Japan Hotel REIT Investment : Financial Results Briefing for the Fiscal Year Ended December 31, 2019 (January 1, 2019-December 31, 2019)

February 20, 2020 at 03:43 am EST

Japan Hotel REIT Investment Corporation (TSE: 8985)

Financial Results

FY12/2019 (20th Period) February 20, 2020

Japan Hotel REIT Investment Corporation Japan Hotel REIT Advisors Co., Ltd.

http://www.jhrth.co.jp/en/

Table of Contents

Settlement of Accounts for FY12/2019 - Highlights 1. FY12/2019 Highlights

Summary of Settlement of Accounts and Revenue Forecast for the Full Fiscal Year
1. Results for FY12/2019
2. Revenue Forecast for FY12/2020
3. Balance Sheet
External Growth
1. Successive External Growth
2. Two New Properties Acquired in 2019

Portfolio
1. Portfolio
2. Portfolio Diversification

Internal Growth
1. Rent Structures
2. Performance of the 20 Hotels with Variable Rent, etc.
3. RevPAR Variance to Previous Year by Region of the 20 Hotels with Variable Rent, etc. for 2020
4. Active Asset Management
5. Capital Expenditure and Depreciation

Financial Conditions 1. Financial Conditions

Market Environment 1. Market Environment

	Appendix 1 JHR's Characteristics and Strategy
3	1.	JHR's Investment Targets	34
	2.	Simultaneous Pursuit of Stability and Upside Potential	35
	3.	External Growth Strategy	36
6	4.	Internal Growth Strategy	37
5.	Financial Strategy	38
7
6.	Sustainability Initiatives	39
8
7.	Benefits Program for Unitholders	41

10 Appendix 2 Information on Properties

11	1.	Property List	43
2.	Summary of Lease Contracts	45

13	3.	Major CAPEX Ⅲ by Hotels	47
4.	The Five HMJ Hotels - Highlights	48
14
5.	Portfolio Map	49

16	Appendix 3 Investors Composition and Investment Unit Price
1.	Major Unitholders and Classification of Unitholders	51
17
2.	Changes in Investment Unit Price and Market Capitalization	52

18 Appendix 4 Summary of the Asset Management Company

19	1.	Summary of the Asset Management Company	54
22	2.	Features and Governance of the Asset Management Company	55

Ⅰ. Settlement of Accounts for FY12/2019 - Highlights

1. FY12/2019 Highlights

1. External Growth(*1)
Strategic property replacement

End of FY12/2016	41 properties/JPY286.8Bn
	◆Public Offering in June			Acquisition in 2017
2017	Acquired			Total Acquisition	Total Funds
3 properties/				Price	Raised through
			Public Offerings

	JPY32.6Bn			JPY	Bn	JPY	Bn
				32.6	18.6

End of FY12/2017	44 properties/JPY319.4Bn
	◆Sale of Properties in August	Sale in 2018
2018	Sold 3 properties/		Total Book Value	Total Sales Price of
of Sold Properties	Sold Properties
-JPY10.1Bn(*1)
	JPY10.1Bn	JPY12.1Bn
	Total gain on sale:
	JPY1.9Bn

End of FY12/2018	41 properties/JPY309.3Bn
	◆Public Offering in January	Acquisition in 2019
	Acquired			Total Acquisition	Total Funds
			Raised through
	2 properties/				Price	Public Offerings

			JPY65.1Bn	JPY33.3Bn
2019	JPY65.1Bn
			Hotel Oriental Express
Hilton Tokyo Odaiba		Osaka Shinsaibashi

End of FY12/2019 43 properties/JPY374.5Bn

2. Internal Growth(*2,3)

3. Strengthening of Financial Base

▶ Improvement in hotel performance and

▶ Conservative financial management

increase of rent through Active Asset

(as of the end of December 2019)

Management

LTV

Costs for

Interest-bearingAverage Life of

 Track Record

Debt

40.6%

1.0%

5.2 years

The 21 Hotels with Variable Rent, etc.

 Status of Credit Rating

2018

2019

Variance

JCR

R&I

RevPAR (JPY)

13,833

13,444

(2.8%)

A+ (stable)

A (positive)

First Half

12,817

12,765

(0.4%)

※ The rating outlook of R&I changed to positive

from stable in October 2019

Second Half

14,831

14,113

(4.8%)

 Reinforcement of Lender Formation

GOP (JPY MM)

17,911

17,270

(3.6%)

• Increased borrowings from Development Bank of

Japan Inc.

⇒ 3.4% as of the end of December 2019

 Forecast for FY12/2020

(Increased by 0.6% from the end of December

2018)

The 20 Hotels with Variable Rent, etc.

 Diversified Funding Methods by Issuance of

2019

2020

Variance

Investment Corporation Bonds

(forecast)

• Issuance of investment corporation bonds for

RevPAR (JPY)

13,272

14,061

+5.9%

individual investors (the fourth time)

(June 2019): Total JPY8.0Bn

First Half

12,491

12,506

+0.1%

• Issuance of investment corporation bonds (Green

Bonds) (the first time as J-REITs specializing in

hotels) (July 2019): Total JPY2.0Bn

Second Half

14,041

15,600

+11.1%

⇒ The proceeds were allocated to the funds for

repayment of loans procured for renovation of

GOP (JPY MM)

15,722

16,345

+4.0%

Oriental Hotel Fukuoka Hakata Station and will

be allocated for the funds for construction for

renovation, etc. of other hotels

(*1) Stating total amount of the acquisition price.

(*2) The 21 Hotels with Variable Rent, etc. are the 11 HMJ Hotels plus ibis Tokyo Shinjuku, ibis Styles Kyoto Station, ibis Styles Sapporo,

Mercure Sapporo, Mercure Okinawa Naha, Mercure Yokosuka, the b ikebukuro, the b hachioji, the b hakata and the b suidobashi.

The 11 HMJ Hotels are Kobe Meriken Park Oriental Hotel, Oriental Hotel tokyo bay, Namba Oriental Hotel, Hotel Nikko Alivila, Oriental Hotel Hiroshima, Okinawa Marriott Resort & Spa, ACTIVE-INTER CITY HIROSHIMA (Sheraton Grand Hiroshima Hotel), Holiday Inn Osaka Namba, Hilton Tokyo Narita Airport, International Garden Hotel Narita and Hotel Nikko Nara. The same shall apply hereinafter.

(*3) The 20 Hotels with Variable Rent, etc. are 20 hotels excluding Namba Oriental Hotel, which is planning to implement large-scale renovation from November 2020 from The 21 Hotels with Variable Rent, etc. The same shall apply hereinafter.

1. FY12/2019 Highlights (cont.)

Dividends per Unit Growth

(JPY)

4,000

3,500

3,000

2,500

2,000

1,500

The amount of sales effect(*)

3,683

3,890

(5.1%)

3,690

3,750

3,420

+5.6%

204

2,975

+7.7%

+0.1%

+1.6%

+15.0%

3,686

2,877

(excluding the

amount of sales effect)

(excluding the

amount of sales effect)

FY12/2015

FY12/2016

FY12/2017

FY12/2018

FY12/2019

FY12/2020

(16th Period)

(17th Period)

(18th Period)

(19th Period)

(20th Period)

(21st Period (forecast))

					NAV per Unit Growth
(JPY)					77,129	79,407	83,286
80,000			75,209

		+2.6%		+3.0%	+4.9%
70,000		63,385

	+18.7%
60,000

50,000

40,000

30,000

FY12/2015	FY12/2016	FY12/2017	FY12/2018	FY12/2019
(16th Period)	(17th Period)	(18th Period)	(19th Period)	(20th Period)

(*) The amount of sales effect represents dividends per unit which increased due to sales of properties.

Ⅱ. Summary of Settlement of Accounts and

Revenue Forecast for the Full Fiscal Year

1. Results for FY12/2019

(Unit: JPY MM)

FY12/2018	FY12/2019		Variance				Breakdown of Variance
(19th Period)	(20th Period)
					Three	Oriental Hotel
Actual	Actual(*1)				Property	Existing
	(B)-(A)	%	Properties	Fukuoka
(A)	(B)		Acquired in	Sold in	Hakata	Properties	(*6)
			2019	(*3)
						2018(*4)	Station(*5)

Major Causes of Variance of

Existing Properties

Fixed rent, etc.

Proper ties	No. of Properties		41	43
Acquisition Price		309,370	374,508

	Operating Revenue		28,253		28,278
		Real Estate Operating		26,318		28,278
		Revenue
			Fixed Rent, etc.	56.2%	14,788	60.5%	17,101
			Variable Rent	43.8%	11,529	39.5%	11,176
		Gain on Sale of		1,934		-
		Properties, etc.
Loss	NOI(*2)		22,104		24,087
		NOI Yield		7.1%		6.4%
	Depreciation		4,091		4,557
and
	Asset Retirement		2		2
Profit		Obligations Expenses
	Loss on Retirement of		35		246
	Noncurrent Assets
	NOI after		17,974		19,281
	Depreciation(*2)
	NOI Yield after Depreciation		5.8%		5.1%
		Other Operating		1,916		2,132
		Expenses
	Operating Income		17,993		17,148
	Ordinary Income		16,211		15,291
	Net Income		16,210		15,290

	Use of Negative Goodwill		563	1,176
Dividend	Reserve for Special		(1,174)		-
Advanced Depreciation
Total Dividends		15,602	16,466
Number of Units Issued	4,010,847	4,462,347
	(Unit)
	Dividend per Unit (JPY)	3,890	3,690
	[3,686](*7)

2		2	-		-
65,138	21.1%	65,138	-		-

24	0.1%	2,374	(2,214)	150	(286)
1,959	7.4%	2,374	(279)	150	(286)

2,312	15.6%	2,367	(199)	0	144
(353)	(3.1%)	7	(79)	150	(430)
(1,934)	-	-	(1,934)	0	-

1,983	9.0%	2,368	(251)	151	(284)
(0.7%)
465		197	(34)	130	171
0		-	-	-	0
210		-	-	205	5
1,306	7.3%	2,170	(216)	(185)	(461)
(0.7%)
216	-

(4.7%)

(5.7%)

(5.7%)

108.8%
1,174 -

5.5%

451,500 11.3%

(200) (5.1%)

• Increase in fixed-rent	JPY124MM
• Increase in rent from office and
commercial tenants, etc.	JPY27MM
• Utilities income, etc.	(JPY7MM)

	Total	JPY144MM
Variable rent
• Variable rent from the 21 Hotels
with Variable Rent, etc.	(JPY569MM)
• Revenue sharing, etc.	JPY138MM

	Total	(JPY430MM)

Use of Negative Goodwill(*8)

＜FY12/2018＞
50-year amortization amount	JPY262MM
Correspondence to large-scale renovation work
		JPY265MM
Loss on retirement of noncurrent assets	JPY35MM
	Total	JPY563MM
＜FY12/2019＞
50-year amortization amount	JPY262MM
Correspondence to dilution, etc.	JPY310MM
Correspondence to large-scale renovation work
		JPY357MM
Loss on retirement of noncurrent assets	JPY246MM

Total JPY1,176MM

(*1)	For detail, please refer to Financial Report for the Fiscal Year Ended December 31, 2019 (January 1, 2019-December 31, 2019) dated February 20, 2020.
(*2)	Each figure is calculated by the following formula:
	NOI (Net Operating Income) = Real estate operating revenue − Real estate operating costs + Depreciation + Loss on retirement of noncurrent assets + Asset retirement obligations expenses
	NOI after depreciation = Real estate operating revenue − Real estate operating costs
(*3)	Representing Hilton Tokyo Odaiba and Hotel Oriental Express Osaka Shinsaibashi, which JHR acquired in FY12/2019 (20th Period). The same shall apply hereinafter.
(*4)	Representing R&B Hotel Higashi-nihonbashi, the b akasaka-mitsuke and the b Ochanomizu, which JHR sold in FY12/2018 (19th Period).
(*5)	Large-scale renovation works causing the suspension of hotel operation were implemented at Oriental Hotel Fukuoka Hakata Station from October 1, 2018 to April 8, 2019. Stating the amount of impact of the renovation. The same shall apply hereinafter.
(*6)	"The existing properties" above refers to 40 properties which excludes properties acquired in 2019 and Oriental Hotel Fukuoka Hakata Station from 43 properties owned by JHR as of February 20, 2020. The same shall apply hereinafter.
(*7)	[ ] represents the amount of dividend per unit excluding the amount of sales effect (reference).
(*8)	Please refer to P.26 for the use of negative goodwill (reserve for temporary difference adjustment).
	6

2. Revenue Forecast for FY12/2020

(Unit: JPY MM)

FY12/2019	FY12/2020			Comparison with Previous Period
(20th Period)	(21st Period)

Actual	Forecast(*1)		(B)-(A)		Property	Oriental Hotel	Existing
(A)	(B)		Variance	Acquired in	Fukuoka
		Properties
					2019	Hakata Station

Major Causes of Variance of

Existing Properties

Fixed rent
• Fixed-rent increase	JPY29MM

Proper ties	No. of Properties	43	43
Acquisition Price	374,508	374,508

	Operating Revenue	28,278		29,971
		Real Estate Operating	28,278		29,971
		Revenue
			Fixed Rent, etc.	60.5% 17,101	60.0%	17,987
			Variable Rent	39.5% 11,176	40.0%	11,984
	NOI	24,087		25,273
Loss			NOI Yield	6.4%	6.7%
	Depreciation	4,557		4,859
and		Asset Retirement	2		2
	Obligations Expenses
Profit		Loss on Retirement of	246		18
	Noncurrent Assets
NOI after Depreciation	19,281		20,392

	NOI Yield after Depreciation	5.1%	5.4%
		Other Operating	2,132		2,264
		Expenses
	Operating Income	17,148		18,128
	Ordinary Income	15,291		16,239
	Net Income	15,290	16,238

Dividend	Use of Negative Goodwill	1,176		496
Total Dividends	16,466		16,733
Number of Units Issued	4,462,347	4,462,347
(Unit)
	Dividend per Unit (JPY)	3,690	3,750

1,692	6.0%	950	480	261
1,692	6.0%	950	480	261

885	5.2%	842	25	18
807	7.2%	108	455	243
1,185	4.9%	670	471	43
0.3%
302		139	55	108
0		-	(0)	(0)
(228)		-	(205)	(23)

1,111	5.8%	531	621	(41)
0.3%

5.7%

6.2%

6.2%

(679)	(57.8%)
267	1.6%
-	-
60	1.6%

• Utilities income, etc.	(JPY11MM)

	Total	JPY18MM
Variable rent
• The 20 Hotels with Variable Rent, etc.	JPY589MM

Variable rent of Namba Oriental Hotel
(planned to implement the large-scale renovation) (JPY320MM)

• Revenue sharing, etc.		(JPY25MM)

	Total	JPY243MM

Use of Negative Goodwill(*2)

＜FY12/2019＞
50-year negative goodwill amortization	JPY262MM
Adjustment for dilution	JPY310MM
Correspondence to large-scale renovation work	JPY357MM
Loss on retirement of noncurrent assets	JPY246MM

	Total JPY1,176MM
＜FY12/2020 (plan)＞
50-year negative goodwill amortization	JPY262MM
Correspondence to large-scale renovation work	JPY216MM
Loss on retirement of noncurrent assets	JPY18MM

	Total	JPY496MM

(*1) For detail, please refer to Financial Report for the Fiscal Year Ended December 31, 2019 (January 1, 2019-December 31, 2019) dated February 20, 2020.

