JAPANREAL
ESTATEINVESTMENTCORPORATION

http://www.j-re.co.jp

G r o w t h i s c r e a t e d b y “ t h e 4 S ’s ”
SEPTEMBER

2002 SEMIANNUAL REPORTJAPAN REAL ESTATE INVESTMENT CORPORATIONSEPTEMBER 2002 SEMIANNUAL REPORTFOR THE PERIOD FROM APRIL 1, 2002 TO SEPTEMBER 30, 2002
Printed in Japan

Growth is created by “the 4 S’s”

Corporate Data
As of September 30, 2002

Executives

Transfer Agent and Registration

Executive Director: Yoneichiro Baba

The Sumitomo Trust & Banking Co., Ltd.

Supervisory Directors: Tsunaya Kawamura

5-33, Kitahama 4-chome, Chuo-ku, Osaka 540-8639, Japan

Kenji Kusakabe
Independent Public Accountants
Paid-in Capital> SINCERITY¥112,152,420,000
Highly transparent management,
conducted with integrity and honesty

Shin Nihon & Co.
Hibiya Kokusai Bldg.
2-3, Uchisaiwai-cho 2-chome, Chiyoda-ku, Tokyo 100-0011, Japan> S TA B I L I T Y
A steadily increasing cash flow derived fromcomprehensive investment strategies

Number of Shares Issued
225,400

Incorporation
May 11, 2001

Number of Shareholders
18,083

Executive Office
Japan Real Estate Investment Corporation

Stock Listing

3-1, Marunouchi 3-chome, Chiyoda-ku, Tokyo 100-0005, JapanTokyo Stock Exchange
For further information, please contact :> STRENGTH OF WILL

Securities CodeJapan Real Estate Asset Management Co., Ltd.

8952

Planning Department, Manager
Toshiya Kobayashi

Determination to make investment strategies forsolid growth a reality> SOUNDNESS

Tel: 81-3-3211-7921
Fax: 81-3-3212-8886

Nurturing a healthy financial position toultimately increase shareholder value

E-mail: toshiya-kobayashi@j-rea.co.jp

We believe that our growth is created by “the 4 S’s”: sincerity, stability, soundness and strength of will. By
consistently incorporating these concepts into management guidelines, we are confident that the success we are
currently enjoying will be far-reaching, and will allow us to continue to fulfill our responsibility to our shareholders.

This semiannual report includes translations of documents originally filed under the Securities and Exchange Law of Japan. This report was prepared in English solely for theconvenience 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 contained in this report.
Estimates for Japan Real Estate Investment Corporation’s future operating results contained in this semiannual report are forward-looking statements based on information
currently available and are subject to risks and uncertainties. Consequently, these projections should not be relied upon as the sole basis for evaluating Japan Real Estate Investment
Corporation. Actual results may differ substantially from the projections depending on a number of factors.

2

9Profile

Japan Real Estate Investment Corporation (the “Company”) was incorporated on May 11, 2001 as one of the first real estate investment
corporations in Japan. The Company invests primarily in office buildings, seeking stable growth and dividends in the medium to long term throughhigh-quality, competitive properties with geographical diversity. We endeavor to take full advantage of the potential inherent in Japanese realestate investment trusts and corporations, or J-REITs, dedicating our resources toward enhancing profitability and ensuring stability. The Company
was listed on the Tokyo Stock Exchange (“TSE”) on September 10, 2001. (Securities Code: 8952)
Note: Investment corporations, including Japan Real Estate Investment Corporation, are special legal entities incorporated and operated under the Investment Trust Law. Accordingly,
the “shares” of such investment corporations, including the shares of the Company, are governed by the Investment Trust Law and represent the equity interests in suchinvestment corporations, which may differ in certain material respects from the “shares” governed by the Commercial Code of Japan and representing the equity interests inJapanese ordinary corporations incorporated and operated under the Commercial Code of Japan. Investors and readers are specifically reminded to pay attention to suchdifferences when reviewing this semiannual report and making any investment decision on or in respect of the “shares” of the Company. “Shareholders” of the Company may beconstrued accordingly. Each of the investors and readers should consult their own legal, tax and other advisors regarding all Japanese legal, tax and other consequences of aninvestment in the shares of the Company, with specific reference to their own legal, tax and other situation and any recent changes in applicable laws, guidelines or theirinterpretation.

The Strengths of Japan Real Estate Investment Corporation
・Portfolio of 29 high quality office buildings as of December 31, 2002 (including two properties acquired since September 30, 2002)
・Steady growth—Total asset value nearly doubled in one year, from 20 buildings valued at ¥92.8 billion to 29 buildings valued at¥174.1 billion (as of December 31, 2002)
・Superior geographic and tenant diversity, with a 94% occupancy rate (average for the period under review)
・Solid backing from Mitsubishi Estate Co., Ltd.; The Tokio Marine and Fire Insurance Co., Ltd.; The Dai-ichi Mutual Life Insurance Company;
and Mitsui & Co., Ltd.
・Highest issuer credit ratings of any office REIT in the world: A+ from Standard & Poor's and A2 from Moody’s Investors Service
・Praise from investors—Awarded the 3rd “Deal of the Year” prize in Equity Finance by the “Nikkei Bonds and Financial Weekly” (for corporate
performance during 2001)
・Healthy financial strategy that supports strong growth through additional issues of shares and bonds

Contents
FINANCIAL HIGHLIGHTS

p. 2

STOCK PRICE PERFORMANCE

p. 2 PORTFOLIO HIGHLIGHTS p. 3 TO OUR SHAREHOLDERS p. 4
p. 6 OVERVIEW OF PORTFOLIO PROPERTIES p. 9 FINANCIAL SECTION p. 17

THE PORTFOLIO OF JAPAN REAL ESTATE INVESTMENT CORPORATIONCORPORATE DATA

p. 29

0

1

Financial Highlights
For the period from April 1, 2002 to September 30, 2002 and the period from May 11, 2001 to March 31, 2002

Millions of yen

Thousands of U.S. dollars (Note 1)

For the period from
April 1, 2002 to
September 30, 2002

For the period fromMay 11, 2001 to
March 31, 2002

For the period from
April 1, 2002 to
September 30, 2002

7,910

6,492

64,521

Operating Profits

3,386

2,961

27,625

Income before Income Taxes

2,898

2,405

23,639Operating Revenues

Net Income

2,897

2,403

23,631Net Operating Income (NOI) (Note 2)

5,211

4,732

42,504

Funds from Operations (FFO) (Note 3)

4,091

3,505

33,369FFO Multiple (Note 4)

14.1 times

13.5 times

14.1 times

Cash Distribution

2,897

2,403

23,630

Number of Shares

225,400

160,400

225,400

Dividend per Share (yen/U.S. dollars)

12,853

14,983

105

Notes: 1. Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥122.60 = US$1.00, the foreign exchange rate on September 30, 2002, has been used fortranslation. The inclusion of such amounts is not intended to imply that Japanese yen has been or could be readily converted, realized or settled into U.S. dollars at that rate or any other rate.
2. NOI = (Property-Related Revenues – Property-Related Expenses) + Depreciation
3. FFO = Net Income – gains (losses) from sales of specified assets + Depreciation
4. FFO Multiple = Share Price at end of the respective term ÷ FFO per share (annualized)(Annualized portion of the calculation given in note 4 assumes a fiscal period of 203 days for the period ended March 31, 2002, and 183 days for the period ended September 30, 2002.)

Stock Price Performance
2001

2002

110%
105%
100%
95%
90%
85%
80%
75%
Sept

Oct

Nov

The Company’s stock price on TSETOPIXThe Company’s PO priceNote: Based on the weekly closing price

0

2

Dec

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct

Nov

Dec

Portfolio Highlights

TRENDS IN THE STATE OF PORTFOLIO MANAGEMENT
Number ofbuildings

Total numberof tenants(Note)

Total leasable
floor space

Occupancy
rate

September 2001

20

198

133,927m2

94.6%

October 2001

20

197

136,381m

2

93.9%

November 2001

21

248

164,883m2

94.7%

December 2001

22

266

171,734m

2

93.8%

January 2002

23

269

178,698m2

94.1%

February 2002

24

325

201,934m2

94.0%

March 2002

24

328

201,884m

2

94.0%

April 2002

24

326

201,580m2

93.3%

May 2002

25

329

207,914m

2

93.6%

June 2002

25

334

207,914m

2

94.4%

July 2002

26

333

212,194m2

94.3%

August 2002

27

340

215,928m2

95.2%

September 2002

27

339

215,928m

2

95.3%

120,000

140,000

160,000

200,000

180,000

220,000

Total leasable
floor space (m2)95.0

Occupancy rate (%)

Total leasable floor space
Occupancy rate

80.0

85.0

90.0

Note: In the event that the same tenant occupies several buildings, the tenant is calculated as one tenant in the total number of tenants.

