This English translation is provided for information purposes only. If any discrepancy is identified between thistranslation and the Japanese original, the Japanese original shall prevail.
August 25, 2021

Midterm Financial Report for the Fiscal Year Ending December 31, 2021
(January 1, 2021 – June 30, 2021)
Japan Hotel REIT Investment Corporation
Listing:
Securities code:
URL:
Representative:

Tokyo Stock Exchange8985
https://www.jhrth.co.jp/en/
Kaname Masuda, Executive Director

Asset Management Company:
Representative:
Contact:

Japan Hotel REIT Advisors Co., Ltd.
Hisashi Furukawa, Representative Director and President
Noboru Itabashi,Managing Director, Director of the Board, Head of Operations Division
Phone: +81-3-6422-0530

Scheduled date to file midterm Securities Report:

September 22, 2021

Preparation of supplementary material on midterm financial report:
Schedule for presentation of midterm financial results:

Yes
Yes (Institutional investors and analysts only)(Amounts are rounded down to the nearest million yen)

1. Status summary of operation and assets for the midterm of the fiscal year ending December 31, 2021
(January 1, 2021 - June 30, 2021)(1) Operating results(Percentages: full year—changes from the previous year, midterm period—changes from the previous midterm period)

Operating revenue
JPY1M
%
4,589
(17.1)
5,536(56.5)

Midterm period ended
June 30, 2021
June 30, 2020
Fiscal year ended
December 31, 2020

Midterm period ended
June 30, 2021
June 30, 2020
Fiscal year ended
December 31, 2020

13,838(51.1)

Operating income
JPY1M
%
(699)
325
(95.5)
3,176(81.5)

Ordinary profit (loss)
JPY1M%(1,488)
(550)
1,398

(90.9)Net income (loss)
JPY1M%(1,488)
(551)
1,527

(90.0)Net income for current
midterm period per unit
JPY
(333)
(123)
342

(Note) Net income for current midterm period per unit is calculated based on the period-average number of investment units issued.

(2) Financial position
Midterm period ended
June 30, 2021
June 30, 2020
Fiscal year ended
December 31, 2020

Total assets
JPY1M
395,554398,827400,296

Net assets
JPY1M
218,306
219,427

Equity ratio
%
55.2
55.0

Net assets per unit
JPY
48,87049,173

221,201

55.3

49,570(Note) Net assets per unit are calculated based on the total number of investment units issued and outstanding at the end of the midterm period / full year.

- 1 -(3) Cash flows

Cash flows fromoperating activities

Cash flows frominvesting activities

Cash flows fromfinancing activities

Cash and cash equivalents
at end of period/year

Midterm period ended

JPY1M

JPY1M

JPY1M

JPY1M

June 30, 2021
June 30, 2020
Fiscal year ended
December 31, 2020

(760)
5,085

(1,025)(2,264)(1,541)(16,455)

25,22520,70813,747(3,077)(16,461)

28,553

2. Operating forecast for the fiscal year ending December 31, 2021
(January 1, 2021 – December 31, 2021)(Percentages show changes from the previous year)
Operating revenue

Operating income

Ordinary profit

Net income

Dividend per unit
(Excess of earnings
exclusive)

Dividend per unit
resulting fromexcess of earnings

%
%
%
%
JPY
JPY
JPY1M
JPY1M
JPY1M
JPY1M
Full year(Note)
It has been difficult to reasonably estimate the performance of hotels due to the spread of the infection by COVID-19. Because the share of variable
rents and income from management contract that are linked to the performance of hotels in JHR’s earnings is large, operating forecast and forecast of
dividend for the fiscal year ending December 31, 2021 (January 1, 2021 to December 31, 2021) are withdrawn and left as undetermined.

* Other(1) Changes in accounting policies, changes in accounting estimates, and restatement of financial statements for prior period after
error corrections(a) Changes in accounting policies due to revisions to accounting standards and other regulations: No change(b) Changes in accounting policies due to other reasons than above (a): No change(c) Changes in accounting estimates: No change(d) Restatement of financial statements for prior period after error corrections: No change(2) Total number of investment units issued and outstanding(a) Total number of investment units issued and outstanding at the end of the midterm period / full year(including investment units owned by Japan Hotel REIT Investment Corporation (hereinafter referred to as “JHR”))
As of June 30, 2021
4,467,006 units
As of June 30, 2020

4,462,347 units

As of December 31, 2020(b) Number of JHR’s own investment units held at the end of the midterm period / full year
As of June 30, 2021

4,462,347 units
0 units

As of June 30, 2020

0 units

As of December 31, 2020

0 units(Note) For the number of investment units serving as the basis of computation of net income per unit, please refer to “Notes on per unit information” on page 29.

* Status of midterm audit procedures

Midterm financial report is not subject to audit procedures by accountants.

* Appropriate use of forecasts of results and other special items

Forward-looking statements presented in this midterm financial report including operating forecasts are based on information
currently available to us and on certain assumptions we deem to be reasonable. As such, actual operating and other results may
differ materially from these forecasts due to a number of factors.

- 2 -○Table of Contents

1. Operating results................................................................................................................................................................................... 4(1) Operating results .............................................................................................................................................................................. 4(2) Material events related to going concern assumption .................................................................................................................... 13
2. Semi-annual financial statements ....................................................................................................................................................... 14(1) Semi-annual balance sheets............................................................................................................................................................ 14(2) Semi-annual statements of income ................................................................................................................................................. 16(3) Semi-annual statements of changes in net assets ........................................................................................................................... 17(4) Semi-annual statements of cash flows............................................................................................................................................ 19(5) Notes on going concern assumption............................................................................................................................................... 20(6) Notes on matters concerning significant accounting policies......................................................................................................... 20(7) Notes to semi-annual financial statements ..................................................................................................................................... 21(8) Changes in total number of investment units issued and outstanding ............................................................................................ 31
3. Reference information ......................................................................................................................................................................... 32(1) Information on values of assets under management, etc. ............................................................................................................... 32(2) Status of capital expenditures ........................................................................................................................................................ 45- 3 -1. Operating results(1) Operating results(A) Overview of the midterm period under review(a) Brief history and principal activities
Japan Hotel REIT Investment Corporation (JHR) was established under the Act on Investment Trusts and Investment
Corporations (Act No. 198 of 1951, as amended; hereinafter referred to as the “Investment Trusts Act”) on November 10,
2005, and was listed on the Real Estate Investment Trust (REIT) section of the Tokyo Stock Exchange (Securities code:8985) on June 14, 2006.
JHR entrusts asset management to Japan Hotel REIT Advisors Co., Ltd. (hereinafter referred to as the “Asset Management
Company”). Focusing on importance as social infrastructure and profitability as investment real estate of hotels, JHR
primarily invests in real estate which are wholly or partially used as hotels or real estate equivalents of such real estate or
related assets that are backed by such real estate or real estate equivalents (hereinafter referred to as “Real Estate for Hotels,Etc.”).
JHR, the former Nippon Hotel Fund Investment Corporation, merged with Japan Hotel and Resort, Inc. with an effective
date of April 1, 2012 (hereinafter referred to as the “Merger”), and changed its name to Japan Hotel REIT Investment
Corporation. Since the Merger, JHR has carried out nine public offerings for capital increase and continuously acquired“highly competitive hotels” in mainly “strategic investment areas” where domestic and inbound leisure demand can be
expected over the medium to long term.
By implementing the aforementioned growth strategy, JHR has expanded its asset size while improving the quality of its
portfolio through new property acquisitions of 26 properties amounting to ¥275,160 million (acquisition price basis) intotal in the little more than nine years since the Merger through the end of the midterm period under review (June 30, 2021).
Furthermore, in March 2021, JHR conducted issuance of new investment units through a third-party allotment with SC JREIT Investments GK, which belongs to the Sponsor Group (Note) as the allottee, aiming to strengthen its financial base as
well as relationship with lender financial institutions. As a result, JHR had a portfolio of 42 properties with a combined
acquisition price of ¥370,031 million. The total number of investment units issued stood at 4,467,006 units at the end of themidterm period under review.
(Note) The Sponsor Group refers to the SC CAPITAL PARTNERS group, which is the main sponsor (shareholder) of the Asset Management
Company. The same shall apply hereinafter in this document.

(b) Investment performance for midterm period under review
The Japanese economy in the midterm period under review (six-month period from January 1, 2021 to June 30, 2021)
continued to be severe in some regions despite ongoing recovery as a whole amid the still severe situation due to the impact
of state-of-emergency declarations, stricter measure to prevent the spread of the virus, etc. implemented in line with the
spread of COVID-19.
The domestic accommodation and tourism market was heavily impacted by the low number of foreign visitors to Japan(hereinafter referred to as “inbound visitors”), which was estimated to be 96,000 in the first half of 2021 (-97.6% from thesame period of the previous year; -99.4% from the same period of 2019), due to travel restrictions to Japan from various
countries, etc., as well as the worsening of the COVID-19 situation, resulting in sluggish domestic demand. Accordingly,
the cumulative number of overnight guests at domestic accommodation facilities in the first half of 2021 fell by 16.4%
from the previous year (or by 56.3% from 2019) to 124 million guest nights (preliminary release).
As to the performance of hotels owned by JHR under these circumstances, RevPAR (Note 1) of The 24 hotels with Variable
Rent, etc. (Note 2) for the midterm period under review fell below the figures of the same period of the previous year due
to the impact of the spread of COVID-19, however, GOP (gross operating profit) slightly exceeded the figures of the same
period of the previous year.
Under such circumstances, JHR maintained, as it did in the previous year, close communication with the lessees andoperators of its respective hotels and worked to secure hotel earnings through reduction of operating costs, etc. In particular,
after discussions and investigations with JHR, Hotel Management Japan Co., Ltd. (hereinafter referred to as “HMJ”), a
group company of the Asset Management Company, and its subsidiaries (hereinafter collectively referred to as the “HMJ
- 4 -Group”), have continued to implement large-scale restructuring of labor costs, outsourcing costs and other costs since lastyear.
In addition, JHR changed lessees and conducted rebranding during the midterm period under review in order to improve
hotel operations and increase earnings as follows.
In January 2021, for Chisun Hotel Kamata (former name: Hotel Vista Kamata Tokyo), JHR changed lessees and conductedrebranding after terminating the existing lease contract. In addition, In June 2021, for Hotel Oriental Express Fukuoka
Tenjin (former name: HOTEL ASCENT FUKUOKA), JHR changed the lessee to the HMJ Group and conductedrebranding. More efficient operations can be carried out through sharing of human resources and back offices with the HMJ
Group Hotels located in the surrounding areas. Furthermore, expecting an improvement in ADR (Note 3) through therebranding, the grade of the hotels has been changed from economy to mid-price. JHR has adopted a rent scheme thatcombines fixed rent and variable rent in the lease contract with the HMJ Group. Under the scheme, the rent burden ratio
has risen compared with the former lease contract, and thus the amount of rent JHR will receive during the market recovery
period is expected to increase.
On the other hand, JHR made a drastic review of its capital expenditures, including postponement of large-scale renovation
work planned for the fiscal year ending December 2021, and worked to reduce costs under such cost items as real estate
operating costs and general and administrative expenses through discussions with related parties. For further details of sales,
GOP and other management indicators for The 24 hotels with Variable Rent, etc., please refer to “<Reference Information>
Hotel operation indexes, sales and GOP (gross operating profit)” on page 12.
(Note 1)

RevPAR represents revenue per available room, which is calculated by dividing revenue of the rooms department for a certain period(including service charge) by the total number of rooms available for sale during the period. The same shall apply hereinafter in thisdocument.

