Prospect Reit Investment Corporation
Listed on the Tokyo Stock Exchange with the securities code 8969

Eighth Fiscal Period Results(February 1, 2009 to July 31, 2009)(Disclaimer
2)
1．Recent Highlights and MidMid- and LongLongTerm Strategy
3
2．External Growth Strategy
4
3．Outline of Property
54．Internal Growth Strategy
6
5．Financial Strategy
96．Appendix
10
10

September 17, 2009

Ⓒ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

Disclaimer

Prospect Reit Investment Corporation

This document contains a translation of the majority of the information
information provided in the Japanesematerial for the presentation of eighth fiscal period results held
held on September 17, 2009 as well assome information provided in the Financial Report (Kessan(Kessan Tanshin)
Tanshin) dated September 11, 2009, andothers, with some updated data.
This English language document is provided solely for the convenience
convenience of and reference by nonnonJapanese investors, and is not intended to constitute a disclosure
disclosure document. The Japanese language
presentation material should be referred to as the original of this
this document. The English translation oflegal, accounting, tax and business terms used herein may not precisely
precisely convey the identical meaningof equivalent Japanese terms. With respect to any and all terms herein, including without limitation,
financial statements, if there exist any discrepancies in the meaning
meaning or interpretation thereof between
the original Japanese document and English translation contained herein, the original Japanese
document will govern the meaning and interpretation. Neither PRI,
PRI, Prospect Reit Advisors, Co., Ltd.
(“the Asset Management Company”
Company”) nor any of their respective directors, officers, employees,
partners, shareholders, agents or affiliates will be responsible or liable for the completeness,
appropriateness or accuracy of this English translation or any portion(s)portion(s) of any document(s)document(s) translated
into English. No person has been authorized to give any information
information or make any representations
other than those contained in this document in relation to mattersmatters set out in this document, and if given
or made, such information or representation must not be relied upon
upon as having been authorized by PRI,
Prospect Reit Advisors, Co., Ltd. or any of their respective directors, officers,
officers, employees, partners,
shareholders, agents or affiliates.
The financial statements of PRI have been prepared in accordance with generally accepted accounting
principles in Japan (Japanese GAAP), which may materially differ in certain respects from generally
accepted accounting principles in other jurisdictions.
Many provisions within this document contain information that constitutes
constitutes forwardforward-looking statements.
These forwardforward-looking statements are not a guarantee of future performance and involve risks anduncertainties. Therefore, actual results may differ materially fromfrom those in the forwardforward-looking
statements as a result of various factors.
All rights are reserved. Unauthorized duplication and copy of this
this document and contents herein inany measures is strictly prohibited.
Contact Information:
Investor Relations
Prospect Reit Advisors, Co., Ltd.
2-2-1, Marunouchi,
Marunouchi, ChiyodaChiyoda-ku, Tokyo, 100100-0005, Japan
ir@pra.co.jpⒸ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

2

1. Eighth Fiscal Period Highlights
and Mid- and Long-Term Strategy

Prospect Reit Investment Corporation

Eighth Fiscal Period Highlights
Internal GrowthCompletion of large-scale renovations of Prospect Urawa-Tokiwa

Financial Strategy

Strengthening earnings base (installing vending machines and mobile antennas) and reducing costs.
New debt finance (rollover of bank loans)(the occupancy rate was 100% at the end of July 2009). In the January 2010 period, thelarge scale renovations of Sky Hills Takadai I and U House Tsurumai II are under way.

Reducing refinancing risk and strengthening financial structure through longer-term borrowings。
(JPY million)

Seventh fiscal
period results(Six months
from Aug 1, 2008
to Jan 31, 2009）

Pop change

Pop % chg

Nineth fiscal
period forecasts*(Six months
from Aug 1, 2009
to Jan 31, 2010)

Eighth fiscal period results (Six months fromFeb 1, 2009 to July 31, 2009)

Operating Revenues

2,254

2,236

△17

△ 0.8%
0.8

2,252

Operating Expenses

1,351

1,393

42

3.1%
3.1

1,342

Operating Income

902

843

△59

△ 6.6%
6.6

910

Ordinary Income

451

361

△89

△ 19.8%19.8

357

Net Income

448

362

△85

△ 19.2%19.2

356

Distribution per Unit

JPY5,970

JPY4,826△ JPY1,144△ 19.2%
19.2

JPY4,740

Number of Property(at the end of fiscal periods)

53

53

※
Total Leasable Floor Space

132,808sq m

127,458sq m

Occupancy Rate (By Space)(at the end of fiscal periods)

90.7%

91.2%

Capex

105

142

Gains on sale of real estate△20−

NOI (Leasing Operations)

1,686

1,589

※Changed calculation methodologies for Sky Hills N15, Sky Hills
Sakaimchi, Domy Chitose, Sky Hills Takadai I, and Prospect Urawa
Tokiwa (no changes beside this.)

Note: The interest-bearing debt ratio as of July 31, 2009 was
49.4%. Forecasts are, however, based on an interest-bearing
debt ratio of approximately 49.7% as of January 31, 2010.