PORTFOLIO BREAKDOWN (As of September 30, 2002)

Properties by geographic region

Tenants by industry type

(Percentage based on acquisition price)(All 339 tenants, based on leased floor space)
Employment Agency
2.1%

Machinery
2.5%
Glass & Ceramics
2.6%
Construction
3.2%
Other major cities(29.6%)
Tokyo 23 wards(65.0%)

Others
8.7%

Steel & Metals
3.3%
Transport Services/Travel
3.7%

Finance/Insurance
16.0%
Information
Services
15.1%

Retail/Food Service
4.0%
Communications
3.9%

Tokyo metropolitan area,
excluding 23 wards(5.4%)

Real Estate
5.0%
Textile & Apparel
5.0%
Pharmaceuticals
5.3%

Electric
Devices
9.0%

ServiceIndustries
10.5%

0

3

To Our Shareholders

Executive Director of Japan Real Estate Investment Corporation <Yoneichiro Baba (Left)
CEO & President of Japan Real Estate Asset Management Co., Ltd. <Ryoichi Kakehashi (Right)

The Japanese economy during the six-month period ended September 30, 2002, showed signs of further sluggishness due tosuch factors as the slowdown in the U.S. economy and the delays in resolving the bad debt problem in Japan. In the market
for leased office space, the demand for existing floor space weakened. In such an environment, the positive and negative
aspects of properties become apparent in the face of intensified competition. We have taken advantage of this situation tobuild a strong portfolio and expect to continue making acquisitions as more properties come onto the market.
Bolstering Our Financial StructureWith this state of affairs in mind, the Company determined that financial preparations for property acquisition werenecessary in order to ensure growth over the medium term. As a result, the Company became the first J-REIT to make an
additional public share offering after its initial listing. This offering of 65,000 shares on May 8, 2002, generated
approximately ¥31 billion ($253 million). With this base, our ability to secure financing has been enhanced. The Company
also became the first J-REIT to issue corporate bonds for qualified investors. These bonds, offered on June 21, 2002, raised¥25 billion ($204 million) in capital, and the Company received credit ratings of A+ from Standard & Poor’s, and A2 from
Moody’s Investors Service.
Acquisition and Management
The Company, during the period under review, conducted a meticulous examination of properties being offered for sale,considering them from all angles to assess their value. The Company then acquired those properties that it determined on thewhole would be worthy investments. The three properties acquired during the term are the MD Kanda Building (May 31;¥9,520 million/$77,651 thousand), the Burex Kyobashi Building (July 22; ¥5,250 million/$42,822 thousand), and theKandabashi Park Building (August 15; ¥4,810 million/$39,233 thousand).
At the end of the period, the Company’s portfolio consisted of 27 office buildings, acquired for a total of ¥164,277
million ($1,339,943 thousand), with total leasable floor space of 215,928m2 (2,324,227ft2) for a total of 339 tenants. For thepurchase of the additional properties the Company borrowed ¥5 billion ($41 million) on August 15, bringing its totalborrowings to ¥29 billion ($237 million) (¥24 billion/$196 million in long-term borrowings), with outstanding issues ofcorporate bonds totaling ¥25 billion ($204 million).
The highly competitive strength of the properties acquired allowed us to maintain an average occupancy rate ofalmost 94% for the period (95.3% at the end of the term).

04

Performance
The operations outlined above resulted in operating revenues of ¥7,910 million ($64,521 thousand) and operating profits of¥3,386 million ($27,625 thousand). Income before income taxes, excluding interest expense, operating and administrative
costs, and amortization expenses related to the issuance of additional shares and corporate bonds, was ¥2,898 million($23,639 thousand). Net income was ¥2,897 million ($23,631 thousand). Cash dividends for the period under review were
¥12,853 ($105) per share.

Outlook for the Next Period
The continued slump in the Japanese economy is causing concern over demand for leased office space in the Tokyo
metropolitan area. In the city center, the so-called 2003 problem—which refers to an expected increase in supply of newlarge-scale buildings—is also forecast to exert downward pressure on the market. At the same time, demand in regional
urban areas is similarly weak as businesses consolidate operations.
Under these worsening circumstances certain properties are favored over others, due mainly to the quality of theirbuilding management. As occupancy rates fall, and impairment accounting is adopted, these other properties become
liabilities as companies can no longer manage them. Accordingly, we expect that many properties with good potential will
come onto the market from companies and individuals that do not specialize in office building management.
In light of the above analysis, the Company has adopted policies to guide its acquisition of properties, including:strengthening existing real estate information channels and developing new channels, conducting thorough due diligence on
potential acquisitions and being highly selective in investment activities, and maintaining regional diversity in property
ownership. Looking to stabilize rental revenues and maintain occupancy rates, the Company also has resolved to strengthen
its relationship of trust with existing tenants, fill vacancies promptly, promote fixed- and long-term lease contracts, andreduce administrative costs.
Performance Forecasts
In our third fiscal period (the six months ending March 31, 2003), operating revenues are forecast at ¥8,300 million ($67,700
thousand), income before income taxes at ¥3,200 million ($26,101 thousand), and net income at ¥3,200 million ($26,101
thousand). Cash dividends are expected to be ¥14,300 ($117) per share. The forecasts for the six-month period ending
September 30, 2003 are for operating revenues of ¥8,300 million ($67,700 thousand), income before income taxes of ¥3,000
million ($24,470 thousand), and net income of ¥3,000 million ($24,470 thousand). Cash dividends for the same period areforecast at ¥13,600 ($111) per share. We also expect more capital to flow into the market as investors are encouraged bygovernment plans to simplify taxes and lower taxes on stock dividends from 20% to 10%.
Opportunity amid Difficulty
In the coming year, the market for leased office space in Japan will present difficulty but also opportunity. We believe that ourstrong portfolio, capable management and dedicated professionals will allow us to succeed in this challenging environment.
The Company will continue to find growth through "the 4 S’s": sincerity, stability, soundness and strength of will. We offer
sincere thanks to you, our shareholders, for your continued support.

Yoneichiro Baba

Ryoichi Kakehashi

Executive Director of Japan Real Estate Investment Corporation

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

0

5The Portfolio of Japan Real Estate Investment Corporation
As of September 30, 2002

PROPERTIES ROSTER
NumberBuilding nameLocation

Type ofspecified asset

Acquisitiondate

Acquisition
price(¥ millions)

Percentage ofownership of thebuilding (%)

Completion

App
(¥ m

Tokyo 23 wards●

I- 1

Mitsubishi Soken Building

Otemachi, Chiyoda-ku

Trust

9/25/2001

27,267 (16.6%)

100

1970

●

I- 2

Kodenmacho Shin-Nihonbashi Building

Nihonbashi, Chuo-ku

Trust

9/25/2001

3,173 ( 1.9%)

100

1991

●

I- 3

Shiba 2chome Daimon Building

Shiba, Minato-ku

Trust

9/10/2001

4,859 ( 3.0%)

100

1984

●

I- 4

Cosmo Kanasugibashi Building

Shiba, Minato-ku

Trust

9/25/2001

2,808 ( 1.7%)

100

1992

●

I- 5

Takanawadai Building

Higashi Gotanda, Shinagawa-ku

Trust

9/25/2001

2,738 ( 1.7%)

100

1991

●

I- 6

JTS Building

Shimo Meguro, Meguro-ku

Trust

9/10/2001

1,362 ( 0.8%)

100

1991

●

I- 7

Omori-Eki Higashiguchi Building

Omori Kita, Ota-ku

Trust

9/10/2001

5,123 ( 3.1%)

100

1989

●

I- 8

Otsuka Higashi-Ikebukuro Building

Higashi-Ikebukuro, Toshima-ku

Trust

9/25/2001

3,541 ( 2.2%)

100

1987

●

I- 9

Ikebukuro 2chome Building

Ikebukuro, Toshima-ku

Trust

9/25/2001

1,728 ( 1.1%)