(*2) Please refer to P.26 for the use of negative goodwill (reserve for temporary difference adjustment).

3. Balance Sheet

													(Unit: JPY MM)
				FY12/2018	FY12/2019						FY12/2018	FY12/2019
				End of	End of						End of	End of
				Fiscal Year	Fiscal Year	Variance					Fiscal Year	Fiscal Year	Variance
			(as of) December 31, December 31,					(as of)	December 31,	December 31,

				2018	2019						2018	2019
ASSETS					LIABILITIES
	Current Assets	40,266	37,762	(2,503)			Current Liabilities	17,020	16,627	(393)
		Cash and Deposits(*1)	37,184	34,343	(2,840)				Operating Accounts Payable	1,941	1,485	(455)
		Operating Accounts	2,474	2,779	305				Current Portion of Investment Corporate	2,000	-	(2,000)
		Receivables				Bonds Payable
		Others	607	638	31				Current Portion of Long-term Loans Payable	11,117	12,782	1,665
	Noncurrent Assets	309,993	377,608	67,614				Accounts Payable	1,028	1,313	285
		Net Property and	272,889	340,522	67,633				Advances Received	882	909	27
		Equipment				Others	52	137	84
			Buildings in Trust(*2)	107,874	118,128	10,254
					Long-term Liabilities	130,163	162,572	32,408
			Land in Trust	163,151	219,901	56,749
						Investment Corporation Bonds	31,600	41,600	10,000
			Others(*3)	1,864	2,493	629
						Long-term Loans Payable	91,954	114,372	22,418
		Intangible Assets	33,915	33,804	(110)
					Tenant Leasehold and Security Deposits	5,634	5,722	87
		Other Assets	3,188	3,280	92
					Derivative Liabilities	514	416	(97)
			Leasehold and	162	162	-
						Others	460	461	1
			Security Deposits
			Others	3,025	3,117	92			TOTAL LIABILITIES	147,184	179,200	32,015
	Deferred Assets	296	351	55		NET ASSETS
										Unitholders' Capital	153,516	186,894	33,378
										Capital Surplus	21,746	21,746	-
										Reserve for Temporary Difference	12,357	11,794	(563)
										Adjustment
										Reserve for Special Account for Tax Purpose	-	1,174	1,174
										Reduction Entry
										Unappropriated Retained Earnings	16,213	15,290	(923)
										Others	(461)	(377)	84
									TOTAL NET ASSETS	203,372	236,522	33,150
TOTAL ASSETS	350,556	415,722	65,165
	TOTAL LIABILITIES AND NET ASSETS	350,556	415,722	65,165

(*1) Cash and deposits in trust is included.

(*2) The sum of buildings in trust, structures in trust, machinery and equipment in trust, tools, furniture and fixtures in trust, and construction in progress in trust.

(*3) The sum of machinery and equipment, tools, furniture and fixtures.

Ⅲ. External Growth

1. Successive External Growth

Improvement of the quality of JHR's portfolio and successive external growth through strategic asset replacement

Growth in Asset Size(*1), etc. (JPY MM)										+21.1%
									+11.4%	(3.2%)
								+27.1%


							+30.2%
	+7.0%	+21.4%	+9.1%												374,508
						319,474			309,370
							286,801
								225,723
					158,902	173,429
	122,285	130,883



	April 2012	FY12/2012 FY12/2013 FY12/2014 FY12/2015 FY12/2016 FY12/2017 FY12/2018		FY12/2019
	(merger)	(13th Period)	(14th Period)	(15th Period)	(16th Period)	(17th Period)	(18th Period)	(19th Period)		(20th Period)


NOI Yield(*2)	-		6.2%			6.2%	6.3%	6.6%	6.6%			6.7%	7.1%		6.4%
NOI Yield after	-		4.5%			4.8%	5.0%	5.3%	5.4%			5.5%	5.8%		5.1%
Depreciation(*2)

NAV per Unit	-	JPY32,321		JPY36,074	JPY46,272	JPY63,385	JPY75,209	JPY77,129	JPY79,407		JPY83,286


No. of Properties	28		28			28	30	36	41			44	41		43
No. of Acquisition			2			2	3	9	5			3				2
Acquisition Price		JPY10.8Bn		JPY32.6Bn	JPY15.7Bn	JPY57.0Bn	JPY61.0Bn	JPY32.6Bn					JPY65.1Bn
No. of Dispositions			2			2	1	3						3
Sale Price		JPY0.8Bn		JPY2.6Bn	JPY0.7Bn	JPY4.8Bn						JPY12.1Bn

Aim for Successive Growth

(*1) Asset size is based on the aggregate acquisition price of the properties at the end of each fiscal period. The same shall apply hereinafter.

(*2) NOI yield for FY12/2012 is hypothetical annualized based on actual NOI after merger.

2. Two New Properties Acquired in 2019

An acquisition of largest(*1) asset in our portfolio and trophy asset for JHR
Scarce large-scalefull-service hotel in the middle of Tokyo

Located in "Osaka Minami" area, one of Kansai's foremost tourist destinations
Can accommodate two or more person in all guest rooms

Hilton Tokyo Odaiba

Hotel Oriental Express Osaka Shinsaibashi

Changes in Major Indicators(*2)					Changes in Major Indicators(*3)
(JPY)	ADR (left axis)	RevPAR (left axis)	Occupancy Rates (right axis)		(JPY)	ADR (left axis)	RevPAR (left axis)	Occupancy Rates (right axis)
						40,860	100%								100%
40,000			34,969			31,085			12,000	9,927	9,293	9,331	9,611	9,275	8,967	9,385
30,108	30,202	29,263	29,488		75%
30,000			9,000							75%

						33,981
											8,868
			30,336				50%		8,632	8,407	8,535	8,414		8,654
20,000	28,309	26,558	25,135	26,650	27,957		6,000	7,954	50%


10,000	94.0%	87.9%	86.8%	85.9%	90.4%	89.9%	83.2%	25%	3,000	87.0%	90.5%	91.5%	92.3%	90.7%	88.7%	92.2%	25%
0	0%	0	0%
2018	2019	2020 (F)	2019	2020 (F)	2019	2020 (F)	2018	2019	2020 (F)	2019	2020 (F)	2019	2020 (F)

GOP (JPY MM)	3,097	2,644	3,423	First Half	Second Half		GOP (JPY MM)	104	156	151	First Half	Second Half

% of Inbound	54.0% 50.3%	ー						% of Inbound	94.4% 97.1%	ー
Visitors(*4)						Visitors(*5)

(*1) Based on the acquisition price.

(*2) Hilton Tokyo Odaiba is planning to implement large-scale renovation works from September 2020 through December 2020.

(*3) Hotel Oriental Express Osaka Shinsaibashi opened in April 2018, the figures for 2018 state the figures from April to December 2018.

(*4) Based on numbers of guest rooms sold.

(*5) Based on room sales.

Ⅳ. Portfolio

1. Portfolio

Portfolio consisting of competitive hotels in areas with strong leisure lodging demand
Selectively invest in locations with high growth potential of leisure demand such as Strategic Investment Areas

Portfolio Summary		Strategic Investment Areas and Locations of Properties

Total Assets

JPY374.5Bn

Properties acquired in 2019 Existing properties Strategic Investment Areas

	Hokkaido Area
No. of Hotels	Okinawa Area

43 Hotels

(34 in Strategic Investment Areas)

No. of Guest Rooms	Fukuoka	Tokyo & the Bay Area(*1)


11,705 Rooms	Area
	Osaka/Kyoto Area(*2)

(*1) Bay Area includes the coastal area of Tokyo Bay in Kanagawa and Chiba prefectures.	Tokyo 23 wards

(*2) Osaka/Kyoto Area refers to Osaka and Kyoto prefectures.		13

2. Portfolio Diversification

Widely diversified and high-quality portfolio
Appeal to inbound visitors by international brands

By Area and Rent(*1)

	(V) (F)	(V)
(F)	4.5%
0.7%	(F)
3.2%
(V) 1.6%	16.7%
2.2%
(F)		Hokkaido
4.3%

	By Hotel Brand(*2)
	Others	Oriental Hotel
Dormy Inn, etc.	14%
16%
(Kyoritsu Maintenance)

4% the b		Hotel Nikko
3%		8%

(V)	5.2%	(V)
Chubu

ibis/Mercure (Accor)

Holiday Inn (IHG)

3.1%	Chugoku	4.9%	Tokyo	4.0%
	6.5%		20.7%

(F)			Kyushu
5.2%		(excluding Okinawa)
			8.3%
		Okinawa		Kanto	(F)
(V)			(excluding Tokyo)
		13.6%		13.8%
			22.5%
7.5%
		Kansai

			(excluding Osaka)
			8.0%	Osaka
	(F)			10.3%

	6.2%				(V)
		(V)
				8.7%
	3.9%	(F)	(V)	(F)
			4.0%
			3.3%	7.0%

		Fixed Rent (F)	Variable Rent (V)

59.5%40.5%

(*1) Based on the annualized rent in revenue forecast of FY12/2020

(*2) Based on the acquisition price

Sheraton

HiltonMariott

31%4%

International Brand: 55%

By Grade(*2)		By Hotel Type(*2)
Economy
5%
	Luxury		Resort	Limited-
	21%	21%
	service
Mid-price
			33%
42%	Upper-
	Full-service
	middle
	33%	47%

Ⅴ. Internal Growth

1. Rent Structures

Stability

Upside

(FY12/2020 forecast)

Rent Structure(*1)

Fixed rent

Fixed rent +

Fixed rent + Variable rent

Variable rent

Management contract

Total

Revenue sharing

Type of Contract

Lease contract

Management contract

Type of

Fixed

○

A certain percentage of sales

A certain percentage of

A certain percentage of hotel

Rent

Variable

Hotel GOP

exceeding the threshold

hotel GOP

revenue or hotel GOP

Real Estate Operating

JPY2,832MM

JPY3,927MM

JPY18,479MM

JPY1,894MM

JPY3,080MM

JPY30,214MM

Revenue (%)

(annualized forecast for

(9.4%)

(13.0%)

(61.2%)

(6.3%)

(10.2%)

(100.0%)

FY12/2020)

(breakdown)

(%)

(1.8%)

(25.4%)

(4.5%)

(8.7%)

(40.5%)

Fixed Rent,

JPY2,832MM

JPY3,382MM

JPY10,796MM

JPY536MM

JPY439MM

JPY17,987MM

etc.(*2) (%)

(9.4%)

(11.2%)

(35.7%)

(1.8%)

(1.5%)

(59.5%)

Variable Rent

JPY545MM

JPY7,682MM

JPY1,358MM

JPY2,641MM

JPY12,227MM

Involvement in

Low

High

Hotel Operation

Renewal of building

Renewal of building and

CAPEX Paid by JHR

1) Renewal of building

facilities

and facilities

Fixtures and equipment

<3)

Strategic investment>

Strategic investment

No. of Properties

Acquisition Price

JPY37,300MM

JPY44,216MM

JPY245,628MM

JPY17,723MM

JPY29,640MM

JPY374,508MM

(%)

(10.0%)

(11.8%)

(65.6%)

(4.7%)

(7.9%)

(100.0%)

The Beach Tower Okinawa

Hilton Tokyo Bay

The Twelve HMJ Hotels(*3)

Hilton Nagoya

ibis Tokyo Shinjuku

Hotel Francs

Hotel Keihan Universal City

the b ikebukuro

Mercure Yokosuka

ibis Styles Kyoto Station

CANDEO HOTELS

Sotetsu Fresa Inn Shimbashi-

the b hachioji

Chisun Inn Kamata

ibis Styles Sapporo

Hotels

UENO-KOEN

Karasumoriguchi

the b hakata

Mercure Sapporo

HOTEL ASCENT FUKUOKA

Smile Hotel

the b suidobashi

Mercure Okinawa Naha

and other hotels

Nihombashi Mitsukoshimae

Hilton Tokyo Odaiba

Hotel Vista Kamata Tokyo

Hotel Oriental Express Osaka

Comfort Hotel Tokyo

Shinsaibashi

Higashi Nihombashi

(*1) Rent structure is categorized according to the rent contract for hotels of each asset owned by JHR.

(*2) Fixed rent includes fixed rent and utility income based on rent contract of non-hotel portion (offices, signage, car parks, retail shops, etc.) of asset owned by JHR.

(*3)

The Twelve HMJ Hotels are the 11 HMJ Hotels plus Oriental Hotel Fukuoka Hakata Station.

2. Performance of the 20 Hotels with Variable Rent, etc.

		Total of the 20 Hotels with Variable Rent, etc.				Total of the 10 HMJ(*) Hotels
		Changes in Major Indicators				Changes in Major Indicators

(JPY)	Occupancy (right axis)	ADR (left axis)	RevPAR (left axis)	(JPY)
					100%	17,999 (2.6%) 17,537	+5.4%18,490	100%
20,000	15,592		15,391		16,077	20,000
	(1.3%)	+4.5%	80%					80%
15,000
					15,000			+6.1%16,234
						15,679	(2.4%) 15,297
	13,559	(2.1%)	13,272	+5.9%	14,061	60%		60%
10,000	10,000

					40%				40%

5,000						20%	5,000			20%
	87.0%		86.2%		87.5%		87.1%	87.2%	87.8%
0			0%	0	0%

2018	2019	2020 (forecast)	2018	2019	2020 (forecast)
Changes in GOP				Changes in GOP

(JPY MM)			(JPY MM)
18,000		16,345	14,000
16,101	15,722

16,000		13,000
(2.4%)	+4.0%			12,377
	12,140
		11,966
14,000			12,000
		(1.4%)	+3.4%


12,000			11,000
10,000			10,000
2018	2019	2020 (forecast)	2018		2019	2020 (forecast)

(*) The 10 HMJ Hotels are 10 hotels excluding Namba Oriental Hotel from the 11 HMJ Hotels.