* These forecasts are based on “Assumptions for Forecasts for the Nineth Fiscal Period” mentioned afterwards.
* Disclaimer regarding ‘Forecasts of Revenues and Earnings’: Forward-looking statements such as forecasts of revenues and earnings inthis document are based on many sources including current information available to PRI’s management as well as the assumptions judged
to be rational by management. These forward-looking statements are not guarantees of future performance and they involve risks anduncertainties. As a result of various factors, actual results may differ materially from those in the forward-looking statements.

Mid- and Long-Term Strategy; Prospect Reit Investment Corporation (“PRI”) changed its corporation name as well as investment
targets by the approval at the 4th unitholders’ meeting held on April 10, 2009, including office properties
and retail properties. This change would target to welcome new sponsor candidates in addition to
expanding investment opportunities to enhance unitholders’ values.
; PRI and the Asset Management Company have been studying various measures, aiming at attaining
remarkable growth in PRI’s corporate value, including asset growth and a strengthening of its
fundamentals.
; PRI and the Asset Management Company are studying various measures but have reached neither
conclusions nor decisions yet. As soon as any determinations are reached, we shall disclose suchconclusions and decisions in a timely and prompt manner.
Ⓒ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

3

2. External Growth Strategy

Prospect Reit Investment Corporation

Active Replacement Strategy in the Eighth Fiscal Period(As of July 31, 2009)

Other Regions
Number of property: 23
Total acquisition price：
JPY 17,044 million

Tokyo’
Tokyo’s 23 Wards
Number of property: 24
Total acquisition price：
JPY 44,815 million(25.0% of Total Portfolio)
Total Leasable Floor Space ：53,837.74sq m
Total No. of Leasable
Residential Units： 1,362(65.9% of Total Portfolio)
Total Leasable Floor Space ：60,790.65sq m
Total No. of Leasable
Residential Units： 1,575

Tokyo Metropolitan Area
(excluding Tokyo’
Tokyo’s 23 Wards)
Number of property: 6
Total acquisition price：
JPY 6,141 million(9.0% of Total Portfolio)
Total Leasable Floor Space ：12,830.22sq m
Total No. of Leasable
Residential Units： 352

Portfolio changes by region on an acquisition price basis（JPY million）

70,00060,00050,00040,00030,00020,00010,000062,746

58,951
51,882

10,661

52,941

14,794

7,497
3,225

3,225

10,661

3,925

41,16045,06569,73968,24968,00068,00017,044

17,044

17,044

17,044

6,141

6,141

6,141

45,06444,81544,815

4,911

3,225

39,05544,02747,783At the end At the end At the end At the end At the end At the end At the end At the endof Jan 2006 of July 2006 of Jan 2007 of July 2007 of Jan 2008 of July 2008 of Jan 2009 of July 2009
(Eighth(Fifth fiscal (Sixth fiscal (Seventh(Fourh(First fiscal (Second (Third fiscal
fiscalfiscalperiod)period)fiscalperiod)fiscalperiod)period)period)period)period)Tokyoʼs 23 Wards

Tokyo Metropolitan Area (excluding Tokyoʼs 23 Wards)Ⓒ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

Other Regions4

3. Outline of property

Prospect Reit Investment Corporation

Portfolio growth on an
acquisition-price basis

Total No. of leased residential units

3,305

3,291

3,289

Jan 2007

Jul 2007

Jan 2008

Jul 2008

Jan 2009

Jun 2009

Jan 2006

Jul 2006

Jan 2007

Jul 2007

Jan 2008

Jul 2008

Jan 2009

Jul 2009(Second)(Third)(Forth)(Fifth)(Sixth)(Seventh)(Eighth)(First)(Second)(Third)(Forth)(Fifth)(Sixth)(S eventh)(Eighth)49

53

Jul 2006(First)

53

3,311

54

3500

Jan 2006

3,022

3000

35

39

42

45

2000

0

2,254

15

2,402

2500

2,107

30

54

(Number of property)

60

1500
(At the end of fiscal period)

Average age of property

Portfolio PML

since completion on a weighted-average basis(Years)(Years)

10.%

9.0
8.4

9.0%

7.9

8.0
7.2

9.%

7.4
7.0

7.0

7.0

8.%

8.2%

6.1

6.1

6.0

7.7%
7.6% 7.6%

8.1%

7.6% 7.6%

7.%

5.0
Jan 2006 Jul 2006 Jan 2007 Jul 2007 Jan 2008 Jul 2008
(First)(Second)(Third)(Forth)(Fifth)(Sixth)Jan 2009 Jul 2009

6.%

(Seventh) (Eighth)

Occupancy rate by space

Jan 2006

Jul 2006

Jan 2007

Jul 2007

Jan 2008

Jul 2008

Jan 2009

Jul 2009(First)(Second)(Third)(Forth)(Fifth)(Sixth)(Seventh)(Eighth)Occupancy rate by residential units
100.%

