#110 JPR Japan Prime Realty Investment Corporation Presentation Material for the 21st Fiscal Period Ended June 2012 Japan Prime Realty Investment Corporation (Securities Code: 8955 TSE) URL: http://www.jpr-reit.co.jp/jpr_e/ TRIM Tokyo Realty Investment Management, Inc.#2JPR Table of Contents Financial Summary for the 21st Fiscal Period (Ended June 2012) and Future Prospects 4. Financial Highlights for the 21st Fiscal Period Ended June 2012 Appendix 30. 29. Performance over the Past Five Fiscal Periods Historical Unitholder Composition 31. Milestones since IPO and Historical Unit Price 5. Statement of Income and Retained Earnings for the 21st Fiscal Period 6. 7. 8. Comparison of Actual Results and Forecasts for the 21st Fiscal Period (Ended June 2012) Forecasts for the 22nd Fiscal Period [Reference] Forecasts of Rent Revenue - Real Estate and Expenses Related to Rent Business for the 23rd Fiscal Period 9. Balance Sheet as of the End of the 21st Fiscal Period 32. Changes in Variation between Appraisal Value and Book Value at End of Period 33. Appraisals and Cap Rates at End of Period 34. NOI Yield by Property for the 21st Fiscal Period 35. Contracting Status of Tenants by Property for the 21st Fiscal Period 36. 37. Office Vacancy Rates and Average Advertised Rents in Major Investment Areas Environmental Initiatives Management Results of the 21st Fiscal Period (Ended June 2012) 38. Governance Initiatives 11. History of Portfolio Growth 12. Property Acquisition in the 21st Period 13. Property Acquisition in the 22nd Period 14. Changes in Occupancy Rates and Contract Changes 15. Changes in Rent Revenue and Unit Rent 16. Financial Strategy 17. Equity Finance Overview 18. Breakdown of Interest-Bearing Liabilities 19. History of JPR's Unit Price and Trade Volume (Jan. 4, 2012 - Aug. 10, 2012) Future Management Strategy 21. Future Management Policies 22. Office Transaction Market Conditions 23. Office Rental Market Conditions 24. External Growth Strategy 25. [Reference materials] Development Projects which Tokyo Tatemono is Undertaking in the Tokyo Station Area 26. Internal Growth Strategy 27. Financial Strategy (Note) The figures to the left of each item represents the relevant page number. 2 Japan Prime Realty Investment Corporation#3Japan Prime Realty Investment Corporation Financial Summary for the 21st Fiscal Period (Ended June 2012) and Future Prospects 21st#4JPR Financial Highlights for the 21st Fiscal Period Ended June 2012 Achieved significant period-on-period increase in revenue and profits for the 21st fiscal period, thanks to the acquisition of Otemachi 1-6 Plan (tentative name) (land with land leasehold), and secured DPU at a level matching forecast at beginning of period Assume to deliver DPU of JPY 6,000 in the forecast for the 22nd fiscal period, the target level for normal operations without extraordinary events, despite impact of dilution due to issuance of new investment units via public offering 20th Period 21st Period (Forecast upon announcement of the 20th period financial results) 22nd Period 21st Period (Jan. 1, 2012 – Jun. 30, 2012) Change from 20th period Change from forecast (Jul. 1, 2012 - Dec. 31, 2012) Change from 21st period Operating revenue Operating income Ordinary income Net income Distribution per unit (DPU) Total number of investment units outstanding JPY 11,772 mn JPY 5,763 mn JPY 4,201 mn JPY 4,200 mn JPY 12,174 mn JPY 6,224 mn JPY 12,345 mn JPY 6,393 mn 4.9% 1.4% JPY 12,859 mn 4.2% 10.9% 2.7% JPY 6,624 mn 3.6% JPY 4,577 mn JPY 4,597 mn 9.4% 0.4% JPY 4,951 mn 7.7% JPY 4,576 mn JPY 4,596 mn 9.4% 0.4% JPY 4,950 mn 7.7% JPY 5,876 715,000 JPY 6,400 715,000 JPY 6,430 715,000 9.4% % 0.5% JPY 6,000 -6.7% % 825,000 15.4% Properties owned at end of fiscal period Total acquisition price Average occupancy rate during period 57 properties JPY 344,984 mn 95.0% 58 properties JPY 380,984 mn 94.6% 58 properties JPY 380,984 mn 94.8% 1 property 10.4% -0.2%p properties % 0.2%p 59 properties JPY 391,980 mn 93.9% 1 property 2.9% -0.9%p (Note) Amounts have been rounded down to the nearest specified unit and percentages have been rounded to the first decimal place. Financial Results and Forecasts Internal Growth Achieved period-on-period increase in DPU for the 21st fiscal period financial results due to such factors as increase in rent revenue through new property acquisition and the positive impact of accompanying property taxes being recorded as acquisition costs, and decrease in expenses related to rent business including depreciation. Anticipates period-on-period increase in revenue and profits for the 22nd fiscal period due to new property acquisition in the period, as well as to full-period contribution of property acquired in the 21st fiscal period, but expects DPU to be JPY 6,000 in the face of dilution caused by the public offering External Growth Acquired beneficiary interest in real estate of Otemachi 1-6 Plan (tentative name) (land with land leasehold) in March 2012 for JPY 3.6 billion (excluding acquisition costs and other expenses) by taking advantage of sponsors' pipelines, followed by acquisition of Yakuin Business Garden (located in Fukuoka) in August 2012 for JPY 10.9 billion (excluding acquisition costs and other expenses) For the moment, keep reinforcing collection and investigation of information from sponsors on property supply, given the still limited availability of excellent properties in the real estate transaction market ■Continue focused investment in office properties in the greater Tokyo area Occupancy rate at end of period End of 21st fiscal period: 94.1% (down 1.5%p from 20th fiscal period, up 1.8%p from forecast) End of 22nd fiscal period (forecast): 93.7% (down 0.4%p from the 21st fiscal period) *Occupancy rate at end of 22nd fiscal period is based on confirmed contract status alone, reflecting newly concluded contracts and already notified cancellations, etc. ■Occupancy at end of 21st fiscal period decreased period-on-period due to the impact of tenant cancellations at some properties Tenant relocations is getting activated for the moment, but occupancy rate at end of 22nd fiscal period is expected to decrease slightly, based on currently confirmed contract status Financial Strategy Ratio of interest-bearing debts at end of 21st fiscal period (on a unitholders' capital basis): 53.2% (Ratio of interest-bearing debts is expected to have decreased to 48.5% after public offering) ■Credit ratings: R&I: AA-; S&P: A; and Moody's: A3 ■Reduced borrowing costs for the 22nd fiscal period and after by making partial repayment of borrowings before maturity (June 2012) Issued additional investment units via public offering in July 2012 Number of units issued: 110,000 (planned), total procured amount: JPY 20.7 billion (planned) Japan Prime Realty Investment Corporation 4#5JPR Statement of Income and Retained Earnings for the 21st Fiscal Period Achieved significant period-on-period increase in revenue and profits due to new property acquisition and other factors, and conducted partial repayment of borrowings before maturity to bolster earnings for the 22nd fiscal period and after (JPY mn) 20th Fiscal Period 21st Fiscal Period Change Jul. 1, 2011 Dec. 31, 2011 Amount Rental Revenues Other rental revenues Rent revenue - real estate (1) Operating revenue Property and other taxes Other expenses related to rent business Outsourcing expenses Utilities expenses 10,996 776 11,772 % 93.4% Jan. 1, 2012 - Jun. 30, 2012 Amount % Amount % 6.6% 100.0% 11,626 719 12,345 94.2% 5.8% 629 5.7% -56 -7.3% 100.0% 573 4.9% Increase/decrease by contract revision: (Note) The increase/decrease includes variations in 21st period due to factors changed in 20th period) 11,772 100.0% 12,345 100.0% 573 4.9% 1,061 9.0% 1,031 8.4% -29 -2.8% • Properties acquired in 20th period: ⚫ Properties acquired in 21st period: 1. Rent revenues • Properties owned at end of 19th period: Increase by new move-ins: -246 mn yen +267 mn yen Decrease by cancellation: -336 mn yen -183 mn yen +31 mn yen +844 mn yen 2,471 21.0% 2,432 19.7% -39 -1.6% 510 4.3% 496 4.0% -13 -2.7% 711 6.0% 682 5.5% -28 -4.0% Casualty insurance 28 0.2% 27 0.2% -1 -3.6% Repairs and maintenance 335 2.9% 347 2.8% 11 3.4% 2. Other rental revenues ⚫ Properties owned at end of 19th period: Incidental income: • Properties acquired in 20th period: - 58 mn yen - 55 mn yen] +2 mn yen Property management fees 218 1.9% 214 1.7% -3 -1.7% Management association accounts 554 4.7% 555 4.5% 1 0.3% 3. Expenses related to rent business Others 112 1.0% 107 0.9% -5 -4.5% • Properties owned at end of 19th period: - 164 mn yen Depreciation 1,824 15.5% 1,754 14.2% -69 -3.8% Property and other taxes: Expenses related to rent business (2) 5,357 45.5% 5,217 42.3% -139 -2.6% Utilities expenses: Asset management fees 421 3.6% 443 3.6% 21 5.1% Depreciation: - 48 mn yen -31 mn yen -71 mn yen Adm. service/custody fees 74 0.6% 74 0.6% 0 -0.1% Directors' compensation 6 0.1% 6 0.1% (Shinjuku Square: -38 mn yen, HDC Kobe; -26 mn yen, and others) • Properties acquired in 20th period: Trust fees 43 0.4% 42 0.3% -1 -2.4% • Properties acquired in 21st period: +24 mn yen +0 mn yen Other operating expenses 105 0.9% 167 1.4% 61 58.6% Operating expenses Operating income 6,009 51.0% 5,952 48.2% -57 -0.9% 4. Other operating expenses 5,763 49.0% 6,393 51.8% 630 10.9% Undeductible consumption taxes: +61 mn yen Profits ((1) (2)) 6,415 54.5% 7,127 57.7% 712 11.1% Net operating income (NOI) 8,239 70.0% 8,882 71.9% 642 7.8% 5. Non-operating income Non-operating income 10 0.1% 62 0.5% 51 478.7% ⚫ Settlement of management association accounts +48 mn yen Interest expenses (incl. investment corporation bonds) 1,402 11.9% 1,459 11.8% 57 4.1% Borrowing expenses 147 1.2% 373 3.0% 226 154.1% 6. Interest expenses Amortization of investment corporation bond issuance costs Other non-operating expenses Non-operating expenses Ordinary income Income before income taxes 20 0.2% 23 0.2% 3 16.3% • Interest expenses for loans: +55 mn yen 3 0.0% 2 0.0% -1 -41.2% 1,573 Net income Unappropriated retained earnings 13.4% 4,201 35.7% 4,201 35.7% 4,200 35.7% 4,226 1,858 15.1% 285 18.1% 7. Borrowing expenses 4,597 37.2% 396 9.4% Fees for early repayment: +198 mn yen 4,597 37.2% 396 35.9% Distributions per unit (Note 1) Total number of units outstanding at end of period 5,876 yen (715,000) 4,596 37.2% 4,622 6,430 yen (715,000) 396 37.4% 395 9.4% 9.4% 9.4% 554 yen (-) Japan Prime Realty Investment Corporation (Note 1) With regard to the cash distributions for the 20th and 21st fiscal periods, JPR includes part of the retained earnings brought forward that were internally reserved through the previous fiscal period, with the aim of having the profit distributions deducted as expenses based on application of the special provision on taxation of investment corporations (Article 67-15 of the Act on Special Measures Concerning Taxation) and in order to minimize the burden to unitholders incurred by accrual of income taxes, etc., and distributes the amount that is an integral multiple of the number of investment units outstanding as profit distributions. (Note 2) Amounts have been rounded down to the nearest specified unit and percentages have been rounded to the first decimal place. 5#6JPR Comparison of Actual Results and Forecasts for the 21st Fiscal Period (Ended Jun. 2012) Revenue and profits related to rent business surpassed forecast at beginning of period, and DPU settled at a level matching the forecast at beginning of period after absorbing the burden of fees for early repayment (JPY mn) 21st Fiscal Period Forecasts 21st Fiscal Period Actual Change Jan. 1, 2012 - Jun. 30, 2012 Amount Rental Revenues Other rental revenues Rent revenue - real estate (1) Operating revenue Property and other taxes Other expenses related to rent business Outsourcing expenses Utilities expenses % 11,520 94.6% 653 5.4% 12,174 100.0% 12,174 100.0% Jan. 1, 2012 Jun. 30, 2012 Amount 11,626 719 12,345 12,345 % 94.2% 5.8% Amount % 106 0.9% 65 10.1% 100.0% 171 1.4% Increase/decrease by contract revision: (Note) The increase/decrease includes variations in 21st period due to factors changed in 20th period) 1. Rent revenues ⚫ Properties owned at end of 19th period: Increase by new move-ins: Decrease by cancellation: +81 mn yen +41 mn yen - 18 mn yen +53 mn yen 100.0% 171 1.4% • Properties acquired in 20th period +0 mn yen 1,070 8.8% 1,031 8.4% -39 -3.6% • Properties acquired in 21st period: +24 mn yen 2,403 19.7% 2,432 19.7% 28 1.2% 493 4.1% 496 4.0% 3 0.7% 2. Other rental revenues 675 5.5% 682 5.5% 7 1.0% Casualty insurance 27 0.2% 27 0.2% 0 -1.3% Repairs and maintenance 316 2.6% 347 2.8% 31 9.9% Property management fees 212 1.7% 214 1.7% 2 1.1% Management association accounts 555 4.6% 555 4.5% 0 0.1% Others 122 1.0% 107 0.9% -15 -12.9% Depreciation 1,750 14.4% 1,754 14.2% 4 0.2% Expenses related to rent business (2) 5,224 42.9% 5,217 42.3% -6 -0.1% Asset management fees 439 3.6% 443 3.6% 3 0.8% ⚫ Properties owned at end of 19th period: [Incidental income: •Properties acquired in 20th period: 3. Expenses related to rent business • Properties owned at end of 19th period: Property and other taxes: Repairs and maintenance: • Properties acquired in 20th period: +66 mn yen +55 mn yen] +0 mn yen - 8 mn yen Adm. service/custody fees 76 0.6% 74 0.6% -2 -2.6% • Properties acquired in 21st period: -39 mn yen +29 mn yen +1 mn yen +0 mn yen Directors' compensation 6 0.1% 6 0.1% Trust fees 41 0.3% 42 0.3% 1 3.2% 4. Non-operating income Other operating expenses 160 1.3% 167 1.4% 7 4.4% ⚫ Settlement of management association accounts +12 mn yen Operating expenses Operating income 5,949 48.9% 5,952 48.2% 3 0.1% 6,224 51.1% 6,393 51.8% 168 2.7% 5. Interest expenses Profits ((1) - (2)) Net operating income (NOI) 6,949 57.1% 7,127 57.7% 178 2.6% • Interest expenses for loans: -78 mn yen 8,699 71.5% 8,882 71.9% 182 2.1% Non-operating income 44 0.4% 62 0.5% 18 41.7% 6. Borrowing expenses Interest expenses (incl. investment corporation bonds) 1,539 12.6% 1,459 11.8% Borrowing expenses 125 1.0% 373 3.0% -79 -5.2% 247 196.7% • Fees for early repayment: +220 mn yen Net income Amortization of investment corporation bond issuance costs Other non-operating expenses Non-operating expenses Ordinary income Income before income taxes Unappropriated retained earnings 23 0.2% 23 0.2% 0 -1.0% 2 0.0% 2 0.0% 0 -2.9% 1,691 13.9% 1,858 15.1% 167 4,577 37.6% 4,597 37.2% 19 9.9% 0.4% 4,577 37.6% 4,597 37.2% 19 0.4% 4,576 37.6% 4,596 37.2% 19 0.4% 4,602 37.8% 4,622 37.4% 19 0.4% (Note 1) The forecasts for the 21st fiscal period were those released at the results announcement for the 20th fiscal period (ended December 31, 2011). They were calculated on the basis of 58 properties, comprising 57 properties JPR owned as of the end of the 20th fiscal period and one property to be acquired in the 21st fiscal period. (Note 2) Amounts have been rounded down to the nearest specified unit; the percentages and the changes have been rounded to the first decimal place. Distributions per unit (Note 1) Total number of units outstanding at end of period 6,400 yen 6,430 yen 30 yen (715,000) (715,000) (-) Japan Prime Realty Investment Corporation 6#7Forecasts for the 22nd Fiscal Period JPR 21st Fiscal Period 22nd Fiscal Period Forecast Acquire excellent properties and repay borrowings using proceeds obtained from add-on offering to reinforce business foundations toward stable management in the 23rd fiscal period and after while securing the DPU level under normal operations without extraordinary events 1. Rent revenues (JPY mn) Change Jan. 1, 2012 Jun. 30, 2012 Amount % Jul. 1, 2012 - Dec. 31, 2012 Amount % Amount % Rental Revenues Other rental revenues Rent revenue - real estate (1) 11,626 719 12,345 94.2% 5.8% 100.0% 12,132 727 12,859 94.3% 5.7% 505 4.3% 7 1.1% 100.0% 513 4.2% Operating revenue 12,345 100.0% 12,859 100.0% 513 4.2% Increase/decrease by contract revision: (Note) The increase/decrease includes variations in 22nd period due to factors changed in 21st period) ⚫ Properties acquired in 21st period: • Properties owned at end of 20th period: Increase by new move-ins: Decrease by cancellation: -368 mn yen +176 mn yen -369 mn yen - 176 mn yen +564 mn yen Property and other taxes 1,031 8.4% 1,025 8.0% -6 -0.6% ■ Properties acquired in 22nd period: +309 mn yen Other expenses related to rent business 2,432 19.7% 2,652 20.6% 220 9.1% Outsourcing expenses 496 4.0% 510 4.0% 13 2.8% Utilities expenses 682 5.5% 817 6.4% 135 19.8% Casualty insurance 27 0.2% 30 0.2% 2 9.4% Repairs and maintenance 347 2.8% 379 2.9% 31 9.1% Property management fees 214 1.7% 214 1.7% 0 -0.4% 2. Other rental revenues ■ Properties owned at end of 20th period: Incidental income: Cancellation penalty, etc.: ⚫ Properties acquired in 22nd period: -49 mn yen +23 mn yen -65 mn yen +57 mn yen Management association accounts 555 4.5% 565 4.4% 9 1.7% Others 107 0.9% 136 1.1% 28 27.1% 3. Expenses related to rent business Depreciation 1,754 14.2% 1,830 14.2% 76 4.4% Expenses related to rent business (2) 5,217 42.3% 5,508 42.8% 291 5.6% ⚫ Properties owned at end of 20th period: Utilities expenses: +134 mn yen +90 mn yen Asset management fees 443 3.6% 461 3.6% 17 4.0% Adm. service/custody fees 74 0.6% 81 0.6% 6 8.7% Directors' compensation 6 0.1% 6 0.1% Trust fees 42 0.3% 42 0.3% 0 0.6% Other operating expenses 167 1.4% 133 1.0% -33 -20.0% Operating expenses Operating income 5,952 48.2% 6,234 48.5% 282 4.7% 6,393 51.8% 6,624 51.5% 231 3.6% Profits ((1) (2)) Net operating income (NOI) 7,127 57.7% 7,350 57.2% 222 3.1% 8,882 71.9% 9,181 71.4% 298 3.4% Non-operating income Interest expenses (incl. investment corporation bonds) Borrowing expenses 62 0.5% 2 0.0% -60 -96.8% 1,459 11.8% 1,394 10.8% -64 -4.4% 373 3.0% 148 1.2% -224 -60.2% Amortization of investment corporation bond issuance costs New unit issuance costs Other non-operating expenses Non-operating expenses Ordinary income 23 0.2% 19 0.2% -4 -17.4% Repairs and maintenance: ⚫ Properties acquired in 22nd period: 4. Other operating expenses . Undeductible consumption taxes: 5. Non-operating income ⚫ Settlement of management association accounts: 6. Interest expenses Interest expenses for loans: (Decrease in interest expenses due to early repayment: • Interest expenses for investment corporation bonds: +156 mn yen 54 mn yen -71 mn yen +30 mn yen 57 mn yen +6 mn yen -60 mn yen ) 110 0.9% 110 2 0.0% 2 0.0% 0 12.9% 1,858 15.1% 1,675 13.0% -183 -9.9% 7. Borrowing expenses ■Fees for early repayment: 4,597 37.2% 4,951 38.5% 354 7.7% 4,597 37.2% 4,951 38.5% 4,596 4,622 37.4% 37.2% 4,950 38.5% 4,975 38.7% 6,430 yen (715,000) 6,000 yen (825,000) Income before income taxes Net income Unappropriated retained earnings Distributions per unit (Note 1) Total number of units outstanding at end of period Assumptions for the 22nd Fiscal Period Forecast Assets owned: Total of 59 properties (58 properties owned as of the end of the 21st fiscal period + 1 property acquired in the 22nd fiscal period) ■Average Monthly Occupancy during Period: 93.9% (based on confirmed contract status only, reflecting newly concluded contracts and already notified cancellations, etc.) ■Total units outstanding: 825,000 units ■Ratio of interest-bearing debts (on a unitholders' capital basis): 48.5% (at end of 22nd fiscal period) Japan Prime Realty Investment Corporation The forecasts for the 22nd fiscal period were calculated based on the left "Assumptions for the 22nd Fiscal Period Forecast." Actual operating revenue, ordinary income, net income and cash distributions per unit may change as a result of the acquisition of new properties or the sale of owned properties, etc. Furthermore, the forecasts are in no way a guarantee of cash distribution amounts. 354 7.7% 8. New unit issuance costs: -219 mn yen +110 mn yen 353 7.7% 353 7.6% -430 yen (110,000) (Note) Amounts have been rounded down to the nearest specified unit and percentages have been rounded to the first decimal place. 7#8JPR [Reference] Forecasts of Rent Revenue - Real Estate and Expenses Related to Rent Business for the 23rd Fiscal Period Work to further improve NOI as well as decrease non-operating expenses, despite projected period-on-period decrease in profits related to rent business due to lack of property and city planning taxes to be included in the deductible acquisition cost of new property (JPY mn) 22nd Fiscal Period Forecast 23rd Fiscal Period Forecast Jul. 1, 2012 - Dec. 31, 2012 Change from the 22nd Fiscal Period Forecast Jan. 1, 2013 - Jun. 30, 2013 Amount % Amount % Amount % 1. Rent revenues • Properties owned at end of 21st period: + 134 mn yen Increase by new move-ins: +223 mn yen Rental revenues Other rental revenues Rent revenue - real estate (1) 12,132 94.3% 12,342 94.7% 210 1.7% 727 5.7% 687 5.3% -39 -5.4% 12,859 100.0% 13,030 100.0% 170 1.3% Property and other taxes 1,025 8.0% 1,821 14.0% 796 77.7% Decrease by cancellation: Increase/decrease by contract revision: • Properties acquired in 22nd period: (Note) The increase/decrease includes variations in 23rd period due to factors changed in 22nd period) - 139 mn yen +41 mn yen +76 mn yen Other expenses related to rent business 2,652 20.6% 2,449 18.8% -203 -7.7% Outsourcing expenses 510 4.0% 500 3.8% -9 -1.9% 2. Other rental revenues Utilities expenses 817 6.4% 763 5.9% -54 -6.6% ■ Properties owned at end of 21st period -38 mn yen Casualty insurance 30 0.2% 30 0.2% 0 0.4% Properties acquired in 22nd period: - 1 mn yen Repairs and maintenance 379 2.9% 259 2.0% -119 -31.6% Property management fees 214 1.7% 221 1.7% 6 3.2% 3. Property and other taxes Management association accounts 565 4.4% 524 4.0% -41 -7.3% ■ Properties owned at end of 21st period: Others 136 1.1% 151 1.2% 15 11.4% Otemachi 1-6 Plan (tentative name) (land with land leasehold) Depreciation 1,830 14.2% 1,852 14.2% 21 1.2% ■ Properties acquired in 22nd period: + 762 mn yen +756 mn yen +33 mn yen Expenses related to rent business (2) 5,508 42.8% 6,124 47.0% 615 11.2% Profits ((1) (2)) 7,350 57.2% 6,905 53.0% -444 -6.0% 4. Other expenses related to rent business Net operating income (NOI) 9,181 71.4% 8,758 67.2% -422 -4.6% ■ Properties owned at end of 21st period: -215 mn yen Capital expenditure 1,188 9.2% 926 7.1% -262 -22.1% Net cash flow (NCF) 7,992 62.2% 7,832 60.1% -160 -2.0% (Note) Amounts have been rounded down to the nearest specified unit and percentages have been rounded to the first decimal place. Utilities expenses: Repairs and maintenance: Management association accounts: - 119 mn yen -41 mn yen ■ Properties acquired in 22nd period: +12 mn yen -58 mn yen Assumptions for the 23rd Fiscal Period Forecast ■Assets owned: Total of 59 properties (58 properties owned as of the end of the 21st fiscal period + 1 property acquired in the 22nd fiscal period) ■Average Monthly Occupancy during Period: 95.8% (Assumes some new contracts, etc. in addition to the assumptions for the 22nd fiscal period) The forecasts of rent revenue - real estate and expenses related to the rent business for the 23rd fiscal period were calculated based on the left "Assumptions for the 23rd Fiscal Period Forecast." Actual rent revenue - real estate, expenses related to the rent business, profits, net operating income (NOI), net cash flow and other figures may change as a result of the acquisition of new properties or the sale of owned properties, etc. Japan Prime Realty Investment Corporation 5. Depreciation ■ Properties owned at end of 21st period: ■ Properties acquired in 22nd period: +6 mn yen +15 mn yen 8#9JPR Balance Sheet as of the End of the 21st Fiscal Period Interest-bearing debt ratio, which rose to 53.2% at end of the 21st fiscal period, is projected to decrease to 48.5% after the add-on offering (JPY mn) 1. Balance of interest-bearing debt 20th Fiscal Period 21st Fiscal Period Change as of Dec. 31, 2011 as of Jun. 30, 2012 Unsecured loans payable Amount % Amount % Amount % Secured loans payable Current assets 27,171 7.5% 25,075 6.3% -2,096 -7.7% Cash and deposits 13,647 3.8% 12,750 3.2% -897 -6.6% Unsecured investment corporation bonds Total End of 20th Period End of 21st Period 111,505 143,581 (JPY mn) Change 32,076 51,500 163,005 51,500 195,081 32,076 Cash and deposits in trust 13,132 3.6% 11,910 3.0% -1,221 -9.3% Other current assets 391 Noncurrent assets 333,357 Property, plant and equipment Real estate Buildings and structures 0.1% 92.4% 328,084 91.0% 151,009 41.9% 44,361 12.3% Land 106,648 29.6% Real estate in trust 177,074 49.1% 414 370,795 93.6% 365,368 92.3% 150,681 38.0% 44,012 11.1% 106,669 26.9% 214,686 54.2% 0.1% 23 6.0% 37,438 11.2% 37,284 11.4% -327 -0.2% -348 -0.8% 2. Interest-bearing debt ratio, etc. Interest-bearing debt ratio (Note 1) Interest-bearing debt to total assets (Note 2) Interest-bearing debt to total assets End of 20th Period End of 21st Period Change (p) 48.8% 53.2% 4.5 45.2% 49.3% 4.1 15 & 21 37,612 0.0% 21.2% (including unrealized gains or losses) (Note 3) 47.6% 52.2% 4.7 Long-term fixed-rate interest-bearing debt ratio (Note 4) 76.1% 75.3% -0.7 Buildings and structures 56,583 15.7% 55,807 14.1% Land 120,491 33.4% 158,879 40.1% -776 38,388 -1.4% Intangible assets 4,801 1.3% 4,800 1.2% -1 31.9% -0.0% (Note 1) Interest-bearing debt/ (Interest-bearing debt + Unitholders' capital) (Note 2) Interest-bearing debt/Total assets at end of period Leasehold rights 4,794 1.3% 4,794 1.2% - (Note 3) Interest-bearing debt/ (Total assets at end of period + Gains or losses from real estate valuation) (Note 4) Long-term fixed-rate interest-bearing debt(*) / Interest-bearing debt Other intangible assets Investments and other assets 7 0.0% 5 0.0% -1 472 0.1% 627 0.2% 155 -16.7% 32.9% (*) Total amount of long-term fixed-rate debt with over 1 year to maturity 3. Cash and deposits Status Others Lease and guarantee deposits Deferred assets Investment corporation bond issuance costs 49 0.0% 49 0.0% End of 20th Period End of 21st Period (JPY mn) Change 422 0.1% 577 0.1% 155 36.7% Cash and deposits 169 0.0% 146 0.0% -23 169 0.0% 146 0.0% -23 Total assets 360,699 100.0% 396,017 100.0% 35,318 Current liabilities 43,210 12.0% 54,346 13.7% 11,136 -13.8% -13.8% 9.8% 25.8% Tenant leasehold and security deposits (except tenant leasehold and security deposits) (Note) (Note) Amount equivalent to leasehold deposits released from tenants (4,000 million yen at end of 20th period and 7,500 million yen at end of 21st period) is excluded. 26,780 13,859 24,660 11,197 -2,119 -2,661 4. Commitment line status Accounts payable - other 2,434 0.7% 3,875 1.0% 1,440 59.2% End of 20th Period End of 21st Period (JPY mn) Change Advances received 1,759 0.5% 2,328 0.6% 568 32.3% Credit limit (total) 28,000 28,000 Short-term loans payable 12,400 3.4% 20,600 5.2% 8,200 66.1% Outstanding debt Current portion of long-term loans payable Current portion of investment corporation bonds 17,616 4.9% 18,543 4.7% 927 5.3% Unused commitment line 28,000 28,000 9,000 2.5% Noncurrent liabilities Tenant leasehold and security deposits Long-term loans payable Investment corporation bonds Total liabilities Unithoders' capital Surplus Total unitholders' equity Total liabilities and unitholders' equity 141,848 39.3% 17,859 5.0% 81,489 22.6% 42,500 11.8% 185,058 51.3% 171,339 47.5% 4,300 1.2% 175,640 48.7% 360,699 100.0% 9,000 2.3% 165,635 41.8% 18,697 4.7% 104,438 26.4% 42,500 10.7% 219,981 55.5% 171,339 43.3% 4,696 1.2% 176,035 44.5% 396,017 100.0% Lenders 23,787 838 22,949 16.8% 4.7% 28.2% Mizuho Corporate Bank, Resona Bank, The Bank of Tokyo-Mitsubishi UFJ, Mitsubishi UFJ Trust and Banking, Sumitomo Mitsui Banking, Aozora Bank and Mizuho Trust & Banking 5. Investment unit status 34,923 18.9% 395 395 35,318 9.2% Total number of units outstanding (units) (Note) Net assets per unit (yen) End of 20th Period End of 21st Period Change 715,000 245,651 715,000 246,204 553 0.2% 9.8% (Note Total number of units outstanding is projected to be 825,000 units, adding the 101,420 units newly issued via add-on offering in July 2012 and the 8,580 units (maximum) newly issued through third-party allotment in August 2012 in association with the over-allotment option. (Note) Amounts have been rounded down to the nearest specified unit and percentages have been rounded to the first decimal place. Japan Prime Realty Investment Corporation 9#10Japan Prime Realty Investment Corporation Management Results of the 21st Fiscal Period (Ended June 2012) 21st#11JPR History of Portfolio Growth JPR has been steadily expanding its assets over ten years since listing, while working to enhance portfolio quality through focused investment in office properties in the greater Tokyo area History of Average Occupancy Rate during Period and Growth of Portfolio Size (%) 96.1 97.7 98.3 99.0 98.7 98.0 100 95.2 97.0 96.2 96.4 96.1 94.0 94.3 94.9 94.0 95.0 94.8 93.8 95 5 92.6 93.1 93.6 H 90 Average figure of period-average occupancy rate from the 1st to 21st fiscal periods: 95.7% 85 (JPY bn) 391.9 380.9 400 Office (Tokyo) Office (other cities) Retail properties Total properties sold 331.2 341.5 341.5 344.9 350 310.6 299.4 300 275.1 280.6 245.3 251.9 259.2 250 222.4 259.2 197.6 202.6 209.2 179.6 135.7 141.6 172.9 184.1 209.5 219.8 219.8 223.2 200 163.6 108.2 114.7 139.6 100.1 150 125.7 99.2 100.1 100.1 91.2 92.1 94.5 77.4 57.5 43.1 43.1 43.1 39.4 31.1 31.1 26.5 26.5 26.5 26.5 26.5 37.5 100 52.7 45.2 45.2 40.1 41.5 48.3 45.2 50 39.7 43.9 47.9 47.9 77.0 93.9 93.9 96.1 99.5 95.3 95.3 95.2 95.2 95.2 95.2 95.2 95.2 38.8 39.7 33.2 38.2 38.2 0 13.2 132 -0.4 -0.4 40.4 -0.4 50.0 57.2 -6.2 -9.3 63.8 -9.3 -9.3 -14.4 -14.4 -14.4 -18.1 -30.6 -30.6 -35.4 -35.4 -35.4 -35.4 -35.4 -35.4 -50 1st Period 2nd Period 3rd Period Jun. 2002 Dec. 2002 Jun. 2003 4th Period 5th Period Dec. 2003 Jun. 2004. 