100

1990

●

I- 10

Shibuya Cross Tower

Shibuya, Shibuya-ku

Ownership

11/30/2001

34,600 (21.1%)

100

1976

●

I- 11

MD Kanda Building

Kanda, Chiyoda-ku

Ownership

5/31/2002

9,520 ( 5.8%)

100

1998

●

I- 12

Burex Kyobashi Building

Kyobashi, Chuo-ku

Ownership

7/22/2002

5,250 ( 3.2%)

100

2002

●

I- 13

Kandabashi Park Building

Kandanishiki-cho, Chiyoda-ku

Ownership

8/15/2002

4,810 ( 2.9%)

56.76

1993

Saitama, Saitama Prefecture

Ownership

9/25/2001

1,232

Tokyo metropolitan area (excluding 23 wards)
●

II- 1

Urawa Dai-Ichi-Seimei Dowa Kasai Building

10/11/2001

1,342

total

2,574 ( 1.6%)

100

1990

●

II- 2

Kawasaki Isago Building

Kawasaki, Kanagawa Prefecture

Trust

9/25/2001

3,375 ( 2.1%)

100

1990

●

II- 3

Ericsson Shin-Yokohama Building

Yokohama, Kanagawa Prefecture

Ownership

1/28/2002

3,000 ( 1.8%)

100

1992

Other major cities●

III- 1

Sendai Honcho Honma Building

Sendai, Miyagi Prefecture

Trust

9/25/2001

2,924 ( 1.8%)

93.39

1991

●

III- 2

Niigata Ishizuecho Nishi-Bandaibashi Building

Niigata, Niigata Prefecture

Trust

9/25/2001

1,010 ( 0.6%)

100

1984

●

III- 3Kanazawa Minamicho Building

Kanazawa, Ishikawa Prefecture

Trust

9/25/2001

1,331 ( 0.8%)

100

1987

●

III- 4

Nagoya Hirokoji Building

Nagoya, Aichi Prefecture

Ownership

9/10/2001

14,533 ( 8.8%)

100

1987

●

III- 5

Midosuji Daiwa Building

Osaka, Osaka Prefecture

Trust

9/25/2001

6,934

2/28/2002

7,380
1991

total

14,314 ( 8.7%)

100●

III- 6

Fukusuke Sakaisujihonmachi Building

Osaka, Osaka Prefecture

Trust

9/25/2001

2,264 ( 1.4%)

46.17

1992

●

III- 7

Kobe Itomachi Building

Kobe, Hyogo Prefecture

Trust

9/25/2001

1,436 ( 0.9%)

100

1989

●

III- 8Hinode Tenjin Building

Fukuoka, Fukuoka Prefecture

Trust

9/10/2001

3,657 ( 2.2%)

76.18

1987

●

III- 9Tosei Tenjin Building

Fukuoka, Fukuoka Prefecture

Ownership

9/25/2001

1,550 ( 0.9%)

100

1992

●

III- 10

Kyoto Shijo Kawaramachi Building

Kyoto, Kyoto Prefecture

Ownership

12/20/2001

2,650 ( 1.6%)

100

1982

●

III- 11

Kanazawa Park Building

Kanazawa, Kanazawa Prefecture

Ownership

2/28/2002

2,880 ( 1.8%)

55.13

1991

Total

164,277 (100%)——

MAJOR TENANTS ROSTER
Rank
1

Percent of total
leasable area

Name of tenant

Name of building

Leased area

Mitsubishi Research Institute, Inc. (Note)

Mitsubishi Soken Building

14,529m2 (156,389ft2)
2

2

7.1%

2

The Dai-ichi Mutual Life Insurance Company

Midosuji Daiwa Building (also includes another 8 buildings)

13,292m (143,074ft )

6.5%

3

Nippon Ericsson K.K.

Ericsson Shin-Yokohama Building

5,794m2 ( 62,366ft2)

2.8%

4

TOTO Ltd.

Nagoya Hirokoji Building, Midosuji Daiwa Building

4,840m2 ( 52,097ft2)

2.4%

5

Janssen Pharmaceutical K.K.

Takanawadai Building, Tosei Tenjin Building

4,318m2 ( 46,479ft2)

2.1%

Note: Lease with this tenant is a fixed-term lease for the period from February 1, 2001 to March 31, 2011. This tenant has agreed not to terminate the contract during the lease period.
061

Percentage ofownership of thebuilding (%)

Completion

Appraisal(¥ millions)

Total leasable
floor space

Leased area

Total number oftenants

Revenue fromleasing operations(¥ millions)

100

1970

28,10018,006m2 (193,815ft2)

17,347m2 (186,721ft2)

3

1,001 (12.7%)

100

1991

3,170

3,897m2 ( 41,947ft2)

3,897m2 ( 41,947ft2)

5141 ( 1.8%)

100

1984

4,890

9,622m2 (103,570ft2)

8,655m2 ( 93,162ft2)

22311 ( 3.9%)

100

1992

2,760

4,062m2 ( 43,723ft2)

3,379m2 ( 36,371ft2)

7131 ( 1.7%)

100

1991

2,970

4,091m2 ( 44,035ft2)

4,091m2 ( 44,035ft2)

1

153 ( 1.9%)

100

1991

1,330

3,383m2 ( 36,414ft2)

3,383m2 ( 36,414ft2)

1

99 ( 1.3%)

100

1989

4,980

7,708m2 ( 82,968ft2)

7,376m2 ( 79,395ft2)

19293 ( 3.7%)

100

1987

3,480

7,114m2 ( 76,574ft2)

7,016m2 ( 75,520ft2)

8188 ( 2.4%)

100

1990

1,570

2,186m2 ( 23,530ft2)

1,944m2 ( 20,925ft2)

475 ( 1.0%)

100

1976

34,50028,547m2 (307,277ft2)

28,547m2 (307,277ft2)

54

1,573 (19.9%)

100

1998

9,590

6,334m2 ( 68,179ft2)

6,334m2 ( 68,179ft2)2

3

248 ( 3.1%)

100

2002

5,040

4,279m ( 46,059ft )4,279m2 ( 46,059ft2)

1

58 ( 0.7%)

56.76

1993

4,920

3,687m2 ( 39,686ft2)

3,687m2 ( 39,686ft2)

751 ( 0.6%)

100

1990

2,690

4,510m2 ( 48,545ft2)

2

4,111m2 ( 44,250ft2)

2

12154 ( 2.0%)

100

1990

3,370

6,831m ( 73,528ft )6,359m2 ( 68,448ft2)

8185 ( 2.3%)

100

1992

3,100

6,964m2 ( 74,960ft2)

6,964m2 ( 74,960ft2)

2

190 ( 2.4%)

93.39

1991

2,900

5,829m2 ( 62,743ft2)

5,829m2 ( 62,743ft2)

12165 ( 2.1%)

100

1984

911

4,383m2 ( 47,178ft2)

3,634m2 ( 39,116ft2)

7

83 ( 1.1%)

100

1987

1,310

3,773m2 ( 40,612ft2)

3,337m2 ( 35,919ft2)

1295 ( 1.2%)

100

1987

14,90021,590m2 (232,393ft2)

21,518m2 (231,618ft2)

31805 (10.2%)

2

100

1991

14,40020,449m2 (220,111ft2)

20,449m2 (220,111ft2)

20

847 (10.7%)

46.17

1992

2,330

5,337m2 ( 57,447ft2)

4,886m2 ( 52,592ft2)

7169 ( 2.1%)

100

1989

1,310

3,478m2 ( 37,437ft2)

2,566m2 ( 27,620ft2)

1079 ( 1.0%)

76.18

1987

3,640

5,944m2 ( 63,981ft2)

5,944m2 ( 63,981ft2)

9225 ( 2.8%)

100

1992

1,530

4,080m2 ( 43,917ft2)

3,280m2 ( 35,306ft2)2

17102 ( 1.3%)

100

1982

2,470

6,800m ( 73,195ft )4,818m2 ( 51,860ft2)

20

122 ( 1.6%)

55.13

1991

3,090

13,030m2 (140,254ft2)

12,155m2 (130,835ft2)

60

355 ( 4.5%)——

165,251

215,928m2 (2,324,227ft2)

205,796m2 (2,215,168ft2)

339

7,910 (100%)

