May 20, 2003
JAPAN REAL ESTATE INVESTMENT CORPORATIONANNOUNCEMENT OF THIRD FISCAL PERIOD RESULTS
1. Summary of Financial Results
On May 20, 2003, Japan Real Estate Investment Corporation (“JRE,” TSE: 8952) has
announced the financial results of its third fiscal period, ended March 31, 2003.
For the third fiscal period, JRE reported gross revenues of 8,500 million yen,operating profits of 3,687 million yen, recurring profits of 3,259 million yen and net
income of 3,258 million yen, or 14,455 yen per share.
As of March 31, 2003, JRE’s total asset balance was 200,022 million yen andits net worth was 115,410 million yen, or 512,026 yen per unit. On its balance sheet,
JRE bore interest-bearing debt of 66,800 million yen.
2. Current Status(1) Overview of Operations, September 10, 2001−September 30, 2002
JRE was listed on the Tokyo Stock Exchange (“TSE”) on September 10, 2001. JRE had
acquired 24 properties during its first fiscal period, ended March 31, 2002, and acquired
three properties during its second fiscal period, ended September 30, 2002, for a total of27 properties. JRE steadily expanded revenues by increasing asset scale while
maintaining an average occupancy rate of almost 94% during these periods.
(2) Results of Operations① Property Management and Acquisition
During the period under review, deflation tightened its hold on the Japanese economy
against a backdrop of lingering uncertainty on the future of the economy, dampened
consumer spending and restrained corporate capital investment.
In the market for leased office space, companies streamlined their branch
offices to further integrate and reduce costs, and the demand/supply gap for floor space
worsened. In the Tokyo metropolitan area in particular, there were concerns for an
increase in overall vacancy rates and a fall in rents due to the so-called year 2003
problem (when the supply of new office space is to peak). An examination of properties,
however, reveals a clear distinction between those able to maintain or improve
occupancy rates and those losing their tenants, resulting in a disparity in revenues aswell. Under these operating conditions, JRE was able to maintain an occupancy rate of1

94.4% as of March 31, 2003, as a result of its highly competitive properties, robust
management of existing tenants and efforts to attract new tenants.
Facing restructuring and the introduction of asset-impairment accounting,companies are trimming assets, leading to a deluge of market information on properties
for sale. JRE, after meticulously examining this data on properties for sale to determine
fair value, acquired properties from the standpoint of stabilizing overall revenues andexpected rates of return. During the fiscal period under review, JRE acquired theKokusai Iidabashi Building for 5,000 million yen on October 31, 2002, and changed theproperty’s name to Genki Medical Plaza on April 1, 2003. The Company purchased daVinci Harajuku for 4,885 million yen on November 22, 2002. JRE acquired a33.87238% stake in the Kanazawa Park Building for 1,700 million yen on March 3,2003, increasing its ownership to 89.0% from the 55.12762% stake acquired onFebruary 28, 2002. On March 14, 2003, JRE acquired the Aoyama Crystal Building for
7,680 million yen. As a result, as of March 31, 2003, JRE’s portfolio consisted of 30office buildings, acquired for a total of 183,542 million yen, with total leasable floor
space of 236,693 m2 and a total of 359 tenants.
② Capital Procurement
Some of these additional properties were acquired through loans and otherinterest-bearing debt. During the fiscal period under review, JRE raised capital throughshort-term borrowings. As of March 31, 2003, JRE’s total borrowings were 41.8 billion
yen (of which long-term borrowings were 24.0 billion yen), with outstanding issues ofcorporate bonds totaling 25.0 billion yen.
JRE has received the following issuer credit ratings.
Rating Agency
Standard & Poor’sIssuer Credit Rating
Long-term: A+; Short-term: A-1; Outlook: Stable