100.%
95.5% 95.2%

95.5% 94.8%

93.2%
94.8%

95.2%

94.1%

90.%

90.7%

89.5%

80.%

93.9%
92.7%

91.2%

90.%

94.5%

92.5%

90.5%

80.%

70.%
J an 2006 J ul 2006
(Firs t)(Sec ond)

J an 2007

J ul 2007 J an 2008

J ul 2008

J anl 2009 J ul 2009

(Third)(Forth)(Six th)(Sev enth) (Eighth)(Fifth)70.%
Jan 2006

Jul 2006

Jan 2007

Jul 2007

Jan 2008

Jul 2008

Jan 2009

Jul 2009(First)(Second)(Third)(Forth)(Fifth)(Sixth)(Seventh)(Eighth)Ⓒ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

5

4. Internal Growth Strategy

Prospect Reit Investment Corporation

Rent and Occupancy rate
Rent increases and decreases by region at contract renewals and changes of tenants120

Raising rents mainly of single-type
properties in Tokyo’s 23 wards from theJanuary 2009 period

100
80＜By type of properties＞

60(Number of property)
100

40

Rent decreases

20

80

0

60

-20

Tokyo's 23 Wards

Tokyo metropolitan
area

Osaka & Kyoto

NagoyaTohoku & Hokkaido

40

-40

20

-60

0
-20

-80

Rent increases

Studio Type

Family Type

-40

-100

-60

Rent increases Rent decreases-80

Solid demand for property units in the outskirts of Tokyo
Occupancy rate by region (floor-space basis)
(%)

100
95
90
85
80

Total

75

Toky o's 23 Wards

70(excluding Tokyo's 23 Wards)

The occupancy rate of Prospect
UrawaUrawa-Tokiwa temporarily fell to
0% due to the termination of aleasing contract for the entire
building on December 31, 2008.
The occupancy rate of thatproperty has already returned to100%.

Toky o Metropolitan Area
Other Regions

65
60
Aug 2008

Sep

Oct

Nov

Dec

Jan 2009

Feb

Mar

Apr

May

Ⓒ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

Jun

Jul

6

4. Internal Growth Strategy

Prospect Reit Investment Corporation

Strengthening Profitability

Diversifying sources of revenue
1. Actively installing vending machinesof major beverage producers

2. Actively installing antennas of major
mobile telecommunications companies
July 2009： one
Jan 2010 (e): additionally four

July 2009：7 additional machines

Cost Reduction Measures
Eighth fiscal period (from Feb 1, 2009 to July 31, 2009)

Achievements by the change of PMs

1. Change of Property Managementcompanies (PMs(PMs)) for four properties①Raising Occupancy rates
Average Occupancy rate 90.4% → 94.9%

S002

Prospect Shinonome-bashi

S011

Fragrance Kawasaki

F003

BELNOS 34②Reduction PM fees （△20％〜△40% by
fee rates）
Prospect Shinonome-bashi
Fragrance Kawasaki

F026

Prospect Nishisugamo

2. Reduction of fees

3. Reduction of Repair expenses① Reduction of PM fees
（approximately △30% by fee rate）① Reduction of repair expenses by utilizing
outside advisors

Abreast Sakuragawa
SK Residence② Reduction of appraisers’ fees by ¥6 million
yoy for 53 properties② Reduction of repair management fees
Prospect Shinonome-bashi
Fragrance Kawasaki
BELNOS 34

SK ResidenceⒸ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

5% → 0%5% → 0%5% → 0%10% → 0%7

4. Internal Growth Strategy

Prospect Reit Investment Corporation

Prospect Urawa-Tokiwa
January 1, 2009

Leasing contract for
the entire building

March 13, 2009

March 20, 2009

Large-scale renovations

ChangeOf
Property
nameStart of leasing
Application of leasing contract

The property name was changed
from ‘Garden City Urawa’ toWith support from the
PM company,‘Prospect Urawa-Tokiwa’

100% occupancy

Termination ofleasing contract for
the entire building on
December 31, 2008

As of July 31, 2009

Occupancy rate

100.0％
100.0％

Large-scale renovations
・ Ceiling works
・ Painting of steel parts
・ Painting of external walls
・ Repair of water proofing facility
・Renovation works for all of 30 units

Capital Expenditure Plan (in the eighth period consisting of items from JPY 5 million)
Property Name

PurposePlannedperiodPlannedwork amount(millions of yen)

Sky Hills
Takadai I

Large-scale renovations

November
200972

U HouseTsurumai II

Large-scale renovations

September
2009

37

BELNOS 34

Renovation of retail spaceon the second floor

January
2010

35

U House Gokiso

Renovation of two rooms

January
2010

10

DemiHashimoto

Renovation of threerooms

January
2010

9

BELNOS 34

Maintenance of
mechanical parking
systemAugust2009

7

Palais D'Or
Maruyama

Renovation of retail spaceon the first floor

October2009

5【Details of largelarge-scale
repair works】
works】Sky Hills Takadai I
・Ceiling works
・Painting of external walls
・Painting of steel parts
・Repair of water proofing facility
・New installation of security cameras

