March 23, 2010

Outlook On Japan Real Estate Investment Corp.
Revised To Negative
Primary Credit Analyst:
Roko Izawa, Tokyo (81) 3-4550-8674; roko_izawa@standardandpoors.com
Secondary Credit Analyst:
Yumi Oikawa, Tokyo (81) 3-4550-8775; yumi_oikawa@standardandpoors.com

OVERVIEW• JRE holds the second-largest asset portfolio among the listed J-REITs
that focus on office buildings and commands high market recognition.
• JRE's debt-to-capital ratio has risen moderately and its profitability
measures and financial indicators are slightly weak amid difficult
business conditions.
• We are revising to negative from stable the outlook on the long-term
corporate credit rating on JRE.
• We are affirming our long-term corporate credit and unsecured debt
ratings and our short-term corporate credit rating on JRE, given thecompany's strong business position and generally stable cash flows
derived from its very high quality real estate portfolio.
TOKYO (Standard & Poor's) March 23, 2010--Standard & Poor's Ratings Services
today revised to negative from stable its outlook on the long-term corporate
credit rating on Japan Real Estate Investment Corp. (JRE). At the same time,
we affirmed our 'AA-' long-term corporate credit rating and unsecured debt
ratings, as well as our 'A-1+' short-term corporate credit rating on JRE.
The outlook revision is based on the following factors: (1) JRE's rental
revenues are experiencing certain downward pressure amid difficult businessconditions; its debt-to-capital ratio has been hovering at levels that arerelatively high in the target range established under the company's
conservative financial policy, and its profitability measures and financial
indicators are rather weak; (2) Given current real estate market conditions,
JRE is likely to actively pursue external growth. As weak funding conditionsin the equity market have yet to fully recover, we see a possibility that thewww.standardandpoors.com/ratingsdirect

1783826 | 300052817

Outlook On Japan Real Estate Investment Corp. Revised To Negative

company may experience some delays in restoring its conservative financial
profile; and (3) The portfolio's unrealized profit (the difference between theappraisal value and the book value of the portfolio at the end of the fiscalterm) is decreasing, thereby weakening JRE's financial buffer to a certain
degree. On the other hand, we affirmed our ratings on JRE, reflecting thecompany's strong business position in the Japanese real estate investment
trust (J-REIT) market and generally stable cash flows derived from its very
high-quality portfolio.
JRE has said that it intends to pursue a conservative financial policy,
maintaining its ratio of debt to total assets at between 30% and 40%. However,as of Sept. 30, 2009 (end of the 16th fiscal term), the company's
debt-to-capital ratio (interest-bearing debt including Hoshokin
liabilities/(interest-bearing debt + total net assets) according to Standard &Poor's definition) stood at about 41.9%, which is slightly higher than former
levels, due to weakness in capital markets. JRE carried out an approximately¥26.7 billion capital increase in December 2009. Yet, as the company has seena decline in the amount of funds it has raised due to volatility in thecapital markets, and made property acquisitions since then, we expect thedebt-to-capital ratio to be around 44% at the end of the 17th fiscal term
(ending March 31, 2010).
The weakness in the office leasing market is putting downward pressure on
JRE's rental revenues. The portfolio's average occupancy rate had declined to
92.0% as of Jan. 31, 2010. The company's profitability measures have also
weakened slightly. JRE's current financial indicators are slightly weakcompared with the assumptions in the analysis for our initial ratings
assignment. Since the company believes that real estate market prices wouldbottom out in the foreseeable future, it intends to shift the focus of its
operations to external growth. Future financing market conditions, if notstabilized, may cause delays in restoring the company's conservative financialprofile. Moreover, the unrealized profit on JRE's portfolio has decreased(about 9.5% as of Sept. 30, 2009).
We may consider lowering the ratings on JRE if the real estate leasing market
and the capital markets suffer prolonged weakness, and/or if we see anincreased likelihood of the company facing delays in improving its
profitability measures and financial indicators. On the other hand, we mayrevise the outlook to stable if profitability measures recover, and theoutlook for financial indicators, such as leverage and interest coverage,
clearly improves as the company pursues external growth.
Standard & Poor's expects JRE to maintain good credit quality, backed by its
solid business position, very high-quality real estate portfolio, and strong
financial flexibility, thereby affirming our 'AA-' long-term corporate creditrating and unsecured debt ratings, as well as our 'A-1+' short-term corporate
credit rating on JRE.
JRE boasts the second-largest asset portfolio among the listed J-REITs that
focus on office buildings. The company has a strong business position in theStandard & Poor’s | RatingsDirect on the Global Credit Portal | March 23, 2010

2783826 | 300052817

Outlook On Japan Real Estate Investment Corp. Revised To Negative

J-REIT market and commands high market recognition, backed by the strong brandrecognition and credit quality of its sponsors, Mitsubishi Estate Co. Ltd.
(Mitsubishi Estate; A+/Stable/A-1), Dai-ichi Mutual Life Insurance Co.
(A/Negative/--), and Mitsui & Co. Ltd. (A+/Stable/A-1). As of Feb. 28, 2010,
JRE owned a portfolio of 55 office properties throughout Japan located mainlyin the 23 wards of Tokyo, worth about ¥620.6 billion, based on total purchaseprice. Using funds secured in a timely manner, JRE has made large property
acquisitions utilizing its sponsor network despite difficult businessconditions. In particular, JRE acquired an additional stake in Shiodome
Building (Minato-ward, Tokyo; purchase price of additional stake: ¥54.6billion) in January 2010. The company intends to acquire an additional stakein Tokyo Opera City Building (Shinjuku-ward, Tokyo; about ¥22.4 billion) inMarch 2010.
RELATED RESEARCH"Rating Policy For Japanese Real Estate Investment Trusts", published on May
9, 2001.
OUTLOOK REVISEDTo
From
Negative
StableRATINGS AFFIRMEDJapan Real Estate Investment Corp.
Long-term corporate credit rating
Short-term corporate credit rating

RatingAAA-1+A Japanese-language version of this media release is available on Standard &Poor's Research Online at www.researchonline.jp, or via CreditWire Japan onBloomberg Professional at SPCJ <GO>.

www.standardandpoors.com/ratingsdirect

3783826 | 300052817

Copyright ( c ) 2010 by Standard & Poor’s Financial Services LLC (S&P), a subsidiary of The McGraw-Hill Companies, Inc. All rights reserved.
No content (including ratings, credit-related analyses and data, model, software or other application or output therefrom) or any part thereof (Content) may be modified,
reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P. The Content
shall not be used for any unlawful or unauthorized purposes. S&P, its affiliates, and any third-party providers, as well as their directors, officers, shareholders, employees oragents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors oromissions, regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content isprovided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OFMERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONINGWILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to anyparty for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, withoutlimitation, lost income or lost profits and opportunity costs) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact orrecommendations to purchase, hold, or sell any securities or to make any investment decisions. S&P assumes no obligation to update the Content following publication in anyform or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/orclients when making investment and other business decisions. S&P's opinions and analyses do not address the suitability of any security. S&P does not act as a fiduciary or
an investment advisor. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence orindependent verification of any information it receives.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result,certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain theconfidentiality of certain non-public information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the rightto disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), andwww.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party
redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.

Standard & Poor’s | RatingsDirect on the Global Credit Portal | March 23, 2010

4783826 | 300052817