J PRJapan Prime Realty Investment Corporation
Eighth Fiscal Period Business Report
July 1, 2005– December 31, 2005

PROFILE

Established on September 14, 2001, Japan Prime Realty Investment Corporation (“JPR” or“the Company”) is a closed-end corporate type fund that focuses on a geographically diverse
investment portfolio of office and retail properties. Through its investment activities, JPR
has received high credit ratings from rating agencies, reflecting the Company’s high-quality
portfolio, earnings stability and sound financial standing. As of December 31, 2005, JPR
had an investment portfolio totaling 202.6 billion yen on an acquisition basis, 441 tenants
and 42 properties, and is recognized as one of the top ranked diversified REITs in Japan.

< TARGE T PORTFOLIO >Other
CitiesRetailProperties

20 %

40 %
80 %

60 %

OfficeBuildings

Tokyo

Location

Asset Class< SOU ND FI NANCI ALS >(As of December 31, 2005)

SP

Moody’s

R&I

A-

A3

A+

C ONTENTS
H IGHLIGHTS 1

T O O UR I NVESTORS 2

ACTIVITY H IGHLIGHTS 5

P ORTFOLIO B REAKDOWN 3O VERVIEW O F T HE E IGHTH F ISCAL P ERIOD 4

D EFINING O UR P OSITION I N T HE J-R EIT M ARKET 6

P ROPERTY P ORTFOLIO 10

S UBSEQUENT ACTIVITY H IGHLIGHTS 9

REIT S TRUCTURE AND E XTERNAL S ERVICE P ROVIDERS 21

M ANAGEMENT ’ S D ISCUSSION AND A NALYSIS 24
JPR I NVESTMENT P OLICIES (R EFERENCE ) 43

F INANCIAL S TATEMENTS 30

U NITHOLDER I NFORMATION 42

M EMBERS OF THE B OARD 53

C ORPORATE D ATA 55

HIGHLIGHTS

EXTERNAL GROWTH>> Placing the utmost importance on profitability, JPR implemented measures toacquire new properties amid an increasingly competitive real estate market.
>> In the pursuit of stable external growth, JPR adopted a number of innovativeacquisition techniques to secure agreements for properties under construction
and development as well as the preferential option to purchase prime quality
real estate.
• Acquisition of a development property• Acquisition of preferred securities>> Striving to consistently enhance the quality of its investment portfolio, JPR
also sold certain properties.

INTERNAL GROWTH>> Enjoying favorable conditions in the leasing market and buoyed by its leasing
activities and efforts, JPR continued to attract new tenants and experienced
increases in rental rates.

RESULTS>> Despite the decline in gain on sale of real estate, results were more than
supported by the strong increase in real estate rental revenues. For thesix-month period ended December 31, 2005, operating revenues were ¥8,587
million while net income was ¥3,398 million. Spurred by improved results,
JPR paid a cash distribution of ¥6,411 per unit.

1

TO OUR INVESTORS

Consistent with its focus on stability and growth, Japan Prime Realty Investment
Corporation (“JPR” or “the Company”) continues to experience improved resultsin every facet of its business operations. In the eighth fiscal period ended
December 31, 2005, the Company enjoyed an upswing in asset scale, occupancy
and operating revenues and an increase in earnings across the board. Placing theutmost importance on the distribution of profits to its unitholders, JPR was particularly pleased to announce a cash distribution of ¥6,411 per unit. In addition to
exceeding cash distribution for the previous fiscal period, this distribution levelsignificantly surpassed our yardstick of ¥6,000.
Despite its short history, Japan’s real estate investment trust ( J-REIT) market ischaracterized by considerable activity, high growth and a consistent influx of new
entrants. As one of the pioneers in the market, JPR is distinguished by its experience and expertise complemented by its close collaboration with sponsor companies. From its innovative property acquisition techniques, proprietary Brand
Equity concept and environmental initiatives through its asset management company, Tokyo Realty Investment Management, Inc. (“TRIM”), JPR will continue
to set the de facto standard while contributing to mutual prosperity in concert
with unitholders, tenants, employees and the communities it serves.

Hirohito Kaneko
Executive Officer
Japan Prime Realty Investment Corporation

All amounts in millions of yen
unless otherwise stated

All amounts in millions of yen
unless otherwise stated

8th period ended December 31, 2005

7th period ended June 30, 2005

8th period ended December 31, 2005

Operating revenues

8,587

8,503

72.7

Operating expenses

4,603

4,549

39.0

Operating profits

3,985

3,955

33.7

Net income

3,398

3,376

28.8

Total assets

225,882

216,574

1,913.1

Interest-bearing liabilities

90,966

83,666770.4

Unitholders’ capital

115,432

115,432

977.7

Cash distributions

3,398

3,376

28.8

224,206

224,165

1,898.9

Cash distribution per unit (yen/U.S. dollars)

6,411

6,370

54.3

Funds from operations (FFO) per unit (yen/U.S. dollars)

8,896

8,214

75.3

Return on total assets (annualized)

3.0%

3.3%

—

Return on total unitholders’ equity (annualized)

5.7%

6.5%

—

Interest-bearing liabilities to total assets

40.3%

38.6%

—

Total unitholders’ equity per unit (yen/U.S. dollars)(*) The rate of ¥118.07=US$1.00, the foreign exchange rate on December 31, 2005, has been used for translation.

2

All amounts in millions of
U.S. dollars unless otherwise stated (*)

PORTFOLIO BREAKDOWNNOI** Breakdown by Location

Value Breakdown by Location

Other Cities(¥75,107 million)

Other Cities(¥2,318 million)

Tokyo CBDs*(¥90,001 million)

37.1%

Total Leased Floor Space by Location

300,579.10 m2¥5,860 million¥202,663 million

39.6%

44.4%

Other Cities(136,382.78 m2)

Tokyo CBDs*(¥2,170 million)

37.0%

Tokyo CBDs*(79,799.49 m2)
26.5%

45.4%

28.1%

23.4%

18.5%

Greater Tokyo(84,396.83 m2)

Greater Tokyo(¥1,372 million)

Greater Tokyo(¥37,555 million)

Total Leased Floor Space by Asset ClassNOI** Breakdown by Asset Class

Value Breakdown by Asset Class¥202,663 million

300,579.10 m2¥5,860 million
Retail Properties(¥1,694 million)

Retail Properties(¥57,250 million)
28.2%

Retail Properties(111,628.14 m2)

28.9%

37.1%

71.8%

71.1%

62.9%

Office Buildings(¥145,413 million)

Office Buildings(¥4,166 million)

Office Buildings(188,950.96 m2)*CBDs = Tokyo Central Business Districts**NOI = Net operating income

Total Leasable Floor Space and Occupancy Rate
Total leasable floor space (m2)

Portfolio Growth(%) Occupancy rate100

400,000

360,000

95

Accumulated
Investment

Properties¥202.66 billion¥197.65 billion

90¥163.65 billion

280,000

85¥139.65 billion

240,000

80

200,000

75

120,000

80,000

25

27

June
2002

Dec.
2002

18

¥72.66 billion¥40.73 billion

Dec.
2005

32
30

¥94.60 billion¥92.18 billion

70

June
2005

38

¥125.80 billion

160,00042

42¥179.63 billion
320,000

42

13

65

60

Nov.
2001

Dec.
2001

June
2002

Dec.
2002

June
2003

Dec.
2003

June
2004

Dec.
2004

June
2005

Dec.
2005

Purchase
Period

Nov.
2001

Dec.
2001

June
2003

Dec.
2003

June
2004

Dec.
2004

Note: Accumulated investment does not include miscellaneous acquisition expenses,
property tax, city-planning tax and consumption tax.

3

OVERVIEW OF THE EIGH TH FISCAL P ERIODOPERATING ENVIRONMENT

low rates of interest and the leverage effects when com-

Japan’s overall economy throughout the six-monthpared with equity yields, overall interest rate levels are

period ended December 31, 2005 exhibited continued

expected to remain favorable for a while.

signs of a moderate recovery. Buoyed by favorable

Under these circumstances, the real estate market,

operating conditions, a substantial turnaround in

JPR’s principal operating domain, was characterized bycorporate earnings contributed to an increase in demand

increasingly vigorous trading activity. Significant

for office buildings. As positive conditions in the corpo-

growth in the number of market participants and therate sector took hold, and businesses increasingly focused

inflow of money was balanced by property sellingon expansion, imbalance in supply and demand graduallyactivity in the corporate sector and the exit of private

pushed up rent rates and fueled the office building

funds and development projects. In light of the realleasing market.

estate trading market showing signs of overheating,

Positive conditions in the corporate sector prompted
an upswing in consumer spending. Following a pro-4

profitability experienced an overall decline with lessyield difference.

longed period of corporate restructuring, employment

Against the backdrop of a highly competitive market,

conditions gradually improved and signaled an increasea decline in overall property cap rates and increasing dif-in disposable incomes and a reversal of the deflationary

ficulty in the acquisition of prime real estate, JPR will

spiral. Driven by positive market sentiment and a rise incontinue to implement a selective approach in expanding

overall consumer confidence, demand for retail spaceits property portfolio, adopt innovative acquisition tech-increased to accommodate further expansion throughniques and reinforce ties with sponsor companies.

new store openings.

Closely monitoring economic, financial and market indi-

In the context of monetary and fiscal policies, move-cators, the Company is adjusting its diversified invest-

ments in interest rates contributed to mixed conditions

ment portfolio strategy and pursuing the selective acqui-

for the J-REIT market vis-a-vis competing financial

sition of development proposals. With the aim of main-

instruments. Impacted by the relative costs of debt andtaining a stable cash distribution per unit, JPR works toequity as well as the lag between policy initiatives andbalance asset scale expansion with efforts to reduce prop-

market activity, the J-REIT market is sensitive to a hosterty and individual tenant risks. JPR is committed toof economic and market indicators. During the six-enhancing asset management mobility and flexibility

month period ended December 31, 2005, the Bank ofwith the aim of stabilizing fund profitability. Since its

Japan and public authorities continued to adopt mone-

public listing, JPR has endeavored to achieve an estab-tary easing policies in quantitative terms to support

lished asset scale target of ¥300 billion. In light of recent

activity in securities markets. The ensuing decline inand forecast market conditions, the Company will con-interest rates made for favorable J-REIT market condi-

tinue to make every effort to meet this target within thetions. Even with the recent easing of monetary and fiscal

earliest and most prudent time frame possible, while also

policies, this is not expected to produce an increase infocusing on the key objective of a stable cash distribution

the official discount rate for some time. Given historic

per unit above ¥6,000.

ACT IVI T Y H IGHLIGH TS

Acquisitions
Housing Design Center Kobe
Located in West Kobe’s Harborland district, a vibranteconomic and cultural center, the Housing and Design
Center Kobe is a landmark building of the highest
quality. Situated in front of JR Kobe Station and threeminutes on foot from Kosoku Kobe Station, thebuilding consists of shops, office space and an
exhibition hall.

3,994.47

Site Area (m2):
Total Floor Space (m ):33,877.71

Structure/Floors:

SRC/S B2/11F

Completed:

June 1994

Site Area (m2):

2,047.22

Total Floor Space (m2):

14,706.36

Structure/Floors:

S/SRC B1/12F

Completed:

December 1994

Site Area (m2):

3,895.42

Total Floor Space (m2):

26,779.84

Structure/Floors:

S/SRC/RC
B2/11F

Completion:

December 2005

2

Tachikawa Business Center Building
The Tachikawa Business Center Building waspurchased in accordance with JPR’s fundamental
investment policies to acquire new office buildings inGreater Tokyo. The building is five minutes on footfrom Tachikawa Station, serviced by the JR Chuo
Line, Ome Line and Nambu Line. Consisting of
office space and parking facilities, the main tenant is
Ricoh Sales Co., Ltd.

Kawasaki Dice Building (Acquisition through Preferred Securities)
JPR acquired preferred securities from Kawasaki Dice
Special Purpose Company, supported by cash flows
from the Kawasaki Dice Building. Ideally locatedwithin close proximity to JR Kawasaki Station and
Keikyu Kawasaki Station, the Kawasaki Dice
Building houses a collection of retail outlets, restaurants, and a cinema complex. Although JPR has
invested in high-grade prominently located retailproperties, the Kawasaki Dice Building is considereda rare investment choice for the Company.

Divestments
In accordance with its fundamental investment policy, JPR sold the Park East Sapporo and the SK Hiroshima Building during theperiod under review. The properties were sold after examining the impact on dividends, future property prices and earnings potential, portfolio composition and diversification, and other factors. Sale prices of ¥1,040 million for the SK Hiroshima Building and¥2,400 million for the Park East Sapporo represent gains of approximately ¥38 million and ¥177 million, respectively, after
deducting sales expenses.

5

DEFINING OUR POSITION IN THE J-REIT MARKETJPR has established a firm presence in the J-REIT

occupancy, operating revenues and property values andmarket, recognized for its experience and expertise.

under specific circumstances undertakes property sale.

Inherent in this position of strength, are the unique

JPR was again a frontrunner among J-REITs in the salecharacteristics that define the Company providing theof investment properties and selectively adopts this tech-platform for stable profit and growth.

nique in an effort to increase portfolio quality.

Sponsor Collaboration
GROWTH POTENTIAL

In addition to its close ties with sponsor companies
including Tokyo Tatemono Co., Ltd., Meiji Yasuda Life

An Investment Portfolio that Emphasizes Growth andInsurance Company, Yasuda Real Estate Co., Ltd. andQuality (External Growth)

Sompo Japan Insurance Inc., JPR is distinguished as theAmid intense competition for the

only J-REIT linked to a major

acquisition of prime properties, JPR

general contractor, namely Taisei

pursues select opportunities both

Corporation. This provides thethrough sponsor collaboration andopportunity to quickly secure proper-

open-market negotiation.

ties that have the potential of reaping

Complementing these avenues, JPR

significant investor benefits. Amid ais increasing its exposure in develop-

real estate market showing signs ofment proposals, the result of its

overheating and characterized byforward-looking posture and a comprehensive analysis of

declining yields and reduced disparity among properties,risks and returns. Distinguishing itself from competitors,

sponsor collaboration contributes to property acquisition

JPR also adopts innovative acquisition techniques such

at appropriate prices, terms and conditions. As ofas the acquisition of preferred securities.

December 31, 2005, 24 properties representing 57.1% of

During the fiscal period under review, JPR acquired

the total portfolio were acquired through sponsor collab-

preferred securities from Kawasaki Dice Special Purpose

oration. On an acquisition price basis, this equated toCompany. Through this investment, JPR maintains¥117,800 million, or 58.1% of the total. As recent exam-

preferential options to purchase the Kawasaki Dice

ples, the previously mentioned preferred securities were

Building in the event of sale. In this manner, theacquired through Tokyo Tatemono Co., Ltd. ThroughCompany is pursuing growth-type retail properties andits links with Taisei Corporation, JPR has also executedenhancing its ability to avoid exposure to excessive

agreements for the acquisition of two properties cur-market competition.

rently under construction. As each sponsor company is a

Through renovation and upgrade, JPR also increases
6

shareholder of TRIM, JPR maintains strict criteria

toward transactions with interested parties for theassessment of probable maximum loss associated withpurpose of avoiding conflicts of interest (please refer toearthquake damage, for example, the Company main-

page 23 for detailed information).

tains acceptable standards across its portfolio as well as awide geographic spread in order to minimize risk andInternal Growth Strategies that Contribute to Profit

ensure stable profitability.

GrowthEnhancing tenant satisfaction and maximizing

A Commitment to Tenant Satisfaction

economies of scale are two internal factors over which

Despite enjoying continuous high levels of portfolio

JPR retains significant control. Accordingly, JPR under-

occupancy, steady asset scale and revenue growth, JPR

takes the upgrade of properties through proactive reno-

remains committed to tenant satisfaction, safety, resource

vation, repairs and maintenance in an effort to generateconservation and environmental protection. In thisrent rate increases and improved

context, the Company is uniqueoccupancy. Through its property

within the industry in its pursuit ofmanagement company strategy, JPR

excellence and the implementation ofalso strives to curtail costs anda wide variety of initiatives. Chiefenhance efficiency.

among these initiatives is JPR’s Brand
Equity concept. In an effort to createa distinct and recognizable market

STABILITY

presence, an increasing number ofbuildings within the portfolio are adopting “JPR” as a

Portfolio Diversification amid Expanding Asset Scalepart of their name. In addition to this naming concept,

JPR maintains a flexible balance between its established

JPR has implemented its proprietary A/3S concept,

investment guidelines and fluctuating market conditions.

which emphasizes “Amenities” based on a three “S” plat-

In this context, the Company adheres to an investment

form of Service, Safety, and Saving energy. Anotherportfolio diversification policy based on a number of cri-aspect of JPR’s Brand Equity concept is the introduction

teria including asset class and geographic location. In

of a brand standard into all areas of the Company’s busi-

principle, JPR acquires office buildings and retail proper-

ness activities, divided along management (service, rapid

ties based on a ratio of 80:20, respectively. With regard

response and other factors) and building (safety andto their geographic location, the Company acquires 60%

energy-saving) lines. As a responsible corporate citizen,of its properties in Tokyo and 40% in other major cities.

JPR is addressing issues of safety, including concerns

With this as a key defining feature, portfolio diversifica-

relating to asbestos. Following a survey of its entire port-tion enables JPR to minimize a variety of risks. In its

folio, asbestos-compound spraying materials were identi7

fied in the MS Shibaura Building, the Fukuoka

maintain a high ratio of long-term fixed-rate financing to

Building, the Across Shinkawa Building Annex and thetotal financing.