(Note 2)The hotel group combining the hotels which JHR leases to HMJ (Kobe Meriken Park Oriental Hotel, Oriental Hotel tokyo bay, Namba
Oriental Hotel, Hotel Nikko Alivila and Oriental Hotel Hiroshima, (hereinafter referred to as the “Five HMJ hotels”)), with the hotels
which JHR leases to HMJ subsidiaries (Okinawa Marriott Resort & Spa, Sheraton Grand Hiroshima Hotel (main facility of ACTIVEINTER CITY HIROSHIMA), Oriental Hotel Fukuoka Hakata Station, Holiday Inn Osaka Namba, Hilton Tokyo Narita Airport,
International Garden Hotel Narita, Hotel Nikko Nara, Hotel Oriental Express Osaka Shinsaibashi, and Hilton Tokyo Odaiba, totaled 14
hotels, are referred to as the HMJ Group Hotels. Although the lessee of Hotel Oriental Express Fukuoka Tenjin was changed to a
subsidiary of HMJ on June 18, 2021, it is not included in the HMJ Group Hotels in the midterm period under review. The 24 hotels with
Variable Rent, etc. refers to the HMJ Group Hotels plus ibis Tokyo Shinjuku, ibis Styles Kyoto Station, ibis Styles Sapporo, Mercure
Sapporo, Mercure Okinawa Naha, Mercure Yokosuka, the b suidobashi, the b ikebukuro, the b hachioji and the b hakata. The same shallapply hereinafter in this document.

(Note 3)

ADR represents average daily rate, which is calculated by dividing revenue for rooms for a certain period (including service charges) by
the total number of rooms sold during the period. The same shall apply hereinafter in this document.

(c) Funding status
In the midterm period under review (six-month period from January 1, 2021 to June 30, 2021), JHR procured ¥300 million
through third-party allotment with the Sponsor Group as the allottee in March 2021 with the aim to strengthen its financialbase as well as relationship with lender financial institutions, and JHR took out loans of ¥6,800 million in total to refinanceexisting borrowings that were due for repayment in the same month. In addition, JHR took out loans of ¥935 million in
total to refinance existing borrowings that were also due for repayment in June 2021.
Consequently, as of the end of the midterm period under review, the balance of interest-bearing debt totaled ¥168,754
million, including short-term loans payable of ¥19,582 million, current portion of long-term loans payable of ¥14,900
million, long-term loans payable of ¥92,672 million, current portion of investment corporation bonds of ¥1,500 million andinvestment corporation bonds of ¥40,100 million, and the ratio of interest-bearing debt to total assets (Note) at end of themidterm period stood at 42.7%. The ratio of fixed interest rate to total interest-bearing debt at the end of the midterm period
was at 87.0%.
(Note)

Ratio of interest-bearing debt to total assets at end of the midterm period = Balance of interest-bearing debt at end of the midterm
period ÷ Total assets at end of the midterm period × 100- 5 -As of the end of the midterm period under review, JHR’s issuer ratings were as follows.
Rating agency

RatingOutlookJapan Credit Rating Agency, Ltd. (JCR)

A+

Negative

Rating and Investment Information, Inc. (R&I)

A

Negative(d) Financial results
As a result of the abovementioned asset management, operating revenue, operating loss, and ordinary loss were ¥4,589
million, ¥699 million, and ¥1,488 million, respectively, for the midterm period under review (six-month period fromJanuary 1, 2021 to June 30, 2021). Net loss for the midterm period under review was ¥1,488 million. Variable rent from thehotels with variable rent leased to the HMJ Group Hotels in the amount of ¥437 million is included in operating revenue,
but this amount is calculated based on the GOP of the HMJ Group Hotels for the midterm period under review. The
variable rent to be ultimately received from the HMJ Group Hotels will be determined by the full-year GOP (12-month
period) of each hotel of the HMJ Group Hotels.
JHR settles accounts on an annual basis and investment corporations do not have a system for interim dividends under theInvestment Trusts Act. Accordingly, no distribution of earnings can be made in the midterm period under review.
Distribution of earnings is made based on the earnings for the full year (12-month period from January 1, 2021 to
December 31, 2021). With regard to such distribution of earnings, in accordance with the policy that earnings exceeding
90% of JHR’s distributable profit as defined by Article 67-15 of the Act on Special Measures Concerning Taxation (Act No.
26 of 1957; as amended; hereinafter called “the Act on Special Measures Concerning Taxation”) will be distributed.
(B) Outlook for the second half of the fiscal year(a) Investment policies and issues to be addressed
The Japanese economy is expected to recover due to the progress of vaccine rollout and such, although severe condition
may continue due to the impact of the spread of the infection by COVID-19 pandemic. The domestic accommodation andtourism market are also forecast to remain in a harsh environment for the time being due to the number of inbound visitorsand domestic tourists continuing to remain low. However, JHR believes that when the infection status improves with more
vaccinations, domestic tourism demand will enter a phase of recovery.
JHR will discuss, investigate and implement with lessees and operators a variety of measures, such as reducing operating
costs through review of operations at each hotel, maintaining necessary employment, handling cash management, andimplementing sales measures in response to new demand including “staycation” and “workation.” Especially for the hotels
with variable rent, etc. centering on the HMJ Group Hotels, JHR will endeavor to maximize GOP of each hotel and thus
maximize the rent JHR can receive as a result.
In addition, if JHR receives requests for rent reduction, etc. from the lessees that have been impacted by the spread of
COVID-19, etc., JHR will examine what has been requested from respective lessees, the details of the existing lease
contracts with them, rent levels compared with the market rent, the possibility to collect the reduced rent portion in the
future, and their financial conditions. By doing so, JHR will respond to requests individually after discussing with eachlessee and operator, while carefully considering the possibility of replacing operators.
On the other hand, given the large potential demand for overseas tourism globally and in particular, due to the improvement
in income levels in Asian countries as well as the popularity of Japan as a travel destination, JHR believes that
accommodation demand from inbound visitors will recover over the medium to long term. As such, there is no change inthe view of JHR that the accommodation and tourism market will expand over the medium to long term. On the belief thatthe location and competitiveness of individual hotels as well as the capabilities of operators (the ability to differentiate fromother hotels, improve profitability including cost management and capture recovering demand, etc.) will lead todifferentiation of performance among hotels, JHR will continue to implement strategies to differentiate its hotels as it hasdone to date.

- 6 -In the meanwhile, as a result from the spread of COVID-19, contactless new behavior patterns such as web conferencing,etc. have spread, and these may cause structural changes in the hotel industry, for instance, a reduction in banquet demand,
etc. JHR will work more closely than ever with hotel lessees and operators to respond to environmental changes. Under therecognition of such circumstances, JHR intends to work with the Asset Management Company to implement strategies todifferentiate hotels owned by JHR in the market by utilizing the experience it has cultivated as a J-REIT specializing inhotel investment, and manage assets based on the approach described below.
Internal Growth
JHR will work to secure “stability” mainly with fixed rent contracts, while at the same time aim for “upside potential” ofhotel revenue through implementation of active asset management strategies which proactively pursue greater profitability
and asset value in properties by way of a variety of measures such as expanding international brands and coordinating withHMJ.
For properties with fixed-rent contracts, JHR will continue to focus on setting and maintaining appropriate rents based onrent levels in the market where respective hotels are located or each tenant’s creditworthiness and ability to bear the rent
costs, and aiming at raising rents (including introduction of a revenue-sharing structure) in accordance with the conditionsof the accommodation market while appropriately respond to requests for reduction of fixed rent from lessees which was
greatly affected by COVID-19.
For hotels under variable rent contracts and under a management contract structure, JHR is working to increase variable
rent and reduce management contract fees by implementing the active asset management strategy.
In July 2021, for Oriental Hotel Universal City (former name: Hotel Keihan Universal City), JHR changed the lessee to the
HMJ Group and conducted rebranding. More efficient operations will be carried out through sharing of human resources
and back offices with the HMJ Group Hotels located in the surrounding areas. Furthermore, JHR aims to maximize revenue
from the hotel in the recovery period of domestic demand as a theme park hotel adjacent to Universal Studios Japan. JHR
has adopted a rent scheme that combines fixed rent and variable rent in the lease contract with the HMJ Group. Under thescheme, the rent burden ratio has risen compared with the former lease contract, and thus the amount of rent JHR will
receive during the market recovery period is expected to increase.
In addition, with Okinawa Marriott Resort & Spa, JHR also plans to conduct rebranding in October 2021 in line with theexpiration of the franchise contract. The HMJ Group will remain as the lessee after the rebranding, and the name will bechanged to Oriental Hotel Okinawa Resort & Spa. The HMJ Group is the largest strategic operator for JHR, and it has
deployed its branding strategy of “Oriental Hotels & Resorts” since this year in order to further strengthen its effort tocapture business and leisure demand in both domestic and overseas markets. JHR believes that, with the branddevelopment by the HMJ Group, the “Oriental Hotel” brand, of which trademark rights are held by JHR, will also gain
more recognition and it is expected to increase in hotel revenue, leading to an increase in rent JHR receives, and that will
result in improvement of the revenue of JHR’s overall portfolio.
i) Properties under variable rent contracts
JHR works to enhance the profitability of its properties under variable rent contracts through its active asset management
strategy. JHR has adopted world-leading international brands such as Hilton, Sheraton, Mercure and Holiday Inn as well as
leading brands in Japan including Oriental Hotel and Hotel Nikko that are operated in various areas throughout the country
and, together with excellent operators, aims to increase variable rent, etc. through improved performance of these hotels.
JHR coordinates with the operators in an effort to enhance hotel performance by requesting them to implement marketing
initiatives to attract a wider range of demand with considerations given to recovery of leisure demand from domestic andinbound visitors, measures to maintain and increase room rates, and realization of synergy effects like cost reductions fromoperating multiple properties, among other efforts.