2

0

7

LOCATIONS OF PORTFOLIO PROPERTIES

III-1
III-2
III-3
III-11

III-8

III-7
III-5 III-10
III-6

III 1 – III 11 : Other major cities

III-4

III-9

I 1 – I 13 : Tokyo 23 wards

I-9
I-8
I-11
I-13
I-1

II-1
I-10

I-4
I-3

I-6
I-5
II-2
II-3
I-7

0

II 1 – II 3 : Tokyo metropolitan area (excluding 23 wards)

8

I-2
I-12

Overview of Portfolio Properties

PROPERTY ACQUISITION
As of September 30, 2002●

I-1

Mitsubishi Soken Building

Location :3-6, Otemachi 2-chome, Chiyoda-ku, Tokyo

Site area :3,441.35m2 (37,042.35ft2)

Floor area of building :26,372.92m2 (283,875.47ft2)

Structure :Above ground: 15 floors
Below ground: 2 floors●

I-2

Kodenmacho Shin-Nihonbashi
Building●

I-3

Shiba 2chome Daimon Building

Completion :July 1970

Location :4-9, Kodenmacho, Nihonbashi, Chuo-ku, Tokyo

Site area :773.28m2 (8,323.51ft2)

Floor area of building :5,822.88m2 (62,676.90ft2)

Structure :Above ground: 9 floors
Below ground: 1 floor

Completion :November 1991

Location :3-3, Shiba 2-chome, Minato-ku, Tokyo

Site area :2,820.90m2 (30,363.89ft2)

Floor area of building :16,235.10m2 (174,752.99ft2)

Structure :Above ground: 8 floors
Below ground: 2 floors●

I-4

Cosmo Kanasugibashi Building

Completion :March 1984

Location :10-11, Shiba 1-chome, Minato-ku, Tokyo

Site area :758.54m2 (8,164.85ft2)

Floor area of building :5,420.93m2 (58,350.35ft2)

Structure :Above ground: 9 floors
Below ground: 1 floor

Completion :March 1992

0

9

●

I-5

Takanawadai Building●

I-6

JTS Building

Location :1-5, Higashi Gotanda 3-chome, Shinagawa-ku, Tokyo

Site area :1,416.17m2 (15,243.51ft2)

Floor area of building :5,762.70m2 (62,029.13ft2)

Structure :Above ground: 13 floors

Completion :January 1991

Location :7-10, Shimo Meguro 3-chome, Meguro-ku, Tokyo

Site area :1,401.52m2 (15,085.82ft2)

Floor area of building :5,269.58m2 (56,721.23ft2)

Structure :Above ground: 6 floors
Below ground: 1 floor●

I-7

Omori-Eki Higashiguchi
Building●

I-8

Otsuka Higashi-Ikebukuro
Building

Completion :September 1991

Location :5-1, Omori Kita 1-chome, Ota-ku, Tokyo

Site area :2,199.30m2 (23,673.05ft2)

Floor area of building :14,095.34m2 (151,720.83ft2)

Structure :Above ground: 11 floors

Completion :July 1989

Location :32-22, Higashi-Ikebukuro 2-chome, Toshima-ku, Tokyo

Site area :2,121.39m2 (22,834.43ft2)

Floor area of building :9,531.28m2 (102,593.74ft2)

Below ground: 2 floors

Structure :Completion :10Above ground: 8 floors
Below ground: 1 floor
November 1987

●

I-9

Ikebukuro 2chome Building

Location :14-2, Ikebukuro 2-chome, Toshima-ku, Tokyo

Site area :397.26m2 (4,276.07ft2)

Floor area of building :3,157.51m2 (33,987.12ft2)

Structure :Above ground: 9 floors
Below ground: 1 floor

●

I-10

Shibuya Cross Tower

Completion :May 1990

Location :15-1, Shibuya 2-chome, Shibuya-ku, Tokyo

Site area :5,153.45m2 (55,471.22ft2)

Floor area of building :61,862.33m2 (665,879.93ft2)

Structure :Above ground: 32 floors
Below ground: 3 floors

Completion :

●

I-11

MD Kanda Building

●

I-12

Burex Kyobashi Building

April 1976

Location :9-1, Mitoshiro-cho, Kanda, Chiyoda-ku, Tokyo

Site area :1,085.83m2 (11,687.77ft2)

Floor area of building :8,185.11m2 (88,103.71ft2)

Structure :Above ground: 10 floors

Completion :February 1998

Location :7-14, Kyobashi 2-chome, Chuo-ku, Tokyo

Site area :756.03m2 (8,137.83ft2)

Floor area of building :5,470.54m2 (58,884.35ft2)

Structure :Above ground: 8 floors,
Below ground: 1 floor

Completion :February 2002

1

1

●

I-13

Kandabashi Park Building

Location :19-1, Kandanishiki-cho 1-chome, Chiyoda-ku, Tokyo

Site area :1,218.56m2 (13,116.46ft2)

Floor area of building :9,370.25m2 (100,860.43ft2)

Structure :Above ground: 10 floors
Below ground: 1 floor

●

II-1

Urawa Dai-Ichi-Seimei
Dowa Kasai Building

●

II-2

Completion :July 1993

Location :2-3, Takasago 2-chome, Saitama, Saitama Prefecture

Site area :1,533.06m2 (16,501.70ft2)

Floor area of building :6,258.59m2 (67,366.84ft2)

Structure :Above ground: 8 floors

Completion :March 1990

Location :2-4, Isago 1-chome, Kawasaki-ku, Kawasaki,
Kanagawa Prefecture

Kawasaki Isago Building

Site area :1,594.50m2 (17,163.04ft2)

Floor area of building :9,623.83m2 (103,589.94ft2)

Structure :Above ground: 12 floors
Below ground: 1 floor

Completion :

●

II-3

Location :December 1990

2-1, Shin-Yokohama 1-chome, Kohoku-ku, Yokohama,
Kanagawa Prefecture

Ericsson Shin-Yokohama
Building

Site area :1,528.00m2 (16,447.24ft2)

Floor area of building :10,403.41m2 (111,981.26ft2)

Structure :Above ground: 10 floors

Completion :April 1992

Below ground: 2 floors

1

2

●

III-1

Location :1-29, Honcho 2-chome, Aoba-ku, Sendai,
Miyagi Prefecture

Sendai Honcho Honma Building

●

III-2

Site area :1,437.47m2 (15,472.78ft2)

Floor area of building :8,247.50m2 (88,775.27ft2)

Structure :Above ground: 11 floors

Completion :November 1991

Location :1945-1, Ishizuecho Dori-ichinocho, Niigata,
Niigata Prefecture

Niigata Ishizuecho
Nishi-Bandaibashi Building

Site area :957.90m2 (10,310.74ft2)

Floor area of building :6,410.33m2 (69,000.15ft2)

Structure :Above ground: 8 floors
Below ground: 1 floor

●

III-3

Kanazawa Minamicho Building

●

III-4

Nagoya Hirokoji Building

Completion :November 1984

Location :3-10, Oyamamachi, Kanazawa, Ishikawa Prefecture

Site area :887.17m2 (9,549.41ft2)

Floor area of building :5,163.19m2 (55,576.06ft2)

Structure :Above ground: 9 floors

Completion :March 1987

Location :3-1, Sakae 2-chome, Naka-ku, Nagoya, Aichi Prefecture

Site area :4,095.81m2 (44,086.89ft2)

Floor area of building :33,377.73m2 (359,274.55ft2)

Structure :Above ground: 18 floors
Below ground: 2 floors

Completion :May 1987

1

3

●

III-5

Location :6-8, Kyutaromachi 3-chome, Chuo-ku, Osaka,
Osaka Prefecture

Midosuji Daiwa Building

Site area :3,044.65m2 (32,772.31ft2)

Floor area of building :31,213.27m2 (335,976.52ft2)

Structure :Above ground: 15 floors

Completion :September 1991

Location :8-14, Minamihonmachi 1-chome, Chuo-ku, Osaka,

Below ground: 2 floors

●

III-6

Osaka Prefecture
Fukusuke Sakaisujihonmachi
Building

Site area :2,036.22m2 (21,917.67ft2)

Floor area of building :17,145.59m2 (184,553.42ft2)

Structure :Above ground: 13 floors
Below ground: 2 floors

●

III-7

Kobe Itomachi Building

●

III-8

Completion :October 1992

Location :121, Itomachi, Chuo-ku, Kobe, Hyogo Prefecture

Site area :808.55m2 (8,703.15ft2)