Kawaguchi Center Building. With tenant safety a key

Complementing this fundamental policy, JPR also

concern, JPR has confirmed that in each of the afore-emphasizes a low interest-bearing debt ratio, strict LTV

mentioned buildings spraying materials are adequately

control and diverse and flexible fund procurement meth-sealed and in compliance with all relevant regulatory

ods. From a short-term perspective, JPR has supple-

requirements. Continuing on with this safety theme,

mented its existing line of credit with the establishment

JPR is installing or upgrading security and surveillanceof a commitment line of credit for the purpose of

systems on a progressive basis at all properties.

addressing refinance risk. From a long-term perspective,

Conscious of the environment and the need to conserve

JPR has established a registered limit for the flexible

scarce resources, the Company has undertaken an

issue of corporate bonds. Through these means, theupgrade of electric and toilet facilities

Company strives to further sustain

in an effort to save energy. From thestable financial operations.

perspective of enhancing tenant satisfaction, JPR has selectively imple-

In Summary

mented rooftop gardens, designatedAs an early entrant in the J-REIT

areas for smokers and installed green-market, JPR boasts a wealth of expe-

ery in entrance halls and common

rience. In an increasingly competitive

areas. Entrance halls decorated tomarket, the Company endeavors tomatch seasonal events are a highlight of JPR’s amenity

leverage this experience, its defining characteristics andand service initiatives. Through these and other initia-

inherent, diverse strengths to secure and maintain atives, JPR is committed to securing tenant satisfaction,

leading role. From the perspectives of both growthincreasing occupancy and ensuring stable revenues.

potential and stability, JPR enjoys a number of uniquefeatures that sets it apart from its competitors. We are

A Robust Financial Position and Structure

confident that the Company is well positioned for

In an effort to sustain stable financial operations, JPR

growth and will continue to deliver significant returns tofocuses on maintaining profits to offset risks associatedunitholders.

with a rise in interest rates. To this end, JPR adopts afundamental policy for funds procurement that determines the optimum balance of long-term fixed-rate
financing and fixed-rate corporate bonds with short-term
floating-rate financing. At the same time, JPR strives to8

SUBSEQ UEN T ACT IVI T Y H IGHLIGH TS

Acquisitions
JPR Jingumae 432
The JPR Jingumae 432 is located in an expansive andvibrant commercial area known for a large number ofleading fashion and luxury brand stores. With the
opening of Omotesando Hills, a large-scale commercial redevelopment, the area is also earmarked for further growth. Conveniently located approximately threeminutes on foot from Meiji-Jingumae Station on theTokyo Metro Chiyoda Line, access will further
improve with the planned opening of Tokyo Metro
No. 13 Line in 2007.

218.21Site Area (m2):

Total Floor Space (m ): 1,066.81
2Structure/Floors:

S/SRC B1/7F

Completed:

March 2006

Location:

Shibuya-ku,
Tokyo

Acquisition Date:

March 2006

Acquisition Price:¥4,460 million

Cupo-la Main Building
The Cupo-la Main Building is being
constructed as part of the 1-1 Kawaguchi
Redevelopment Project, a large-scale
project encompassing commercial andpublic facilities, as well as high-riseurban-type residential complexes. The
city of Kawaguchi is approximately 25
minutes by train to the Tokyo city center.
JPR plans to acquire a retail facility portion of the development.

15,008.28

Site Area (m2):

Total Floor Space (m ): 48,321.96
2Structure/Floors:

S/RC/SRC B2/10F

Completion:

March 2006

Location:

Kawaguchi-shi,
SaitamaAcquisition Date:

March 2006

Acquisition Price:¥2,100 million

Site Area (m2):

9,377.28

Rise Arena Building (Higashi-Ikebukuro 4-chome Redevelopment Project)
The Rise Arena Building is under construction at theHigashi-Ikebukuro 4-chome Redevelopment Project.
This building will be a state-of-the-art office complex
near Sunshine City, a large shopping center in the commercial area of Ikebukuro. It is conveniently located one
minute on foot from Higashi-Ikebukuro Subway
Station and nine minutes on foot from Ikebukuro
Station, a major hub serviced by JR, Seibu, and several
subway lines.

Total Floor Space (m2): 37,596.19
Structure/Floors:

S/SRC/RC B2/15F

Completed:

January 2007 (planned)

Location:

Toshima-ku, Tokyo

Acquisition Date:

March 2007 (planned)

Acquisition Price:¥5,467 million

Note: In the event profitability improves as a result of efforts by
the seller to attract tenants, the acquisition price is subject
to revision based on a predetermined formula.

9

PROPERT Y PORTFOLIO

Locations of Portfolio Properties
A Tokyo CBDs
Office A-11 Shinjuku-ku
Office A-12 Office A-9
Office A-5
Office A-3
Office A-4
Chiyoda-ku Office A-1
Shibuya-ku
Office A-2
Office A-8
Office A-13
Retail A-1
Chuo-ku
Office A-6
Retail A-2

Hokkaido
C – 10

Minato-ku

Office A-7
Office A-10

Shinagawa-ku

B Greater Tokyo
Saitama

Office B-6
Office B-8

Retail B-1 Office B-7
Tokyo

Office B-1
Kanagawa

Office B-5
Office B-3

TohokuOffice B-2

Retail B-2

C – 12Chiba

2Hokuriku
C – 1

B
A
C – 4

C – 16 19 Chubu

Osaka

C – 2

4

17

1

3

C – 6
C – 13

Shikoku

Kinki

Kyushu
C – 7

14 18

C – 9

A

Tokyo CBDs

Chiyoda, Chuo, Minato, Shinjuku,
Shinagawa and Shibuya Wards

B

Greater Tokyo

All other areas of Tokyo and Chiba,
Kanagawa and Saitama Prefectures

C

Other Cities

All other areas in Japan

Okinawa10

A Tokyo CBDs
■

■ A-1
■ A-2
■ A-3
■ A-4
■ A-5
■ A-6
■ A-7
■ A-8
■ A-9
■ A-10■ A-11■ A-12■ A-13● A-1● A-2

Kanematsu Bldg.
Kanematsu Bldg. Annex
JPR Ningyo-cho Bldg.
Shin-Kojimachi Bldg.
JPR Crest Takebashi Bldg.
MS Shibaura Bldg.
Gotanda First Bldg.
Fukuoka Bldg.
JPR Ichigaya Bldg.
Oval Court Ohsaki Mark West
Shinjuku Square Tower
BYGS Shinjuku Bldg.
Across Shinkawa Bldg. Annex
JPR Shibuya Tower Records Bldg. (Retail)JPR Daikanyama (Retail)

B Greater Tokyo
■

■ B-1
■ B-2
■ B-3
■ B-5
■ B-6
■ B-7
■ B-8
● B-1
● B-2

Arca East
JPR Chiba Bldg.
JPR Yokohama Nihon Odori Bldg.
Shinyokohama 2nd Center Bldg.
Kawaguchi Center Bldg.
JPR Ueno East Bldg.
Tachikawa Business Center Bldg.
Tanashi ASTA (Retail)Tsurumi fuga 1 (Retail)

C Other Cities—Hokkaido, Tohoku and Hokuriku■■ C-10■ C-12■ C-1● C-2

NORTH 33 Bldg.
Sompo Japan Sendai Bldg.
Niigata Ekinan Center Bldg.
Strasse Ichibancho (Retail)

C Other Cities—Osaka
■

■ C-2
■ C-4
■ C-17● C-1● C-3

Meiji Yasuda Life Osaka Umeda Bldg.
Tokyo Tatemono Honmachi Bldg.
Dojima F Bldg.
JPR Umeda Loft Bldg. (Retail)Benetton Shinsaibashi Bldg. (Retail)

C Other Cities—Chubu, Kinki and Shikoku■■ C-16■ C-19■ C-13■ C-6● C-4

JPR Nagoya Sakae Bldg.
UFJ Central Leasing Head Office Bldg.
Sompo Japan Wakayama Bldg.
JPR Takamatsu Bldg.
Housing Design Center Kobe (Retail)

C Other Cities—Kyushu and Okinawa
■

■ C-7
■ C-9
■ C-14■ C-18JPR Hakata Bldg.
JPR Naha Bldg.
Tenjin 121 Bldg.
Semba Fukuoka Bldg.

11

Location
Category

Tokyo
CBDs

Asset
Class

No.

OfficeA-1

Kanematsu Bldg.

Office

A-2

OfficeA-3

Name

Location

Completed

Acquired

Chuo-ku, Tokyo

1993. 2

2001.12

Kanematsu Bldg. Annex

Chuo-ku, Tokyo

1993. 2

2001.12JPR Ningyo-cho Bldg.

Chuo-ku, Tokyo

1989.122001.11

OfficeA-4

Shin-Kojimachi Bldg.

Chiyoda-ku, Tokyo

1984.10

2001.11–2004.11

OfficeA-5

JPR Crest Takebashi Bldg.

Chiyoda-ku, Tokyo

1999. 92002. 6

OfficeA-6

MS Shibaura Bldg.

Minato-ku, Tokyo

1988. 2

2003. 3

OfficeA-7

Gotanda First Bldg.

Shinagawa-ku, Tokyo

1989. 7

2003. 7

OfficeA-8

Fukuoka Bldg.

Chuo-ku, Tokyo

1990. 5

2003.10–2005. 4

OfficeA-9

JPR Ichigaya Bldg.

Chiyoda-ku, Tokyo

1989. 3

2004. 5

OfficeA-10

Oval Court Ohsaki Mark West

Shinagawa-ku, Tokyo

2001. 6

2004. 6

OfficeA-11

Shinjuku Square Tower

Shinjuku-ku, Tokyo

1994.10

2004. 7

OfficeA-12

BYGS Shinjuku Bldg.

Shinjuku-ku, Tokyo

1985. 4

2004.11–2005. 4

OfficeA-13

Across Shinkawa Bldg. Annex

Chuo-ku, Tokyo

1994. 6

2004.11RetailA-1

JPR Shibuya Tower Records Bldg.

Shibuya-ku, Tokyo

1992. 2

2003. 6

RetailA-2

JPR Daikanyama

Shibuya-ku, Tokyo

2002. 7

2004.10

OfficeB-1

Arca East

Sumida-ku, Tokyo

1997. 3

2001.11

OfficeB-2

JPR Chiba Bldg.

Chiba, Chiba

1991. 1

2001.12

Total

GreaterTokyo

OfficeB-3

JPR Yokohama Nihon Odori Bldg.

Yokohama, Kanagawa

1989.10

2001.11

OfficeB-5

Shinyokohama 2nd Center Bldg.

Yokohama, Kanagawa

1991. 8

2002. 9

OfficeB-6

Kawaguchi Center Bldg.

Kawaguchi, Saitama

1994. 2

2004. 2

OfficeB-7

JPR Ueno East Bldg.

Taito-ku, Tokyo

1992.10

2004. 3

OfficeB-8

Tachikawa Business Center Bldg.

Tachikawa, Tokyo

1994.122005. 9RetailB-1

Tanashi ASTA

Nishitokyo, Tokyo

1995. 2

2001.11RetailB-2

Tsurumi fuga 1

Yokohama, Kanagawa

1985. 92001.11

OfficeC-1

Niigata Ekinan Center Bldg.

Niigata, Niigata

1996. 3

2001.11

OfficeC-2

Meiji Yasuda Life Osaka Umeda Bldg.

Osaka, Osaka

2000. 6

2001.12

OfficeC-4

Tokyo Tatemono Honmachi Bldg.

Osaka, Osaka

1970. 2

2001.11

OfficeC-6

JPR Takamatsu Bldg.

Takamatsu, Kagawa

1982. 92001.12

OfficeC-7

JPR Hakata Bldg.

Fukuoka, Fukuoka

1985. 6

2001.11

OfficeC-9

JPR Naha Bldg.

Naha, Okinawa

1991.10

2001.11

OfficeC-10

NORTH 33 Bldg.

Sapporo, Hokkaido

1992. 2

2002. 6

Office

C-11

Park East Sapporo(3)Sapporo, Hokkaido

1985.11

2002. 6

Total

Other
Cities

OfficeC-12

Sompo Japan Sendai Bldg.

Sendai, Miyagi

1997.12

2002. 6

OfficeC-13

Sompo Japan Wakayama Bldg.

Wakayama, Wakayama

1996. 7

2002. 6

OfficeC-14

Tenjin 121 Bldg.

Fukuoka, Fukuoka

2000. 7

2002. 6

Office

C-15

SK Hiroshima Bldg.(3)Hiroshima, Hiroshima

2002.10

OfficeC-16

JPR Nagoya Sakae Bldg.

Nagoya, Aichi

OfficeC-17

Dojima F Bldg.

Osaka, Osaka

1989.122003. 1 (building)1986.12 (parking)1993.10

OfficeC-18

Semba Fukuoka Bldg.

Fukuoka, Fukuoka

1993. 2

2004. 6

Office

C-19

UFJ Central Leasing Head Office Bldg.

Nagoya, Aichi

1991. 32005. 3RetailC-1

JPR Umeda Loft Bldg.

Osaka, Osaka

1990. 4

2003.5–7

RetailC-2

Strasse Ichibancho

Sendai, Miyagi

2002.10

2005. 2RetailC-3

Benetton Shinsaibashi Bldg.

Osaka, Osaka

2003. 2

2005. 5RetailC-4

Housing Design Center Kobe

Kobe, Hyogo

1994. 6

2005. 9

Total

Total

12

Notes: (1) Acquisition price does not include miscellaneous expenses of acquisition (real estate agent’s fee and consumption tax).
(2) Percentages and ratios are rounded to the first decimal point. (3) The ratio of proprietary ownership is shown on the deed for the land.

2003. 92004. 1

Acquisition
Price (1)Appraisal
Value

Ownership (3)Site Area(Millions of yen)%of Total (2)(Millions of yen)

(%)

(m2)

Total Leasable
Floor Space (m2)( JPR’s portion)

Occupancy
Rate (2)# ofTenants

RentalRevenue(Thousands of yen)%of Total (2)16,2768.0%

13,50079.4%

1,751.13

7,994.02

100.0%

10434,317

5.2%

2,874

1.4%

2,810

79.4%

679.06

2,291.13

100.0%

1

105,738

1.3%

2,100

1.0%

2,040

100.0%

550.062,788.98

100.0%

4

100,377

1.2%

2,420

1.2%

2,570

77.3%

657.803,319.33

100.0%

11

112,329

1.3%

4,000

2.0%

3,440

100.0%

636.903,265.34

100.0%

9132,824

1.6%

11,2005.5%

12,90036.0%

8,992.18

14,429.09

100.0%

8521,002

6.2%

2,920

1.4%

3,080

61.8%

1,551.19

4,243.58

100.0%

2

133,918

1.6%

2,920

1.5%

2,900

21.8%

1,302.17

1,937.40

100.0%

2

102,489

1.3%

5,100

2.5%

5,300

100.0%

1,058.04

4,186.09

100.0%

9

188,019

2.2%

3,500

1.7%

4,140

27.1%

4,006.00

4,088.44

100.0%

4

171,879

2.1%

10,000

4.9%

9,350

29.3%

8,409.52

10,982.03

89.6%

21

249,532

3.0%

11,821

5.8%

11,90075.0%

3,522.46

11,363.35

90.6%

22

417,076

5.0%

710

0.4%

739

100.0%

858.481,253.39

100.0%

4

47,8670.6%

12,0005.9%

15,100100.0%

1,010.47

8,076.85

100.0%

1

345,576

4.1%

2,160

1.1%

1,750

100.0%

277.12653.99100.0%

4

41,9240.5%

90,001

44.4%

91,51935,262.58

80,873.01

97.3%

112

3,104,875

37.1%

5,880

2.9%

5,990

41.1%

3,755.01

7,022.76

93.1%

5203,046

2.4%

2,350

1.2%

2,050

100.0%

1,382.35

5,562.97

90.5%

28

143,237

1.7%

2,927

1.4%

2,450

100.0%

1,100.59

6,066.53

97.5%

11

139,077

1.7%

920

0.5%

1,230

50.0%

841.712,641.19

96.0%

14

68,124

0.8%

8,100

4.0%

9,650

86.5%

4,524.61

15,478.43

99.5%

38

498,415

6.0%

3,250

1.6%

3,660

100.0%

1,242.97

6,512.45

100.0%

9

192,387

2.3%

888

0.4%

922

16.9%

2,047.22

1,747.13

100.0%

4

28,1660.3%

10,2005.0%

13,00042.1%

12,326.30

31,121.71

100.0%

1

596,400

7.1%

64.4%

3,040

1.5%

3,630

37,55518.5%

42,582

1,962.18

9,578.60

100.0%

1

145,200

1.7%

29,182.94

85,731.77

98.4%

111

2,014,054

24.0%

2,140

1.1%

2,130

8,300

4.1%

9,160

52.7%

2,706.99

5,205.82

100.0%

12

134,255

1.6%

33.3%

5,999.33

9,600.62

94.2%

24

360,781

4.3%

4,150

2.0%

4,060

64.3%

1,432.64

7,210.25

98.8%

10

251,534

3.0%

2,130

1.1%

1,400

100.0%

1,407.78

5,037.06

85.6%

29

102,082

1.2%

2,900

1.4%

2,760

100.0%

1,214.63

6,581.15

87.7%

26

157,214

1.9%

1,560

0.8%

1,480

100.0%

959.87

3,947.69

84.6%

14

99,297

1.2%

3,700

1.8%

2,910

100.0%

1,382.12

6,642.98

96.9%

23

174,580

2.1%

—

—

—

—

—

—

—

—

102,106

1.2%

3,150

1.6%

3,420

100.0%

1,895.67

7,118.61

94.2%

13

194,448

2.3%

1,670

0.8%

1,680

100.0%

1,128.45

4,891.36

91.6%

16

112,813

1.3%

2,810

1.4%

2,650

52.2%

1,164.39

3,292.02

88.1%

12

112,292

1.3%

—

—

—

—

—

—

—

—

28,872

0.3%

4,550

2.2%

5,480

100.0%

992.31

5,461.90

100.0%

20

230,029

2.7%

2,140

1.1%

2,180

100.0%

668.11

3,941.40

84.9%

9121,420

1.5%

1,920

0.9%

2,050

100.0%

680.63

3,349.57

87.5%

5

82,627

1.0%

4,137

2.0%

4,230

100.0%

1,610.38

7,123.07

100.0%

1

193,754

2.3%

13,000

6.4%

13,910100.0%

3,518.68

18,586.97

100.0%

1

402,413

4.8%

4,200

2.1%

3,850

100.0%

648.81

2,861.91

100.0%

1

128,388

1.5%
(4)
(4)

5,430

2.7%

5,650

100.0%

609.315,303.98

100.0%

1

(4)

7,220

3.6%

7,500

100.0%

3,994.47

35,444.13

100.0%

1(4)

75,10737.1%

76,50032,014.57

141,600.49

96.3%

218

3,253,781

38.9%

202,663100.0%

210,601

96,460.09

308,205.26

97.2%

441

8,372,711

100.0%(3) The Park East Sapporo and the SK Hiroshima Building were sold during the 8th fiscal period.
(4) The Benetton Shinsaibashi Building and the Housing Design Center Kobe are leased to single tenants. JPR was unable to obtain the tenants’ approval
to disclose rental information.

13

O V E R V I E W O F P O R T F O L I O P R O P E R T I E S (As of December 31, 2005)

Tokyo CBDs
A -■
1
■

Chuo-ku, Tokyo

Kanematsu Bldg.

