Japan Real Estate Investment Corporation

SEMIANNUAL REPORTMarch 2021
For the period from October 1, 2020 to March 31, 2021

Contents
P. 2	The Strengths of Japan Real Estate Investment Corporation

P. 8

Portfolio Highlights

P. 3

P. 9

Approach to ESG

To Our Unitholders

P. 6	Replacement of Portfolio Properties andReturn of Internal Reserves
P. 6

Asset Management SummaryP. 7

Financial Highlights

P. 7

Top 10 Unitholders

P. 7

Unit Price Performance

P. 13	Asset Size, Property Acquisitions, and Performance Trends
P. 16	Overview of Portfolio Properties
P. 22 Financial Section
P. 53 Other Information
P. 56 Corporate Data

ProfileJapan Real Estate Investment Corporation (the “Company”) was established as one of the first real estate investment corporations in Japanfollowing 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 ­geographic diversity while seeking stable growth and dividends inthe 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” of such 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 andoperated under the Corporation Law of Japan. Investors and readers are specifically reminded to pay attention to such differences when reviewing this semiannual reportand making any investment decision on or in respect of the units of the Company. “Unitholders” of the Company may be construed accordingly. Each investor andreader should consult their own 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

The Strengths ofJapan Real Estate Investment Corporation
Steady Growth of Dividends
Actual dividend per unit for the March 2021 period:

JPY 11,320
Forecast dividend per unit for the September 2021 period:

JPY 11,350

Collaboration with Sponsor*
Expertise of Mitsubishi Estate Co., Ltd.
* On April 16, 2021, 28,571 JRE-AM shares owned by Mitsui & Co., Ltd. (10.0% of outstanding shares) were transferred to
Mitsubishi Estate Co., Ltd. (MEC). Upon the completion of the share transfer, the percentage of JRE-AM’s shares held by
MEC increased from 90.0% to100.0%.

Steady Growth of Quality Portfolio (As of March 31, 2021)
Total acquisition price: JPY 1.07 trillion 73 properties

The first listed J-REIT in 2001

Sound Financial Base (As of March 31, 2021)
Highest credit ratings for a J-REIT: A+ from S&P, A1 from Moody’s, AA from R&I
Long-term interest-bearing debt ratio*: 95.7%
LTV (Interest-bearing debt / Total assets): 41.9%* ‌(Long-term loans [including current portion of long-term loans] +Investment corporation bonds) / Total interest-bearing debt

Japan Real Estate Investment Corporation

2

To Our Unitholders
In the fiscal period ended March 31, 2021, Japan Real Estate Investment Corporation (“JRE”) posted almost thesame level of operating profit as that of the previous period through strong upward rent revisions, cost controls,
and the full contribution of the assets acquired in the previous period. JRE also commenced paying dividends
from the internal reserves accumulated from the gain on sales of real estate in the past periods. As a result, dividends per unit increased to JPY 11,320, resulting in dividend increases for 14th consecutive periods.
When we look at the office market in Japan, due to the impact of the COVID-19 pandemic, new demand
was sluggish as companies kept a wait-and-see attitude. Vacancy rates keep increasing, and market rents are under
downward pressure after reaching the peak.

Business Performance for the March 2021 Period 
Summary of Financial Results and Cash Dividends

national development of the pandemic and the impact ofIn the March 2021 period (October 1, 2020 to March 31, 2021), Japan

fluctuations in financial and capital markets.

Real Estate Investment Corporation recorded operating revenues

In the office leasing market, vacancy rates have been on an

decreased 0.1% compared with the previous period, to JPY 34.9 billion.

upward trend against the backdrop of the penetration of telework,

On the income front, operating profit decreased 0.1%, to JPY 16.4

which accelerated in the wake of COVID-19. Rents have turned to abillion. After deducting expenses for interest payments on loans anddownward trend, but slightly. Against the backdrop of such leasingother costs, ordinary profit decreased 0.6%, to JPY 15.5 billion, andmarket trends, the Company strived to secure stable income and occu-

profit decreased 0.2%, to JPY 15.5 billion.

pancy rates for the entire portfolio, attracting new tenants throughTurning to dividends, the Company will make cash distributions

strategic leasing activities and further increasing the satisfaction level ofusing earnings based on the dividend policy outlined in Article 32-1(2)existing tenants by improving the added value of the properties. Whileof the Company’s Articles of Incorporation, in an amount that exceeds

demand for office buildings in good locations and high quality continues

90% of profit available for dividends as required by Article 67-15 of

to be high, the Company considers it necessary to continue to pay

the Special Taxation Measures Act. Based on this policy, the Company

close attention to the impact of changes in work styles and other factors

decided that the total amount of dividends, which is calculated byin the office leasing market.

adding the reversal of reserve for tax purpose reduction entry to the

In the real estate investment market, property prices remained inunappropriated retained earnings and also securing retained earnings

a high price range due to the continued favorable financing environment

brought forward, is JPY 15,680,577,200 for the period, which isagainst the backdrop of continued monetary easing policy. Whilea multiple of 1,385,210—the number of units outstanding as of Marchdomestic and overseas investors are highly motivated to acquire properties,

31, 2021. Accordingly, the dividend per investment unit is JPY 11,320.

the number of prime office buildings for sale is limited, and theacquisition environment continues to be challenging.

Operating Environment and Performance
During the March 2021 period (October 1, 2020 to March 31, 2021),
the Japanese economy, as a whole, was getting back on the recovery

unitholders, which was set forth at the time of the Company’s listing

track, although the new coronavirus pandemic (“COVID-19”) hason the TSE and remains unchanged to date. Accordingly, the Company

severely affected some industries such as non-manufacturing industries,

was able to provide a dividend per investment unit at JPY 11,320,

which show signs of weakness in corporate income, etc. The Company

which is an increase of JPY 58 compared with the previous period.

considers it necessary to continue to monitor the domestic and inter-

3

Under such market conditions, the Company made sound investments under the Investment Guideline of providing stable dividends toJapan Real Estate Investment Corporation

Although the market condition does not seem supportive, we will take advantage of JRE’s quality portfolio andfocus on leasing the vacant space once the pandemic begins to subside. In the mid-term, we will strategically andproactively conduct replacement of portfolio properties and create a portfolio that are selected by many tenants.
Meanwhile, on the ESG front, JRE became the first J-REIT to procure funds through a sustainability-linked
loan. Also, one of our buildings obtained Net Zero Energy Building (ZEB) Certification. We would like to continue to actively promote ESG activities in our asset management.

In the office leasing market in the fiscal period under review, theConcerning new loans related to property acquisition and themarket was in the above-mentioned environment, and although somerefinancing of existing loans, the Company carries out loans strategicallynew contracts were concluded to improve the location and office envi-

and flexibly after giving close consideration to the above-mentioned

ronment, the occupancy rate at the end of the period decreased bymeans, as well as the possibility of repayment with funds procured

1.1% from the end of the previous period to 97.9% due to the impact

from issuing new investment units.

of an increase in the number of terminations and extended downtime,
but overall it still remained high.
Although there were no property acquisitions or sales during

During the March 2021 period, the Company issued Japan
Real Estate Investment Corporation 13th Unsecured Bonds in order
to increase the ratio of long-term loans and investment corporation

the fiscal period under review, the Company made a contract on

bonds to interest-bearing debt, and borrowed funds through sustainability-

March 31, 2021 to dispose of the trust beneficiary interest in Otsuka

linked loans, a first in the J-REIT industry, as well as borrowing to

Higashi-Ikebukuro Building (Toshima-ku, Tokyo) for JPY 6,025 million.

fund the repayment of existing loans.

The transfer date is scheduled for August 31, 2021.

As a result of the above financing activities, as of March 31, 2021,

As a result of the above, the Company’s portfolio at the end of thethe Company’s total interest-bearing debt increased by JPY 0.5 billion

fiscal period under review, March 31, 2021, consisted of 73 properties,

compared with the previous period, to JPY 419.4 billion. This amountwith a total acquisition price of JPY 1.07 trillion. Net rentable floor

consists of long-term loans totaling JPY 358.5 billion (including thearea stood at 873,873 m with 1,497 tenants in total.

current portion of long-term loans totaling JPY 51.7 billion), short-term

Note: Shibuya Cross Tower (land with leasehold interest), whose building ownership
was disposed of on January 18, 2018, is included in the above number ofproperties and total acquisition price, but is not included in net rentablefloor area or total number of tenants. This applies to all relevant instances insubsequent pages.

loans totaling JPY 18.0 billion, and investment corporation bonds

2

Finance Activities
According to its financial policy, the Company aims to maintain the
LTV ratio (ratio of interest-bearing debt to total assets) at 30% to
40%, and strives to maintain a sound and conservative financial profile
through staggered maturities, an extension of durations and diversification of stable lenders among other possibilities, taking into consider-

totaling JPY 42.9 billion. The current LTV ratio stands at 41.9%.
The Company’s credit ratings as of March 31, 2021 were as follows:
Rating 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: Negative

Rating and Investment Information, Inc.