Floor area of building :4,894.09m2 (52,679.50ft2)

Structure :Above ground: 10 floors

Completion :September 1989

Location :12-20, Tenjin 1-chome, Chuo-ku, Fukuoka,
Fukuoka Prefecture

Hinode Tenjin Building

Site area :1,452.15m2 (15,630.80ft2)

Floor area of building :12,527.07m2 (134,840.13ft2)

Structure :Above ground: 10 floors

Completion :August 1987

Below ground: 2 floors

1

4

●

III-9

Location :9-25, Tenjin 3-chome, Chuo-ku, Fukuoka,
Fukuoka Prefecture

Tosei Tenjin Building●

III-10Site area :1,221.31m2 (13,146.06ft2)

Floor area of building :5,588.57m2 (60,154.81ft2)

Structure :Above ground: 8 floors

Completion :March 1992

Location :338, Tominaga-cho, Kawaramachidori Matsubara-agaru
2-chome, Shimogyo-ku, Kyoto, Kyoto Prefecture

Kyoto Shijo Kawaramachi
Building

Site area :1,471.57m2 (15,839.83ft2)

Floor area of building :9,701.04m2 (104,421.02ft2)

Structure :Above ground: 9 floors
Below ground: 1 floor●

III-11Kanazawa Park Building

Completion :November 1982

Location :1-1, Hirooka 3-chome, Kanazawa, Ishikawa Prefecture

Site area :6,642.71m2 (71,501.47ft2)

Floor area of building :43,481.20m2 (468,027.29ft2)

Structure :Above ground: 12 floors
Below ground: 2 floors

Completion :October 1991

1

5

NEW PROPERTY ACQUISITION
Properties acquired between October 1, 2002 and December 31, 2002

Kokusai Iidabashi Building

Property Summary
Type of specified asset: Ownership
Acquisition price:¥5,000 million

Acquisition date:

October 31, 2002

Location:

6-5, Iidabashi 3-chome, Chiyoda-ku, Tokyo

Intended use:

Office space

Site area:

1,052.80m2 (11,332.23ft2)

Floor area of building: 6,722.02m2 (72,355.15ft2)
Structure:

Above ground: 8 floors, Below ground: 1 floor

Completion:

September 1985

Leasing Conditions

Da Vinci Harajuku

Number of tenants:

1

Rentable area:

4,791m2 (51,569.84ft2)

Leased area:

4,791m2 (51,569.84ft2)

Property Summary
Type of specified asset: Ownership
Acquisition price:¥4,885 million

Acquisition date:November 22, 2002

Location:25-15, Jingumae 3-chome, Shibuya-ku, Tokyo

Intended use:

Office space, Retail stores

Site area:

839.66m2 (9,038.02ft2)

Floor area of building: 4,359.20m2 (46,921.99ft2)
Structure:

Above ground: 7 floors, Below ground: 2 floors

Completion:

December 1987

Leasing Conditions
Number of tenants:

6

Rentable area:

3,051m2 (32,840.66ft2)

Leased area:

3,051m2 (32,840.66ft2)

Note: Details on area, structure, etc., listed above as recorded in the registry.

1

6

Financial Section
BALANCE SHEETS

p. 18

STATEMENTS OF INCOME AND RETAINED EARNINGSSTATEMENTS OF CHANGES IN SHAREHOLDERS ’ EQUITY

p. 22

p. 20

STATEMENTS OF CASH FLOWSNOTES TO FINANCIAL STATEMENTS

p. 22

p. 21

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

p. 28

SELECTED FINANCIAL DATA
For the period from April 1, 2002 to September 30, 2002 and the period from May 11, 2001 to March 31, 2002

Millions of yen

For the period from
April 1, 2002 to
September 30, 2002

Thousands of U.S. dollars (Note 1)

For the period fromMay 11, 2001 to
March 31, 2002

For the period from
April 1, 2002 to
September 30, 2002

Operating Revenues

7,910

6,492

64,521

Operating Expenses

4,523

3,530

36,896

Operating Profits

3,386

2,961

27,625

Income before Income Taxes

2,898

2,405

23,639Net Income

2,897

2,403

23,631

Total Assets

185,397

161,809

1,512,211

Interest-Bearing Liabilities

54,00064,000440,457

Total Shareholders’ Equity

115,049

83,663

938,414

Shareholders’ Capital

112,152

81,260914,783

Number of Shares

225,400

160,400

225,400

Total Shareholders’ Equity per Share (yen/U.S. dollars)

510,424

521,591

4,163

Cash Distribution

2,897

2,403

23,630

Dividend Payout Ratio

99.9%

99.9%

99.9%

Dividend per Share (yen/U.S. dollars)

12,853

14,983105

Net Operating Income (NOI)

5,211

4,732

42,504

4,091

3,505

33,369Funds from Operations (FFO)
Return on Assets (ROA) (Note 2)

1.6% (3.2% annualized) 2.0% (3.6% annualized) 1.6% (3.2% annualized)

Return on Equity (ROE) (Note 3)

2.7% (5.4% annualized) 2.9% (5.2% annualized) 2.7% (5.4% annualized)

EOP Equity Ratio (Note 4)
EOP Interest-Bearing Debt Ratio on Total Assets (Note 5)

62.1%

51.7%

62.1%

29.1%

39.6%

29.1%

FFO Multiple

14.1 times

13.5 times

14.1 times

Debt Service Coverage Ratio (Note 6)

13.9 times

15.5 times

13.9 times

Notes: 1. Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥122.60 = US$1.00, the foreign exchange rate on September 30, 2002, has been used fortranslation. The inclusion of such amounts is not intended to imply that Japanese yen has been or could be readily converted, realized or settled into U.S. dollars at that rate or any rate.
2. ROA = Income before Income Taxes ÷ Average of Total Assets during the period
3. ROE = Net Income ÷ Average of Net Worth during the period(Annualized portions of the calculations given in notes 2 and 3 above assume a fiscal period of 203 days for the period ended March 31, 2002, and 183 days for the period ended September 30, 2002.)
4. EOP Equity Ratio = (Net Worth at end of period ÷ Total Assets at end of period) x 100
5. EOP Interest-Bearing Debt Ratio on Total Assets = (Interest-Bearing Debt at end of period ÷ Total Assets at end of period) x 100
6. Debt Service Coverage Ratio = Net Income before Interest, Taxes, Depreciation and Amortization ÷ Interest Expenses

1

7

JAPAN REAL ESTATE INVESTMENT CORPORATIONBALANCE SHEETSAs of September 30, 2002 and March 31, 2002

Thousands of yen

U.S. dollars (Note 1)

As of September
30, 2002

As of March
31, 2002

As of September
30, 2002

19,990,003

15,323,911

163,050,593

ASSETS
Current Assets:
Cash and bank deposits (Note 6)
Rental receivables

83,741

59,275683,043

Consumption tax refundable

69,322

714,493565,439

Other current assets
Total current assets

22,27264,361

181,663

20,165,338

16,162,040

164,480,738

Property and Equipment, at Cost (Notes 3 and 6):
Land

113,727,332

99,614,150

927,629,137

Buildings and structures

52,171,555

45,676,498

425,542,863

Machinery and equipment

1,036,947

944,758

8,457,972

Tools, furniture and fixtures

2,942

—

23,996

166,938,776

146,235,406

1,361,653,968

Less accumulated depreciation(2,294,189)(1,100,006)(18,712,800)

Net property and equipment

164,644,587

145,135,400

1,342,941,168

14,10014,100115,008

Investments and Other Assets:
Deposits
Long-term prepaid expenses

57,656

53,684

470,278

Leasehold rights

444,160

444,160

3,622,844

Deferred corporate bond issuance costs

70,786—577,371

454

454

3,700

185,397,081

161,809,838

1,512,211,107

Other
Total Assets

18Thousands of yen

As of September
30, 2002

U.S. dollars (Note 1)

As of March
31, 2002

As of September
30, 2002

LIABILITIESCurrent Liabilities:
Trade accounts payable

128,327

259,617

1,046,715

Other payables

551,315

291,225

4,496,859

Short-term debt (Notes 4 and 6)

