922

V Retained earnings brought forward

35,645,112

35,645,112

The Company will make cash distributions using accounting profits based on
the cash distribution policy outlined in
Article 32-1(2) of the Company’s Articles
of Incorporation, in an amount thatexceeds 90% of the “amount of distributable profit” as set forth in Article 67-15 of
the Special Taxation Measures Act. Basedon this policy, the Company has decided
that the total amount of dividends, under
the application of Article 65-7 “Exceptions of the Taxation in case of theReplacement by Purchase of Specific
Assets” of the Special Taxation Measures
Act, making reduction entries, and also
which is set not to exceed the unappropriated retained earnings and to secureretained earnings brought forward, is¥14,124,986,370 for the period, which isa multiple of 1,385,210 — the number ofunits outstanding as of September 30,
2019. Furthermore, the Company does
not pay out dividends that exceed
accounting profits as outlined in Article
32-1(3) of the Company’s Articles ofIncorporation.

The Company will make cash distributions using accounting profits based on
the cash distribution policy outlined in
Article 32-1(2) of the Company’s Articles
of Incorporation, in an amount thatexceeds 90% of the “amount of distributable profit” as set forth in Article 67-15
of the Special Taxation Measures Act.
Based on this policy, the Company has
decided that the total amount of dividends, under the application of Article65-7 “Exceptions of the Taxation in caseof the Replacement by Purchase ofSpecific Assets” of the Special Taxation
Measures Act, making reduction entries,
and also which is set not to exceed theunappropriated retained earnings and tosecure retained earnings brought
forward, is ¥14,697,078,100 for theperiod, which is a multiple of 1,385,210— the number of units outstanding as ofMarch 31, 2020. Furthermore, theCompany does not pay out dividends
that exceed accounting profits as outlined
in Article 32-1(3) of the Company’s
Articles of Incorporation.

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

Computation Method for Determining Dividends

29Japan Real Estate Investment Corporation

Statements of Cash Flows
For the six months ended September 30, 2019 and March 31, 2020

Thousands of yen

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

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

Profit before income taxes

15,390,620

16,326,004

Depreciation

6,435,380

6,418,143

7,379

7,379

Cash flows from operating activities

Amortization of investment corporation bond issuance costs
Dividend income(11,681)—Interest income

(134)

(146)

Interest expenses

1,071,256

978,035

78,86353,280Decrease (increase) in operating accounts receivable

(663)

2,562

(6,267)130,438

1,423,739

3,688,085—

444,160

Increase (decrease) in operating accounts payable

75,370(113,519)

Increase (decrease) in accounts payable - other

153,83175,712

Increase (decrease) in accrued consumption taxes

392,331(417,018)

Increase (decrease) in accrued expenses

(131)

131

Increase (decrease) in advances received(42,859)

68,005Decrease (increase) in long-term prepaid expenses

57,265(71,654)

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

Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities(86,664)(86,668)

24,937,637

27,502,932

11,871146(1,071,245)(1,038,661)(13,815)(8,917)23,864,447

26,455,500

Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of property, plant and equipment in trust
Payments of leasehold and guarantee deposits
Proceeds from refund of leasehold and guarantee deposits
Refund of leasehold and guarantee deposits received(757,328)(6,492,144)(1,020,222)(29,478,070)—(14,160)

2,680—(995,148)(988,925)

Proceeds from leasehold and guarantee deposits received

1,556,781

2,476,425

Net cash provided by (used in) investing activities(1,213,237)(34,496,874)

Cash flows from financing activities
Proceeds from short-term borrowings

10,500,000

50,500,000

Repayments of short-term borrowings(5,500,000)(35,000,000)

Proceeds from long-term borrowings

10,500,000

30,000,000

Repayments of long-term borrowings(15,500,000)(33,500,000)

Distributions paid

(13,429,623)(14,124,323)

Net cash provided by (used in) financing activities(13,429,623)(2,124,323)

Net increase (decrease) in cash and cash equivalents

9,221,586(10,165,696)

Cash and cash equivalents at beginning of the period

24,382,950

33,604,537

Cash and cash equivalents at end of the period

33,604,537

23,438,840

Japan Real Estate Investment Corporation30

Notes to Financial Statements
September 30, 2019 and March 31, 2020

1. Organization and Basis of Presentation
Organization

Japan Real Estate Investment Corporation (the “Company”) is a real estate investment corporation formed to own and invest primarily
in a portfolio of office properties. The Company is externally managed by a licensed asset management company, Japan Real Estate AssetManagement Co., Ltd. (“J-Rea”). J-Rea is currently owned 90% by Mitsubishi Estate Co., Ltd. (“MEC”) and 10% by Mitsui & Co., Ltd.
On May 11, 2001, the Company was incorporated with ¥200 million of original capital contribution by MEC, Tokio Marine &Nichido Fire Insurance Co., Ltd. and The Dai-ichi Life Insurance Company, Limited under the ITA.
On September 10, 2001, the Company commenced operations when the Company was listed on the Tokyo Stock Exchange as oneof the first real estate investment corporations in Japan (“J-REITs”). The Company issued 160,000 units at a price of ¥506,625 per unit,
generating gross proceeds of ¥81,060 million.
As of March 31, 2020, the Company owned a portfolio of 73 office properties with an aggregate of approximately 864,014 m2 ofleasable space.
Basis of presenting financial statements

The Company maintains its accounting records and prepares its financial statements in accordance with accounting principles generally
accepted in Japan (“Japanese GAAP”), including provisions set forth in the ITA, the Japanese Financial Instruments and Exchange Law
and related regulations, which are different in certain respects as to the application and disclosure requirements of International Financial
Reporting Standards (“IFRS”).
The accompanying financial statements are a translation of the audited financial statements of the Company, which were prepared inaccordance with Japanese GAAP and were presented in the Securities Report of the Company filed with the Kanto Local Finance Bureau.
In preparing the accompanying financial statements, certain reclassifications and modifications have been made to the financial statements
issued domestically in order to present them in a format that is more familiar to readers outside Japan. In addition, the notes to financial
statements include information that might not be required under Japanese GAAP but is presented herein as additional information.
As permitted under the Japanese Financial Instruments and Exchange Law, amounts of less than one million yen have been omitted.
As a result, the totals shown in the accompanying financial statements do not necessarily agree with the sum of the individual amounts.

2. Summary of Significant Accounting Policies
Investment securities

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

Property and equipment is stated at cost, less accumulated depreciation. The cost of land, buildings and building improvements includes
the purchase price of property and acquisition costs. Depreciation is calculated on a straight-line basis over the estimated useful lives of theassets ranging as stated below:
Buildings ................................................................................................................................... 2 – 61 years
Structures ................................................................................................................................. 2 – 60 years
Machinery and equipment ................................................................................ 2 – 18 years
Tools, furniture and fixtures ............................................................................. 2 – 29 years
Expenditures for repairing expenses are charged to income as incurred. Significant renewals and betterments are capitalized.
The Company reviews fixed assets for impairment whenever events or changes in circumstances indicate that the carrying amount of
its fixed assets may not be recoverable. According to the standard set by the Accounting Standards Board of Japan (“ASBJ”), companies are
required to recognize an impairment loss in their statements of income if certain indicators of asset impairment exist and the book value ofan asset exceeds the undiscounted sum of future cash flows of the asset. The standard states that impairment losses should be measured as
the excess of the book value over the higher of (i) the fair market value of the asset, net of disposition costs, and (ii) the present value of

31

Japan Real Estate Investment Corporation

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 stated at cost. Amortization of a term leasehold interest forbusiness use is calculated by the straight-line method based on the period of agreement.
Leased assets

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

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

Revenues from leasing of office space are recognized as rent accrued over the lease period.
Taxes on property and equipment