3. RevPAR Variance to Previous Year by Region of the 20 Hotels with Variable Rent, etc. for 2020

Diverse Portfolio

Total of 20 properties	Properties owned by JHR
<2018 vs 2019: -2.1%>
+11.1%	+5.9%
+0.1%


First Half of Second Half of	Full Year 2020
2020 (forecast) 2020 (forecast)	(forecast)

Hokkaido (2 properties) <2018 vs 2019: +1.9%>

+3.6% +12.2% +8.2%

First Half of Second Half of	Full Year 2020
2020 (forecast) 2020 (forecast)	(forecast)

 ibis Styles Sapporo  Mercure Sapporo

			Hiroshima (2 properties)		Narita (2 properties)
			<2018 vs 2019: +0.8%>
				<2018 vs 2019: +6.8%>
				+4.5%	+2.8%
Okinawa (3 properties)		+0.9%			+10.0%	+4.1%
<2018 vs 2019: -7.3%>

+13.6%	+9.4%					-2.3%
+3.5%	First Half of	Second Half of	Full Year 2020
			First Half of	Second Half of	Full Year 2020
			2020 (forecast) 2020 (forecast)	(forecast)
				2020 (forecast) 2020 (forecast)	(forecast)
			 Oriental Hotel Hiroshima
First Half of Second Half of	Full Year 2020			 Hilton Tokyo Narita Airport
 ACTIVE-INTER CITY HIROSHIMA
2020 (forecast) 2020 (forecast)	(forecast)		 International Garden Hotel Narita
			(Sheraton Grand Hiroshima Hotel)
 Hotel Nikko Alivila
						Tokyo and Bay Area (5 properties)
 Okinawa Marriott Resort & Spa
 Mercure Okinawa Naha							<2018 vs 2019: -1.6%>
								+15.5%	+6.9%	 Oriental Hotel

										tokyo bay
Fukuoka (1 property)					-2.1%			 ibis Tokyo Shinjuku
<2018 vs 2019: -4.1%>							 the b ikebukuro
		Osaka, Kyoto (2 properties)	First Half of	Second Half of	Full Year 2020
+7.3%				 the b hachioji
+1.6%		<2018 vs 2019: -10.3%>	2020 (forecast) 2020 (forecast)	(forecast)	 the b suidobashi

-3.8%					+5.9%

First Half of Second Half of	Full Year 2020		-6.1%	-0.3%
2020 (forecast) 2020 (forecast)	(forecast)
 the b hakata				First Half of Second Half of	Full Year 2020	 Holiday Inn Osaka Namba
			2020 (forecast) 2020 (forecast)	(forecast)
							 ibis Styles Kyoto Station

(*) Stating major hotels in each area out of the 20 Hotels with Variable Rent, etc.

4. Active Asset Management

Implement Active Asset Management at both hotel and REIT sides
Accelerate internal growth through both revenue enhancement and cost control

	Improvement of Hotel
Hotels	Revenue
Reduction of Hotel

	Operating Costs

	Improvement of Real
REIT	Estate Operating Revenue

	Reduction of Real Estate
	Operating Costs

Examples of Active Asset Management

Strategic capital expenditure (e.g., renovation of rooms to increase RevPAR)
Rebranding according to each hotel's characteristics
Synergy from sharing guest by hotels located nearby in the same group
Renewal of a hotel booking system
Integration of back-office operations at hotels located in nearby area
Optimization of staffing ● Cost reduction by joint purchasing in the same group
Reduction of utility costs

Improve GOP

Rent increase by revision of rent scheme, etc.
- The Five HMJ Hotels(*), CANDEO HOTELS UENO-KOEN,
  Comfort Hotel Tokyo Higashi Nihombashi, HOTEL ASCENT FUKUOKA, Oriental Hotel Fukuoka Hakata Station and rent from non-hotel tenant, etc.
Reduction of cost for Property Management and Trust, management contract fee, and ground rent, etc.

Improve NOI

Maximize DPU

(*) The Five HMJ Hotels are Kobe Meriken Park Oriental Hotel, Oriental Hotel tokyo bay, Namba Oriental Hotel, Hotel Nikko Alivila and Oriental Hotel Hiroshima.

4. Active Asset Management (cont.)

Promote internal growth through renovation and rebrand, etc.
Plan to appropriate the negative goodwill in case the operation is suspended due to large-scale renovations

Hilton Tokyo Odaiba		Namba Oriental Hotel
Completed Project	Future Project		Future Project
(December 2019 to February 2020)	(September 2020 to December 2020)		(November 2020 to March 2021)

Summary

Amount invested: JPY92MM

Scope: Banquet hall ("Seaside Banquet Rooms" with Tokyo Bay views)

Summary

Amount to invest: Approximately JPY3.0Bn (plan)

Scope: Guest room, front lobby, exterior pedestrian alley from station, pool

Summary

Amount to invest: Approximately JPY2.6Bn (plan)

Scope: Guest room, front lobby, hotel entrance, tenant area, etc.

Aim

※The entire building is expected to close during the renovation period

Maximize the spectacular ocean view of Rainbow Bridge by removing the window frames
Creating an open banquet hall with a sense of unity with a wide seaside-facing balcony
Increase the number of banquets and weddings

Improve ADR by differentiating itself through renovation taking advantage of one of the world's most spectacular panoramic ocean view
Provide consistent quality for guest stay and increase value to stay at the hotel

Aim

•	Improve ADR by differentiating itself through
	renovation with a superior design in a
	favorable location in central Namba
•	Add value by renovating the lobby and the

Renovation of Banquet Halls at Hilton Tokyo Odaiba

＜After＞＜After＞

garden

• Improve operating efficiency and reducing

costs by changing the layout

＜Before＞

4. Active Asset Management (cont.)

Promote internal growth through renovation, rebrand, etc.

Oriental Hotel Fukuoka Hakata Station

Increase rent through revision of rent scheme, etc.

Track Record of Rent Scheme Revision (after Apr. 2014)

Summary

Renovation Term: October 1, 2018 to April 8, 2019

※ Hotel operation was suspended during the renovation period

Investment: Approximately JPY3.1Bn

Renovated the whole building and rebranded including an increase in the number of guest rooms
Changed the hotel grade from mid-price to upper-grade hotel
Sustained DPU level by utilizing the negative goodwill during the suspension of the hotel operation

			Occupancy (right axis)		ADR (left axis)	RevPAR (left axis)
(JPY)
		18,633		100%
20,000
	13,330
15,000		15,921		75%

10,000		12,597		50%

5,000		94.5%	85.4%		25%

0			0%

	January to September 2018 April to December 2019

＜After＞	＜After＞
＜Before＞	＜Before＞

Apr. 2014

Jul. 2014

Dec. 2014

Jul. 2015

Jul. 2017

Jan. 2018

Jan. 2019

Apr. 2019

Aug. 2019

Oct. 2019

Dec. 2019

Smile Hotel Nihombashi Mitsukoshimae

Fixed-rent

Fixed and Revenue Sharing

Hotel Keihan Universal City

Fixed-rent

Fixed and Revenue Sharing

ibis Styles Sapporo

Changed to Management Contract

the b suidobashi

Fixed-rent

Fixed and Variable-rent

CANDEO HOTELS UENO-KOEN

Fixed-rent Increase

Comfort Hotel Tokyo Higashi Nihombashi

Fixed-rent

Fixed and Revenue Sharing

ibis Styles Kyoto Station

Reduction of Management Contract Fee

Hilton Tokyo Bay

Revision of Rent (Increase)

HOTEL ASCENT FUKUOKA


Fixed-rent/	Fixed-rent Increase/
Traditional Lease		Fixed-lease

Mercure Yokosuka

Revision of Rent (Effectively increase)

the b suidobashi

Revision of Rent (Increase)

Oriental Hotel Fukuoka Hakata Station

Revision of Rent (Increase)

ibis Styles Sapporo
Mercure Sapporo

Reduction of Management Contract Fee

5. Capital Expenditures and Depreciation

Strengthen competitiveness and improve asset value by continuing investment in CAPEX

	Clarification of CAPEX
		CAPEX Ⅰ	capital investment related to renewal of buildings, facilities, and equipment which is
		required to maintain proper values of properties

(JPY MM)		CAPEX Ⅱ	capital investment for fixtures furniture and equipment that are not directly related to building
	structures or facilities but necessary for operating hotels				4,859

5,000		CAPEX Ⅲ	strategic capital investment for renewals of guest rooms, banquet rooms, restaurant

				and others in order to maintain or to improve the competitiveness of the hotels	4,557
4,500	Depreciation			4,091			6,775

							6,766
4,000	Cost for Large-scale Renovation Works	3,725		3,775

						3,619	Oriental Hotel
								234
3,500					3,294				Fukuoka	Hilton
						393	Hakata Station
							3,056	3,147		Tokyo Odaiba
						2,898			862	3,000
3,000			2,772
		2,619
			476
					469	999
2,500

								1,690
			1,811	783	475	781
2,000
								2,200
				36
1,500				640	511					2,678

								2,226
1,000						1,954	1,798

					1,324			1,456
500			1,134

								800

0
Asset Size	225,723	286,801	319,474	309,370	374,508	374,508
(JPY MM)

			FY12/2015	FY12/2016	FY12/2017	FY12/2018	FY12/2019	FY12/2020 (forecast)

The planned amount of large-scale renovation works for the entire property of Namba Oriental Hotel is not included in the capital expenditure for FY12/2020 due to the construction being scheduled for completion in March 2021.

Ⅵ. Financial Conditions

1. Financial Conditions

Changes in LTV (total asset base)

Term of Interest-bearing Debt

50%
45%	42.8%		40.6%
	39.7%	39.9%
40%	39.0%


35%

		As of the end of Dec. 2018
	Long-term	9.6%

	(scheduled repayment
	within one year)
	Long-term


(*) Long-term represents debts	90.4%
	with original maturity over

one year.

As of the end of Dec. 2019

7.6%

92.4%

30%
End of	End of	End of	End of	End of

	FY12/2015	FY12/2016	FY12/2017	FY12/2018	FY12/2019
	(16th Period)	(17th Period)	(18th Period)	(19th Period)	(20th Period)

(*) LTV as of the end of each period.

Changes in Costs for Interest-bearing Debt(*1) and

Average Life of Debt(*2)

Fixed Interest Rate Ratio

As of the end of	As of the end of
Dec. 2018	Dec. 2019
97.7%	97.8%

	Average Life of Debt	Costs for Interest-bearing Debt	(year)	Repayment Schedule of Interest-bearing Debt
2.0%	6.0
	5.0			5.2
	1.5%	4.7	4.8
		5.0	(JPY MM)						(as of the end of December 2019)

1.5%
3.7	1.2%	1.1%	1.1%		4.0	30,000	Loans	Investment Corporation Bonds			28,000
		1.0%
						25,000
1.0%						3.0					21,650				10,000
										19,000

0.5%						2.0	20,000			16,900	15,772	3,000	17,350	17,000

					1.0	15,000	12,782 12,300
						6,000
								1,500
0.0%						0.0	10,000			15,772 18,650 19,000	13,100	17,000 18,000	8,000

End of	End of	End of	End of	End of	5,000		10,800 10,900
	FY12/2015	FY12/2016	FY12/2017	FY12/2018	FY12/2019
	(16th Period)	(17th Period)	(18th Period)	(19th Period)	(20th Period)		0							4,250
(*1) Weighted-average costs for interest-bearing debt (including up-front fee, etc.) as of the end of	2020	2021	2022	2023	2024	2025	2026	2027	2028	2029
each period. Rounded off to one decimal place.
(*2) Average life of debt as of the end of each period				24

1. Financial Conditions (cont.)

Lender List for Interest-bearing Debt

Breakdown of Interest-bearing Debt

					(Unit: JPY MM)
		Balance	Balance
	Lenders/Bond Name	(as of the end of	(as of the end of	Variance
	December 2018)	December 2019)

		Balance	%	Balance	%
Sumitomo Mitsui Banking Corporation	26,431	19.3%	31,901	18.9%	5,470
Shinsei Bank, Ltd.	15,035	11.0%	19,015	11.3%	3,980
Mizuho Bank, Ltd.	15,030	11.0%	19,000	11.3%	3,970
Sumitomo Mitsui Trust Bank, Limited	10,540	7.7%	13,640	8.1%	3,100
Resona Bank, Limited	9,360	6.8%	10,126	6.0%	766
Development Bank of Japan Inc.	3,780	2.8%	5,750	3.4%	1,970
Fukuoka Bank, Ltd.	3,610	2.6%	4,750	2.8%	1,140
The Nomura Trust and Banking Co., Ltd.	4,190	3.1%	4,660	2.8%	470
MUFG Bank, Ltd.	4,135	3.0%	4,135	2.5%	0
Aozora Bank, Ltd.	2,435	1.8%	3,435	2.0%	1,000
The Chiba Bank, Ltd.	2,670	2.0%	3,100	1.8%	430
Hiroshima Bank, Ltd.	2,927	2.1%	2,892	1.7%	(35)
The Nishi-Nippon City Bank, Ltd.	1,600	1.2%	2,750	1.6%	1,150
Sompo Japan Nipponkoa Insurance Inc.	828	0.6%	1,500	0.9%	672
The Shizuoka Bank, Ltd.	500	0.4%	500	0.3%	0
Total of Bank Loans	103,071	75.4%	127,154	75.3%	24,083
	Investment Corporation Bonds
	(for institutional investors)
	3rd Investment Corporation Bonds without Collateral	2,000	1.5%	-	-	(2,000)
Bonds	4th Investment Corporation Bonds without Collateral	1,500	1.1%	1,500	0.9%	0
6th Investment Corporation Bonds without Collateral	3,000	2.2%	3,000	1.8%	0

	8th Investment Corporation Bonds without Collateral	1,100	0.8%	1,100	0.7%	0
Corporation	9th Investment Corporation Bonds without Collateral	1,000	0.7%	1,000	0.6%	0
12th Investment Corporation Bonds without Collateral	-	-	2,000	1.2%	2,000

	Total of Investment Corporation Bonds	8,600	6.3%	8,600	5.1%	0
	(for institutional investors)

Investment	Investment Corporation Bonds
(for individual investors)
5th Investment Corporation Bonds without Collateral	6,000	4.4%	6,000	3.6%	0

	7th Investment Corporation Bonds without Collateral	9,000	6.6%	9,000	5.3%	0
	10th Investment Corporation Bonds without Collateral	10,000	7.3%	10,000	5.9%	0
	11th Investment Corporation Bonds without Collateral	-	-	8,000	4.7%	8,000
	Total of Investment Corporation Bonds	25,000	18.3%	33,000	19.6%	8,000
	(for individual investors)

	Total of Investment Corporation Bonds	33,600	24.6%	41,600	24.7%	8,000
Total of Interest-bearing Debt	136,671	100.0% 168,754	100.0%	32,083

As of the end of Dec. 2018

As of the end of Dec. 2019

Loans

Investment24.6%24.7%

Corporation Bonds

75.4%75.3%

Status of Credit Rating

Japan Credit Rating Agency, Ltd.	A+ (stable)
(JCR)
Rating and Investment Information, Inc.	A	(positive)
(R&I)

※ The rating outlook of R&I changed to positive from stable in October 2019

Status of Reserve for Special Advanced Depreciation

A part of gain on sale of three properties sold in 2018 are retained

Reserve for special	JPY1,174MM
advanced depreciation

1. Financial Conditions (cont.)

Negative Goodwill

Changes in Appraisal Value (Unrealized Gains)

1.	Add JPY262 million (50-year amortization amount of
	negative goodwill) to dividends every period
2.	In addition to above, dividends will be increased in
	response to the following
		• Cope with losses caused by property dispositions
		• Cope with loss on retirement of noncurrent assets
		• Cope with dilution of dividend per unit
		• Cope with inconsistency between tax and accounting treatments
		(Amortization of fixed-term leasehold of land, amortization of

(JPY Bn)

500

400

Book Value

Unrealized Gains

398.7

525.9

439.3 437.5 151.5

122.1 130.7

asset retirement obligations, etc.)