5,000,000

40,000,000

40,783,034

Accrued expenses

169,243

154,557

1,380,449

914

1,332

7,459

Rent received in advance

1,219,158

998,248

9,944,195

Other current liabilities

23,44323,425191,211

Total current liabilities

7,092,400

41,728,404

57,849,922

25,000,000—

203,915,171

Accrued income taxes

Long-Term Liabilities:
Corporate bonds
Long-term debt (Notes 5 and 6)

24,000,000

24,000,000

195,758,565

Deposits from tenants

14,255,089

12,418,100

116,273,157

Total long-term liabilities

63,255,089

36,418,100

515,946,893

Total Liabilities

70,347,489

78,146,504

573,796,815

112,152,420

81,260,000

914,783,197

SHAREHOLDERS’ EQUITY
Shareholders’ capital
Retained earnings (Note 7)

2,897,172

2,403,334

23,631,095

Total shareholders’ equity

115,049,592

83,663,334

938,414,292

Total Liabilities and Shareholders’ Equity

185,397,081

161,809,838

1,512,211,107

1

9

JAPAN REAL ESTATE INVESTMENT CORPORATIONSTATEMENTS OF INCOME AND RETAINED EARNINGSFor the six months ended September 30, 2002 and for the period from May 11, 2001 to March 31, 2002

Thousands of yen

U.S. dollars (Note 1)

For the Period from
April 1, 2002 to
September 30, 2002

For the period fromMay 11, 2001 to
March 31, 2002

For the Period from
April 1, 2002 to
September 30, 2002

7,889,166

6,427,133

64,348,822

Operating Revenues and Expenses
Operating Revenues:
Rental revenues (Note 11)
Non-rental revenues (Note 11)21,11765,385

172,247

7,910,283

6,492,518

64,521,069

Property-related expenses (Note 11)

3,893,229

2,859,570

31,755,543

Asset management fees

382,270

389,449

3,118,023

Operating Expenses:

Administrative service fees

133,920

146,714

1,092,335

Other operating expenses

113,996

135,029

929,818

4,523,415

3,530,762

36,895,719

3,386,868

2,961,756

27,625,350

Interest received

510

2,035

4,161

Other non-operating revenues

2,315

813

18,882

Interest expense

224,827

241,563

1,833,829

Interest expense on corporate bonds

91,315—

744,821

Amortization of corporate bond issuance costs

70,786—577,371

New share issuance costs

70,760121,149

577,161

Operating profits
Non-Operating Revenues and Expenses
Non-Operating Revenues:

Non-Operating Expenses:

Share listing expenses—

74,901—

Amortization of start-up costs—

90,498—Other non-operating expenses
Income before Income Taxes

33,861

31,457276,191

2,898,144

2,405,036

23,639,020

Income Taxes (Note 8):
Current

1,017

1,738

8,291

Deferred

16

(36)

130

Net Income

2,897,111

2,403,334

23,630,599

61

—

496

2,897,172

2,403,334

23,631,095

Retained Earnings at beginning of period
Retained Earnings at end of period

20JAPAN REAL ESTATE INVESTMENT CORPORATIONSTATEMENTS OF CASH FLOWS (Unaudited)
For the six months ended September 30, 2002 and the period from May 11, 2001 to March 31, 2002

Thousands of yen

U.S. dollars (Note 1)

For the Period from
April 1, 2002 to
September 30, 2002

For the period fromMay 11, 2001 to
March 31, 2002

For the Period from
April 1, 2002 to
September 30, 2002

2,898,144
1,194,194
155
70,78670,760(510)
316,143(24,462)
645,171
24,522
17,546(131,290)
260,090
220,91017(3,972)5,558,204
510(301,456)(1,434)
5,255,824

2,405,036
1,100,006
649——(2,035)
241,563(59,279)(714,493)(46,183)(18,137)
259,617291,225998,248
23,425(53,684)
4,425,958
2,035(87,006)(407)
4,340,580

23,639,020
9,740,571
1,269
577,371
577,161(4,161)
2,578,651(199,529)
5,262,403
200,020
143,120(1,070,877)
2,121,449
1,801,874
140(32,397)
45,336,085
4,161(2,458,861)(11,695)
42,869,690

Cash Flows from Investing Activities
Purchases of property and equipment
Purchases of intangible assets
Payment of deposits
Proceeds from lease deposits received
Repayment of lease deposits
Net cash used in investing activities(20,703,536)——
2,354,100(517,111)(18,866,547)(146,236,055)(444,614)(14,100)
12,845,326(427,226)(134,276,669)(168,870,604)——
19,201,465(4,217,871)(153,887,010)

Cash Flows from Financing Activities
Proceeds from short-term borrowings
Repayment of short-term borrowings
Proceeds from long-term borrowings
Proceeds from corporate bonds
Payments of corporate bond issuance costs
Proceeds from issuance of shares
Payments of share issuance costs
Dividends to shareholders
Net cash provided by financing activities
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents at beginning of Period
Cash and Cash Equivalents at end of Period

5,000,000(40,000,000)—
25,000,000(141,572)
30,892,420(70,760)(2,403,273)
18,276,815
4,666,092
15,323,911
19,990,003

40,000,000—
24,000,000——
81,260,000——
145,260,000
15,323,911—
15,323,911

40,783,034(326,264,274)—
203,915,171(1,154,742)
251,977,325(577,161)(19,602,555)
149,076,798
38,059,478
124,991,115
163,050,593

Cash Flows from Operating Activities
Income before income taxes
Depreciation and amortization
Loss on retirement of property and equipment
Amortization of corporate bond issuance costs
New share issuance costs
Non-cash portion of interest income
Non-cash portion of interest expense
Rental receivables and other receivables
Consumption tax refundable
Prepaid expenses
Other current assets
Trade accounts payable
Other payables
Rent received in advance
Other current liabilities
Long-term prepaid expenses
SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by operating activities

2

1

JAPAN REAL ESTATE INVESTMENT CORPORATIONSTATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the six months ended September 30, 2002 and for the period from May 11, 2001 to March 31, 2002

Shareholders’ equity
SharesBeginning
5/11/01 Initial private placement
9/10/01 Initial public offering
Net income

Thousands of yen—

U.S. dollars (Note 1)—

400

200,000

160,000

81,060,000—

2,403,334

Balance as of March 31, 2002

160,400

83,663,334

682,408,923

5/8/02 Second public offering

65,00030,892,420

251,977,325—(2,403,273)(19,602,555)

Cash dividends paid
Net income
Balance as of September 30, 2002—

2,897,111

23,630,599

225,400

115,049,592

938,414,292

JAPAN REAL ESTATE INVESTMENT CORPORATIONNOTES TO FINANCIAL STATEMENTS
September 30, 2002 and March 31, 2002

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 Asset Management Co., Ltd.
(“J-Rea”). J-Rea is currently owned 36% by Mitsubishi Estate Co., Ltd., 27% by The Tokio Marine and Fire Insurance Co., Ltd., 27% by The Dai-ichi
Mutual Life Insurance Company and 10% by Mitsui & Co., Ltd.
On May 11, 2001, the Company was incorporated with ¥200 million of original capital contribution by Mitsubishi Estate Co., Ltd., The Tokio Marine
and Fire Insurance Co., Ltd. and The Dai-ichi Mutual Life Insurance Company under the Law Concerning Investment Trusts and Investment Corporationsof Japan, or the Investment Trust Law.
On September 10, 2001, the Company commenced operations when the Company was listed on the Tokyo Stock Exchange as one of the first realestate investment corporations in Japan (so-called “J-REITs”). The Company issued 160,000 shares at a price of ¥525,000, generating gross proceeds of¥84,000 million. The proceeds from the offering of the shares, net of underwriters’ discount, were ¥81,060 million.
During the current six-month period ended September 30, 2002, the Company issued additional shares and corporate bonds. On May 8, 2002, theCompany completed a second offering of 65,000 shares at a price of ¥490,980 ($4,005), generating gross proceeds of ¥31,914 million ($260,308
thousand). The proceeds from the offering of the shares, net of underwriters’ discount, were ¥30,892 million ($251,977 thousand). On June 21, 2002, theCompany issued ¥25,000 million ($203,915 thousand) of unsecured corporate bonds due June 2007 with an interest rate of 1.32% to the qualified
investors. The proceeds from issuance of additional shares and corporate bonds were used to repay short-term borrowings made for the acquisition of
the properties during the previous period and for working capital purposes.
At September 30, 2002, the Company owned a portfolio of 27 office properties (24 office properties at March 31, 2002) containing an aggregate of
approximately 216,000 square meters of net rentable area.
Basis of presenting financial statements
The Company maintains its accounting records and prepares its financial statements in accordance with accounting principles and practices generally
accepted and applied in Japan (“Japanese GAAP”), including provisions set forth in the Investment Trust Law, the Japanese Commercial Code, theSecurities and Exchange Law of Japan and the related regulations, which may differ in some material respects from accounting principles and practices
generally accepted in countries and jurisdictions other than Japan.
22The accompanying financial statements are a translation of the audited financial statements of the Company, which were prepared in accordancewith Japanese GAAP and were presented in the Securities Report of the Company filed with the Kanto Local Finance Bureau. In preparing theaccompanying financial statements, certain reclassifications and modifications have been made to the financial statements issued domestically inorder to present them in a format that is more familiar to readers outside Japan. In addition, the notes to financial statements include information thatmight not be required under Japanese GAAP but is presented herein as additional information.
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥122.60=US$1.00, the foreign exchange rateon September 30, 2002, has been used for translation. The inclusion of such amounts is not intended to imply that Japanese yen has been or could bereadily converted, realized or settled into U.S. dollars at that rate or any other rate.
2. Summary of Significant Accounting Policies
Property and equipment