6th Period 7th Period 8th Period 9th Period Dec. 2004 Jun. 2005 Dec. 2005 Jun. 2006 10th Period 11th Period 12th Period 13th Period 14th Period 15th Period 16th Period 17th Period 18th Period 19th Period 20th Period 21st Period Dec. 2006 Jun. 2007 Dec. 2007 Jun. 2008 Dec. 2008 Jun. 2009 Dec. 2009 Jun. 2010 Dec. 2010 Jun. 2011 Dec. 2011 Jun. 2012 Aug. 17, 2012 Number of properties (buildings)) 25 27 30 32 38 42 42 42 44 46 48 49 50 52 51 53 55 56 56 57 58 59 Average acquisition price per property 3.6 3.5 4.1 4.3 4.3 4.2 4.7 4.8 4.7 4.8 5.1 5.1 5.5 5.3 5.8 5.8 6.0 6.1 6.1 6.0 6.5 6.6 (billion yen) (Note 1) Average occupancy rates have been rounded to the first decimal place. (Note 2) Portfolio size represents the sum total amount of acquisition price of the properties included in the JPR portfolio as of respective dates, rounded down to the nearest hundred million yen. In addition, portfolio size after having acquired a property to be acquired represents the sum total amount of acquisition prices of the properties JPR owns as of August 17, 2012. Furthermore, the acquisition price is the deal price (rounded down to the nearest hundred million yen) described in the transaction contracts with the sellers for respective properties, and does not include expenses related to acquisitions and consumption taxes. The same is true to below. (Note 3) The accumulated amount of total properties sold represents the accumulated amount of acquisition prices at which JPR had acquired the respective properties that were sold by the respective dates.) (Note 4) Average acquisition price per property is rounded down to the nearest hundred million yen. Portfolio Management Guidelines As of End of 1st Period (June 2002) As of August 17, 2012 Other cities 17.7% Retail (other cities) 8.1% Investment ratio of office properties Investment Target by Area Tokyo: 80-90% Other cities: 20~10% Other cities 42.1% Office (other cities) Office (Tokyo CBDs) 29.2% 42.1% Investment Target by Office: 70-90% Office Asset Class Retail: 30-10% (Greater Tokyo) 14.3% Retail (Tokyo) 14.4% (Note) Figures in the graphs to the right represent investment ratio by area and by asset class, or the ratio of the total acquisition prices of properties in respective categories to the total acquisition prices of the entire portfolio, and is rounded to the first decimal place. in the greater Tokyo area rising as a result of focused investment Office properties in the greater Greater Tokyo area: +22.6% Tokyo area 57.9% (of which, office: 43.5%) Japan Prime Realty Investment Corporation Office (other cities) 9.6% Retail (Tokyo) 16.2% Office (Tokyo CBDs) 46.4% Office (Greater Tokyo) 19.7% Greater Tokyo area 82.3% (Of which, office: 66.1%) 11#12JPR Property Acquisition in the 21st Period Improved portfolio quality and stability of earnings through acquisition of a property in a prime location for domestic offices 1. Property Overview Location Site area / Type of ownership Otemachi 1-6 Plan (tentative name) (ownership of land with land leasehold) 2. Outline of Leasehold Form of agreement/ agreement period 3. Transaction Summary Seller Type of asset Acquisition price Appraisal value Acquisition date 4. Yield 6-6, etc., Otemachi 1-chome, Chiyoda-ku, Tokyo 11,034.78m² / Beneficiary interest in real estate (land with surface rights establishment agreement) Contract to set surface rights Surface rights / 70 years Tokyo Prime Stage Y.K. (SPC established jointly by Tokyo Tatemono Co., Ltd and Taisei Corporation) Beneficiary interest in real estate 36,000 million yen 36,800 million yen (as of June 30, 2012) March 13, 2012 Exterior perspective Characteristics and Reasons for Acquisition ■Superiority in a prime location for domestic office buildings ◉ Ensure long-term stable earnings based on a contract to set surface rights for 70 years ■There is no depreciation burden, so the property contributes highly to dividends The property's yield (after depreciation) is 3.6% (Note), surpassing the average yield after depreciation of JPR's office buildings in Tokyo CBDs. Preferential negotiating rights are granted for cases of transferring, etc. currently planned buildings, etc. Yield after depreciation (Note) 3.6% 5. Overview of Building under Project Development project for high-rise complex building with 38 floors above ground and total floor space of approx. 198,000m² is currently underway, with construction completion scheduled for end of April 2014. Occupancy by leading Japanese financial institution in office portion and world-class hotel on higher floors are planned. Concerning the rent review article Rent will be reviewed when there is an A: increase or reduction of property and other taxes, or B: change in the consumer price index in the base year of property tax. (However, rent will also be adjusted if there is change in property and other taxes other than in the base year.) As such, the provision for rent review will not be impacted by changes of rental revenue, etc. of currently planned buildings. Rent (2,817 million yen/year) (Note) (Note) Yield after depreciation is calculated by using annual earnings and expenses estimated exclusive of extraordinary factors of the fiscal year the property was acquired in (they are not the figures expected for the current fiscal period under review). It is calculated by dividing the rental business income (where property and other taxes, etc. are subtracted from annual rent) by the acquisition price. The figure is rounded to the first decimal point. ΝΟΙ (Rent Property and other taxes, etc.) Property and other taxes (Property tax, etc.: 1,512 million yen/year) (Note) (Note) Figures for rent and property tax, etc. are the annual amounts after the fiscal 2012 review based on the contract to set surface rights. Net rental income (NOI), which is rent subtracted by property and other taxes, is reviewed in conjunction with the consumer price index (Statistic Bureau, Ministry of Internal Affairs and Communications) When there are changes in property and other taxes, the same amount will be reviewed in rent Location map Tokyo Metro Chiyoda Line Tokyo Metro Hanzomon Line Otemachi 1st Square Tokyo Metro Marunouchi Line Tokyo Metro Tozai Line Otemachi Sta. Uchibori-dori Shin-Marunouchi Bldg. Toei Mita Line Tokyo Metro Tokyo Sta. Marunouchi Bldg. Otemachi 1-6 Plan (Land with Leasehold Interest)* Marunouchi Nihonbashi North Gate Gate JR Tokyo Sta. Marunouchi Central Gate Japan Prime Realty Investment Corporation Image of Underground Plaza (tentative name) Image of Otemachi Forest (tentative name) 12#13JPR Property Acquisition in the 22nd Period Leveraging sponsors' pipelines and selectively investing in excellent large office buildings in Fukuoka where steady market recovery is expected compared to other regional cities Yakuin Business Garden 1. Property Overview Location Completion Total floor space 1-1, Yakuin 1-chome, Chuo-ku, Fukuoka-shi, Fukuoka January 2009 Type of ownership 22,286.35m² Ownership Characteristics and Reasons for Acquisition Location with Excellent Access Accomplished companies such as Kyushu Electric Power Company (head office) and NTT DoCoMo (Kyushu branch) place their Kyushu hubs in the Yakuin area of Fukuoka where the property is located and transportation access throughout the area is excellent with Fukuoka's main train line, the Nishitetsu Tenjin-Omuta Line, passing through Yakuin Station in addition to the Nanakuma subway line and several bus routes. Exterior photogragh 2. Transaction Summary Seller Yakuin Holdings TMK (an SPC invested in by Tokyo Tatemono) Asset type Acquisition price Appraisal value Acquisition date 3. Yield (Current Base) Real estate 10,996 million yen 11,000 million yen (as of May 1, 2012) August 8, 2012 ■ Top-class Specifications in the Area The property is relatively new, completed in January 2009. With floor space of a standard floor of approx. 400 tsubos, the largest scale in the area, and built in a rectangular shape with column-free space and surrounded on three sides by glass wall curtains, the property provides a very open office environment. In terms of facilities, the property employs the latest technology in power supply, air conditioning, communications, security, etc. and is fully equipped with high specifications. The building's design employs a seismic damping structure and is therefore highly resistant to earthquakes (earthquake PML: 1.45%). NOI yield (Note) Yield after depreciation (Note) 5.8% 4.0% (Note) Yields are calculated based on annual earnings and expenses estimated that assumes the current rent level, occupancy rate, etc. NOI yield is calculated by dividing expected NOI by the acquisition price and yield after depreciation is calculated by dividing the rental income (expected NOI subtracted by depreciation) by the acquisition price. Figures are rounded to the first decimal point. Furthermore, the NOI yield of the property obtained by dividing the net operating income, which was indicated in the appraisal report and used as a base for calculating the capitalized value through direct capitalization method by the acquisition price, was 5.5%. Expectation for Internal Growth Capacity The Fukuoka business district was impacted by large supply in 2009, the year the property was completed, resulting in a downturn of rents. Because many of the tenants moved in when rents were in a lower range, an increase in profitability can be expected with the market recovery. Changes in Supply and New Demand Trends and the Vacancy Rate in Fukuoka's Office Market Tenjin Sta. Kuko Subway Line Newly supplied space (left axis) Average vacancy rate (right axis) New demand space (left axis) Fukuoka City (thousand tsubo) 15.4 Office Tenjin 121 Bldg. 30 14.7 (%) 16 Daimaru Tenjin Sta. Tenjin-Minami Sta. 13.2 25 12.6 (July 2012 results) 14 Iwataya Mitsukoshi 11.0 20 12 Kokutai Street 15 8.4 10 8.1 Watanabe-dori 10 8 Nishitetsu Tenjin ← July 2012 results Inside of an office Vibration control damper Omuta Line Watanabe-dori Sta. The Yakuin 50 6 4 Business Garden Kyushu Electric New Otani Hotel -5 2 Power Co. -10 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Yakuin Sta. Nanakuma Subway Line Yakuin-Odori Sta. Approx. 2-minute walk from Yakuin Station on the Nishitetsu Tenjin-Omuta Line and Fukuoka City Subway Nanakuma Line (Note) Data through 2011 was prepared by Tokyo Realty Investment Management, Inc. based on the Office Report (Fukuoka CBD) published by Miki Shoji Co., Ltd. Data for 2012 and after were prepared by Tokyo Realty Investment Management, Inc. based on its own survey. Japan Prime Realty Investment Corporation 13#14JPR Changes in Occupancy Rates and Contract Changes Despite tenant relocations becoming more active, the impact of cancellations at some properties resulted in occupancy rates being as assumed at the beginning of the period Changes in Period-End Occupancy Rates of Properties by Asset Class and by Location 100% 98% 99.8% 99.8% (±0.0%p) Although steady lease-up was conducted centering on office buildings in Tokyo, due to the impact of cancellations at some properties, the occupancy rate for the entire portfolio at the end of the period dropped 1.5% points compared to the 20th fiscal period ■By location, decreases were seen in office buildings in Tokyo CBDs of -3.0% points and both Greater Tokyo and other cities of -1.8% points compared to the 20th fiscal period 96% 94% All properties Office (Tokyo CBDS) 92% Office (Greater Tokyo) 90% Office (Other cities) Retail properties 95.6% 94.2% 94.1% (-1.5%p) (Main Properties with Fluctuations in Occupancy Rates) 20th Period Dec. 2011 21st Period Change Jun. 2012 92.4% JPR Harajuku Building 88.5% 98.7% 10.2%p Yume-ooka Office Tower 87.9% 91.1% 3.2%p 92.0% 91.2% (-3.0%p) 90.6% (-1.8%p) 90.2% (-1.8%p) Shinjuku Center Building Minami Azabu Building 87.5% 90.0% 2.5%p 100.0% 0.0% -100.0%p JPR Crest Takebashi Building 94.9% 58.5% -36.4%p Olinas Tower 98.6% 91.3% -7.3%p 88% (75.6%) 0% End of 11th Period End of End of End of End of 12th 13th 14th 15th Period Period Period Period End of End of End of End of 16th Period 17th 18th Period 19th Period Period End of 20th Period End of 21st Period Changes in Contract Changes 30,000m Newly leased space Cancelled space 25,000m 20,000m 15,000m 10,000m 18,188 25,989 (Note 1) Indicated occupancy rates are as of the end of June 30, 2012, calculated on the basis of the lease conditions as of the same date for properties JPR owned as of the same date. (Note 2) Figures have been rounded to the first decimal place. ■Given notices of cancellations for about 6,000m² in three office buildings in Tokyo CBDs, cancelled space significantly exceeded newly leased space (Breakdown by Asset Class and by Location for the 21st Fiscal Period) Newly leased space Cancelled space Newly leased space - cancelled space Entire portfolio 6,617m 13,940m -7,323m Office in Tokyo CBDS 1,901 m 6,408m -4,508m Office in Greater Tokyo 3,290m 5,222m -1,932m Office in other cities. 