• Cope with suspension of sales and such due to large-scale

renovation works with significant impact on revenues

＜Amount used in FY12/2019＞

50-year amortization amount on negative goodwill	:	JPY262MM
Adjustment for dilution	:	JPY310MM
Cope with large-scale renovation works	:	JPY357MM

300

200

302.1

78.7

205.4

34.8

113.8

374.3

Cope with loss on retirement of noncurrent assets	:	JPY246MM
Total amount	:	JPY1,176MM
Balance of Negative Goodwill		JPY10,617MM
after the end of December 2019

＜Amount to be used in FY12/2020＞

50-year amortization amount on negative goodwill	:	JPY262MM
Cope with large-scale renovation works	:	JPY216MM

100

284.9

223.3

170.5

317.2 306.7

Cope with loss on retirement of noncurrent assets	:	JPY18MM
Total amount	:	JPY496MM
Balance of Negative Goodwill		JPY10,120MM
after the end of December 2020 (forecast)

The breakdown of the amount used for "cope with large-scale renovation works" in FY12/2019: JPY357MM for Oriental Hotel Fukuoka Hakata Station
The breakdown of the amount to be used for "cope with large-scale renovation works" in FY12/2020: JPY44MM for Hilton Tokyo Odaiba, and JPY172MM for Namba Oriental Hotel

Ratio of	20.4%	35.2%	39.9%	38.5%	42.6%	40.5%
Unrealized
Gains
	FY12/2014	FY12/2015	FY12/2016	FY12/2017	FY12/2018	FY12/2019
	(15th Period) (16th Period) (17th Period) (18th Period) (19th Period) (20th Period)

(*) Unrealized gains are calculated by subtracting book value from appraisal value.

Memo

Ⅶ. Market Environment

1. Market Environment

 The number of inbound visitors continues to increase	 While the number of inbound visitors from South Korea
		significantly decreased, inbound visitors from China and many
		other countries reached a record high
Changes in Number of Inbound Visitors		Changes in Inbound Visitors by Country

(Thousands)							+2.2%
35,000		Number of Inbound Visitors

		Tourists			+8.7%	31,191 31,882

30,000						28,691
				+19.4%
25,000					24,039		27,766
		+21.8%
				25,441

20,000				19,737

		+47.1%		21,049

15,000			13,413	16,969
		10,363
10,000	8,358		10,880

5,000		7,962
6,041

0	2012	2013	2014	2015	2016	2017	2018	2019

(unit: million people)

10	China		South Korea

9	Taiwan		Hong Kong
	Others
8	(Asian countries other than
above and Europe, US, etc.)

7
6
5
4
3
2
1
0
2012	2013	2014	2015	2016	2017	2018	2019

Source: Number of International Visitors to Japan by Japan National Tourism Organization (JNTO)

(*) The numbers for Jan.-Oct. 2019 are provisional numbers, and Nov.-Dec. are estimated numbers.

Source: Visitor Arrivals by Country/Area & Purpose of Visit (provisional figures) by Japan National Tourism Organization (JNTO)

(*) The numbers for Jan.-Oct. 2019 are provisional numbers, and Nov.-Dec. are estimated numbers.

1. Market Environment (cont.)

Lodging demand increased due to inbound visitors
The number of overnight guests has been solid

Supply of rooms has been increasing, mainly in Tokyo and Osaka, but the supply after 2021 is expected to decrease

Changes in Number of Overnight Guests in Japan

(Guest nights in millions)
600				No. of Japanese Overnight Guests				+1.3%


			No. of Inbound Overnight Guests		+5.6%


											545
						+6.5%	(2.3%)	+3.5%	538

500		+6.0%	+1.6%	504	492	510
		474

	466
	439
400											444	443

300										430

							438	423

Supply of Rooms in Hotels/Ryokans in Japan


		(No. of Rooms)			＜Japan＞			Actual		Supply Forecast



80,000			53,812	59,572	63,498

60,000
		32,988			27,408	27,937
40,000		16,517

20,000										10,219

0

	Ratio of New Supply	+1.1%	+2.1%	+3.4%	+3.6%	+3.7%	+1.5%	+0.6%	+1.5%
	Excl. Tokyo, Osaka	+0.7%	+1.7%	+2.5%	+2.7%	+2.7%	+1.2%	+0.4%	+1.5%
	(%: change from the	2016	2017 2018	2019	2020 2021		2022 2023~
		previous year)
		(No. of Rooms)			＜Tokyo＞ 17,344
20,000
		11,833
15,000			11,095	6,273

10,000		6,107	5,866

413

432 429

5,000	1,348	2,267

0

200 CAGR (Compound Average Growth Rate) of Japanese overnight guests

							+1.0%	+18.3%+8.3%
100
				+46.4%+5.8% +14.8%

	+27.3%+33.8%	66	69	80	94	102
	26	33	45
0

2012 2013 2014 2015 2016 2017 2018 2019

Source: Statistics of Overnight Travel by Japan Tourism Agency

Rounded off to the nearest millions of people.
Numbers for Jan.-Nov. 2019 are second preliminary figure, numbers for Dec. 2019 are first preliminary figure. The annual revised report, which reflects newly opened hotels in 2019, etc. is schedule to be released on June 30, 2020.


	Ratio of New Supply	+4.1%	+3.8%	+7.4%	+6.5%	+9.5%	+3.1%	+0.7%	+1.1%
	(%: change from the	2016	2017	2018	2019	2020	2021	2022	2023~
	previous year)			＜Osaka＞
	(No. of Rooms)
				11,003
12,000				8,329
				8,082
9,000
		5,018				4,257
6,000						2,347	3,419
	1,402
3,000

0

	Ratio of New Supply	+1.8%	+6.3%	+9.9%	+11.9%	+7.8%	+3.8%	+2.0%	+2.9%
	(%: change from the	2016	2017	2018	2019	2020	2021	2022	2023~
	previous year)

Source: Estimated by the Asset Management Company using data from "Public Health Administration Report" by Ministry of Health, Labour and Welfare (MHLW), a weekly hotel & restaurant magazine (HOTERES), and Nikkei Telecom.

Ratio of new supply is the ratio of new rooms to be supplied in a year to the stock of rooms at the beginning of the year. With regard to the above data, please note that in case the number of rooms are stated as "to be determined" by hotels, the asset management company has used 180, the average number of new supply of hotel rooms, for calculation.

1. Market Environment (cont.)

Many venues are located in Tokyo, where there are many properties owned by JHR

Tokyo 2020 Games

Venue Maps and Properties owned by JHR

the b

the b suidobashi

ikebukuro

R&B Hotel Ueno-hirokoji

CANDEO HOTELS UENO-KOEN

ibis Tokyo

dormy inn・global cabin Asakusa

Shinjuku

Comfort Hotel Tokyo Higashi Nihombashi

Olympic Stadium

Smile Hotel Nihombashi Mitsukoshimae

(Opening and Closing

★

Ceremonies)

Sotetsu Fresa Inn

Shimbashi-Karasumoriguchi

★

Oriental Hotel

tokyo bay

Hilton

Tokyo Bay

Hotel

Francs

Chisun Inn Kamata

Hotel Vista

Kamata Tokyo

Tokyo Aquatics

Yumenoshima

Sapporo

Olympic Village Centre

Park Archery

Mercure

Field

Odori Park

Ariake Arena

Tatsumi Water

Sapporo

Ariake Urban

Polo Centre

ibis Styles

Sapporo

Ariake Gymnastics Centre

Sapporo

Sports Park

Dome

Ariake Tennis Park

Hilton Tokyo

Odaiba

Odaiba ★

IBC/MPC Tokyo

Olympic:

Marine

International Exhibition Centre

July 24 to

Park

Aomi Urban

(Tokyo Big Sight)

August 9

Shiokaze

Sports Park

Paralympic:

Park

August 25 to

September 6

Source: Prepared by the Asset Management Company based on the official website by The Tokyo Organising Committee of the Olympic and Paralympic Games

(*) Tokyo 2020 Games represents Tokyo Olympics and Paralympics

: Properties owned by JHR, : Venues for games or facilities related to the Olympics, ★: Places where the cauldrons would be placed

The number of inbound visitors in past host countries has increased even after the Olympics

Changes in Number of International Tourist Arrivals

after Olympics and Paralympics

(times)

Greece (Athens Olympics in 2004)

1.8

UK (London Olympics in 2012)

China (Beijing Olympics in 2008)

Brazil (Rio de Janeiro Olympics in 2016)

1.7

1.6

1.5

1.4

1.3

1.2

1.1

1.0

0.9

city

Six years ago

Five years ago

Four years ago

Three years ago

Two years ago

one year ago

One year

Two years

Three years

Four years

year

theas

after

Selected

host

Olympic

Source: Prepared by the Asset Manager based on the data from "International tourism, number of arrivals" by World Bank and "Tourism Highlights 2019 Edition" by UNWTO

(*1) The data were statistics in the past and those will be not guaranteed for the change after Tokyo Olympics and Paralympics.

(*2) Figures for two years after in Brazil are preliminary figures.

1. Market Environment (cont.)

Various international events, conferences and infrastructure improvements are scheduled in and after 2020. Further growth of the tourism industry is expected

Major domestic airports are expected to attract more inbound visitors by increasing the number of the international flights
Haneda and Narita Airports in Tokyo metropolitan area are expected to reach 1 million fights per year as total

Coming Major Events Related to Tourism, etc. in Japan

	International Events,	Others
	Conferences, etc.

2020	• Tokyo Olympics and	• "Large-scale Development at Tokyo Disneyland",
	Paralympics Games	new areas and facilities are planned to open
	(nationwide)	(Beauty and the Beast, etc. is themed)
	(July 24 to August 9,	• New area is planned to open in Universal Studio
	August 25 to September 6)	Japan (Nintendo-themed)
		• Tokyo International Cruise Terminal is planned to
		open in Odaiba (July)
2021	• World Masters Games 2021
	Kansai (May 14 to May 30)
	• 19th FINA World Aquatics
	Championships 2021 Fukuoka
	(July to August)
2022	• Badminton World	• New Shinkansen route opens in Kyushu
	Championships (Tokyo)	(Takeo Onsen～Nagasaki)
		• Extension of Hokuriku Shinkansen
		(Kanazawa and Tsuruga)
		• Tokyo BRT (Bus Rapid Transit) service starts
		(Tokyo city center～Seaside "Rinkai" area)
2023		• "Large-scale expansion project at Tokyo Disney
		Sea", new theme port is planned to open
		("Fantasy Springs")
2024		• Mixed-use infrastructure development including a
		convention center in Rinku Central Park
		(Izumisano-City, Osaka)
		• Openings of Yumeshima Station of Osaka Metro
		Line and tower building at Yumeshima Station
2025	• World EXPO 2025	• Integrated Resorts start their operations
	in Osaka, Kansai (184 days)	(Undecided)
	(April 13 to October 13)
2027		• Linear Chuo Shinkansen line commences operation
2029		• Open of Haneda Airport Access Line
2031		• Extension of the Hokkaido Shinkansen line to
		Sapporo (Shin Hakodate Hokuto～Sapporo)

(*) As events are those scheduled as of January 31, 2020 and may be changed.

Future Airport Development Plan for Major Domestic Airport

Haneda Airport

Narita International Airport

 March 29, 2020

 2029

Setting up new flight and increase

Construction of a new runway and

the number of flights to cities in

extension of the existing runways

North America, Europe, Australia

and Asia, etc.

Number of international flights

Number of flights

(10,000

99,000

(10,000

times)

500,000

times/year

60,000

(130 flights/day)

times/year

256,000

(80 flights/day)

times/year

Approximately

1.7 times

2.0 times

Current

Plan

Current

Plan

※＜Reference＞ London Area Airports: 1,210,000 times/year New York Area Airports: 1,320,000 times/year

Other Airport Development Plan

Naha Airport	March 26, 2020	•	Operating of the second runway

	around July 2020	•	Expand the CIQ (Customs, Immigration,
			and Quarantine)
Kansai	2021 to 2025	•	Large-scale renovation is planned for the
International			first time since its opening in 1994
Airport		•	Renovation of Terminal 1
Fukuoka Airport	March 2025	•	Operating of the second runway

Appendix 1

JHR's Characteristics and Strategy

1. JHR's Investment Targets

Aim to increase dividend for mid to long term

Strong	High
capability in
ability in
achieving
acquiring
internal
properties
growth

	Stable
	financing
	capability

Strong ability in acquiring properties

Highly recognized as Japan's largest J-REIT specializing in hotels
High presence and credibility in the property market by continuously acquiring properties
Capability to propose various acquisition schemes and to execute acquisitions

High capability in achieving internal growth

Management approach through active asset management strategies that achieves a good balance between stability and upside potential
Increase in hotel revenue through collaboration with high- quality operators
Attract inbound demand through enhanced international brand portfolio
Strengthen and maintain competitiveness by investing in appropriate capital expenditures

Stable financing capability

Secure sound and stable finance
Diversify financing methods

2. Simultaneous Pursuit of Stability and Upside Potential

JHR pursues both stability and upside potential by steadily implementing growth strategies

Ensure Stable Revenue

Fixed rent structure

Appropriate monitoring of hotel operation
Capital expenditures to maintain competitiveness and asset value

Maintain and improve rent-paying capacity of tenants, etc.

Pursue Upside

Management	Variable rent	Revenue sharing
contract structure	structure	structure

Active Asset Management Strategies

Change in rent structures and rebranding
Strategic capital expenditures, etc.