Property and equipment is subject to property taxes and city planning taxes on a calendar year basis. These taxes are generally charged toincome during the period. The sellers of the properties are liable for property taxes for the calendar year including the period from the dateof purchase by the Company through the end of the year since the taxes are imposed on the owner registered on the record as of January
1 based on the assessment made by the local government. The Company pays the amount equivalent to the property taxes to the sellers
applicable to the period since acquisition and includes the amount equivalent to the taxes in the purchase price of each property and­capitalizes it as a cost of the property.
Consumption taxes

Consumption taxes withheld and consumption taxes paid are not included in the statements of income. The consumption taxes paid are
generally offset against the balance of consumption taxes withheld. As such, the excess of payments over amounts withheld are included incurrent assets and the excess of amounts withheld over payments are included in current liabilities.
Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, deposits with banks, and short-term investments, which are highly liquid, readily
convertible to cash and with insignificant risk of price fluctuation, with original maturity of three months or less.
Hedge accounting

The Company enters into derivative transactions to hedge against interest-rate risk and other forms of risk based on the risk management
policies outlined in the Company’s Articles of Incorporation. The Company uses interest-rate swap transactions for hedging fluctuations ininterest rates on floating-rate loans. The Company has also executed currency swap transactions as a method of hedging against currency
exchange fluctuation risks. Deferred hedge accounting is generally used for such interest-rate swaps and currency swap transactions, and theeffectiveness of hedging is measured by comparing the total cash flow fluctuation of the hedged item and that of the hedging instrument
since the inception of the hedge.
For interest-rate swaps and currency swaps that qualify for hedge accounting and meet certain criteria provided under Japanese GAAP,
however, the Company applies special accounting treatment. Under such special accounting treatment, the differentials paid or received

Japan Real Estate Investment Corporation

32

under the swap agreements are recognized and included in interest expense of the hedged loans, and the interest-rate swaps and currency
swaps are not required to be separately valued. For interest-rate swaps and currency swaps that meet the specific criteria for such special
accounting treatment, ongoing assessments of hedge effectiveness are not required and hence not performed.

3. New Accounting Standards Issued but not Yet Effective
New accounting standards and implementation guidance to be adopted in the future are as follows:•A ccounting Standards Board of Japan (“ASBJ”) Statement No. 29, Accounting Standard for Revenue Recognition, revised on March 31, 2020
• ASBJ Guidance No. 30, Implementation Guidance on Accounting Standard for Revenue Recognition, revised on March 31, 2020
• ASBJ Guidance No. 19, Implementation Guidance on Disclosures about Fair Value of Financial Instruments, revised on March 31, 2020
(1) Overview
		The International Accounting Standards Board (“IASB”) and the Financial Accounting Standards Board (“FASB”) have jointly developed
the new and comprehensive accounting standard for revenue recognition, and have published “Revenue from Contracts with Customers”(IFRS 15 by IASB and Topic 606 by FASB) in May 2014. As IFRS 15 shall be adopted in the IFRS-based financial s­ tatements for periods
beginning on or after January 1, 2018, and in the U.S. GAAP-based financial statements for periods beginning after December 15,
2017, ASBJ has developed and published the comprehensive accounting standard and implementation guidance for revenue
recognition accordingly.
		  As the basic policy of ASBJ for the development of new accounting standard for revenue recognition, from the point of view of thecomparability between the financial statements based on IFRS or U.S. GAAP and Japanese GAAP as a benefit for the consistency withIFRS 15, the accounting standard in Japan has been established while adopting the basic principle of IFRS 15, and in the case that
there is an item that the actual practice conducted in Japan is considered, the alternate treatments are added within the scope not to failthe comparability.
(2) Date of the adoption		The Company will adopt the accounting standard and implementation guidance from the beginning of the fiscal period ending
September 30, 2021.
(3) Impact of the adoption of the respective accounting standards
		The Company is currently evaluating the effect of the adoption of this accounting standard and implementation guidance on its­financial statements.
• ASBJ Statement No. 30, Accounting Standard for Fair Value Measurement, issued on July 4, 2019
• ASBJ Statement No. 10, Accounting Standard for Financial Instruments, revised on July 4, 2019
• ASBJ Guidance No. 31, Implementation Guidance on Accounting Standard for Fair Value Measurement, issued on July 4, 2019
• ASBJ Guidance No. 19, Implementation Guidance on Disclosures about Fair Value of Financial Instruments, revised on March 31, 2020
(1) Overview
		IASB and FASB have established similar contents and detailed guidance regarding fair value measurement (IFRS 13 “Fair Value
Measurement” in IFRS and Accounting Standards Codification Topic 820 “Fair Value Measurement” in U.S. GAAP). In light of thisestablishment, ASBJ has worked on the consistency of Japanese GAAP with such international accounting standards regarding theguidance on fair value of financial instruments and disclosures, and issued these standards and implementation guidance listed above.
		  As the basic policy of ASBJ for the development of accounting standards for fair value measurement, by using the unified measurement
method, from the view point of improvement of the comparability of financial statements among domestic and foreign companies,
ASBJ decided to adopt all the provisions of IFRS 13 basically. In addition, considering the practices that have been executed in ourcountry, within the scope not to significantly impair the comparability between the financial statements, the other treatments to theindividual items are defined.

33

Japan Real Estate Investment Corporation

(2) Date of the adoption		The Company will adopt the accounting standards and implementation guidance from the beginning of the fiscal period
ending September 30, 2021.
(3) Impact of the adoption of the respective accounting standards
		The effects of the adoption of these accounting standards and implementation guidance on its financial statements are
currently uncertain.
• ASBJ Statement No. 31, Accounting Standard for Disclosure of Accounting Estimates, issued on March 31, 2020
(1) Overview
		IASB issued a revised International Accounting Standard No.1 (“IAS 1”), “Presentation of Financial Statements” in 2003. The disclosure of “Sources of estimation uncertainty” is required in paragraph 125 of IAS 1, as highly useful information to the users of financial
statements, and the disclosure as notes information has been requested to be considered under Japanese GAAP as well. Accordingly,
ASBJ developed and issued Accounting Standard for Disclosure of Accounting Estimates.
		  As the basic policy of ASBJ for the development of the Accounting Standard, by showing the principle (disclosure purpose) rather
than expanding individual notes, a company should judge its own specific disclosure content in light of the disclosure purpose. For thedevelopment, the provisions in the paragraph 125 of IAS 1 were used as a reference.
(2) Date of the adoption		The Company will adopt the accounting standard from the end of the fiscal period ending March 31, 2021.
• ASBJ Statement No.24, Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections, revised on
March 31, 2020
(1) Overview
		In response to the recommendation considering the enhancement of note information in regards to “Principles and Procedures of
Accounting Treatment Adopted When Related Accounting Standards Are Uncertain”, ASBJ revised Accounting Standard for Accounting
Policy Disclosures, Accounting Changes and Error Corrections.
		  Working to improve the note information related to “Principles and Procedures of Accounting Treatment Adopted When Related
Accounting Standards Are Uncertain”, the provision of Financial Accounting Principles (note 1-2) will be followed to avoid influencing
actual practice when the relevant accounting standards exist.
(2) Date of the adoption		The Company will adopt the accounting standard from the end of the fiscal period ending March 31, 2021.