Chuo-ku, Tokyo

Kanematsu Bldg. Annex• Acquisition Price (millions of yen)

• Acquisition Price (millions of yen)

16,2762,874• % of Total• % of Total

8.0%

1.4%

• Site Area (m2)

• Site Area (m2)

1,751.13

679.06• Total Floor Space (m2)

• Total Floor Space (m2)

14,995.09

4,351.46• Structure/Floors• Structure/Floors

S/RC/SRC B2/13F

SRC B1/8F• Completed• Completed

February 1993

Chuo-ku, Tokyo

JPR Ningyo-cho Bldg.

February 1993

A -■
3
■

• Acquisition Price (millions of yen)

Chiyoda-ku, Tokyo

Shin-Kojimachi Bldg.
2,420• % of Total• % of Total

1.0%

1.2%

• Site Area (m2)

• Site Area (m2)550.06657.80• Total Floor Space (m2)

• Total Floor Space (m2)

4,117.70

5,152.98• Structure/Floors• Structure/Floors

SRC/RC B1/8F

SRC B1/9F• Completed• Completed

December 1989

Chiyoda-ku, TokyoJPR Crest Takebashi Bldg.
• Acquisition Price (millions of yen)

October 1984

A -■
5
■

Minato-ku, TokyoMS Shibaura Bldg.

• % of Total

A -■
6
■

• Acquisition Price (millions of yen)

4,000

11,200• % of Total

2.0%

5.5%
• Site Area

(m2)

(m2)

636.90• Total Floor Space (m2)

8,992.18• Total Floor Space (m2)

4,790.68• Structure/Floors

31,020.21• Structure/Floors

SRC B1/9F• Completed

SRC/RC/S B2/13F• Completed

September 1999

14

A -■
4
■

• Acquisition Price (millions of yen)

2,100

• Site Area

A -■
2
■

February 1988

Note 1: Acquisition price does not include miscellaneous expenses (real estate agent’s fee and consumption tax).
Note 2: Percentages and ratios are rounded to the first decimal point.
Note 3: Abbreviations under “Structure/Floors” indicate S: Steel-frame, RC: Reinforced concrete, and SRC: Steel-frame reinforced concrete.

Shinagawa-ku, Tokyo

Gotanda First Bldg.

A -■
7
■

• Acquisition Price (millions of yen)

Fukuoka Bldg.
• Acquisition Price (millions of yen)

2,920

2,920

• % of Total• % of Total

1.4%• Site Area

1.5%
• Site Area

(m2)

(m2)

1,551.19• Total Floor Space

1,302.17• Total Floor Space

(m2)

(m2)

10,553.34

11,627.74• Structure/Floors• Structure/Floors

SRC/RC B2/11F

SRC B2/10F• Completed• Completed

July 1989

Chiyoda-ku, Tokyo

JPR Ichigaya Bldg.

May 1990

A -■9■• Acquisition Price (millions of yen)

Shinagawa-ku, Tokyo

Oval Court Ohsaki Mark West

A -■
10
■

• Acquisition Price (millions of yen)

5,100

3,500

• % of Total• % of Total

2.5%

1.7%

• Site Area (m2)

• Site Area (m2)

1,058.04

4,006.00• Total Floor Space (m2)

• Total Floor Space (m2)

5,888.82

28,575.80• Structure/Floors• Structure/Floors

SRC B1/9F

S/SRC B2/17F• Completed• Completed

March 1989

Shinjuku-ku, Tokyo

Shinjuku Square Tower• Acquisition Price (millions of yen)

June 2001

A -■
11
■

Shinjuku-ku, TokyoBYGS Shinjuku Bldg.

• % of Total

A -■
12
■

• Acquisition Price (millions of yen)

10,00011,821• % of Total

4.9%• Site Area

A -■
8
■

Chuo-ku, Tokyo

5.8%• Site Area

(m2)

(m2)

8,409.52• Total Floor Space (m2)

3,522.46• Total Floor Space (m2)

78,796.00• Structure/Floors

25,733.10• Structure/Floors

S/RC/SRC B4/30F• Completed

SRC B2/14F• Completed

October 1994

April 1985

15

Chuo-ku, Tokyo

Across Shinkawa Bldg. Annex

A -■
13
■

• Acquisition Price (millions of yen)A -●1 (Retail)■Shibuya-ku, Tokyo

JPR Shibuya Tower Records Bldg.
• Acquisition Price (millions of yen)710

12,000• % of Total• % of Total

0.4%• Site Area

5.9%
• Site Area

(m2)

(m2)

858.48• Total Floor Space

1,010.47• Total Floor Space

(m2)

(m2)

5,535.90

8,449.56• Structure/Floors• Structure/Floors

S/SRC B2/10F

SRC/S B3/8F• Completed• Completed

June 1994

February 1992

Greater TokyoA -●2 (Retail)■Shibuya-ku, TokyoJPR Daikanyama

B -■
1
■

Sumida-ku, Tokyo

Arca East• Acquisition Price (millions of yen)

• Acquisition Price (millions of yen)

5,880

2,160
• % of Total• % of Total

2.9%

1.1%
• Site Area (m2)

• Site Area (m2)

3,755.01

277.12• Total Floor Space (m2)

• Total Floor Space (m2)34,281.86

668.09• Structure/Floors• Structure/Floors

S/SRC B3/19F

RC B2/2F• Completed• Completed

March 1997

July 2002

B -■
2
■

Chiba, Chiba

JPR Chiba Bldg.
• Acquisition Price (millions of yen)

Yokohama, Kanagawa

JPR Yokohama Nihon Odori Bldg.
• Acquisition Price (millions of yen)

2,350
• % of Total

2,927• % of Total

1.2%• Site Area

1.4%
• Site Area

(m2)

(m2)

1,382.35• Total Floor Space (m2)

1,100.59• Total Floor Space (m2)

9,072.57• Structure/Floors

9,146.52• Structure/Floors

S/SRC B1/13F• Completed

January 199116

SRC B1/11F• Completed

October 1989

B -■
3
■

Yokohama, Kanagawa

Shinyokohama 2nd Center Bldg.

B -■
5
■

• Acquisition Price (millions of yen)

Kawaguchi, Saitama

Kawaguchi Center Bldg.
• Acquisition Price (millions of yen)

920

8,100

• % of Total• % of Total

0.5%• Site Area

B -■
6
■

4.0%
• Site Area

(m2)

(m2)

841.71• Total Floor Space

4,524.61• Total Floor Space

(m2)

(m2)

7,781.93

28,420.85• Structure/Floors• Structure/Floors

S/SRC B2/12F

S/SRC B2/15F• Completed• Completed

August 1991

Taito-ku, Tokyo

JPR Ueno East Bldg.

February 1994

B -■
7
■

• Acquisition Price (millions of yen)Tachikawa, Tokyo

Tachikawa Business Center Bldg.

B -■
8
■

• Acquisition Price (millions of yen)

3,250

888

• % of Total• % of Total

1.6%

0.4%

• Site Area (m2)

• Site Area (m2)

1,242.97

2,047.22• Total Floor Space (m2)

• Total Floor Space (m2)

8,490.44

14,706.36• Structure/Floors• Structure/Floors

S/SRC B1/8F

S/SRC B1/12F• Completed• Completed

October 1992

Nishitokyo, Tokyo

Tanashi ASTA

December 1994

B -●1 (Retail)■Yokohama, Kanagawa

Tsurumi fuga 1• Acquisition Price• Acquisition Price(millions of yen)(millions of yen)

10,200• % of Total

B -●2 (Retail)■3,040• % of Total

5.0%• Site Area (m2)

12,326.30• Total Floor Space

1.5%• Site Area (m2)

1,962.18(m2)• Total Floor Space (m2)80,675.27

13,543.32• Structure/Floors

SRC B2/17F• Completed

February 1995

• Structure/Floors

SRC B2/7F• Completed

September 1985

17

Other Cities — Hokkaido, Tohoku and Hokuriku
Sapporo, Hokkaido

NORTH 33 Bldg.

C -■
10
■

• Acquisition Price (millions of yen)

Sompo Japan Sendai Bldg.
• Acquisition Price (millions of yen)

3,700

3,150

• % of Total• % of Total

1.8%• Site Area

C -■
12
■

Sendai, Miyagi

1.6%• Site Area

(m2)

(m2)

1,382.12• Total Floor Space

1,895.67• Total Floor Space

(m2)

(m2)

10,568.23

10,783.52• Structure/Floors• Structure/Floors

SRC B1/12F

SRC B1/12F• Completed• Completed

February 1992

Niigata, Niigata

Niigata Ekinan Center Bldg.

December 1997

C -■
1
■

• Acquisition Price (millions of yen)

Sendai, Miyagi

Strasse IchibanchoC -●2 (Retail)■• Acquisition Price (millions of yen)

2,140

4,200

• % of Total• % of Total

1.1%

2.1%

• Site Area (m2)

• Site Area (m2)

2,706.99

648.81• Total Floor Space (m2)

• Total Floor Space (m2)

19,950.42

3,445.80• Structure/Floors• Structure/Floors

S/SRC B1/10F

RC/S B1/8F• Completed• Completed

March 1996

October 2002

Other Cities — Osaka
Osaka, Osaka

Meiji Yasuda Life Osaka Umeda Bldg.
• Acquisition Price (millions of yen)

C -■
2
■

Osaka, Osaka

Tokyo Tatemono Honmachi Bldg.
• Acquisition Price (millions of yen)

8,300
• % of Total

4,150• % of Total

4.1%• Site Area

2.0%
• Site Area

(m2)

(m2)

5,999.33• Total Floor Space (m2)

1,432.64• Total Floor Space (m2)

52,982.94• Structure/Floors

14,619.52• Structure/Floors

S/SRC B2/31F• Completed

June 200018

SRC B3/9F• Completed

February 1970

C -■
4
■

C -■
17
■

Osaka, Osaka

Dojima F Bldg.
• Acquisition Price (millions of yen)

Osaka, OsakaJPR Umeda Loft Bldg.
• Acquisition Price (millions of yen)

2,140

13,000• % of Total• % of Total

1.1%• Site Area

C -●1 (Retail)■6.4%• Site Area

(m2)

(m2)

668.11• Total Floor Space

3,518.68• Total Floor Space

(m2)

(m2)

5,696.01

17,897.56• Structure/Floors• Structure/Floors

SRC B2/9F

SRC B1/8F• Completed• Completed

October 1993

April 1990

Other Cities — Chubu, Kinki and Shikoku
Osaka, Osaka

Benetton Shinsaibashi Bldg.

C -●3 (Retail)■

Nagoya, Aichi

JPR Nagoya Sakae Bldg.

C -■
16
■

• Acquisition Price (millions of yen)

• Acquisition Price (millions of yen)

4,550

5,430
• % of Total• % of Total

2.2%

2.7%
• Site Area (m2)

• Site Area (m2)

992.31

609.31• Total Floor Space (m2)
• Total Floor Space (m2)

7,340.18
5,303.98• Structure/Floors
Building
Parking• Structure/Floors

S B2/10F• Completed
Building
January 2003
Parking December 1986

• Completed

February 2003

Wakayama, Wakayama

Sompo Japan Wakayama Bldg.
• Acquisition Price (millions of yen)

S B1/11F
S 1F

C -■
13
■

Nagoya, Aichi

UFJ Central Leasing Head Office Bldg.
• Acquisition Price (millions of yen)

1,670
• % of Total

4,137• % of Total

0.8%• Site Area

C -■
19
■

2.0%
• Site Area

(m2)

(m2)

1,128.45• Total Floor Space (m2)

1,610.38• Total Floor Space (m2)

6,715.07• Structure/Floors

10,201.44• Structure/Floors

S 9F• Completed

SRC B1/9F• Completed

July 1996

March 1991

19

Takamatsu, Kagawa

JPR Takamatsu Bldg.

C -■
6
■

• Acquisition Price (millions of yen)

Kobe, Hyogo

Housing Design Center Kobe
• Acquisition Price (millions of yen)

2,130

7,220

• % of Total• % of Total

1.1%• Site Area

C -●
4 (Retail)■3.6%• Site Area

(m2)

(m2)

1,407.78• Total Floor Space

3,994.47• Total Floor Space

(m2)

(m2)

7,409.08

33,877.71• Structure/Floors• Structure/Floors

SRC B1/10F

SRC/S B2/11F• Completed• Completed

September 1982

June 1994

Other Cities — Kyushu and Okinawa
C -■
7
■

Fukuoka, Fukuoka

JPR Hakata Bldg.
• Acquisition Price (millions of yen)

JPR Naha Bldg.
• Acquisition Price (millions of yen)

2,900

1,560

• % of Total• % of Total

1.4%

0.8%

• Site Area (m2)

• Site Area (m2)

1,214.63

959.87• Total Floor Space (m2)

• Total Floor Space (m2)

9,828.73

5,780.71• Structure/Floors
Building
S/RC B1/12F
Parking
S 1F• Structure/Floors

SRC/S 12F

• Completed
Building
June 1985
Parking November 2003

• Completed

October 1991

C -■
14
■

Fukuoka, Fukuoka

Tenjin 121 Bldg.
• Acquisition Price (millions of yen)

Fukuoka, Fukuoka

Semba Fukuoka Bldg.
• Acquisition Price (millions of yen)

2,810
• % of Total

1,920• % of Total

1.4%• Site Area

0.9%
• Site Area

(m2)

(m2)

1,164.39• Total Floor Space (m2)

680.63• Total Floor Space (m2)

8,690.95• Structure/Floors

3,874.81• Structure/Floors

S/SRC 13F
• Completed

SRC 8F• Completed

July 2000

20

C -■
9
■

Naha, Okinawa

February 1993

C -■
18
■

REI T STRUCT URE AND EXTERNAL SERVICE PROVIDERS

General Tenant Services Agent/
Property Transfer Agent/
Construction Management Agent

Asset Management Company

Tokyo Realty Investment
Management, Inc.
Asset Management

Tenant Agents

Tokyo Tatemono Co., Ltd.
Yasuda Real Estate Co., Ltd.
Taisei Corporation

Tokyo Tatemono Co., Ltd.

Asset Management

Investment Corporation

Japan Prime Realty
Investment Corporation

Liabilities

Loans
Corporate Bonds

LenderCorporate Bond Investor

AssetsInvestment

Property, etc.
Unitholders’EquityProperty Manager

Unitholder

Cash Distribution
Unitholder

Asset Custodian

Asset Custodian
Mizuho Trust & Banking Co., Ltd.

Tokyo Tatemono Co., Ltd. performs agency services for thesigning of real estate leasing contracts (“general tenant agency
services”) under a commission from JPR in order to provide
uniform tenant recruitment. Tokyo Tatemono also has beencommissioned by TRIM to undertake “property transfer services,” which include both the purchase and sale of properties.
Tokyo Tatemono also provides advice on rental operations

Administrative Agent

Administrative Agent
Mizuho Trust & Banking Co., Ltd.

management and construction planning management work(“leasing management/construction management services” or“LM /CM services”) to TRIM.
Yasuda Real Estate Co., Ltd., and Taisei Corporation
provide general tenant agency services for real estate, as commissioned by the trustees.

21

Tokyo Realty Investment Management, Inc.
Tokyo Realty Investment Management, Inc., (“TRIM”) concluded the asset management contract with JPR on September
27, 2001. Based on the contract, TRIM provides asset management services as a REIT Management Company under the
Law Concerning Investment Trust and Investment
Corporations (“the Investment Trust Law”).
TRIM is assigned to provide (1) services regarding asset
management for JPR (including all decision-making in connection with the acquisition/disposition or leasing of properties and acting as an agent or broker of such transactions
based on relevant evaluation and judgment), (2) services
regarding funding by JPR, (3) reporting to JPR, and (4) any
other services related to or affiliated with the above.

TRIM’s Decision-Making Process ofInvestment Management
The “Investment Committee” is set as a committee to makeinvestment decisions along with its sub-organizations, the“Investment Subcommittee” and the “Fund Management
Subcommittee.” Members of these organizations include theCEO, CIO, CFO, CAO, Fund Manager, Research Manager,
Asset Manager, Investment Management Manager, and otherrelated Group managers.
The Investment Committee formulates fundamental
investment policy for the medium and long term within two
fiscal periods, while the Investment Subcommittee has chargeof decisions on issues regarding acquisitions and dispositions,and the the Fund Management Committee is responsible forissues regarding the management of individual assets. The
Board of Directors is given the final authorization on acquisitions or dispositions of individual assets of a certain amount.

Shareholders’ Meeting
Auditors
Board of Directors
CEO
Compliance Committee

Investment Committee
Investment Management
Division

ResearchGroup

Investment
Group

Asset
Management
Group

Financial Division

FinancialGroup

IR Group

FundManagement
Group

Shareholders in TRIM (As of December 31, 2005)

10%
Sompo Japan Insurance Inc.
26%
Tokyo Tatemono Co., Ltd.
20%
Yasuda Real Estate Co., Ltd.
24%
Meiji Yasuda Life Insurance Company
20%
Taisei Corporation

22

Corporate Planning/
Administration Division

GeneralAdministrationGroup

Planning
Group

ComplianceGroupMeasures to Prevent Conflicts of Interest
TRIM adopts strict measures with the aim of preventing conflicts of interest.
Transaction counterparties comprise “Related Parties,” whoare defined under the Implementation Ordinance of theInvestment Trust Law and subject to certain transaction limitations pursuant to the Investment Trust Law, and “Interested
Parties*,” who are defined under internal rules. Transactions
between JPR and either Related Parties or Interested Parties(collectively referred to as “interested parties”) are recognized as“Interested-Party Transactions.”* Interested Parties
Interested parties are defined as specific parties with which transactions have been made or
to which commissions or other payments have been made in the relevant term. Interested
parties comprise Tokyo Tatemono Co., Ltd., Meiji Yasuda Life Insurance Company,
Taisei Corporation, Yasuda Real Estate Co., Ltd., Sompo Japan Insurance Inc., and theiraffiliated companies that invest in TRIM or dispatch directors or personnel to TRIM.