1,340m 2,309m -969m 13,511 13,940 7,897 11,104 Retail properties 86m Om 86m 8,723 6,617 5,000m 9,691 7,850 6,853 4,042 Om 16th Period 17th Period 18th Period 19th Period 20th Period 21st Period Japan Prime Realty Investment Corporation 14#15JPR Changes in Rent Revenue and Unit Rent Rent revenue on same-store basis and average unit rent continued on downward trends, impacted by reductions in contract rents and other factors Changes in Rent Revenue (from Properties Owned as of the End of the 16th Period) (JPY mn) 14,000 (+3.1%) (+2.6%) (+0.9%) 12,000 11,014 10,684 617 10,731 10,825 (+1.6%) 10,996 (+5.7%) 11,626 Entire portfolio 754 10,000 967 1,243 1,433 2,339 Properties acquired or sold since the 16th fiscal period 8,000 7,125 7,315 6,847 6,000 6,672 6,662 (+2.7%) (-6.4%) (-2.6%) (-0.1%) 6,414 (-3.7%) Office properties owned as of the end of the 16th fiscal period 4,000 2,916 (-1.0%) 2,000 2,941 2,944 (0.1%) 2,909 (-0.2%) 2,900 (-0.3%) 0 16th Period 17th Period 18th Period 19th Period 20th Period 2,872 (-1.0%) 21st Period Retail properties owned as of the end of the 16th fiscal period ■Rent revenue of entire portfolio increased significantly as a result of new property acquisition ■Office buildings owned as of the end of the 16th fiscal period decreased period-on-period as a result of declines in occupancy rate ■Concerning retail properties, since the 16th fiscal period, none have been acquired or sold and rent revenue has generally been stable, serving to support entire portfolio (Note 1) Values for the entire portfolio are the sum of rents, common charges, parking rates and other revenues (excluding such variable revenues as incidental income) for all properties owned in respective periods (including properties sold during the respective periods). Values for the office properties owned as of the end of the 16th fiscal period and Retail properties owned as of the end of the 16th fiscal period are the sum of rents, common charges, parking rates and other revenues (excluding such variable revenues as incidental income) for properties owned as of the end of the 16th fiscal period but excluding those sold by the end of the 21st fiscal period. Furthermore, BYGS Shinjuku Building, of which JPR additionally acquired the remainder of common areas at the end of the 18th fiscal period, has been excluded from the Office properties owned as of the end of the 16th fiscal period and included in the Properties acquired or sold since the 16th fiscal period category. (Note 2) Values have been rounded down to million yen, and the rates of period-on-period change have been rounded to the first decimal place. Changes in Average Rent of Office Buildings (for Properties Owned as of the End of the 16th Period) Average unit rent (including common charges; thousand yen/tsubo) 20.0 18.8 (-0.3%) 18.7 (-1.5%) 18.5 (-3.1%) 17.9 (-2.2%) 17.5 18.0 (-2.8%) 17.0 (+0.9%) (-1.2%) (-1.0%) 15.2 15.4 15.2 16.0 15.0 (-0.9%) 14.9 (-2.7%) 14.5 Entire office buildings owned at end of 16th period Entire portfolio 14.0 15.0 14.9 14.6 14.4 (-0.8%) 14.2 (-1.9%) (-1.7%) (-1.4%) 12.0 13.8 (-2.9%) 10.0 10.0 8.0 9.9 (-1.8%) 9.8 9.9 (-0.4%) (+0.9%) 9.9 (0.0%) 9.7 (-1.6%) ■Average unit rent of entire portfolio continues to be on downward trend, albeit modest ■Degree of decrease for office buildings owned as of the end of the 16th fiscal period grew to -2.8% period-on-period for the 21st fiscal period ■Average unit rent of retail properties remained relatively stable 21st Period Entire properties owned at end of 16th period Entire retail properties owned at end of 16th period Japan Prime Realty Investment Corporation (Note 1) Values for Entire portfolio are the average unit rent (monthly rent revenue per tsubo of occupied spaces including common charges at end of each fiscal period) for all properties owned in respective periods (including properties sold during the respective periods). Values for Properties Owned as of the End of the 16th Period, Office properties owned as of the end of the 16th fiscal period and Retail properties owned as of the end of the 16th fiscal period are the average unit rent (monthly rent revenue per tsubo of occupied spaces including common charges at end of each fiscal period) for properties owned as of the end of the 16th fiscal period but excluding those sold by the end of the 21st fiscal period. Furthermore, BYGS Shinjuku Building, of which JPR additionally acquired the remainder of common areas at the end of the 18th fiscal period, has been excluded from the Properties Owned as of the End of the 16th Period and the Office properties owned as of the end of the 16th fiscal period categories. (Note 2) The period-on-period figures have been rounded to the first decimal place. 00 0.0 16th Period 17th Period 18th Period 19th Period 20th Period 15#16JPR Financial Strategy Continued conservative financial operations by promoting long-term, fixed interest rates and diversifying repayment dates, so as to maintain high credit ratings Changes in Unitholders' Capital and Ratio of Interest-Bearing Debts (LTV) Ratio of Interest-Bearing Debts (as of August 17, 2012) Short term borrowings (JPY bn) 250 Unitholders' capital LTV as ratio of gains or losses from valuation to total assets at end of period LTV based on unitholder's capital (%) 54.9 60 53.2 Corporate bonds maturing 51.1 48.7 46.4 45.8 200 44.1 42.0 39.4 40. 48.0 48.7 37.144.4 48.9 49.0 48.5 48.9 48.7 48.8 in more than one year 48.5 44.1 45.2 50 7.7% 52.2 9.6% 23.2% 38.9 46.9 47.5 47.5 47.6 37.2 44.6 45.5 40 150 36.5 35.3 34.4 39.3 38.5 38.9 39. 37.2 34.5 30 100 29.4 29.9 50 Current portion of long-term borrowings 59.6% 20 Long-term interest bearing debts Long-term borrowings maturing In more than one year 82.7% 10 20th Period Dec. 2011 Aug. 17, 2012 56 56 56 89 89 89 115 115 115 115 156 156 156 156 156 156 171 171 171 171 171 192 0 Ratio of long-term, fixed-ratio borrowings 76.1% 82.7% 0 1st Period 2nd Period 3rd Period 4th Period 5th Period 6th Period 7th Period 8th Period 9th Period Jun. 2002 Dec. 2002 Jun. 2003 Dec. 2003 Jun. 2004 Dec. 2004 Jun. 2005 Dec. 2005 Jun. 2006 10th Period 11th Period 12th Period 13th Period 14th Period 15th Period 16th Period 17th Period 18th Period 19th Period 20th Period 21st Period Dec. 2006 Jun. 2007 Dec. 2007 Jun. 2008 Dec. 2008 Jun. 2009 Dec. 2009 Jun. 2010 Dec. 2010 Jun. 2011 Dec. 2011 Jun. 2012 End of Aug. 2012 Forecast (Note 1) LTV based on unitholders' capital (%) = Interest-bearing debts / (interest-bearing debts + Unitholders' capital); LTV as ratio of gains or losses from valuation to total assets at end of period = Interest-bearing debt / (Total assets at end of period + Gains or losses from real estate valuation) (Note 2) Unitholders' capital has been rounded down to the nearest specified unit. (Note 3) LTV based on unitholders' capital and LTV as ratio of gains or losses from valuation to total assets at end of period have been rounded to the first decimal place. (Note 4) Forecast at end of August 2012 assumes that JPR will issue 8,580 new investment units through third-party allotment and repay JPY 2.5 billion in interest-bearing debts. Diversification of Repayment Dates of Interest-Bearing Debts Average maturity of long-term interest-bearing debts 3.84 years 3.72 years Average interest rate of long-term interest- bearing debts 1.76% 1.54% Average maturity of interest-bearing debts 3.05 years 3.19 years (JPY bn) 35 30 30 (7.5) 25 12.1 20 Short-term borrowings (as of August 17, 2012) Long-term borrowings Corporate bonds Of the 12.1 billion yen, JPR intends to repay 2.5 billion yen by using funds from issuing new investment units through third-party allotment and other sources, and refinance 5 billion yen for the same amount in long-term borrowings 6.1 15 0.1 12.0 10 18.3 2.0 12.2 сл 5.4 4.1 19.5 11.0 13.0 13.5 13.1 7.0 5.0 0 22nd 7.0 0.1 7.1 3.3 4.5 4.5 2.0 28th Period 29th Period 23rd 24th 25th 26th 27th Period Period Period Period Period Period Dec. 2012 Jun. 2013 Dec. 2013 Jun. 2014 Dec. 2014 Jun. 2015 Dec. 2015 Jun. 2016 Dec. 2016 Jun. 2017 Dec. 2017 Jun. 2018 Dec. 2018 Jun. 2019 Dec. 2019 30th Period 31st 32nd 33rd 34th 35th 36th 50th Period Period Period Period Period Period Period Dec. 2026 (Note) Figures have been rounded down to the nearest 100 million yen. Japan Prime Realty Investment Corporation (Note) Long-term interest-bearing debts: interest-bearing debts with repayment dates coming in more than one year Credit Ratings Assigned to JPR Rating Agency Rating and Investment Information, Inc. (R&I) (as of August 17, 2012) Corporate Outlook Credit Rating AA- Stable Stable Short-term: A-1 A3 Negative Standard & Poor's Ratings Japan K.K. (S&P) (Note 1) Long-term: A Moody's Japan K.K. (Moody's) (Note 2) (Note 1) JPR had been placed on credit watch with negative implications since March 5, 2012, but the credit watch was removed on August 1, 2012 and the ratings were kept unchanged at A/A-1, with the Outlook being stable. (Note 2) The rating was downgraded from A2 to A3 on May 9, 2012. 16#17JPR Equity Finance Overview JPR conducted its fifth additional public offering through a global offering, the first such arrangement for JPR [Background] Concerns about real estate transaction prices rising in anticipation for recovery in the office building leasing market Apparent moves toward equity financing during the current fiscal year being activated led by operating companies Tendency for "risk off" (avoiding risks) in the face of the European sovereign debt crisis, uncertain outlook of the world economy and other factors JPR's unit price remains solid, staying above net asset value (NAV) per unit Investigation of an offering size that can absorb investor demand amid limited offering opportunities [Objectives] ■Prepare for implementing growth strategy by quickly regaining JPR's extra capacity to acquire properties through debt financing ■Selective investment in properties with relatively high yields, akin to the stabilized profitability and reinforced foundations for growth realized by the acquisition of Otemachi 1-6 Plan (tentative name) (land with land leasehold) ■Secure DPU at 6,000 yen, the target level under normal operations, for the 23rd fiscal period and after ■Firmly maintain the position as one of the largest J-REITS managing a comprehensive-type portfolio, both in terms of market capitalization and asset size ■Provide foreign investors with investment opportunity in the primary market through global offering, the first such arrangement for JPR LTV (based on unitholders' capital) End of 21st fiscal period After public offering 53.2% 48.5% (Note) (Note) The figure assumes that JPR will issue 8,580 new investment units through third-party allotment and repay JPY 2.5 billion in interest-bearing debts. Acquisition price (single property) NOI yield (current figure) Market capitalization (as of Aug. 10, 2012) Asset size (as of Aug. 17, 2012) JPY 10,996 million 5.8% JPY 170.4 billion JPY 391.9 billion [Equity Finance Overview] Offering type Number of investment units issued and outstanding Global offering (offering centered on Europe and Asia [excluding the U.S. and Canada]) 715,000 units Total number of units issued / dilution ratio 110,000 units Dilution ratio: 15.4% of units issued and outstanding Domestic primary offering and global offering Secondary offering (over-allotment) Total amount of offering Domestic primary offering and global offering Secondary offering (over-allotment) Portion 101,420 units (57,420 units via domestic offering and 44,000 units via global offering) [Public Offering Results] First additional public offering Additional listing: July 2003 Unit issued: 140,400 (JPY bn) Total purchase price: JPY 32.1 billion 250 Second additional public offering Additional listing: February 2005 Unit issued: 100,000 Total purchase price: JPY 26.3 billion Third additional public offering Additional listing: February 2007|| Unit issued: 95,000 Fourth additional public offering Additional listing: February 2010 Unit issued: 90,000 Total purchase price: JPY 41.2 Total purchase price: JPY 14.6 billion billion Fifth additional public offering Additional listing: July 2012 Unit issued: 110,000 Total purchase price: JPY 20.7 billion 8,580 units (Third-party allotment as a result of exercising the greenshoe option: 8,580 units maximum) 200 JPY 21,407 million Total procured amount JPY 20,704 million (maximum) 192 171 171 171 171 171 156 156 156 156 156 156 JPY 19,737 million Net proceeds JPY 19,089 million 150 JPY 1,669 million. Net proceeds through third-party allotment JPY 1,614 million (maximum) 115 115 115 115 60% domestic 100 89 89 89 (42% public and 18% institutional): 40% global Issue price (offer price) JPY 194,610 per unit (closing price of the pricing date: JPY 199,600). 56 56 56 50 Paid-in amount (purchase price) JPY 188,222 per unit Resolution day of issuance /pricing date Resolution day of issuance: July 9, 2012 Pricing date: July 23, 2012 H 54.9 39.4 40.6 46.4 51.1 37.1 42.0 44.1 45.8 48.7 37.2 38.9 44.1 45.2 48.9 49.0 48.5 48.9 48.7 48.8 53.2 48.5 Payment date / additional listing Payment date: July 30, 2012 date 0 Additional listing date: July 31, 2012 Use of proceeds JPY 7.0 billion to fund acquisition of specified asset, JPY 13.7 billion to repay short- term borrowings (planned) 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st End of Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Aug. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. 