Nippon Accommodations Fund : Financial Results for the Fiscal Period from September 1, 2021 to February 28, 2022

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April 19, 2022

Financial Results for the Fiscal Period from September 1, 2021 to February 28, 2022

Nippon Accommodations Fund Inc. (NAF) is listed on the Tokyo Stock Exchange (J-REIT) with the securities code number 3226. (Website:https://www.naf-r.jp/english/)

Executive Director:	Takashi Ikeda
Investment Trust
Management Company:	Mitsui Fudosan Accommodations Fund Management Co., Ltd.
President and CEO:	Hiroshi Kojima
Inquiries:	Tetsuji Kawakami, Director and Chief Financial Officer
Tel: [phone]

Scheduled Filing Date of Securities Report: May 31, 2022

Scheduled Commencement Date of Cash Distribution Payment: May 16, 2022

1. Business Results for the Fiscal Period from September 1, 2021 to February 28, 2022

(1) Operating Results

(in millions of yen, rounded down; except as noted)

Total revenues

Operating incomeIncome before income taxes

(%)*

(%)*

(%)*

For the period ended

February 28, 2022

August 31, 2021

12,217 11,986

1.9 3.7

5,726 5,428

5.5 3.1

5,279 4,978

6.0 2.4

Net income

Net income Net income/ per unit net assets

Income before income taxes/ total assets

Income before income taxes/ operating income

(%)*

(yen)

(%)

(%)

(%)

For the period ended

February 28, 2022

August 31, 2021

5,278 4,978

6.0 2.4

10,485 9,887

3.5 3.3

1.6 1.5

43.2 41.5

* Percent figures show changes from previous period.

(2) Distributions

(in millions of yen, rounded down; except as noted)

Distribution Total per unit distributions (not including (not including distributions in distributions inexcess of earnings)excess of earnings)

Distribution in excess of earnings per unit

Total distributions in Payout ratio Distributions/

excess of earningsnet assets

(yen)

(yen)

(%)

(%)

For the period ended

February 28, 2022

August 31, 2021

10,485 10,035

5,278 5,052

- -

- -

100.0 3.5

101.5 3.3

(Note)Distribution per unit for the fiscal period ended August 31, 2021 is calculated by dividing ¥5,052 million (retained earnings of ¥4,978 million plus reversal of reserves for reduction entry of ¥74 million) by the total number of investment units issued.

(3) Financial Position

(in millions of yen, rounded down; except as noted)

Total assets

Net assets

Net assets/ total assets

Net assets per unit

(%)

(yen)

As of

February 28, 2022

August 31, 2021

326,050 327,824

151,153 150,926

46.4 300,222

46.0 299,772

(4) Cash Flows

(in millions of yen, rounded down; except as noted)

Cash flows from	Cash flows from	Cash and cash
investing activities	financing activities	equivalents
For the period ended
February 28, 2022	(684)	(7,087)	13,821
August 31, 2021	(20,482)	4,925	14,297

Cash flows from operating activities

7,296 7,171

2. Forecasts for the Fiscal Period from March 1, 2022 to August 31, 2022 and

Fiscal Period from September 1, 2022 to February 28, 2023

(in millions of yen, rounded down; except as noted)

Distribution

per unitTotal revenuesOperating incomeIncome before income taxes

Net income

(not including distributions in excess of earnings)

Distribution in excess of earnings per unit

(%)*

(%)*

(%)*

(%)*

(yen)

(yen)

For the period ending

August 31, 2022

12,248

February 28, 2023 12,219

0.3 (0.2)

5,497 (4.0) 5,630 2.4

5,041 (4.5) 5,166 2.5

5,040 (4.5) 5,165 2.5

10,010 10,260

- -

* Percent figures show changes from previous period.

Note:

The net income per unit projections for the fiscal period ending August 31, 2022 and the fiscal period ending February 28, 2023 are ¥10,010 and ¥10,260, respectively.

3. Other

• 1. Changes in significant accounting policies, Changes in accounting estimates and Restatement

  • (1) Changes in significant accounting policies due to revisions in accounting standards and others: Yes

  • (2) Changes other than in the above item (1): None

  • (3) Changes in accounting estimates: None

  • (4) Restatement: None

• 2. Total number of investment units issued

  • (1) The total number of investment units issued (including treasury investment units) as of the period-end

As of February 28, 2022:

As of August 31, 2021:

503,472 units 503,472 units

• (2) The number of treasury investment units as of the period-endAs of February 28, 2022:

As of August 31, 2021:

- units - unitsDisclaimer:

The above forecasts are based on information currently available to NAF and on certain assumptions deemed to be reasonable. Actual operations may differ substantially due to a number of factors. Accordingly, the forecasts are not a guarantee of any cash distribution amount.