・Replacement of interphone system

U House Tsurumai II・ Ceiling works
・ Painting of external walls
・ Painting of steel parts
・Repair of water proofing facilityⒸ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

8

5. Financial Strategy

Prospect Reit Investment Corporation

Stabilization of Financial Structure
Improved Maturity LadderAchieved longer-terms of borrowings
by the roll over of loans(total Y7,500 mil) on May 29, 2009.
Debt
financing(JPY Mil)

Duration

Debt
financing(JPY Mil)

Duration

4,000

1 year

4,500

2 years

3,500

3 months

3,000

4 months

LenderDebt
financing(JPY Mil)Interest Rate (%)

AozoraBank, Ltd.

4,500

2.46636%
May 29, May 31,(TIBOR+2.00%)
2009
2011

AozoraBank, Ltd.

3,000

20,000Long-term borrowings

Short-term borrowings

Investment Corporation Bonds

15,00010,000Maturity /Drawdown
RepaymenDatet Date5,000

2.41636%
May 29, Sep 30,
2009
2009
(TIBOR+1.95%)

Rating0
Repayment scheduled Repayment scheduled Repayment scheduled Repayment scheduled
in CY2009
in CY2010
in CY2011
in CY2012

Investment Corporation Bonds
On October 12, 2007, PRI issued its First Series
Unsecured Investment Corporation Bonds.

CreditratingagencyObjectJCR

Long-term issuer
credit rating forlong-term senior
debt

RatingOutlookName of thebondsFirst Series Unsecured Investment
Corporation Bonds

Total amount of JPY 5,000 million
the bonds

BBB

StableRepayment
deadline

October 9, 2009

Coupon rate

Six-month yen LIBOR plus 100 bps(floating interest rates)

Interest Swap Contract

Interest rate caps

Subsequently, PRI concluded an interest swap contract
covering the entire issue of the investment corporation bonds.

PRI concluded two contracts for the purchase of yen
interest rate caps covering a total of JPY 10,000

Contracted
party

Notional Terminat
principa ion date

JPMorgan
Securities
Japan Co.,
Ltd.

JPY
5, 000
millionInterest rate

Fixed interest payment
rate: 2.183%
October
9, 2010 Floating interest receipt
rate: six-month yen
LIBOR

As a result, the interest rate for the two-year bondissue has been fixed at 2.183%.

Contracted party

Notional Terminati
principal on date

JPMorgan Securities
Japan Co., Ltd.
（corridor-type
contract）

JPY
5, 000
millionJuly 30, First：1.0%
2010
Second：2.0%

Daiwa Securities
SMBC Co. Ltd.

JPY
5, 000
millionOctober29, 2010Ⓒ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

Strike rate

1.0%

9

Prospect Reit Investment Corporation

6. APPENDIXⒸ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

10

Statements of Income

Prospect Reit Investment Corporation

Eighth Fiscal Period (February 1, 2009 to July 31, 2009)

Seventh Fiscal Period

Eighth Fiscal Period（Thousand of yen）
Operating revenues

2,254,053

2,236,868

2,160,486

2,121,562

93,566

115,305

1,351,126

1,393,667

Real estate rental expenses

1,053,178

1,133,698

Loss on sale of real estate

20,937−

Asset management fees

136,272

122,267

Custodian fees

3,606

3,584

Administrative service fees

21,26522,848

Directors’ fees

6,000

6,000

Bad debt loss

109,865

105,267

902,926

843,200

2,533

2,218

2,493

1,431

39

787

454,441

483,510

Interest expense

292,950

284,995

Bond interest expense

55,47854,364

Amortization of bond issuance expense

7,686

7,686

Debt-related expenses

94,073129,020

Other non-operating expenses

4,251

7,442

Ordinary income

451,018

361,908

Income before income taxes

451,018

362,488

Income taxes

2,687

60

448,331

362,42824

8448,355

362,436

Real estate rental revenues
Other rental revenues
Operating expenses

Operating income
Non-operating income

Interest income
Other non-operating income
Non-operating expenses

Net income

Retained earnings brought forward
Retained earnings at the end of periodⒸ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

11

Balance Sheets

Prospect Reit Investment Corporation

Eighth Fiscal Period (As of July 31, 2009)
Seventh Fiscal
Period（Thousand of yen）
Current assets