- 7 -On the other hand, under the impact of the spread of COVID-19, recovery in hotel performance is expected to take time. To
cope with such a situation, JHR will closely cooperate with the lessees and operators of respective hotels to promote drastic
reform of the earnings structure through cost-cutting measures centered on thoroughly enhancing efficiency of theoperating system, while continuing efforts on consideration for the health of guests and employees of respective hotels andenvironmental sanitation management. JHR will also promote various measures to restore hotel earnings, such as thecreation of appropriate products in response to major changes in the market environment and the preparation of hotel
facility environments.
Moreover, JHR will strive to recover and improve hotel earnings by implementing strategic capital expenditure (CAPEX)
as necessary through accurately grasping the conditions in the domestic accommodation and tourism market, and changing
customers’ needs.
ii) Properties under fixed rent contracts
JHR will monitor operating conditions of these hotels appropriately, pay careful attention to each lessee’s creditworthinessand ability to bear the cost of rent, and pursue efforts to set and maintain reasonable rent, while appropriately responding torequests from lessees for reduction of fixed rent, which was greatly affected by COVID-19. In addition, JHR willcontinuously execute investment to maintain and renew facilities and equipment in order to ensure each hotel becomesprominent in the market and to maintain and enhance asset value.
External Growth
In terms of external growth strategy, JHR believes that domestic and inbound leisure demand will recover over the medium
to long term and will continue targeting acquisition of highly competitive Real Estate for Hotels, Etc. (Hotel Assets) inareas which can expect “domestic and inbound leisure demand” over the medium to long term as it has done to date. In
addition, JHR will build a portfolio which can secure stable revenues with future growth potential in mind in order toachieve upside gains.
Upon acquiring properties, JHR will focus on infrastructure aspects of the relevant Hotel Assets such as buildings andfacilities, services aspects such as the credibility of the hotel lessee and operator (including the ability of the hotel lessee tobear the cost of rent) as well as operation and management capabilities, and the properties’ locational superiority thatserves as the base for stability in demand and growth potential.
Specifically, JHR will aim to invest in “full-service hotels” and “resort hotels” that pose barriers to new opening due tosuch factors as operation and management know-how required for operating the hotels and limitations in terms of invested
capital and location. As for “limited-service hotels,” JHR emphasizes the credibility and operation capabilities of the hotel
lessee and operator as well as the building age, location, guestroom composition, profitability, etc. of the properties.
Moreover, JHR will take a particularly selective approach to hotels specialized for accommodation and of a budget type(low price zone) that mainly offers single rooms and where the source of competitiveness relies only on prices.

- 8 -In the hotel investment market, although hotel transactions had remained stagnant due to a sense of uncertainty over thedomestic accommodation and tourism market stemming from the impact of COVID-19, transactions, including those
involving large properties, have gradually started to take place since the beginning of 2021. Furthermore, there is apossibility of an increase in special investment opportunities unlike before, such as sales of assets due to rapid deteriorationin the financial position of operators, sales of hotels which are non-core assets due to deterioration in main businessperformance, sales of hotels completed or scheduled to be completed without operators, etc. JHR will flexibly deal withsuch investment opportunities by utilizing the efficient hotel operation platform of HMJ and such. Moreover, over the
medium to long term, JHR believes that, along with the spread of COVID-19 coming to an end and accompanying
recovery of domestic accommodation demand including that from inbound visitors, many investors who have been on thesideline may resume investment in hotels, and competition over acquisition may become more active. Going forward,
while closely monitoring market trends from many angles and responding to changes in earnings structures of hotels andthe investment environment according to circumstances through leveraging its strengths and advantages, JHR will work to
expand asset size that accompanies improvement of the portfolio quality through flexibly to acquire highly competitive
properties, while utilizing the HMJ platform as necessary. Considering the uncertainty of the impact of COVID-19 and of
the outlook for the hotel market environment, JHR intends to be careful with property acquisition for the time being, fromthe standpoint of procurement of new funds for property acquisition. In addition, from the standpoint of financial
soundness, JHR will also consider asset replacement accompanying property disposition as necessary.
Finance Strategy
As the impact of the spread of the infection by COVID-19 prolongs and the outlook of earnings remains uncertain, JHR
will focus on the enhancement of financial stability and soundness more than before and intends to maintain and enhance
the relationship of trust with financial institutions with which it does business through close communication and such.
Specifically, JHR will work to securely achieve refinancing of existing borrowings while paying attention to financing
costs and maintaining good relationships with respective lenders. In addition, JHR will secure liquidity on hand in an effort
to strengthen its financial foundation through appropriate control of capital expenditures, necessary property disposition,etc. It aims to conduct financial operations by keeping the ratio of interest-bearing debt to total assets at no larger than 50%
as in the past. In addition, when seeking new borrowing for property acquisitions, JHR will work to disperse the maturity
dates of its debt as well as further reinforce its base of lenders and further diversify funding methods, such as issuance ofinvestment corporation bonds (including green bonds), while considering the balance with the funding costs.
Policy on Handling of Negative Goodwill
JHR has conducted appropriation for dividends through reversal of reserve for temporary difference adjustment inconnection with partial amendments to the “Ordinance on Accounting of Investment Corporations (Cabinet Order No. 47
of 2006, as amended)” and the “Regulation for Real Estate Investment Trusts and Real Estate Investment Corporations” of
The Investment Trusts Association, Japan since the fiscal year ended December 31, 2017 (18th period). JHR stipulated apolicy to reverse ¥262 million (hereinafter called the “50-year amortization amount of negative goodwill”), which is anamount equivalent to 2% (1/50) of the balance of the reserve for temporary difference adjustment for the fiscal year ended
December 2017, to pay out as dividends, with the balance of the reserve for temporary difference adjustment remaining at
the time of reversal set as the maximum reversal amount (Note).
Furthermore, in cases of incurrence of losses caused by property dispositions, impairment loss of assets, dilution ofdividend per unit due to the issuance of new investment units through public offerings, etc., loss on retirement of
noncurrent assets, depreciation of trademark right, and suspension of sales and such due to large-scale renovations withsignificant impact on revenues, JHR stipulated a policy to reverse additional portion of the negative goodwill on top of the
50-year amortization amount of negative goodwill (¥262 million) (Note).
(Note) The policy may change due to a resolution of the board of directors, and it does not guarantee the way to reverse the reserve for temporary
different adjustment and specific amounts, etc., for the future.

- 9 -Initiatives for Sustainability
In recent years, the risks and opportunities of ESG (Environment, Social and Governance) issues have grown in importancein the investment management industry from the standpoint of long-term sustainability. JHR recognizes that conducting
real estate investment management based on consideration for ESG is important to maximize unitholder value and tofurther raise the attractiveness of JHR. In addition, JHR believes that it is indispensable to establish favorable relationships
with its stakeholders including unitholders, hotel guests, lessees, operators, business partners including property managers,etc., local communities, officers and employees of the Asset Management Company and others and to fulfill our social
responsibilities expected from each of them.
In order to put such ideas into practice, JHR, along with the Asset Management Company, has established a “Sustainability
Policy” as guidance to ESG initiatives. We have promoted efforts to reduce environmental impact at properties in our
portfolio based on this policy, and received the Building-Housing Energy-efficiency Labeling System (BELS) evaluationfor Hotel Nikko Alivila and Mercure Okinawa Naha in February 2018 as first such cases for hotel properties owned by a JREIT (Note 1). In September 2018, JHR became the first J-REIT specializing in hotels to be recognized by GRESB (Note2) for its environmental awareness and sustainability initiatives, and acquired “Green Star” in the GRESB Real Estate
Assessment for three consecutive years thereafter. Moreover, JHR was selected as a Sector Leader of Asian Hotel Sector in
the GRESB Real Estate Assessment conducted in 2020. In April 2020, Hilton Tokyo Odaiba acquired CASBEE
Certification for Buildings, the first such recognition for an existing hotel property. In June 2021, Oriental Hotel Fukuoka
Hakata Station also acquired CASBEE (Comprehensive Assessment System for Built Environment Efficiency)
Certification for Buildings, the second case of such for an existing hotel following Hilton Tokyo Odaiba. Going forward,
JHR will continue to actively promote enhancement of its initiatives on a variety of sustainability issues.
Furthermore, JHR issued green bonds in July 2019 to allocate funds mainly to refinancing of loans procured for funding
capital expenditures and constructions cost, etc. for equipment which contribute to environment, including reduction of
CO2 and water consumption in the renovation work at Oriental Hotel Fukuoka Hakata Station. It was the first case of a JREIT specializing in hotels issuing green bonds. Of the funds procured from the green bonds, the remaining funds,
excluding the repayment of such loans, were used to fund renovation work at other hotels, and during the midterm period
under review, JHR allocated funds to construction costs for reduction of CO2, etc. at four hotels including Hilton Nagoya.
As a result, the funds procured from the green bonds have fully appropriated for eligible projects and there is no
unappropriated balance.
In addition, as an effort under the expanding spread of COVID-19, JHR worked together with the lessees to provide a totalof seven hotels which it owns as facilities to accept patients with mild or no symptoms who do not require hospitaltreatment among the patients infected with COVID-19 from last year through the date of this document. JHR also provided
restaurants and banquet rooms in Oriental Hotel tokyo bay and Hotel Nikko Nara as venues for vaccination for specified
occupation and local residents. Furthermore, the HMJ Group has been also promoting vaccinations to its employees whowish to be vaccinated so that hotel guests can use the hotels safely with peace of mind.
Recognizing its social responsibility towards local communities as a J-REIT specializing in hotels, JHR will proactively
carry out social contribution activities capitalizing on the characteristics of the hotel sector and each hotel.
(Note 1) Investigated by the Asset Management Company based on public information.
(Note 2) GRESB, which stands for Global Real Estate Sustainability Benchmark, is an annual benchmarking program to evaluate Environment,
Social and Governance (ESG) awareness of real estate companies and funds. It evaluates initiatives for sustainability of real estatecompanies, REITs and real estate funds, not of individual properties. The GRESB Rating makes relative assessment based on total scores,
with 5 Stars being the highest ranking.

(b) Significant subsequent events
Not applicable- 10 -c) Operating forecast
As the impact of COVID-19 pandemic continues, including the extension of the state of emergency issued by thegovernment, it is difficult at the moment to reasonably estimate the earnings of hotels through December 2021. Because
JHR’s earnings are affected by variant rents linked to the earnings of hotels and income from management contracts, it is
not possible to reasonably estimate an operating revenue for the full year ending December 2021 (22nd Period) at the
moment.
Therefore, the operating forecast for the full year of the fiscal year ending December 31, 2021 (22nd Period) announced in“Financial Report for the Fiscal Year Ended December 31, 2020 (January 1, 2020 – December 31, 2020),” dated February
25, 2021 will be withdrew and left as undetermined at this time. JHR will disclose the operating status as soon as it
assesses the impact on its performance and rational calculation becomes possible going forward.
Full year of the fiscal year ending
December 31, 2021

Forecast this time

Previous forecast

Variance

Operating revenue

TBD¥13,920 million－

Operating income

TBD¥2,715 million－

Ordinary profit (loss)

TBD¥879 million－

Net income (loss)

TBD¥877 million－

Dividend per unit

TBD

¥270

－

Dividend per unit resulting
from excess of earnings

TBD

－

－

(22nd period)(Note)

The forecast figures above are the current forecasts calculated based on certain assumptions. As such, actual
operating revenue, operating income, ordinary profit (loss), net income (loss), dividend per unit and dividend
per unit resulting from excess of earnings may vary due to changes in the circumstances. Furthermore, theforecasts are not intended to guarantee any dividend amount.