2012 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 Forecast Unitholders' capital LTV based on unitholder's capital Japan Prime Realty Investment Corporation 17#18JPR Breakdown of Interest-Bearing Liabilities JPR invited 5 banks as new lenders by originating its first syndicated loan to expand lenders to 28 financial institutions Borrowings Lender Balance as of Dec. 31, 2011 Balance as of June 30, 2012 (JPY mn) Security The Bank of Tokyo-Mitsubishi UFJ, Ltd. 2,000 5,000 Short-term borrowings Mizuho Corporate Bank, Ltd. 2,000 4,600 Mitsubishi UFJ Trust and Banking Corporation 2,000 4,000 Unsecured Resona Bank, Limited 2,000 2,000 Unguaranteed Non-subordinated Long-term borrowings The Bank of Yokohama, Ltd. (Note 3) The Minato Bank, Ltd. (Note 3) The Yamaguchi Bank, Ltd. (Note 3) The Chiba Kogyo Bank, Ltd. (Note 3) Aozora Bank, Ltd. 2,000 2,000 Sumitomo Mitsui Bank Corporation 1,400 2,000 Total long-term borrowings Total borrowings Lender Balance as of Dec. 31, 2011 The Tokyo Tomin Bank, Limited. (Note 3) Balance as of June 30, 2012 1,000 1,000 Security 800 Unsecured Unguaranteed Non-subordinated 500 100 122,981 143,581 99,105 111,505 Mizuho Trust & Banking Co., Ltd. 1,000 1,000 Total short-term borrowings 12,400 20,600 (Note 1) Among the short-term borrowings of 20,600 million yen, JPR repaid 11,000 million yen on August 1, 2012 prior to the repayment date using proceeds gained through the additional offering. (Note 2) Among the long-term borrowings of 5,000 million yen, JPR repaid 3,500 million yen on June 27, 2012 prior to the repayment date. (Note 3) These are borrowings made through originating a syndicated loan. Mizuho Corporate Bank, Ltd. 13,500 20,400 The Bank of Tokyo-Mitsubishi UFJ, Ltd 12,585 12,502 Mitsubishi UFJ Trust and Banking Corporation 7,000 7,000 Zenkyoren (The National Mutual Insurance Federation of Agricultural 7,000 7,000 Cooperatives) Sumitomo Mitsui Bank Corporation 5,750 12,100 The Bank of Fukuoka, Ltd. 5,000 5,000 American Family Life Assuarance Company of Columbus (Note 2) 5,000 1,500 Development Bank of Japan Inc. 4,370 4,245 Corporate bonds Sompo Japan Insurance Inc. 4,000 4,000 Long-term bborrowings Sumitomo Life Insurance Company 4,000 4,000 Meiji Yasuda Life Insurance Company 4,000 3,934 Unsecured Mizuho Trust & Banking Co., Ltd. 3,000 7,000 Unguaranteed Non-subordinated Corporate Bonds Balance as of Balance as of Name (JPY mn) Security Dec. 31, 2011 June 30, 2012 Third Series of Corporate Bonds 5,000 5,000 Sixth Series of Corporate Bonds 5,000 5,000 Seventh Series of Corporate Bonds 4,500 4,500 Eighth Series of Corporate Bonds (Note) 9,000 9,000 Unsecured Ninth Series of Corporate Bonds 6,000 6,000 Unguaranteed Non-subordinated Eleventh Series of Corporate Bonds 6,000 6,000 Twelfth Series of Corporate Bonds 7,000 7,000 Thirteenth Series of Corporate Bonds 7,000 7,000 Fourteenth Series of Corporate Bonds 2,000 2,000 Balance of corporate bonds 51,500 51,500 163,005 195,081 The Chugoku Bank, Ltd. 3,000 3,000 Total interest-bearing liabilities (Note) Redemption of Japan Prime Realty Investment Corporation's Eighth Series of Unsecured Bonds of 9,000 million yen was conducted on July 23, 2012. Taiyo Life Insurance Company 3,000 3,000 ORIX Trust and Banking Corporation 3,000 Commitment Line Contract 3,000 Lenders (already established) Limit Maturity date (JPY mn) Security The Shinkumi Federation Bank 3,000 3,000 Mizuho Corporate Bank, Ltd. The Nishi-Nippon City Bank, Ltd. 3,000 3,000 The Bank of Tokyo-Mitsubishi UFJ, Ltd. 4,000 4,000 Shinsei Bank, Limited 2,000 7,000 The Hachijuni Bank, Ltd. 2,000 2,000 Daido Life Insurance Company 2,000 2,000 Resona Bank, Limited Mitsubishi UFJ Trust and Banking Corporation Sumitomo Mitsui Bank Corporation 4,000 4,000 November 30, 2012 Unsecured Unguaranteed 4,000 Aozora Bank, Ltd. 1,900 1,900 Aozora Bank, Ltd. 4,000 The lyo Bank, Ltd. 1,000 1,000 Mizuho Trust & Banking Co., Ltd. 4,000 Resona Bank, Limited 2,000 Total commitment line 28,000 Japan Prime Realty Investment Corporation 18#19History of JPR's Unit Price and Trade Volume (Jan. 4, 2012~Aug. 10, 2012) JPR (Unit Price) (JPY) 260,000 240,000 220,000 200,000 180,000 160,000 الليالي السلس البلس וווין Trade Volume (units) Price (JPY) TSE REIT Index - TOPIX TSEROFF 140,000 Jan. 2012 Feb. 2012 Mar. 2012 Apr. 2012 May. 2012 Jun. 2012 "The TSE REIT Index and other figures have been indexed with January 4, 2012 as the base date, and the chart shows relative performances. Japan Prime Realty Investment Corporation (Trade Volume) (Unit) 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Jul. Aug. 2012 2012 19#20Future Management Strategy Japan Prime Realty Investment Corporation 22nd~#21JPR Future Management Policies Investing with an emphasis on Tokyo offices in addition to implementing various measures for improving NOI with the aim of stabilizing steady DPU in the 23rd Fiscal Period forward External Growth Strategy [Market Analysis] ■The real estate transaction market is heading for recovery ahead of office rental market and conditions for greater market activity is emerging ■Information on excellent properties in the secondary market still in scarce state ■Buyers find it difficult to set high price targets as the Japanese economy remains unclear and the real estate market is not showing clear improvements ■Investment corporations may boost property acquisition with recovery of investment unit prices [JPR's Strategy] ■Somewhat overheated transaction can be seen here and there as there is a lack of excellent properties in the real estate transaction market, but judging from a medium- to long-term perspective the favorable period for property acquisitions will continue for some time ■Leverage sponsors' pipelines and consider acquisitions mainly of office properties in the greater Tokyo area and also acquisitions from the secondary market ■Continue to strive to enhance portfolio quality while continuing to consider property replacements intended for NAV improvement ■Continue to make investment decisions by extensively setting up antennas in the market to collect information through such sources as sponsors, accurately grasping market trends and carefully researching investment value including determining future potential Internal Growth Strategy [Market Analysis] Although the vacancy rate of Tokyo offices increased due to the impact of new supply concentrated in the first half of 2012, the vacancy rate is expected to improve in the second half due to a decrease in supply and steady demand ■The supply-demand balance is improving but a turnaround (increase) of rents is expected to require some time due to uncertain economic prospects ■Some excellent offices and retail properties in good locations have mostly bottomed out [JPR's Strategy] ■Newly set up the Leasing Supervising Group at the Asset Manager (TRIM) to oversee leasing and reinforce leasing activities ■In the recovery phase of the office rental market, steadily catch up to the needs for relocation and increasing floor space to lead to the recovery of the occupancy rate through careful operative response ■Improve competitiveness of properties with focused investment in renewal work, responding to tenant needs, etc. ■Strengthen cost control by proactively introducing energy-saving facilities and pursuing rationalization of management structure Financial and IR Strategies [Market Analysis] ■Long-term interest rates will be falling as risk aversion tendencies increase due to the impact of concerns over global economic slowdown such as the European debt crisis ■Environment of debt financing from financial institutions continues to be favorable [JPR's Strategy] ■Engage in further compression of borrowing costs in refinancing and financing for property acquisitions ■Continue to consider early repayments with regard to some relatively high cost borrowings ■Consider acquiring borrowings with longer terms, keeping in mind the diversification of maturity dates ■Utilize syndicate loans, etc. and work to increase new lenders as flexibility of loan transactions have improved with amendment of loan agreement Japan Prime Realty Investment Corporation 21 24#22JPR Office Transaction Market Conditions With environment of debt financing from financial institutions favorable, property acquisition by J-REITs from sponsors driving real estate transactions Lending Attitude of Japanese Financial Institutions and Amount of New Lending Financing from Japanese financial institutions is proactive, and the amount of Changes in Cap Rates of Offices (JPY trillion) 12.0 new lending is also on gradual recovery trend Amount of new lending to real estate industry (left axis) Lending attitude (large enterprises in real estate industry) (right axis) While office building cap rates in Tokyo remained flat, some areas showed a slight decrease (%) 40 6.5 Otemachi/Marunouchi — Nihonbashi Nishi-Shinjuku Shibuya Osaka 30 10.0 6.0 (Estimate) 8.0 220 20 5.5 10 5.0 6.0 0 5.8 5.8 5.1 5.0 5.0 5.0 4.5 -10 4.7 4.7 4.0 Actual as of June 2012 -20 4.0 4.2 4.2 2.0 -30 0.0 -40 0.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (Note) Prepared by Tokyo Realty Investment Management, Inc. based on data by Bank of Japan. Changes in Amount of Acquisition and Amount of Buying on Balance by Business Sector Analysis by business sector finds largest is J-REITS in amount of acquisition at 750 billion yen and amount of buying on balance at 600 billion yen in past year Construction and real estate Construction J-REITs, etc. J-REITs, etc. SPCS SPCs and real estate Apr. 2005 Oct. 2005 Apr. 2006 Oct. 2006 Apr. 2007 Oct. 2007 Apr. 2008 Oct. 2008 Apr. 2009 Oct. 2009 Apr. 2010 Oct. 2010 Apr. 2011 Oct. 2011 Apr. 2012 (Note) Prepared by Tokyo Realty Investment Management, Inc. based on the Cap Rate of Average-Sized Class A Office Building in The Japanese Real Estate Investor Survey published by Japan Real Estate Institute Changes in Acquisition Results of Office Buildings in Tokyo by J-REITS Acquisition size on upward trend, led by property acquisition from sponsors (Acquisition price: JPY bn) 160 Acquisition from sponsor Other Other J-REITs, etc.: 484 140 Acquisition other than from sponsor Acquisitions (JPY bn) Buying/selling balance 500 400 300 200 100 0 -100 -200 -300 2008 1H (Note) 120 100 Other: 233 Construction and 80 real estate: 149 SPCs: 93 60 2008 2H 2009 1H 2009 2H 2010 1H 2010 2H 2011 2H 2011 1H Prepared by Tokyo Realty Investment Management, Inc. based on Survey on Actual Real Estate Transactions by Urban Research Institute Corporation (Mizuho Trust & Banking Co., Ltd.'s think tank). 40 20 4 3 0 6 1 1 5 6 2 3 4 9 3 9 7 8 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 4Q 1Q 3Q 4Q 2Q 1Q 3Q 4Q 2Q 1Q 4Q 2Q 3Q 2Q 1Q (Note) Prepared by Tokyo Realty Investment Management, Inc. based on press releases by respective J-REITS, with acquisition prices rounded off to the nearest specified unit. 1Q refers to the period from January to March and subsequent quarters refer to the 3-month periods thereafter. Japan Prime Realty Investment Corporation 22#23JPR Office Rental Market Conditions Secondary vacancies, etc. can be seen due to the impact of new supply in 2012 but a moderate recovery is anticipated due to robust new demand Changes in Average Vacancy Rates of Tokyo Office Buildings Although vacancy rates were trending upward due to the impact of large supply in 2012, the trend was turned around and rates have been falling moderately supported by robust tenant demand for newly-built buildings, etc. Supply and New Demand Trends of Tokyo Office Buildings (1) Large supply in 2012 is focused in the first half and supply in the second half is expected to remain at about 1/3 of the first half (%) 10.0 (%) 60 (thousand tsubo) 60 Average vacancy rate (left axis) Vacancy rate of existing buildings (left axis) Vacancy rate of newly-built buildings (right axis) 50 50 9.4 9.4 9.5 40 9.3 9.2 9.2 9.2 40 40 30 9.0 9.0 39.2 8.9 35.7 36.4 20 9.0 33.8 33.6 30 20 8.8 8.8 23.7 32.5 21.7 8.7 22.3 29.1 10 204 20 17.2 8.7 8.7 0 8.5 8.6 8.6 8.6 8.6 8.6 8.6 8.5 8.49 10 -10 8.4 8.44 8.42 8.45 New demand in the past year was robust at approx. 140,000 tsubos (%) 10.0 Newly supplied space (left axis). Average vacancy rate (right axis) Actual figures ← Newly demanded space (left axis). → Forecasts 9.5 9.0 8.5 0.0 [1st half of 2012] [2nd half of 2012] -20 0 0.0 Jun. 2011 Aug Sep. Oct. Nov. Dec. Jan. 2012 Feb. Mar. Apr. May Jun. Jul. (Note) Actual figures were prepared by Tokyo Realty Investment Management, Inc. based on the Office Report (in Tokyo CBDs) published by Miki Shoji Co., Ltd. Supply and New Demand Trends of Tokyo Office Buildings (2) New supply in 2012 and after will continue at a certain level, but the net increase in leasable space estimated from the volume extinguished will likely remain low compared to the volume of new supply, and will have only limited impact on the market (thousand tsubo) 400 Newly supplied space (left axis) Newly demanded space (left axis) 350 300 250 200 150 100 50 0 I Net increase in leasable space (left axis) Vacancy rate (right axis) (%) 12.0 Actual figures: Forecasts 10.5 (Actual figures of July 2012) 9.0 Average volume 7.5 extinguished over past 5 years (left axis) (Estimate) 6.0 4.5 3.0 (Actual as of July 2012) 1.5 0.0 -50 -100 Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 2011 2012 (Note) Data through July 2012 was prepared by Tokyo Realty Investment Management, Inc. based on the Office Report (Tokyo CBD) published by Miki Shoji Co., Ltd. Data for August 2012 and after were prepared by Tokyo Realty Investment Management, Inc. based on its own survey. Views on the Market by an Independent Institution (Office Buildings in Tokyo) Outlook of Office Market in the 23 Wards of Tokyo ■In 2012 large-scale buildings will generally be completed as scheduled and will have large supply of 302,000 tsubos ■Companies that are viewing rents to be close to the bottom price are starting to move toward relocating to reduce costs as well as to improve location and grade Although the European debt crisis will put downward pressure on the economy, demand for recovery from the Great East Japan Earthquake will support the economy, and the volume of new demand in 2012 will be a relatively sizeable 218,000 tsubos As absorption of large supply in 2012 will be difficult, the vacancy rate is forecast to remain generally flat at 7.4% ■The vacancy rate continues to remain high but the downward pressure is becoming relaxed as average contract rents have already been significantly adjusted and tenant relocations are becoming more active ■Volume of new supply in 2013 will shrink to 109,000 tsubos as a rebound to the large supply, and the vacancy rate which has remained high for some time will finally head toward a decrease, and it is expected to continue decreasing in 2014 also ■Average contract rent will remain stagnant during 2013 where the after effect of the large supply will still linger, and is expected to begin increasing starting from 2014 when the vacancy rate will start to show a clear decreasing trend -150 2009 2001 2002 2003 2004 2005 2006 2007 2008 2010 2011 2012 2013 (Note) Data through July 2011 was prepared by Tokyo Realty Investment Management, Inc. based on the Office Report (Tokyo CBD) published by Miki Shoji Co., Ltd. Data for August 2012 and after were prepared by Tokyo Realty Investment Management, Inc. based on its own survey. Japan Prime Realty Investment Corporation 2014 201 (Note) Prepared by Tokyo Realty Investment Management, Inc. based on the Real Estate Market Research Report (surveyed in Apr. 2012) by Sumitomo Mitsui Trust Research Institute Co., Ltd. 23#24JPR External Growth Strategy Position focused investment in office properties in the greater Tokyo area as the basic strategy for external growth, leveraging sponsors' pipelines and promoting acquisitions from the secondary market JPR has in the approx. 