Increase in rental income, etc. through improvement in hotels' performance

Proportion of Rental Income

(Annualized effect of forecast for FY12/2020)

Fixed rent	Variable rent(*)
59.5%	40.5%

Variable rent, Rent from revenue sharing and Income from management contracts

Proportion of Rent Structures

(as of February 20, 2020)

Fixed rent only

11 properties

Variable rent, etc.(*)

32 properties

Fixed rent + variable rent structure Fixed rent + revenue sharing structure
Variable rent structure and management contract structure

3. External Growth Strategy

Recognition of External

Environment

Trend of the Hotel

Investment Market

Amid gradually recovering economy, domestic leisure demand remained firm. However, hotel revenue in some area showed a sluggish growth due to factors such as a declined in inbound visitors to Japan in some regions by the political issue between Japan and South Korea, and natural disasters, etc.
However, following the last year's Rugby World Cup 2019 in Japan, the Tokyo Olympic and Paralympic Games are scheduled to be held this year, and hotel assets continue to attract strong attention as an investment target. In addition, competition for acquisitions in the hotel investment market is severe, due to the decline in yields on other asset classes and the increase in the number of players in hotel investment and hotel development, including new private funds.
As inbound visitors have trended upward, new hotel supply continues to increase at a certain volume, and the competitiveness of the hotel is becoming clearer depending on the hotel's specifications, locations, and the capabilities of the hotel operators, making it important to differentiate each hotel from its competitors.

Basic Policies

Acquire highly competitive hotel real estate, etc. in areas that have potential to attract "demand by both domestic and inbound leisure customers" in the medium to long-term
Improve profitability, stability, and quality of the overall portfolio

Key Measures

Emphasize the superiority of buildings and facilities (infrastructure), operations (services), and locations of hotel real estate, etc.
- The prime investment targets are "full-service hotels" and "resort hotels" that have high barriers to entry due to operation and management know-how, capital outlay and locations
- In the case of "limited-service hotels," the creditworthiness of the hotel lessee, the age of the building, location, guest room composition and profitability are important
- For limited-service hotels specialized in selling single rooms, consider acquisition individually, taking into account the hotel specifications and the possibility of achieving the upside.
- Especially, proactively review the purchase of hotels that have potential for internal growth by implementing active asset management or the possibility of synergy effect with the existing properties
Strategic investment areas
- Hokkaido area, Tokyo and bay area, Osaka/Kyoto area, Fukuoka area, and Okinawa area
Investigation and planning of the internal growth strategy upon property acquisition
- Investigate the appropriate rent level and rent structure upon renewal, etc., cost reduction possibilities, and possibilities to improve buildings and facilities
- Particularly, if the hotel pays variable rent, etc., promote internal growth through collaboration with lessees and/or operators

4. Internal Growth Strategy

Recognition of External

Environment

Hotel Market Environment

In addition to stable domestic leisure demand, due to the government policy to promote tourism nation, the number of inbound tourists, mainly from Asian countries, is continuing to rise. Amid such growth expectation for Japan's tourism and hotel industries, although there are needs to carefully monitor some impact by supply of new hotels and Minpaku (private lodging for a fee), demand for accommodation is expected to stay firm.

Basic Policies

Pursue both stability and upside potential by steadily implementing active asset management strategies

Key Measures

Planning and execution of the active asset management in order to realize pursuit in upside revenue
- Make strategic CAPEX which will improve profitability and strengthen competitiveness mainly at hotels with high growth potential
- Raise rent and change to rent structures that can achieve upside revenue
- Reduction of management contract fee of properties under management contract
- Attract inbound demand through rebranding to international brands
- Make proactive proposals to build effective hotel operating structures which aim to maximize GOP, from the perspective of both hotel sales and expenses
- Increase hotel revenue through collaboration with high-quality operators
Planning and execution of strategic CAPEX which secure steady revenue, and monitoring of lessees
- Analyze the creditworthiness of hotel lessees, understand hotel income and expenditures, closely observe and improve rent-paying capacity
- Maintain and improve rent-paying capacity of tenants, etc. through capital expenditures, which lead to maintain and improve competitiveness and asset value

5. Financial Strategy

Recognition of External

Environment

Trend of Financing Environment

and Interest Rates

In 2019, both the number of public offerings (including IPOs) and the amount of fund procured by J-REIT were below the previous year's level, but the Tokyo Stock Exchange REIT Index remained firm and conditions remained favorable.
As for investment corporation bonds, issuance of green bonds increased. Long-term interest rates continued to be low and interest rate for bonds remained low.
There is no particular change in the lending attitude of financial institutions. Both short-term and long-term interest rates remain at low levels. Although drastic change may not happen in the financial environment, some attention should be paid to fluctuations in long-term interest rates mainly due to international factors.

Basic Policies

Ensure healthy and stable finance
Strengthen lender formation and relationships with financial institutions
Diversify financing methods

Key Measures

Maintain LTV level at a maximum of 50% (total asset base) for the time being
Diversify financing methods such as public offerings and issuance of investment corporation bonds including green bonds
Improve financial stability by extending and diversifying repayment periods and fixing interest rates, etc.
Optimize borrowing costs

6. Sustainability Initiatives

Aiming for achieving a mid to long-term growth that coexists with society and environment and enhancing sustainability through appropriate actions for ESG issues

Sustainability Policy

Acquisition of BELS Certification(*1)

JHR and JHRA stipulated "Sustainability Policy", which defines material issues and initiatives for sustainability in our business

Sustainability Policy

Monitoring and improvement of environmental performance in our portfolio
Promotion of comfortable, healthy, secure and safe hotels
Promotion of ESG in value chains
Consideration for and contribution to local communities
Initiatives for our officers and employees
Compliance as corporate citizens
Improvement of transparency and engagement with our stakeholders

JHR obtained a BELS certification for two properties, Hotel Nikko Alivila and Mercure Okinawa Naha, for the first among J-REIT owned hotels

Hotel Nikko Alivila

Mercure Okinawa Naha

GRESB Real Estate Assessment(*2)

JHR received a "Green Star" designation. It was highly evaluated in both "Management & Policy" and "Implementation & Measurement" areas with regards to initiatives for environmental considerations
and sustainability (September 2019)
- Highest ranking
  Acquired Green Star
- "GRESB Rating" Acquired 3-star

SMBC Environment Assessment Loan(*3)

Acquisition of "A" grade
- SMBC Environmental Assessment Loan evaluated JHR's excellent initiatives for environmental considerations in asset management
  (March 2018)

Issuance of Green Bonds

Issuance of unsecured investment corporation bonds as Green Bonds for the first among J-REITs specializing in hotels (July 2019)
- Amount: JPY2.0Bn
- Duration: 5 years
Usage of the Green Bonds proceeds
- For refinance of loans for renovation of Oriental Hotel Fukuoka Hakata Station
- To fund construction works, etc. for renovation etc. of the other hotels

(*1) BELS (Building-HousingEnergy-Efficiency Labeling System) is a display system of energy conservation performance of a building set by Ministry of Land, Infrastructure, Transport and Tourism.

(*2) The GRESB is an annual benchmarking program to evaluate ESG considerations of property companies and real estate funds. The GRESB Real Estate Assessment is distinguished by its comprehensive evaluation of initiatives for sustainability of property companies, REITs and real estate funds, not of individual properties. GRESB rating is a relative evaluation based on comprehensive scores and the highest being "5-stars".

(*3) "SMBC Environmental Assessment Loan" assesses status of corporate initiatives for environmental considerations, on loan execution and establishment of lending conditions, based on environmental assessment criteria developed independently by Sumitomo Mitsui Banking Corp. and the Japan Research Institute, Limited.

6. Sustainability Initiatives (cont.)

Energy-saving Work for Restaurant Renovations

For Okinawa Marriott Resort & Spa

Renovation for All-Day Dining (July 2019)
- Introduced highly energy-efficient equipment for kitchen and air-conditioning, etc.
- Enhancing customer satisfaction as well as considering the environment
- - Introduction of LED lightings
  - - 75% reduction of CO2 emissions after the renovation
  - Replacement of air conditionings
  - - 46% reduction of CO2 emissions after the renovation
  - Upgrade of washing and sterilizing equipment
  - - 45% reduction of CO2 emissions figures after the renovation

＜Entrance＞

＜Interior＞

These figures related to the CO2 emissions are estimated by the Asset Management Company based on expert reports.

Energy-saving Work for Large-scale Renovations

For Oriental Hotel Fukuoka Hakata Station

Rebranded and Reopened (April 2019)
- Changed from central air conditioning to individual air conditioning
- Changed all lightings to LEDs
- Replaced plumbing installation to improve water efficiency

⇒ 16% reduction of CO2 emissions after renovation of the entire building

＜After＞

＜Before＞

Initiatives for smoking ban for all rooms

The 21 Hotels with Variable Rent, etc.
- JHR has been successively implementing to convert all hotel rooms into non-smoking rooms at all owned hotels
- Non-smokingroom ratio (based on the room numbers):

89% (the beginning of 2018) ⇒ 97% (the end of December 2019)

⇒ Promote to provide a healthy and comfortable environment for both hotel guests and hotel staff

7. Benefits Program for Unitholders

JHR implemented benefits program for unitholders to obtain a better understanding, improve their satisfaction and expand the investor base. JHR also expanded the benefits program in 2019 by adding two newly acquired hotels, aggregated coverage to 20 hotels.

 Eligible recipients of complimentary coupons	 Details of the benefits program
Complimentary coupons will be sent to those who hold ten or more JHR units	Five complimentary coupons for accommodations and five
at the end of June every year (end of the midterm settlement)	complimentary coupons for restaurants(*)
	10% discount from the best rate for accommodation by each
Eligible unitholders: 12,120	hotel and 10% discount for restaurants
Valid period: One year between October 1, 2019 to September 30, 2020	(*) Complimentary coupons for restaurants are only available at selected hotels.


Hotels that offer the Benefits Program
The 14 HMJ Hotels	The Six Accor Hotels

Kobe Meriken Park	Oriental Hotel	Namba	Oriental Hotel	Hotel Nikko Alivila	Okinawa Marriott	ibis Tokyo Shinjuku	ibis Styles Kyoto Station
Oriental Hotel	tokyo bay	Oriental Hotel	Hiroshima		Resort & Spa

ACTIVE-INTER CITY	Oriental Hotel Fukuoka	Holiday Inn	Hilton Tokyo	International Garden Hotel Narita
HIROSHIMA (Sheraton	Hakata Station	Osaka Namba	Narita Airport
Grand Hiroshima Hotel)

Hotel Nikko Nara	Newly Added	Hotel Oriental Express Osaka Shinsaibashi
Hilton Tokyo Odaiba

Mercure Sapporo

ibis Styles Sapporo

Mercure Okinawa Naha

Mercure Yokosuka

Appendix 2

Information on Properties

1. Property List (1/2)

(as of the end of December 2019)

										Appraisal Value			Revenue from		P/L from

							Acquisition		20th Period	20th Period
		Hotel Type	Grade	No. of		Age	Book Value		Real Estate	NOI	Real Estate	NOI Yield
No.	Property Name		Price	(as of June 30, 2019)	(as of December 31, 2019)	Investment
Guest	Location	(JPY MM)	Operation	(JPY1,000)	Operation	(actual)
(*1)	(*2)	(*3)	(JPY MM)	Appraisal		Appraisal		Ratio

		Rooms		(*5)			(JPY1,000)	(*7)	(JPY1,000)	(*8)
						(*4)			(*6)
								Value	CAP Rate	Value	CAP Rate	(*7)		(*7)
									(JPY MM)		(JPY MM)
1	Kobe Meriken Park Oriental Hotel (*9)	Full-service	Upper-middle	323	Hyogo	24.5	10,900	9,888	16,200	5.1%	16,200	4.8%	2.9%	1,256,795	1,003,298	669,037	9.2%

2	Oriental Hotel tokyo bay	Full-service	Mid-price	511	Chiba	24.7	19,900	17,699	34,900	4.4%	37,800	4.4%	5.3%	1,883,870	1,765,658	1,357,731	8.9%

3	Namba Oriental Hotel	Limited-service	Mid-price	258	Osaka	23.8	15,000	14,640	32,900	4.1%	32,900	4.1%	4.0%	1,406,836	1,299,612	1,139,547	8.7%

4	Oriental Hotel Hiroshima	Full-service	Upper-middle	227	Hiroshima	26.3	4,100	4,171	4,370	7.5%	4,400	4.9%	1.1%	472,555	428,306	340,288	10.4%

5	Hotel Nikko Alivila	Resort	Luxury	397	Okinawa	25.8	18,900	18,168	32,900	4.8%	32,900	4.8%	5.0%	1,977,644	1,829,606	1,512,840	9.7%

6	The Beach Tower Okinawa	Resort	Mid-price	280	Okinawa	15.8	7,610	6,587	10,000	4.4%	10,100	4.4%	2.0%	511,028	468,191	335,312	6.2%

7	Hakone Setsugetsuka	Resort	Mid-price	158	Kanagawa	13.3	4,070	3,696	5,300	4.9%	5,310	4.9%	1.1%	294,957	271,037	177,854	6.7%

8	Dormy Inn Kumamoto	Limited-service	Mid-price	291	Kumamoto	11.9	2,334	2,139	3,060	5.6%	3,060	5.6%	0.6%	194,460	173,568	130,770	7.4%

9	the b suidobashi	Limited-service	Mid-price	99	Tokyo	33.4	1,120	1,213	1,940	4.1%	2,440	4.1%	0.3%	103,848	89,840	61,793	8.0%

10	dormy inn・global cabin Asakusa (*10)	Limited-service	Economy	75	Tokyo	22.8	999	941	1,330	3.9%	1,330	3.9%	0.3%	63,995	54,899	41,359	5.5%

11	Hakata Nakasu Washington Hotel Plaza	Limited-service	Mid-price	247	Fukuoka	24.8	2,130	2,022	4,520	4.4%	4,520	4.4%	0.6%	240,000	224,000	198,000	10.5%

12	Nara Washington Hotel Plaza	Limited-service	Mid-price	204	Nara	19.8	2,050	1,800	2,440	5.0%	2,440	5.0%	0.5%	151,000	134,000	97,000	6.6%

13	R&B Hotel Ueno-hirokoji	Limited-service	Economy	187	Tokyo	17.8	1,720	1,822	2,010	3.9%	2,010	3.9%	0.5%	97,292	83,017	66,694	4.8%
	Comfort Hotel Tokyo Higashi
14	Limited-service	Economy	259	Tokyo	11.9	3,746	3,527	5,830	4.3%	5,830	4.3%	1.0%	287,814	256,887	220,539	6.9%
Nihombashi

15	Smile Hotel Nihombashi Mitsukoshimae	Limited-service	Economy	164	Tokyo	22.8	2,108	2,022	3,160	4.0%	3,160	4.0%	0.6%	154,623	138,482	118,017	6.6%

16	Toyoko Inn Hakata-guchi Ekimae	Limited-service	Economy	257	Fukuoka	18.3	1,652	1,419	2,780	4.5%	2,750	4.5%	0.4%	141,039	127,703	109,484	7.7%