Rating: AA; Outlook: Stableation the borrowing costs and existing relationships with lenders.

Japan Real Estate Investment Corporation

4

Outlook 
Operating Environment
Although the Japanese economy is expected to remain in a difficult situation for some time
due to the prolonged COVID-19 pandemic, it is expected to continue to pick up due to theeffect of various measures and overseas economic recovery as the level of socio-economic activity has been raised in stages while preventive measures against COVID-19 have been in place.
On the other hand, the Company considers it necessary to pay close attention to the impact of
the re-emergence of the infectious disease in Japan and abroad, the risk of a global economic
downturn due to trade issues between the United States and China, and fluctuations in financial and capital markets.
In the office leasing market, the Company pays close attention to the impact of thepenetration of telework, which has accelerated due to COVID-19, and other factors, and at
the same time, the Company strives to secure stable income and maintain and improve asset
value over the medium- to long-term while carefully monitoring trends in the office leasing
market and the business conditions of tenants managed by the Company.
Regarding the real estate investment market, it is important to continue to be proactive insearching for new properties in order to promote more strategic replacement of our portfolio

Yutaka Yanagisawa
Executive Director of Japan Real Estate
Investment Corporation

while paying close attention to future market trends due to changes in social conditions.

Performance Forecasts for the September 2021 and March 2022 Periods
The Company’s forecasts for the September 2021 period (April 1, 2021 to September 30, 2021)
are as follows: operating revenues totaling JPY 36.9 billion, operating profit totaling
JPY 18.0 billion, ordinary profit totaling JPY 17.1 billion, and profit totaling JPY 16.6 billion.
The Company plans to declare a per-unit cash dividend of JPY 11,350.
The Company’s forecasts for the March 2022 period (October 1, 2021 to March 31, 2022)
are as follows: operating revenues totaling JPY 34.5 billion, operating profit totaling
JPY 16.0 billion, ordinary profit totaling JPY 15.1 billion, and profit totaling JPY 15.2 billion.
The Company plans to declare a per-unit cash dividend of JPY 11,100.
Note: Operating 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

Replacement of Portfolio Properties andReturn of Internal Reserves• Strategically conduct replacement of portfolio properties from a proactive perspective• Proactively return gain on sales of real estate properties obtained throughasset replacement to investors(Distribute 1/20 of the period‐end balance of internal reserves for each fiscal period as a target)
Note: The distribution may be reduced or may not be conducted when dividend from the gain on sales is anticipated, etc.

Asset Management Summary
Property to be disposed

Otsuka Higashi-Ikebukuro Building
Location	2-32-22 Higashi-Ikebukuro,
Toshima-ku, Tokyo
Site area

2,121.39m2

Floor area of building

9,531.28m2

Structure	Steel-framed reinforced concrete
structure, flat roof
FloorsAbove ground: 8 floors
Below ground: 1 floor

Completion

November 1987

Acquisition date /Acquisition price

September 25, 2001 / JPY 3,541 million

Disposition date /Disposition priceAugust 31, 2021 / JPY 6,025 million

Type of ownership

Land: Ownership
Building: Ownership

Buyer

Tosei Corporation

Japan Real Estate Investment Corporation

6

Financial Highlights
In millions of JPY
For the period from
April 1, 2020 to
September 30, 2020

For the period from
October 1, 2020 toMarch 31, 2021

For the period from
October 1, 2019 toMarch 31, 2020

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

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

Operating revenues

34,94434,96635,99635,16433,022

Operating profit

16,47916,49817,354

16,494

14,548

Ordinary profit

15,50815,60816,326

15,39013,441

Profit15,56015,59815,755

14,945

13,431

Net operating income (NOI) (Note 1)

24,82524,943

23,413

23,10422,603Funds from operations (FFO) (Note 2)

22,08922,22519,986

19,795

19,831

20.4

16.8

22.0

25.4

22.7

Cash distribution

15,68015,60014,697

14,124

13,432

Number of units

1,385,210

1,385,210

1,385,210

1,385,210

1,385,210

11,32011,262

10,61010,1979,697

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, 2019, 183 days for the period
ended September 30, 2019, 183 days for the period ended March 31, 2020, 183 days for the period ended September 30, 2020 and 182 days for the period ended
March 31, 2021.

Top 10 Unitholders As of March 31, 2021
Company

Units% of total units
outstanding

Custody Bank of Japan, Ltd. (Shintaku Acc.) ��������������������������������������������������������������������������������������������������������������������������������������������

332,502

24.00%The Master Trust Bank of Japan, Ltd. (Shintaku Acc.) �������������������������������������������������������������������������������������������������������������������������������

210,485

15.20%The Nomura Trust and Banking Co., Ltd. (Toshin Acc.) ���������������������������������������������������������������������������������������������������������������������������

61,347

4.43%

Custody Bank of Japan, Ltd. (Toshin Acc.) �����������������������������������������������������������������������������������������������������������������������������������������������

50,4303.64%

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

24,9071.80%

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

17,1201.24%

SSBTC CLIENT OMNIBUS ACCOUNT ����������������������������������������������������������������������������������������������������������������������������������������������

15,926

1.15%

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

15,580

1.12%

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

15,001

1.08%

GOVERNMENT OF NORWAY �������������������������������������������������������������������������������������������������������������������������������������������������������������

14,287

1.03%

Unit Price Performance
350%

TSE REIT Index   

TOPIX   The Company

300%

250%

200%

150%

100%

50%
Sep. Mar.
20012002

7

Mar.
2003

Mar.
2004

Mar.
2005

Japan Real Estate Investment Corporation

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

Mar.
2021

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

March 2020

73

1,515

864,014

99.7

October 2020

73

1,509

873,819

98.6

November 2020

73

1,504

873,823

98.5

December 2020

73

1,500

873,833

98.4

January 2021

73

1,503

873,812

98.4

February 2021

73

1,497

873,812

97.9

March 2021

73

1,497

873,873

97.9

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.
2021
period

50.0

60.0

70.0

80.0

90.0

100.0
Occupancy rate (%)

Portfolio breakdown As of March 31, 2021
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 7.0%

Electricity andheat supply services

1.5%

Osaka city and
Kyoto city 5.8%
Tokyo metropolitan area
(excluding
Tokyo 23 wards) 6.2%

Tokyo 23 wards

78.0%

71.8%

6.1%

Information services

12.9%

Public services andassociations 1.9%

Tokyo 5 central wards*

Tokyo 23 wards(excluding Tokyo 5 central wards)

Others 10.3%
Ceramics 1.3%

Finance

10.0%

Medical 2.1%
Insurance 3.5%

Service industries

9.8%

Construction 3.6%

Real estate

Machinery 3.6%

8.3%

Electric devices

Communications

6.7%

4.2%

Specialist services(Consulting, etc.) 4.2%

Retail and restaurants 6.6%
Media and advertisement 4.9%
Pharmaceuticals 4.8%

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

Japan Real Estate Investment Corporation

8

Approach to ESG

Sustainability Policy
Japan Real Estate Asset Management Co., Ltd. (JRE-AM), which
manages the Company’s assets, believes that asset management focusedon 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 in international initiatives, and other efforts.
We disclose ESG-related information on our company website ina timely manner.
We refer to GRI standards and SASB (Real Estate Industry) for
the disclosure of a wide range of ESG information on our website.
Please refer to our ESG website for further information.
https://jre-esg.com/en/esg/information.html#anchor03

Sustainability Policy
1. Contribution to creating a low-carbon society
2. Contribution to creating a recycling-oriented society
3. Contribution 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. Information disclosure and obtaining environmental certifications

GRI STANDARDS Content Index
https://jre-esg.com/en/pdf/en-esg_gri.pdf

SASB Framework
https://jre-esg.com/en/pdf/sasb_framework.pdf

External Evaluation and Certification
Commitment to GRESBGreen Building-Certified Properties in Our Portfolio

JRE was selected for “Office Asia Regional Listed Sector Leader” inthe 2020 GRESB results, receiving the first place assessment results inthe listed office sector in Japan for the second consecutive year. JRE
also received the highest evaluations in both “GRESB Real Estate
Assessment” and “GRESB Public Disclosure” as below.

We are focusing on improving the sustainability of the Company’s
entire portfolio. As of the end of March 2021, about three-quarters of
the Company’s portfolio is green
certified. Going forward, theCompany will continue to acquire
environmental certifications andevaluations, such as the DBJ
Green Building Certification.