Moody’s Investors Service Rating: A2; Outlook: Stable③ Shareholders’ Meeting Held
JRE held its second shareholders’ meeting on March 28, 2003, the first such meeting
since the Company’s listing. At the shareholders’ meeting, resolutions were passed
without modification to proposals for changes to regulations including the lowering of
the rate of asset management compensation paid to Japan Real Estate AssetManagement Co., Ltd., and for the appointment of an executive director andsupervisory directors.
2Performance
The operations outlined above resulted in gross revenues of 8,500 million yen (+7.5%compared with the previous fiscal period) and operating profits of 3,687 million yen(+8.9%). Recurring profits, excluding interest expenses, operating and administrativecosts, were 3,259 million yen (+12.5%) and net income totaled 3,258 million yen(+12.5%).
JRE’s policy with regard to cash distributions is to issue dividends ofapproximately 100% of taxable income, in accordance with Article 67-15 of the SpecialTaxation Measures law of Japan applicable to J-REITs. The dividend for the period
under review was 14,455 yen per share.
3. Outlook for the Next Period(1) General Operational Outlook
With no recovery in the domestic economy, there is concern that lackluster conditions
will continue in the market for leased office space in the Tokyo metropolitan area,
owing to a persistent weakening of demand and the so-called year 2003 problem
concerning an oversupply of new office space. On the back of globalization andadvancements in information technology, office needs are expected to become morecomplex and diverse. In areas outside of Tokyo, the market for office space is expected
to remain on a downtrend, as corporate restructuring and the concentration of offices inTokyo and other primary cities continue.
In such an operating environment, although the real estate market continues tosoften, a closer look at individual properties reveals an increasing bipolarization
between office buildings with rising occupancy rates and those with falling occupancy
rates. It is becoming more necessary to provide services in tune with demand, andprovide added value by distinguishing from competitive office buildings.
In a liquid real estate market, it is expected that the trend will strengthen for
selling real estate to write off non-performing loans and adopt asset-impairment
accounting. JRE believes that these conditions present a favorable environment for
acquiring prime properties.
① Property Acquisition
In light of the above analysis, JRE has adopted the following policies to guide its
acquisition of properties to improve both profitability and stability of earnings:
i. Because the early acquisition of information is vital, JRE is strengthening its3

existing real estate information channels, and is developing new channels throughwhich to obtain information on available properties.
ii. In its acquisition activities, JRE will conduct business with due diligence, being
meticulous in its investigation and consideration of the economic factors, physicalcondition and legal status of potential acquisitions. Through this heightened
attention to the utility of potential acquisitions, JRE will be highly selective in itsinvestments, centering on properties able to generate stable revenues over the longterm. JRE is targeting buildings with structures that meet or exceed newearthquake-resistance standards and that will be able to remain competitiveness overthe medium to long term.
iii. The general target for regional diversity of property ownership, in accordance with
JRE’s property-acquisition policies, is for 60% to 70% to be located in the Tokyo
metropolitan area, with the remainder located in other regional urban centers. It ispossible, however, that future trends in office demand may cause JRE to diverge
from the above ratio, and increase the proportion of its holdings in the greater Tokyo
metropolitan area.
The timing of property acquisition cannot be ascertained in advance. Therefore,
JRE’s policy is to fund property acquisition with short-term loans, then to refinanceutilizing various funding methods, including corporate bonds, taking into account trends
in financial markets at the time. When effecting such a loan, it is JRE’s policy tominimize funding costs by negotiating with several qualified institutional investors
before settling on a lender.
② Property Administration
With the continued weakening of the market for leased office space, it is unlikely there
will be an increase in rental revenues. Further, occupancy rates in some properties may
decline. In response to these business conditions, JRE has adopted the following
policies:
i. Strengthen JRE’s relationship of trust with existing tenants
As of March 31, 2003, JRE had contracts with seven property management companies
for the administration of its properties. In almost all cases, these firms were managing
their respective buildings before JRE acquired them, and so they have long-establishedrelationships with the tenants. Further strengthening these relationships will allow JRE
to anticipate tenant needs and provide tailored services, heightening tenant satisfaction
4and reducing turnover.
ii. Fill vacancies promptly
In cooperation with the property management companies mentioned above, JRE seeks
the best tenants for its vacant properties and soon-to-be vacant properties inconsideration of their location and other characteristics, and works energetically to fillvacancies as rapidly as possible. JRE is also working to uncover latent demand for
expansion of floor space among its existing tenants.
iii. Promote fixed- and long-term lease contracts
To assure future revenues, JRE is working to gradually shift to fixed- and long-termlease contracts.
iv. Reduce administrative costs
JRE promotes healthy competition among the seven property management companies it
employs, encouraging them to improve their administrative structures and revaluate
costs. JRE’s target is to achieve a 5% reduction in management fees and utility expenses
for all properties within three years of their acquisition.
(2) Performance Forecasts
In JRE’s fourth six-month period (ending September 30, 2003), gross revenues are
forecast at 8,800 million yen, recurring profits at 3,300 million yen, and net income at
3,300 million yen. JRE also expects to pay cash dividends of 14,500 yen per share.
Actual figures for gross revenues, recurring profits, net income and cash dividends mayvary due to changes in operating conditions.
Assuming that JRE realizes its aforementioned forecasts for the fourth fiscal
period, estimates for its fifth fiscal period (ending March 31, 2004) are gross revenuesof 8,400 million yen, recurring profits of 3,100 million yen, net income of 3,100 million
yen, and cash dividends of 14,000 yen per share.
After closing its books for the fiscal period under review, JRE issued its second andthird corporate bonds April 30, 2003, as a part of efforts to diversify capital procurement.
JRE raised 10.0 billion yen from each bond issuance. These corporate bonds received
credit ratings of A+ from Standard & Poor’s and A2 from Moody’s Investors Service.

