The real estate development business utilizes a variety of development and financing schemes to maximize asset efficiency. It includes the sales and leasing of property, related fee-based businesses, as well as property development for which sophisticated technology is the main selling point. The development expertise in real estate operations also helps Kajima to win construction contracts.

Shirokane Tower

Toranomon 4-chome Project

Masterview Residence

The appraised value of land in Tokyo as of January 2006 rose for the first time in 15 years, with prime areas rising at an especially rapid rate as the real estate industry overall enjoyed a boom period.

The business environment for condominiums and office buildings continues to recover. The market for office buildings has been strong over the last few years, supported by robust demand in central Tokyo, but during the financial year ended March 31, 2006 demand began picking up in such other major metropolitan areas as Osaka, Nagoya, Fukuoka and Sendai. Occupancy rates have reached high levels. In the condominium market, the large supply of new units in the Tokyo metropolitan area continued, with more than 80,000 units a year added for the seventh consecutive year. This strong market has been supported by strong demand from secondgeneration baby boomers starting to have families and retiring first-generation baby boomers looking for condominiums, and market conditions were favorable overall.

Kajima's real estate development business showed strong performance, despite fierce competition. Results were well above initial targets, with contract awards totaling ¥153 billion.

The office leasing business maintained an occupancy rate greater than 95% for the 58 buildings it manages, including full occupancy at the Akihabara UDX Building completed in March 2006.

In the investment properties business, Kajima decides to either hold or sell a certain portion of a high-earnings portfolio, carefully monitoring and weighing the prevailing market conditions. Our major transactions during the financial year ended March 31, 2006 were a sale of the Italian Cultural Institute and an agreement to sell the Musashi Kosugi Twin Tower condominium en bloc to an investor upon its completion of construction scheduled in 2008.

In the condominium business, Kajima listed some 1,400 units (of which nearly all were sold), mainly upscale condominiums in such prime residential areas as Toranomon (Minato-ku), Mejiro (Toshimaku), and Shirokane (Minato-ku). The Company sold nearly 100% of its units for sale, drawing praise for its funding schemes, technological capabilities and product planning.

The real estate development business is generating strong earnings, and Kajima will continue to work to develop a distinctive business, employing sophisticated development schemes focusing on urban centers and transportation hubs, and utilizing the technological and information-gathering capabilities of the construction division. We will also expand revenue opportunities by making full use of off-balance-sheet financing and other measures, enhancing investment efficiency, and strengthening the Company's financial position.

We will continue to focus on acquiring select tenants for large-scale office developments currently in progress, mainly Tokyo Station Yaesu and the Toranomon 4-chome Project. In the condominium market, Kajima will focus on sales efforts in Ikejiri and Koraku. We will also work to develop and expand our fee-based businesses, including asset and property management, brokerage and consulting services.