17	Hotel Keihan Universal City	Resort	Mid-price	330	Osaka	18.5	6,000	5,905	13,900	4.9%	13,900	4.9%	1.6%	746,118	668,997	583,302	11.1%

18	Chisun Inn Kamata	Limited-service	Economy	70	Tokyo	16.7	823	772	1,450	4.5%	1,430	4.5%	0.2%	80,876	73,891	62,713	9.0%

19	Hotel Vista Kamata Tokyo	Limited-service	Economy	105	Tokyo	27.9	1,512	1,453	2,040	4.5%	1,990	4.5%	0.4%	112,476	98,166	72,951	6.5%
	Sotetsu Fresa Inn Shimbashi-
20	Limited-service	Mid-price	220	Tokyo	11.8	4,800	4,802	8,970	3.9%	8,950	3.9%	1.3%	446,477	383,039	361,093	8.0%
Karasumoriguchi (*11)

21	Hilton Tokyo Bay	Resort	Luxury	828	Chiba	31.5	26,050	26,422	40,400	4.3%	40,500	4.3%	7.0%	2,220,187	1,938,334	1,765,290	7.4%

22	ibis Tokyo Shinjuku	Limited-service	Mid-price	206	Tokyo	39.3	7,243	8,013	10,200	4.0%	10,200	4.0%	1.9%	704,537	497,729	385,256	6.9%

23	ibis Styles Kyoto Station	Limited-service	Mid-price	215	Kyoto	10.8	6,600	6,675	11,600	4.3%	10,900	4.3%	1.8%	459,002	412,032	373,486	6.2%

24	ibis Styles Sapporo	Limited-service	Mid-price	278	Hokkaido	9.4	6,797	6,601	11,200	4.7%	11,200	4.7%	1.8%	661,063	525,459	442,798	7.7%

1. Property List (2/2)

(as of the end of December 2019)

										Appraisal Value			Revenue from		P/L from
							Acquisition		20th Period	20th Period
		Hotel Type	Grade	No. of		Age	Book Value		Real Estate	NOI	Real Estate	NOI Yield
No.	Property Name		Price	(as of June 30, 2019)	(as of December 31, 2019)	Investment
Guest	Location	(JPY MM)	Operation	(JPY1,000)	Operation	(actual)
(*1)	(*2)	(*3)	(JPY MM)	Appraisal		Appraisal		Ratio

		Rooms		(*5)			(JPY1,000)	(*7)	(JPY1,000)	(*8)
						(*4)			(*6)
								Value	CAP Rate	Value	CAP Rate	(*7)		(*7)
									(JPY MM)		(JPY MM)
25	Mercure Sapporo	Limited-service	Mid-price	285	Hokkaido	10.7	6,000	5,857	11,000	4.6%	11,000	4.6%	1.6%	797,832	523,042	430,996	8.7%

26	Mercure Okinawa Naha	Limited-service	Mid-price	260	Okinawa	10.4	3,000	2,887	7,760	4.6%	7,190	4.6%	0.8%	342,013	270,481	209,569	9.0%

27	the b ikebukuro	Limited-service	Mid-price	175	Tokyo	37.5	6,520	6,608	7,350	4.2%	7,350	4.2%	1.7%	356,173	328,770	296,705	5.0%

28	the b hachioji	Limited-service	Mid-price	196	Tokyo	33.4	2,610	2,699	2,790	5.1%	2,790	5.1%	0.7%	185,672	160,629	129,084	6.2%

29	the b hakata	Limited-service	Mid-price	175	Fukuoka	22.3	2,300	2,361	4,710	4.3%	4,610	4.3%	0.6%	228,379	215,725	194,131	9.4%

30	Hotel Francs	Full-service	Mid-price	222	Chiba	28.4	3,105	3,178	4,090	4.6%	4,140	4.6%	0.8%	300,000	237,023	193,824	7.6%

31	Mercure Yokosuka	Full-service	Mid-price	160	Kanagawa	26.2	1,650	1,658	3,000	4.6%	3,590	4.6%	0.4%	360,970	250,373	212,998	15.2%

32	Okinawa Marriott Resort & Spa	Resort	Upper-middle	361	Okinawa	14.9	14,950	15,106	18,700	4.9%	17,900	4.9%	4.0%	937,465	853,261	569,108	5.7%
	ACTIVE-INTER CITY HIROSHIMA
33	Full-service	Luxury	238	Hiroshima	9.3	17,320	17,436	21,700	4.5%	21,900	4.5%	4.6%	1,624,836	1,182,632	966,133	6.8%
(Sheraton Grand Hiroshima Hotel)

34	CANDEO HOTELS UENO-KOEN	Limited-service	Mid-price	268	Tokyo	10.0	6,705	6,652	7,630	4.0%	7,650	4.0%	1.8%	349,975	323,962	283,942	4.8%
	Oriental Hotel Fukuoka Hakata Station
35	Full-service	Upper-middle	221	Fukuoka	34.5	7,197	9,847	14,000	4.6%	15,300	4.6%	1.9%	740,062	494,731	(65,231)	6.9%
(*12)

36	Holiday Inn Osaka Namba	Limited-service	Mid-price	314	Osaka	11.4	27,000	27,126	27,200	4.3%	27,200	4.3%	7.2%	967,957	920,119	728,343	3.4%

37	HOTEL ASCENT FUKUOKA	Limited-service	Economy	263	Fukuoka	20.7	4,925	5,161	6,630	4.8%	6,620	4.8%	1.3%	447,198	302,154	266,423	6.1%

38	Hilton Nagoya	Full-service	Luxury	460	Aichi	30.9	15,250	15,651	16,000	4.2%	15,700	4.2%	4.1%	1,452,768	746,661	591,860	4.9%

39	Hilton Tokyo Narita Airport	Full-service	Upper-middle	548	Chiba	26.4	13,175	13,499	13,700	4.6%	13,700	4.6%	3.5%	912,491	826,763	621,261	6.3%

40	International Garden Hotel Narita	Full-service	Mid-price	463	Chiba	23.6	9,125	9,245	9,650	4.8%	9,660	4.8%	2.4%	604,422	560,153	422,311	6.1%

41	Hotel Nikko Nara	Full-service	Upper-middle	330	Nara	21.8	10,373	10,442	11,200	4.8%	10,900	4.8%	2.8%	625,869	576,007	434,069	5.6%
	Hotel Oriental Express Osaka
42	Limited-service	Mid-price	124	Osaka	1.9	2,738	2,829	3,050	4.6%	2,990	4.6%	0.7%	109,991	107,162	95,381	-
Shinsaibashi

43	Hilton Tokyo Odaiba	Full-service	Upper-middle	453	Tokyo	24.0	62,400	63,652	69,400	3.7%	69,500	3.7%	16.7%	2,264,830	2,261,016	2,075,257	-
Total or Average (43 properties)	-	-	11,705	-	21.8	374,508	374,314	522,960	4.5%	525,910	4.5%	100.0%	28,278,550	24,087,502	19,281,141	6.4%

(*1) Under the category of Hotel Type, "Full-service" is full-service hotel, "Resort" is resort hotel, and "Limited-service" is limited-service hotel.

(*2) Mainly based on ADR, etc., JHR has classified the hotels into four categories as "luxury," "upper-middle,""mid-price," and "economy."

(*3) Average age: Weighted average calculated as follows. The sum of (acquisition price of each property x property age)/total acquisition price.

(*4) The acquisition price in the Purchase & Sale Agreement for the Beneficial Interest in Trust, etc. is indicated. (Consumption tax, amount equivalent to consumption tax, brokerage fee, and other purchase-related costs are excluded.)

(*5) Book value as of the end of December 2019.

(*6) Investment ratio indicate percentage of the acquisition price of each asset to the total acquisition price. Numbers beyond one decimal place is rounded off.

(*7) Actual for one year from January to December 2019. Since the lessees did not agree to disclose numbers in units of JPY1,000 for No. 11 and 12, amounts are rounded down to the nearest JPY million. Since No.42 and 43 were acquired during the period, numbers after acquisition is indicated.

(*8) NOI yield for the portfolio is calculated as follows: Total NOI for FY12/2019 (actual) ÷ total acquisition price of properties held as of the end of FY12/2019. As No. 42 and 43 were acquired during the period, NOI yield (actual) is not calculated.

(*9) The number of guest rooms at Kobe Meriken Park Oriental Hotel was changed from 319 to 323 on December 30, 2019.

(*10) The name of the hotel was changed from Dormy Inn EXPRESS Asakusa on August 4, 2019.

(*11) The name of the hotel was changed from Hotel Sunroute Shinbashi on April 23, 2019.

(*12) The name of the hotel was changed from Hotel Centraza Hakata on April 9, 2019. The hotel grade was changed from "Mid-price" to "Upper-middle."

2. Summary of Lease Contracts (1/2)

(as of the end of December 2019)

Lease

Rent

Hotel Operator/

Lease/

Expiration

Contractual Rent

Rent Modification Summary

Rent Modification Schedule

No.

Property Name

Structure

Lessee

Hotel Consulting and

Date of

Rent Modification Summary

(After acquisition)

(2020 to 2021)

Type

(*2)

(*1)

Management Company

Term

Contract

Timing

Condition

2020

2021

Kobe Meriken Park Oriental Hotel

Oriental Hotel tokyo bay

Hotel Management Japan Co., Ltd.

(Fixed rent) JPY3,221MM/year +

Namba Oriental Hotel

Fixed-

Fixed + Variable

Dec. 2034

(Variable rent) When the total GOP of The

In principle, the same rent will be

Five HMJ Hotels exceeds GOP base

applied until expiration of the

Jan. 2020

Same

Renewed

Oriental Hotel Hiroshima

lease

amount (JPY3,351MM), the excess x 85%

contract.

is paid

Hotel Nikko Alivila

Okura Nikko Hotel

Management Co., Ltd.

The Beach Tower Okinawa

Fixed-

Fixed

Jun. 2026

JPY42MM/month

The same rent will be applied until

lease

expiration of the contract.

Hakone Setsugetsuka

Fixed-

Fixed

Oct. 2026

JPY24MM/month

The same rent will be applied until

lease

expiration of the contract.

Kyoritsu Maintenance Co., Ltd.

Dormy Inn Kumamoto

Fixed-

Fixed

Mar. 2023

JPY16MM/month

Rent can be modified through mutual

Apr. 2017

Same

Under

discussion

lease

agreement every three years.

(Apr.)

dormy inn・global cabin Asakusa

Lease

Fixed

Mar. 2020

JPY5MM/month

Rent can be modified through mutual

Apr. 2017

Same

To be expired

Hakata Nakasu Washington Hotel

agreement every three years.

(Mar.)

Lease

Fixed

Mar. 2021

JPY20MM/month

Rent can be modified through mutual

Apr. 2018

Same

To be expired

Plaza

agreement.

(Mar.)

Nara Washington Hotel Plaza

Lease

Fixed

Washington Hotel K.K.

Mar. 2020

JPY11MM/month

Rent can be modified through mutual

To be expired

agreement.

(Mar.)

R&B Hotel Ueno-hirokoji

Lease

Fixed

Apr. 2022

JPY8MM/month

Rent can be modified through mutual

Apr. 2011

Increased

agreement.

(+3.0%)

Comfort Hotel Tokyo Higashi

Fixed-

Fixed + Revenue

Rent can be modified through mutual

Same

Greens Co., Ltd.

Jan. 2028

JPY21MM/month + Revenue sharing

Apr. 2018

(Introduced

Nihombashi

lease

sharing

agreement every five years.

revenue sharing)

Smile Hotel Nihombashi

Lease

Fixed + Revenue

THE KAMOGAWA GRAND HOTEL, LTD

Mar. 2020

JPY11MM/month + Revenue sharing

Rent can be modified through mutual

Apr. 2017

Same

To be expired

Mitsukoshimae

sharing

agreement.

(Mar.)

Toyoko Inn Hakata-guchi Ekimae

Lease

Fixed

Toyoko Inn Co., Ltd.

Sep. 2031

JPY11MM/month

No rule has been stipulated.

Oct. 2007

Increased

(+9.4%)

Hotel Keihan Universal City

Lease

Fixed + Revenue

K.K. Hotel Keihan

Jun. 2021

Nondisclosure(*4)

Jul. 2014

Modified Structure

To be expired

sharing

(Jun.)

Fixed-

Solare Hotels &

Hotel GOP x 86%

Chisun Inn Kamata

Variable

SHR Hotels, Co., Ltd.

Dec. 2026

(If the amount is below zero, it will be

Jan. 2020

Same

Renewed

lease

Resorts Co., Ltd.

JPY0)

Hotel Vista Kamata Tokyo

Lease

Fixed + Revenue

In principle, the same rent will be

To be expired

Vista Hotel Management Co., Ltd.

Dec. 2021

JPY7MM/month + Revenue sharing

applied until expiration of the

Jul. 2015

Modified Structure

sharing

contract.

(Dec.)

Sotetsu Fresa Inn Shimbashi-

Fixed-

Fixed + Revenue

Sotetsu Hotel Development Co., Ltd.(*3)

Mar. 2023

JPY18MM/month + Revenue sharing

No rule has been stipulated.

Karasumoriguchi

lease

sharing

Hilton Tokyo Bay

Fixed-

Fixed + Revenue

THE DAI-ICHI

Hilton International

Dec. 2022

JPY163MM/month + Revenue sharing

Rent can be modified through

Jan. 2019

Renewed

lease

sharing

BUILDING CO., LTD.

Company

mutual agreement.

(Increased)

ibis Tokyo Shinjuku

Management

Jun. 2024

Amount equivalent to hotel GOP

Jul. 2012

Modified Structure

contract

ibis Styles Kyoto Station

Management

Dec. 2024

Amount equivalent to hotel GOP

contract

ibis Styles Sapporo

Management

AAPC Japan K.K.

Dec. 2024

Amount equivalent to hotel GOP

contract

Mercure Sapporo

Management

Sep. 2029

Amount equivalent to hotel GOP

contract

Mercure Okinawa Naha

Management

Apr. 2024

Amount equivalent to hotel GOP

contract

Mercure Yokosuka

Fixed-

Variable

AAPC Japan K.K.

Aug. 2024

Linked to hotel GOP

The same rent will be applied until

Aug. 2019

Renewed

lease

expiration of the contract.

(Effectively increased)

the b ikebukuro

Fixed-

Fixed + Variable

Ishin Ikebukuro Operations K.K.

Jan. 2022

JPY163MM/year + Linked to hotel GOP

The same rent will be applied until

lease

expiration of the contract.

the b hachioji

Fixed-

Fixed + Variable

Ishin Hachioji Operations, Y.K.

Jan. 2022

JPY98MM/year + Linked to hotel GOP

The same rent will be applied until

lease

expiration of the contract.

the b hakata

Fixed-

Fixed + Variable

Ishin Hakata Operations K.K.