- 11 -

<Reference Information> Hotel operation indexes, sales and GOP (gross operating profit)
The numeral figures are based on figures obtained from hotel lessees, etc. Please note that these figures have not been audited nor havethey gone through other procedures. No guarantee is made as to the accuracy or completeness of the figures and information.
The operating forecast for the second half and full year of the fiscal year ending December 31, 2021 (22nd Period) is not statedbecause they are undecided at this time.
ADR and RevPAR are rounded off to the nearest yen. Sales and GOP are rounded off to the nearest million yen. Occupancy rate andcomparison with the previous period are rounded off to one decimal place.
<1> HMJ Group Hotels
Fiscal year ending
December, 2020
Comparison

Resultwith previous
periodOccupancy
Rate

ADR

RevPAR

Sales(JPY 1M)
GOP(JPY 1M)

Fiscal year ending December, 2021
PreviousFirst half

forecast

resultComparison with

Comparison withthe previous

the previous

periodforecast

First half of the year

33.1%

(52.2pt)

36.4%

27.7%

(5.4pt)(8.7pt)Second half of the year

38.4%

(49.5pt)

68.3%

－

－

－

Full year

35.8%(50.8pt)

52.5%

－

－

－

First half of the year

15,222(13.4%)

14,906

13,048(14.3%)(12.5%)

Second half of the year

16,814(14.4%)

19,590－－－

Full year

16,081(13.7%)

17,979－－－First half of the year

5,045

(66.4%)

5,428

3,618

(28.3%)(33.3%)

Second half of the year

6,460

(62.6%)

13,379－－－Full year

5,757(64.3%)

9,436

－

－

－

First half of the year

9,167

(61.9%)

9,443

8,313

(9.3%)(12.0%)

Second half of the year

11,978(55.9%)

20,624－－－

Full year

21,146(58.7%)

30,067－－－First half of the year

(370)

(105.1%)

113

(136)

－%

－%

Second half of the year

1,696

(82.8%)

6,280

－

－

－

Full year

1,326(92.3%)

6,393

－

－

－

<2> The 24 hotels with Variable Rent, etc.
Fiscal year ending
December, 2020
Comparison

Resultwith previous
periodOccupancy
Rate

ADR

RevPAR

Sales(JPY 1M)
GOP(JPY 1M)

Fiscal year ending December, 2021
PreviousFirst half

forecast

resultComparison with

Comparison withthe previous

the previous

periodforecast

First half of the year

34.0%

(51.1pt)

39.4%

30.6%

(3.3pt)(8.8pt)Second half of the year

40.8%

(46.1pt)

68.8%

－

－

－

Full year

37.4%(48.6pt)

54.2%

－

－

－

First half of the year

13,362(14.8%)

12,368

10,846(18.8%)(12.3%)

Second half of the year

13,354(22.6%)

16,398－－－Full year

13,357(19.0%)

14,947－－－First half of the year

4,536

(66.0%)

4,868

3,320

(26.8%)(31.8%)

Second half of the year

5,445

(63.7%)

11,289－－－Full year

4,993(64.8%)

8,105

－

－

－

First half of the year

10,718(62.1%)

11,0109,478(11.6%)(13.9%)

Second half of the year

13,378(57.5%)

23,455－－－Full year

24,096(59.6%)

34,466－－－First half of the year

(213)

(102.4%)

277

(65)

－%

－%

Second half of the year

1,867

(84.2%)

7,046

－

－

－

Full year

1,654(92.1%)

7,323

－

－

－

- 12 -

(2) Material events related to going concern assumption
In the midterm period under review, JHR saw deterioration in its earnings because of the decrease in variable rents linked tohotel performance, etc. due to the impact of state-of-emergency declarations, stricter measure to prevent the spread of the virus,
etc. implemented in line with the spread of COVID-19. As a result, continuing from the previous fiscal year, the debt-service
coverage ratio, which is designated in the loan-related contracts with the financial institutions which JHR conducts business
with, fell below the predetermined reference value. Because such financial situation caused temporary breach of financial
covenants, there is a condition where substantial doubts on going concern may arise. However, JHR has agreed with thefinancial institutions with which it conducts business that such financial situation is not considered a breach of the financial
covenants. In the case where the debt-service coverage ratio is lower than the predetermined reference value in the full-year
period of the current fiscal year and thereafter, JHR may breach the financial covenants. Still, JHR believes that there is nomaterial uncertainty regarding the going concern assumption due to consideration of good relationships between JHR andfinancial institutions with which it conducts business, continuing support from sponsor related entities, the sufficient amount ofcash it has on hand and conservative debt ratio, etc.

- 13 -

2. Semi-annual financial statements(1) Semi-annual balance sheets(thousands of yen)
As ofDecember 31, 2020

AssetsCurrent assets
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Prepaid expenses
Income taxes receivable
Other
Total current assets
Noncurrent assets
Property and equipment, at cost
Machinery and equipment
Accumulated depreciation
Machinery and equipment, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Construction in progress
Buildings in trust
Accumulated depreciation
Buildings in trust, net
Structures in trust
Accumulated depreciation
Structures in trust, net
Machinery and equipment in trust
Accumulated depreciation
Machinery and equipment in trust, net
Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Construction in progress in trust
Net property and equipment
Intangible assets
SoftwareTrademark rightLeasehold rights in trust
Fixed-term leasehold rights in trust
Other
Total intangible assets
Investments and other assets
Security deposits
Leasehold and security deposits in trust
Long-term prepaid expenses
Reserve for repairs and maintenanceTotal investments and other assets
Total noncurrent assets
Deferred assets
Investment unit issuance costs
Investment corporation bond issuance costs
Total deferred assets
Total assets*1- 14 -

As ofJune 30, 2021

19,382,019
9,171,145
672,415533,15042
82,69829,841,471

18,040,761
7,185,076
540,946434,972－
107,898
26,309,656

622,365(252,877)
369,487
4,373,456(2,739,679)
1,633,776
2,761
137,193,115(25,172,139)
112,020,975
2,772,035(511,004)
2,261,030
683,995(183,954)
500,040
133,628(112,061)
21,566
216,410,533
83,507
333,303,679

662,140(280,955)
381,184
4,634,724(3,004,604)
1,630,120－
138,054,014(27,019,629)
111,034,384
2,775,904(548,219)
2,227,684
688,595(200,589)
488,005
133,878(114,762)
19,115
216,410,533
84,167332,275,196*1

162,441
523,498
28,532,362
4,765,994
7,076
33,991,374

237,431495,454
28,532,362
4,698,392
6,736
33,970,377

12,520150,223
2,449,539
314,067
2,926,350
370,221,403

12,520150,223
2,318,317
320,432
2,801,493
369,047,067

56,111
177,418
233,529400,296,404

37,575
160,654
198,230
395,554,954

(thousands of yen)
As ofDecember 31, 2020
Liabilities
Current liabilities
Operating accounts payable
Short-term loans payable
Current portion of investment corporation bonds
Current portion of long-term loans payable
Accrued expenses
Income taxes payable
Consumption taxes payable
Advances received
Dividends payable
Deposits received
Derivative liabilities
Other current liabilities
Total current liabilities
Long-term liabilities
Investment corporation bonds
Long-term loans payable
Tenant leasehold and security deposits
Tenant leasehold and security deposits in trust
Derivative liabilities
Asset retirement obligations
Total long-term liabilities
Total liabilities
Net assets
Unitholders’ equity
Unitholders’ capital
SurplusCapital surplus
Voluntary reserve
Reserve for temporary difference
adjustment
Reserve for tax purpose reduction entry
Total voluntary reserve
Unappropriated retained earnings(undisposed loss)
Total surplus
Total unitholders’ equity
Valuation and translation adjustments
Deferred gains (losses) on hedges
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets*2- 15 -

As ofJune 30, 2021

2,654,679
12,782,000
1,500,000
10,800,000
527,572
1,210
143,389
423,355
17,381
9,111
21,39842,76328,922,861

1,251,568
19,582,000
1,500,000
14,900,000
512,241605
15,026
336,994
11,425
6,967
25,323
15,34338,157,496

40,100,000
103,572,000
1,040,520
4,356,804
767,749
335,161
150,172,234
179,095,095

40,100,000
92,672,000
1,040,520
4,309,654
632,819
335,972
139,090,965
177,248,461

186,894,169

187,194,209

21,746,398

21,746,398

10,617,580*2

10,311,886

1,174,860
11,792,441

1,174,860
11,486,747

1,527,790(1,485,018)

35,066,630
221,960,800

31,748,126
218,942,336(759,492)(759,492)*3 221,201,308
400,296,404(635,843)(635,843)*3 218,306,492
395,554,954

(2) Semi-annual statements of income(thousands of yen)
For the six months ended
June 30, 2020
Operating revenue
Real estate operating revenue
Other real estate operating revenue
Total operating revenue
Operating Expenses
Real estate operating costs
Asset management fee
Asset custody and administrative service fee
Directors’ compensation
Other operating expenses
Total operating expenses
Operating profit (loss)
Non-operating income
Interest income
Gain on forfeiture of unclaimed dividends
Gain on insurance claims
Refunded fixed asset tax
Interest on tax refunds
Gain on derivative instruments
Other
Total non-operating income
Non-operating Expenses
Interest expense
Interest expense on investment corporation bonds
Borrowing costs
Amortization of investment corporation bond issuancecosts
Amortization of investment unit issuance costs
Loss on derivative instruments
Other
Total non-operating expenses
Ordinary loss
Loss before income taxes
Income taxes – current
Total income taxes
Profit (loss)
Retained earnings brought forward
Unappropriated retained earnings (undisposed loss)*1

5,092,804
443,894
5,536,698

For the six months ended
June 30, 2021

*1

*1

*1

- 16 -

4,316,312
733,044
60,3668,700
92,707
5,211,131
325,567

4,143,994
445,316
4,589,311*1*1

4,417,463
706,383
60,9438,700
95,5905,289,080(699,769)

155
3,535
29,857－－
1,536－
35,084147
4,233
33,172
20,527
10,5907,356
15176,180484,215
157,677
188,141454,793
157,322
199,628

16,80916,76356,464
1,207
6,994
911,511(550,858)(550,858)605
605(551,463)
744(550,718)

29,245－
6,994
864,747(1,488,336)(1,488,336)
605
605(1,488,941)
3,922(1,485,018)

(3) Semi-annual statements of changes in net assets
For the six months ended June 30, 2020
(thousands of yen)
Unitholders’ equity
Surplus
Unitholders’capitalBalance, January 1, 2020

186,894,169

Voluntary reserve
CapitalsurplusReserve fortemporarydifference
adjustment

21,746,398

11,794,071

Changes of items during
the period
Reversal of reserve fortemporary difference
adjustment
Provision of reserve fortax purpose reduction
entry
Reversal of reserve for
special account for tax
purpose reduction entry