3,169,057

3,346,755

Cash and deposits

1,119,128

1,291,069

Entrusted cash and deposits

1,854,042

1,768,022

1,407

279

194,479

287,384

68,587,380

68,333,802

68,473,804

68,141,808

Buildings

761,172

747,145Land

794,545794,545

Entrusted buildings

30,192,576

29,874,543

Entrusted land

36,725,509

36,725,573

Intangible assets

6,803

5,696

Other intangible assets

6,803

5,696

Long-term derivative assets

106,772

186,298

Investments and other assets

10,646

2,959

71,767,084

71,683,518

13,087,969

25,947,044

343,168

336,4077,500,000

3,000,000−

17,346,000

5,000,000

5,000,000

244,800

264,637

23,698,824

10,829,640

22,904,000

10,058,000

794,824

771,640

36,786,793
35,070,193

36,776,684
34,984,275

Unitholders’ capital

34,621,838

34,621,838

Retained earnings

448,355

362,436

Evaluation and conversions△ 89,902△77,441△ 89,902△77,441

Total net assets

34,980,291

34,906,833

Total liabilities and net assets

71,767,084

71,683,518

Derivative assets
Other current assets
Fixed assets
Property and equipment
ASSETS

Total assets
Current liabilities
Operating payables
Short-term debt
Long-term Borrowing withrepayment dates within one year
Current portion of investment
corporation bonds
LIABILITIESAdvances received
Fixed liabilities
Long-term debt
Leasehold and security deposits
Total liabilities
Unitholders’ capital

NET ASSETS

Eighth Fiscal
PeriodEarnings on differed hedgetransactionsⒸ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

12

Real Estate Appraisal

Prospect Reit Investment Corporation

Outline of Appraisers’ reports as of July 31, 2009
Discount Cash Flow Methodologies

Code

Property Name

S001 TK Flats Shibuya
S002 Prospect Shinonomebashi
S004 Maison de Ville Takanawa
Gyoranzaka
S005 Prospect Omori-Kaigan
S006 Abreast Shin-Osaka
S007 Maison de Ville Naka-Meguro
S008 Roppongi Rise House
S009 Prospect Nihonbashi-Honcho
S011 Fragrance Kawasaki
S012 Abreast Sakuragawa
S013 Dome Takamine
S014 Dome Yotsuya
S016 Abreast Nagase
S017 Living Stage Higashi-Sendai
S018 Prospect Toyonaka Hattori
S019 Prospect Bishoen
S020 Prospect Shimogamo
S021 Prospect Kawaramachi-Gojo
S022 Prospect Chuo-Rinkan
S023 Sky Hills N15
S024 Sky Hills Sakaimachi
S025 Domy Chitose
S026 Sky Hills Takadai I
S027 Exceria Ikebukuro West II
S028 Prospect Monzennakacho
S029 Prospect KALON Minowa
S030 Prospect Nakanoshima
S031 Prospect Ogikubo
S032 Prospect Musashi-Shinjo
F001 Prospect Kiyosumi-Teien
F002 Park Terrace Ebisu
F003 BELNOS34
F004 Prospect Dogenzaka
F005 U House Daikan-Cho
F006 U House Gokiso
F007 Angel Heim Nishi-Rokugo No.2
F008 Prospect Onshi-Koen
F009 Deim-Hashimoto
F010 SK Residence
F012 Prospect Urawa-Tokiwa
F014 U House Tsurumai II
F017 Living Stage Minami-Sendai
F019 Prospect Glarsa Hiroo
F020 Prospect Katsura
F021 Crown Heim Nishi-Tanabe
F022 Takasagoseki Nibankan
F023 Prospect Machiya
F024 Prospect Hatsudai
F025 Prospect Morishita
F026 Prospect Nishi-Sugamo
F027 Palais D’Or Maruyama
F028 Prospect Kawasaki
F029 Prospect Nihonbashi-Koamicho

Appraisalvalue(Y mil)Acquisition App
rais
Final
cap
Price
Discounrate(Millions of er
t
(Note
Yen)
rate(％)(％))

Direct cap
value(Y mil)Direct Cap
rate
(％)

DCF value(Y mil)

5,210
3,270
1,600

5,260
3,300
1,620

5.3
5.5
5.2

5,160
3,240
1,580

5.0
5.2
4.9

5.5
5.7
5.4

6,399
3,353
1,768

A
A
A

1,660
1,556
1,090
951
897
601
430
223
194
159
347
388
289
321
643
537
840
876
500
609
880
1,080
1,740
789
726
1,080
2,660
2,230
1,960
1,740
1,336
1,165
1,291
1,160
825
901
788
527
241
4,020
478
446
639
498
577
1,310
1,220
889
1,580
875

1,670
1,620
1,100
961
902
629
442
236
208
163
363
398
291
324
649
540
859
911
508
596
889
1,090
1,750
795
734
1,060
2,680
2,280
1,990
1,760
1,468
1,208
1,408
1,160
835
915
800
610
253
4,050
483
448
647
502
582
1,320
1,230
900
1,590
881

5.6
6.2
5.4
5.2
5.5
5.6
6.1
6.2
6.4
6.5
6.6
6.2
6.3
6.1
6.1
6.1
6.4
7.0
8.0
7.5
5.4
5.5
5.6
5.7
5.5
5.9
5.5
5.3
6.0
5.3
6.2
6.6
6.1
5.6
6.5
5.8
6.0
6.2
6.7
5.2
6.5
6.1
7.0
5.6
5.3
5.5
5.6
7.0
5.7
5.3