73.9%* 76.2%*

73.6%*
Office Asia Regional Listed
GRESB Real Estate Assessment
GRESB Public Disclosure

Sector Leader
5 StarsA

47

24.8%*
Participation in the CDP’s Climate Change Program
Received the “B” designation in the 2020 Carbon Disclosure Project(CDP) Climate Change ProgramAwarded “Prime” Status in the ISS ESG Corporate RatingAwarded “Prime” status in the ISS’s sustainability rating in March 2020

DISCLOSURE INSIGHT ACTION

9Japan Real Estate Investment Corporation

Number ofproperties

53.6%*

6
Mar. 1751

48

27
Mar. 18

Mar. 19

Mar. 20

Mar. 21* Based on acquisition price

Please refer to our ESG website for further information.
https://jre-esg.com/en/external/

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

Became Signatory in August 2018

United Nations Environment
Programme Finance Initiative(UNEP FI)

Principles for Responsible
Investment (PRI)

United Nations Global
Compact (UNGC)*M
 itsubishi Estate Co., Ltd., JRE-AM’s parent
company, became a signatory to the UNGC.
Accordingly, JRE-AM has participated in this­initiative as a member of the Mitsubishi Estate Group.

PRI signatories are required to report on the status of their ESG
integration practices to PRI each year. JRE-AM has received the highest
score of “A+” in both categories for which we made the report in 2020,as shown on the right. This is the highest result among all signatories
around the world.

ModuleScore

Strategy & GovernanceA+

PropertyA+* The rating system is a 6-rank scale (A+, A, B, C, D, E).

Environment
CO2 Reduction Targets and KPIs for 2030
Toward 2030
About KPIs

Carbon Intensity

60 kg/m or lower
2

CO2 Emissions*1

35% reduction

Water Usage*2

20% reduction

Waste Recycling Rate

90% or higher

Zero Energy
Buildings*3
Own

5~10

*1 Carbon intensity basis *2 Intensity (m3/m2) basis *3 Includes ZEB Ready and ZEB Oriented buildings

Sustainability-Linked Loans
JRE announced to borrow funds which will be procured through sustainability‐linked loans (“the SLLs”), the first such arrangement in the
J‐REIT industry, in January 2021.
In the SLLs, the focus is placed on climate change risks, especiallythe reduction of CO2 emissions. Among the JRE’s environmental
KPIs for fiscal 2030, the following targets have been set as sustainability
performance targets (“SPTs”).
• Reduce CO2 emissions by 35%(Base year: Fiscal 2013 / Carbon intensity basis)• Own five ZEBs
Moreover, the SLLs are designed in such a way that, based on theabove SPTs, achievement confirmation shall be made several times
and, if the predetermined levels are achieved upon each confirmation,a reduction in the interest rate will be offered.

Overview of Borrowings
Loan 1
LenderLoan amount
Borrowing datePrincipal repayment date

Loan 2The Norinchukin Bank
JPY 5,000 million

JPY 5,000 million

January 29, 2021
July 31, 2031

January 30, 2032

• JRE has obtained a second‐party opinion from Japan Credit Rating Agency,
Ltd. regarding the rationale of the established SPTs.
• The SLLs have been selected to the “Model Cases in the Model Creation
Projects on Sustainability-Linked Loans 2020” by the Ministry of theEnvironment of Japan, cited to serve as a model in terms of environmental
awareness and to represent a pioneering fund procurement method.

Japan Real Estate Investment Corporation

10

JRE’s First ZEB Ready Certification(Higashi‐Gotanda 1Chome Building)Supporting TCFD Recommendations
To enhance the sustainability of its future business, JRE evaluates therisks and opportunities that climate change presents, and reflects themin its operational policies and asset management accordingly.

Higashi‐Gotanda 1Chome Building hasreceived the ZEB Ready Certification as
well as the 5 Stars Certification by the
Building‐Housing Energy‐efficiency
Labeling System (“BELS”) based on thedesign and renovation plan for thebuilding, assuming that the renovation
will be carried out in the future.

For more information, please visit “Climate Change Initiatives” on our ESG website.
https://jre-esg.com/en/environment/climate.html

ZEB Ready
Energy saving of 50% or more
ReduceEnergySavingEnergy consumption
requiredby ordinary building

100%

Energy consumption
requiredby ZEB
Below 50%

Source: Ministry of the Environment ZEB PORTAL Site
http://www.env.go.jp/earth/zeb/detail/01.html

Society
For Tenants and Partners

Raising ESG Awareness of Our Stakeholders

Sustainability Guide to Promote Owner and Tenant Collaboration
JRE has created a Sustainability Guide and distributed it to its 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 VOL. 1

Sustainability Guide VOL. 2

Resilience for Communities

VOL. 2

MITSUBISHI ESTATE CO., LTD.

Japan Real Estate Investment Corporation

Society

Tenants/
Customers

Co-creation
EconomyTheme 1
Offices in the“New Normal”
Era

For Communities

SUSTAINABILITY
GUIDE

Theme
Work Style
ReformBuilding
OwnersEnvironment

Our Thoughts
In 2020, the COVID-19 pandemic completelychanged the way we live.

Theme 2
Waste Recycling

The pandemic has prompted us to evolve into

a “non-contact” society where contact is avoided
to prevent infection from airborne droplets.

This transformation has resulted in a steep increasein the use of delivery and take-out services,which in turn has led to more plastic bottle andlunch box waste in homes and offices. Consequently,
the pandemic has had a significant impact
on the problem of waste.

What can we do to help create a sustainable society?

This Sustainability Guide mainly focuses on steps that,
as office workers, all of us can take to enhanceenvironmental and employee friendliness.
In partnership with our tenants,

we will co-create a sustainable society.

2

Sustainability Guide VOL.2
Please refer to the following link for the Sustainability Guide.
https://jre-esg.com/en/society/society.html

11Japan Real Estate Investment Corporation

JRE offers ESG seminars for our business partners, master lessees, andproperty managers, among others, for the purpose of raising stakeholder awareness. We invite ESG experts from outside the Company
to cover global ESG trends and discuss specialized fields such as
GRESB and ZEB.
We believe that raising sustainability awareness not only within
JRE, but among all our stakeholders, will benefit sustainability efforts
at each asset level.

As part of our efforts to strengthen our relationship with local communities, we have established systems to host stranded commuters in the eventof a disaster. These systems have been put in place at such properties as
Akasaka Park Building. In addition, we have concluded an agreementwith 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
warehouse for disaster control. We
also participate in disaster control
drills. Through these efforts, weare contributing to local communities by offering 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 andorganizes the musical performances andart exhibitions that take place at theConcert Hall, the Recital Hall, and the
Art Gallery of 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 our sponsor.

For more details on JRE-AM’s sponsor’s personnel development
system, please refer to the following website.
 itsubishi Estate:Mhttp://www.mec.co.jp/e/csr/employees/index.html

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.

Free-address work environment

GovernanceOur basic policy as an investment corporation and asset managementcompany is not only to comply with laws and regulations, but tomeet social demands as well. Taking care to have each employee perform his or her duties with high ethical standards and strict self-discipline raises our reputation among investors and garners the trust of
the greater society.

Basic Principle of Compliancefor the Investment Corporation (JRE)
JRE’s basic principle of compliance is to thoroughly observe legal andother relevant norms in regard to the business operation as well as torespond to the requirements from society. This means that the investment corporation administers and oversees the outsourcing companies
from the same standpoint, while complying with legal and other relevant norms in its decision-making.

For more information on our environmental, social, and governance initiatives,
please visit our ESG website or see our Sustainability Report 2020.

Basic Principle of Compliancefor the Asset Management Company (JRE-AM)
Basic Principle
1. Ensuring thorough compliance is one of its top priority issues, since
JRE-AM understands that any insufficiency in compliance would
affect even its management base.
2. As an asset management company, JRE-AM recognizes that it bears
the responsibility for realizing the values that are required by society
in its business operation, and makes proactive and continuous efforts
for full compliance to enhance the value of its business operation
both qualitatively and quantitatively.
3. JRE-AM is determined to achieve a reputation for quality among its
investors by promoting compliance activities, and thereby gains thetrust of a wide spectrum of society.

