Kajima's real estate development business centers on office buildings and residential housing, but also encompasses a wide range of fields that include shopping malls, supermarkets, hotels, restaurants, and distribution centers. In addition, we are involved in fee-based businesses that utilize our development expertise, focusing on subdivision and leasing businesses employing a variety of development and financing methods. One of the main features of Kajima's product development is cooperation between the design and construction divisions from the early stages of a project for full utilization of Kajima's technologies. At the same time, feedback from the end-user is employed to further enhance the technology of the construction division.

Chiba Marine Court, Chiba Prefecture

Tokyo Station Yaesu Area Development Project

Masterview Residence condominium, Setagaya Ward, Tokyo

The national average for appraised value of land as of January 2007 rose for the first time in 16 years, as the real estate industry overall enjoyed a boom period. The major factor behind this rise was a surge in land prices in the three major cities of Tokyo, Osaka and Nagoya.

In the Tokyo metropolitan condominium market, supply fell to below 80,000 units for the first time in eight years. However, this was due mainly to scaling back by developers in anticipation of future price increases, and sales prices are indeed on a rising trend.

In the downtown office market, improvement is also seen in long-sluggish occupancy rates for small and mid-sized buildings. There is a strong sense of scarcity in the building market in general, and occupancy rates continue to improve while lease rates increase.

Kajima's real estate development business recorded strong performance, significantly exceeding its initial targets with contract awards of ¥90 billion and revenues of ¥140 billion. The office leasing business maintained an overall occupancy rate of greater than 95%. A new sublease business will be added to Kajima's operations from the financial year ending March 31, 2008 with the completion of Toranomon Towers Office, from which we expect further stable earnings. In the condominium business, Kajima's brand reputation, technological capabilities and product planning have helped us to achieve a nearly 100% sales ratio for everything from such high-end condominiums as Toranomon Towers Residence and Mejiro Place to family-oriented condominiums such as Chiba Marine Court. Kajima also actively pursued the PFI business, completing construction on the new Akasaka apartment for the House of Representatives in Tokyo, the Japanese government's first major PFI project.

Kajima will conduct product planning featuring its technological skill and enhance its brand power to further expand the strongly growing real estate development business. We will pursue a community strategy focusing on areas that allow Kajima to utilize its general abilities such as downtown locations and transportation hubs. At the same time, we will work to hedge risks, enhance investment efficiency through use of non-recourse loans and off-balance-sheet financing, and further expand earnings potential.

We will continue with development of such large-scale projects as the Tokyo Station Yaesu Area Development Project along with sales efforts for such high-end condominiums as the Masterview Residence condominium in Ikejiri, Setagaya Ward, Tokyo. We will further expand our asset and property management operations, and other fee-based businesses.