4. Commitment Line Agreement
As of September 30, 2019 and March 31, 2020
The Company has signed commitment line agreements with three banks.
Total amount of commitment line agreement
Debt financing balance
BalanceThousands of yen

September 30, 2019

As of March 31, 2020

60,000,000

60,000,000——

60,000,000

60,000,000

Japan Real Estate Investment Corporation

34

5. Financial Instruments
1. Status of financial instruments(1) Policies for dealing financial instruments
		Concerning the financing of property acquisitions, the Company shall use several funding sources including bank loans, the issuance ofinvestment corporation bonds and the issuance of investment units. When executing such financing activities, the Company endeavors
to retain the ability to secure stable and low-cost financing by maintaining high credit ratings and thereby limiting the financial covenants that may restrict the financial flexibility of the Company. To achieve these goals, the Company intends to further develop andreinforce the confidence of debt holders and rating agencies in the Company by bolstering the capital base and controlling the loan-tovalue ratio (“LTV”) at an adequate level.
		  In order to hedge against future interest-rate fluctuations, the Company may enter into derivative transactions, which shall be
executed solely for the purpose of hedging against interest-rate fluctuation and other risks, and not for speculative purposes.
		  With respect to management of excess funds, as a matter of policy the Company uses time deposits as its main vehicle, while securities
and monetary claims are also eligible for such investment.
(2) Characteristics and risk profile of each financial instrument and risk management system		The Company regularly re-evaluates the appropriateness and effectiveness of its risk management system in order to improve on it.
		The characteristics and risk profile of financial instruments and the system in place to manage such risks are as follows:		The deposits, which are typically large time deposits used to manage excess funds, are exposed to the credit risk of the deposit-taking
financial institutions. The Company manages credit risk by restricting the tenor of the deposit to relatively short periods and setting
a minimum credit rating requirement for the deposit-taking financial institutions.
		  The funding proceeds from borrowings and issues of investment corporation bonds are applied mainly to acquire real estate properties
and repay outstanding loans and bonds. While floating-rate short-term and long-term loans are exposed to the risk of interest-rate hikes,
such risk is mitigated by the Company’s low LTV and relatively high percentage of long-term fixed-rate debts within the total borrowing.
The Company may also exercise hedging by means of derivative transactions (interest-rate swap transactions) in order to mitigate the riskof fluctuation concerning the floating-rate long-term loans, thereby effectively stabilizing the overall interest rates on the loans. Foreign
currency-denominated loans are also exposed to currency exchange and interest-rate fluctuation risk. However, the Company uses derivative transactions as a method of hedging against these risks (interest-rate and currency swap transactions). Foreign currency investment
corporation bonds are also exposed to currency exchange risk. However, the Company uses derivative transactions as a method of hedging
against the risks (currency swap transactions). For more detailed information on the hedge accounting method, please refer to Section 2.
“Summary of Significant Accounting Policies: Hedge accounting”.
		  Loans and investment corporation bonds involve liquidity risk at the time of maturity. To manage such liquidity risk, the Company
implements measures such as (i) maintaining and strengthening its ability to access equity markets to secure funds, (ii) maintaining
commitment lines with major financial institutions (There is no amount outstanding under the facility as of September 30, 2019 andMarch 31, 2020) and (iii) preparing monthly financial plans.
(3) Supplementary note regarding fair value of financial instruments		The fair values of financial instruments presented in this report are based on their market value, and in cases where market values
are not available, reasonably calculated values are presented. Since calculation of fair value is based on certain assumptions,the fair value could differ depending on the assumptions used. In addition, the contract value of derivative transactions,which is presented in Section 6. “Derivative Transactions”, is not an exact representation of market risk attributableto derivative transactions.

35

Japan Real Estate Investment Corporation

2. Fair value of financial instruments

Fair value of financial instruments, their values carried on the balance sheets and the differences between them as of September 30, 2019and March 31, 2020 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, 2019
Book value*

Fair value*

Difference*(1) Cash and deposits

26,723,523

26,723,523—(2) Cash and deposits in trust

6,881,014

6,881,014—(3) Short-term borrowings(13,500,000)(13,500,000)—(4) Current portion of long-term borrowings(46,500,000)(46,590,431)(90,431)(5) Investment corporation bonds(32,993,175)(34,481,445)(1,488,270)(6) Long-term borrowings(297,000,000)(300,056,730)(3,056,730)(7) Derivative transactions

—

—

—

* Liabilities are shown in parentheses.
Thousands of yen

As of March 31, 2020
Book value*

Fair value*

Difference*(1) Cash and deposits

16,996,570

16,996,570—(2) Cash and deposits in trust

6,442,270

6,442,270—(3) Short-term borrowings(29,000,000)(29,000,000)—(4) Current portion of long-term borrowings(41,000,000)(41,136,608)(136,608)(5) Investment corporation bonds(32,993,175)(34,211,333)(1,218,158)(6) Long-term borrowings(299,000,000)(301,272,773)(2,272,773)(7) Derivative transactions

—

—

—

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

As of September 30, 2019

As of March 31, 2020

577,168
54,419,220

577,168
55,905,313*1. With regard to non-listed stock, which does not have a quoted market price in an active market and whose cash flows are not reasonably estimated, fair value cannot
be reliably measured and it is therefore presented at book value.
*2. With regard to deposits received from tenants, which do not have a quoted market price in an active market and reasonably estimated tenor, their cash flows cannot
be reliably measured and they are therefore presented at their book value.

Japan Real Estate Investment Corporation

36

3. Redemption schedule for monetary claims after the closing dateThousands of yen

As of September 30, 2019

Cash and deposits
Cash and deposits in trust
Total

1 year or less
26,723,523
6,881,014
33,604,537

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, 2020

Cash and deposits
Cash and deposits in trust
Total

1 year or less

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

Over 5 years

16,996,570
6,442,270
23,438,840

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

4 to 5 years—
10,000,000
42,300,000
52,300,000

Over 5 years—
22,993,175
103,000,000
125,993,175

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

As of September 30, 2019

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

1 year or less
13,500,000—
46,500,000
60,000,000

1 to 2 years——
52,200,000
52,200,000

2 to 3 years——
51,000,000
51,000,000

3 to 4 years——
48,500,000
48,500,000

Thousands of yen

As of March 31, 2020

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

37

Japan Real Estate Investment Corporation

1 year or less

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

Over 5 years

29,000,000—
41,000,000
70,000,000——
51,700,000
51,700,000——
48,500,000
48,500,000—
10,000,000
39,500,000
49,500,000——
54,800,000
54,800,000—
22,993,175
104,500,000
127,493,175

6. Derivative Transactions(1) Derivatives not designated as hedging instruments
		 As of September 30, 2019		  “Not applicable”
		As of March 31, 2020		  “Not applicable”(2) Derivatives designated as hedging instruments
		 As of September 30, 2019			The contract amount or the equivalent principal amount set out in the contract as of the closing date for each derivative designated asa hedging instrument is as follows:
Thousands of yen

Contract value

Fair value

Measurementof fair value

57,300,000*1—

10,000,000

10,000,000*1—2,993,175

2,993,175*2—

Derivative accounting method

Type of derivative transaction

Hedged item

Special Treatment for interest-rate swap

Receive floating, pay fixed interest-rate
swap transactions

Long-term
borrowings

63,300,000

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

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

Long-term
borrowings

Allocation Treatment for currency swap

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

Investment
corporation bonds

Over one year

		 As of March 31, 2020			The contract amount or the equivalent principal amount set out in the contract as of the closing date for each derivative designated asa hedging instrument is as follows:
Thousands of yen

Contract value

Fair value

Measurementof fair value

46,800,000*1—

10,000,000

10,000,000*1—2,993,175

2,993,175*2—

Derivative accounting method

Type of derivative transaction

Hedged item

Special Treatment for interest-rate swap

Receive floating, pay fixed interest-rate
swap transactions

Long-term
borrowings

57,300,000

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

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

Long-term
borrowings

Allocation Treatment for currency swap

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

Over one year

*1. The derivative transactions eligible for Special Treatment for interest-rate swap and Integrated Treatment (Special Treatment for interest-rate swap and Allocation Treatment
for currency swap) are accounted for as integral parts of the hedged loans, and the fair value of those derivative transactions is included in that of the underlying long-termborrowings as of September 30, 2019 and March 31, 2020. Please refer to Note 1 of “2. Fair value of financial instruments” under Section 5. “Financial Instruments”,
as well as subheadings (4) and (6) concerning derivative transactions.
*2. Currency swap transactions eligible for allocation treatment are accounted for as integrated parts of the hedged investment corporation bonds, and the fair value of thecurrency swap transactions is included in that of the underlying investment bonds as of September 30, 2019 and March 31, 2020. Please refer to Note 1 of “2. Fair valueof financial instruments” under Section 5. “Financial Instruments”, as well as subheading (5) concerning derivative transactions.