ESG website
https://jre-esg.com/en/

Sustainability Report 2020
https://jre-esg.com/en/pdf/sustainability_report2020.pdf

Japan Real Estate Investment Corporation

12

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

94.6

95.9

96.1

95.5

93.3

93.0

92.4

93.2

94.6

94.7

95.5

96.7

96.3

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 per unit overthe medium- to long-term. The Company’s growth is based on external growth strategies that aim to increase 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 1.07 trillion as of the period ended March 31, 2021 due to the steady achievement of external growthstrategies. 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)

641

643

660

657

740

782

794

837

(Number of properties)

518

542

564

564

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

92
(20)

(53)

(54)

(55)

(55)

(55)

(55)

(57)

(56)

(57)

(58)

(60)

(62)

(64)

Sep.
2001

Mar.
2008

Sep.
2008

Mar.
2009

Sep.
2009

Mar.
2010

Sep.
2010

Mar.
2011

Sep.
2011

Mar.
2012

Sep.
2012

Mar.
2013

Sep.
2013

Mar.
2014

9,510

9,599

9,021

8,314

7,821

7,925

8,095

7,850

7,570

7,683

7,633

At IPO

Dividend per unit* (JPY )14,611

9,536

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

Apr. 2014
Ninth Follow-On* As the Company implemented a 2-for-1 split of each investment unit as of 1 January 2014, the figures for March 2002 through September 2013 periods have taken the split into account.

13

Japan Real Estate Investment Corporation

97.8

97.8

97.7

98.3

98.7

98.8

99.1

99.2

99.2

99.5

99.3

99.7

99.0

97.9

As of Mar. 31, 2021:
73 properties;
JPY 1,070 billion

838

883

927

923

923

944

955

990

1,014 1,025 1,023

1,053 1,070 1,070

(64)

(68)

(70)

(68)

(68)

(69)

(69)

(70)

(71)

(73)

(73)

(73)

(73)

(73)

Sep.
2014

Mar.
2015

Sep.
2015

Mar.
2016

Sep.
2016

Mar.
2017

Sep.
2017

Mar.
2018

Sep.
2018

Mar.
2019

Sep.
2019

Mar.
2020

Sep.
2020

Mar.
2021

(End of fiscal period)

7,648

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

10,61011,262

11,320

Apr. 2018
Eleventh
Follow-On

Japan Real Estate Investment Corporation14

Major tenant roster
Name of tenant

Leased officearea (m2)Name of property% of total leased
office area

MUFG Bank, Ltd.

Harumi Front (also includes 3 other properties)

33,912

4.0%

Undisclosed*

Kitanomaru Square (also includes 3 other properties)

22,681

2.7%

Undisclosed*

Osaki Front Tower (also includes 3 other properties)

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 property)

12,817

1.5%

JSOL Corporation

Harumi Center Building

10,7091.3%

Mitsubishi UFJ Trust and Banking Corporation

Mitsubishi UFJ Trust and Banking Building

10,5981.2%

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

10,117

1.2%

TOTO LTD.

Shiodome Building (also includes 1 other property)

9,923

1.2%

* Undisclosed 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

15

Japan Real Estate Investment Corporation

Overview of Portfolio Properties
As of March 31, 2021

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

16

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:

17

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

Link Square
Shinjuku

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●

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

Jingumae
Terrace●

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

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

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

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

Ebisu Neonato●

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

Osaki Front
Tower●

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

Otsuka HigashiIkebukuro
Building●

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

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

●

I-36

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●

I-33

Shibuya Cross Tower(Land with leasehold interest)

Omori-Eki
Higashiguchi
Building

I-40

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

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

I-38

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

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:

I-32

Jingumae Media
Square Building

I-34

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 Corporation18

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:

19

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

20

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.

21

Japan Real Estate Investment Corporation

Financial Section
Selected Financial Data ........................................................................................................................ p.22
Balance Sheets ................................................................................................................................................ p.23
Statements of Income and Retained Earnings ........................................................... p.25
Statements of Changes in Unitholders’ Equity ......................................................... p.26
Statements of Cash Distributions ............................................................................................ p.27
Statements of Cash Flows ................................................................................................................. p.28
Notes to Financial Statements ...................................................................................................... p.29
Independent Auditor’s Report ..................................................................................................... p.50

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 (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, 2020
to March 31, 2021

For the period
from April 1, 2020
to September 30, 2020

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, 201934,944
18,464
16,47915,50815,50815,5601,001,734
419,493515,262497,241
1,385,210
371,974
15,680100.8%
11,32024,82522,0891.5%(3.1% annualized)
3.0%(6.1% annualized)
51.4%

34,966
18,46816,49815,60815,60815,5981,000,254
418,993515,302497,241
1,385,210
372,002
15,600100.0%
11,262
24,94322,2251.6%(3.1% annualized)
3.0%(6.0% annualized)
51.5%

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%

41.9%
20.4
24.8

41.9%
16.8
24.2

40.9%
22.0
24.3

40.4%
25.4
21.4

40.5%
22.7
19.6

Notes: 1. Dividend payout ratio = Dividend per unit / Profit per unit × 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, 2019, 183 days for the period
ended September 30, 2019, 183 days for the period ended March 31, 2020, 183 days for the period ended September 30, 2020 and 182 days for the period ended
March 31, 2021.)
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

Japan Real Estate Investment Corporation

22

Balance Sheets
As of September 30, 2020 and March 31, 2021

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   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

23Japan Real Estate Investment Corporation

As of September 30, 2020

As of March 31, 2021

21,499,934
7,195,933
430,651
228,047
20,81829,375,384

27,205,981
7,147,852
521,760
135,511
20,94835,032,055

263,978,877(107,639,942)
156,338,934
3,231,736(1,074,576)
2,157,160
3,478,769(2,616,025)
862,743
461,525(307,996)
153,528474,256,178
26,968107,000,367(32,423,749)
74,576,617
1,022,645(368,876)
653,769
802,094(568,526)
233,568
72,089(45,355)
26,733
251,658,301
5,689
960,950,193

265,776,388(111,950,847)
153,825,541
3,232,451(1,127,789)
2,104,661
3,480,509(2,683,808)
796,701
483,514(320,897)
162,617474,256,178
60,380107,362,525(34,437,955)
72,924,570
1,029,596(396,294)
633,302814,862(584,870)
229,991
72,983(48,399)
24,584
251,658,301
11,316956,688,146

5,627,555
828,095
38,7286,494,378

5,611,725
828,095
33,1606,472,981

577,168
1,573,847
95,0281,125,046
3,371,090
970,815,663

577,168
1,573,847
61,736
1,226,601
3,439,354
966,600,481

63,42863,4281,000,254,476

102,101
102,101
1,001,734,637

Thousands of yen

As of September 30, 2020

As of March 31, 2021

LIABILITIESCurrent liabilities   Operating accounts payable

1,079,870

1,424,904  Short-term borrowings

31,000,000

18,000,000   Current portion of long-term borrowings

52,200,000

51,700,000   Accounts payable - other

1,880,176

1,874,124

367,496

347,827  Accrued expenses   Income taxes payable   Accrued consumption taxes  Advances received  Other   Total current liabilities

8,247

11,612

468,126

1,145,093

3,170,806

3,172,578

14,71314,142

90,189,438

77,690,282

Non-current liabilities   Investment corporation bonds

32,993,175

42,993,175  Long-term borrowings

302,800,000

306,800,000   Deposits received from tenants

57,302,113

57,385,322   Deferred tax liabilities

1,281,107

1,217,307   Asset retirement obligations

356,041

359,628  Other

30,56926,345

394,763,006

408,781,778

484,952,444

486,472,061

497,241,216

497,241,216

2,426,375

2,424,282   Total non-current liabilities
Total Liabilities
NET ASSETS
Unitholders’ equity  Unitholders’ capital  Surplus    Voluntary retained earnings     Reserve for tax purpose reduction entry     Total voluntary retained earnings

2,426,375

2,424,282   Unappropriated retained earnings

15,634,440

15,597,077   Total surplus

18,060,815

18,021,360   Total unitholders’ equity

515,302,031

515,262,576

515,302,031

515,262,576

1,000,254,476

1,001,734,637

Total Net Assets
Total Liabilities and Net Assets

Japan Real Estate Investment Corporation24

Statements of Income and Retained Earnings
For the six months ended September 30, 2020 and March 31, 2021

Thousands of yen

For the period
from April 1, 2020
to September 30, 2020

For the period
from October 1, 2020
to March 31, 2021

34,778,422

34,666,758

Operating revenues
Rent revenues

187,969

277,319

34,966,391

34,944,078

Expenses related to lease business

16,649,118

16,648,001

Asset management fees

1,456,400

1,433,297

Asset custody fees

64,69264,705Administrative service fees

133,043

134,140

Directors’ compensations

7,800

7,800

Commission expenses

89,743

105,520

Other operating expenses

67,293

71,203

Total operating expenses

18,468,092

18,464,669

16,498,298

16,479,409

Interest income

122

140

Dividend income

12,574—

Reversal of distributions payable

1,384

1,501

100,456

9,166

897

—

115,434

10,807

Interest expenses

798,168

754,704

Interest expenses on investment corporation bonds

Other lease business revenues
Total operating revenues
Operating expenses

Operating profit
Non-operating income

Gain on receipt of donated non-current assets
Other
Total non-operating income
Non-operating expenses