TRIM has established the Compliance Committee, which
together with external attorneys assess the relevance and validityof interested-party transactions. TRIM also has theCompliance Subcommittee to monitor each of the committees
outlined on page 22 and determine whether their decisionmaking activities strictly adhere to laws and regulations. Suchmeasures include:a) Acquisitions of property and assets from interested parties
i. Real estate and beneficiary interest may be acquired withthe prior approval of JPR’s Board of Directors.
ii. Other specific assets are acquired at market value if
applicable. If not applicable, specific assets are considered
under i. above.
b) Sales of property or assets to interested parties
i. Regarding real estate and beneficiary interest, the sale priceof each property (not including taxes and sales commissions) shall be greater than the appraised value. In addition, prior approval from JPR’s Board of Directors is
required.
ii. Other specific assets are sold at market value if applicable.
If not applicable, specific assets are considered under i.
above.
c) Property leasing to interested parties
Properties shall be leased to interested parties under terms
and conditions consistent with the market. Prior approval of
JPR’s Board of Directors is required.
d) Property management commissions to interested parties
Commissions are based on in-house property management
standards. Prior approval of JPR’s Board of Directors is
required.

e) Trading intermediation fees paid to interested parties
Trading intermediation fees are limited to up to 3% of the
trading price plus ¥60,000, excluding consumption tax andother costs, with the prior approval of JPR’s Board of
Directors.
f ) Commissioning of construction work to interested parties
Commissions of construction work worth ¥10 million ormore require a comparison against third-party estimates andproposals. Prior approval of JPR’s Board of Directors is
required.
g ) Borrowings from interested parties
Terms of borrowings must be at market levels. Prior approvalof JPR’s Board of Directors is required.

Compensation Paid to TRIM
The compensation scheme has been established with simplicity
in mind and is in line with unitholders’ interests.
Compensation to TRIM is calculated on the following basis:
1. Fixed compensation: ¥12.5 million per month
2. Incentive-based compensation 1: 2% of each fiscal period’s
total revenue (1.5% for amounts in excess of ¥8 billion)
3. Incentive-based compensation 2: 3% of each fiscal period’s
distributable income prior to the deduction of incentivebased compensation 2
NOTE 1: Total revenue is defined as rental revenues, non-rental revenues andnon-operating revenues. Rental revenues comprise rental revenues, common
charges, parking revenues and other rental revenues. Non-rental revenues comprise incidental income, cancellation charges and other miscellaneous revenues.
Non-operating revenues comprise interest income, income on settlement ofmanagement association accounts and other non-operating revenues. Total
revenue does not include gain on sale of real estate.
NOTE 2: Distributable income is defined in Article 28-1 of the Articles of Incorporation,and include profits from the sale of property.

The compensation rate for incentive-based compensation 1
decreases as total revenue increases in line with asset size
growth, as a means to leverage scale merits.
Incentive-based compensation 2 is a performance-based
compensation scheme designed to match the interests ofunitholders.
JPR did not adopt property acquisition-based compensation in order to avoid a structure that rewards the relentless
pursuit of asset growth, and similarly, property dispositionbased compensation was not implemented in favor of emphasizing profits from disposition through incentive-based
compensation 2, which the Company believes is better alignedwith unitholders’ interests.
23

M A N AG E M E N T ’ S D I S C U S S I O N A N D A N A LY S I SOVERVIEWIn an effort to secure sustainable growth and stable profits
from a medium- to long-term perspective, JPR adopts adiversified investment portfolio strategy, emphasizing
diversification based on asset class and geographic
location. From an asset class diversification perspective,
JPR maintained an investment portfolio with officebuildings comprising 71.8% and retail properties 28.2%(calculated on an acquisition price basis) as of December
31, 2005. From a geographic diversification perspective,
investment properties in Tokyo accounted for 62.9%,
with the remaining 37.1% located in other major cities.
While the Company’s established investment guideline
sets an 80:20 ratio for office/retail allocation and a 60:40
ratio for Tokyo/Other cities, the actual ratios for the 8th
fiscal period-end were within acceptable investment
parameters. In addition to minimizing investment risk,
this current investment tendency toward retail properties
and other cities reflects the yield differential between
retail properties and office buildings (NOI yields of 6.3%
and 5.6%, respectively), and the significant upside ofareas outside Tokyo where NOI yields remain higher

than the portfolio average.
Since July 1, 2005, JPR acquired the Housing Design
Center Kobe (for an investment of ¥7,220 million) andthe Tachikawa Business Center Building (for aninvestment of ¥888 million). During the period underreview, the Company also invested in preferred securities
issued by Kawasaki Dice Special Purpose Company (foran investment of ¥1,553 million). As part of thisacquisition, JPR has also acquired preferential options topurchase the Kawasaki Dice Building in the event of
future property sale. Consistent with efforts to diversify
asset holdings and to better secure a portfolio
distinguished by stable cash flows and stability, JPR
undertook the sale of the SK Hiroshima Building (sales
price ¥1,040 million) and the Park East Sapporo (sales
price ¥2,400 million). As a result, JPR held 42 properties
as of December 31, 2005, worth ¥202,663 million on an
acquisition price basis. Total leasable floor space was308,205.26 square meters and the number of tenants
totaled 441.

FISCAL PERIOD
JPR’s fiscal periods cover the six months starting fromJanuary 1 to June 30 and July 1 to December 31 each year.
The Company’s first fiscal period, however, commenced
on September 14, 2001, the date of incorporation, andcontinued through to June 30, 2002. The fiscal period
under review is JPR’s 8th fiscal period, the six-month
period ended December 31, 2005 (184 days).

FACTORS AFFECTING RESULTS OF OPERATIONS
The table below is a summary of business results for the periods ended December 31, 2005 and June 30, 2005.

OPERATING REVENUES:
Real estate rental revenues
Gain on sale of real estate
OPERATING EXPENSES
Loss on sale of real estate
OPERATING PROFITSNON-OPERATING REVENUESNON-OPERATING EXPENSES
INCOME BEFORE INCOME TAXESNET INCOME

Thousands of yen

U.S. dollars

8th Period( July 1, 2005–Dec. 31, 2005)

7th Period( Jan. 1, 2005–June 30, 2005)

8th Period( July 1, 2005–Dec. 31, 2005)¥8,587,373
8,372,711
214,662
4,602,617—
3,984,756
13,805599,292
3,399,269¥3,398,098¥8,503,222
7,801,176
702,0464,548,529
235,2393,954,693
91,224
668,857
3,377,060¥3,376,071$72,731,207
70,913,110
1,818,097
38,982,106—
33,749,101
116,926
5,075,735
28,790,292$28,780,368

Revenues
JPR derives the vast majority of its operating revenues
from real estate rental revenues. For the 8th fiscal period,
the Company benefited from the full-period contribution
from properties acquired during the 7th fiscal period aswell as income from properties acquired during the 8th
fiscal period. In addition to the aforementioned, JPR’s
efforts to implement new leasing activities, attract new24

tenants and raise tenant satisfaction continued to bear fruit.
The leasing market also enjoyed favorable conditions
buoyed by a robust corporate sector and business expansion
activities. As a result, the overall property portfolio
occupancy rate stood at 97.2% as of December 31, 2005,
an increase of 1.8 percentage points from the end of theprevious fiscal period.
Accounting for these factors, real estate rental revenues

rose ¥572 million to ¥8,373 million. This included rental
revenues of ¥7,793 million, which climbed ¥452 million,
and non-rental revenues of ¥580 million, an increase of¥119 million on the back of mainly seasonal factors.
In the course of its asset management activities, JPR
undertakes the sale of investment properties when
considered appropriate. The Company sold the SK
Hiroshima Building and the Park East Sapporo andrecorded a gain on sale of real estate totaling ¥215 million
in the fiscal period under review. This gain declined ¥487
million compared with the previous fiscal period, andoverall operating revenues improved ¥84 million to¥8,587 million.
Expenses
JPR has five primary categories of operating expenses:
real estate rental expenses; asset management fees; loss onsale of real estate; administrative service and custodian
fees, and; other operating expenses.
Real estate rental expenses are by far the largest
expense and comprise a number of items including
property management fees, utilities expenses, property
and other taxes, casualty insurance, repairs andmaintenance, depreciation and other rental expenses. In
general terms, property management fees, casualty
insurance, depreciation and other rental expenses trend inline with asset scale. As a result, property management
fees rose ¥7 million to ¥166 million, casualty insurance
edged up ¥2 million to ¥39 million, depreciation climbed¥87 million to ¥1,532 million and other rental expenses
increased ¥35 million to ¥896 million reflecting an asset
scale that rose ¥5,011 million to ¥202,663 million as ofthe end of the fiscal period under review.
Turning to the remaining key components of realestate rental expenses, utilities expenses jumped ¥99
million to ¥546 million mainly due to seasonal factors.
Property and other taxes for the six-month period ended
December 31, 2005, declined ¥24 million compared withthe previous fiscal period to ¥683 million. Propertyrelated taxes in Japan are imposed annually on registeredowners of property as of January 1. When a property is
acquired, the purchaser typically reimburses the seller forthe pro rata portion that relates to the period from theacquisition date to the end of the calendar year. As iscustomary in real estate property transactions in Japan,
the pro rata portion is capitalized as part of theacquisition price and not recognized as an expense until
the following year after acquisition. During the fiscal
period under review, JPR undertook renovations atselected properties in an effort to enhance tenantsatisfaction as well as improvements to common-use areas
and the installation of office automation floors for leased
offices with the aim of attracting new tenants. As a result,repairs and maintenance for the period climbed ¥69
million to ¥183 million.

Accounting for these factors, real estate rental expenses totaled ¥4,044 million, an increase of ¥276 million forthe six-month period ended December 31, 2005.
In the context of the remaining operating expenses
categories, JPR employs a fixed administrative fee
component of ¥12.5 million per month, as well as twolevels of incentives in lieu of acquisition and sales
compensation in the calculation of asset management
fees. Incentives are paid for each fiscal period, calculated
as a percentage of operating revenue and earnings. (Fordetails of incentive-based compensation, please refer to“Compensation Paid to TRIM” on page 23.)
In the fiscal period under review, the Company did notincur a loss on the previously mentioned sale of real estate.
Administrative service and custodian fees are paid to
JPR’s Administrative Agent and Asset Custodian,Mizuho Trust & Banking Co., Ltd., for certain generaladministrative and custodial services. In each case, fees
are calculated as a percentage of total assets and decrease
as total assets expand. Accordingly, fees are dependent on
the size of the property portfolio. In the fiscal period
under review, administrative service and custodian fees
were ¥73 million, a decline of ¥13 million from the 7th
fiscal period. This is due to the public offering
undertaken in the previous period.
Other operating expenses primarily include legal fees,
professional fees, and communication and promotional
expenses. In line with the increase in business activity andasset scale, other operating expenses grew by ¥18 million
to ¥139 million.
Accounting for operating revenues and expenses,
operating profits for the six-month period ended
December 31, 2005 totaled ¥3,985 million, an increase of¥30 million. Net operating income climbed ¥383 million,to ¥5,860 million.
Despite increased business activity and asset scale
growth, both non-operating revenues and expenses
declined. Non-operating revenues fell ¥77 million
compared with the previous period, reflecting the absenceof settlement of management association accounts, whichis generally reported during the fiscal period ended June
30 each year. The principal decline in non-operating
expenses was due to the absence of new unit issuancerelated costs, which fell ¥65 million from the 7th fiscal
period.
For the six-month period ended December 31, 2005,
net income rose ¥22 million to ¥3,398 million.

25

Itemization of Management Expenses
Thousands of yen

8th Fiscal Period
July 1, 2005 – Dec. 31, 2005

7th Fiscal Period
Jan. 1, 2005 – June 30, 2005

¥345,844
75,000165,728
105,116
73,471
5,700
52,28881,070¥558,374¥337,265
75,000157,848
104,41786,666
5,700
52,691
62,401¥544,723

Asset management fees
Fixed compensation
Incentive-based compensation 1
Incentive-based compensation 2
Administrative service and custodian fees
Directors’ compensation
Trustees’ compensation
Other expenses
Total

CASH DISTRIBUTIONSIn the 8th fiscal period, cash distribution per unit was¥6,411, compared with ¥6,370 in the 7th fiscal period.
The increase is attributed to the Company’s improved
position across the board and in particular, asset scale,occupancy rate and operating revenues. The number ofinvestment units issued and outstanding as of December
31, 2005 remained unchanged from the end of theprevious fiscal period at 530,000 units.
Thousands of yen except per unit data

Cash distributions for theperiod ended Dec. 31, 2005

Cash distributions for theperiod ended June 30, 2005

¥3,398,098
3,397,830
6,411¥3,376,071
3,376,100
6,370

Net income
Total cash distributions
Cash distribution per unit

CAPITALIZATION
Paid-In Capital
As identified, the number of investment units issued andoutstanding remained constant. Following cash
Unit Information
JPR was listed on the Tokyo Stock Exchange Real Estate
Investment Trust Section on June 14, 2002, under the
securities code 8955 and with the issue of 289,600
investment units. Since the initial public offering, JPR
increased capital through an additional public offering inJuly 2003, and subsequently in February and March
2005. The current number of investment units issued andoutstanding is 530,000 units. The high and low closing
prices for the periods indicated are provided in the tablethat follows.
Equity and Debt Financing
As part of a strategy that places the utmost importanceon financial stability and flexibility, JPR makes use offinancial markets through prudent debt financing frommajor financial institutions and the issue of corporate
bonds. During the 8th fiscal period, JPR looked to
procure short-term funds for greater flexibility in theacquisition of investment properties, and long-term,

26

distribution from net income of ¥3,397 million,
unitholders’ capital was unchanged, totaling ¥115,431
million as of December 31, 2005.

Yen

1st fiscal period
2nd fiscal period
3rd fiscal period
4th fiscal period
5th fiscal period
6th fiscal period
7th fiscal period
8th fiscal period

High

Low

202,000
240,000
283,000
270,000
305,000
311,000
330,000
345,000

199,000
200,000
217,000
234,000
257,000
274,000
278,000
300,000

fixed-rate funds to hedge the risk of an increase in futureinterest rates, better diversify its debt repayment profileand promote improved stability. Complementing these
efforts, and cognizant of the risks associated withrefinance, JPR has also established a commitment line ofcredit totaling ¥20,000 million, and a registered limit for
the flexible issue of unsecured corporate bonds totaling¥100,000 million for use over a two-year period. Thesefacilities further complement the existing line of credit
totaling ¥28,000 million of which ¥26,500 million
remained unused as of December 31, 2005.
As a result of these endeavors, the balance of total
outstanding borrowings as of December 31, 2005 stood at¥48,966 million, an increase of ¥7,300 million over theprevious period, and the balance of unsecured corporate
bonds remained unchanged at ¥42,000 million. With theaim of reducing exposure to the risk of potential increases
in interest rates, which averaged 1.3% during the fiscal
period under review, 75.3% of total outstanding
borrowings were long-term borrowings with a maturity ofmore than one year and an average maturity of 4.7 years.
The interest-bearing debt ratio was 44.1% and theinterest-bearing debt to total assets ratio was 40.3%. To
complement the increase in asset scale, JPR maintains
prudent financial strategies that ensure flexibility
balanced with quality risk management and stability.
Integral to funds procurement is a company’s ability
to secure a credit rating, the level of which determines thefunding cost. On the issue of corporate bonds, JPR was
assigned credit ratings as follows.
Credit Ratings (As of December 31, 2005)
SP

Moody’s

R&I

A-

A3

A+

Investment Performance of JPR since its IPO on June 14, 2002
Unit Price (Yen)

Performance (%)

JPR Unit Price Performance (Left scale)180

330,000

TOPIX Performance (Left scale)160

305,000

JPR Unit Price (Right scale)140

280,000

120

255,000

100

230,000

80

205,000

60
2004
2005
2002
2003
6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2

180,000
3 4 5 6 7 8 9 10 11 12

Borrowings-1
Category

LenderMizuho Corporate Bank, Ltd.

Short-Term
Borrowings

Shinsei Bank, Ltd.
Mitsubishi UFJ Trust and Banking Corp.
The Hachijuni Bank, Ltd.
Total

Balance as ofDec. 31, 2005
(Thousands of yen)¥——
1,500,000
5,000,000
1,000,000¥7,500,000

Balance as ofJune 30, 2005
(Thousands of yen)
¥3,200,000
2,000,000———¥5,200,000

Average
Interest
Rate
0.330%
0.330%
0.340%
0.330%
0.340%

Repayment
Date
May 27, 2006
May 27, 2006
July 5, 2006
Sept. 27, 2006
Sept. 27, 2006

Principal
lump sum
repayment
on maturity

Drawdown
Date

Balance as ofDec. 31, 2005
(Thousands of yen)

Balance as ofJune 30, 2005
(Thousands of yen)

Average
Interest
Rate

Repayment
Date

Repayment
MethodDec. 27, 2001

¥ 6,500,000¥—

1.234%

Dec. 27, 2006

Dec. 27, 2001
June 19, 2002
June 19, 2002

6,500,000
1,000,000
1,000,000¥15,000,000

—
—
—
¥—

1.234%
1.295%
1.295%

Dec. 27, 2006
Dec. 27, 2006
Dec. 27, 2006

Principal
lump sum
repayment
on maturity

Drawdown
Date
May 27, 2005
May 27, 2005
Sept. 27, 2005
Sept. 27, 2005
Sept. 27, 2005

Repayment
MethodRemarks
Unsecured /Unguaranteed /Non-subordinatedBorrowings-2
Category
Current
Portion ofLong-Term
Borrowings

Lender
The Chuo Mitsui Trust andBanking Company, Limited
Sumitomo Life Insurance Company
Aozora Bank, Ltd.
Resona Bank, Limited
Total

Remarks
Secured/
Unguaranteed /Non-subordinated27

Borrowings-3
Category

LenderLong-Term
Borrowings

Sompo Japan Insurance Inc.
Nippon Life Insurance Company
The Bank of Fukuoka, Ltd.
The Chugoku Bank, Ltd.
The Iyo Bank, Ltd.
Zenkyoren (The National Mutual Insurance
Federation of Agricultural Cooperatives)
The Chuo Mitsui Trust andBanking Company, Limited
SumitomoLife Insurance Company
Meiji Yasuda
Life Insurance Company
Resona Bank, Ltd.
Aozora Bank, Ltd.
Total
Total Borrowings Balance

Drawdown
DateMar. 25, 2004
Mar. 31, 2005
Apr. 11, 2005
Apr. 11, 2005
Apr. 11, 2005

Balance as ofDec. 31, 2005
(Thousands of yen)
¥ 1,000,000
2,000,000
2,000,000
1,500,000
1,000,000

Balance as ofJune 30, 2005
(Thousands of yen)
¥ 1,000,000
2,000,000
2,000,000
1,500,000
1,000,000

Average
Interest
Rate
0.873%
0.493%
0.478%
0.478%
0.478%

Repayment
Date
Mar. 23, 2007
Apr 13, 2007
Apr 11, 2007
Apr 11, 2007
Apr 11, 2007

Nov. 24, 2005

5,000,000—

1.453%

Nov. 27, 2012

Dec. 27, 2001—

6,500,000

1.234%

Dec. 27, 2006

Dec. 27, 2001—

6,500,000

1.234%

Dec. 27, 2006

Dec. 27, 2001
June 21, 2002
Mar. 28, 2003
June 19, 2002
June 19, 2002

4,783,000
4,783,000
4,400,000——¥26,466,000¥48,966,000

4,783,000
4,783,000
4,400,000
1,000,000
1,000,000¥36,466,000¥41,666,000

1.700%
2.050%
1.750%
1.295%
1.295%

Dec. 26, 2008
June 21, 2011
Mar. 28, 2013
Dec. 27, 2006
Dec. 27, 2006

Issue Date

Maturity Date

Total Issue
Amount(Thousands of yen)

Coupon Rate(per annum)

Feb. 12, 2004

Feb. 12, 2008

¥10,000,000

0.84%

Repayment
MethodRemarks

Unsecured /Unguaranteed /Non-subordinatedPrincipal
lump sum
repayment
on maturity
Secured /Unguaranteed /Non-subordinatedCorporate Bonds

First Series of Corporate Bonds
Second Series of Corporate Bonds

Feb. 12, 2004

Feb. 12, 2010

¥ 7,000,000

1.38%

Third Series of Corporate Bonds

Feb. 12, 2004

Feb. 12, 2014

¥ 5,000,000

2.32%

Fourth Series of Corporate Bonds

Nov. 4, 2004

Nov. 4, 2009

¥10,000,000

0.92%

Fifth Series of Corporate Bonds

Nov. 4, 2004

Nov. 4, 2011

¥ 5,000,000

1.44%

Sixth Series of Corporate Bonds

Nov. 4, 2004

Nov. 4, 2014

¥ 5,000,000

2.00%

Total

Collateralbullet payment

Unsecured/
Unguaranteed¥42,000,000

MAJOR TENANTS
The table below shows JPR’s leading tenants by leased
floor space as of December 31, 2005.
The Company is acutely aware of the impact of lease
contract maturity and cancellation. From a risk
management perspective, JPR is also conscious ofmaintaining an optimal balance between stability and#28

Redemption

Tenantgrowth. Stability is characterized by a single tenant longterm lease agreement and fixed rentals, while growth ischaracterized by multiple tenants, short-term leaseagreements and variable rentals, particularly for retailproperties. For the fiscal period under review, occupancy
rates remained high and rose across the board.
Industry

Property

1

The Seiyu, Ltd.