Japan Real Estate Investment Corporation

38

7. Property, Plant and Equipment and Intangible Assets
Changes in Property, plant and equipment and Intangible assets for the six months ended March 31, 2020 are as follows:
Thousands of yen
Accumulated depreciation
Accumulated amortization

Balance at
beginning of
the period

Increase during
the period

Decrease during
the period

Net balanceat end ofthe period

Remarks

Buildings

254,826,921

2,027,472—

256,854,393

103,245,716

4,277,922

153,608,677—

Structures

2,987,203

11,711—

2,998,915

1,021,770

48,346

1,977,144—

Machinery and equipment

3,358,886

27,191—

3,386,077

2,529,346

92,030856,730—

Tools, furniture and fixtures

468,865

14,646—

483,511

339,690

13,091

143,821—458,682,518

4,802,117—

463,484,636——

463,484,636

—

6,527

17,753—24,280——24,280—

Buildings in trust

102,939,399

5,898,981

2,324,603

106,513,777

30,411,289

1,921,563

76,102,488—

Structures in trust

991,213

38,5398,640

1,021,112

341,674

25,531

679,437—

Machinery and equipment in trust

1,041,321

25,097

264,323

802,094552,253

15,135249,841—

Tools, furniture and fixtures in trust

72,594

2,439

4,741

70,29242,281

3,460

28,010—229,768,734

24,107,003

2,283,224

251,592,514——

251,592,514*1

28,540—19,180

9,360

—

—

9,360

—

Subtotal

1,055,172,727

36,972,952

4,904,714

1,087,240,965

138,484,022

6,397,080

948,756,943

Land leasehold interests

5,933,601——

5,933,601

290,216

15,8295,643,385—

Land leasehold interests in trust

444,160—

444,160

—

—

—

—

*2

Easement

828,095——

828,095——

828,095—

Other

17,169——17,16912,665

1,716

4,504

—

7,223,027—

444,160

6,778,866

302,881

17,5466,475,985

1,062,395,754

36,972,952

5,348,874

1,094,019,832

138,786,904

6,414,627

955,232,928

Type of Asset

Property, plant and equipment

Land
Construction in progress

Land in trust
Construction in progress in trust

Intangible assets

Subtotal
Total

Balance at endof the period

Depreciation andamortization*1. The major reasons for the increase of land in trust were the acquisitions of additional ownership interests of Shinjuku Eastside Square and Shinjuku Front Tower and theacquisition of Otemachi Park Building.
*2. The major reason for the decrease of land leasehold interests in trust was the disposition of Kodenmacho Shin-Nihonbashi Building.

39

Japan Real Estate Investment Corporation

8. Borrowings
The condition of loans by financial institutions as of March 31, 2020 is as follows.

Drawdown date

Balance at
beginning ofcurrent period(¥ thousand)

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

Repayment dateMizuho Bank, Ltd.

November 5, 2019——

0.05859

November 15, 2019

MUFG Bank, Ltd.

November 5, 2019——

0.05859

November 15, 2019

Sumitomo Mitsui Trust Bank, Limited

December 26, 2018

1,300,000—

0.11371

December 26, 2019

MUFG Bank, Ltd. *3

November 15,2019——

0.1072February 17, 2020

Sumitomo Mitsui Trust Bank, Limited

March 29, 2019

1,700,000—

0.11136

March 30, 2020

Mizuho Bank, Ltd.

April 3, 20195,500,000—

0.1172

April 3, 2020
*4

MUFG Bank, Ltd. *5

February 17, 2020—

11,000,000
*5

0.109

May 18, 2020

MUFG Bank, Ltd.

September 2, 2019

5,000,000—

0.11715

September 2, 2020
*6

Sumitomo Mitsui Trust Bank, Limited

December 26, 2019—

1,300,000

0.10962

December 28, 2020

MUFG Bank, Ltd.

March 27, 2020—

5,000,000

0.120

March 29, 2021

Mizuho Bank, Ltd.

March 27, 2020—

5,000,000

0.120

March 29, 2021

Classification
LenderShort-term borrowings

Sumitomo Mitsui Banking Corporation

March 27, 2020—

5,000,000

0.120

March 29, 2021

Sumitomo Mitsui Trust Bank, Limited

March 30, 2020—

1,700,000

0.120

March 30, 2021

13,500,000

29,000,000

The Hiroshima Bank, Ltd.

Subtotal
October 1, 2014

3,000,000—

0.31575

October 1, 2019

Mizuho Bank, Ltd.

November 1, 2011

6,000,000—

1.2075

November 1, 2019

Mizuho Bank, Ltd.

November 15, 2011

3,000,000—

1.13875

November 15, 2019

MUFG Bank, Ltd.

November 15, 2011

3,000,000—

1.13875

November 15, 2019

MUFG Bank, Ltd.

November 15, 2011

3,000,000—

1.13875

November 15, 2019

The Gunma Bank, Ltd.

November 17, 2014

1,000,000

—

0.316

November 18, 2019

The Yamanashi Chuo Bank, Ltd.

December 15, 2014

2,000,000

—

0.266

December 16, 2019

Long-term borrowings

Shinkin Central Bank

January 7, 2013

2,000,000—

0.71375

January 7, 2020

MUFG Bank, Ltd.

January 15, 2013

5,500,000

—

0.710

January 15, 2020

Shinkin Central Bank

January 15, 2013

5,000,000

—

0.710

January 15, 2020

MUFG Bank, Ltd.

June 15, 2012

4,000,000

4,000,000

0.9525June 15, 2020
*7

Sumitomo Mitsui Trust Bank, Limited

June 15, 2012

4,000,000

4,000,000

0.9525June 15, 2020
*7

Sumitomo Mitsui Trust Bank, Limited

June 15, 2015

3,000,000

3,000,000

0.3425June 15, 2020
*7

Tokio Marine &Nichido Fire Insurance Co., Ltd.

July 3, 2017

2,000,000

2,000,000

0.100

July 3, 2020
*7

The Yamaguchi Bank, Ltd.

October 29, 2012

2,000,000

2,000,000

0.800

October 29, 2020
*7

MUFG Bank, Ltd.

December 21, 2012

5,000,000

5,000,000

0.80125

December 21, 2020
*7

MUFG Bank, Ltd.

December 21, 2012

5,000,000

5,000,000

0.80125

December 21, 2020
*7

MUFG Bank, Ltd.

January 15, 2013

5,500,000

5,500,000

0.83625

January 15, 2021
*7

MUFG Bank, Ltd.

January 31, 2014

4,000,000

4,000,000

0.64225

January 29, 2021
*7

The Bank of Fukuoka, Ltd.

January 31, 2014

2,500,000

2,500,000

0.63849

January 29, 2021
*7

Repayment
methodUse ofproceeds

Notes

Bullet*2

Unsecured
Unguaranteed
UnsubordinatedBullet*2

Unsecured
Unguaranteed
UnsubordinatedJapan Real Estate Investment Corporation

40

Drawdown date

Balance at
beginning ofcurrent period(¥ thousand)

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

Repayment date

Sumitomo Mitsui Trust Bank, Limited

January 31, 2014

2,000,000

2,000,000

0.62575

January 29, 2021
*7

The Iyo Bank, Ltd.