5

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

6

JAPAN REAL ESTATE INVESTMENT CORPORATIONSTATEMENT OF INCOME AND RETAINED EARNINGSFor the Period from October 1, 2002 to March 31, 2003
(In millions of yen)

3rdItem

2nd Period(183days)

Existing 27
properties

Additional 3
properties

7,910
7,889
21
2,699
1,121
769
628
20
152
7
5,211
1,194
4,017
630
382
247
3,386
2
02
491
224
91
70
70
33
2,898
2,898
1
2,897
2,897

FFO (Net Income＋Depreciation）

4,091

4,568

¥12,853¥14,455

7260
260
−6427
80026
0196
49147

Total

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

Dividend per unit

8,240
8,189
51
2,734
1,049
703
626
21297
385,506
1,261
4,244

Period (182 days)

8,500
8,449
51
2,798
1,076
711
626
21
323
39
5,702
1,310
4,391
703
432
270
3,687
101429
175
164
70
―
19
3,259
3,259
1
3,258
3,258

Change% Change

590

7.5%

99

3.7%

491

9.4%

374
73

9.3%
11.6%

301
△18.9%△ 62△12.6%

361
361

12.5%
12.5%

361

12.5%

477

11.7%

JAPAN REAL ESTATE INVESTMENT CORPORATIONBALANCE SHEETAs of March 31, 2003
(In millions of yen)

ASSETS

Item

As of Sept.
30, 2002

As of March.
31, 2003

Change over Previous Period

Current Assets
19,99015,459△ 4,531175

196

2120,165

15,656△ 4,509

Buildings

51,892

57,6935,801Structures

279

315

361,039

1,161

122

Land

113,727

128,013

14,286

Accumulated depreciation△ 2,294△ 3,604△ 1,310

Total Property and Equipment

164,644

183,578

18,934

444

726

282

444

726

282

7161

△ 107161△ 10

165,160

184,366

19,20670―△ 7070―△ 70

185,397

200,022

14,625

Cash and entrusted cash
Other current assets
Total Current Assets
Fixed Assets
Property and equipment (Including entrusted
property and equipment)

Machinery and equipment

Intangible Assets
Lease hold rights and entrusted lease hold rights

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

8JAPAN REAL ESTATE INVESTMENT CORPORATIONBALANCE SHEETAs of March 31, 2003
(In millions of yen)