1,640
1,556
1,080
941
892
601
430
223
194
159
347
378
286
318
636
533
832
861
496
614
876
1,080
1,730
786
723
1,090
2,630
2,210
1,930
1,720
1,336
1,165
1,291
1,160
815
886
775
527
241
3,980
472
444
631
493
571
1,300
1,210
877
1,570
873

5.3
5.9
5.1
4.9
5.2
5.3
5.8
5.9
6.1
6.2
6.3
5.9
6.0
5.8
5.8
5.9
6.0
6.9
8.0
7.0
5.2
5.3
5.3
5.9
5.3
5.9
5.2
5.5
5.7
5.0
5.9
6.3
5.8
5.5
6.2
5.5
5.8
5.9
6.4
4.9
6.2
5.8
6.7
5.3
5.1
5.3
5.3
6.7
5.8
5.4

5.8
6.7
5.6
5.4
5.7
6.1
6.6
6.7
6.9
7.0
7.1
6.5
6.5
6.3
6.3
6.3
6.7
7.3
8.3
7.8
5.6
5.7
5.8
6.0
5.7
6.1
5.7
5.6
6.3
5.5
6.7
7.1
6.6
5.9
6.8
6.1
6.2
6.7
7.2
5.4
6.7
6.3
7.3
5.8
5.5
5.7
5.8
7.3
6.0
5.6

1,807
1,826
1,189
1,184
1,070
624
516
322
275
209
435
396
376
411
803
700
932
1,115
592
691
1,020
1,250
1,930
1,000
880
1,230
2,780
2,712
2,534
2,294
1,548
1,406
1,401
1,196
992
1,020
878
685
275
3,905
570
601
810
547
730
1,480
1,419
1,250
1,717
946

A
C
A
A
A
C
C
C
C
C
C
A
A
A
A
J
T
T
T
T
D
D
A
T
D
D
A
T
A
A
C
C
C
T
A
A
A
C
C
A
A
A
A
A
J
J
A
A
T
T

(Note) A：Aoyama Realty Advisors、C：Chuo、J：Japan Real Estate Research Institute、T：Tanizawa
D：DaiwaⒸ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

13

Interest-bearing Debt

Prospect Reit Investment Corporation

Interest-bearing debt balance (As of July 31, 2009)2009(Millions of yen unless otherwise stated)

LenderShort-term
Borrowings

Aozora Bank, Ltd.

Drawdown
Date

Debt
Financing /Repayment

Average
Interest
Rate (%)(Note 1)

Interest
Rate

Maturity /Repayment
Date

Remarks

May 29,
2009

3,000

2.416%

Floating

September 30,
2009

SecuredMarch 15,2010

Secured

Aozora Bank, Ltd.

4,336

Floating

Sumitomo Mitsui Banking Corporation(Note 3)

2,601

Floating

The Sumitomo Trust & Banking
Long-term
Corporation
Borrowing with
The Musashino Bank, Ltd.
repayment
dates within
The Norinchukin Trust & Banking
one year
Corporation (Note 2)

1.420%NTT Finance Corp.
（Subtotal）
The Norinchukin Trust & Banking
Corporation (Note 2)Long-term
borrowings（Total）

867

Floating

8,239

Floating

433

Floating(17,346)
June 28,
2007

Sumitomo Mitsui Banking Corporation September 7,(Note 3)
2007
Aozora Bank, Ltd.

Floating

867

March 15,2007

May 29,
2009

2,634

1.620%

Floating

July 31, 2012

Secured

2,924

1.670%

Floating

October 31,
2012

Secured4,500

2.466%

Floating

May 31, 2011

Secured30,404Note 1: Average interest rates are based on weighted-average rates and the number of days in the period. Figures are rounded to thenearest third decimal place.
Note 2: Following the approval of PRI for the application from Lehman Brothers Japan Inc. to transfer (sell) claimable assets arisingfrom these loans, such assets were transferred to the Norinchukin Trust & Banking Corporation (NTBC) on August 27, 2007. The
contract terms and contents including loan conditions and other matters were also transferred unchanged to NTBC.
Note 3: Following the approval of PRI for the application from Lehman Brothers Japan Inc. to transfer (sell) claimable assets arisingfrom these loans, such assets were transferred to Sumitomo Mitsui Banking Corporation (SMBC) on March 30, 2009. The contract
terms and contents including loan conditions and other matters were also transferred unchanged to SMBC.