March 24, 2014

2,000,000

2,000,000

0.6035

March 24, 2021
*7

MUFG Bank, Ltd.

April 4, 2017

5,000,000

5,000,000

0.0108*8April 5, 2021

Classification
Lender

MUFG Bank, Ltd.

April 24, 2013

5,000,000

5,000,000

0.775

April 26, 2021

Mizuho Bank, Ltd.

June 15, 2012

4,000,000

4,000,000

1.07375

June 15, 2021

Sumitomo Mitsui Trust Bank, Limited

December 26, 2016

3,700,000

3,700,000

0.1913June 28, 2021

Sumitomo Mitsui Banking Corporation

January 19, 2018

5,000,000

5,000,000

0.16255

July 20, 2021

Long-term borrowings

The Bank of Fukuoka, Ltd.

August 31, 2017

1,500,000

1,500,000

0.1325

August 31, 2021

The Iyo Bank, Ltd.

October 1, 2014

1,000,000

1,000,000

0.46525

October 1, 2021

The Chugoku Bank, Limited

October 1, 2014

0.4725October 1, 2021

0.463

November 15, 2021

1,000,000

1,000,000

The Daishi Bank, Ltd.

1,800,000

1,800,000

Sony Bank Incorporated

1,400,000

1,400,000

The Toho Bank, Ltd.

1,400,000

1,400,000

The Hokuetsu Bank, Ltd.

1,400,000

1,400,000

The Shinkumi Federation Bank

1,000,000

1,000,000

The Akita Bank, Ltd.

900,000

900,000

The Gunma Bank, Ltd.

900,000

900,000

The 77 Bank, Ltd.

900,000

900,000

The Tochigi Bank, Ltd.

900,000

900,000

The Fukui Bank, Ltd.

900,000

900,000

The Bank of Iwate, Ltd.

500,000

500,000

The Higo Bank, Ltd.

500,000

500,000

November 14, 2014

The Yamagata Bank, Ltd.
The Nishi-Nippon City Bank, Ltd.

500,000

500,000

2,000,000

2,000,000

0.621

December 17, 2021

Sumitomo Mitsui Banking Corporation

January 7, 2013

2,000,000

2,000,000

0.980

January 7, 2022

Mizuho Bank, Ltd.

January 15, 2013

5,000,000

5,000,000

0.96625

January 17, 2022

The Norinchukin Bank

January 31, 2014

3,500,000

3,500,000

0.757

January 31, 2022

Mizuho Bank, Ltd.

April 24, 2013

3,000,000

3,000,000

0.87375

April 25, 2022

MUFG Bank, Ltd.

June 15, 2012

4,000,000

4,000,000

1.1975June 15, 2022

MUFG Bank, Ltd.

June 15, 2012

2,500,000

2,500,000

1.2725June 15, 2022

Shinsei Bank, Limited

June 15, 2012

2,500,000

2,500,000

1.2725June 15, 2022

The Norinchukin Bank

June 17, 2014

3,000,000

3,000,000

0.6785June 17, 2022

The Gunma Bank, Ltd.

1,000,000

1,000,000

The Shinkumi Federation Bank

1,000,000

1,000,000

The Daishi Bank, Ltd.

1,000,000

1,000,000
0.3925

August 10, 2022

The Chugoku Bank, Limited

41

June 17, 2014

1,000,000

1,000,000

The Toho Bank, Ltd.

1,000,000

1,000,000

The Fukui Bank, Ltd.

1,000,000

1,000,000

The Tochigi Bank, Ltd.

500,000

500,000

Japan Real Estate Investment Corporation

August 10, 2015

Repayment
methodUse ofproceeds

Notes

Bullet*2

Unsecured
Unguaranteed
UnsubordinatedDrawdown date

Balance at
beginning ofcurrent period(¥ thousand)

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

Repayment date

MUFG Bank, Ltd.

September 1, 2015

2,000,000

2,000,000

0.47125

September 1, 2022

The Hachijuni Bank, Ltd.

December 20, 2017

1,000,000

1,000,000

0.1863

December 20, 2022

Development Bank of Japan Inc.

January 7, 2013

3,000,000

3,000,000

1.115

January 6, 2023

Classification
Lender

The Daishi Bank, Ltd.

January 7, 2016

1,500,000

1,500,000

0.2802January 10, 2023

The 77 Bank, Ltd.

January 10, 2018

1,000,000

1,000,000

0.205

January 10, 2023

The Hachijuni Bank, Ltd.

January 15, 2016

1,000,000

1,000,000

0.265

January 16, 2023

The Iyo Bank, Ltd.

January 15, 2016

1,000,000

1,000,000

0.265

January 16, 2023

Sumitomo Mitsui Trust Bank, Limited

January 17, 2018

3,000,000

3,000,000

0.210January 17, 2023

Development Bank of Japan Inc.

January 31, 2014

5,000,000

5,000,000

0.9325January 31, 2023

The Yamaguchi Bank, Ltd.

March 25, 2013

1,000,000

1,000,000

0.945

March 24, 2023

The Bank of Fukuoka, Ltd.

March 24, 2015

2,000,000

2,000,000

0.5125

March 24, 2023

The Norinchukin Bank

March 25, 2015

3,500,000

3,500,000

0.46825

March 27, 2023

Long-term borrowings

The Chugoku Bank, Limited

March 26, 2018

2,000,000

2,000,000

0.1988March 27, 2023

Sumitomo Mitsui Banking Corporation

November 29, 2018

3,000,000

3,000,000

0.1694

May 29, 2023

Sumitomo Mitsui Trust Bank, Limited

November 29, 2018

3,000,000

3,000,000

0.1694

May 29, 2023

MUFG Bank, Ltd.

June 1, 2017

12,000,000

12,000,000

0.00331*8

June 1, 2023

The Chugoku Bank, Limited

June 15, 2015

3,000,000

3,000,000

0.61175

June 15, 2023

The Bank of Fukuoka, Ltd.

June 15, 2017

2,500,000

2,500,000

0.2388June 15, 2023

10,000,000

0.42375*9December 19, 2023

MUFG Bank, Ltd.

December 19, 2014

10,000,000

MUFG Bank, Ltd.

March 26, 2018

5,000,000

5,000,000

0.02276*8

March 26, 2024

The Hachijuni Bank, Ltd.

March 26, 2018

1,000,000

1,000,000

0.2338March 26, 2024

Sumitomo Mitsui Trust Bank, Limited

May 29, 2019

5,000,000

5,000,000

0.075

May 29, 2024

The Iyo Bank, Ltd.

June 15, 2017

2,500,000

2,500,000

0.275

June 17, 2024

The Hachijuni Bank, Ltd.

June 15, 2017

1,000,000

1,000,000

0.275

June 17, 2024

MUFG Bank, Ltd.

September 1, 2015

3,500,000

3,500,000

0.630

September 2, 2024

Sumitomo Mitsui Trust Bank, Limited

September 2, 2015

3,800,000

3,800,000

0.536

September 2, 2024

The Norinchukin Bank

September 1, 2017

5,000,000

5,000,000

0.240

September 2, 2024

Sumitomo Mitsui Trust Bank, Limited

September 26, 20195,500,000

5,500,000

0.105

September 26, 2024

Taiyo Life Insurance Company

October 1, 2014

2,000,000

2,000,000

0.7825October 1, 2024

Mizuho Bank, Ltd.

October 1, 2015

2,500,000

2,500,000

0.5575October 1, 2024

The Gunma Bank, Ltd.

November 18, 2019—

1,000,000

0.11784*8

November 18, 2024

MUFG Bank, Ltd.