Property and equipment is stated at cost, less accumulated depreciation. The costs of land, buildings and building improvements include the purchaseprice of property, legal fees and acquisition costs. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets
ranging as stated below:
Buildings .....................................................................................................................................2-61 years
Structures..................................................................................................................................10-42 years
Machinery and equipment ...........................................................................................................3-10 years
Tools, furniture and fixtures...........................................................................................................3-6 years
Expenditures for repairs and maintenance are charged to operations as incurred. Significant renewals and betterments are capitalized.
Deferred charges

Deferred charges include bond issuance costs, share issuance costs and start-up costs. Bond issuance costs are amortized using the straight-line
method over one year. Share issuance costs and start-up costs were charged to operations when incurred. The underwriters’ commissions of the public
offering were not reflected to the financial statements since such costs are not payable by the Company under the so-called “spread method”. Under the
spread method, the difference between the offer price (the price paid by the shareholder) and the purchase price (the price received by the Company)
was directly distributed to the underwriters. The amounts incurred at the initial offering on September 10, 2001 and the second offering on May 8, 2002
were ¥2,940 million and ¥1,021million ($8,330 thousand), respectively.
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 to expense
during the period. The sellers of the properties were liable for property taxes for the calendar year including the period from the date of purchase by theCompany through the end of the year since the taxes are imposed on the owner registered in the record as of January 1 based on the assessment madeby the local government. The Company paid the amount equivalent to the property taxes to the sellers applicable to the period since acquisition andincluded the amount equivalent to the taxes in the purchase price of each property and capitalized as cost of the property.
Consumption taxes
Consumption taxes withheld and consumption taxes paid are not included in the statements of income. The consumption taxes paid are generally offset
against the balance of consumption taxes withheld. As such, the excess of payments over amounts withheld are included in the current assets and theexcess of amounts withheld over payments are included in the current liabilities.
2

3

Cash and cash equivalents
The statements of cash flows is provided for information purposes only since it is not required to be prepared by the Investment Trust Law, the JapaneseCommercial Code, the Securities and Exchange Law of Japan and the related regulations. Cash and cash equivalents consists of cash on hand, deposits
placed with bank and short-term investments which are highly liquid, readily convertible to cash and with insignificant risk of price fluctuation, withoriginal maturity of three months or less.
3. Real Estate
Real Estate at September 30, 2002 and March 31, 2002 consisted of the following:Thousands of yen

As of September 30, 2002

U.S. dollars

As of March 31, 2002

As of September 30, 2002

Acquisition Costs

Book Value

Acquisition Costs

Book Value

Acquisition Costs

Book ValueLand

55,833,517

55,833,517

41,755,393

41,755,393

455,412,050

455,412,050

Buildings and structures

27,584,214

Accumulated depreciation

1,062,197

Machinery and equipment

365,344

Accumulated depreciation

35,231Tools, furniture and fixtures

2,942

Accumulated depreciation

21,232,642
26,522,017

224,993,588

456,078

20,776,564

8,663,928

273,155
330,113

216,329,660

2,979,973

14,592

258,563

287,364—

2,692,609

23,995

129

2,813

—

—

1,056

22,939Land in trust

57,893,815

57,893,815

57,858,757

57,858,757

472,217,087

472,217,087

Buildings and structures in trust

24,587,341

Accumulated depreciation

1,116,412

Machinery and equipment in trust

671,603

Accumulated depreciation

80,220Total

24,443,856
23,470,929

200,549,275

586,866

23,856,990

671,603591,383

9,106,131

191,443,144

5,477,999

42,470629,133

164,644,587

145,135,400

654,320

4,823,679
1,342,941,168

4. Short-Term Debt
Short-term debt at September 30, 2002 and March 31, 2002 consisted of the following:Thousands of yen

U.S. dollars

As of September
30, 2002

As of March
31, 2002

As of September
30, 2002

5,000,000

40,000,000

40,783,034

5,000,000

40,000,000

40,783,034

Secured loans from banks, trust banks with variable interest,
due on June 23, 2003.

The weighted average interest rates applicable to the bank loans at September 30, 2002 and March 31, 2002 were 0.89417% and 0.898%, respectively,
per annum.

2

4

5. Long-Term Debt
Long-term debt at September 30, 2002 and March 31, 2002 consisted of the following:Thousands of yen

U.S. dollars

As of September
30, 2002

As of March
31, 2002

As of September
30, 2002

24,000,000

24,000,000

195,758,565

24,000,000

24,000,000

195,758,565

Secured loans from banks, trust banks and an insurance company
with variable interest, due on June 23, 2006.

The weighted average interest rate applicable to the loans at September 30, 2002 and March 31, 2002 was 1.120% per annum.
6. Secured Assets
At September 30, 2002 and March 31, 2002, the following assets were pledged as collateral for the following debt:
Thousands of yen

U.S. dollars

As of September
30, 2002

As of March
31, 2002

Cash and cash equivalents

8,690,039

13,223,134

70,881,233

Land and land leasehold

51,111,173

85,666,327

416,893,744

Buildings and structures

19,674,960

32,815,949

160,480,911

Machinery and equipment

498,550

671,180

4,066,478

79,974,722

132,376,595

652,322,366

As of September
30, 2002

As of March
31, 2002

As of September
30, 2002

Short-term debt

5,000,000

40,000,000

40,783,034

Long-term debt

24,000,000

24,000,000

195,758,565

Total

29,000,000

64,000,000

236,541,599

Pledged assets:

Total

Thousands of yen

Debt secured by the pledged assets:

As of September
30, 2002

U.S. dollars

7. Shareholders’ Equity
Under the Investment Trust Law and the related regulations, the declaration of cash distribution for the current fiscal period is made by the resolution of
the Board of Directors after the close of such fiscal period. As such, the retained earnings of shareholders’ equity at September 30, 2002 included cash
distribution of ¥2,897,066 subsequently made for the current fiscal period.
8. Income Taxes
At September 30, 2002, the Company’s deferred tax assets consist mainly of the enterprise tax, which is not deductible for tax purposes. The
reconciliation of tax rate difference between the adjusted statutory tax rate and the effective tax rate for the period from April 1, 2002 to September 30,
2002 and the period from May 11, 2001 to March 31, 2002 was as follows:
For the period from April 1, 2002
to September 30, 2002

For the period from May 11, 2001
to March 31, 2002

Statutory tax rate .................................................................................................................39.39% ...............................................39.39%
Deductible dividend distribution .......................................................................................( 39.37%)............................................( 39.36%)
Others ....................................................................................................................................0.02% .................................................0.04%
Effective tax rate ...................................................................................................................0.04% .................................................0.07%

25The Company is subject to Japanese corporate income taxes on all of its taxable income. However, under the Special Taxation Measures Law of Japan,
or the STML, an investment corporation is allowed to deduct dividends of accounting profits, or dividend distributions, paid to investors from its taxable
income if certain tax requirements are satisfied. Such tax requirements include dividend distributions in excess of 90% of its taxable income for the
fiscal period as stipulated by Article 67-15 of the STML. Based on the distribution policy provided by Article 33-2 of the Articles of Incorporation, theCompany made a dividend distribution of approximately 100% of retained earnings in the amount of ¥2,897 million ($23,630 thousand) and treated it
as tax deductible dividend. The Company will not distribute the dividends in excess of accounting profit under Article 33-3 of the Articles ofIncorporation.
9. Per Share Information
The following table summarizes information about net assets per share and net income per share at September 30, 2002 and March 31, 2002, and forthe periods then ended:
Thousands of yen

For the period
from April 1, 2002
to September 30, 2002

U.S. dollars

For the period
from May 11, 2001
to March 31, 2002

For the period
from April 1, 2002
to September 30, 2002

Net assets at period end per share

510,424

521,591

4,163

Net income per share

12,853

23,952

105

14,983**Net income per share for the operating period from September 10, 2001 to March 31, 2002.