Jan. 2022

JPY82MM/year + Linked to hotel GOP

The same rent will be applied until

lease

expiration of the contract.

the b suidobashi

Fixed-

Fixed + Variable

Ishin Suidobashi Operations K.K.

Dec. 2026

JPY85MM/year + Linked to hotel GOP

The same rent will be applied until

Jan. 2020

Conditions changed

Renewed

lease

expiration of the contract.

(Increased)

2. Summary of Lease Contracts (2/2)

(as of the end of December 2019)

Lease

Rent

Hotel Operator/

Lease/

Expiration

Contractual Rent

Rent Modification Summary

Rent Modification Schedule

No.

Property Name

Structure

Lessee

Hotel Consulting and

Date of

Rent Modification Summary

(After acquisition)

(2020 to 2021)

Type

(*2)

(*1)

Management Company

Term

Contract

Timing

Condition

2020

2021

Hotel Francs

Fixed-

Fixed

K.K. Bridal Produce

Oct. 2024

JPY25MM/month

The same rent will be applied until

lease

expiration of the contract.

Fixed-

(Fixed rent) JPY550MM/year +

In principle, the same rent will be

To be expired

32 Okinawa Marriott Resort & Spa

Fixed + Variable

Lagoon resort Nago Co., Ltd.

Dec. 2020

(Variable rent) When the total GOP

applied until expiration of the

lease

exceeds GOP base amount (JPY700MM),

(Dec.)

the excess x 90% is paid

contract.

Fixed-

K.K. A.I.C Hiroshima

Luxury Hotels

(Fixed rent) JPY348MM/year +

In principle, the same rent will be

ACTIVE-INTER CITY HIROSHIMA

Fixed + Variable

(Variable rent) When the total GOP

International of Hong

Dec. 2026

applied until expiration of the

(Sheraton Grand Hiroshima Hotel)

lease

Management

Kong Limited

exceeds GOP base amount (JPY468MM),

contract.

the excess x 82.5% is paid

CANDEO HOTELS UENO-KOEN

Fixed-

Fixed

Candeo Hospitality Management, Inc.

Feb. 2030

Nondisclosure(*4)

Rent can be modified through mutual

Jul. 2016

Nondisclosure(*4)

lease

agreement every three years.

Oriental Hotel Fukuoka

Fixed-

(Fixed rent) JPY425MM/year +

In principle, the same rent will be

Fixed + Variable

Hotel Centraza Co., Ltd.

Dec. 2034

(Variable rent) When the total GOP

Conditions changed

applied until expiration of the

Jan. 2020

Renewed

Hakata Station

lease

exceeds GOP base amount (JPY442MM),

(Increased)

the excess x 98% is paid

contract.

Fixed-

(Fixed rent) JPY576MM/year +

In principle, the same rent will be

Holiday Inn Osaka Namba

Fixed + Variable

OW Hotel Operations KK

Oct. 2031

(Variable rent) When the total GOP

applied until expiration of the

lease

exceeds GOP base amount (JPY650MM),

the excess x 92.5% is paid

contract.

(Fixed rent) ① JPY17MM per month from

HOTEL ASCENT FUKUOKA

Fixed-

Fixed

K.K.ASCENT.

Mar. 2026

April 1, 2019 to April 30, 2019,

Rent can be modified through mutual

Apr. 2019

Renewed

② JPY20MM per month from May 1, 2019

lease

agreement every three years.

(Increased)

to March 30, 2020, ③ JPY22MM per month

from April 1, 2020 to March 31, 2026

Hilton Nagoya

Lease

Variable

Nagoya Hilton Co.,

Hilton International

Dec. 2029

Nondisclosure(*4)

Rent can be modified through mutual

Ltd.

Company

agreement.

Hilton Tokyo Narita

Fixed-

(Fixed rent) JPY444MM/year +

In principle, the same rent will be

Fixed + Variable

KK NaritaKosuge Operations

Jun. 2037

(Variable rent) When the total GOP

applied until expiration of the

Airport

lease

exceeds GOP base amount (JPY550MM),

the excess x 86.5% is paid

contract.

Fixed-

(Fixed rent) JPY336MM/year +

In principle, the same rent will be

40 International Garden Hotel Narita

Fixed + Variable

KK NaritaYoshikura Operations

Jun. 2027

(Variable rent) When the total GOP

applied until expiration of the

lease

exceeds GOP base amount (JPY360MM),

the excess x 98% is paid

contract.

Fixed-

Hotel Management

Okura Nikko Hotel

(Fixed rent) JPY420MM/year +

In principle, the same rent will be

To be expired

Hotel Nikko Nara

Fixed + Variable

Dec. 2020

(Variable rent) When the total GOP

applied until expiration of the

lease

Co., Ltd.

Management Co., Ltd.

exceeds GOP base amount (JPY470MM),

(Dec.)

the excess x 91.5% is paid

contract.

Hotel Oriental Express Osaka

Fixed-

(Fixed rent) JPY110MM/year +

In principle, the same rent will be

Fixed + Variable

K.K. HOTEL ORIENTAL EXPRESS

Mar. 2028

(Variable rent) When the total GOP

applied until expiration of the

Shinsaibashi

lease

exceeds GOP base amount (JPY128MM),

the excess x 91% is paid

contract.

(Fixed rent) JPY3,100MM/year, JPY1,600MM/year on and after January 1, 2022

(Variable rent)

Until December 31, 2019: When AGOP(*5)

	Fixed-			exceeds AGOP base amount	In principle, the same rent will be
43 Hilton Tokyo Odaiba	Fixed + Variable	Tokyo Humania Enterprise Inc.	11 Dec. 2029 (JPY2,450MM), the excess x 30% is paid	applied until expiration of the	-	-	-	-
	lease			• On and after January 1, 2020: When	contract.
				AGOP exceeds AGOP base amount
				(JPY2,970MM), the excess x 30% is paid
				• On and after January 1, 2022: When
				AGOP exceeds AGOP base amount
				(JPY1,660MM), the excess x 98% is paid

(*1) Rent structure is as follows:	(*2)	Amount including car park and CAM without tax
Fixed: Fixed rent	(*3)	The lessee is changed to Sotetsu Hotel Management CO., LTD. on May 1, 2019.
Variable: Variable rent	(*4)	The detailed content of the contract is not disclosed as consent on disclosure has not been obtained from the lessee.
Management contract: Management contract	(*5)	AGOP (adjusted GOP) is the amount calculated by subtracting certain fees and other items from GOP.
Fixed + Variable: Property paying both fixed and variable rent	(*6)	The conditions of the new contracts are stated for the following properties which contracts were expired on and
Fixed + Revenue sharing: When the sales of the hotel exceed pre-determined amount, additional rent is paid		before December 31, 2019 and the new contracts were signed or renewed, and started from January 1, 2020:
		No.1-5, 17, 30, 35
	46

3. Major CAPEX Ⅲ by Hotels

* (Numbers in parentheses are CAPEX amounts: JPY MM)

	FY12/2012	FY12/2013	FY12/2014	FY12/2015	FY12/2016	FY12/2017	FY12/2018	FY12/2019	FY12/2020 Plan


					Guest rooms on 7F		Private rooms at	Restaurant (30)	Conversion of space
Kobe Meriken					(50)
					restaurant and	Conversion of brides'	of backyard to
Park Oriental	-	-	-	Chapel (36)	Balconies on each	Bridal salon (76)
balcony, etc. on 3F	room to guest	guest rooms
Hotel					floor (62)		(19)	rooms (40)	(120)
					Bar (85)
Oriental Hotel
-	Restaurant	-	-	Guest rooms on 4F	-	Guest rooms on 11F	-	-
tokyo bay	(45)	(101)	to 12F (140)

Namba Oriental		Corner rooms			Guest rooms on 9F	Guest rooms on	Guest rooms on 6F
-	on 5F to 8F	-	-	-	-
Hotel	(91)	7F (77)	(78)
	(10)

			Guest rooms on 3F to		Guest rooms on 9F		Guest rooms on 1F,
Hotel Nikko			8F of North building
-	-	-	(55)	-	etc.	-	-
Alivila	and 3F to 5F of
			Restaurant (31)		(16)
			central building (333)

Oriental Hotel			Banquet room on 23F		Guest rooms on			Guest rooms on 13F	Guest rooms on
-	-	-	7F to 10F (43)	-	Chapel (10)	17F to 18F (14)
Hiroshima	(10)	Banquet room on 4F	to 14F (14)	Increase number of

					(38)				seats in café (8.5)
Ibis Tokyo	Lobby and				Guest rooms on	Guest rooms on
restaurant on 2F,	-	-	-	-	-	-
Shinjuku	and guest rooms	3F to 10F (192)	3F to 10F (312)

	on 3,5,7,9F (170)
Holiday Inn							Guest rooms on	Guest rooms on
-	-	-	-	-	-	10F to 11F (72)	-
Osaka Namba	4,6,7,12F (115)	Guest rooms on

ibis Styles								8F to 9F (72)
-	-	-	-	-	-	Vacant space on 1F	-	-
Sapporo	(28)

Mercure Hotel	-	-	-	-	-	-	Banquet room (15)	-	-
Sapporo

the b Ikebukuro	-	-	-	-	-	-	Guest rooms on	-	-
3F to 10F, etc. (18)
Okinawa Marriott
-	-	-	-	-	-	-	Restaurant (142)	-
Resort & Spa

Oriental Hotel	-	-	-	-	-	-	-	Large-scale	-
Fukuoka	renovation works
Hakata Station								(1,690)
Hilton Tokyo									Banquet room (92)
-	-	-	-	-	-	-	-	Large-scale
Odaiba	renovation works

									(3,000)

4. The Five HMJ Hotels - Highlights

Change in GOP and GOP ratio

	(JPY MM)	GOP	GOP ratio
	10,000										45%
										7,765	8,033
	8,000								6,941	7,591	7,793	7,546
	6,296					6,155	6,302
	6,000	5,136	5,696	5,158	5,645						35%

									34.2%	33.7%
	4,000									31.8%	32.8%	32.2%
								29.9%
GOP	27.0%		26.6%		26.5%	28.0%	28.3%					25%ratioGOP
2,000		25.5%
	24.3%

	0	CY2008	CY2009	CY2010	CY2011	CY2012	CY2013	CY2014	CY2015	CY2016	CY2017	CY2018	CY2019	15%
		CY2020
														(forecast)

Change in KPI

	(JPY)		ADR	RevPAR	OCC				87.7%	88.4%	91.0%	89.9%	90.5%	88.8%	100%
	25,000	77.9%	77.8%		80.4%	76.7%	82.7%	86.1%	86.9%
		73.8%							21,067
ADR・RevPAR							20,153	19,856			80%
									19,212	22,197	22,135
20,000	17,970	18,463						17,551		60%
17,197				17,297				19,954			OCC
	15,980		16,200				19,066	19,664
			15,846			17,807	18,060	40%
15,000									16,843
	14,367					14,886	15,245						20%
		13,999				13,400
		12,696	12,845	12,160
	10,000											0%
	CY2007	CY2008	CY2009	CY2010	CY2011	CY2012	CY2013	CY2014	CY2015	CY2016	CY2017	CY2018	CY2019	CY2020

															(forecast)

Namba Oriental Hotel is planned to close the entire building and suspend its hotel operation due to the large-scale renovation from November 2020 through March 2021. Stating the figures reflecting the impact of the suspension of hotel sales for the fiscal year ending December 2020.

5. Portfolio Map

Total Assets

Limited-service hotel

JPY374.5Bn	Full-service hotel

		Resort hotel

No. of Hotels

(as of February 20, 2020)

43 Hotels

No. of

Guest Rooms

11,705 Rooms

3 17 36 42

11 16

29 35 37

4 33

32 6

24 25

2 30

7 39 40

3121

38
12 41	Tokyo 23 wards

	27		13	34
						10

		9


22						14

		15


		20


					43

Kobe Meriken Park	Oriental Hotel	Namba	Oriental Hotel Hotel Nikko Alivila	The Beach	Hakone	Dormy Inn
Oriental Hotel			tokyo bay	Oriental Hotel Hiroshima			Tower Okinawa	Setsugetsuka	Kumamoto

9		10			11		12		13	14	15	16	17	18

the b

dormy inn・

Hakata Nakasu Nara Washington R&B Hotel

Comfort Hotel

Smile Hotel

Toyoko Inn

Hotel Keihan

Chisun Inn

suidobashi

global cabin

Washington

Hotel Plaza

Ueno-hirokoji Tokyo Higashi

Nihombashi

Hakata-guchi

Universal City

Kamata

Asakusa

Hotel Plaza

Nihombashi

Mitsukoshimae

Ekimae

Hotel Vista

Sotetsu Fresa

Hilton Tokyo Bay

ibis Tokyo

ibis Styles

Mercure

the b ikebukuro

Kamata Tokyo

Inn Shimbashi-

Shinjuku

Kyoto Station

Sapporo

Okinawa Naha

Karasumoriguchi

the b hachioji

the b hakata

Hotel Francs

Mercure

Okinawa Marriott

ACTIVE-INTER CITY

CANDEO

Oriental Hotel

Yokosuka

Resort & Spa

HIROSHIMA (Sheraton

HOTELS

Fukuoka

Grand Hiroshima Hotel)

UENO-KOEN

Hakata Station

Acquisition in 2019

Holiday Inn	HOTEL ASCENT	Hilton Nagoya Hilton Tokyo	International	Hotel Nikko Nara Hotel Oriental Hilton Tokyo Odaiba
Osaka Namba	FUKUOKA	Narita Airport	Garden Hotel	Express Osaka
			Narita	Shinsaibashi

Appendix 3

Investors Composition and Investment Unit Price

1. Major Unitholders and Classifications of Unitholders

	Top 10 Major Unitholders
As of the end of June 2019	As of the end of December 2019

Rank	Name	No. of Units	%(*)
1	The Master Trust Bank of Japan, Ltd. (Trust)	721,861	16.17
2	Japan Trustee Service Bank, Ltd. (Trust)	531,521	11.91
3	J.P. Morgan Bank Luxembourg S.A. 384500	337,322	7.55
4	The Nomura Trust and Banking Co., Ltd. (Investment Trust)	195,422	4.37
5	Trust and Custody Services Bank, Ltd.	131,797	2.95
(Securities Investment Trust)
	122,142	2.73
6	BNYM AS AGT Clients 10 PERCENT
7	State Street Bank and Trust Company 505223	64,452	1.44
8	State Street Bank West Client-Treaty 505234	64,127	1.43
9	Shikoku Railway Company	56,989	1.27
10	CBNY DFA International Real Estate Securities Portfolio	54,823	1.22
	Total	2,280,456	51.10

Rank	Name	No. of Units	%(*)
1	The Master Trust Bank of Japan, Ltd. (Trust)	697,102	15.62
2	Japan Trustee Service Bank, Ltd. (Trust)	526,839	11.80
3	J.P. Morgan Bank Luxembourg S.A. 384500	334,947	7.50
4	The Nomura Trust and Banking Co., Ltd. (Investment Trust)	213,302	4.78
5	BNYM AS AGT Clients 10 PERCENT	140,401	3.14
6	Trust and Custody Services Bank, Ltd.	134,779	3.02
(Securities Investment Trust)
	59,918	1.34
7	State Street Bank West Client-Treaty 505234
8	Shikoku Railway Company	56,989	1.27
9	JPMorgan Securities Japan Co., Ltd.	52,951	1.18
10	Japan Securities Finance Co., Ltd.	46,600	1.04
	Total	2,263,828	50.73

(*) The total units held by each investor to the total units issued by JHR as of the end of June 2019 and the end of December 2019 respectively. (Rounded off to two decimal places.)