June 1, 2018

10,000,000

10,000,000

0.2544

December 2, 2024

Shinkin Central Bank

January 7, 2020—

2,000,000

0.2075January 7, 2025

The Ashikaga Bank, Ltd.

January 9, 2018

1,000,000

1,000,000

0.285January 9, 2025

Mizuho Trust & Banking Co., Ltd.

March 2, 2015

3,000,000

3,000,000

0.5585

March 3, 2025

MUFG Bank, Ltd.

March 26, 2018

2,000,000

2,000,000

0.2725

March 26, 2025

Development Bank of Japan Inc.

March 30, 2017

5,000,000

5,000,000

0.315

March 31, 2025

Taiyo Life Insurance Company

May 29, 2015

1,500,000

1,500,000

0.7375

May 29, 2025

Repayment
methodUse ofproceeds

Notes

Bullet*2

Unsecured
Unguaranteed
UnsubordinatedJapan Real Estate Investment Corporation

42

Drawdown date

Balance at
beginning ofcurrent period(¥ thousand)

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

Repayment dateAugust 31, 2018

3,000,000

3,000,000

0.320

August 29, 2025

Development Bank of Japan Inc.

September 1, 2015

7,000,000

7,000,000

0.7175September 1, 2025

Mizuho Bank, Ltd.

December 26, 2016

5,000,000

5,000,000

0.3625

December 26, 2025

MUFG Bank, Ltd.

February 26, 2018

6,500,000

6,500,000

0.3413February 26, 2026

Mizuho Bank, Ltd.

March 27, 2018

5,500,000

5,500,000

0.300

March 27, 2026
March 30, 2026

Classification
LenderSumitomo Mitsui Trust Bank, Limited

Shinkin Central Bank

March 30, 2017

5,000,000

5,000,000

0.360

The Norinchukin Bank

January 23, 2019

4,000,000

4,000,000

0.1988July 23, 2026

Shinkin Central Bank

September 1, 2017

5,000,000

5,000,000

0.3188September 1, 2026

Long-term borrowings

MUFG Bank, Ltd.

October 31, 2016

3,000,000

3,000,000

0.240

October 30, 2026

Mizuho Bank, Ltd.

December 21, 2016

5,000,000

5,000,000

0.415

December 21, 2026

Shinkin Central Bank

January 23, 2019

5,000,000

5,000,000

0.2213January 25, 2027

Shinkin Central Bank

April 24, 2018

6,000,000

6,000,000

0.3675

April 26, 2027

The Joyo Bank, Ltd.

January 9, 2018

1,000,000

1,000,000

0.4188January 11, 2028

Sumitomo Mitsui Banking Corporation

January 19, 2018

3,000,000

3,000,000

0.4338January 19, 2028

Mizuho Bank, Ltd.

March 30, 2018

4,000,000

4,000,000

0.3963

March 30, 2028

MUFG Bank, Ltd.

March 30, 2018

4,000,000

4,000,000

0.3963

March 30, 2028

Taiyo Life Insurance Company

March 30, 2018

1,000,000

1,000,000

0.3963

March 30, 2028

Mizuho Bank, Ltd.

November 15, 2019—8,500,000

0.34875

November 15, 2028

Shinkin Central Bank

January 15, 2020—

5,000,000

0.325

January 15, 2029

Mizuho Bank, Ltd.

November 1, 2019—

6,000,000

0.35125

November 1, 2029

MUFG Bank, Ltd.

January 15, 2020—

5,500,000

0.3625January 15, 2030

The Yamanashi Chuo Bank, Ltd.

March 26, 2019

2,000,000

2,000,000

0.3688March 26, 2031

Sumitomo Life Insurance Company

March 26, 2019

1,000,000

1,000,000

0.505

March 27, 2034

Sumitomo Life Insurance Company

December 16, 2019—

2,000,000

0.490

December 18, 2034

Subtotal

343,500,000

340,000,000

Total

357,000,000

369,000,000

Repayment
methodUse ofproceeds

Notes

Bullet*2

Unsecured
Unguaranteed
Unsubordinated*1. The average for floating interest rates is recorded as the weighted average during the period. The average is rounded off to the fifth decimal place. The weighted average forinterest rates of loans for which floating interest rates were swapped to fixed rates in order to hedge the risk of interest rate fluctuations is calculated taking the effect of thisswap into consideration.
*2. The purposes of executing these loans are to purchase real properties or beneficiary right of real estate in trust, to repay existing loans, and to fund the redemption of
investment corporation bonds.
*3. As of November 15, 2019, MUFG Bank, Ltd. transferred its loan receivable of ¥10,900 million to Mitsubishi UFJ Trust and Banking Corporation.
*4. The Company made a full repayment (¥5,500 million) before maturity on November 5, 2019.
*5. As of February 17, 2020, MUFG Bank, Ltd. transferred its loan receivable of ¥10,900 million to Mitsubishi UFJ Trust and Banking Corporation.
*6. The Company made a full repayment (¥5,000 million) before maturity on November 5, 2019.
*7. At the end of the period under review, these loans are accounted for under current liabilities on the balance sheets as the current portion of long-term borrowings.
*8. These are floating rate borrowings which are not swapped into fixed rates.
*9. In order to hedge the risk of exchange rate and interest rate fluctuations related to foreign currency-denominated loans, the Company conducted an interest-rate andcurrency swap transaction, which substantially secured exchange and interest rates. Accordingly, the balance and the weighted average for interest rates during the period
are calculated taking the effect of this interest-rate and currency swap into consideration.

43

Japan Real Estate Investment Corporation

9. Investment Corporation Bonds including Current Portion of Investment Corporation Bonds
Outstanding investment corporation bonds as of March 31, 2020 are as follows.

Securities

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

Date of issue

Balance at
beginning ofcurrent period(¥ thousand)

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

Repayment period

Repayment
methodUse ofproceeds

Notes

September 29, 2005

10,000,000

10,000,0002.56

September 29, 2025

Bullet*1*2

March 30, 2017

10,000,000

10,000,000

0.3975

March 30, 2027

Bullet*1*2 *3

October 26, 2017

2,993,175

2,993,175

0.2788October 26, 2027

Bullet*1*2 *3 *4

November 1, 2018

10,000,000

10,000,000

0.23

November 1, 2023

Bullet*1*2

32,993,175

32,993,175*1. The investment corporation bonds are primarily used to fund the acquisition of real properties or beneficiary right of real estate in trust, and to repay existing loans.
*2. Financial covenants, such as a negative pledge, are not included in these bonds.
*3. Bond issuance was limited to qualified institutional investors by a private placement.
*4.	For the purpose of avoiding foreign currency risk with respect to foreign currency investment corporation bonds, the Company engages in currency swap transactions to fix
the exchange rates. Considering the effects of the currency swap transactions, the balances and interest rates are reflected in the schedule.