Reserve fortax purpose
reduction
entry

Reserve for
special accountfor tax purpose
reduction entry－

1,174,860(1,176,490)
1,174,860(1,174,860)

Total
voluntary
reserve

Unappropriatedretainedearnings(undisposed
loss)

Total
surplus12,968,932

15,290,314

50,005,645(1,176,490)

1,176,490－

1,174,860(1,174,860)－(1,174,860)

1,174,860－

Dividends paid

(16,466,060) (16,466,060)

Profit (loss)(551,463)(551,463)

Net changes of items
other thanunitholders’ equity
Total changes of items
during the period－－(1,176,490)

1,174,860(1,174,860)(1,176,490)

Balance, June 30, 2020

*1 186,894,169

21,746,398

10,617,580

1,174,860－

11,792,441

Unitholders’equityValuation and translation
adjustments
Deferred
Total
gains
valuation and(losses) on
translation
hedgesadjustments(thousands of yen)Totalunitholders’equityBalance, January 1, 2020
Changes of items during
the period
Reversal of reserve fortemporary difference
adjustment
Provision of reserve fortax purpose reduction
entry
Reversal of reserve for
special account for tax
purpose reduction entry

236,899,815(377,376)

Total net
assets(377,376)

236,522,438

－

－

－

－

－

－

Dividends paid

(16,466,060)(16,466,060)

Profit (loss)(551,463)(551,463)

Net changes of items
other thanunitholders’ equity(77,630)(77,630)(77,630)

Total changes of items
during the period(17,017,524)(77,630)(77,630)(17,095,155)

Balance, June 30, 2020

219,882,290(455,007)(455,007)

219,427,283- 17 -(15,841,033) (17,017,524)(550,718)

32,988,121

For the six months ended June 30, 2021
(thousands of yen)
Unitholders’ equity
Surplus
Unitholders’capitalBalance, January 1, 2021
Changes of items during
the period
Issuance of new
investment unit
Reversal of reserve fortemporary difference
adjustment

186,894,169

Voluntary reserve
CapitalsurplusReserve fortemporarydifference
adjustment

Reserve fortax purpose
reduction
entry

21,746,398

10,617,580

1,174,860

Total
unitholders’equityTotal
voluntary
reserve

Unappropriat
ed retained
earnings(undisposed
loss)

Total
surplus11,792,441

1,527,790

35,066,630

300,039

221,960,800

300,039(305,694)(305,694)

305,694－－

Dividends paid

(1,829,562)(1,829,562)(1,829,562)

Profit (loss)(1,488,941)(1,488,941)(1,488,941)

Net changes of items
other thanunitholders’ equity
Total changes of items
during the period

300,039－(305,694)－(305,694)(3,012,809)(3,318,504)(3,018,464)

Balance, June 30, 2021

*1 187,194,209

21,746,398

10,311,886

1,174,860

11,486,747(1,485,018)

31,748,126

218,942,336(thousands of yen)
Valuation and translation
adjustments
Deferred
Total
gains
valuation and(losses) on
translation
hedgesadjustments
Balance, January 1, 2021

(759,492)(759,492)

Changes of items during
the period
Issuance of new
investment unit
Reversal of reserve fortemporary difference
adjustment

Total net
assets221,201,308

300,039－

Dividends paid

(1,829,562)

Profit (loss)(1,488,941)

Net changes of items
other thanunitholders’ equity

123,648

123,648

123,648

Total changes of items
during the period

123,648

123,648(2,894,816)

Balance, June 30, 2021

(635,843)(635,843)

218,306,492- 18 -

(4) Semi-annual statements of cash flows(thousands of yen)
For the six months ended
June 30, 2020
Cash flows from operating activities
Profit (loss) before income taxes
Depreciation and amortization
Loss on retirement of noncurrent assets
Loss (profit) on derivative instruments
Amortization of investment corporation bond issuancecosts
Amortization of investment unit issuance costs
Interest income
Interest expense
Interest on tax refunds(Increase) decrease in operating accounts receivable(Increase) decrease in consumption taxes receivable(Increase) decrease in prepaid expenses(Increase) decrease in long-term prepaid expenses
Increase (decrease) in operating accounts payable
Increase (decrease) in accrued expenses
Increase (decrease) in consumption taxes payable
Increase (decrease) in advances received
Increase (decrease) in deposits received
Other
SubtotalInterest received
Interest paid
Interest received on tax refunds
Income taxes – refunded (paid)
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property and equipment
Purchase of property and equipment in trust
Purchase of intangible assets
Payments of reserve for repairs and maintenance
Proceeds from tenant leasehold and security deposits
in trust
Reimbursements of tenant leasehold and security
deposits in trust
Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from short-term loans payable
Repayments of short-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of investment units
Dividends paid
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period- 19 -For the six months ended
June 30, 2021

(550,858)
2,365,860
876
(328)

(1,488,336)
2,334,009
7,227(7,356)

16,80916,76356,464(155)
641,893－
2,109,926(169,943)
58,098
165,423(74,782)(146,707)(661,048)(346,942)
2,394,983(128,021)
5,731,548
192(645,114)－(1,155)5,085,470

29,245(147)
612,116(10,590)
131,468－
98,178131,221(1,653,476)(11,790)(128,363)(86,360)(2,143)(125,668)(154,002)
150(615,657)
10,590(1,167)(760,085)(425,310)(1,219,101)(603,180)(20,288)(224,682)(775,972)(29,766)(20,312)26,762

49,049(23,580)(23,589)(2,264,698)(1,025,273)

5,792,000－(5,792,000)－(16,455,764)(16,455,764)(13,634,992)
34,343,930*1 20,708,937

7,735,000(935,000)(6,800,000)
289,329(1,831,295)(1,541,965)(3,327,325)
28,553,164*1 25,225,838

(5) Notes on going concern assumption
Not applicable.

(6) Notes on matters concerning significant accounting policies
1.

Method ofdepreciation andamortization of
noncurrent assets(1) Property and equipment (including trust accounts)
Depreciation of property and equipment is calculated using the straight-line method. The useful
lives of major property and equipment components are as follows:
Machinery and equipment
Tools, furniture and fixtures

2 to 17 years
2 to 20 years

Buildings in trust
Structures in trust

2 to 64 years
2 to 64 years

Machinery and equipment in trust
Tools, furniture and fixtures in trust

3 to 32 years
2 to 27 years(2) Intangible assets
Intangible assets are amortized using the straight-line method. The amortization period of major
intangible assets is as follows.
Software (for internal use)
Trademark right

5 years as internally usable years
10 years

Fixed-term leasehold rights in trust is amortized using the straight-line method based on remaining
period (41 years) of the contract.
(3) Long-term prepaid expenses
Long-term prepaid expenses are amortized using the straight-line method.
2.

Accounting fordeferred assets(1) Investment unit issuance costs
Investment unit issuance costs are amortized using the straight-line method over three years.
(2) Investment corporation bond issuance costs
Investment corporation bond issuance costs are amortized using the interest method over therespective term of the bond.

3.

Standards for

Treatment of property taxes and other taxes

recognition ofrevenues and

For taxes imposed on properties, etc. under management such as property taxes, city planning taxes,
and depreciable asset taxes, the imposed amounts are allocated to the midterm period and expensed as

expenses“Real estate operating costs.”
Cash paid for property taxes and city planning taxes, etc. to the transferor of real properties, etc. atacquisition is not recorded as “Real estate operating costs” but capitalized as part of the acquisition costof the relevant property.
The amount of such taxes capitalized in the acquisition cost of real properties, etc. was none for theprevious midterm period and the midterm period under review.

4.

Method of hedge(1) Method of hedge accounting

accounting

Deferred hedge accounting is applied(2) Hedging instruments and hedged items
Hedging instruments
Interest rate swaps
Hedged items
Interest rates on loans payable(3) Hedging policy
JHR enters into certain derivative transactions in accordance with its financial policy in order tomanage risks, which is provided in the Articles of Incorporation.
(4) Method for assessing hedge effectiveness
JHR evaluates hedge effectiveness by comparing the cumulative changes in cash flow of hedging
instruments and the hedged items and assessing the ratio between the changes.

- 20 -

5.

Scope of funds(cash and cash

Cash and cash equivalents in the semi-annual statements of cash flows consist of cash on hand, cash intrust accounts, bank deposit and trust deposit, which can be withdrawn at any time, and short-term

equivalents) in thesemi-annual

investments with a maturity of three months or less when purchased, which can easily be converted to
cash and subject to minimal risk of change in value.

statements of cash
flows
6.

Other significant(1) Accounting treatment of beneficial interests in trust with real estate, etc. as their assets

matters serving as
the basis for

For trust beneficial interests in real estate, etc., under management, all assets and liabilities held in
trust accounts as well as all income generated and expenses incurred from assets in trust are

preparing semiannual financial

presented in the accompanying semi-annual balance sheet and income statement accounts
accordingly.

statements

The following material items of the trust accounts recorded in the relevant accounts are presented
separately on the semi-annual balance sheets.
(a) Cash and deposits in trust(b) Buildings in trust; Structures in trust; Machinery and equipment in trust; Tools, furniture andfixtures in trust; Land in trust; Construction in progress in trust(c) Leasehold rights in trust; Fixed-term leasehold rights in trust; Leasehold and security deposits
in trust(d) Tenant leasehold and security deposits in trust(2) Accounting treatment of consumption taxes
Consumption taxes are excluded from the transaction amounts.

(7) Notes to semi-annual financial statements
Disclosure of notes on “securities” and “share of (profit) loss of entities accounted for using equity method” is omitted because
there is thought to be no significant need for disclosure in the midterm financial report.

[Notes to semi-annual balance sheets]*1. Accumulated advanced depreciation of property and equipment deducted from acquisition costs due to government
subsidies received, etc.
(thousands of yen)
As ofDecember 31, 2020
Buildings in trust

As ofJune 30, 2021
¥24,921- 21 -¥24,921

*2. Matters concerning provision and reversal of reserve for temporary difference adjustment
As of December 31, 2020
Amount ofinitial accrual
Dividend
reserve

13,127,153

Balance at
beginning of
periodAmount ofprovision
during period

11,794,071-

Amount ofreversal during
periodBalance at endof period

1,176,490

10,617,580(Note)(Note)(thousands of yen)
Grounds forprovision andreversal
Allocation for
dividend

Dividend reserve indicates the remaining balance of the amount subdivided into gain on negative goodwill, which was recorded as a dividend reserve
before the fiscal year ended December 2016, and is scheduled for reversal every fiscal year starting from the fiscal year following the fiscal year inwhich the reserve was made in an amount that shall be no less than that in equal amounts every fiscal year over a period of no more than 50 years.