Retail2
3
4
5
6

ABC Development Corporation
The Loft Co., Ltd.
Shinjuku Square Tower Management Co., Ltd.
TOWER RECORDS JAPAN INC.
UFJ Central Leasing

Housing
RetailReal Estate
RetailFinancial Services

7

Sompo Japan Insurance Inc.

Casualty Insurance

8910

Iwatani International Corporation
Benetton Japan
Tohmatsu & Co.

Wholesale
Retail
Accounting Firm

Tanashi ASTA
Tsurumi fuga 1
Housing Design Center Kobe
JPR Umeda Loft Bldg.
Shinjuku Square Tower
JPR Shibuya Tower Records Bldg.
UFJ Central Leasing Head Office Bldg.
Kawaguchi Center Bldg.
Sompo Japan Sendai Bldg.
Sompo Japan Wakayama Bldg.
Tokyo Tatemono Honmachi Bldg.
Benetton Shinsaibashi Bldg.
MS Shibaura Bldg.

10

Mitsubishi Electric Information
Systems CorporationIT

MS Shibaura Bldg.

PROPERTY MANAGEMENT
In the context of property management, JPR has a strong
track record in successfully attracting new tenants. JPR is
endeavoring to differentiate itself from other competing
properties by adopting a proprietary Brand Equity
concept, employing innovative measures andLeased Floor Space(m2)%

40,700.31

13.5

35,444.13
18,586.97
10,982.03
8,076.85
7,123.07

11.8
6.2
3.7
2.7
2.4

6,432.52

2.1

5,959.86
5,303,98
3,922.74

2.0
1.8
1.3

3,922.74

1.3

implementing renovations to ensure tenant satisfaction.
Reflecting these ongoing efforts, the occupancy rate at
the end of the period was 97.2%, an increase of 1.8
percentage points.

Planned Capital Expenditures
JPR has the following capital expenditure plan for the maintenance of its properties as of December 31, 2005.
Property Name

Location

PurposePlanned Project Cost
(Millions of yen)

Schedule

Total

Paid inFiscal Year
under
Total
Review Payments

JPR Chiba Bldg.

Chiba City, Chiba Pref.

Renewal of heating and cooling water generator

Apr. 2006 – May 2006

67

—

—

JPR Umeda Loft Bldg.

Osaka City, Osaka Pref.

Repairs of 6th–8th floor toilets

Feb. 2006 – June 2006

41

—

—

JPR Nagoya Sakae Bldg.
JPR Takamatsu Bldg.
JPR Chiba Bldg.
NORTH 33 Bldg.
JPR Shibuya Tower Records Bldg.

Nagoya City, Aichi Pref.

Improvements to interior of car park

Mar. 2006 – May 2006

18

—

—

Takamatsu City, Kagawa Pref.

Replacement of fan coils

Apr. 2006 – May 2006

18

—

—

Chiba City, Chiba Pref.

Repairs to common areas

Apr. 2006 – June 2006

12

—

—

Sapporo City, Hokkaido Pref.

Repairs to common area

Feb. 2006 – Apr. 2006

12

—

—

Shibuya-ku, Tokyo

Renewal of smoke ventilator monitors

Mar. 2006 – May 2006

10

—

—

Capital Expenditures During the Fiscal Period Under
Review
JPR made the following capital expenditures related to its
properties. Most capital expenditures were comprised of
Property Name

Location

repair work to maintain and improve tenant satisfaction,
maintenance on common areas to attract new tenants andconstruction including the installation of energy-saving
facilities.
PurposeSchedule

Capital Expenditure(Millions of yen)

Kanematsu Bldg.

Chuo-ku, Tokyo

Renewal of exterior repair seals

Apr. 2005 – July 2005

72

JPR Hakata Bldg.

Fukuoka City, Fukuoka Pref.

Replacement of 12th floor air-conditioning units and lighting

Oct. 2005 – Dec. 2005

61

JPR Shibuya Tower Records Bldg.

Shibuya-ku, Tokyo

Replacement of cooling tower and heat source water pump

Oct. 2005 – Dec. 2005

29

Kanematsu Building Annex

Chuo-ku, Tokyo

Renewal of exterior repair seals

Apr. 2005 – July 2005

28

JPR Umeda Loft Bldg.

Osaka City, Osaka Pref.

Repairs of 2nd–3rd floor toilets

Aug. 2005 – Nov. 2005

22

Park East, Sapporo

Sapporo City, Hokkaido Pref.

Renewal of exterior repair seals

Sep. 2005 – Nov. 2005

16

Kawaguchi Center Bldg.

Kawaguchi City, Saitama Pref.

Upgrade of smoking area

July 2005 – Nov. 2005

16

Kawaguchi Center Bldg.

Kawaguchi City, Saitama Pref.

Upgrade of revolving doors

Nov. 2005 – Dec. 2005

13

Repairs of common areas, installation of office equipment floors,
maintenance of parking, air conditioners, and disaster prevention facilities

218

Other capital expenditures
Total

478

Note: Improvement costs include construction management compensation (¥5 million) paid to property management companies in addition to amounts for improvement
work.

SUBSEQUENT EVENTS AND OUTLOOKAs part of its continuous efforts to pursue opportunities
that facilitate the increase of its asset scale, in thesubsequent six-month period ending June 30, 2006, JPR
contracted to acquire the JPR Jingumae 432, a retailproperty, for an investment of ¥4,460 million. In
addition, JPR is expected to complete acquisition of the
Cupo-la Main Building at the end of March 2006
following construction completion.
Looking ahead, JPR will continue to leverage its
defining features and pursue optimal balance between
stability and growth. In this context, the Company
contracted to acquire the Rise Arena Building (HigashiIkebukuro 4-chome Redevelopment Project) for aninvestment of ¥5,467 million during the fiscal period
under review. Scheduled for completion in January 2007,
this is another example of JPR’s balanced focus ondevelopment properties.
Despite a cap rate of 3.6%, the JPR Jingumae 432 isanother measure of the Company’s forward-looking
approach. The property is located in a bustling retail,commercial and residential area that continues to enjoy

high rates of growth. In addition to significant upgrades
to infrastructure including the widening of roads and a
new rail link, the property is ideally located to benefit
from an anticipated traffic flow increase.
JPR will also continue to pursue the substantial upside
provided by properties in other major cities. To this end,
and in its efforts to reinforce tie-ups with the sponsor
companies, JPR is strategically positioning its portfolio inline with Tokyo Tatemono’s branch offices in Sapporo,
Tokyo, Nagoya, Osaka and Fukuoka. As the government
considers the possibility of reviewing the structure of thenation’s prefectural system, JPR is poised to capitalize on
any changes.
Based on an occupancy rate forecast of 97.4%, which
includes allowances for confirmed future occupancy andtermination of lease agreements, JPR conservatively
forecasts operating revenues in the 9th fiscal period of¥8,516 million, operating profit of ¥3,858 million, net
income of ¥3,286 million and a cash distribution perinvestment unit of ¥6,200.
29

F I N A N C I A L S TA T E M E N T S
BALANCE SHEETS(As of December 31, 2005 and June 30, 2005)
Thousands of yen

U.S. dollars

End of 8th Period(as of Dec. 31, 2005)

End of 7th Period(as of June 30, 2005)

End of 8th Period(as of Dec. 31, 2005)¥ 23,910,941¥ 20,304,126$ 202,514,956

126,226

191,263

1,069,076—

51,773—ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Rental receivables
Consumption tax refundable
Other current assets

146,277

92,3731,238,904

24,183,444

20,639,535

204,822,936

Land

121,920,950

120,398,583

1,032,615,817

Buildings and structures

85,178,042

81,252,899

721,419,856

Machinery and equipment

1,468,092

1,385,247

12,434,080

Tools, furniture and fixtures

58,064

43,144

491,773

Total current assets
PROPERTY AND EQUIPMENT AT COST:

Construction in progress
SubtotalLess accumulated depreciation
Net property and equipment

5,433

3,110

46,019208,630,581

203,082,983

1,767,007,545(8,608,683)(7,307,245)(72,911,686)

200,021,898

195,775,738

1,694,095,859

INVESTMENTS AND OTHER ASSETS:
Investment securities

1,558,460—

13,199,458

Intangible assets

6,468

3,335

54,779Deposits

10,10010,10085,543

293

1,675

2,478

101,263

143,377

857,653

250

250

2,117

¥225,882,176¥216,574,010$1,913,120,823

Long-term prepaid expenses
Deferred corporate bond issuance costs
Other
TOTAL ASSETS
The accompanying notes form an integral part of these financial statements.

30

End of 8th Period(as of Dec. 31, 2005)

Thousands of yen

U.S. dollars

End of 7th Period(as of June 30, 2005)

End of 8th Period(as of Dec. 31, 2005)

LIABILITIESCURRENT LIABILITIES:
Trade accounts payable¥

782,906¥

900,822$

6,630,865

Other accounts payable

435,460

435,199

3,688,150

Short-term borrowings

7,500,000

5,200,000

63,521,640

Current portion of long-term borrowings

15,000,000—

127,043,279

165,059

161,014

1,397,976

1,159

1,598

9,820

223,858—

1,895,974

Accrued expenses
Accrued income taxes
Accrued consumption taxes
Rent received in advance

921,591

850,132

7,805,465

25,030,033

7,548,765

211,993,169

Corporate bonds

42,000,000

42,000,000

355,721,182

Long-term borrowings

26,466,000

36,466,000

224,155,162

Total current liabilities

LONG-TERM LIABILITIES:

13,556,501

11,751,601

114,817,489

Total long-term liabilities

Deposits received from tenants

82,022,501

90,217,601

694,693,833

TOTAL LIABILITIES

107,052,534

97,766,366

906,687,002

Unitholders’ capital

115,431,504

115,431,504

977,653,117

Retained earnings

3,398,138

3,376,140

28,780,704

UNITHOLDERS’ EQUITY:TOTAL UNITHOLDERS’ EQUITY

118,829,642

118,807,644

1,006,433,821

TOTAL LIABILITIES AND UNITHOLDERS’ EQUITY¥225,882,176¥216,574,010$1,913,120,823

31

STATEMENTS OF INCOME AND RETAINED EARNINGS(For the six-month periods ended December 31, 2005 and June 30, 2005)
Thousands of yen

U.S. dollars

8th Period( July 1, 2005–
Dec. 31, 2005)

7th Period( Jan. 1, 2005–
June 30, 2005)

8th Period( July 1, 2005–
Dec. 31, 2005)

OPERATING REVENUES:¥8,587,373¥8,503,222$72,731,207

Real estate rental revenues

8,372,711

7,801,176

70,913,110

Gain on sale of real estate

214,662702,046

1,818,097

OPERATING EXPENSES:

4,602,617

4,548,529

38,982,106

Real estate rental expenses

4,044,243

3,768,567

34,252,927

Asset management fees

345,844

337,2652,929,145—

235,239—

73,471

86,666622,272

Loss on sale of real estate
Administrative service and custodian fees
Other operating expenses
OPERATING PROFITSNON-OPERATING REVENUES:Interest income
Income on settlement of management association accounts
Other non-operating revenues
NON-OPERATING EXPENSES:Interest expense
Loan arrangement fees

139,059

120,792

1,177,762

3,984,756

3,954,693

33,749,101

13,80591,224

116,926

96

148

815

—

77,279—13,70913,797116,111599,292

668,857

5,075,735

264,210245,541

2,237,745

5,958

18,30050,460Interest expense on corporate bonds

281,359

278,620

2,382,981

Amortization of corporate bond issuance costs

42,114

42,114

356,686—

65,469—New unit-issuance costs
Other non-operating expenses

5,651

18,81347,8633,399,269

3,377,060

28,790,292

Current

1,178

1,628

9,982

Deferred

(7)

(639)

(58)

3,398,098

3,376,071

28,780,368

40

69

336

¥3,398,138¥3,376,140$28,780,704

Units

Thousands of yen

430,000¥ 91,982,403

INCOME BEFORE INCOME TAXESINCOME TAXES:NET INCOMERETAINED EARNINGS BROUGHT FORWARD
RETAINED EARNINGS AT END OF PERIOD
The accompanying notes form an integral part of these financial statements.

STATEMENTS OF CHANGES IN UNITHOLDERS’ EQUITY(For the six-month periods ended December 31, 2005 and June 30, 2005)
Unitholders’ equity

BALANCE AS OF DECEMBER 31, 2004
Cash distributions paid
Public offering
Net income(2,868,530)
26,317,700—

3,376,071

530,000¥118,807,644$1,006,247,509

Cash distributions paid—

(3,376,100)(28,594,056)

Net income—

3,398,098

28,780,368

530,000¥118,829,642$1,006,433,821

BALANCE AS OF JUNE 30, 2005

BALANCE AS OF DECEMBER 31, 2005
The accompanying notes form an integral part of these financial statements.

32—
100,000

U.S. dollars

STATEMENTS OF CASH FLOWS(For the six-month periods ended December 31, 2005 and June 30, 2005)
Thousands of yen

U.S. dollars

8th Period( July 1, 2005–
Dec. 31, 2005)

7th Period( Jan. 1, 2005–
June 30, 2005)

8th Period( July 1, 2005–
Dec. 31, 2005)¥ 3,399,269¥ 3,377,060$ 28,790,292

1,531,780

1,444,283

12,973,493

CASH FLOWS FROM OPERATING ACTIVITIES:
Income before income taxes
Depreciation
Amortization of corporate bond issuance costs

42,114

42,114

356,686

Interest income

(96)

(148)

(815)

Interest expense

545,569

524,161

4,620,726

Decrease (increase) in rental receivables

60,629(32,620)

513,503

Decrease (increase) in consumption tax refundable(Decrease) increase in trade accounts payable
Increase (decrease) in other accounts payable

51,773(51,773)438,494(302,858)

107,075(2,565,072)

2,605(13,669)

22,066

Increase (decrease) in accrued consumption taxes

223,858(37,941)

1,895,974

Increase in rent received in advance

71,45937,765605,225

3,154,114

6,503,193

26,713,930(84,630)

461,864(716,780)

8,695,586

12,361,364

73,647,722

96

148

815

(541,524)(545,807)(4,586,469)(1,617)(1,005)(13,699)

8,152,541

11,814,700

69,048,369(8,747,112)(24,741,447)(74,084,121)

Decrease in property and equipment due to sale
Change in other current assets/liabilities
SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
Purchases of intangible assets
Purchases of investment securities
Payment of deposits received from tenants
Proceeds from deposits received from tenants
Net cash used in investing activities(3,583)—(30,349)(1,558,460)—(13,199,458)(621,998)(903,825)(5,268,040)

2,459,644

1,307,076

20,832,082(8,471,509)(24,338,196)(71,749,886)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings

7,500,000

5,200,000

63,521,639

Repayment of short-term borrowings(5,200,000)(21,100,000)(44,041,670)

Proceeds from long-term borrowings

5,000,000

6,500,000

42,347,760—

26,317,700—(3,374,217)(2,868,808)(28,578,109)

3,925,783

14,048,892

33,249,620

Proceeds from issuance of units
Distributions to unitholders
Net cash provided by financing activities
NET INCREASE IN CASH AND CASH EQUIVALENTS

3,606,815

1,525,396

30,548,103

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

20,304,126

18,778,730

171,966,853

CASH AND CASH EQUIVALENTS AT END OF PERIOD¥ 23,910,941¥ 20,304,126$ 202,514,956

The accompanying notes form an integral part of these financial statements.