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

Japan Real Estate Investment Corporation

44

11. Income Taxes
The Company is subject to Japanese corporate income taxes on all of its taxable income. However, under the Special Taxation Measures
Act, an investment corporation is allowed to deduct dividends of accounting profits, or dividend distributions, paid to unitholders fromits taxable income if certain tax requirements are satisfied. Such tax requirements include dividend distributions in excess of 90% of its
earnings available for dividends for the fiscal period as stipulated by Article 67-15 of the Special Taxation Measures Act. The significant
components of deferred tax assets and liabilities as of September 30, 2019 and March 31, 2020 were as follows:
Thousands of yen

As of September 30, 2019

As of March 31, 2020

Deferred tax assets:
Accrued enterprise tax

942

958

Amortization of a term leasehold interest

94,937

100,385

Asset retirement obligations

120,745

121,926

216,624

223,270

Valuation allowance(114,197)(120,856)

Total deferred tax assets

102,427

102,413

Asset retirement obligations

101,484

101,455

Reserve for advanced depreciation of non-current assets

723,845

1,283,111

Total deferred tax liabilities

825,330

1,384,567

722,903

1,282,153

Deferred tax liabilities:

Net deferred tax liabilities

The reconciliation of tax rate difference between the adjusted statutory tax rate and the effective tax rate as of September 30, 2019and March 31, 2020 was as follows:45

As of September 30, 2019

As of March 31, 2020

Statutory tax rate

34.59%

34.59%

Deductible dividend distribution(31.75%)(31.14%)

Change in valuation allowance

0.04%

0.04%

Others

0.00%

0.00%

Effective tax rate

2.89%

3.50%

Japan Real Estate Investment Corporation

12. Related Party Transactions
For the six months ended September 30, 2019 and March 31, 2020
Transactions with related parties defined under the Financial Instruments and Exchange Act are listed below.
(1) Parent Company and Major Corporation Unitholders
		 For the period from April 1, 2019 to September 30, 2019
			“Not applicable”
		For the period from October 1, 2019 to March 31, 2020
			“Not applicable”(2) Affiliated Companies
		 For the period from April 1, 2019 to September 30, 2019
			“Not applicable”
		For the period from October 1, 2019 to March 31, 2020
			“Not applicable”(3) Sister Companies
		 For the period from April 1, 2019 to September 30, 2019
			“Not applicable”
		For the period from October 1, 2019 to March 31, 2020
			“Not applicable”(4) Directors and Major Individual Unitholders
		 For the period from April 1, 2019 to September 30, 2019
			“Not applicable”
		For the period from October 1, 2019 to March 31, 2020
			“Not applicable”

Japan Real Estate Investment Corporation46

Transactions with related parties defined under the ITA are listed below.
In addition to controlling unitholders, major unitholders, subsidiary corporations, subsidiary companies of controlling unitholders, andofficers and their close relatives, the definition of a “related party” under the ITA also includes the asset management company and its
interested parties (parent and subsidiary corporations, specified individual shareholders, and major shareholders of the asset managementcompany defined as interested parties under Article 201 of the ITA and Article 123 of the enforcement order of the ITA), as well as theasset custody company.
For the period from April 1, 2019 to September 30, 2019 (Unaudited)Type of relationship

Name oftransaction partner

Interested party

Mitsubishi EstateCo., Ltd.

Type of business

Percentage ofunits held

Transaction details

Rent revenue
Real estate

1.235%

Security deposit increase
Security deposit return

Interested party

Mitsubishi Jisho
Property Management
Co., Ltd.

Asset custodycompany

Sumitomo Mitsui
Trust Bank, Limited

Real estate
management

Bank

—

—

Transaction amount(¥ thousand)

14,277,898

Accounting item—

459,342 Deposits received
from tenants
255,377

Property management
expenses

2,331,533

Proceeds from long-termborrowings

10,500,000

Repayments of long-termborrowings

10,500,000—

Long-term
borrowings

Balance at
end of the period(¥ thousand)—
19,391,744—

36,000,000

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

For the period from October 1, 2019 to March 31, 2020 (Unaudited)Type of relationship

Interested party

Name oftransaction partner

Mitsubishi EstateCo., Ltd.

Type of business

Real estate

Percentage ofunits held

1.235%

Transaction details

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

14,504,178——

28,735,000——

Security deposit increase

Interested party

Mitsubishi Jisho
Property Management
Co., Ltd.

Real estate
management—

Property management
expenses

Asset custodycompany

Sumitomo Mitsui
Trust Bank, Limited

Bank

—

—

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

Japan Real Estate Investment Corporation

Accounting item

Real estate beneficiaryrights in trust purchase

Security deposit return

47

Transaction amount(¥ thousand)349,286 Deposits received
from tenants
241,266
2,370,009——
Long-term
borrowings

19,499,765—

36,000,000

13. Segment Information
For the six months ended September 30, 2019 and March 31, 2020
Since the Company has been engaged in the real estate leasing business using a single segment, segment information has been omitted.
Information on products and services

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

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

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

14. Asset Retirement Obligations
For the six months ended September 30, 2019 and March 31, 2020
Asset retirement obligations reported on balance sheets

The Company acquired Osaki Front Tower on February 1, 2011 under the term leasehold for business use agreement which, at the expiryof the leasehold, obligates the Company to restore the leased land to its original state. At the inception of a lease with such an obligation,
the Company recognized an asset retirement obligation and a corresponding capital asset in an amount equal to the present value of theestimated demolition cost required for the removal of the properties located on the leased land. The present value is calculated using
2.015% as the discount rate over 42 years, which is the term of the leasehold.
Change in the asset retirement obligations for the six months ended September 30, 2019 and March 31, 2020 consisted of the following:Thousands of yen

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

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

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

345,493348,974

—

—

3,480

3,515

348,974

352,489

Japan Real Estate Investment Corporation48

15. Investment and Rental Property
For the six months ended September 30, 2019 and March 31, 2020
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 September 30, 2019 and March 31, 2020 and the fair values as of September 30, 2019 andMarch 31, 2020 are as follows:
Thousands of yen

Book value

Fair value

As of March 31, 2019

Change during the period *1

As of September 30, 2019

As of September 30, 2019935,057,721(6,237,260)

928,820,461

1,204,238,234

Thousands of yen

Book value

Fair value

As of September 30, 2019

Change during the period *2

As of March 31, 2020

As of March 31, 2020

928,820,461

26,408,499

955,228,960

1,235,000,000

Notes: 1. Book value on balance sheets means the acquisition cost less accumulated depreciation.
2. Significant changes
		 *1. As for the increases/decreases for the period, the major reasons for the decreases were the disposition of a 50% quasi-co-ownership interest of Kawasaki Isago
Building (¥1,423,739 thousand) and by depreciation.
		 *2. As for the increases/decreases for the period, the major reasons for the increases were the acquisitions of Seavans S Building (¥5,669,307 thousand) andOtemachi Park Building (¥10,235,651 thousand), and the additional acquisitions of Shinjuku Front Tower (¥10,164,729 thousand) and Shinjuku Eastside Square(¥8,512,551 thousand). The major reasons for the decreases were the dispositions of a remaining 50% quasi-co-ownership interest of Kawasaki Isago Building(¥1,417,827 thousand) and Kodenmacho Shin-Nihonbashi Building (¥2,714,418 thousand), and by depreciation.
3.	Fair values as of September 30, 2019 and March 31, 2020 are defined as the appraised values provided by an external qualified professional appraiser. As of September
30, 2019, Kawasaki Isago Building (50% quasi-co-ownership interest), for which the disposition agreement was made dated September 19, 2019, was valued at thedisposition price.

Profits and losses related to investment and rental property are listed in Section 17. “Breakdown of Property-Related Revenues and Expenses”.