3 years since 2009 conducted focused investment in 10 office properties in the greater Tokyo area amounting to 117.6 billion yen JPR will advance an acquisition strategy that utilizes its sponsors' pipelines, preferential negotiation rights, etc. and plan further investment in Tokyo offices ■Acquisition of large development property from Tokyo Tatemono, the main sponsor Tokyo Tatemono is handling many large developments centering in Tokyo and owns excellent properties that rarely flow through the transaction market. Also, Tokyo Tatemono has in the area of focus in its medium-term business plan the continued expansion of REIT and real estate fund management business. Its policy for JPR is to further strengthen the collection of information to be passed through the sponsor pipeline. Otemachi 1-6 Plant (tentative name) (ownership of land with leasehold) Focused investment in office properties in the greater Tokyo area ■Supply of properties from other sponsors such as Taisei Corporation JPR has also acquired many properties from its 4 other sponsors. JPR will watch the changes in the sponsors' business environments going forward and consider together with the sponsors the strengthening of supply of properties from a long-term perspective. Investment Ratio by Location and by Asset Class Olinas Tower Retail properties 24.3% Office propertie In the greater Tokyo area (acquired in and before 2008) 36.1% Office (other cities) 9.6% Office properti the greater after 2009 30.0% Rise Arena Bldg. JPR Ningyocho Bldg. Greater Tokyo area 66.1% ■Utilizing various property acquisition methods and promoting an investment strategy based on excellent sourcing abilities JPR also has a history of property acquisitions from third parties other than its sponsors. It engages in property acquisitions that utilize various acquisition methods such as additional acquisition of co-ownership of shared properties that makes use of preferential negotiation rights. (JPR possesses preferential negotiation rights for a majority of the 20 office properties in the greater Tokyo area for which it owns land with leasehold or has co-ownership or partial unit ownership.) Property Acquisitions that Utilized Sponsors' Pipelines Transactions with third parties BYGS Shinjuku Bldg. Ginza Sanwa Bldg. Acquired regional property for the first time in approx. 6 years, complementing profitability of portfolio with relatively high yields Selective investment in regional office buildings and retail properties ■Selective investment in regional office buildings As the capacity for expanding investment size per property was generated due to the growth of the portfolio asset size, JPR will selectively invest in large regional offices with high area competitiveness. Yakuin Business Garden 48.0% Properties acquired from parties other than sponsors, etc. 30.9% Properties acquired with information provided by sponsors 17.0% Properties acquired from sponsor, etc. 52.0% ■Replacement of assets centering on retail properties The yields of JPR's retail properties are comparatively higher than its office buildings and they contribute to the raising the overall portfolio's earnings. However, some of these properties cannot be expected to continually grow in the future while they can be sold at preferable prices. Opportunities for replacements centering on these assets will be considered. Japan Prime Realty Investment Corporation Acquisitions that utilized sponsors' pipelines 69.1% 24#25JPR [Reference] Development Projects which Tokyo Tatemono is Undertaking in the Tokyo Station Area The following graphic shows properties owned, or development projects being undertaken, by Tokyo Tatemono Co., Ltd., its affiliates or special purpose companies in which Tokyo Tatemono Co., Ltd. has interests in the Tokyo station area. As of August 17, 2012, we have not yet entered into negotiations with Tokyo Tatemono Co., Ltd., or any other party to acquire any of these properties, with the exception of the Otemachi 1-6 Plan (land with land leasehold), which we acquired in March 2012. 1. JA Building Keidanren Kaikan Development Projects Developed Properties 5 1 4 JR Shinnihonbashi Sta. 6 2 Kandabashi JCT 7 Tei Park 8 YUITO Bank of Japan COREDO Muromachi BOJ Currency Mitsukoshi Museum Mitsukoshimae Sta. Gofukubashi JCT 2. Otemachi Financial City (North Tower) 3. Otemachi 1-6 Plan(a) (Note) Otemachi Building Otemachi Sta. Tokyo Metro Marunouchi Line | Marunouchi OAZO Shangri-La Hotel 12 16. Kyobashi 2-chome Project (a) 17. Kyobashi 3-1 Project (a) (a) The names of these properties have not been determined. 9 Tokyo Metro Tozai Line 11 COREDO Nihonbashi Nihombashi Sta. Shin-Marunouchi Building Tokyo Metro Tokyo Sta Marunouchi Building Daimaru JR Tokyo Sta. 14 Sotobori-dori Takashimaya 13 Tokyo Metro Ginza Line Yanmar Tokyo Building Toei Asakusa Line Pacific Century Place Marunouchi Yaesu-dori Showa-dori Yaesu Book Center Bridgestone Building Chuo-dori 15 Takaracho Lamp Tokyo Sta. 16 Kajibashi-dori Tokyo International Kyobashi Sta. / Forum 17 Takaramachi Sta. JR Keiyo Line Japan Prime Realty Investment Corporation 7. Nihonbashi IT Building 8. Tokyo Tatemono Nihonbashi Honcho Bldg. 12. Tokyo Tatemono Yaesu Bldg. 4. Tokyo Tatemono Muromachi Bldg. 5. Tokyo Tatemono Daisan Muromachi Bldg. 6. Tosho Bldg. 9. Shingofukubashi Bldg. 10. Nihonbashi First Bldg. 11. Nihonbashi 1-chome Project 13. Tokyo Tatemono Headquarters Bldg. 14. NTA Nihonbashi Bldg. 15. Kyobashi YS Bldg. (Note) JPR has the ownership of land with land leasehold. 25#26JPR Internal Growth Strategy Work to achieve recovery in occupancy rate by securing to absorb tenants' demand for relocation, which is becoming more active, and conduct various measures to improve NOI Perspective of Portfolio Occupancy Rates 190 Number of private views of properties Occupancy rates of office properties in the greater Tokyo area still at a low level and there is room for further increase Since better results have been achieved than expected, strive for further lease-up going forward (Views) (%) 300 98 Number of private views significantly increased in the 21st fiscal period, primarily for properties located in central Tokyo ■Number of private views of properties (entire portfolio) Number of private views of properties (only those located in central Tokyo) 281 96.1 249 Results 96 94.1 95.5 238 250 227 94 92 22 93.3 Includes confirmed contracts only Occupancy rate for the 22nd fiscal period includes confirmed contract status alone, including newly concluded contracts and already notified cancellations. 200 157 93.7 Includes confirmed contracts and some assumed contracts 150 Occupancy rate for the 23rd fiscal period assumes some new contracts, etc. on top of the assumptions for the 22nd fiscal period 100 88 50 Average 94.8% ->>> - Average 93.9% - ← Average 95.8% 62 62 131 80 83 76 53 0 0 12.1 2 3 4 5 6 7 8 21st Period 9 10 11 12 22nd Period 13.1 2 3 4 23rd Period 5 6 16th Period 17th Period 18th Period 19th Period 20th Period 21st Period 90 Rent Reduction Rate Due to Downward Revision Worked to address high-level rent reductions during the 21st fiscal period, almost completing rent reductions for tenants who still saw certain rent gaps with the market Number of contracts (left axis) (%) Rent reduction rate (right axis) -3.0 Comparison with assumptions at beginning of 21st period Rent reduction rate: +0.8% (assumption: -2.8%) Reduction cases: +21 contracts (assumption: 38 contracts) -2.0 -2.5 -2.0 (Contracts) 100 90 80 70 64 61 60 50 -1.6 38 35 40 31 -1.3 30 20 -1.0 20 -0.7 10 -0.6 -0.5 0 0.0 15th 16th Period Period 17th Period 18th 19th 20th 21st 22nd 23rd Period Period Period Period Period Period Initiatives to improve NOI ■ Leasing: 59 42 -1.5 -1.1 ☐ -1.0 36 -0.5 -0.5 (Note) Rent reduction rate expresses the amount of rent revised downward as a percentage of gross monthly rent (including common charges) at the end of the respective fiscal period. Newly set up the Leasing Supervising Group at the Asset Manager (TRIM) to further reinforce leasing activities Focused investment in construction work to facilitate leasing and for upgrading: Conduct focused investment in works to renovate highly-demanded spaces and common areas, etc., and to upgrade facility specifications Reduction in energy costs: Place priority on older properties in replacing facilities with energy-saving models ahead of schedule, thereby taking advantage of the effect of energy cost reductions as early as possible ■ Streamlining of operational and administrative systems: Pursue streamlining of administrative systems, management specifications and other factors, primarily for properties in which JPR has co-ownership or sectional ownership, in order to further enhance cost control that should lead to improved NOI Outlook for the 22nd fiscal period and 23rd fiscal period anticipates some assumed rent reductions in addition to the confirmed rent reductions. Japan Prime Realty Investment Corporation 26 26#27JPR Financial Strategy Strive for extended duration and lower average borrowing interest rate by reaping maximum benefits from the favorable debt financing environment Basic Policy on Financial Strategy ■Lower interest rates through refinancing ■ Promote long-term, fixed interest rates and diversify and level off repayment dates ■Maintain commitment line (28.0 billion yen) Changes in base borrowing rate (%) 2.0 1.5. 1.0 Swap rate (5Y) 0.5 ■ Enhance flexibility of debt financing through complete revision of financing agreements 0.0 00.04 01.04. 02.04 03.04 04.04 05.04 06.04 07.04 08.04 09.04 10.04 11.04 12.04 ■Increase lenders by utilizing syndicated loans Changes in Maturity and Average Interest Rate of Long-Term Interest-Bearing Debts (Note) Data has been taken from the swap rate of the five-year Tokyo Swap Reference Rate (10 a.m.) indicated on the Telerate Systems screen 17143P. Average interest rate of long-term interest-bearing debts has been decreasing under the favorable debt financing environment, and is projected to continue decreasing slowly On the other hand, JPR intends to increasingly extend maturity (duration) of long-term interest-bearing debts Maturity of long-term interest-bearing debts (right axis) Average interest rate of long-term interest-bearing debts (left axis) (Reference) Overview of Refinancing in the 22nd Fiscal Period (years) Lender: Aozora Bank, Ltd. 2.2% 6 2.07% Debts to be refinanced (average interest rate) Amount 1.99% 2.0% Interest rate Borrowing terms 2.0 billion yen 1.178% 1.91% 1.85% 22nd period: 5.900 million yen (1.55%) 23rd period: 11.000 million yen (1.39%) Duration 5 1.76% Drawdown date 7 years 2012.8.8. 