In calculating the net assets per share, the amount of the net assets included the cash distribution declared in the subsequent period.
Net income per share is computed by dividing net income by the weighted average number of shares outstanding during each period. The weighted
average number of shares used in the calculation was 225,400 shares for the period from April 1, 2002 to September 30, 2002 and 160,400 shares forthe period from May 11, 2001 to March 31, 2002. 225,400 shares for the period from April 1, 2002 to September 30, 2002 were calculated as if 65,000
additional shares issued on May 8th, 2002 had been issued on April 1, 2002. Diluted net income per share has not been presented since no warrants andconvertible bonds were outstanding during the period.
10. Related Party Transactions
The Company entered into the following related party transactions with Mitsubishi Estate Co. Ltd. and certain affiliates of Mitsubishi Estate Co., Ltd.,the Tokio Marine and Fire Insurance Co., Ltd., and Mitsui & Co., Ltd.
Thousands of yen

For the period
from May 11, 2001
to March 31, 2002

Purchase of the properties

4,810,000

17,413,000

39,233,279

Property management fees

596,476

425,423

4,865,221

Commissions for property acquisition

6

For the period
from April 1, 2002
to September 30, 2002—

400,000—

Utilities

74,367

66,191

606,585

Insurance

4,010

35,55732,709Other operating expenses

1,640

1,300

13,380

Other commissions

—

2,936

—

Due diligence costs

500

—

4,078

125,201

15,331

1,021,217

Repair and maintenance2

U.S. dollars

For the period
from April 1, 2002
to September 30, 2002

11. Breakdown of Property-Related Revenues and Expenses
For the period from April 1, 2002 to September 30, 2002 and the period from May 11, 2001 to March 31, 2002
Thousands of yen

U.S. dollars

For the period
from April 1, 2002
to September 30, 2002

For the period
from May 11, 2001
to March 31, 2002

Property-Related Revenues

7,910,283

6,492,518

64,521,069

Rental Revenues

7,889,166

6,427,133

64,348,822

Rental revenues

5,520,576

4,571,649

45,029,165

Common area charges

1,442,741

1,181,816

11,767,866

Parking revenues

306,922

247,2092,503,445

Other rental revenues

618,927

426,459

5,048,346

21,11765,385

172,247

Cancellation charges

11,03051,79089,968Other miscellaneous revenues

10,087

13,59582,2793,893,229

2,859,570

31,755,543

Property management fees

1,121,506

915,169

9,147,681

Utilities expenses

769,500

493,413

6,276,507

Property and other taxes

628,567

4,146

5,126,978

Casualty insurance

20,205

15,246

164,807

Non-Rental Revenues

Property-Related Expenses

For the period
from April 1, 2002
to September 30, 2002

Repairs and maintenance

152,207

321,486

1,241,493

Depreciation

1,194,194

1,100,006

9,740,571

Other rental expenses
Profits

7,050

10,10457,506

4,017,054

3,632,948

32,765,526

12. Leases
The Company leases office buildings and earns rent income. The future minimum lease payments to be received by the Company on non-cancelable
leases at September 30, 2002 and at March 31, 2002 were as follows:
Thousands of yen

As of September
30, 2002

U.S. dollars

As of March
31, 2002

As of September
30, 2002

Due within one year

2,856,633

2,132,045

23,300,435

Due after one year

17,557,395

13,278,205

143,208,765

Total

20,414,028

15,410,250

166,509,200

2

7REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders ofJapan Real Estate Investment Corporation

We have audited the accompanying balance sheets of Japan Real Estate Investment Corporation as of September 30, 2002 and March 31, 2002, thestatements of income and retained earnings, and changes in shareholders’ equity for the six months ended September 30, 2002 and for the period fromMay 11, 2001 (date of incorporation) to March 31, 2002, all expressed in yen. Our audits were made in accordance with auditing standards, proceduresand practices generally accepted and applied in Japan and, accordingly, included such tests of the accounting records and such other auditing
procedures as we considered necessary in the circumstances.
In our opinion, the accompanying financial statements, expressed in yen, present fairly the financial position of Japan Real Estate Investment
Corporation at September 30, 2002 and March 31, 2002, and the results of its operations for the six months ended September 30, 2002 and for theperiod from May 11, 2001 (date of incorporation) to March 31, 2002, in conformity with accounting principles and practices generally accepted in Japan.
The U.S. dollar amounts in the accompanying financial statements are presented solely for convenience. We have also reviewed the translation of yen
amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 1 to the financial statements.

Shin Nihon & Co.
Tokyo, Japan
December 20, 2002

See Note 1 to the financial statements, which explains the basis of presentation of the financial statements of Japan Real Estate Investment
Corporation under Japanese accounting principles and practices.

28

Growth is created by “the 4 S’s”

Corporate Data
As of September 30, 2002

Executives

Transfer Agent and Registration

Executive Director: Yoneichiro Baba

The Sumitomo Trust & Banking Co., Ltd.

Supervisory Directors: Tsunaya Kawamura

5-33, Kitahama 4-chome, Chuo-ku, Osaka 540-8639, Japan

Kenji Kusakabe
Independent Public Accountants
Paid-in Capital> SINCERITY¥112,152,420,000
Highly transparent management,
conducted with integrity and honesty

Shin Nihon & Co.
Hibiya Kokusai Bldg.
2-3, Uchisaiwai-cho 2-chome, Chiyoda-ku, Tokyo 100-0011, Japan> S TA B I L I T Y
A steadily increasing cash flow derived fromcomprehensive investment strategies

Number of Shares Issued
225,400

Incorporation
May 11, 2001

Number of Shareholders
18,083

Executive Office
Japan Real Estate Investment Corporation

Stock Listing

3-1, Marunouchi 3-chome, Chiyoda-ku, Tokyo 100-0005, JapanTokyo Stock Exchange
For further information, please contact :> STRENGTH OF WILL

Securities CodeJapan Real Estate Asset Management Co., Ltd.

8952

Planning Department, Manager
Toshiya Kobayashi

Determination to make investment strategies forsolid growth a reality> SOUNDNESS

Tel: 81-3-3211-7921
Fax: 81-3-3212-8886

Nurturing a healthy financial position toultimately increase shareholder value

E-mail: toshiya-kobayashi@j-rea.co.jp

We believe that our growth is created by “the 4 S’s”: sincerity, stability, soundness and strength of will. By
consistently incorporating these concepts into management guidelines, we are confident that the success we are
currently enjoying will be far-reaching, and will allow us to continue to fulfill our responsibility to our shareholders.

This semiannual report includes translations of documents originally filed under the Securities and Exchange Law of Japan. This report was prepared in English solely for theconvenience 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 contained in this report.
Estimates for Japan Real Estate Investment Corporation’s future operating results contained in this semiannual report are forward-looking statements based on information
currently available and are subject to risks and uncertainties. Consequently, these projections should not be relied upon as the sole basis for evaluating Japan Real Estate Investment
Corporation. Actual results may differ substantially from the projections depending on a number of factors.

2

9

JAPANREAL
ESTATEINVESTMENTCORPORATION

http://www.j-re.co.jp

G r o w t h i s c r e a t e d b y “ t h e 4 S ’s ”
SEPTEMBER

2002 SEMIANNUAL REPORTJAPAN REAL ESTATE INVESTMENT CORPORATIONSEPTEMBER 2002 SEMIANNUAL REPORTFOR THE PERIOD FROM APRIL 1, 2002 TO SEPTEMBER 30, 2002
Printed in Japan