16. Per Unit Information
The following table summarizes information about net assets per unit and profit per unit as of September 30, 2019 and March 31, 2020and for the periods then ended, respectively:
Yen

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

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

Net assets per unit

370,174

371,351

Profit per unit

10,78911,373

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

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

49

Japan Real Estate Investment Corporation

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

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

14,945,513—
14,945,513
1,385,210 units

15,755,259—
15,755,259
1,385,210 units17. Breakdown of Property-Related Revenues and Expenses
For the six months ended September 30, 2019 and March 31, 2020
Thousands of yen

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

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

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

33,580,214

33,810,571

33,522,024

33,746,218

27,114,478

27,566,414

2,845,225

2,686,402

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

774,730

763,482

2,787,590

2,729,919

58,18964,35235,524

11,096

22,66553,256

16,909,983

16,813,977

16,909,983

16,813,977

3,637,328

3,740,195

2,570,022

2,251,223

3,256,368

3,241,944

50,39846,005

767,963936,2026,433,778

6,416,541

194,123

181,864

16,670,230

16,996,593

18. Breakdown of Gain on Sales of Real Estate Properties
For the period from April 1, 2019 to September 30, 2019
Thousands of yen

Kawasaki Isago Building (50% quasi-co-ownership interest)
Revenue from sale of real estate property
Cost of real estate property sold
Other sales expenses
Gain on sales of real estate properties

3,078,234
1,423,739
70,5001,583,993

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

Kawasaki Isago Building (50% quasi-co-ownership interest)
Revenue from sale of real estate property
Cost of real estate property sold
Other sales expenses
Gain on sales of real estate properties

3,078,234
1,417,827
62,015
1,598,391
Thousands of yen

Kodenmacho Shin-Nihonbashi Building
Revenue from sale of real estate property
Cost of real estate property sold
Other sales expenses
Gain on sales of real estate properties

3,450,000
2,714,418
148,334
587,246

Japan Real Estate Investment Corporation50

19. Changes in Unitholders’ Equity
For the six months ended September 30, 2019 and March 31, 2020
Total number of investment units issuable
and number of units outstanding

As of September 30, 2019

March 31, 2020

Total number of investment units issuable

4,000,000 units

4,000,000 units

Number of units outstanding

1,385,210 units

1,385,210 units

20. Supplemental Cash Flow Information
Cash and cash equivalents

The following table represents a reconciliation of cash and cash equivalents as of September 30, 2019 and March 31, 2020:
Thousands of yen

As of September 30, 2019

As of March 31, 2020

Cash and deposits

26,723,523

16,996,570

Cash and deposits in trust

6,881,014

6,442,270——

33,604,537

23,438,840

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

21. Leases
1. Leased assets under finance lease transactions that do not transfer ownership of the leased assets to the lessees are capitalized and depreciatedby the straight-line method over the lease term with no residual value. Such capitalized leased assets primarily consist of tools, furnitureand fixtures.
2. The Company, as a lessor, owns office buildings under leases and earns rent income. As of September 30, 2019 and March 31, 2020,
the future lease revenues under the non-cancelable operating leases are as follows:
Thousands of yen

As of September 30, 201924,263,634

28,841,474

Due after one year

52,576,964

55,020,909

Total

76,840,598

83,862,384

22. Subsequent Events
For the six months ended March 31, 2020
“Not applicable”

51

As of March 31, 2020

Due within one year

Japan Real Estate Investment Corporation

Japan Real Estate Investment Corporation

52

53

Japan Real Estate Investment Corporation

Japan Real Estate Investment Corporation

54

Other Information
1. Risk Factors
The principal risks with respect to investment in JRE are as follows:• any adverse conditions in the Japanese economy could adversely affect JRE;
• JRE may not be able to acquire properties to execute the growth and investment strategy in a manner that is accretive to earnings;• illiquidity in the real estate market may limit the ability to grow or adjust the portfolio;• the past experience of the asset manager (the “AIFM”) in the Japanese real estate market is not an indicator or guarantee of future results;• JRE’s reliance on its sponsor companies, the AIFM, and other third-party service providers could have a material adverse effecton business;• there are potential conflicts of interest between JRE and its sponsor companies as well as the AIFM;• JRE’s revenues largely comprise leasing revenues from the portfolio properties, which may be negatively affected by vacancies, decreases
in rent, and late or missed payments by tenants;• JRE faces significant competition in seeking tenants and it may be difficult to find replacement tenants;• increases in interest rates may increase the interest expense and may result in a decline in the market price of the units;• JRE may suffer large losses if any of the properties incurs damage from a natural or man-made disaster;• most of the properties in the portfolio are concentrated in Tokyo and the Tokyo metropolitan area;• any inability to obtain financing for future acquisitions could adversely affect the growth of the portfolio;• JRE’s failure to satisfy a complex series of requirements pursuant to Japanese tax regulations would disqualify JRE from certain taxation
benefits and significantly reduce the cash distributions to the unitholders; and• ownership rights in some of JRE’s properties may be declared invalid or limited.
In addition, JRE is subject to the following risks:• risks related to the COVID-19 pandemic;• risks related to increasing operating costs;• risks related to JRE’s dependence on the efforts of the AIFM’s key personnel;• risks related to the restrictive covenants under debt financing arrangements;• risks related to entering into forward commitment contracts;• risks related to third-party leasehold interests in the land underlying JRE properties;• risks related to holding the property in the form of stratified ownership (kubun shoyū) interests or co-ownership interests(kyōyū-mochibun);• risks related to holding the property through trust beneficiary interests;• risks related to properties not in operation (including properties under development);• risks related to the defective title, design and construction, other defects, non-comformity to the agreement or problems in theproperties;• risks related to impairment losses related to the properties;• risks related to tenant leasehold deposits and/or security deposits;• risks related to tenant’s default as a result of financial difficulty or insolvency;• risks related to the insolvency of master lessee;• risks related to the insolvency of a property seller following the purchase of a property by AIF;
• risks related to relying on expert appraisals and engineering, environmental and seismic reports as well as industry and market data;• risks related to the presence of hazardous or toxic substances in the properties, or the failure to properly remediate such substances;• risks related to strict environmental liabilities for the properties;• risks related to the amendment of applicable administrative laws and local ordinances;• risks related to infringing third party’s intellectual property rights;• risks related to holding interests in properties through preferred shares of special purpose companies (tokutei mokuteki kaisha);• risks related to holding Japanese anonymous association (tokumei kumiai) interests;• risks related to investments in trust beneficiary interests;• risks related to the tight supervision by regulatory authorities and compliance with applicable rules and regulations;

55

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

2. Information Required under Article 22(2)(d) of the EU Alternative Investment Fund Managers
Directive (AIFMD)(1) ‌Material Changes in Information Listed in Article 23 of AIFMD during the Financial Period covered by the Report (six-month fiscal
period ended March 31, 2020)
None.

3. Remuneration Policy for Asset Manager Directors, Corporate Auditors, and Employees
Beginning April 1, 2019 and ending March 31, 2020
1. Remuneration for Asset Manager Directors

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

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

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

Number of
person(s)remunerated

2

Corporate Auditors

Remuneration

Number of
person(s)remunerated

JPY 36 million

0

Total

Remuneration

Number of
person(s)remunerated

Remuneration

JPY 0 million

2

JPY 36 million

Japan Real Estate Investment Corporation

56

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

Remuneration based on compensation rules

42

Remuneration
Total

Fixed

Variable

JPY 354 million

JPY 226 million

JPY 128 million

4. Conflicts of Interest

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

57Japan Real Estate Investment Corporation

Corporate Data
As of March 31, 2020

Executives
Executive Director: Yutaka Yanagisawa
Supervisory Directors: ‌Tomohiro Okanoya
Hiroaki Takano
Paid-in Capital
JPY 497,241,216,000
Number of Units Outstanding
1,385,210
Number of Unitholders
13,303
Stock Listing
Tokyo Stock Exchange
Securities Code8952
LEI (Legal Entity Identifier)3538003YAIR3CBGJJ928

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

This semiannual report includes translations of documents originally filed under the Japanese Financial Instruments and Exchange Law of Japan.
This report was prepared in English solely for the convenience of readers outside Japan and should not be considered as a disclosure statement.
The original Japanese documents shall take precedence in the event of any discrepancies arising from the translations or interpretations containedin this report.
Estimates for the Company’s future operating results contained in this semiannual report are forward-looking statements and are based on
information currently available to the Company and its asset management company and are subject to risks and uncertainties. Consequently,
these projections should not be relied upon as the sole basis for evaluating the Company. Actual results may differ substantially from the projections
depending on a number of factors.

Japan Real Estate Investment Corporation

58

Japan Real Estate Investment Corporation
SEMIANNUAL REPORTMarch 2020

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

Printed in Japan