1.8% Repayment date 2019.8.8 1.6% 1.56% 1.54% 4 Lender: The Bank of Tokyo-Mitsubishi UFJ, Ltd. 1.4% 4.2 yrs 4.1 yrs 3.8 yrs 3.8 yrs 3.7 yrs 3.7 yrs 3.7 yrs 1.2% 3 Amount Interest rate Duration Drawdown date Repayment date 0 0.0% End of 16th Period End of 17th Period End of 18th Period End of 19th Period End of 20th Period End of 21th Period As of Aug. 17, 2012 End of 22th End of 23nd Period Period (Note 1) Average interest rate of long-term interest-bearing debts is a weighted average of interest rates at the end of respective periods and dates, calculated in accordance with the balance of respective interest-bearing debts, for long-term interest-bearing debts maturing in more than one year from the end of respective periods and dates. (Note 2) Maturity of long-term interest-bearing debts has been rounded to the first decimal place, and average interest rate of long-term interest-bearing debts has been rounded to the second decimal place. Japan Prime Realty Investment Corporation Borrowing terms 1.0 billion yen 1.178% 7 years 2012.8.8 2019.8.8 + Borrowing terms 1.0 billion yen 0.948% 5 years 2012.8.8 2017.8.8 27 27#28Appendix Japan Prime Realty Investment Corporation 21st#29Performance over the Past Five Fiscal Periods JPR Operating Revenue, Operating Income and Net Income (JPY mn) Change in Distributions per Unit (DPU) and FFO per Unit (JPY) 12,000 16,000 14,000 10,000 12,000 8,000 10,000 8,000 6,000 6,000 4,000 4,000 2,000 2,000 0 0 17th Period 18th Period 19th Period 20th Period 21st Period ■Operating Revenue Operating Income Net Income T 17th Period 18th Period 19th Period 20th Period 21st Period ■FFO per Unit (Notes 1 & 2) DPU (Note 1) (JPY mn) (JPY) 17th Period 18th Period 19th Period 20th Period 21st Period 17th Period 18th Period 19th Period 20th Period 21st Period Operating Revenue 12,314 11,870 11,529 11,772 12,345 FFO per Unit (Notes 1 & 2) 8,952 8,353 8,372 8,426 8,882 Operating Income 6,484 5,886 5,603 5,763 6,393 DPU (Note 1) 6,770 5,680 5,611 5,876 6,430 Net Income 4,963 4,039 4,010 4,200 4,596 Number of Units Outstanding 715,000 715,000 715,000 715,000 715,000 (Note 1) DPU and FFO per unit are calculated by dividing distributions and FFO by the total units outstanding as of the end of each fiscal period. (Note 2) FFO per unit = (Net income - Gains on sale of real estate - Gains on sale of investment securities - Extraordinary revenues and expenses + Depreciation + Other real estate- related depreciation) / Total units outstanding Japan Prime Realty Investment Corporation 29#30Historical Unitholder Composition JPR Number of Units by Investor Type Foreign Investors Other Domestic Companies 800,000 Financial Institutions lIndividuals 715,000 715,000 715,000 715,000 715,000 Number of unitholders Total 14,148 (-365) 700,000 Units Outstanding 625,000 625,000 625,000 625,000 625,000 625,000 600,000 206,019 28.8% 200,030 28.0% 180,711 25.3% 181,443 25.4% 167,425 23.4% 265 (+4) 138,141 152,632 22.1% 24.4% 153,613 24.6% 160,245 25.6% 500,000 155,403 24.9% 165,224 26.4% 81,973 82,846 82,627 74,598 11.9% 11.5% 83,982 11.7% 80,594 11.3% 211 (-3) 73,686 74,057 75,986 77,100 11.6% 11.6% 77,207 400,000 11.8% 11.8% 12.2% 12.3% 12.4% 300,000 359,538 57.5% 353,294 56.5% 353,212 56.5% 343,353 54.9% 344,227 55.1% 332,009 53.1% 372,062 52.0% 379,092 53.0% 399,886 55.9% 397,093 55.5% 411,582 57.6% 124 (-1) Of which, 200,000 (155,575) (24.9%) (163,242) (26.1%) (168,910) (27.0%) (172,655) (27.6%) (173,280) (27.7%) (184,308) (29.5%) (226,535) (31.7%) ( 234,025) (32.7%) (239,084) (33.4%) (252,292) (35.3%) (259,627) (36.3%) 9 are trust banks (+1) 100,000 45.416 55,399 8.4% 0 2007.6 2007.12 2008.6 2008.12 11th Period 12th Period 13th Period 14th Period 2009.6 15th Period 8.1% 2009.12 16th Period 2010.6 17th Period 2010.12 18th Period 2011.6 19th Period 87.3% 2011.12 20th Period 2012.6 21st Period (Note 1) The composition ratios in the above graph have been rounded to the first decimal place. (Note 2) Figures in parentheses in the graph represent the number of investment units owned by trust banks within the category of financial institutions (including securities companies). Principle Unitholders 20th Fiscal Period (Ended December 2011) 13,548 (-365) *Figures in parentheses above represent the change in number of unitholders from the previous period. 21st Fiscal Period (Ended June 2012) Name Number of Units Owned % of Units Outstanding* Name Number of Units Owned % of Units Outstanding* Japan Trustee Services Bank, Ltd. (Trust Account) 129,119 18.05% Japan Trustee Services Bank, Ltd. (Trust Account) 143,607 20.08% The Nomura Trust and Banking Co., Ltd. (Investment Trsut Account) Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account) Tokyo Tatemono Co., Ltd. 53,652 7.50% 42,043 5.88% 29,300 4.09% The Nomura Trust and Banking Co., Ltd. (Investment Trsut Account) Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account) Tokyo Tatemono Co., Ltd. 44,278 6.19% 39,390 5.50% 29,300 4.09% Northern Trust Company (AVFC), Account Singapore Clients (Standing Proxy: The Hongkong and Shanghai Banking Corporation Ltd., Tokyo Branch) Kawasaki Gakuen 27,258 3.81% 25,000 3.49% Northern Trust Company (AVFC), Account Singapore Clients (Standing Proxy: The Hongkong and Shanghai Banking Corporation Ltd., Tokyo Branch) The Master Trust Bank of Japan, Ltd. (Trust Account) 27,258 3.81% 26,858 3.75% Meiji Yasuda Life Insurance Company 24,000 3.35% Kawasaki Gakuen 25,000 3.49% The Master Trust Bank of Japan, Ltd. (Trust Account) 23,000 3.21% Meiji Yasuda Life Insurance Company 24,000 3.35% The Senshu Ikeda Bank, Ltd. 13,630 1.90% Nomura Bank (Luxembourg) S. A. (Standing Proxy: Sumitomo Mitsui Banking Corporation) Nomura Bank (Luxembourg) S. A. (Standing Proxy: Sumitomo Mitsui Banking Corporation) 17,832 2.49% 13,096 1.83% Deutsche Securities Inc. 9,256 1.29% Total 380,098 53.16% Total 386,779 54.09% (Note) For the percentages of units outstanding, figures after the second decimal place have been rounded off Japan Prime Realty Investment Corporation 30#31JPR Milestones since IPO and Historical Unit Price (JPY) 600,000 550,000 500,000 450,000 400,000 350,000 300,000 250,000 200,000 Add-on Offering Jul. 15, 2003 Offering Price: JPY 237,160 Unit Issued/Sold: 144,400 Listed on Tokyo Stock Exchange MSCI Standard Index Introduced on May 13, 2005 Add-on Offering Feb. 2, 2005 Add-on Offering Feb. 7, 2007 Offering Price: JPY 449,820 Unit Issued/Sold: 95,000 Offering Price: JPY 272,440 Unit Issued/ Sold: 100,000 2007 Add-on Offering Price 2005 Add-on Offering Price 2003 Add-on Offering Price 2002 IPO Offering Price 2012 Add-on Offering Price 2010 Add-on Offering Price Unit Price (closing): JPY 208,800 (Aug. 10, 2012) All-Time High (trading): JPY 564,000 (May 7, 2007) All-Time Low (trading): JPY 130,300 (Oct. 28, 2008) Add-on Offering Feb. 9, 2010 Offering Price: JPY 168,101 Unit Issued/Sold: 90,000 Add-on Offering Jul. 31, 2012 Offering Price: JPY 194,610 Unit Issued/Sold: 110,000 150,000 Jun. 14, 2002 Offering Price: JPY 200,000 Unit Issued /Sold: 182,000 100,000 Jun. 2002 Dec. 2002 Jun. 2003 Dec. 2003 Jun. 2004 Dec. 2004 Jun. 2005 Dec. 2005 Jun. 2006 Dec. 2006 Jun. 2007 Dec. 2007 Jun. 2008 Dec. 2008 Jun. 2009 Dec. 2009 Jun. 2010 Dec. 2010 Jun. 2011 Dec. 2011 Jun. 2012 Fiscal Period 1st Period 2nd Period 3rd Period 4th Period 5th Period 6th Period 7th Period 8th Period 9th Period 10th Period 11th Period 12th Period 13th Period 14th Period 15th Period 16th Period 17th Period 18th Period 19th Period 20th Period 21st Period DPU 2,545 yen 6,912 yen 6,873 yen 5,738 yen 6,081 yen 6,671 yen 6,370 yen 6,411 yen 6,509 yen 6,873 yen 6,996 yen 6,671 yen 7,122 yen 7,092 yen 3,731 yen 6,933 yen 6,770 yen 5,680 yen 5,611 yen 5,876 yen 6,430 yen Japan Prime Realty Investment Corporation 31#32JPR Changes in Variation between Appraisal Value and Book Value at End of Period NAV (as of Jun.2012) 214,588 yen P/NAV:1.00 (Note 1) 11th Period Jun. 2007 12th Period Dec. 2007 13th Period Jun. 2008 14th Period Dec. 2008 15th Period Jun. 2009 16th Period Dec. 2009 17th Period Jun. 2010 18th Period Dec. 2010 19th Period Jun. 2011 20th Period Dec. 2011 21st Period Jun. 2012 Number of properties 48 49 50 52 51 53 55 56 56 57 58 Appraisal value at end of 285,176 299,995 322,984 311,513 300,509 301,979 308,134 315,806 313,274 314,704 347,558 period (JPY mn) Book Value (JPY mn) 240,546 246,002 268,506 273,323 292,607 303,090 322,804 331,804 330,536 332,880 370,163 Variation (unrealized 44,630 53,993 54,478 38,190 7,902 -1,111 -14,670 -15,998 -17,262 -18,176 -22,605 gains: JPY mn) Ratio of unrealized gains 18.60% 21.90% 20.30% 14.00% 2.70% -0.37% -4.54% -4.82% -5.22% -5.46% -6.11% or losses (Note 2) (Note 1) NAV: Net assets per unit after including unrealized gains = (Net assets at end of period + Unrealized gains or losses) / Number of outstanding units issued at end of period P/NAV: Unit Price (Aug. 10, 2012) / NAV (Note 2) Ratio of unrealized gains or loss = Variation / book value x 100 (JPY mn) 60,000 48,000 36,000 53,993 54,478 24,000 44,630 38,190 12,000 0 -12,000 Variation (unrealized gains or losses: JPY mn) 7,902 + + + -1,111 -14,670 -15,998 -17,262 -18,176 -22,605 -24,000 Jun. 2007 Dec. 2007 11th Period 12th Period Jun. 2008 13th Period Dec. 2008 14th Period Jun. 2009 15th Period Dec. 2009 16th Period Jun. 2010 17th Period Dec. 2010 18th Period Jun. 2011 19th Period Dec. 2011 20th Period Jun. 2012 21st Period Japan Prime Realty Investment Corporation 32 32#33Appraisals and Cap Rates at End of Period JPR Area No. Property Name 1 Kanematsu Building End of 20th Period (a) Appraisal Value Cap Rate (Note 1) (Note 2) 10,200 4.7% End of 21st Period (b) Appraisal Value Cap Rate (Note 1) (Note 2) 10,600 End of 20th Period (a) End of 21st Period (b) Change (b-a, JPY mn, %) Appraiser Area No. Property Name 4.6% 2 Kanematsu Building Annex 2,060 5.1% 2,040 5.1% 400 3.9% -20 -1.0% 3 3 38 Olinas Tower 39 3 JPR Ningyo-cho Building 4 Shin-Kojimachi Building 5 JPR Crest Takebashi Building 6 MS Shibaura Building 7 Gotanda First Building 8 Fukuoka Building 2,260 5.1% 3,030 4.8% 3,470 4.7% 13,400 4.9% 2,850 5.0% 3,180 4.5% 2,100 5.1% 3,050 4.8% 3,410 4.7% 12,300 4.9% -160 20 -60 -7.1% 1 0.7% -1.7% -1,100 -8.2% 1 2,770 5.0% -80 -2.8% 3,170 4.5% -10 -0.3% 9 JPR Ichigaya Building 4,760 4.6% 4,770 4.6% 10 0.2% 10 Oval Court Ohsaki Mark West 4,280 4.8% 4,200 4.8% -80 -1.9% -511555 Greater Tokyo 40 Tokyo Tatemono Yokohama Building Tanashi ASTA 41 Cupo-la Main Building 42 JPR Musashikosugi Building 43 44 45 Musashiurawa Shopping Square Kawasaki Dice Bldg. Niigata Ekinan Center Building Appraisal Value Cap Rate (Note 1) (Note 2) 32,300 4.7% 6,990 5.6% 12,300 5.8% 5.9% 2,480 5,280 5.2% 3,920 5.4% 14,664 4.7% 2,090 6.7% Appraisal Value Cap Rate (Note 1) (Note 2) Change (b-a, JPY mn, %) Appraiser 32,300 4.7% 46 Tokyo Tatemono Honmachi Building 3,210 5.7% 47 JPR Hakata Building 11 Shinjuku Square Tower 7,796 4.6% 7,685 4.6% -111 -1.4% 6 48 JPR Naha Building. 12 BYGS Shinjuku Building 13,700 Tokyo CBDS 13 Across Shinagawa Building Annex 819 14 Shinjuku Center Building 13,300 15 Minami Azabu Building 2,730 4.6% 5.5% 4.3% 5.2% 13,400 4.6% -300 -2.2% 813 5.5% 12,500 4.3% -6 -0.7% 55 49 Sompo Japan Sendai Building -800 -6.0% 16 Shinagawa Canal Building 1,790 4.9% 17 Rokubancho Building 3,090 6.1% 2,830 5.4% 1,780 4.9% 3,110 7.2% 100 3.7% 1 18 Ryoshin Harajuku Building 7,250 4.5% 6,830 19 Tokyo Tatemono Kyobashi Building 5,210 4.9% 5,210 4.5% 4.9% -10 -0.6% 1 20 0.6% 1 -420 -5.8% ----8- 1 Other cities 51 50 Sompo Japan Wakayama Building Tenjin 121 Building 52 JPR Dojima Building 53 JPR Hakata-chuo Building 2,890 6.0% 1,460 6.8% 6.3% 3,320 1,670 7.5% 5.8% 2,070 2,180 5.3% 1,640 5.7% 6,910 5.7% 12,500 5.7% 2,500 5.9% 5,270 5.2% 3,960 5.4% 14,560 4.7% 2,090 6.7% 3,210 5.7% 2,770 6.0% 1,460 6.7% 3,300 6.3% 1,660 7.5% 2,080 5.7% 2,050 5.4% 1,650 5.7% -80 200 1882 -1.1% 1.6% 20 -10 0.8% -0.2% 40 1.0% -104 -0.7% -120 -4.2% -20 -0.6% -10 -0.6% 11518872-22- 10 1 0.5% 54 JPR Nagoya Fushimi Building 2,660 6.3% 55 1 56 20 JPR Nihonbashi-horidome Building 5,740 4.9% 5,630 4.9% 21 JPR Sendagaya Building 10,200 4.4% 22 Ginza Sanwa Building 3,430 3.8% 23 Olemachi 1-6 Plan (tentative name) (land with land leasehold) 24 JPR Shibuya Tower Records Building 25 JPR Daikanyama 26 JPR Jingumae 432 12,600 4.5% 1,280 5.1% 3,750 3.5% 10,300 4.4% 3,230 3.8% 36,800 3.6% 12,100 4.4% 1,270 5.1% 3,700 3.5% -110 -1.9% 8 100 1.0% 8 -200 -5.8% JPR Umeda Loft Building Benetton Shinsaibashi Building 57 Housing Design Center Kobe 58 JPR Chayamachi Building 8 Total 13,500 4.8% 4,270 4.8% 6,460 6.2% 4,540 5.0% 314,704 2,770 6.2% 13,600 4.8% 4,340 4.8% 6,430 6.2% 4,550 5.0% 347,558 -130 10 110 100 -6.0% 0.6% 4.1% 4 1 1 0.7% 6 70 1.6% 4 -30 -0.5% 4 10 0.2% 4 -3,946 5 -500 -4.0% 1 -10 -0.8% -50 -1.3% 3 7 Properties whose appraisal values decreased by 5% or more compared with those at the end of the 20th period 27 Shinjuku Sanchome East Building 2,330 4.5% 28 Yurakucho Ekimae Building (Yurakucho Itocia) 2,620 4.3% Arca East 29 30 JPR Chiba Building 5,890 4.7% 1,550 6.1% 31 JPR Yokohama Nihon Odori Building 2,460 5.7% 2,390 4.4% 2,620 4.2% 5,750 4.7% 1,550 6.1% 2,400 5.7% 60 2.6% 1 Properties whose appraisal values increased compared with those at the end of the 20th period 1 -140 -2.4% 1 Appraiser No. -60 -2.4% Greater Tokyo 32 Shinyokohama 2nd Center Building 815 6.1% 33 Kawaguchi Center Building 8,020 34 JPR Ueno East Building. 4,620 6.0% 5.1% 35 Tachikawa Business Center Building 2,880 5.6% 36 Rise Arena Building 5,890 5.6% 37 Yume-ooka Office Tower 5,560 5.6% 840 6.0% 7,700 6.0% 4,570 5.1% 2,890. 5.6% 6,030 5.4% 5,260 5.6% 25 3.1% -320 -4.0% 3 -50 -1.1% 1 10 0.3% 1 140 2.4% 4 -300 -5.4% 553 Japan Real Estate Institute 1 (Note 1) At end of period (JPY mn) (Note 2) Direct Capitalization Method 3 The Tanizawa Sogo Appraisal Co., Ltd. Nippon Tochi-Tatemono Co., Ltd. 2 3 CBRE K.K. 4 Daiwa Real Estate Appraisal Co., Ltd. 5 LCR Co., Ltd. 6 1 Appraisal Firm A Square Ltd. Japan Valuers Co., Ltd. 7 8 (Note 3) The Direct Capitalization Method is a method for determining income using the capitalization method (a method that determines the price of targeted real estate by determining the sum of the current price of the net income that the targeted real estate is expected to produce in the future), which discounts the net income for a set period using the cap rate. (Note 4) "Otemachi 1-6 Plan (tentative name) (land with land leasehold)" acquired in the 20th period is excluded from the Change column. Japan Prime Realty Investment Corporation 33#34JPR NOI Yield by Property for the 21st Fiscal Period Portfolio NOI: 4.9% Office building NOI: 4.8% Retail property NOI: 5.1% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Kanematsu Building 2.7% Entire portfolio: 4.9% Kanematsu Building Annex 2.7% JPR Ningyo-cho Building Shin-Kojimachi Building 2.5% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Arca East 3.1% JPR Crest Takebashi Building MS Shibaura Building Gotanda First Building Fukuoka Building 4.9% 3.5% 5.5% 6.3% 6.3% Greater Tokyo JPR Chiba Building JPR Yokohama Nihon Odori Building Shinyokohama 2nd Center Building Kawaguchi Center Building JPR Ueno East Building Tachikawa Business Center Building ← Entire portfolio: 4.9% 4.7% 5.9% 6.5% 5.5% 6.1% 6.4% Rise Arena Building Yume-ooka Office Tower 5.8% 4.9% Olinas Tower 5.1% JPR Ichigaya Building Oval Court Ohsaki Mark West Shinjuku Square Tower 2.7% BYGS Shinjuku Building 4.0% Across Shinagawa Building Annex 6.5% Shinjuku Center Building 2.8% Minami Azabu Building 2.6% Shinagawa Canal Building 5.2% Rokubancho Building 7.4% JPR Harajuku Building 3.7% Tokyo Tatemono Kyobashi Building JPR Nihonbashi Horidome Building 5.6% 6.2% 5.0% 7.0% Tokyo Tatemono Yokohama Building 6.8% Tanashi ASTA Cupo-la Main Building JPR Musashikosugi Building Musashiurawa Shopping Square Kawasaki Dice Bldg. 10.0% 7.2% 4.6% 5.2% 4.4% 0.0% 2.0% 4.0% Niigata Ekinan Center- Tokyo Tatemono.. 