Investment
Corporation
Bonds

First Series Unsecured
Investment Corporation Bonds

October 12, 2007

5,000

Six-month
LIBOR plus
100 bpsⒸ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

October 9,
2009Unsecured

14

Unitholder Composition

Prospect Reit Investment Corporation

Unitholder Composition
Number of investment units held by type of unitholders
Individuals and others
Financial institutions (including securities companies)
Japanese corporations
Foreign investors (individuals and corporations)
15,153First fiscal period

17,67620.18%

14,229Second fiscal period

18.95%

Third fiscal period
Fourth fiscal period
Fifth fiscal period
Sixth fiscal period

14,50023.54%

27,771

19.31%

36.98%

17,9503,737

39,18423.90%

4.98%

52.18%

12,261

14,992

3,329

44,51816.33%

19.96%

4.43%

59.28%

11,573

14,9492,952

45,62615.41%

19.91%

3.93%

60.75%

11,525

15,584

2,873

45,11815.35%

20.75%

3.83%

60.08%

11,08915,7392,809

45,46314.77%

20.96%

3.74%

60.54%

16,118Seventh fiscal period

21.46%

16,026

2,942

21.34%

3.92%

18,142Eighth fiscal period

24.16%

0

10,00040,01416,0102,531

21.32%

3.37%

20,00030,00053.28%

38,41751.15%

40,00050,00060,00070,00080,000

Number of unitholders by type of unitholders

6,098First fiscal period

80 242 49

5,474

Second fiscal period

72 188 64

5,025

Third fiscal period

68 163 119

Fourth fiscal period

4,745
60 131 132

Fifth fiscal period

4,606

Sixth fiscal period

4,414

56 123 118
47 119 109

5,065

Seventh fiscal period

43 125 116

Eighth fiscal period

5,641
35 121 121

0

1,000

2,000

3,000

4,000

5,000

Ⓒ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

6,000

7,000

15

Unitholder Composition

Prospect Reit Investment Corporation

Major Unitholders
Number ofinvestment
units held

Name of unitholder

Percentage shareof total number ofoutstanding
investment units

The Chase Manhattan Bank N.A. London Special Account Number One

8,531

11.4 %

NikkoCiti Trust and Banking Corporation (Investment trust account)

5,821

7.8 %

Prospect Japan Fund Limited

5,331

7.1 %

Goldman Sachs International

3,752

5.0 %

State Street Bank and Trust Company 505041

2,688

3.6 %

BNP Paribas Securities Services Luxembourg Jasdec Securities

2,328

3.1 %

The Okinawa Kaiho Bank Limited

2,158

2.9 %

CGML-IPB Customer Collateral Account

2,077

2.8 %

Bank of Minami-Nippon Limited

2,000

2.7 %

Japan Trustee Services Bank Limited (trust account)

1,830

2.4 %

Total

36,51648.6 %

Significant Unitholding Report (to the Ministry of Finance)
Filing Date

Name

Number ofinvestment
units held

Percentage share of total
number of outstanding
investment units (%)

September 2, 2009

Prospect Asset Management, Inc.

12,525

16.68

June 26, 2009

Citigroup Global Markets Limited

2,077

2.77

Ⓒ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

16

Prospect Reit Investment Corporation

Structure of the Investment Corporation

Property Provider
Prospect Co., Ltd.

Memorandum
Concerning
Preferential
Information
Provision

Prospect Reit Investment
Corporation

General Meeting ofUnitholders
Property Information
ProviderMitsui Real Estate Sales
Co., Ltd.

Memorandum
Concerning
Information
Provision

Memorandum Concerning
Information Provision

Memorandum
Concerning Preferential
Information Provision

Board of Officers
Executive officer:
Takeo Nishiyoshi
Supervisory Officer:
Chikao Nomura
Supervisory Officer:
Kazuhiko Chiba

Asset Custody
Contract

Asset Custodian
Sumitomo Trust andBanking Co., Ltd.

Adminstrative
Duty Contract

Administrative Agent
Sumitomo Trust andBanking Co., Ltd.

Unitholders’ Register
Administration
Contract

Unitholders’ Register
Administrator
Mizuho Trust andBanking Co., Ltd.

Asset Management
Constract
Asset Management Company
Prospect Reit Advisors Co.,Ltd.

Accouting Auditor
Grant Thornton Taiyo
ASG

Outline of the Asset Management Company
Name:
Shareholders’ capital:

Prospect Reit Advisors, Co., Ltd.
JPY 200 million (as of July 31, 2009)

Total number of shares authorized: 9,000
Total number of shares issued
and outstanding:
4,000
Major share holders:
Prospect Co., Ltd. (2-2-1, Marunouchi, Chiyoda-ku, Tokyo)<Number of shares held:4,000, percentage of outstanding shares:100%>
The history of Prospect Reit Advisors, Co., Ltd.
June16, 2009
December 3, 2007

March 4, 2005

Changed the corporation name to Prospect Reit Advisors, Co., Ltd
Registration as a financial products exchange company (asset managementbusiness) under provision of the Financial Products Exchange Law; Registration
number 394, granted by the Head of the Kanto Local Finance Bureau
Approved by the Prime Minister of Japan as an asset management company forinvestment corporations under the Investment Trust Law (the relevant law at thattime, before partial revisions to the Securities Exchange Law)

January 13, 2005

Approved by the Minister of Land, Infrastructure and Transport as a full transaction
agency under the Real Estate Business Law

November 19, 2004

Received a license as a Real Estate Agent

September 7, 2004

The Asset Management Company was establishedⒸ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

17

Prospect Reit Investment Corporation

Outline of the Asset Management Company
The Corporate Structure of the Asset Management Company
General Meeting of
Shareholders

Board Meeting

Investment Committee

Compliance Committee
Representative Director
Compliance Officer

Investment
Management Dept.