As of June 30, 2021
Amount ofinitial accrualBalance at
beginning of
periodAmount ofprovision
during period

Amount ofreversal during
periodBalance at endof period

305,694

10,311,886

Dividend
reserve(Note)(Note)

13,127,153

10,617,580-(thousands of yen)
Grounds forprovision andreversal
Allocation for
dividend

Dividend reserve indicates the remaining balance of the amount subdivided into gain on negative goodwill, which was recorded as a dividend reserve
before the fiscal year ended December 2016, and is scheduled for reversal every fiscal year starting from the fiscal year following the fiscal year inwhich the reserve was made in an amount that shall be no less than that in equal amounts every fiscal year over a period of no more than 50 years.

*3. Minimum net assets as required by Article 67, Paragraph 4 of the Investment Trusts Act
As ofDecember 31, 2020
¥50,000 thousand- 22 -

As ofJune 30, 2021
¥50,000 thousand

[Notes to semi-annual statements of income]*1. Components of real estate operating revenue and real estate operating costs(thousands of yen)
For the six months ended
June 30, 2020

For the six months ended
June 30, 2021

A. Real estate operating revenue
Real estate operating revenue
Fixed rent
Variable rent

4,446,315
564,4093,302,542
838,154

Income from management contracts

82,079

3,297

Total

5,092,804

4,143,994

Parking lots
Other incidental revenue

52,647
32,11948,27232,262

Utilities
Other

276,959
82,167

217,611
147,169

443,894445,316

5,536,698

4,589,311

Land lease and other rent expenses
Property taxes

447,307919,540

433,307981,618

Outsourcing expenses (Note)

230,352

312,058

Nonlife insurance

27,35738,7572,365,860

2,334,009

Other real estate operating revenue

Total
Total real estate operating revenue
B. Real estate operating costs
Real estate operating costs

Depreciation and amortization
Loss on retirement of noncurrent assets

876

7,227

Repairs
Utilities

9,456
289,373

7,601
228,019

Trust fees
Other

21,066
5,120

24,01550,846

Total real estate operating costs

4,316,312

4,417,463

C. Net real estate operating income(A − B)

1,220,385

171,847(Note)

Outsourcing expenses include management contract fees of ¥51,281 thousand for the six months ended June 30, 2020, and ¥136,852 thousand for thesix months ended June 30, 2021.

[Notes to semi-annual statements of changes in net assets]
For the six months ended
June 30, 2020

For the six months ended
June 30, 2021

*1. Total number of investment units
authorized, and issued and outstanding
Total number of investment units authorized

20,000,000 units

20,000,000 units

Total number of investment units issued andoutstanding

4,462,347 units

4,467,006 units- 23 -

[Notes to semi-annual statements of cash flows]*1. Relation of balance of cash and cash equivalents at end of period and the amount in semi-annual balance sheet accounts(thousands of yen)
For the six months ended
June 30, 2020

For the six months ended
June 30, 2021

Cash and deposits
Cash and deposits in trust¥13,887,918¥6,821,019¥18,040,761¥7,185,076

Cash and cash equivalents¥20,708,937¥25,225,838[Notes on lease transactions]Operating leases (as lessor)
Minimum rental revenue under non-cancellable operating leases(thousands of yen)
As ofDecember 31, 2020

As ofJune 30, 2021

Due within one year

¥990,152¥1,025,136

Due after one year

¥1,213,075¥2,601,518

Total¥2,203,227¥3,626,654[Notes on financial instruments]
Matters concerning fair value of financial instruments
Carrying amounts of financial instruments on the (semi-annual) balance sheets, their fair values, and the differences were as
follows. Financial instruments whose fair values are considered extremely difficult to measure are not included in the table.
See Note 2 below.
As of December 31, 2020
Carrying amount(JPY 1,000)

Fair value(JPY 1,000)

Difference(JPY 1,000)(1) Cash and deposits

19,382,019

19,382,019-(2) Cash and deposits in trust

9,171,145

9,171,145-

672,415

672,415-

Total assets

29,225,579

29,225,579-(4) Short-term loans payable

12,782,000

12,782,000-(5) Current portion of investment corporation
bonds payable

1,500,000

1,468,350(31,650)(6) Current portion of long-term loans payable

10,800,000

10,800,000-(7) Investment corporation bonds

40,100,000

34,415,280(5,684,720)(8) Long-term loans payable

103,572,000

103,572,000-

Total liabilities

168,754,000

163,037,630(5,716,370)(789,147)(789,147)-(3) Operating accounts receivable(9) Derivative transactions (*)- 24 -

As of June 30, 2021
Carrying amount(JPY 1,000)

Fair value(JPY 1,000)

Difference(JPY 1,000)(1) Cash and deposits

18,040,761

18,040,761-(2) Cash and deposits in trust

7,185,076

7,185,076-

540,946

540,946-

Total assets

25,766,785

25,766,785-(4) Short-term loans payable

19,582,000

19,582,000-

1,500,000

1,485,000(15,000)(6) Current portion of long-term loans payable

14,900,000

14,900,000-(7) Investment corporation bonds

40,100,000

34,976,160(5,123,840)(8) Long-term loans payable

92,672,000

92,672,000-

Total liabilities

168,754,000

163,615,160(5,138,840)(3) Operating accounts receivable(5) Current portion of investment corporation
bonds payable(9) Derivative transactions (*)(658,142)(658,142)(*) Receivables and payables arising from derivative transactions are presented on a net basis and amounts in parenthesis denote net
payables.
(Note 1) Methods to measure fair value of financial instruments, and derivative transactions(1) Cash and deposits; (2) Cash and deposits in trust; (3) Operating accounts receivable; (4) Short-term loans payable
The carrying value is deemed to approximate the fair value since the instruments are scheduled to be settled in a short periodof time.
(5) Current portion of investment corporation bonds payable; (7) Investment corporation bonds
The fair value of these instruments is measured based on the market price.
(6) Current portion of long-term loans payable; (8) Long-term loans payable
The carrying value is deemed to approximate the fair value since the interest rate on long-term loans payable are floatinginterest rates which are revised periodically to reflect market interest rates.
(9) Derivative transactions
The information on the fair value of derivative transactions is presented in “Notes on derivative transactions” below.
(Note 2) Carrying amount of financial instruments whose fair values are considered extremely difficult to measure
Classification

As ofDecember 31, 2020

(thousands of yen)
As ofJune 30, 2021

Tenant leasehold and security deposits

1,040,520

1,040,520

Tenant leasehold and security deposits in trust

4,356,804

4,309,654

Total

5,397,324

5,350,174

Tenant leasehold and security deposits / Tenant leasehold and security deposits in trust
Tenant leasehold and security deposits (in trust) are not subject to fair value disclosure because they have no market priceand their actual deposit periods from a tenant’s move-in to move-out are not estimable, thus making a reasonable estimate of
future cash flows is difficult.

- 25 -

[Notes on derivative transactions]
1. Derivative transactions to which hedge accounting is not applied
As of December 31, 2020
For derivative transactions which hedge accounting is not applied, the contract amount or the amount equivalent to theprincipal provided in the contract, etc. as of the account closing date was as follows:(thousands of yen)Classification

Type, etc. of derivativetransaction

Transactions
other thanmarkettransactions

Interest rate swaps(fixed rate payment,
floating rate receipt)

Contract amount, etc.
Of which, due
after one year
3,494,000

3,494,000

Fair value

Method to measure the fair value

The fair value is measured at the(29,655) quoted price, etc. obtained from thecounterparty financial institutions.

As of June 30, 2021
For derivative transactions which hedge accounting is not applied, the contract amount or the amount equivalent to theprincipal provided in the contract, etc. as of the account closing date was as follows:(thousands of yen)Classification

Type, etc. of derivativetransaction

Transactions
other thanmarkettransactions

Interest rate swaps(fixed rate payment,
floating rate receipt)

Contract amount, etc.
Of which, due
after one year
3,494,000

3,494,000

Fair value

Method to measure the fair value

The fair value is measured at the(22,299) quoted price, etc. obtained from thecounterparty financial institutions.

2. Derivative transactions to which hedge accounting is applied
As of December 31, 2020
For derivative transactions which hedge accounting is applied, the contract amount or the amount equivalent to the principal
provided in the contract, etc. as of the account closing date for each method of hedge accounting was as follows:(thousands of yen)
Method ofhedge
accounting

Type, etc. of derivative Main hedged
item
transaction

DeferralmethodInterest rate swaps(fixed rate payment,
floating rate receipt)

Long-termloans payable

Contract amount, etc.
Of which, due
after one year
101,072,000

90,272,000

Fair value

Method to measure thefair value

The fair value ismeasured at the quoted(759,492) price, etc. obtained fromthe counterparty financial
institutions.

As of June 30, 2021
For derivative transactions which hedge accounting is applied, the contract amount or the amount equivalent to the principal
provided in the contract, etc. as of the account closing date for the midterm for each method of hedge accounting was asfollows:(thousands of yen)
Method ofhedge
accounting

Type, etc. of derivative Main hedged
item
transaction

DeferralmethodInterest rate swaps(fixed rate payment,
floating rate receipt)

Long-termloans payable

Contract amount, etc.
Of which, due
after one year
94,272,000- 26 -

79,072,000

Fair value

Method to measure thefair value

The fair value ismeasured at the quoted(635,843) price, etc. obtained fromthe counterparty financial
institutions.

[Notes on asset retirement obligations]
Asset retirement obligations recognized on the (semi-annual) balance sheets
1. Outline of the subject asset retirement obligations
JHR recognizes asset retirement obligations as it is obliged to restore the land of Oriental Hotel Fukuoka Hakata Station(former name: Hotel Centraza Hakata), acquired on April 1, 2016, and Hotel Oriental Express Fukuoka Tenjin (former
name: HOTEL ASCENT FUKUOKA), acquired on August 19, 2016, to the original state in accordance with the fixed-termleasehold agreement on their land. For the asset retirement obligations of Hotel Oriental Express Fukuoka Tenjin, theobligations have been expired as of the end of the fiscal year ended December 31, 2020, with the termination of the fixedterm leasehold agreement on its land due to the exchange of part of the site on October 29, 2020.
2. Calculation method of the subject asset retirement obligations
Calculated the amount of asset retirement obligations estimating that the expected useful life is 34 years and 48 years,
respectively, due to their remaining use period and using the discount rate of 0.484% and 0.394%, respectively.
3. Increase and decrease of the subject asset retirement obligations(thousands of yen)
For the year ended
December 31, 2020
Balance at beginning of period
Adjustment due to passage of time
Decrease due to expiration of asset
retirement obligations
Balance at end of period

For the six months ended
June 30, 2021
447,677

335,161

1,989

811

(114,505)-

335,161

335,972[Notes on rental properties, etc.]
JHR owns rental properties for hotels to earn lease income and income from management contracts. The carrying amounts,changes in such balances, and fair values of such properties were as follows:(thousands of yen)
For the year ended
December 31, 2020

Use

For the six months ended
June 30, 2021

Carrying amount

Hotel

Balance at beginning of period

374,314,498

367,283,696

Net increase (decrease) during period(7,030,802)(1,046,914)

Balance at end of period

367,283,696

366,236,782

493,330,000

493,730,000

Fair value at end of period(Note 1)

Decrease during the year ended December 31, 2020, principally represents the sale of Sotetsu Fresa Inn Shimbashi-Karasumoriguchi for ¥4,790(Note 2)

Fair value at end of mid-term (end of fiscal period) is the appraisal value determined by licensed real estate appraisers from outside.

million and recording of depreciation. Decrease during the six months ended June 30, 2021, principally represents recording of depreciation.