6.0% 8.0% 10.0% 7.8% 3.7% JPR Sendagaya Building 2.7% Ginza Sanwa building 3.3% Otemachi 1-6 Plan 7.8% JPR Shibuya Tower Records Building 5.0% JPR Daikanyama 2.8% JPR Jingumae 432 2.7% Shinjuku Sanchome East Building 3.5% 3.3% Other Cities JPR Hakata Building JPR Naha Building 6.3% 5.4% Sompo Japan Sendai.. Sompo Japan Wakayama.. Tenjin 121 Building JPR Dojima Building 3.7% 6.6% JPR Hakata-chuo Building 5.4% JPR Nagoya Fushimi.. JPR Umeda Loft Building Benetton Shinsaibashi.. Housing Design Center Kobe JPR Chayamachi Building 2.9% 5.4% 3.8% 5.6% 3.6% 7.9% 7.8% Tokyo CBDS Yurakucho Ekimae Building (Yurakucho Itocia) (Note) NOI yield (Operating revenues - Operating expenses + Depreciation) x 365 / 182 Acquisition price. However, for properties acquired during the fiscal period, the annualized NOI yield has been calculated on a daily pro rata basis. The entered properties are those owned as of the end of the 21st fiscal period. Japan Prime Realty Investment Corporation 34#35Contracting Status of Tenants by Property for the 21st Fiscal Period JPR Net Increase / Decrease of Floor Space by Property (Occupied-Vacated) Occupied / Vacated Floor Space by Property (Unit: m²) (Unit: m²) 402 0 Kanematsu Building 402 379 0 88 -1,190 -278 -4 -61 Tokyo CBDs 224 -3,406 JPR Ningyo-cho Building Shin-Kojimachi Building 1 JPR Crest Takebashi Building Shinjuku Square Tower 1 Shinjuku Square Tower 2 BYGS Shinjuku Building Shinjuku Center Building Minami Azabu Building 379 88 1,190 278 4 61 224 3,406 548 488 -629 JPR Harajuku Building JPR Nihonbashi-horidome Building 60 629 260 260 -68 -482 JPR Sendagaya Building Arca East 482 550 JPR Chiba Building 241 723 130 -133 Shinyokohama 2nd Center Building 130 Greater Tokyo Kawaguchi Center Building 378 Yume-ooka Office Tower -1,758 Olinas Tower 1,054 1,186 1,384 1,005 1,758 86 -238 -677 -110 -168 Kawasaki Dice Building JPR Hakata Building 86 276 514 JPR Naha Building 176 853 182 Other cities Sompo Japan Sendai Building Sompo Japan Wakayama Building 293 168 399 224 0 -3,500 -3,000 -2,500 -2,000 -1,500 -1,000 -500 0 500 1,000 1,500 2,000 Tenjin 121 Building 175 308 JPR Dojima Building 308 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 *The above graphs exclude properties at which there were no changes in tenants during the 21st fiscal period, but include changes in tenants from the amendment of lease contracts. Japan Prime Realty Investment Corporation Occupied Vacated (Unit: m²) Net Office (Tokyo CBDs) Office (Greater Tokyo) Office (Other cities) 1,901 6,408 3,290 5,222 -4,508 -1,932 1,340 2,309 -969 Retail 86 0 86 Total 6,617 13,940 -7,323 35#360 3,000 2011Q1 6,000 096' 12,000 9,000 2011Q2 9,960 (JPY/Tsubo) 18,000 3,000 13,470 (JPY/Tsubo) 18,000 15,000 13,210 13,050 JPR Advertised rents 23 Wards of Tokyo 5 Wards of Tokyo (JPY/Tsubo) 18,000 15% Office Vacancy Rates and Average Advertised Rents in Major Investment Areas 15,000 12% 12,000 12,000 12,000 9% 9% 7.8 7.9 7.6 7.4 7.5 7.3 7.2 7.3 7.3 7.2 7.0 7.1 9,000 9,000 9,000 6,000 6% 6,000 6% 6,000 Nagoya City 12,800 12,740 13.4 13.1 12.9 12.5 12.3 11.8 15,000 15,000 12% 2011Q3 9,950 9,870 Source: Japan Office Market Review (CBRE) 9,770 9,720 0% 12,000 9% 0% 3% 3,000 2011Q1 14,150 2011Q2 13,920 2011Q3 13,650 Fukuoka City 2011Q4 13,470 (JPY/Tsubo) 15% 18,000 Vacancy rate (Rents are average advertised rents for relevant periods. Vacancy rates are those as of the end of each fiscal period for relevant periods.) 2012Q1 13,210 2012Q2 13,110 15% (JPY/Tsubo) 18,000 15% 18,000 13.3 13.1 13.1 12.5 12.4 11.9 15,000 12% 9,000 6% 6,000 3% 3,000 9,300 9,380 9,370 9,380 9,350 9,350 0% 0% 3% 3,000 Yokohama City 15% (JPY/Tsubo) 18,000 15,000 11.8 15,000 12% 11.2 11.3 12% 11.0 11.0 11.1 12% 10.8 10.7 10.4 10.5 10.2 10.0 12,000 9% 9% 10,370 10,160 (JPY/Tsubo) Sapporo City 11.0 10.1 12,000 9% 9,000 6% 6,000 3% 3,000 Japan Prime Realty Investment Corporation 7,880 7,890 7,930 2011Q4 7,990 10.0 10.2 2012Q1 7,750 2012Q2 7,730 0% 10,310 10,200 10,160 10,170 9,000 6% 6,000 3% 3,000 0% 0 15% (JPY/Tsubo) 18,000 18.8 15,000 12% 14.3 9.5 9.5 12,000 9% 9,000 6% 6,000 3% 3,000 9,020 9,120 9,040 2011Q4 8,890 2012Q1 8,940 12.5 ,050 9,050 Sendai City 8,860 15% 13.2 12.8 12.1 12% 2012Q2 9,070 36 0% 3% 6% 9% 3,730 18% 21% 3,750 8,660 0% Osaka City 3% 6% 15%#37JPR Environmental Initiatives Environmental initiatives are being proactively taken, such as acquiring DBJ Green Building Certification JPR has been continuously addressing environmental issues as part of the JPR Brand Strategy. With initiatives for "Eco-Friendly Buildings" as the basic concept, JPR thoroughly implements energy management based on assessment and analysis of efficient energy use for each property, among other measures, and strives to effectively cut energy costs through systematic introduction of energy-saving devices and by switching over to contracts with electricity suppliers. Also, JPR is proactively developing greenery that is in harmony with the urban environment as well as advancing ecology through the promotion of waste recycling and such. DBJ Green Building Gold DBJ Green Building Acquisition of DBJ Green Building Certification Acquisition of the First "Gold" among J-REITS~ ■Development Bank of Japan Inc.'s DBJ Green Building Certification is a system designed to select superior real estate that meets the demand of the times, with a purpose of promoting properties that are environmentally friendly, equipped to mitigate disaster and prevent crime, as well as meet the various social requirements surrounding real estate from stakeholders ("Green Buildings"). Four levels of certification, namely Platinum, Gold, Silver or Bronze are awarded depending on a building's green level. ■In August 2011 JPR acquired Gold certification, the first achievement among J-REITs, for Olinas Tower, and Silver certification for JPR Sendagaya Building Olinas Tower 4-1-3 Taihei-cho, Sumida-ku, Tokyo Silver JPR Sendagaya Building 4-23-5 Sendagaya, Shibuya-ku, Tokyo Acquisition of GRESB Ranking by Asset Manager Tokyo Realty Investment Management, Inc. ■GRESB, which stands for Global Real Estate Sustainability Benchmark, is a benchmark system for analyzing and evaluating sustainability of real estate companies, REITs and real estate private placement funds, in terms of environmental friendliness and social nature. It is based on surveys conducted by a group of the same name composed of more than 20 organizations worldwide such as European pension asset managers. ■In the 2011 survey (Note) JPR ranked third among listed companies in Asia. JPR believes that it was evaluated at such a high level in this survey as a result of the consistency of the JPR system among all parties involved in the operation of buildings, from property management companies starting with asset managers, to building maintenance companies, under a clear environmental policy, combined with JPR's steady efforts to reduce energy consumption while gaining the cooperation of tenants. (Note) The number of responding companies in the 2011 survey was 340 worldwide (69 listed companies and 271 private placement funds). Of these, 49 were from Asia (12 listed companies and 37 private placement funds) and 20 from Japan (5 listed companies (including J-REITs) and 15 private placement funds). JPR Brand Strategy The "JPR Brand Strategy" is positioned as one of our internal strategies for improving tenant satisfaction, and increase the earnings ratios and asset values of our properties. This brand strategy is based on the brand concept of "A/3S," which offers the ultimate in "Amenities" and optimal space by focusing on "Service," "Safety" and "Save Energy (environment)." Our office building brand strategy is built around the active promotion of these objectives. Amenity Creating a comfortable space for workers Service Safety Providing safety and security Providing attentive Save Energy Operating facilities in an environmentally- conscious manner services Leveraging the Know-How of the Sponsors of the Asset Manager (TRIM) ■TRIM's features are that it entrusts operations related to environmental laws and regulations to its sponsor, Tokyo Tatemono Co, Ltd., and that it promptly established a system to be provided with know-how and given advice. Based on the technological know-how of Taisei Corporation, another sponsor, JPR places dedicated staff in the portfolio's construction planning section and implements environmental measures. Japan Prime Realty Investment Corporation 37 34#38JPR Governance Initiatives JPR has consistently set reinforcement of "governance" as one of the most important themes in the sound and efficient operation of a corporation and has consequently been establishing such a structure from the listing criteria stage Independent Officer Composition ■At JPR, neither the executive officer nor the supervising officers serve concurrently as officers of the Asset Manager (TRIM). The independence of the JPR officers is firmly secured by appointing human resources with high expertise, such as attorneys and accountants, from the outside. ■This arrangement should reinforce the officers' function to check and control the Asset Manager, ensuring sound and efficient operations of JPR. JPR Officers Executive Officer Supervising Officer Supervising Officer Hirohito Kaneko Sosuke Yasuda Masato Denawa (attorney) (certified public accountant) (attorney) JPR Japan Prime Realty Investment Corporation Entrust the asset management Mutual Checks and Controls between the Investment Corporation and Asset Manager ■For important transactions and other arrangements with sponsor companies, the Compliance Committee screens and verifies the validity and rationality of the deals, in addition to decisions made by the Board of Directors, the Investment Policy Committee and other institutions on ordinary transaction matters. ■The Compliance Committee, in which an outside attorney participates as a special member, employs unanimous vote, not majority vote, for approvals as a rule. ■ Executing transaction matters approved by the Compliance Committee requires approval in advance by JPR's Board of Directors, which comprises directors independent of TRIM. ■For important transaction matters that might cause problematic conflicts of interest with the sponsors, monitoring through internal and external checks and controls is conducted, involving screening/verification and approval in advance, in order to secure sound and efficient operations. This constitutes a characteristic feature of JPR. TRIM Compliance Committee Members TRIM Tokyo Realty Investment Management, Inc. 40% 20% 20% 10% 10% #4 安田不動産 SOMPO JAPAN MEIJI YASUDA TOKYO TATEMONO TAISEI President and CEO Corporate Planning / Administration Division Investment Management Division General Manager Financial Division General Manager General Manager Compliance Office General Manager Special member (outside attorney) The Compliance Committee is held by inviting an outside attorney as special member. As a rule, the Committee employs unanimous voting system rather than majority voting system. Support and Monitoring of Management by the Asset Manager's 5 Sponsors ■TRIM is provided support in terms of properties, human resources and information by respective sponsor companies based on their strengths, while its shareholding composition is diversified among the sponsors so as to secure its independence as an asset manager. ■TRIM President and CEO has assumed office after having his employment transferred to TRIM, instead of being seconded from the sponsor company he belonged to. ■The position of Compliance Office general manager in charge of internal control is assumed by a career employee. *Figures represent the ratio of shares owned by the respective sponsor companies against the number of shares outstanding of the Asset Manager. The asset management of Japan Prime Realty Investment Corporation (JPR) is conducted by entrusting such services to an asset manager (Tokyo Realty Investment Management, Inc. (TRIM)). TRIM maintains close relationships with its sponsors, which are 5 companies of the Fuyo Group. Such relationships allow to build on the strengths of respective sponsor companies. On the other hand, if the sponsor companies become too influential, priority might end up being placed on the interest of the sponsor companies rather than the interest of the investment corporation, causing disadvantages to the investment corporation and unitholders. For sound and efficient operations of the investment corporation, it is particularly important to prevent disadvantages to unitholders To that end, JPR thinks it is vital and has worked to build a compliance structure so that sound and efficient operations can be promised to unitholders. With a high proportion of career employees, the personnel structure of TRIM also serves to help secure independence as an asset manager. Japan Prime Realty Investment Corporation 38#39JPR Disclaimer Regarding Forward-Looking Statements This material contains information that constitutes forward-looking statements. Such forward-looking statements are made by Japan Prime Realty Investment Corporation and Tokyo Realty Investment Management, Inc. based on information currently available, and are therefore not guarantees of future performance. Actual results may differ materially from those in the forward-looking statements as a result of various factors including known or unknown risks and uncertainties. This material is solely for the purpose of providing information and it is not intended for the purpose of offering or soliciting investment, or as a recommendation to purchase or sell any specific product. Please refer any inquiries for possible purchases of units or other products of Japan Prime Realty Investment Corporation to a securities dealer. Although Japan Prime Realty Investment Corporation takes all possible measures to ensure the accuracy of the content provided in this material (including references to legislation and taxation), it makes no guarantee as to the accuracy of the content. Furthermore, the content may be subject to change without prior notification. Please further note that this English material is a provisional translation of the original Japanese material. Japan Prime Realty Investment Corporation