Investor Relations, Corporate Planning,& Business Administration Dept.

Finance Dept.

Ⓒ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

18

Compliance Structure

Prospect Reit Investment Corporation

Basic Policy
Transactions with interested parties must be approved in advance by the Investment Corporation’s Board of Officers.
In the acquisition of a real estate-related asset, the acquisition price shall not exceed the appraisal value. Corporate
entities, including their directors and employees, that have special interests in transactions of real estate-related assets
shall not be given voting rights for the resolution of agendas related to such transactions.

Compliance Structure１

Proposals drafted by the Investment Management Department

２

Prior approval for proposals by the Compliance Officer
Feedback and/orchange request

３

Deliberation at Compliance Committee meetings

４

Resolution by the Investment Committee

５

Prior approval for interested-party transactions by PRI’s Board of Officers

Acquisition and disposition of real estate-related assets

Investment Committee
Compliance Committee
The Compliance Committee includes external
experts (lawyers) in order to secure soundcompliance at the Asset Management Company.

Compliance Committee Members
Compliance Officer, Representative Director
and President, directors and the general managerof each department of the Asset Management
Company, as well as one or more external experts

The Investment Committee is the supremedecision-making body within the Asset Management
Company regarding asset management operations.
The committee has the authority to make important
decisions relating to the acquisition and dispositionof real estate-related assets, fund procurement,
asset management and property management.

Investment Committee Members
Representative Director and President, Compliance
Officer, directors and the general manager of eachdepartment of the Asset Management CompanyⒸ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

19

Notes

Prospect Reit Investment Corporation

Assumptions for Forecasts for the Nineth Fiscal Period (February 1, 2009 to July 31, 2009)
Assumptions
Operating Period

Nineth fiscal period: From August 1, 2009 to January 31, 2010 (184 days)

Managed Assets

Forecasts are based on a property portfolio comprising 53 properties held as of July 31, 2009.
The property portfolio may change, however, due to property acquisition or sale.

Investment Units
IssuedForecasts are based on the assumption that PRI shall not issue additional investment units.

Interest-Bearing
Debt Ratio

The interest-bearing debt ratio as of July 31, 2009 was 49.4%. Forecasts are, however, basedon an interest-bearing debt ratio of approximately 49.7% as of January 31, 2010, taking into
account an increase in debt financing to acquire additional properties as well as repayment
stemming from the above sale of one property.
The interest-bearing debt ratio is calculated as follows: Interest-bearing debt ratio = Interestbearing debt ÷ (Interest-bearing debt + Unitholders’ capital) × 100

OperatingExpenses

Forecasts are based on the assumption that PRI shall post repairs, maintenance andrenovation expenses of JPY 86 million (a decrease of JPY 29 million compared with theprevious fiscal period). Repairs, maintenance and renovation expenses are estimated basedon amounts considered essential for each property for each fiscal period. Actual repairs,
maintenance and renovation expenses for each fiscal period, however, may differ significantly
from these amounts due to unforeseen circumstances or emergencies.
Of the amount of property tax and city planning tax assessed for the property portfolio, theapplicable portion is recorded as rental business expenses for each fiscal period. For
properties acquired during each period, property tax and city planning tax are allocated to theseller and purchaser on a pro rata basis at the time of acquisition settlement. In the case of PRI,
an amount equivalent to the portion allocated to the purchaser is included in the acquisition
price of the property and not recorded as an expense. Forecasts are based on the assumptionthat PRI shall post property tax and city planning tax of JPY 125 million (an increase of JPY 5
million compared with the previous fiscal period).
Depreciation is calculated using the straight-line method inclusive of incidental expenses.
Forecasts are based on the assumption that PRI shall post depreciation expenses of JPY 484
million (a decrease of JPY 1 million compared with the previous fiscal period).

Non-Operating
Expenses

Forecasts are based on the assumption that PRI shall post total interest expenses including
bond interest expenses of JPY 378 million (an increase of JPY 39 million compared with theprevious fiscal period), and debt-related expenses of JPY 167 million (an increase of JPY 38
million compared with the previous fiscal period).
Forecasts for the fiscal period ending in January 2010 are based on the rollover of a JPY3.0
billion short-term loan (repayment on September 30, 2009) and a JPY5.0 billion investment
corporation bonds (repayment on October 9, 2009) in the same amounts. There are neither
long-term loans nor investment corporation bonds with repayment/maturity dates within thisfiscal period.

Cash Distribution

Forecasts are based on the assumption that PRI shall distribute the full amount of retained
earnings each fiscal period in line with its distribution policy.

Ⓒ 2009 Prospect Reit Investment Corporation/Prospect Reit Advisors, Co., Ltd.

20