Owners of the Investment Units

As of the end of June 2019							As of the end of December 2019
Owners	No. of	No. of	No. of Investors	No. of Units		Owners		No. of	No. of	No. of Investors	No. of Units
Investors	Units	0.4%	1.2%			8.0%		Investors	Units	0.5%	1.1%	9.1%


Individuals & Others	28,383	358,329		1.2%					Individuals & Others	29,670	406,900		1.2%
Financial Institutions	138	1,930,626							Financial Institutions	155	2,090,477
(Incl. Securities Firms)							(Incl. Securities Firms)
				46.1%								41.4%
Other Domestic Firms	352	113,176			43.2%	Other Domestic Firms	357	113,795
Foreign Firms &								Foreign Firms &						46.8%
370	2,060,216							392	1,851,175

Individuals	97.0%					Individuals	97.0%

Total	29,243	4,462,347	2.5%		Total	30,574	4,462,347	2.5%

				Individuals &			Financial Institutions		Other Domestic			Foreign Firms &

				Others			(Incl. Securities Firms)		Firms			Individuals

Percentage of investors is percentage of owners in each segment to the total number of investors in JHR, and percentage of investment units is percentage of investment units owned by each segment to the total investment units issued as of respective date (both rounded off to one decimal place).

2. Changes in Investment Unit Price and Market Capitalization

Changes in the investment unit price

and market capitalization

Jun. 2015

Jan. 2016

Jun. 2017

Jan. 2019

(Based on the closing price)

Market Capitalization

PO(*2) JPY10.7Bn

PO(*2) JPY14.6Bn

PO(*2) JPY18.6Bn

PO(*2) JPY33.3Bn

Price of the investment unit:

(JPY)

(JPY MM)

Investment Unit Price of JHR

Jan. 2015

Jul. 2016

JPY73,100

120,000

450,000

(*2)

Total market capitalization:

JPY15.6Bn

JPY34.7Bn

100,000

JPY326.1Bn

Apr. 2013

Sep. 2014

(Based on the closing price of January 31, 2020)

80,000

PO JPY20.5Bn

PO JPY10.1Bn

300,000

(*1)

Price of the real estate investment securities

Sep. 2012

may fall depending on the fluctuations of

60,000

PO(*2) JPY5.0Bn

price of the real estate under management

or profitability, etc., and investors may

40,000

150,000

suffer losses. Investors may also suffer

losses through the bankruptcy or

deteriorated financial condition of the issuer.

20,000

With reference to the risk of investment in

JHR units, please see Securities Report

dated March 20, 2019 and Midterm

Securities Report dated September 18, 2019.

(*2)

Including OA

Comparison with

600

Investment Unit Price of JHR

TSE REIT Index

TOPIX

REIT Index and TOPIX of 500

Tokyo Stock Exchange

(TSE)

400

(*)

100 is the closing price of JHR unit, REIT

index and TOPIX at TSE dated April 2, 2012.

300

REIT Index of TSE is an index of a weighted

average of the market capitalization of all

REITs listed on TSE.

200

100

Appendix 4

Summary of the Asset Management Company

1. Summary of the Asset Management Company

Company	Japan Hotel REIT Advisors Co., Ltd.
Location	Ebisu Neonato 4F, 4-1-18 Ebisu, Shibuya-ku, Tokyo 150-0013
Establishment	August 10, 2004
Capital	JPY300MM as of December 31, 2019
Shareholders	Rockrise Sdn Bhd, Kyoritsu Maintenance Co., Ltd., ORIX Corporation
Representative Director	Hisashi Furukawa
	Building Lots and Buildings Transaction Business Operator, Governor of Tokyo (4) No. 83613
	Discretionary Transaction Agent by Minister of Land, Infrastructure, Transport and Tourism No. 38
Registration and Licenses	Financial Instruments Trading Company, Director-General of Kanto Local Finance Bureau No. 334
	Member of The Investment Trusts Association, Japan
	Member of The Japan Investment Advisers Association

	Shareholders' Meeting

				Auditor


		Board of Directors' Meeting
Investment (and			Compliance Committee

Operation) Committee

		Representative Director
				Compliance Office

Investment Division

Operations Division

Acquisitions

Public REIT

Private Fund

Planning

Finance

Accounting &

Personnel and

Reporting

Administration

2. Features and Governance of the Asset Management Company

Mission Statement

"Provide attractive hotel investment opportunities to investors as specialist in investment and management of hotel assets. Gain trust from our stakeholders, and contribute to local communities and society through investing and managing hotel assets."

Code of Conduct

As an independent asset management company, all employees and officers at JHRA should have a "spirit of challenge" aiming to constantly provide high added value.

Also, "teamwork" is inevitable to provide high added value.

JHRA recognizes "challenge" and "teamwork" as essential value which our code of conduct is based upon.

	Challenge		Teamwork

Be a self-starter, take initiative and demonstrate drive
Set high goal and strive
Respect creativity and innovation
Promote challenge, free from fear of failure

Respect teamwork and collaborate with team-mates
Respect others. Respect values and opinions of others
Promote "sharing" (idea, knowledge, information, goal, achievement, joy of achievement, lesson, etc.)
Make effort for open, frank and sincere communication

2. Features and Governance of the Asset Management Company (cont.)

Advanced Expertise

Ability to propose transaction scheme, execute transaction, and plan and execute unprecedented measures of asset management based on in-depth understanding of hotel operation and track record of such asset management.
Extensive experience of renovation and rebranding through collaboration with many hotel lessees and hotel operators.
Strong and long-term relationships with a large number of hotel lessees and hotel operators.
High analytical skills and accurate judgement capacity based on rich information and data obtained through a broad network and high credibility.

Ensured Independence

No employee of JHRA is a seconded employee from sponsor.
Part-timedirectors from our main sponsor, SC CAPITAL PARTNERS group and non-sponsor-relatedfull-time directors each account for half of JHRA's board of directors.
With regard to transactions with sponsor-related parties and JHR, JHRA has set strict decision-making rules.
In principle, in addition to obtaining approval by Compliance Committee which includes an outside specialist, who is authorized to dismiss proposals, JHRA is required to obtain approval from JHR's board of directors' meetings (directors are all third-party members who do not have any relationship with the sponsor-related parties).
As our main sponsor, SC CAPITAL PARTNERS group is also an independent asset management company, it fully understands and respects importance of JHRA's independency. JHRA conducts asset management business based upon its own judgement.

Disclaimer

This material is prepared and provided solely for the purpose of providing information and not to offer, solicit, or do business, etc. with specific products including purchase of investment units, investment unit subscription rights, or investment corporation bonds of Japan Hotel REIT Investment Corporation ("JHR") or any other particular products. If any discrepancy is identified between this translation and the Japanese original, the Japanese original shall prevail.

This material is neither a disclosure document nor an investment report required under or prepared pursuant to the Financial Instruments and Exchange Act, Act on Investment Trusts and Investment Corporations and related government ordinances, Cabinet Office regulations, listing rules by Tokyo Stock Exchange, Regulations of The Investment Trusts Association, Japan, or other related rules and regulations.

This material contains forward-looking statements about financial conditions, operational results, and businesses of JHR, as well as plans and intentions of JHR and its asset management company, Japan Hotel REIT Advisors Co., Ltd ("JHRA"). Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or performance of JHR to materially differ from those expressed or implied forecasts. Those forecasts are made based on JHR's present and future business strategies and assumptions relating to the political and economic circumstances surrounding JHR in the future.

Every effort has been made to ensure the accuracy of the information contained in this material. However, there can be no assurance that the information is accurate, complete, appropriate or fair. The information may be revised or retracted without prior notice.

Regarding the offering and trading of investment units, investment unit subscription rights or investment corporation bonds, financial institutions may charge you pre-determined handling fees and other charges aside from the price of the investment units, investment unit subscription rights or investment corporation bonds. Since neither JHR nor JHRA handles the offering and trading of investment units, investment unit subscription rights or investment corporation bonds, please ask financial institutions for the amount, upper limit, and calculation methods of such fees and other charges.

JHR mainly invests in real estate-related assets, primarily hotels which are subject to change in values. Therefore, unitholders, holders of investment unit subscription rights and investment corporation bonds may suffer losses due to economic conditions of the real estate market or securities market, economic situations including interest rate environment, the nature of investment units, investment unit subscription rights, and investment corporation bonds, dependency on mechanisms and related persons of investment corporations, changes in legal systems related to real estate (include tax regulations, building regulations and others), damage caused to the real estate-related assets by natural disasters, fluctuation in prices or profitability of the real estate-related assets, nature of the trust beneficiary rights under management, delisting of the investment units, or worsening financial position or insolvency of JHR. For details, please refer to the Articles of Incorporation, Securities Registration Statement, Annual Securities Report and Extraordinary Report, etc. of JHR.

The contents of this material may not be copied or reproduced without our prior permission.

Japan Hotel REIT Advisors Co., Ltd.

Financial Instruments Trading Company

Director-General of Kanto Local Finance Bureau No. 334

Member of The Investment Trust Association, Japan

Member of The Japan Investment Advisers Association

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Japan Hotel REIT Investment Corporation published this content on 20 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 February 2020 08:41:31 UTC

Delayed Japan Exchange Other stock markets 01:22:20 2024-04-25 am EDT			5-day change	1st Jan Change
82,000 ^JPY	+2.63%		+3.27%	+18.50%

Mar. 28	Japan Hotel REIT Investment Fixes Rates for Two Loans; Executes Interest Rate Swaps	MT
Mar. 25	Japan Hotel REIT Investment Corporation Reports Sales Results for the Month and Year to Date Ended February 2024	CI

Japan Hotel REIT Investment Corporation

Equities

8985

JP3046400002

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Japan Hotel REIT Investment : Financial Results Briefing for the Fiscal Year Ended December 31, 2019 (January 1, 2019-December 31, 2019)

Latest news about Japan Hotel REIT Investment Corporation

Chart Japan Hotel REIT Investment Corporation

Company Profile

Income Statement Evolution

Ratings for Japan Hotel REIT Investment Corporation

EPS Revisions

Quarterly earnings - Rate of surprise

Sector Hospitality REITs

Japan Hotel REIT Investment Fixes Rates for Two Loans; Executes Interest Rate Swaps	Mar. 27	MT
Japan Hotel REIT Investment Corporation Reports Sales Results for the Month and Year to Date Ended February 2024	Mar. 25	CI
Japan Hotel Reit Investment Corporation Announces Operating Results for the Month and Year to Date Ended February 2024	Mar. 25	CI
Japan Hotel REIT Investment Gets New Borrowings Worth 30.99 Billion Yen	Mar. 21	MT
Japan Hotel REIT Investment Corporation Announces New Loans	Mar. 21	CI
3,700 Units of Japan Hotel REIT Investment Corporation are subject to a Lock-Up Agreement Ending on 20-MAR-2024.	Mar. 19	CI
Japan Hotel REIT Investment Establishes Green Finance Framework	Feb. 01	MT
Japan Hotel REIT Investment Raises 2023 Earnings Forecast	Jan. 24	MT
Japan Hotel REIT Investment Terminates Unitholder Benefit Program	Jan. 24	MT
Japan Hotel REIT Secures 800 Million Yen Refinancing	Jan. 24	MT
Japan Hotel REIT Investment Corporation Announces Notice Concerning New Loan (Refinancing)	Jan. 23	CI
Japan Hotel REIT Investment Corporation Revises Dividend Guidance for the Year Ended December 31, 2023 and Provides Dividend Guidance for the Year Ending December 31, 2024	Jan. 23	CI
Japan Hotel REIT Investment Corporation Revises Earnings Guidance for the Fiscal Year Ended December 31, 2023	Jan. 23	CI
Japan Hotel REIT Investment Corporation Provides Earnings Guidance for the Six Months and Full Year of Fiscal Year Ending December 31, 2024	Jan. 23	CI
Japan Hotel REIT Investment Corporation Reports Sales Results for the Month and Year to Date Ended December 2023	Jan. 23	CI
Japan Hotel REIT Completes Acquisition of Yokohama Property	Dec. 26	MT
Japan Hotel REIT Investment Corporation acquired Hotel JAL City Kannai Yokohama.	Dec. 21	CI
Certain Units of Japan Hotel REIT Investment Corporation are subject to a Lock-Up Agreement Ending on 21-DEC-2023.	Dec. 20	CI
Japan Hotel REIT to Borrow 4 Billion Yen to Fund Yokohama Hotel Transaction	Dec. 17	MT
Japan Hotel REIT Investment Corporation Announces New Loans	Dec. 15	CI
Japan Hotel REIT Clarifies Scope of Yokohama Property Acquisition	Dec. 12	MT
Increased International Visitors Boost Revenue for Japan Hotel REIT Investment Amid Pandemic Recovery	Nov. 26	MT
Japan Hotel REIT Investment Corporation Announces Operating Results for the Month and Year to Date Ended October 2023	Nov. 24	CI
Japan Hotel REIT Investment Corporation signed a purchase and sale agreement to acquire Hotel JAL City Kannai Yokohama for ¥4 billion.	Nov. 06	CI
Japan Hotel REIT Investment Corporation Announces Operating Results for the Month and Year to Date Ended September 2023	23-10-25	CI

	1st Jan change	Capi.
JAPAN HOTEL REIT INVESTMENT CORPORATION	+18.50%	2.39B
VICI PROPERTIES, INC.	-10.82%	29.66B
HOST HOTELS & RESORTS, INC.	-0.72%	13.6B
GAMING AND LEISURE PROPERTIES, INC.	-11.96%	11.8B
RYMAN HOSPITALITY PROPERTIES, INC.	-1.97%	6.39B
APPLE HOSPITALITY REIT, INC.	-8.07%	3.7B
PARK HOTELS & RESORTS INC.	+9.74%	3.53B
CAPITALAND ASCOTT TRUST	-8.59%	2.51B
COVIVIO HOTELS	-7.62%	2.4B
SUNSTONE HOTEL INVESTORS, INC.	-1.86%	2.14B