32nd Period (February 2022) Overview of Investment

Main Trend of NAF

NAF is a J-REIT that invests in "Accommodation Assets," which it defines as real estate that is mainly used/may be used for residence or hotels. Based on the Act on Investment Trusts and Investment Corporations (hereinafter "Investment Trust Act"), NAF was established on October 12, 2005, and was listed on the Real Estate Investment Trust Securities Market (J-REIT Market) of the Tokyo Stock Exchange on August 4, 2006 (securities code number: 3226).

Since being listed, NAF has continued to acquire properties and the assets under management at the end of the period under review consisted of 134 properties at a total acquisition price of ¥337,930 million (assets at time of listing: 27 properties at a total acquisition price of ¥101,385 million).

Investment Environment

During the six months ended February 28, 2022 (the "32nd Period"), the Japanese economy showed signs of recovery, despite the continuing severe situation due to the impact of the novel coronavirus disease (COVID-19). Personal consumption showed signs of recovery even in the consumption of services such as eating out and travel due to the lifting of the declaration of a state of emergency and progress in vaccination, while exports, corporate performance, and capital investment also recovered against the backdrop of an economic recovery both in Japan and abroad. However, in the latter half of the period, the rapid spread of new strains of COVID-19 and the implementation of priority preventative measures in many prefectures, etc. resulted in a stall in the recovery of personal consumption.

In NAF's main investment area, the residential rental market, tenant leasing activities normalized and occupancy rates in major areas remained steady even though the spread of the infections continued.

In the real estate trading market, transactions were carried out in a proactive manner as demand from investors with regard to rental apartments, where occupancy and revenue is stable, was steady.

External Growth (Acquisition and sale of properties)

No properties were acquired during the period under review, and NAF's assets under management at the end of the period under review were unchanged from the end of the previous period.

Internal Growth (Management and operation of properties held by NAF)

In this environment, as a result of Mitsui Fudosan Residential Lease Co., Ltd., the property management company of NAF, and Mitsui Fudosan Accommodations Fund Management Co., Ltd., the asset management company of NAF, properly collaborating and working on management and operation of NAF's rental apartments portfolio, occupancy rates for rental apartments were 96.6% at the end of the period under review, and rent change before and after turnover maintained an upward trend at 0.8% at the time of tenant turnover. In addition, NAF aims to reduce costs by utilizing the merits of outsourcing all property management tasks to the property management company while examining, whenever necessary, the adequacy of the grade of property management, cost of management and operation.

Meanwhile in the management of "Hospitality Facilities" (Note), NAF has concluded long-term contracts regarding fixed rents to a professional operator or business corporation in order to aim for stable rental revenue. Regarding the circumstances of each property, despite the continuing difficult situation for hotels, dormitories and corporate housing as well as senior residences have been stably occupied in general. In addition, the asset management company regularly monitors the management and operational activities, and makes adjustments through professional dialog with the operator or business corporation as necessary.

In order to maintain and improve the competitiveness of NAF's portfolio, operations, such as appropriate renewal work according to the property age, and work to enhance the property value, are systematically carried out, and in the period under review, NAF carried out facility upgrades to air-conditioning facilities, etc. and renovations in private areas at Okawabata Apartment Communities, etc. In addition, NAF is not only making continuous efforts to reduce costs, but also introducing such features as environmentally friendly, energy-saving facilities, which includes changing the lighting in common areas to LED lighting, in a timely manner.

(Note) "Hospitality Facilities" is a generic term for "Accommodation Assets" that includes the four categories of

"Dormitories, Corporate Housing," "Serviced Apartments," "Senior Residences," and "Hotels," excluding "Rental Apartments."

Financial Strategy (Overview of funds procurement)

NAF's basic policy is to carry out operations in a conservative manner that gives consideration to such matters as maintaining stable distributions in the medium and long term. In the period under review, NAF continued to pursue financing from various sources with diversified repayment dates and an emphasis on long-term, fixed-rate loans in its procurement of funds by taking into account market trends and interest rate levels, and refinancing existing loans. In addition, a total of ¥4,000 million in investment corporation bonds were issued in September 2021, and the procured funds were used as the funds for partial repayment of borrowings that had come due.

As a result, at the end of the period, total interest-bearing debt amounted to ¥167,500 million (¥2,000 million decrease from previous period), the long-term debt ratio was 98.8%, the long-term, fixed-rate debt ratio was 96.4%, and the loan-to-value (LTV) ratio was 51.4%. The average remaining maturity of long-term interest-bearing debt was 4.9 years and the number of financial institutions was 26. Furthermore, the weighted average interest rate at the end of the period was 0.51%.

NAF also has secured a commitment line for the purpose of securing flexible and stable fund procurement methods. At the end of the period under review, its total maximum borrowing amount was ¥15,000 million.