161,468

172,899

Amortization of investment corporation bond issuance costs

7,379

11,642

Other

38,13342,355

1,005,149

981,602

Ordinary profit

15,608,583

15,508,613

Profit before income taxes

Total non-operating expenses

15,608,583

15,508,613

Income taxes – current

10,834

11,633

Income taxes – deferred(1,046)(63,799)

Total income taxes

9,788(52,165)

15,598,795

15,560,779

Profit25

Retained earnings brought forward

35,64536,297

Unappropriated retained earnings

15,634,440

15,597,077

Japan Real Estate Investment Corporation

Statements of Changes in Unitholders’ Equity
For the six months ended September 30, 2020 and March 31, 2021

For the period from April 1, 2020 to September 30, 2020
Thousands of yen

Unitholders’ equity
Surplus
Voluntary retained earnings

Total
net assets

Total surplus

Totalunitholders’equity15,790,904

17,159,098

514,400,314

514,400,314

1,060,273(1,060,273)

—

—

—

(2,092)

2,092

—

—

—

Dividends of surplus(14,697,078)(14,697,078)(14,697,078)(14,697,078)

Profit15,598,795

15,598,795

15,598,795

15,598,795

Unitholders’capitalReserve fortax purpose
reduction entry

Totalvoluntary
retainedearnings

Unappropriatedretainedearnings

1,368,194

1,368,194 Provision of reserve for tax
purpose reduction entry

1,060,273 Reversal of reserve for tax
purpose reduction entry(2,092)

Balance at beginning of the period

497,241,216

Changes during the period

Total changes during the period
Balance at end of the period—

1,058,181

1,058,181(156,463)

901,717

901,717

901,717497,241,216

2,426,375

2,426,375

15,634,440

18,060,815

515,302,031

515,302,031

For the period from October 1, 2020 to March 31, 2021
Thousands of yen

Unitholders’ equity
Surplus
Unitholders’capitalBalance at beginning of the period

497,241,216

Voluntary retained earnings

Total
net assets

Total surplus

Totalunitholders’equity15,634,440

18,060,815

515,302,031

515,302,031

2,092

—

—

—

(15,600,235)(15,600,235)(15,600,235)(15,600,235)

Reserve fortax purpose
reduction entry

Totalvoluntary
retainedearnings

Unappropriatedretainedearnings

2,426,375

2,426,375(2,092)(2,092)

Changes during the period Reversal of reserve for tax
purpose reduction entry
Dividends of surplus
ProfitTotal changes during the period
Balance at end of the period

15,560,779

15,560,779

15,560,779

15,560,779—(2,092)(2,092)(37,363)(39,455)(39,455)(39,455)

497,241,216

2,424,282

2,424,282

15,597,077

18,021,360

515,262,576

515,262,576

Japan Real Estate Investment Corporation

26

Statements of Cash Distributions
For the six months ended September 30, 2020 and March 31, 2021

	 
	 I Retained earnings

For the period
from April 1, 2020 to September 30, 2020

For the period
from October 1, 2020 to March 31, 2021

Amount (Yen)Amount (Yen)

15,634,440,510

15,597,077,487

II Reversal of voluntary retained earnings
	  Reversal of reserve for tax purpose reduction entry
III Cash distribution(Dividend per investment unit)
IV Retained earnings brought forward

Computation Method for Determining Dividends

27Japan Real Estate Investment Corporation

2,092,431

120,506,758

15,600,235,020

15,680,577,200(11,262)(11,320)

36,297,921

37,007,045

The Company will make cash distributions using earnings based on the cash
distribution policy outlined in Article
32-1(2) of the Company’s Articles ofIncorporation, in an amount that exceeds
90% of the “amount of distributableprofit” as set forth in Article 67-15 of theSpecial Taxation Measures Act. Based on
this policy, the Company has decided thatthe total amount of dividends, which is
set not to exceed the unappropriatedretained earnings and also to secureretained earnings brought forward, is¥15,600,235,020 for the period, which isa multiple of 1,385,210 — the numberof units outstanding as of September 30,
2020. Furthermore, the Company does
not pay out dividends that exceed
earnings as outlined in Article 32-1(3) ofthe Company’s Articles of Incorporation.

The Company will make cash distributions using earnings based on the cash
distribution policy outlined in Article
32-1(2) of the Company’s Articles ofIncorporation, in an amount that exceeds
90% of the “amount of distributableprofit” as set forth in Article 67-15 of theSpecial Taxation Measures Act. Based on
this policy, the Company has decided
that the total amount of dividends,
which is calculated by adding the reversalof reserve for tax purpose reduction entry
to the unappropriated retained earnings
and also securing retained earnings
brought forward, is ¥15,680,577,200
for the period, which is a multipleof 1,385,210 — the number of units
outstanding as of March 31, 2021.
Furthermore, the Company does not pay
out dividends that exceed earnings as
outlined in Article 32-1(3) of theCompany’s Articles of Incorporation.

Statements of Cash Flows
For the six months ended September 30, 2020 and March 31, 2021

Thousands of yen

For the period
from April 1, 2020
to September 30, 2020

For the period
from October 1, 2020
to March 31, 2021

Cash flows from operating activities
Profit before income taxes

15,608,583

15,508,613

Depreciation

6,628,009

6,530,798

Gain on receipt of donated non-current assets(100,456)(9,166)

7,379

11,642

Amortization of investment corporation bond issuance costs
Dividend income(12,574)—

Interest income

(122)

(140)

Interest expenses

959,636

927,604

Decrease (increase) in operating accounts receivable(159,133)(91,109)

425

(129)

Decrease (increase) in prepaid expenses(48,282)

92,535

Increase (decrease) in operating accounts payable(77,877)(94,763)

Decrease (increase) in supplies

Increase (decrease) in accounts payable - other(23,243)(19,649)

Increase (decrease) in accrued consumption taxes(105,996)

676,967

Increase (decrease) in accrued expenses

(131)

131

Increase (decrease) in advances received(193,103)

1,771

Decrease (increase) in long-term prepaid expenses

37,88833,291Other, net(78,517)(104,128)

22,442,485

23,464,270

12,696140Interest paid

(961,191)(947,405)

Income taxes paid

(14,059)(8,269)21,479,931

22,508,736

Purchase of property, plant and equipment(18,345,844)(1,431,157)

Purchase of property, plant and equipment in trust(1,577,074)(353,107)

Refund of leasehold and guarantee deposits received(888,636)(1,340,413)

Proceeds from leasehold and guarantee deposits received

2,284,029

1,423,621(18,527,526)(1,701,056)

SubtotalInterest and dividends received

Net cash provided by (used in) operating activities
Cash flows from investing activities

Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from short-term borrowings

39,000,000

27,500,000

Repayments of short-term borrowings(37,000,000)(40,500,000)

Proceeds from long-term borrowings

28,000,000

31,500,000

Repayments of long-term borrowings(13,000,000)(28,000,000)

Proceeds from issuance of investment corporation bonds—

10,000,000

Payments of investment corporation bond issuance costs—(50,315)(14,695,378)(15,599,398)

2,304,621(15,149,713)

Net increase (decrease) in cash and cash equivalents

5,257,026

5,657,966

Cash and cash equivalents at beginning of the period

23,438,840

28,695,867

Cash and cash equivalents at end of the period

28,695,867

34,353,833

Distributions paid
Net cash provided by (used in) financing activities

Japan Real Estate Investment Corporation

28

Notes to Financial Statements
September 30, 2020 and March 31, 2021

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. (“JRE-AM”).
On May 11, 2001, the Company was incorporated with ¥200 million of original capital contribution by Mitsubishi Estate Co., Ltd.
(“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 one of
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.
On February 9, 2021, the transfer of 28,571 JRE-AM shares owned by Mitsui & Co., Ltd. (10.0% of outstanding shares) to MEC wasapproved by the board of directors. Upon the completion of the share transfer on April 16, the percentage of JRE-AM’s shares held by
MEC increased from 90.0% to 100.0%.
As of March 31, 2021, the Company owned a portfolio of 73 office properties with an aggregate of approximately 873,873 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 – 75 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

29

Japan Real Estate Investment Corporation

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
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 forwhich 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.
Japan Real Estate Investment Corporation

30

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
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:• Accounting 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, 202031

Japan Real Estate Investment Corporation

(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 viewpoint 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.
(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 Company is currently evaluating the effect of the adoption of these accounting standards and implementation guidance on its
financial statements.

