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TOKYO-Japan Real Estate Investment Corp. and Nippon Building Fund Inc. each saw their issuer and long-term debt ratings upgraded by Moody’s Investor Service this week. The rating outlook for both entities is “stable.”For Japan Real Estate Investment Corp., Moody’s upgraded the ratings to A1 from A2, reflecting the company’s diversification in accordance with its growth plan, which aims for a portfolio value of JPY 300 billion by March 2006. Additionally, Moody’s says the upgrade reflects JRE’s ability to “control leverage,” remain financially flexible and maintain its leading position in the Japanease REIT market. JRE is a listed J-REIT that focuses on investments in and management of high-quality office buildings. JRE’s portfolio now consists of 40 properties and its total assets have grown to about JPY 245 billion. Moody’s says the growth in the portfolio reduces the ratio of the company’s top four assets to its total assets, and the corresponding increase in tenants further stabilizes the company’s cash flow. “JRE has demonstrated its ability to control leverage through raising equity via multiple public offerings, which has helped to improve the predictability of the financial risk,” states the report. “Additionally, it has raised its number of fund-raising channels – including issuances of straight bonds and a bank commitment line for acquisition and refinancing – and has thus proved its financial flexibility.” Moody’s also upgraded its issuer rating and senior unsecured long-term debt rating for another J-REIT, Nippon Building Fund Inc. The company’s rating was pushed to A2 from A3 on the strength of its competitive advantages achieved through the expansion of its portfolio.Nippon Building Fund is a listed J-REIT focused on investments in and management of high-quality office buildings in major cities throughout Japan. The company’s goal is to increase its portfolio value to JPY 500 billion by March 2006. As of November 2004, it had grown its portfolio to approximately JPY 410 billion, with 45 properties (including two properties under construction). Its portfolio continues to be the largest of the 14 listed J-REITs, and Moody’s considers NBF as one of the leaders in the J-REIT market. Moody’s says NBF has effectively collaborated with Mitsui Fudosan Co. Ltd. to acquire properties, “further diversifying its portfolio without deteriorating its quality.” With regard to its internal growth strategy, Moody’s says NBF has improved its cash flow stability through ensuring tenant retention with several methods including long-term lease agreements, drawing up a mid-term capital expenditure plans and streamlining its in-house investment rules.

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