LIABILITIES

Item

As of Sept.
30, 2002

As of March.
31, 2003

Change over Previous Period

Liabilities
Current Liabilities
Short-term borrowing5,000

17,80012,800Rent received in advance

1,219

1,335

116

Other current liabilities

873

1,340

467

Total Current Liabilities

7,092

20,476

13,384

Investment Corporation Bond

25,00025,0000Long-term borrowings

24,00024,0000

Deposits from tenants

14,255

15,135880

Total Long-term Liabilities

63,25564,135880

Total Liabilities

70,347

84,611

14,264

Unitholders' capital

112,152

112,1520Retained earnings

2,897

3,258

361

Total Unitholders' Equity

115,049

115,410361

Total Liabilities and Unitholders' Equity

185,397

200,022

14,625Long-term Liabilities

Unitholders' Equity

9JAPAN REAL ESTATE INVESTMENT CORPORATIONPORTFOLIO SUMMARY
As of March 31, 2003

AreaTokyo
Metropolitan
Area

23 Wards

Appraisal Valueat End of Period

NameYear
BuiltNet
RentableAreas（㎡）Occupancy
Rate

Mitsubishi Soken Building

28,000 million

27,267 million 1970

18,006

96.3%

Kodenmacho Shin-Nihonbashi Building

3,140 million

3,173 million 1991

3,897

100.0%

Shiba 2-chome Daimon Building

4,890 million

4,859 million 1984

9,622

86.1%

Cosmo Kanasugibashi Building

2,760 million

2,808 million 1992

4,062

100.0%

Takanawadai Building

2,810 million

2,738 million 1991

4,091

100.0%JTS Building

1,500 million

1,362 million 1991

3,383

100.0%

Omori-Eki Higashiguchi Building

5,220 million

5,123 million 1989

7,708

98.6%

Otsuka Higashi-Ikebukuro Building

3,530 million

3,541 million 1987

7,114

94.6%

Ikebukuro 2-chome Building

1,520 million

1,728 million 1990

2,186

88.8%

Shibuya Cross Tower

34,400 million

34,600 million 1976

28,547100.0%MD Kanda Building

9,620 million

9,520 million 1998

6,334100.0%

Burex Kyobashi Building

5,040 million

5,250 million 2002

4,279

100.0%

Kandabashi Park Building

4,900 million

4,810 million 1993

3,687

100.0%

2,570 million

2,574 million 1990

4,510

91.1%

3,190 million

3,375 million 1990

6,831

100.0%

3,180 million

3,000 million 1992

6,964

100.0%

2,940 million

2,924 million 1991

5,829

100.0%

Saitama Urawa Building
Excluding 23
Kawasaki Isago Building
Wards
Ericsson Shin-Yokohama Building
Sendai Honcho Honma Building

Other Major Cities

Acquisition
Price

Niigata Ishizuecho Nishi-Bandaibashi Building

854 million

1,010 million 1984

4,383

82.9%

Kanazawa Minamicho Building

1,200 million

1,331 million 1987

3,773

88.4%

Kanazawa Park Building (55.12762%）

3,202 million

2,880 million 1991

13,030

91.2%

Nagoya Hirokoji Building

15,000 million

14,533 million 1987

21,59093.1%

Kyoto Shijo Kawaramachi Building

2,380 million

2,650 million 1982

6,800

72.6%

Midosuji Daiwa Building

14,400 million

14,314 million 1991

20,44991.4%

Fukusuke Sakaisujihonmachi Building

2,300 million

2,264 million 1992

5,337

91.6%

Kobe Itomachi Building

1,180 million

1,436 million 1989

3,478

85.1%

Hinode Tenjin Building

3,750 million

3,657 million 1987

5,944

98.7%

Tosei Tenjin Building

1,420 million

1,550 million 1992

4,080

76.7%

Genki Medical Plaza

5,450 million

5,000 million 1985

4,791

100.0%

Properties Acquired in the da Vinci Harajuku
3rd Period
Aoyama Crystal Building
Kanazawa Park Building（33.87238%)

Total

4,960 million

4,885 million 1987

3,051

100.0%

7,430 million

7,680 million 1982

4,916

100.0%

1,968 million

1,700 million 1991

8,006

91.2%

236,693

94.4%

184,704

10

183,542