4. Commitment Line Agreement
As of September 30, 2020 and March 31, 2021
The Company has signed commitment line agreements with three banks.
Total amount of commitment line agreements
Debt financing balance
BalanceThousands of yen

As of September 30, 2020

As of March 31, 2021

60,000,000

60,000,000——

60,000,000

60,000,000

5. Reserve for tax purpose reduction entry
As of September 30, 2020 and March 31, 2021
Thousands of yen

Reserve for tax purpose reduction entry

As of September 30, 2020

As of March 31, 2021

2,426,375

2,424,282

Deferred tax liability for the reserve for tax purpose reduction entry

1,282,004

1,218,278

Total

3,708,380

3,642,561

Note: Reduction entry is made based on the reserve method, where the requirements of the tax law are met, and deferred tax liability is recorded in the liabilities section
for the future taxable temporary difference related to the amount of the reserve for reduction entry, and the net amount after deducting the deferred tax liability isrecorded in the net assets section as the reserve for tax purpose reduction entry. This deferred tax liability is recorded (or reversed) as a counterpart account of income
taxes-deferred in the statements of income.

Japan Real Estate Investment Corporation

32

6. Financial Instruments
1. Status of financial instruments(1) Policies for dealing with 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 aminimum 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 totalborrowing. The Company may also exercise hedging by means of derivative transactions (interest-rate swap transactions) in order tomitigate the risk of 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, theCompany 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, 2020 andMarch 31, 2021) 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 7. “Derivative Transactions”, is not an exact representation of market risk attributable to derivative transactions.

33

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, 2020
and March 31, 2021 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, 2020
Book value*

Fair value*

Difference*(1) Cash and deposits

21,499,934

21,499,934—(2) Cash and deposits in trust

7,195,933

7,195,933—(3) Short-term borrowings(31,000,000)(31,000,000)—(4) Current portion of long-term borrowings(52,200,000)(52,285,340)(85,340)(5) Investment corporation bonds(32,993,175)(34,107,600)(1,114,425)(6) Long-term borrowings(302,800,000)(305,188,746)(2,388,746)(7) Derivative transactions

—

—

—

* Liabilities are shown in parentheses.
Thousands of yen

As of March 31, 2021
Book value*

Fair value*

Difference*(1) Cash and deposits

27,205,981

27,205,981—(2) Cash and deposits in trust

7,147,852

7,147,852—(3) Short-term borrowings(18,000,000)(18,000,000)—(4) Current portion of long-term borrowings(51,700,000)(51,806,789)(106,789)(5) Investment corporation bonds(42,993,175)(44,094,756)(1,101,581)(6) Long-term borrowings(306,800,000)(307,182,235)(382,235)(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 7. “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 7. “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 7. “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, 2020

As of March 31, 2021

577,168
57,302,113

577,168
57,385,322*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

34

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

As of September 30, 2020

Cash and deposits
Cash and deposits in trust
Total

1 year or less
21,499,934
7,195,933
28,695,867

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, 2021

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

27,205,981
7,147,852
34,353,833

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

4 to 5 years—
10,000,000
52,000,000
62,000,000

Over 5 years—
12,993,175
109,000,000
121,993,175

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, 2020

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

1 year or less
31,000,000—
52,200,000
83,200,000

1 to 2 years——
51,000,000
51,000,000

2 to 3 years——
48,500,000
48,500,000

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

Thousands of yen

As of March 31, 2021

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

35

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

18,000,000—
51,700,000
69,700,000——
48,500,000
48,500,000—
10,000,000
39,500,000
49,500,000——
54,800,000
54,800,000—
20,000,000
47,500,000
67,500,000—
12,993,175
116,500,000
129,493,175

7. Derivative Transactions(1) Derivatives not designated as hedging instruments
		 As of September 30, 2020		  “Not applicable”
		As of March 31, 2021
		  “Not applicable”(2) Derivatives designated as hedging instruments
		 As of September 30, 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,
currency swap transactions (with initialand final exchange)

Investment
corporation bonds

Over one year

		 As of March 31, 2021
			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

26,300,000*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

46,800,000

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, 2020 and March 31, 2021. Please refer to Note 1 of “2. Fair value of financial instruments” under Section 6. “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, 2020 and March 31, 2021. Please refer to Note 1 of “2. Fair valueof financial instruments” under Section 6. “Financial Instruments”, as well as subheading (5) concerning derivative transactions.

Japan Real Estate Investment Corporation

36

8. Property, Plant and Equipment and Intangible Assets
Changes in Property, plant and equipment and Intangible assets for the six months ended March 31, 2021 are as follows:
Thousands of yen
Type of Asset

Increase during
the period

Decrease during
the period

Balance at endof the period

Depreciation andamortization

Net balanceat end ofthe period

Remarks

Property, plant and equipment

Buildings

263,978,877

1,797,511—

265,776,388

111,950,847

4,310,904

153,825,541—

Structures

3,231,736

715—

3,232,451

1,127,789

53,213

2,104,661—

Machinery and equipment

3,478,769

1,740

—

3,480,509

2,683,808

67,782796,701—

Tools, furniture and fixtures

461,525

21,989—483,514

320,897

12,900162,617—474,256,178——

474,256,178——

474,256,178—

26,96857,467

24,05560,380——60,380—

Buildings in trust

107,000,367

362,158—

107,362,525

34,437,955

2,014,206

72,924,570—

Structures in trust

1,022,645

6,950

—

1,029,596

396,294

27,418633,302—

Machinery and equipment in trust

802,094

12,767—

814,862

584,870

16,344229,991—

Tools, furniture and fixtures in trust

72,089894—

72,983

48,3993,043

24,584—

251,658,301——

251,658,301——

251,658,301

—

5,689

5,626

—

11,316——

11,316—

Subtotal

1,105,995,242

2,267,821

24,055

1,108,239,008

151,550,862

6,505,813

956,688,146

Land leasehold interests

5,933,601——

5,933,601

321,876

15,8295,611,725—

Easement

828,095——

828,095——

828,095—

Other

55,677——55,67722,517

5,567

33,160—6,817,374——

6,817,374

344,393

21,397

6,472,981

1,112,812,617

2,267,821

24,055

1,115,056,383

151,895,255

6,527,211

963,161,127

Land
Construction in progress

Land in trust
Construction in progress in trust

Intangible assets

Subtotal
Total

37

Balance at
beginning of
the period

Accumulated depreciation
Accumulated amortization

Japan Real Estate Investment Corporation

9. Borrowings
The condition of loans by financial institutions as of March 31, 2021 is as follows.

Drawdown date

Balance at
beginning ofcurrent period(¥ thousand)

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

Repayment date

MUFG Bank, Ltd. *3

August 18, 2020

11,000,000

—

0.109

November 18, 2020

Sumitomo Mitsui Trust Bank, Limited

December 26, 2019

1,300,000

—

0.120

December 28, 2020
*4

MUFG Bank, Ltd.

January 15, 2021——

0.11818

January 29, 2021

MUFG Bank, Ltd. *5

November 18, 2020——

0.11909

February 18, 2021

Sumitomo Mitsui Banking Corporation

March 27, 2020

5,000,000

—

0.120

March 29, 2021
*6

Sumitomo Mitsui Trust Bank, Limited

March 30, 2020

1,700,000

—

0.120

March 30, 2021
*7

Sumitomo Mitsui Trust Bank, Limited

April 20, 2020

2,000,000

2,000,000

0.11308

April 20, 2021

MUFG Bank, Ltd.

April 20, 2020

5,000,000

—

0.120

April 20, 2021
*8

Mizuho Bank, Ltd.

April 20, 2020

5,000,000

5,000,000

0.11308

April 20, 2021

MUFG Bank, Ltd. *9

February 18, 2021—

11,000,000*90.11909

May 18, 2021

Classification
LenderShort-term borrowings

31,000,000

18,000,000

The Yamaguchi Bank, Ltd.

Subtotal
October 29, 2012

2,000,000

—

0.800

October 29, 2020

MUFG Bank, Ltd.

December 21, 2012

5,000,000—

0.80125

December 21, 2020

MUFG Bank, Ltd.

December 21, 2012

5,000,000—

0.80125

December 21, 2020

MUFG Bank, Ltd.

January 15, 2013

5,500,000—

0.83625

January 15, 2021

MUFG Bank, Ltd.

January 31, 2014

4,000,000—

0.64225

January 29, 2021

Long-term borrowings

The Bank of Fukuoka, Ltd.

January 31, 2014

2,500,000—

0.63849

January 29, 2021

Sumitomo Mitsui Trust Bank, Limited

January 31, 2014

2,000,000—

0.62575

January 29, 2021

The Iyo Bank, Ltd.

March 24, 2014

2,000,000—

0.6035

March 24, 2021

MUFG Bank, Ltd.

April 4, 2017

5,000,000

5,000,000

0.00064*11

April 5, 2021
*10

MUFG Bank, Ltd.