33

NOTES TO FINANCIAL STATEMENTS(December 31, 2005 and June 30, 2005)

1. ORGANIZATION
Japan Prime Realty Investment Corporation (the“Company”), an externally managed real estate
investment corporation, was incorporated on September
14, 2001 under the Law Concerning Investment Trusts
and Investment Corporations of Japan, or the Investment
Trust Law. The Company was formed to invest primarily
in real estate in Japan.
The Company was originally formed by Tokyo
Tatemono Co., Ltd., Taisei Corporation, and Tokyo
Realty Investment Management, Inc. (“TRIM”), andcommenced its operation on November 16, 2001 byacquiring 13 properties. TRIM, a licensed asset
management company, provides professional asset
management services of office and retail properties to theCompany. TRIM is currently owned 26% by Tokyo
Tatemono Co., Ltd., 24% by Meiji Yasuda Life Insurance

Company, 20% by Yasuda Real Estate Co., Ltd., 20% by
Taisei Corporation, and 10% by Sompo Japan InsuranceInc.
On June 14, 2002, the Company raised ¥25,862
million through an initial public offering and was listedon the Tokyo Stock Exchange (Securities code: 8955).
Since the initial public offering, the Company has
increased capital through the issue of new investment
units and secondary offerings in July and August 2003
and February and March 2005 (unitholders’ capital as ofDecember 31, 2005: ¥115,431 million).
As of December 31, 2005, the Company owned aportfolio of 42 properties containing an aggregate of
approximately 308,205.26 square meters of leasable area,and leased its office space to 441 tenants. The occupancy
rate is 97.2%.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBASIS OF PRESENTING FINANCIAL
Japanese yen has been or could be readily converted,
STATEMENTS
realized or settled into U.S. dollars at that rate or any
The Company maintains its accounting records andother rate.
prepares its financial statements in accordance withaccounting principles generally accepted in JapanINVESTMENT SECURITIES(“Japanese GAAP”), including provisions set forth in theInvestment securities include other securities. Other
Investment Trust Law, the Japanese Commercial Code,securities without market values are stated on a cost basis
the Securities and Exchange Law of Japan and the relatedusing the moving-average method.
regulations, which are different in certain respects as tothe application and disclosure requirements of
PROPERTY AND EQUIPMENT
International Financial Reporting Standards.
Property and equipment is stated at cost, less
The accompanying financial statements are aaccumulated depreciation. The costs of land, buildings
translation of the financial statements of the Company,
and building improvements include the purchase price of
which were prepared in accordance with Japanese GAAP
property, legal fees and acquisition costs. Depreciation of
and were presented in the Securities Report of theproperty and equipment is calculated on a straight-line
Company filed with the Kanto Local Finance Bureau. In
basis over the estimated useful lives of the assets ranging
preparing the accompanying financial statements, certain
as follows:
reclassifications have been made to the financial
statements issued domestically in order to present them
Buildings ...........................................................3–64 years
in a format which is more familiar to readers outside
Structures ........................................................10–20 years
Japan. In addition, the notes to financial statements
Machinery and equipment ................................3–17 years
include information which might not be required underTools, furniture and fixtures ..............................5–15 years
Japanese GAAP but is presented herein as additional
information.
Expenditures for repairs and maintenance are charged
The Company’s accounting period ends at the end of
to operations as incurred. Significant renewals andJune and December. The Company’s 8th accounting
betterments are capitalized.
period began on July 1, 2005 and ended on December 31,
2005.
Effective July 1, 2005, the Company adopted theAmounts in U.S. dollars are included solely for theaccounting standard for the impairment of fixed assets
convenience of readers outside Japan. The rate ofpresented in the “Accounting Standard for Impairment of¥118.07=US$1.00, the foreign exchange rate on
Fixed Assets” (“Comments on the Accounting Standard
December 31, 2005, has been used for translation. The
for Impairment of Fixed Assets” by the Businessinclusion of such amounts is not intended to imply that
Accounting Council in Japan, issued on August 9, 2002),
34and the “Guidance for Accounting Standard for
Impairment of Fixed Assets” (Accounting Standards
Board of Japan, Financial Accounting Standards
Implementation Guidance No. 6, issued on October 31,2003).
There was no impact on profit or loss as a result of
adoption.
INTANGIBLE ASSETS
Intangible assets are amortized utilizing the straight-line
method.
DEFERRED ASSETS
Corporate bond issuance costs are amortized over a
period of approximately three years, comprised of six
fiscal periods, with an equal amount amortized in eachfiscal period.
New unit-issuance costs are charged to income as
incurred.
In connection with the public offering of new
investment units conducted on February 2, 2005, thespread method was utilized, under which the underwriterunderwrote the new investment unit issue at theunderwriting price and sold the investment units to the
public at the offering price.
Under this method, the difference between theoffering price and the underwriting price represents theunderwriting commission. As a result of the applicationof this method, the Company does not pay anunderwriting commission to the underwriter. The
difference between the offering price and theunderwriting price for the public offering of new
investment units conducted on February 2, 2005 was¥879,985 thousand. In the event the underwriter had
offered the new investment units to the public at theunderwriting price (hereafter referred to as “the conventional method”), this amount would have been accounted
as new unit-issuance costs.

The effect of the application of the spread method
was to reduce new unit-issuance costs by ¥879,985
thousand and increase income before income taxes by thesame amount.
REVENUE RECOGNITION
Revenues from leasing of office space are recognized asrent accrued over the lease period.
TAXES ON PROPERTY AND EQUIPMENT
Property and equipment is subject to property taxes andcity planning taxes on a calendar year basis. These taxes
are generally charged to expenses during the period. The
sellers of the properties were liable for property taxes forthe calendar year including the period from the date ofpurchase by the Company through the end of the year
since the taxes are imposed on the registered owner as ofJanuary 1, based on the assessment made by the local
government. The Company paid the amount equivalent
to the property taxes to the sellers applicable to the period
since acquisition and included the amount equivalent to
the taxes in the purchase price of each property andcapitalized 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 thebalance of consumption taxes withheld. As such, theexcess of payments over amounts withheld is included in
the current assets and the excess of amounts withheld
over payments is included in the current liabilities.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand,deposits placed with bank and short-term investments
which are highly liquid, readily convertible to cash andwith insignificant risk of price fluctuation, with original
maturities of three months or less.

3. INVESTMENT SECURITIES
Details of other securities without market value as of December 31, 2005 are as follows:
Thousands of yen

U.S. dollars

As of June30, 2005

As of December
31, 2005

As of December
31, 2005

Category

Preferred securities

Balance Sheet Amount¥1,558,460¥—$13,199,458

Note: The value of preferred securities issued by the Special-Purpose Company is subject to fluctuation owing to changes in the value and profits of underlying
assets.

35

4. REAL ESTATE
Real estate at December 31, 2005 and June 30, 2005 consisted of the following:Thousands of yen

U.S. dollars

As of June30, 2005

As of December
31, 2005

As of December
31, 2005

Land
Buildings and structures
Accumulated depreciation
Machinery and equipment
Accumulated depreciation
Tools, furniture and fixtures
Accumulated depreciation
Construction in progress
Entrusted land
Entrusted buildings and structures
Accumulated depreciation
Entrusted machinery and equipment
Accumulated depreciation
Entrusted tools, furniture and fixtures
Accumulated depreciation
Entrusted construction in progress
Total

Acquisition Costs

Book Value

Acquisition Costs

Book Value¥22,309,883
14,832,798
566,772
141,735
24,632
8,417
850
5,433
99,611,067
70,345,244
7,581,802
1,326,357
428,836
49,647
5,791—¥ 22,309,883¥ 19,967,713
9,654,361
338,748
79,316
14,637
8,417
222
2,060
100,430,870
71,598,538
6,571,891
1,305,931
378,627
34,7273,120
1,050¥ 19,967,713

14,266,026
117,103
7,567
5,433
99,611,067
62,763,442
897,52143,856—¥200,021,898

9,315,613
64,6798,195
2,060
100,430,870
65,026,647
927,304
31,607
1,050¥195,775,738

Acquisition Costs

Book Value$188,954,706 $ 188,954,706
125,627,155
4,800,302
120,826,853
1,200,427
208,625
991,80271,284
7,197
64,08746,01946,019843,661,111
843,661,111
595,792,701
64,214,464
531,578,237
11,233,653
3,632,048
7,601,605
420,489
49,050371,439——$1,694,095,859

5. SHORT-TERM BORROWINGS
Short-term borrowings at December 31, 2005 and June 30, 2005 consisted of the following:
As of December
31, 2005

Unsecured loan from a bank due on July 5, 2006
Unsecured loan from a bank due on September 27, 2006
Unsecured loans from a trust bank due on September 27, 2006
Unsecured loans from banks due on May 27, 2006
Total

Amount(Thousandsof yen)Weightedaverageinterest rate

¥1,500,000¥1,000,000
5,000,000—¥7,500,000

0.334%
0.334%
0.324%—

As of June30, 2005

As of December
31, 2005

Amount(Thousandsof yen)Weightedaverageinterest rate

Amount(U.S. dollars)———
5,200,000¥5,200,000———
0.330%$12,704,327$08,469,553
42,347,760—$63,521,640

As of June30, 2005

As of December
31, 2005

Amount(Thousandsof yen)Weightedaverageinterest rate

Amount(U.S. dollars)

—
—
—

—
—

$110,104,175
16,939,104$127,043,279¥¥

Current Portion of Long-Term Borrowings
As of December
31, 2005

Secured loans from a trust bank and an insurancecompany due on December 27, 2006
Secured loans from banks due on December 27, 2006
Total

Amount(Thousandsof yen)Weightedaverageinterest rate

¥13,000,000
2,000,000¥15,000,000

1.234%
1.295%The Company has executed a commitment line
agreement with its principal bankers in an effort tominimize refinance risks and to secure financial stability.

36

¥
¥

Contract execution date:
Credit limit:
Outstanding debt as of the period-end:
Unused portion of commitment line:

December 1, 2005
¥20,000,000,000¥—¥20,000,000,000

6. CORPORATE BONDS
Details of total corporate bonds outstanding are briefly as follows:
As of December
31, 2005

Unsecured bonds due on February 12, 2008
Unsecured bonds due on February 12, 2010
Unsecured bonds due on February 12, 2014
Unsecured bonds due on November 4, 2009
Unsecured bonds due on November 4, 2011
Unsecured bonds due on November 4, 2014
Total

As of June30, 2005

As of December
31, 2005

Amount(thousandsof yen)Interest rate(%)

Amount(thousandsof yen)Interest rate(%)

Amount(U.S. dollars)¥10,000,000
7,000,000
5,000,000
10,000,000
5,000,000
5,000,000¥42,000,000

0.84%
1.38%
2.32%
0.92%
1.44%
2.00%
—%

¥10,000,000
7,000,000
5,000,000
10,000,000
5,000,000
5,000,000¥42,000,000

0.84%
1.38%
2.32%
0.92%
1.44%
2.00%
—%

$ 84,695,519
59,286,864
42,347,760
84,695,519
42,347,760
42,347,760$355,721,182

As of June30, 2005

As of December
31, 2005

Weightedaverageinterest rate

Amount(U.S. dollars)

7. LONG-TERM BORROWINGS
Long-term borrowings at December 31, 2005 and June 30, 2005 consisted of the following:
As of December
31, 2005

Unsecured loans from an insurance company
due on March 23, 2007
Unsecured loans from an insurance company
due on April 13, 2007
Unsecured loans from banks due on April 11, 2007
Unsecured loans from an insurance federationdue on Nov. 27, 2012
Secured loans from a trust bank and an insurancecompany due on December 27, 2006
Secured loans from banks due on December 27, 2006
Secured loans from an insurance company
due on December 26, 2008
Secured loans from an insurance company
due on June 21, 2011
Secured loans from an insurance company
due on March 28, 2013
Total

Amount(thousandsof yen)Weightedaverageinterest rate

Amount(thousandsof yen)¥ 1,000,000

0.873%¥ 1,000,000

0.873% $8,469,553

2,000,000
4,500,000

0.493%
0.478%

2,000,000
4,500,000

0.493%
0.478%

16,939,104
38,112,984

5,000,000

1.453%——

42,347,759

—
—

—
—

13,000,000
2,000,000

1.234%
1.295%——

4,783,000

1.700%

4,783,000

1.700%

40,509,867

4,783,000

2.050%

4,783,000

2.050%

40,509,867

4,400,000¥26,466,000

1.750%

4,400,000¥36,466,000

1.750%

37,266,028$224,155,162

8. SECURED ASSETSAt December 31, 2005 and June 30, 2005, the following assets were pledged as collateral for the following debt:
Pledged assets:

Cash and cash equivalents
Land
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures
Construction in progress
Total

Thousands of yen

U.S. dollars

As of December
31, 2005

As of June30, 2005

As of December
31, 2005¥ 5,885,259
35,821,302
23,476,612
215,672
17,846—¥65,416,691¥ 5,775,834
35,821,302
23,740,001
229,806
11,974—¥65,578,917$ 49,845,503
303,390,379
198,836,384
1,826,648
151,144—$554,050,05837

Borrowings secured by the pledged assets:
Thousands of yen

U.S. dollars

As of June30, 2005

As of December
31, 2005—
28,966,000¥28,966,000$127,043,279
118,285,763$245,329,042

As of December
31, 2005

Current portion of long-term borrowings
Long-term borrowings
Total¥15,000,000
13,966,000¥28,966,000

9. UNITHOLDERS’ EQUITY
Under the Investment Trust Law and the related
regulations, the appropriations of retained earnings andthe declaration of a cash distribution for the current
accounting period are made by the resolution of theBoard of Directors at a meeting held subsequent to the
10. INCOME TAXESAt December 31, 2005, the Company’s deferred tax assets
consisted mainly of the accrued enterprise tax, which is
not deductible until paid for tax purposes. The
reconciliation of tax rate difference between the adjusted
statutory tax rates and the effective tax rates for the sixmonth periods ended December 31, 2005 and June 30,2005 were as follows:
For the period
from July 1, 2005
to December 31, 2005

For the period
from January 1, 2005
to June 30, 2005

39.39%

39.39%(39.37%)
0.01%
0.03%

(39.38%)
0.02%
0.03%

Statutory tax rate
Deductible dividends
distribution
Others
Effective tax rate¥

close of the accounting period. As such, the retained
earnings of unitholders’ equity at December 31, 2005
included cash distribution of ¥3,397,830 thousand($28,778,097) subsequently made.

The Company is subject to Japanese corporate income
taxes on all of its taxable income. However, under theSpecial Taxation Measures Law of Japan, or the STML,
an investment corporation is allowed to deduct dividendsof accounting profits, or dividend distributions, paid toinvestors 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 accounting period as stipulated by Article
67-15 of the STML. Based on the distribution policy
provided by the Articles of Incorporation, the Company
made a dividend distribution of approximately 100% of
retained earnings in the amount of ¥3,397,830 thousand($28,778,097) at December 31, 2005 and treated it as tax
deductible dividend. The Company will not distribute thedividends in excess of accounting profit under the
Articles of Incorporation.

11. PER UNIT INFORMATION
The following table summarizes information about net assets per unit and net income per unit at December 31, 2005
and June 30, 2005, and for the six-month periods then ended:

Net assets at period-end per unit
Net income per unit

In calculating the net assets per unit, the amount of
the net assets included the cash distribution declared in
the subsequent period.
Net income per unit is computed by dividing net
income by the weighted-average number of units
outstanding during each period. The weighted-average

38

Yen

U.S. dollars

For the period
from July 1, 2005
to December 31, 2005

For the period
from January 1, 2005
to June 30, 2005

For the period
from July 1, 2005
to December 31, 2005

¥224,206
6,411¥224,165
6,599$1,89954

number of units used in the calculation was 530,000 units
for the six months ended December 31, 2005 and511,547 units for the six months ended June 30, 2005.
Diluted net income per unit has not been presented since
no warrants and convertible bonds were issued during theperiod.

12. RELATED PARTY TRANSACTIONSThe Company entered into the following related party transactions:
For the period
from July 1, 2005
to December 31, 2005

Property brokerage fees
Property management fees
Leasing commissions
Outsourced property operation
Repairs and maintenance¥—
32,0882,569
79,571
85,261Thousands of yen

U.S. dollars

For the period
from January 1, 2005
to June 30, 2005

For the period
from July 1, 2005
to December 31, 2005

¥140,000
32,631
6,344
77,09048,863$—271,771
21,762
673,934
722,118

13. BREAKDOWN OF OPERATING REVENUES AND EXPENSES
For the six-month periods ended December 31, 2005 and June 30, 2005.

Real Estate Rental Revenues
Rental Revenues
Rental revenues
Common charges
Parking revenues
Other rental revenues
Non-Rental Revenues
Incidental income
Cancellation charges
Other miscellaneous revenues
Real Estate Rental Expenses
Property management fees
Utilities expenses
Property and other taxes
Casualty insurance
Repairs and maintenance
Depreciation
Other rental expenses
Profits

Gain on sale of real estate
Proceeds from sale of real estate
Cost of real estate
Other related sales expense
Gain on sale of real estate
Loss on sale of real estate
Proceeds from sale of real estate
Cost of real estate
Other related sales expense
Loss on sale of real estate

Thousands of yen

U.S. dollars

For the period
from July 1, 2005
to December 31, 2005

For the period
from January 1, 2005
to June 30, 2005

For the period
from July 1, 2005
to December 31, 2005

¥8,372,711
7,792,957
6,182,585
1,374,408
203,751
32,213579,754516,676
9,695
53,383
4,044,243
166,360
545,836
682,687
38,987
182,611
1,531,774
895,9884,328,468¥7,801,176
7,340,901
5,772,805
1,344,062
193,180
30,854
460,275
404,332
25,16730,776
3,768,567
159,350446,897706,269
37,391
113,768
1,444,283
860,609
4,032,609$70,913,110
66,002,857
52,363,726
11,640,620
1,725,681
272,830
4,910,253
4,376,012
82,113452,128
34,252,927
1,408,995
4,622,984
5,782,054
330,205
1,546,636
12,973,438
7,588,615
36,660,183

Thousands of yen

U.S. dollars

For the period
from July 1, 2005
to December 31, 2005

For the period
from January 1, 2005
to June 30, 2005

For the period
from July 1, 2005
to December 31, 2005

¥3,440,000
3,153,290
72,048¥ 214,662¥3,345,000
2,577,089
65,865¥ 702,046$29,135,259
26,706,951
610,211$ 1,818,097¥¥3,765,000
3,926,104
74,135¥ 235,239

$

¥

—
—
—
—

$

—
—
—
—

39

14. LEASESThe Company leases office buildings and earns rental income. As of December 31, 2005 and June 30, 2005, the futurelease revenues under the non-cancelable operating leases are as follows:

Due within one year
Due after one year
Total

Thousands of yen

U.S. dollars

As of December 31, 2005

As of June 30, 2005

As of December 31, 2005

¥ 4,802,732
24,462,879¥29,265,611¥ 4,630,966
26,239,874¥30,870,840$ 40,676,988
207,189,623$247,866,611

15. SUBSEQUENT EVENTSAPPROPRIATION OF RETAINED EARNINGSOn February 17, 2006, the Board of Directors resolved to effect the payment of a cash distribution of ¥6,411 per share
aggregating ¥3,397,830 thousand ($28,778,097) to unitholders at the record date of December 31, 2005.