- 27 -

[Notes on segment and related information]
1. Segment information
The segment information has been omitted because JHR has only one segment, which is the investment and management ofhotel real estate.
2. Related information
For the six months ended June 30, 2020
(1) Information about products and services
Information about products and services has been omitted because operating revenue from external customers in asingle product/service category accounted for more than 90% of total operating revenue on the semi-annual statements
of income.
(2) Information about geographical areas(i) Operating revenue
Information about geographical areas has been omitted because operating revenue from external customers in Japanaccounted for more than 90% of total operating revenue on the semi-annual statements of income.
(ii) Property and equipment, at cost
Information about property and equipment has been omitted because the amount of property and equipment located inJapan accounted for more than 90% of net property and equipment on the semi-annual balance sheets.
(3) Information about major customers(thousands of yen)
Name of customer

Operating revenue

Hotel Management Japan Co., Ltd. (Note 1)
THE DAIICHI BUILDING CO., LTD.

Name of related segment

1,042,301

Investment and management ofhotel real estate

Undisclosed (Note 2)

Investment and management ofhotel real estate(Note 1) Operating revenue includes the operating revenue from customers belonging to the same company group as said customers.
(Note 2) Undisclosed as the consent of the lessee has not been obtained.

For the six months ended June 30, 2021
(1) Information about products and services
Information about products and services has been omitted because operating revenue from external customers in asingle product/service category accounted for more than 90% of total operating revenue on the semi-annual statements
of income.
(2) Information about geographical areas(i) Operating revenue
Information about geographical areas has been omitted because operating revenue from external customers in Japanaccounted for more than 90% of total operating revenue on the semi-annual statements of income.
(ii) Property and equipment
Information about property and equipment has been omitted because the amount of property and equipment located inJapan accounted for more than 90% of net property and equipment on the semi-annual balance sheets.

- 28 -

(3) Information about major customers(thousands of yen)
Name of customer

Operating revenue

THE DAIICHI BUILDING CO., LTD.

Undisclosed (Note 1)

Name of related segment
Investment and management ofhotel real estate

Kyoritsu Maintenance Co., Ltd.

531,901

Investment and management ofhotel real estate

Hotel Management Japan Co., Ltd. (Note 2)

508,905

Investment and management ofhotel real estate(Note 1) Undisclosed as the consent of the lessee has not been obtained.
(Note 2) Operating revenue includes the operating revenue from customers belonging to the same company group as said customers.

[Notes on per unit information]
Net assets per unit is as follows:
As of
December 31, 2020
Net assets per unit

As ofJune 30, 2021

¥49,570¥48,870

Net income (loss) per unit and the basis of computation of net income per unit are as follows:
For the six months ended
June 30, 2020
Net income (loss) per unit

For the six months ended
June 30, 2021(¥123)(¥333)(551,463)(1,488,941)－－

Net income (loss) for midterm attributable to common
investment units (JPY 1,000)(551,463)(1,488,941)

Average number of investment units during period(units)4,462,347

4,465,101[Basis of computation]
Net income (loss) for midterm (JPY 1,000)
Amount not attributable to common unitholders(JPY 1,000)(Note)Net income (loss) per unit for midterm is computed by dividing net loss for midterm by the average number of investment units during the midterm
period.
Net income (loss) per unit for midterm after the adjustment of potentially dilutive units is not presented since there are no potentially dilutive units.

[Notes on significant subsequent events]
Not applicable.

- 29 -

[Additional information]
Impact of COVID-19
With the number of infections starting to increase again since July 2021, despite growing expectations for containment of
infections in line with the progress in the vaccination rollout, the worldwide spread of the infection by COVID-19 and thedeterioration in social and economic conditions have not yet settled due to the spread of a more transmissible variant, andrecovery in hotel performance is expected to take more time.
Under such circumstances, some of the lessees whose business performance has worsened have requested reduction or
postponement of fixed rent, and variable rents linked to hotel sales have decreased. These and other factors have caused the riskof decrease in JHR’s operating revenue and such to occur.
Although it is uncertain and difficult to foresee when the spread of the infection by COVID-19 will be contained, JHR madeaccounting estimates by applying impairment accounting for property and equipment based on information available as of thedate of preparation of this Midterm Financial Report and assuming that the impact by COVID-19 will continue through thefiscal year ending December 31, 2021, followed by recovery in performance after a certain period of time.
However, as it is difficult to accurately predict when the spread of the infection by COVID-19 will be contained and how large
its impact will be, JHR may see its asset status, income and cash flows affected in case the recovery is delayed.

- 30 -

(8) Changes in total number of investment units issued and outstanding

The following is the status of increase (decrease) in the total number of investment units issued and outstanding andunitholders’ capital for past five years through to the end of the midterm period under review.

Date

July 27, 2016

Capital transaction

Capital increase through public
offering of investment units

Total number ofinvestment units
issued and outstanding(Units)Increase
Balance(Decrease)

Unitholders’ capital(JPY1M)
Increase(Decrease)

BalanceNote428,260

3,750,167

33,813

133,902(Note 1)

August 23, 2016

Capital increase through third-party
allotment of investment units

11,7403,761,907

926

134,829(Note 2)

July 5, 2017

Capital increase through public
offering of investment units

236,000

3,997,907

17,715

152,544(Note 3)

12,9404,010,847

971

153,516(Note 4)

447,800

4,458,647

33,104

186,620(Note 5)

August 2, 2017
January 23, 2019

Capital increase through third-party
allotment of investment units
Capital increase through public
offering of investment units

February 20, 2019

Capital increase through third-party
allotment of investment units

3,700

4,462,347

273

186,894(Note 6)

March 16, 2021

Capital increase through third-party
allotment of investment units

4,659

4,467,006

300

187,194(Note 7)(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)

New investment units were issued through public offering with an issue price per unit of ¥81,536 (issue value of ¥78,956) in order to procure funds
for the acquisition of new properties, etc.
New investment units were issued through third-party allotment with an issue value per unit of ¥78,956 in order to procure funds for allocation to partof future acquisitions of specified assets, part of repayment of loans, or capital expenditures to maintain or improve competitiveness of existing
properties.
New investment units were issued through public offering with an issue price per unit of ¥77,518 (issue value of ¥75,065) in order to procure funds
for the acquisition of new properties, etc.
New investment units were issued through third-party allotment with an issue value per unit of ¥75,065 in order to procure funds for allocation to partof future acquisitions of specified assets, part of repayment of loans, or capital expenditures to maintain or improve competitiveness of existing
properties.
New investment units were issued through public offering with an issue price per unit of ¥76,342 (issue value of ¥73,927) in order to procure funds
for the acquisition of new properties, etc.
New investment units were issued through third-party allotment with an issue value per unit of ¥73,927 in order to procure part of funds for theacquisition of new properties.
New investment units were issued through third-party allotment with an issue value per unit of ¥64,400 in order to procure funds for allocation to partof capital expenditures.

- 31 -

3. Reference information
For detailed information of each property and the operating result of hotels, please see the reference information below as well as
the Financial Results Briefing dated today as well as the website of JHR (https://www.jhrth.co.jp/en/ir/library.html).

(1) Information on values of assets under management, etc.
A. Investment status

The following outlines the investment status of JHR as of the end of the midterm period under review.
Assetcategory

Hotel type
(Note 1)

Prefectural
location

Name

Holiday Inn Osaka Namba
Namba Oriental Hotel
Hotel Oriental Express Osaka Shinsaibashi
ibis Tokyo Shinjuku
CANDEO HOTELS UENO-KOEN
the b ikebukuro
Comfort Hotel Tokyo Higashi Nihombashi
the b hachioji
Tokyo
Smile Hotel Nihombashi Mitsukoshimae
R&B Hotel Ueno Hirokoji
Chisun Hotel Kamata
the b suidobashi
Limited-service
dormy inn·global cabin Asakusa
hotel
Chisun Inn Kamata
ibis Styles Sapporo
Hokkaido
Mercure Sapporo
Hotel Oriental Express
Fukuoka Tenjin (former name: HOTELASCENT FUKUOKA) (Note 4)
Fukuoka
the b hakata
Hakata Nakasu Washington Hotel Plaza
Toyoko Inn Hakata-guchi Ekimae
Kyoto
ibis Styles Kyoto Station
Okinawa
Mercure Okinawa Naha
Kumamoto
Dormy Inn Kumamoto
Nara
Nara Washington Hotel Plaza
SubtotalTokyo
Hilton Tokyo Odaiba
Oriental Hotel tokyo bay
Hilton Tokyo Narita Airport
Chiba
International Garden Hotel Narita
Hotel Francs
ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel) (Note 5)
Full-service hotel Hiroshima
Oriental Hotel Hiroshima
Aichi
Hilton Nagoya
Nara
Hotel Nikko Nara
Hyogo
Kobe Meriken Park Oriental Hotel
FukuokaOriental Hotel Fukuoka Hakata Station
Kanagawa
Mercure Yokosuka
Subtotal
Hotel Nikko Alivila
Okinawa
Okinawa Marriott Resort & Spa
The Beach Tower Okinawa
Chiba
Hilton Tokyo Bay
Resort hotel
Oriental Hotel Universal City (former
Osaka
name: Hotel Keihan Universal City)(Note 4)
Kanagawa
Hakone Setsugetsuka
Subtotal
Real estate in trust – Total
Deposits and other assets (Note 6)
Total assets
Osaka

Real
estate
in
trust

As of
December 31, 2020
Total amount
Ratio toheld
total assets(JPY1M)(%)(Note 2)
(Note 3)
26,8706.7
14,437
3.6
2,805
0.7
7,830
2.0
6,606
1.7
6,578
1.6
3,491
0.9
2,664
0.7
2,042
0.5
1,806
0.5
1,447
0.4
1,173
0.3
934
0.2
768
0.2
6,492
1.6
5,735
1.4
5,450

1.4

5,728

1.4

2,329
2,038
1,401
6,623
2,801
2,170
1,764
116,265
63,376
17,19013,088
9,127
3,145

0.6
0.5
0.4
1.7
0.7
0.5
0.4
29.0
15.8
4.3
3.3
2.3
0.8

2,321
2,067
1,391
6,610
2,777
2,146
1,753
116,225
63,36017,043
13,048
9,059
3,128