April 24, 2013

5,000,000

5,000,000

0.775

April 26, 2021
*10

Mizuho Bank, Ltd.

June 15, 2012

4,000,000

4,000,000

1.07375

June 15, 2021
*10

Sumitomo Mitsui Trust Bank, Limited

December 26, 2016

3,700,000

3,700,000

0.1913June 28, 2021
*10

Sumitomo Mitsui Banking Corporation

January 19, 2018

5,000,000

5,000,000

0.16255

July 20, 2021
*10

The Bank of Fukuoka, Ltd.

August 31, 2017

1,500,000

1,500,000

0.1325

August 31, 2021
*10

The Iyo Bank, Ltd.

October 1, 2014

1,000,000

1,000,000

0.46525

October 1, 2021
*10

The Chugoku Bank, Limited

October 1, 2014

1,000,000

1,000,000

0.4725October 1, 2021
*10

Repayment
methodUse ofproceeds

Notes

Bullet*2

Unsecured
Unguaranteed
UnsubordinatedBullet*2

Unsecured
Unguaranteed
UnsubordinatedJapan Real Estate Investment Corporation

38

Balance at
beginning ofcurrent period(¥ thousand)

Balance at
end ofcurrent period(¥ thousand)

Daishi Hokuetsu Bank, Ltd. *12(former The Daishi Bank, Ltd.)

1,800,000

1,800,000

Sony Bank Incorporated

1,400,000

1,400,000

Classification
Drawdown dateLender

The Toho Bank, Ltd.

1,400,000

1,400,000

Daishi Hokuetsu Bank, Ltd. *12(former 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

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

The Yamagata Bank, Ltd.

500,000

500,000

The Gunma Bank, Ltd.

November 14, 2014

Repayment date

0.463

November 15, 2021
*10Long-term borrowings

The Nishi-Nippon City Bank, Ltd.

June 17, 2014

2,000,000

2,000,000

0.621

December 17, 2021
*10

Sumitomo Mitsui Banking Corporation

January 7, 2013

2,000,000

2,000,000

0.980

January 7, 2022
*10

Mizuho Bank, Ltd.

January 15, 2013

5,000,000

5,000,000

0.96625

January 17, 2022
*10

The Norinchukin Bank

January 31, 2014

3,500,000

3,500,000

0.757

January 31, 2022
*10

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

0.3925

August 10, 2022

The Gunma Bank, Ltd.

1,000,000

1,000,000

The Shinkumi Federation Bank

1,000,000

1,000,000

1,000,000

1,000,000

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

Daishi Hokuetsu Bank, Ltd. *12(former The Daishi Bank, Ltd.)The Chugoku Bank, Limited

August 10, 2015

The Tochigi Bank, Ltd.

39

Averageinterest
rate*1(%)

500,000

500,000

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

Daishi Hokuetsu Bank, Ltd. *12(former 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

Japan Real Estate Investment Corporation

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

March 25, 2013

1,000,000

1,000,000

0.945

March 24, 2023

Classification
LenderThe Yamaguchi Bank, Ltd.
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

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
June 1, 2023

MUFG Bank, Ltd.

June 1, 2017

12,000,000

12,000,000

0.01172*11

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
December 19, 2023

MUFG Bank, Ltd.

December 19, 2014

10,000,000

10,000,000

0.42375*13

MUFG Bank, Ltd.

March 26, 2018

5,000,000

5,000,000

0.00045*11

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

Long-term borrowings

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

1,000,000

0.1264*11

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

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

Sumitomo Mitsui Trust Bank, Limited

June 15, 2020

7,000,000

7,000,000

0.2075June 16, 2025

Sumitomo Mitsui Trust Bank, Limited

August 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

Sumitomo Mitsui Trust Bank, Limited

September 23, 2020

5,000,000

5,000,000

0.1475September 24, 2025

Mizuho Bank, Ltd.

December 26, 2016

5,000,000

5,000,000

0.3625

December 26, 2025

Sumitomo Mitsui Trust Bank, Limited

January 29, 2021—

2,000,000

0.1625January 29, 2026

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

Shinkin Central Bank

March 30, 2017

5,000,000

5,000,000

0.360

March 30, 2026

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

MUFG Bank, Ltd.

October 31, 2016

3,000,000

3,000,000

0.240

October 30, 2026

Repayment
methodUse ofproceeds

Notes

Bullet*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 dateMizuho 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 Norinchukin Bank

July 3, 2020

2,000,000

2,000,000

0.24375

July 5, 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

The Bank of Fukuoka, Ltd.

January 29, 2021—

2,500,000

0.21875

January 31, 2028

Mizuho Bank, Ltd.

March 30, 2018

4,000,000

4,000,000

0.3963

March 30, 2028

Classification
Lender

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

Long-term borrowings

Mizuho Bank, Ltd.

November 15, 20198,500,000

8,500,000

0.34875

November 15, 2028

Shinkin Central Bank

January 15, 2020

5,000,000

5,000,000

0.325

January 15, 2029

Mizuho Bank, Ltd.

November 1, 2019

6,000,000

6,000,000

0.35125

November 1, 2029

MUFG Bank, Ltd.

January 15, 2020

5,500,000

5,500,000

0.3625January 15, 2030

MUFG Bank, Ltd.

April 27, 2020

5,000,000

5,000,000

0.35875

April 26, 2030

Mizuho Bank, Ltd.

April 27, 2020

5,000,000

5,000,000

0.35875

April 26, 2030

MUFG Bank, Ltd.

June 15, 2020

4,000,000

4,000,000

0.36125

June 14, 2030

MUFG Bank, Ltd.

October 20, 2020—

5,000,000

0.2925October 18, 2030

MUFG Bank, Ltd.

December 21, 2020—

10,000,000

0.2825

December 20, 2030
March 24, 2031
March 26, 2031

The Iyo Bank, Ltd.

March 24, 2021—

2,000,000

0.17909*11

The Yamanashi Chuo Bank, Ltd.

March 26, 2019

2,000,000

2,000,000

0.3688The Norinchukin Bank *14

January 29, 2021—

5,000,000

0.35625

July 31, 2031

The Norinchukin Bank *15

January 29, 2021—

5,000,000

0.3775January 30, 2032

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

2,000,000

0.490

December 18, 2034

Subtotal

355,000,000

358,500,000

Total

386,000,000

376,500,000

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 August 18, 2020, MUFG Bank, Ltd. transferred its loan receivable of ¥7,700 million to Mitsubishi UFJ Trust and Banking Corporation.
*4. The Company made a full repayment (¥1,300 million) before maturity on October 26, 2020.
*5. As of November 18, 2020, MUFG Bank, Ltd. transferred its loan receivable of ¥10,400 million to Mitsubishi UFJ Trust and Banking Corporation.
*6. The Company made a full repayment (¥5,000 million) before maturity on October 27, 2020.
*7. The Company made a full repayment (¥1,700 million) before maturity on October 30, 2020.
*8. The Company made a full repayment (¥5,000 million) before maturity on October 20, 2020.
*9. As of February 18, 2021, MUFG Bank, Ltd. transferred its loan receivable of ¥10,400 million to Mitsubishi UFJ Trust and Banking Corporation.
*10. At the end of the period, these loans are accounted for under current liabilities on the balance sheets as the current portion of long-term borrowings.
*11. These are floating rate borrowings which are not swapped into fixed rates.
*12. As of January 1, 2021, The Daishi Bank, Ltd. and The Hokuetsu Bank, Ltd. merged and changed their corporate names to Daishi Hokuetsu Bank, Ltd.
*13.	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.
*14.	The applicable interest rate will be lowered by 0.01% from the original rate of 0.35625% for a corresponding period pursuant to the loan agreement on the condition thateither one of the targets set for CO2 emissions reduction or the number of ZEB-certified buildings the Company owns, respectively, is achieved.
*15.	The applicable interest rate will be lowered by 0.01% from the original rate of 0.3775% for a corresponding period pursuant to the loan agreement on the condition thateither one of the targets set for CO2 emissions reduction or the number of ZEB-certified buildings the Company owns, respectively, is achieved.

41

Japan Real Estate Investment Corporation

10. Investment Corporation Bonds including Current Portion of Investment Corporation Bonds
Outstanding investment corporation bonds as of March 31, 2021 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)
13th unsecured investment
corporation bond
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

October 26, 2020—

10,000,000

0.2

October 24, 2025

Bullet*1*2

32,993,175

42,993,175*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.