40

REPORT OF INDEPENDENT AUDITORS

41

U N I T H O L D E R I N F O R M AT I O N

Breakdown of Unitholders (As of December 31, 2005)
By Number of Units Held (Total Number of Units Outstanding: 530,000)

12.3%
Individuals and others

9.9%
Foreign investors

63.7%
Financial institutions

14.1%
Other domestic corporations

By Composition (Total Number of Unitholders: 19,709)

0.8%
Foreign investors

0.9%

Financial institutions

1.2%

Other domestic corporations

97.1%
Individuals and others

Major Unitholders (As of December 31, 2005)

42

Units

(%)

Japan Trustee Services Bank, Ltd. (Trust Account)

47,240

8.9

Tokyo Tatemono Co., Ltd.

29,300

5.5

NikkoCiti Trust and Banking Corporation

25,496

4.8

Kawasaki Gakuen

25,000

4.7

Meiji Yasuda Life Insurance Company

24,000

4.5

The Master Trust Bank of Japan, Ltd. (Trust Account)

22,631

4.3

Trust & Custody Service Bank, Ltd.

20,315

3.8

AIG Star Life Insurance Co., Ltd.

13,1902.5

The Hiroshima Bank, Ltd.

10,837

2.0

The Senshu Bank, Ltd.

8,936

1.7

J P R I N V E S T M E N T P O L I C I E S (Reference)
A. INVESTMENT POLICIES
1) Basic policies
The Company’s basic investment strategy centers on investment in urban commercial real estate. The Company will invest
primarily in real estate, which comprises superior urban office buildings and retail properties found in thriving commercial
areas, the land on which they are located, as well as in asset-backed securities that have such real estate as their primary
investments. In light of the returns and risks of these investments, the Company will invest not only in Tokyo but willattempt to diversify into other cities so as to maximize portfolio return.
The Company will diversify investments in terms of both tenants and properties, taking into account the amount ofinvestment per property, and will seek thereby to achieve stable medium- and long-term growth. Investment ratio targets
are as shown on page 44 under “3) Investment stance ii) Investment ratio targets.”
Note: For the definitions of “real estate” and “asset-backed securities that have real estate as their primary investments,” please refer to the next section, 2) Types ofinvestment assets I) and II)2) Types of investment assetsI) “Real estate” refers to the following:i) Real estateii) Real estate leasing rightsiii) Surface rightsiv) Beneficiary interests in the following trusts (includes comprehensive trusts in which cash associated with realestate is also entrusted, but excludes the marketable securities [referred to as “marketable securities” hereinafter]
defined in Article 2:5 of the Law Concerning Investment Trusts and Investment Corporations, No. 198 of1951, including all subsequent amendments; referred to as the “Investment Trust Law” hereinafter)a) Real estateb) Surface rights and land leaseholdsv) Beneficiary certificates in monetary trusts (limited to trusts for which the primary purpose is investment in theassets listed in i) to iii) above; excludes equivalents to securities)vi) Equity investment based on a contract that specifies that one party will provide funding to be invested in theassets identified in i) to v) above and the other party will invest these funds in said assets, with the profits andloss from these investments distributed to investors (“Tokumei Kumiai equity” in Japanese, referred to as “TK
equity” hereinafter).
II) “Asset-backed securities that have real estate as their primary investments” refer to investment in securities with over halfof their investment amount backed by real estate, detailed as follows:i) Preferred securities as defined the Law Concerning Asset Liquidation (Law No. 105 of 1998, including all
subsequent amendments; referred to as the “Asset Liquidation Law” hereinafter)ii) Beneficiary certificates in investment trusts as defined under the Investment Trust Lawiii) Investment securities as defined under the Investment Trust Lawiv) Beneficiary certificates in special-purpose trusts as defined under the Asset Liquidation Law (excludes
beneficiary certificates in trusts listed in I) iv) and v) above)III) The Company may invest in the following designated assets in order to efficiently utilize surplus funds remaining after
the investments listed in I) and II) above:i) Bank depositsii) Call loansiii) Japanese government bondsiv) Municipal bondsv) Commercial paper (refers to instruments defined in Article 2:1:8 of the Securities and Exchange Law).
43vi) Transferable certificates of depositvii) Designated bonds as defined under the Asset Liquidation Law (refers to instruments defined in Article 2:1:3:2
of the Securities and Exchange Law; however, this is limited to instruments in which the assets obtained as thebusiness for liquidation by the special purpose company are primarily real estate)viii) Beneficiary certificates in loan credit trusts (refers to instruments defined in Article 2:2:1 of the Securities andExchange Law)ix) Cash credits, excluding securities and promissory notes, as defined in Article 3:12 of the Law Concerning
Investment Trusts and Investment Corporations Cabinet Order (Law No. 480 of 2000, including all subsequent
amendments; referred to as the “Investment Trust Law Cabinet Order” hereinafter) and financial derivativetransactions, as defined in Article 3:14 of the same lawx) Rights resulting from financial futures trading, as defined in Article 3:13 of the Investment Trust Law Cabinet
Orderxi) Rights resulting from financial derivatives trading, as defined in Article 3:14 of the Investment Trust Law
Cabinet Orderxii) Beneficiary interests in monetary trusts for the purpose of investments such as those described in i) to xi) above.
Furthermore, the Company may invest in stock (restricted to the stock of the building management company
and other companies in the course of the Company’s investment activities in specified assets identified in I) andII) above).
IV) In addition to the specified assets identified in I) through III) above, the Company may invest in the following assets when
considered appropriate or of benefit to the Company in accordance with its basic investment management policy:i) Trademarks, exclusive licenses and ordinary use rights based on the Trademark Law (Law No. 127 of 1959,
including all subsequent amendments)ii) Rights to use the source of hot springs as set forth in the Hot Spring Law (Law No. 125 of 1948, including all
subsequent amendments) and facilities related to such hot springsiii) Other assets related to the real estate, which are considered appropriate to acquire together with the subject realestateV) The Company may invest in assets other than the assets under management when considered appropriate and in line withthe organizational operation of trademarks, etc., relating to the Company’s name.
3) Investment stancei) Investment horizon
The Company will, in principle, hold assets for the medium- and long-term (one to five years and over five
years, respectively) and will not acquire assets for the purpose of short-term trading (less than one year).
ii) Investment ratio targets
Type of Investment Asset

Target Ratios

The target allocation ratio between office buildings and retail properties
based on acquisition price shall generally be 8:2
The target allocation ratio between Tokyo(1) and other cities(2) based on
By Locationacquisition price shall generally be 6:4
Rental revenues from any individual tenant (total rental revenue when the tenant occupies
multiple compartments and/or properties) will, in principle, be limited to less than 10% of
total rental revenues(3)The total after-investment value of asset-backed securities(4) shall, in principle, be limited tothan 10% the net worth of the Company
By Asset ClassReal Estate

Asset-Backed
less of Securities, etc.

Notes:(1) “Tokyo” includes two categories: CBDs (Central Business Districts) comprising Chiyoda, Chuo, Minato, Shinjuku, Shinagawa and Shibuya Wards; and Greater
Tokyo comprising all other areas of Tokyo, and Chiba, Kanagawa and Saitama Prefectures.

44

(2) “Other cities” includes all other areas in Japan.
(3) “Rental revenues” includes common charges, parking revenues and storage revenues, but does not include additional usage fees such as after-hours airconditioning charges. This ratio may be exceeded, however, if there is any potential for tenant changes or if warranted by general considerations of leasing
conditions and other factors.
(4) Investment in asset-backed securities assumes that there will be an opportunity to obtain the relevant property, etc., at the end of the asset-backed security period.

iii) Investment policies for development projects
The Company will, in principle, acquire only real estate that generates or is expected to generate stable rental
revenues or similar revenues at the time of acquisition.
The Company will not engage in development investments (projects in which the Company itself develops
property from land and builds buildings). However, the Company may invest in buildings under construction by
third parties prior to their completion if sufficient potential to secure tenants after construction is determined
and the buildings are confirmed as non-development investments. In addition, the Company may invest in
rebuilding projects for properties that it has already acquired, provided that sufficient potential to secure tenants
after rebuilding is determined and the projects are confirmed as non-development investments.
iv) Equipment and fixtures investment policies
The Company will invest in equipment and fixtures in accordance with an efficient upkeep plan created for each
property and designed to maintain and improve the competitiveness of the property from medium- and longterm perspectives. In principle, such investments will be within the scope of the depreciation expense of theindividual property, but final decisions will be made in light of the depreciation expense for the portfolio as awhole. However, repairs to common areas will be implemented quickly by the Company from the perspective of
tenant operational policies, and reinforcements will be made quickly for buildings requiring earthquakeresistance reinforcements in light of the status of tenant operations.
v) Insurance policiesa) Criteria for selecting underwriting insurance companies:
The Company will select fair underwriting insurance companies through independent brokers. The
underwriting insurance company will, in principle, have an insurance rating of A3 or A- or better from
Moody’s Investors Service Inc. (referred to as “Moody’s” hereinafter) or Standard & Poor’s.
b) Earthquake insurance coverage criteria:
The decision to cover earthquake insurance will be made in light of comparisons between the potential
impact of disaster and property insurance premiums based on the PML for the entire portfolio. Earthquake
insurance may be purchased individually for properties that have high PML.
Note: “PML” refers to the probable maximum loss in the event of an earthquake. PML may be calculated for individual properties or for the portfolio
as a whole. While there is no strict definition of PML (valuation methods will differ depending on the institution conducting the survey), it isgenerally found by calculating the probable damage from the largest foreseeable earthquake during the expected period of use (50 years is theuseful lifetime ordinarily assigned to buildings; the largest foreseeable earthquake is a major earthquake of a size seen once every 475 years,
having a 10% probability of occurring during any 50 year span). The figure represents the ratio of projected expenses for restoration of damage
to the price of reacquisition.

vi) Sales policya) The Company will select real estate, asset-backed securities that have real estate as their primary investments,and other investments in its holdings to be sold based on overall considerations of the current status of theasset to be sold, projections of its future profitability and changes in asset value, and the asset allocation of theportfolio as a whole.
b) The Company will determine asset values each fiscal term and an investment sub-committee will study
whether to sell or hold any property that has declined more than 20% in terms of appraised value comparedwith book value. In addition, the Company may also consider the sale of other properties as it sees fit, aswarranted by market conditions and other factors. The following are the main considerations in determining
sales:
45

• Market forecast• Development forecast for the surrounding area
• Profitability forecast• Estimated amount of future investments• Forecast changes in valuation• Considerations of the portfolio as a whole (diversification by geographical location, tenant and asset class,etc.; impact on dividends, etc.)vii) Value-up properties
Value-up properties refer to those properties that exhibit the potential for an increase in profitability and asset
value, and have an immediate income stream on acquisition, along with any of the following characteristics:
1. An occupancy rate of less than 80% at the time of acquisition
2. Significant investment return following effective renovation work
In principle, value-up properties occupy a maximum 15% (based on acquisition price) of the total property
portfolio. The additional acquisition of value-up properties is also subject to a total portfolio occupancy rate inexcess of 90%.
Utilizing the know-how of its asset management company, the Company implements the following key
strategies in the management of value-up properties:
1. Reinforce leasing activity with the aim of improving the occupancy rate
2. Carry out effective renovation to enhance market competitiveness3. Implement cost controls by increasing efficiencies in management structure
Value-up properties that contribute to stabilizing the total income of the portfolio and fulfill certain criteria
as determined by the Investment Committee are reclassified as “core properties,” which have the following
characteristics:
1. Improve occupancy rate
2. Raise property value (on an appraisal basis)
3. Increase and stabilize income
The Company will consider the sale of value-up properties, under the aforementioned criteria, on a mediumterm basis over two to four successive business periods. In addition, properties that are reclassified as coreproperties are, in principle, not reclassified as value-up properties.
The Company will consider the sale of value-up properties as one method to realize asset value appreciation.
Core properties refer to office buildings other than value-up properties. Core properties are positioned as
those properties that contribute to the profit stability of the overall portfolio.
4) Investment standards
When investing in individual real estate property, asset-backed securities that have real estate as their primary investments,
or other investments, the Company will, prior to making the investment, perform a general evaluation that considers thecurrent status, future profitability, risk, location, building and facilities maintenance and management, deterioration andobsolescence, earthquake resistance, rights, contracts with current tenants, environment, topography, as well as otherfactors.
After acquisition of the investment, the Company will make ongoing and effective investments in facilities andequipment so as to maintain and improve the value and competitiveness of the asset, and will seek to stabilize and expand
profitability by increasing revenues and reducing costs.

46

The major specific investment criteria of the Company is as follows:i) Geographical location
Real estate to be invested in will be located in the following cities:a) Major urban areas: CBDs in Tokyo, Yokohama, Kawasaki, Chiba, Saitama, Nagoya, Osaka, Kyoto and Kobeb) Other government-designated cities: CBDs in Sapporo, Sendai, Hiroshima, Fukuoka, Kitakyushu and othersc) Other core cities such as prefectural capitals with populations of 300,000 or more
When investing in retail properties, the Company will identify and determine an appropriate business area forthe property; analyze the business area from a variety of perspectives, including population, demographic trends,
number of households and average income; appropriately measure the latent buying power and growth potentialof the business area; and determine the suitability of the tenants and their businesses to the business area. The
Company will also study and analyze competitiveness from a variety of perspectives, including current market
competition, plans for the opening of competitive stores in the vicinity, and future room for development.
ii) Sizea) Office buildings
In principle, the Company will invest in office buildings with total floor space of at least 3,300 square metersand floor space of approximately 330 square meters for each standard floor above the second story level.
b) Retail properties
In principle, the Company will invest in retail properties of an appropriate size in light of the future growthpotential of their areas, as determined by local characteristics, business area scale and the standard property
size for similar businesses.
iii) Facilities and equipmenta) Office buildings
Giving general consideration to local characteristics or potential for post-acquisition property modification,etc., the Company will evaluate specifications on a case-by-case basis.
b) Retail properties
The Company will decide on retail properties individually, comparing them against standard qualifications
and judging from overall factors, including the local characteristics of the property’s area, versatility as a retailproperty, potential for conversion to other uses, visitor access, etc.
iv) Earthquake resistance
The Company will, in principle, invest only in buildings that meet new earthquake-resistance standards(specified under the Buildings Standards Law) or for which earthquake-resistance reinforcement work has been
completed (including properties for which earthquake-resistance reinforcement work has not been done, but canbe completed after acquisition.)v) Tenantsa) Office buildings
In principle, no single tenant will occupy more than 50% of a property (parent companies and theirsubsidiaries are considered as a single tenant). If a tenant occupies more than 50%, the Company can acquire
the property after an evaluation of the tenant’s creditworthiness, suitability and substitution potential.
b) Retail properties
The Company will make a general evaluation of the tenant’s creditworthiness, suitability and substitution
potential.
vi) Rightsa) Joint ownership• The Company will, in principle, seek a joint ownership ratio above 50% in order to assure sufficient latitude inproperty management (leasing, improvements, etc.), but may acquire properties with an ownership ratio below
50% on a case-by-case basis after considering the nature and creditworthiness of other owners and thecharacteristics of the property.
47• The Company shall, in order to assure sufficient latitude in disposal of the property, confirm whether special
contracts or other agreements providing for preferential purchasing rights or options among the other owners
will be executed, and whether restrictions will be placed on the transfer of rights, and if so, the nature of theserestrictions.
• The Company will attempt to assure the stability of revenues by fully confirming the nature andcreditworthiness of other owners and, where possible, providing for appropriate procedures. (This may include,
but is not limited to, signing contracts prohibiting the division of joint equity and reaching agreements on theregistration of rights and the mutual use of land.)b) Unit ownership• The Company will, in principle, reserve for itself at least 75% of the voting rights in meetings attended by unit
owners in order to assure sufficient latitude in improvements. However, it may make individual decisions basedon a general evaluation of the nature and creditworthiness of other unit owners.
• The Company shall, in order to assure sufficient latitude in disposal of the property, confirm whether special
contracts or other agreements providing for preferential purchasing rights or options among the other owners
will be executed, and whether restrictions will be placed on the transfer of rights, and if so, the nature of theserestrictions.
• The Company will attempt to ensure the stability of revenues by confirming the operations of the
management union (reserves, liability ratios, insurance, etc.) and will take such individual measures as are
required. (This may include, but is not limited to, increasing accumulated amounts within the Company itself,
or providing for insurance on the joint areas and registration of land rights separately from the management
union.)c) Leaseholds• The Company will, in principle, invest in leaseholds as specified in the old Leasehold Law (Law No. 49 of1921, including all subsequent amendments) and the Land and Building Leasing Law (Law No. 90 of 1991,
including all subsequent amendments).
• The Company will carefully study the nature of the proprietary right holder of land and will make its decision
after fully investigating the impact of the provisions for rent revisions, charges for renewing the leasing
contract, charges for approval of rebuilding proposals, charges for the approval of sales proposals and otherfactors in concerning profitability.
d) Collateral rights and usufructuary rights• The Company will confirm the existence of mortgages or other collateral rights on the proposed property at
the time of purchase, and the possibility of extinguishing such rights on closing.
• The Company will make its decision after confirming the existence of usufructuary rights (for example, surface
rights or easements) set forth by third parties and the impact that such rights will have on profitability.
vii) Investment amounta) Minimum investment per property
The minimum investment per property (only the purchasing price, exclusive of taxes, acquisition costs, etc.)
will, in principle, be more than ¥1 billion. A property can be acquired for a lesser amount under the following
circumstances:• When acquiring part of a property valued in total at over ¥1 billion• When acquiring a property with an appraisal value of more than ¥1 billion, but acquired after negotiation for alesser amount• In cases where several properties are being acquired together as a packageb) Maximum investment per property
The ceiling on the investment amount per property will be one-third of the total investment in real estate, assetbacked securities and other investments already held. Generally, however, properties that exceed this ratio can be48

acquired in cases where this is deemed advisable. The “total investment in real estate, asset-backed securities andother investments already held” refers to the total appraised value of investments up to the previous period, plus
the price of investments purchased in the current period (exclusive of taxes, acquisition costs, etc.), plus theamount to be invested in the new property (exclusive of taxes, acquisition costs, etc.).
c) Restrictions on acquisition price
The acquisition price for investments including real estate and asset-backed securities will, in principle, belimited to 105% of the appraised value of the investments. However, provided that the property acquisition does
not cause the total property acquisition fund to fall below the NOI yield criterion for the current period, theabove-mentioned appraised-value upper limit of 105% can be exceeded in the following cases:• Properties that, by long-term fixed leasing contracts, are forecast to contribute to stable cash flow, and thosethat are expected to generate a certain profit for dividends in the medium to long term
• Properties that, in terms of scale, location or general standpoint, are judged to contribute to an increase in totalfund quality and can be expected to generate a certain profit for dividendsviii) Selection guidelines concerning real estate acquisition ownership type
The Company acquires real estate under direct ownership or on an entrusted basis, acquiring beneficiaryinterests to the property. The decision as to which form of ownership the Company will take is determined after
considering the requirements of the existing owner, the cost of transferring rights, and a number of otherfactors.