11. 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

42

12. 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 earnings 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
profit 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, 2020 and March 31, 2021 were as follows:
Thousands of yen

As of September 30, 2020

As of March 31, 2021

Deferred tax assets:
Accrued enterprise tax

897

971

Amortization of a term leasehold interest

105,861

111,337

Asset retirement obligations

123,154

124,395

229,913

236,703

Valuation allowance(127,560)(134,276)

Total deferred tax assets

102,353

102,426

101,455

101,455

Reserve for advanced depreciation of non-current assets

1,282,004

1,218,278

Total deferred tax liabilities

1,383,460

1,319,734

1,281,107

1,217,307

Deferred tax liabilities:
Asset retirement obligations

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, 2020
and March 31, 2021 was as follows:43

As of September 30, 2020

As of March 31, 2021

Statutory tax rate

34.59%

34.59%

Deductible dividend distribution(34.57%)(34.97%)

Change in valuation allowance

0.04%

0.04%

Others

0.00%

0.00%

Effective tax rate

0.06%

(0.34%)

Japan Real Estate Investment Corporation

13. Related Party Transactions
For the six months ended September 30, 2020 and March 31, 2021
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, 2020 to September 30, 2020
			“Not applicable”
		For the period from October 1, 2020 to March 31, 2021
			“Not applicable”(2) Affiliated Companies
		 For the period from April 1, 2020 to September 30, 2020
			“Not applicable”
		For the period from October 1, 2020 to March 31, 2021
			“Not applicable”(3) Sister Companies
		 For the period from April 1, 2020 to September 30, 2020
			“Not applicable”
		For the period from October 1, 2020 to March 31, 2021
			“Not applicable”(4) Directors and Major Individual Unitholders
		 For the period from April 1, 2020 to September 30, 2020
			“Not applicable”
		For the period from October 1, 2020 to March 31, 2021
			“Not applicable”

Japan Real Estate Investment Corporation

44

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, 2020 to September 30, 2020 (Unaudited)Type of relationship

Name oftransaction partner

Type of business

Percentage ofunits held

Transaction details

Rent revenue

Interested party

Mitsubishi EstateCo., Ltd.

Real estate

1.24%

Asset custodycompany

Sumitomo Mitsui
Trust Bank, Limited

Real estate
management

Bank

—

—

Balance at
end of the period(¥ thousand)——Receipt of donatednon-current assets*3

94,186——

Real estate purchase

17,300,000——

Security deposit return
Mitsubishi Jisho
Property Management
Co., Ltd.

Accounting item

15,607,204

Security deposit increase

Interested party

Transaction amount(¥ thousand)

1,783,808 Deposits received
from tenants
475,378

Property management
expenses

2,400,429

Proceeds fromlong-term borrowings

12,000,000

Repayments oflong-term borrowings

7,000,000

20,808,194——

Long-term
borrowings

41,000,000

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.
3. The Company received part of the assets from a number of joint venture partners (including Mitsubishi Estate Co., Ltd. which is an interested party).
		 The transaction amount is the total amount from the joint venture partners.

For the period from October 1, 2020 to March 31, 2021 (Unaudited)Type of relationship

Name oftransaction partner

Type of business

Percentage ofunits held

Transaction details

Interested party

Mitsubishi EstateCo., Ltd.

Real estate

1.24%

Security deposit increase

Rent revenue

Security deposit return
Interested party

Mitsubishi Jisho
Property Management
Co., Ltd.

Asset custodycompany

Sumitomo Mitsui
Trust Bank, Limited

Real estate
management

Bank

—

—

Japan Real Estate Investment Corporation

15,718,057

Accounting item—

237,326 Deposits received
from tenants
302,401

Property management
expenses

2,431,521

Proceeds fromlong-term borrowings

2,000,000

Repayments oflong-term borrowings

2,000,000

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.

45

Transaction amount(¥ thousand)—Long-term
borrowings

Balance at
end of the period(¥ thousand)—
20,743,119—

41,000,000

14. Segment Information
For the six months ended September 30, 2020 and March 31, 2021
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.

15. Asset Retirement Obligations
For the six months ended September 30, 2020 and March 31, 2021
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, 2020 and March 31, 2021 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, 2020
to September 30, 2020

For the period from October 1, 2020
to March 31, 2021

352,489

356,041

—

—

3,551

3,587

356,041

359,628

Japan Real Estate Investment Corporation

46

16. Investment and Rental Property
For the six months ended September 30, 2020 and March 31, 2021
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, 2020 and March 31, 2021 and the fair values as of September 30, 2020 andMarch 31, 2021 are as follows:
Thousands of yen

Book value

Fair value

As of March 31, 2020

Change during the period *1

As of September 30, 2020

As of September 30, 2020

955,228,960

12,213,246

967,442,207

1,253,980,000

Thousands of yen

Book value

Fair value

As of September 30, 2020

Change during the period *2

As of March 31, 2021

As of March 31, 2021

967,442,207(4,281,843)

963,160,363

1,255,095,000

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 reason for the increases was the acquisition of Link Square Shinjuku (¥17,417,790 thousand). The major
reason for the decreases was by depreciation.
		 *2. As for the increases/decreases for the period, the major reason for the decreases was by depreciation.
3.	Fair values as of September 30, 2020 and March 31, 2021 are defined as the appraised values provided by an external qualified professional appraiser. As of March 31,
2021, Otsuka Higashi-Ikebukuro Building, for which the disposition agreement was made dated March 31, 2021, was valued at the disposition price.

Profits and losses related to investment and rental property are listed in Section 18. “Breakdown of Property-Related Revenues and Expenses”.

17. Per Unit Information
The following table summarizes information about net assets per unit and profit per unit as of September 30, 2020 and March 31, 2021
and for the periods then ended, respectively:
Yen

For the period from April 1, 2020
to September 30, 2020

For the period from October 1, 2020
to March 31, 2021

Net assets per unit

372,002371,974

Profit per unit

11,260

11,233

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

47

Japan Real Estate Investment Corporation

For the period from April 1, 2020
to September 30, 2020

For the period from October 1, 2020
to March 31, 2021

15,598,795—
15,598,795
1,385,210 units

15,560,779—
15,560,779
1,385,210 units18. Breakdown of Property-Related Revenues and Expenses
For the six months ended September 30, 2020 and March 31, 2021
Thousands of yen

For the period from April 1, 2020
to September 30, 2020

For the period from October 1, 2020
to March 31, 2021

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

34,966,391

34,944,078

34,778,422

34,666,758

29,118,151

29,084,031

2,585,443

2,501,546

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

711,241

722,895

2,363,586

2,358,284

187,969

277,319

102,624

98,60085,344

178,719

16,649,118

16,648,001

16,649,118

16,648,001

3,657,166

3,792,045

2,228,640

1,959,967

3,295,586

3,295,526

46,01045,983645,173823,623

6,626,407

6,529,196

150,132

201,658

18,317,272

18,296,076

19. Changes in Unitholders’ Equity
For the six months ended September 30, 2020 and March 31, 2021
Total number of investment units issuable
and number of units outstanding

As of September 30, 2020

As of March 31, 2021

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

Japan Real Estate Investment Corporation48

20. Supplemental Cash Flow Information
Cash and cash equivalents

The following table represents a reconciliation of cash and cash equivalents as of September 30, 2020 and March 31, 2021:
Thousands of yen

As of September 30, 2020

As of March 31, 2021

Cash and deposits

21,499,934

27,205,981

Cash and deposits in trust

7,195,933

7,147,852

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

28,695,867

34,353,833

21. Leases
1. L eased 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. Th
 e Company, as a lessor, owns office buildings under leases and earns rent income. As of September 30, 2020 and March 31, 2021, thefuture lease revenues under the non-cancelable operating leases are as follows:
Thousands of yen

As of September 30, 2020

Due within one year

27,830,264

28,645,305

Due after one year

51,396,971

44,882,616

Total

79,227,235

73,527,922

22. Subsequent Events
For the six months ended March 31, 2021
“Not applicable”

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As of March 31, 2021

Japan Real Estate Investment Corporation

Japan Real Estate Investment Corporation

50

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Japan Real Estate Investment Corporation

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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;• t he 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 company, 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 company 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 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-conformity 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;

53

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;• risks related to unexpected repair costs; and• r isks related to pandemics, including the COVID-19 pandemic, and natural disasters.

2. I nformation 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, 2021)
As our Articles of Incorporation were revised in December 2020, we revised the disclosure of asset management fees under the headingof “Description of all fees, charges and expenses and a maximum amount which is directly / indirectly borne by the investors” (Article
23(1)(i)).

3. Remuneration Policy for Asset Manager Directors, Corporate Auditors, and Employees
Beginning April 1, 2020 and ending March 31, 2021
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

54

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

45

Remuneration
Total

Fixed

Variable

JPY 385 million

JPY 253 million

JPY 132 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.

55Japan Real Estate Investment Corporation

Corporate Data
As of March 31, 2021

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
14,309Stock 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

56

Japan Real Estate Investment Corporation
SEMIANNUAL REPORTMarch 2021

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

Printed in Japan