B. FINANCIAL POLICIES
1) Fund management policies
I) Leasehold and security deposits
For beneficiary interests
All leasehold and security deposits by tenants will be accumulated within the trust account, but the Company may
consider reducing the reserve amount if warranted by accumulated historical data, the establishment of commitment
lines and other provisions.
For real estate, real estate leaseholds and surface rights
Leasehold and security deposits by tenants will be deposited in full to a commercial bank savings account or time
deposit account. However, the Company may reduce reserves in order to more effectively utilize these funds if
warranted by accumulated historical data, the establishment of commitment lines and other provisions for the
maintenance of efficiency and security.
II) Cash and bank deposits in the trust account (for real estate in trust)
All cash will be deposited in ordinary savings accounts or time deposit accounts at banks with short-term debt ratingsof at least P-2 from Moody’s.
III) Cash and bank deposits in the Company accounts
The provisions of II) above will apply to cash and bank deposits in the Company accounts. However, this will notinclude savings accounts established for use in the execution of loans by financial institutions or the payment of interest
on loans.
Surplus funds will, in principle, be paid out in the following order of priority; any balances will be administered as
described below:• Reinvestment (refers to a use in purchasing properties or capital expenditures)• Cash distribution to investors (however, no cash distributions will be made to investors in excess of profits in theabsence of changes in current tax treatment of cash distributions in excess of profits)49• Partial repayment of borrowings (however, this will be given the highest priority when the repayment maturity date of
the loan agreement arrives, regardless of the priorities listed above)IV) Derivatives
The Company will use financial futures, options and other derivatives only for the purpose of hedging interest rate
fluctuation risks and other risks generated by the liabilities of the Company.
2) Issuance of additional investment units
The Company may issue additional investment units in a progressive manner for the purpose of assuring stable, long-term
asset growth as warranted by an accurate assessment of the market and upon consideration of the dilution effects toexisting units (reduction in equity of existing units from the issuing of new units; reduction in the per-unit net asset value
or cash distribution of existing units).
3) Borrowings and issuance of corporate bondsI) Basic policies
The Company will seek to actively expand the size of assets and maintain stable cash distributions to investors byachieving an effective combination of stable long-term fund-raising and flexible short-term fund-raising.
II) Loan to value (LTV)
Loan to value (LTV) refers to a ratio calculated as shown below and will be used as a measurement of the ratio of
liabilities to total assets of the Company.
LTV = (Borrowings + corporate bonds) / Total assets
The Company will, in principle, maintain LTV at levels of no higher than 55%, but may temporarily exceed this level
due to the acquisition of properties or changes in appraised values.
Note: For purposes of this calculation, total assets refers to the amount shown in the assets column of the period-end balance sheet
for the most recent period prior to the calculation of LTV, and is found by adjusting the period-end book value of tangible
fixed assets for the difference between the period-end book value of the tangible fixed asset and its appraised value.
C. PROPERTY-RELATED BUSINESS ADMINISTRATION POLICIESProperty-related business refers to property management, general tenant agency, lease manager/construction manager
services andproperty transfers.
This business is necessary and effective for the achievement of growth for the Company. The Company will administer
this business in accordance with the following policies.
1) Asset Manager and Property Manager
The growth of the Company requires integrated management by the Asset Manager (AM) and expert management by theProperty Manager (PM), with the PM overseeing the facilities management, leasing management and construction
management of individual properties.
In order to achieve more integrated management, the AM may seek the advice of third parties regarding leasing
management and construction plans for real estate invested in. The Company initially selected Tokyo Tatemono Co., Ltd.
as the party to provide this advice (the Lease Manager/Construction Manager).
The AM will select PMs with high degrees of management expertise, seek to concentrate the PMs for eachgeographical area, rigorously seek to homogenize management across the portfolio, and work to maximize unitholder
profits.
The AM will compare the capabilities and merits of a number of companies in its selection of property managers.
Existing PMs and candidates include: Tokyo Tatemono, a company that supports the AM in its leasing management50activities and refurbishment plans; PMs that operate under existing contracts of properties acquired by the Company andpossess established knowledge of tenants and locations; and other PMs. Final selection is also based on a variety of factors
such as management expertise and efforts to integrate PMs in line with property proximity.
2) Commissioned General Tenant Agents
General tenant agency will be commissioned to Tokyo Tatemono Co., Ltd., Yasuda Real Estate Co., Ltd., Taisei
Corporation and other agents (Commissioned General Tenant Agents).
3) Property Transfers Agents
Tokyo Tatemono will be commissioned to provide property transfer services in order to ensure the smooth execution ofproperty purchases and sales. This will not be limited to the real estate, real estate leasing rights and surface rights, but will
include real estate in trust as well. Services will include confirmation of leasing status, confirmation of building and facility
maintenance and management, confirmation and establishment of rights, preparation and confirmation of delivery andother ancillary work.
4) Other investment policies
I) The Company will administer its assets in such a way that the ratio of the total price of designated real estate (real estate,real estate leasing rights, surface rights, or real estate in trusts for which real estate, land leaseholds, or surface rights are theentrusted assets) to the total price of designated assets owned by the Company is 75% or more.
II) The Company will administer its assets in such a way that the ratio of real estate, real estate leasing rights, surface rights,
real estate in trusts (refers only to trusts covering real estate, surface rights or land leaseholds), and TK equity (refers tocontracts specifying only investment in real estate, real estate leasing rights or surface rights) to total assets is 75% or more,which is the ratio established by the Ministry of Finance.
III) The Company may modify the above ratios at any time as warranted by factors such as funding trends, market trends,
general economic conditions and real estate market trends.
IV) Lending of assets in the portfolioa) The Company may lend (for such purposes as parking space and the installation of billboards) real estate, realestate leasing rights and surface rights from among the assets listed on page 43 in A. “Investment Policies 2)
Types of investment assets” in order to more efficiently administer assets and achieve higher investment
performance.
b) If the lending of real estate described in a) above results in the acceptance of leasehold and security deposits orother similar cash funds, the acceptance of these funds will follow the guidelines listed in “B. Financial Policies
1) Fund management policies I) Leasehold and security deposits,” on page 49.
c) The Company shall not lend assets other than real estate, real estate leasing rights and surface rights.

D. DISTRIBUTION POLICIESThe Company’s fiscal period is for six months, from January 1 to June 30, and from July 1 to December 31, each year. The
Company makes cash distributions to unitholders listed on the unitholders’ list at the end of each fiscal period, or toeligible registered pledgees.
1) Distributable amount
Income available for distribution by the Company (the “distributable amount”) equals the amount calculated byadding/deducting capital gains/losses and gains/losses on redemption to rent, common expenses, parking charges,
additional service charges, facility charges, facility installation fees, late payment penalties, termination penalties or similar
cash related to termination of lease agreements generated from real estate (including beneficiary interests and underlying
51

properties of any other assets acquired by the Company) and other income, interest/dividend income and similar income
generated from other rental business and deducting expenses (including depreciation and amortization), interest payments,
asset management fees, and after covering the entire amount of net loss carried forward if it exists.
2) Determining amount of distribution
The Company determines the amount of distribution, which must exceed 90% of the Company’s distributable income as
stipulated in Article 67:15 of the Special Taxation Measures Law (Law No. 26 of 1957, including all subsequent
amendments). However, the actual amount of distribution may not exceed the distributable amount, as defined above. In
addition, the Company can reserve funds for capital expenditure, interest payment, dividend payment, or similar purposes,
which are necessary for maintenance of or increasing the value of assets.
3) Retained earnings
Retained earnings not distributed from the distributable amount will be allocated based on the asset management policy of
the Company.
4) Distribution of cash exceeding earnings
In cases when the distribution is less than 90% of the distributable amount, or when the Company makes an appropriate
decision based on the trend of the economic environment, the real estate market, the leasing market or other conditions, theCompany may distribute cash exceeding earnings for the relevant period, as the sum of the distribution amount set in 2)
above and the amount decided by the Company with the upper limit of the depreciation amount reported at the end of the
fiscal period. In such a case, if the cash distribution does not meet the conditions of special tax treatments for the Company,
the amount decided by the Company for the purpose of meeting the conditions may be distributed in cash.
As long as the current tax treatment requires investors to calculate capital gains/losses each time such investors receive
cash distribution exceeding earnings, the Company is will not to conduct cash distribution exceeding earnings to investors.
However, if the board of the Company decides that cash distribution exceeding earnings is required to satisfy the“qualification test of distribution deductible,” the distribution exceeding earnings is allowed following the above
distribution policy.
5) Method of distribution
Distributions are paid in cash based on the number of investment units held to unitholders who are listed on the final
unitholders’ list at the end of each fiscal period, or to eligible registered pledgees, within three months, in principle, fromthe end of each fiscal period.
6) Extinctive prescription
The Company will be released from its payment obligation of distributions after a lapse of three years from the date ofstarting payment. No interest is payable in respect to unpaid distributions in arrears.
7) Issuance of additional investment units
In the event the Company issues additional investment units during a fiscal period, the Company can pay cash
distributions in connection with the aforementioned additional investment unit issue, calculated on a pro rata basis andsubject to approval by the Company’s Board of Directors.

52

M E M B E R S O F T H E B O A R D (As of December 31, 2005)

Title

Name
Biography*Number of Investment Units Held

Japan Prime Realty Investment Corporation
Executive Officer

Hirohito Kaneko*0Dec. 19, 2001 Executive Officer, Japan Prime Realty
Investment Corporation
Apr. 1, 1979 Representative Counsel (currently on service)of Hirohito Kaneko Law Office
Apr. 1, 1977 Bar admission (Tokyo Bar Association)
Shigeru Yamada Law Office

Supervising Officer

Sosuke Yasuda

Supervising Officer*0

Shigeru Sugimoto*0June 28, 2005 Outside Auditor, Mitsui Sumitomo
Insurance Company, Limited (currently on
service)Jan. 24, 2006 Representative Director (currently on service)of SAKURA Holdings Corporation (exSakura Holdings Co., Ltd.)

Sept. 14, 2001 Supervising Officer, Japan Prime Realty
Investment Corporation

Sept. 14, 2001 Supervising Officer, Japan Prime Realty
Investment Corporation

Oct. 1, 1999 Director and Senior Partner (currently on
service), Tokyo Hokuto & Co., (Tokyo
Akasaka Audit Co. and Hokuto Audit Co.
merged)June 1, 2001 Auditor, Morimoto Co., Ltd. (currently on
service)July2, 1993 Senior Partner, Tokyo Akasaka Audit Co.

Feb. 16, 1983 Representative of Tokyo Akasaka CPA Joint
OfficeJune 27, 1980 Sosuke Yasuda Tax Accountant Office(currently on service)

Oct. 2, 1999 Representative Director of Tokyo SPC
Services (currently on service)
June 24, 1998 Senior Partner (currently on service) of
Horwath Sakura & Co. (ex- Sakura Audit
Corporation)
Dec. 1, 1996 Horwath International

Dec. 1, 1975 Masamitsu Serizawa Accounting Firm

Dec. 22, 1995 Representative Partner, Sakura Audit
Corporation

Apr. 1, 1968 Main Store, KK OhgiyaJuly1, 1988 Representative Director of Sakura & Co.
(currently on service)

Nov. 1, 1985 Ohta Showa Audit Corporation
Apr. 1, 1982 Housing and Urban Development Public
Corporation (currently Urban RenaissanceAgency)53

TitleName
Biography*Number of Investment Units Held

Tokyo Realty Investment Management, Inc.
President and CEO

Toshihiro Hagiwara

Director and Chief Investment Officer*0

Yukio Furuya*0

Jan. 23, 2001 President, Tokyo Realty Investment
Management, Inc.

Jan. 23, 2000 Director and Chief Investment Officer,
Tokyo Realty Investment Management, Inc.

Apr. 1, 1999 Director and Head of Osaka Branch Office

Apr. 1, 1999 Group leader of the Sales Planning Group
Structured a system of property management
servicesJan.

1, 1998 Head of Development Business Departmentof Kinshicho Project (Tokyo) and led
negotiations for city planning of large-scale
development of more than 28,000m2

Mar. 28, 1992 Director of Secretary’s Office and Human
Resources

1, 1985 Property management and acquisitionbusinesses of Building Department

Apr.

1, 1968 Tokyo Tatemono Co., Ltd.

July

Apr. 1, 1981 Tokyo Tatemono Co., Ltd. Involved in realestate investment, leasing to tenants andappraisals of real estate

Director and Chief Administrative Officer*0

Oct. 1, 2004 Director and Chief Administrative Officer,
Tokyo Realty Investment Management, Inc.

*0

1, 2001 Director and Chief Financial Officer, Tokyo
Realty Investment Management, Inc.

Apr. 1, 2000 General Manager of Pension Management
Department
Apr. 1, 1991 Manager of International Investment
Department in charge of investments inoverseas real estate and financing activities
Oct. 1, 1989 Investment Banking Division of Paine
Webber Japan Inc. in Tokyo, where he wasinvolved with M&A and IPO businesses
Oct. 23, 1983 New York representative office of Yasuda Life
Apr. 1, 1973 Finance Department of The Yasuda MutualLife Insurance Company (Currently Meiji
Yasuda Life Insurance Company)

June 1, 1993 Took charge of tenant leasing

Kazuo Kitami

Director and Chief Financial Officer

Takeshi Maki

1, 1998 Tenant-leasing team leader

Nov. 1, 1990 Tokyo Tatemono of America

Apr. 20, 1989 Planning of redevelopment scheme
connecting Akihabara and Okachimachi(Tokyo) for JR East Urban Development
Corporation ( Joint Venture of Japan Railway
East)
July

Jan.

Apr. 1, 1997 Manager of Credit Assessment Dept. 2,
Management and Administration Division.
Responsible for loan administration.
Responsible for credit administration
involved in the bulk sale of non-performing
loans, involved in self-assessment andformulation of insur-ance investigation
manual. Manager, Loans Administration
between Aug. 2000 through Mar 2003,
responsible for loan-related accounting.
Apr. 1, 1995 Manager of Real Estate Development
responsible for overall operations.
Sept. 1, 1989 Manager of Real Estate Development Dept.,
Real Estate Division. Involved in real estate
investment activities, property leasing andproperty management.
Mar. 1, 1977 Asset Management Division (Loans, Real
Estate and Other). Engaged in loan front
office operations.
Involved in the establishment of a leasing
subsidiary.
Apr. 1, 1975 The Yasuda Mutual Life Insurance Company(Currently Meiji Yasuda Life Insurance
Company)54

C O R P O R A T E D A TA

Head Office
9-9 Yaesu 1-chome, Chuo-ku, Tokyo 103-8285, Japan
Tel: +81-3-3231-1051
Fax: +81-3-3274-7775
Date of Establishment
September 14, 2001
Listing
Tokyo Stock Exchange (Securities Code: 8955)
Fiscal Period Ends
June 30 and December 31 of each year
General Meeting of Unitholders
More than once every two years
Cash Distribution Payment Eligibility
Unitholders of record as of June 30 and December 31 ofeach year

Transfer Agent
Mizuho Trust & Banking Co., Ltd.
2-1 Yaesu 1-chome, Chuo-ku, Tokyo
Location of Records
Mizuho Trust & Banking Co., Ltd.
2-1 Yaesu 1-chome, Chuo-ku, Tokyo
Main Branch, Stock Transfer Agency Division
Mailing Address Mizuho Trust & Banking Co., Ltd.
1-17-7 Saga, Koto-ku, Tokyo 135-8722
Stock Transfer Agency Division
Telephone+81-3-5213-5213 (Representative)
AgentsMizuho Trust & Banking Co., Ltd.
(All branches nationwide)
Mizuho Investors Securities Co., Ltd.
(Head office and all branches nationwide)
Web Site
http://www.jpr -reit.co.jp/jpr_e/index.html

ANNUAL SCHEDULE (PROVISIONAL)

DEC.

12 Balance date for the six-month period ended December 31
FEB.

2

Announcement of results for the six-month period ended December 31
MAR.

3

Publication of December Performance Information Report
Payment of cash distributions for the six-month period ended December 31

Balance date for the six-month period ended June 30

6 JUNE

Announcement of results for the six-month period ended June 30

8 AUG.

Publication of June Performance Information Report
Payment of cash distributions for the six-month period ended June 30

9 SEPT.

Note: The Performance Information Report is prepared pursuant to the Investment Trust Law of Japan.

This document contains a translation of selected information described in the Financial Report (Kessan Tanshin) dated February 17, 2006, prepared under the timely disclosure requirements of theTokyo Stock Exchange, as well as the Financial Statements and Performance Information Report prepared pursuant to the Investment Trust Law of Japan, for the period from July 1, 2005 to
December 31, 2005 of Japan Prime Realty Investment Corporation (“JPR”).
This English language document was prepared solely for the convenience of and reference by non-Japanese investors and is not intended to constitute a disclosure document. The Japanese
language Financial Report, Financial Statements and Performance Information Report for the aforementioned period should be referred to as the originals of this document.
English translations for legal, accounting, tax and business concepts used herein may not convey precisely identical concepts of the equivalent Japanese terms. The figures presented in the financial
statements may differ from the Company’s Financial Report (Kessan Tanshin) due to rounding. With respect to any and all terms herein, including without limitation, financial statements, if there
exist any discrepancies in the meaning or interpretation thereof between the original Japanese documents and English documents contained herein, the original Japanese documents will govern themeaning and interpretation. Neither JPR, Tokyo Realty Investment Management, Inc., nor any of their respective directors, officers, employees, partners, unitholders, agents or affiliates will be
responsible or liable for the completeness, appropriateness or accuracy of English translations or the selection of the portion(s) of any document(s) translated into English. No person has beenauthorized to give any information or make any representations other than as contained in this document in relation to the matters set out in this document, and if given or made, such information
or representation must not be relied upon as having been authorized by JPR, Tokyo Realty Investment Management, Inc., or any of their respective directors, officers, employees, partners,
unitholders, agents or affiliates.
The financial statements of JPR have been prepared in accordance with generally accepted accounting principles in Japan ( Japanese GAAP), which may materially differ in certain respects fromgenerally accepted accounting principles in other jurisdictions.
Many provisions of this document contain information that constitute forward-looking statements. These forward-looking statements are not a guarantee of future performance and involve risks
and uncertainties, and actual results may differ materially from those in the forward-looking statements as a result of various factors.

55

56

56

Printed in Japan