0.6
0.5
0.4
1.7
0.7
0.5
0.4
29.4
16.0
4.3
3.3
2.3
0.8

17,215

4.3

17,128

4.3

4,048
15,695
10,254
9,482
9,251
1,606
173,483
17,79014,745
6,490
26,289

1.0
3.9
2.6
2.4
2.3
0.4
43.3
4.4
3.7
1.6
6.6

4,024
15,667
10,203
9,385
9,120
1,596
172,766
17,686
14,6286,439
26,215

1.0
4.0
2.6
2.4
2.3
0.4
43.7
4.5
3.7
1.6
6.6

5,830

1.5

5,832

1.5

3,616
74,763364,51235,783400,296

0.9
18.7
91.1
8.9
100.0

3,616
74,418363,410
32,144
395,554

0.9
18.8
91.8
8.1
100.0

Amount(JPY1M)
Total liabilities
Total net assets

179,095
221,201- 32 -

As ofJune 30, 2021
Total amount
Ratio toheld
total assets(JPY1M)(%)(Note 2)
(Note 3)
26,812
6.8
14,379
3.6
2,799
0.7
7,796
2.0
6,586
1.7
6,570
1.7
3,473
0.9
2,679
0.7
2,035
0.5
1,802
0.5
1,465
0.4
1,164
0.3
929
0.2
767
0.2
6,457
1.6
5,706
1.4

Ratio tototal assets
(%)
44.7
55.3

Amount(JPY1M)
177,248
218,306

Ratio tototal assets
(%)
44.8
55.2

(Note 1)(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)

Hotels are categorized as limited-service hotels, full-service hotels or resort hotels according to the manner of operation.
For real estate in trust, “Total amount held” shows the amount calculated by deducting accumulated depreciation from acquisition price (including
expenses incidental to acquisition).
“Ratio to total assets” shows the ratio of total amount of each asset held to total assets, rounded off to one decimal place.
Through rebranding, HOTEL ASCENT FUKUOKA changed its name to Hotel Oriental Express Fukuoka Tenjin on June 18, 2021, and Hotel Keihan
Universal City changed its name to Oriental Hotel Universal City on July 1, 2021. The same shall apply hereinafter in this document.
ACTIVE-INTER CITY HIROSHIMA is classified in accordance with the business category of Sheraton Grand Hiroshima Hotel, its main facility.
Includes machinery and equipment, tools, furniture and fixtures, construction in progress in trust, and intangible assets (excluding leasehold rights intrust and fixed-term land lease right in trust).

- 33 -

B. Assets under management(A) Major issues of investment securities
Not applicable.
(B) Real estate properties under management
Not applicable.
(C) Other major assets under management
A. Summary of real estate properties (in trust) under management
The following summarizes the real estate properties (in trust) under management by JHR as of the end of the midterm period underreview.
a. Details of assets under management (acquisition price, etc.)
Property
No.

Name

Grade
(Note 1)

Acquisition
price(JPY1M)(Note 2)Carrying
amountat end ofperiod(JPY1M)(Note 3)

Appraisalvalue
at end ofperiod(JPY1M)(Note 4)

Investment
ratio
Appraisal(Acquisition
agencyprice)(Note 5)(%)(Note 6)

Collateral(Note 7)

1

Kobe Meriken Park Oriental Hotel

Upper-middle

10,9009,576

14,000N

2.9

Unsecured

2

Oriental Hotel tokyo bay

Mid-price

19,90017,21532,200N

5.4

Unsecured

3

Namba Oriental Hotel

Mid-price

15,00014,457

31,400N

4.1

Unsecured

4

Hotel Nikko Alivila

Luxury18,90017,89928,900N

5.1

Unsecured

5

Oriental Hotel Hiroshima

Upper-middle

4,100

4,088

4,220

N

1.1

Unsecured6

ibis Tokyo Shinjuku

Mid-price

7,243

7,858

9,900

N

2.0

Unsecured

8

The Beach Tower Okinawa

Mid-price

7,610

6,443

10,000N

2.1

Unsecured

9

Hakone Setsugetsuka

Mid-price

4,070

3,622

5,270

N

1.1

Unsecured

10

Dormy Inn Kumamoto

Mid-price

2,334

2,146

2,950

N

0.6

Unsecured

12

the b suidobashi

Mid-price

1,120

1,174

2,280

N

0.3

Unsecured13

dormy inn·global cabin Asakusa

Economy

999

929

1,280

J

0.3

Unsecured

14

Hakata Nakasu Washington Hotel Plaza

Mid-price

2,130

2,067

4,530

N

0.6

Unsecured

15

Nara Washington Hotel Plaza

Mid-price

2,050

1,754

2,430

N

0.6

Unsecured16

R&B Hotel Ueno Hirokoji

Economy

1,720

1,802

1,900

J

0.5

Unsecured

18

Comfort Hotel Tokyo Higashi Nihombashi

Economy

3,746

3,473

5,350

J

1.0

Unsecured

22

Smile Hotel Nihombashi Mitsukoshimae

Economy

2,108

2,036

2,930

J

0.6

Unsecured24

Toyoko Inn Hakata-guchi Ekimae

Economy

1,652

1,391

2,750

T

0.4

Unsecured

25

Chisun Hotel Kamata

Economy

1,512

1,483

2,020

T

0.4

Unsecured

26

Chisun Inn Kamata

Economy

823

770

1,370

T

0.2

Unsecured

29

Oriental Hotel Universal City

Mid-price

6,000

5,924

15,400R

1.6

Unsecured

31

Hilton Tokyo Bay

Luxury26,05026,22640,300D

7.0

Unsecured32

ibis Styles Kyoto Station

Mid-price

6,600

6,626

9,990

D

1.8

Unsecured33

ibis Styles Sapporo

Mid-price

6,797

6,486

11,100N

1.8

Unsecured34

Mercure Sapporo

Mid-price

6,000

5,753

10,500N

1.6

Unsecured35

Mercure Okinawa Naha

Mid-price

3,000

2,813

6,950

N

0.8

Unsecured37

the b ikebukuro

Mid-price

6,520

6,581

7,020

N

1.8

Unsecured39

the b hachioji

Mid-price

2,610

2,695

2,570

N

0.7

Unsecured40

the b hakata

Mid-price

2,300

2,341

4,330

N

0.6

Unsecured

41

Hotel Francs

Mid-price

3,105

3,128

4,040

D

0.8

Unsecured42

Mercure Yokosuka

43

Okinawa Marriott Resort & Spa

44

ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel)

45
46
47
48

Mid-price

1,650

1,627

3,340

D

0.4

Unsecured

Upper-middle

14,95014,742

17,200N

4.0

Unsecured

Luxury17,32017,19020,700D

4.7

Unsecured

CANDEO HOTELS UENO-KOEN

Mid-price

6,705

6,593

7,440

D

1.8

Unsecured

Oriental Hotel Fukuoka Hakata Station

Upper-middle

7,197

9,318

15,200D

1.9

Unsecured

Holiday Inn Osaka Namba

Mid-price

27,00026,861

26,500N

7.3

Unsecured

Hotel Oriental Express Fukuoka Tenjin

Mid-price

5,248

5,849

6,480

D

1.4

Unsecured

49

Hilton Nagoya

Luxury15,25015,667

14,800D

4.1

Unsecured

50

Hilton Tokyo Narita Airport

Upper-middle

13,175

13,291

13,600N

3.6

Unsecured

51

International Garden Hotel Narita

Mid-price

9,125

9,125

9,520

N

2.5

Unsecured

52

Hotel Nikko Nara

Upper-middle

10,373

10,298

9,890

D

2.8

Unsecured- 34 -

Property
No.

Name

53

Hotel Oriental Express Osaka Shinsaibashi

54

Hilton Tokyo Odaiba

Acquisition
price(JPY1M)(Note 2)

Grade
(Note 1)

(Note 2)

(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)(Note 8)

Appraisalvalue
at end ofperiod(JPY1M)(Note 4)

Investment
ratio
Appraisal(Acquisition
agencyprice)(Note 5)(%)(Note 6)

Collateral(Note 7)

Mid-price

2,738

2,823

2,880

D

0.7

Unsecured

Upper-middle

62,40063,58168,300N

16.9

Unsecured

370,031

365,741

493,730

Total(Note 1)

Carrying
amountat end ofperiod(JPY1M)(Note 3)100.0

JHR categorizes hotels into the four grade classes of “Luxury,” “Upper-middle,” “Mid-price” and “Economy” mainly from the perspective of average
daily rate, etc.
“Acquisition price” is the acquisition price stated on the purchase and sale agreement for beneficial interest in trust, etc. (consumption tax, local
consumption tax and the acquisition expense such as broker’s fee are not included). The acceptance prices are indicated for the properties that havebeen accepted through the Merger.
“Carrying amount at end of period” is the book value at the end of the midterm period under review, and includes not only the amounts for real estatein trust, but also for machinery and equipment, tools, furniture and fixtures, construction in progress in trust and intangible assets.
“Appraisal value at end of period” is the appraisal value at the end of the midterm period under review as the date of appraisal, in accordance with theasset valuation methods and standards provided in JHR’s Articles of Incorporation and the regulations set forth by The Investment Trusts Association,
Japan.
Under “Appraisal agency,” the letters indicate the appraisers for the properties as follows:N:
Nihon Fudosan Kenkyusho (Japan Real Estate Institute)J:
JLL Morii Valuation & Advisory K.K.
T:
The Tanizawa Sōgō Appraisal Co., Ltd.
R:
Rich Appraisal Institute Co., Ltd.
D:DAIWA REAL ESTATE APPRAISAL CO., LTD.
“Investment ratio” is the ratio of acquisition price of the respective asset held at the end of the midterm period under review to the total amount ofacquisition price of all assets held at the end of the midterm period under review, rounded off to one decimal place.
“Collateral” is whether or not a pledge has been established for the beneficial interest in trust.
The omitted property numbers are the property numbers of assets that have been sold.

b. Details of assets under management (change in tenants of portfolio)
The following is the change in total number of tenants, total leasable area, total leased area, and occupancy rate, etc. of realestate properties (in trust) under management for the past five years.

Total number oftenants(Note 1)
Total leasable area
(Note 2)
Total leased area
(Note 3)
Occupancy rate
(Note 4)(Note 1)

(Note 2)

(Note 3)(Note 4)End of17th period
December 2016

End of18th period
December 2017

End of19th period
December 2018

End of20th period
December 2019

End of21st period
December 2020

End of midterm periodof 22nd period
June 2021

128

131

126

125

121

119

587,481.02 m2

687,124.54 m2

678,714.48 m2

746,329.68 m2

741,083.02 m2

741,083.02 m2

587,050.94 m2

686,694.46 m2

677,863.00 m2

745,227.67 m2

740,146.96 m2

740,012.93 m2

99.9%

99.9%

99.9%

99.9%

99.9%

99.9%

Total number of tenants indicates the total number of tenants based on the lease contracts for respective real estate in trust (excluding tenants ofparking lots, etc.) as of the end of each fiscal period or midterm period. However, for properties for which master lease contracts under the passthrough scheme are concluded in which trustee receives the same amount of rents, etc. from end tenants as is in principle, the total number of end
tenants (excluding tenants of parking lots, etc.) is indicated.
In principle, total leasable area represents leasable area of the building, which does not include leasable area of land (including parking lots on
ground), based on a lease contract or plan for each real estate in trust. For properties in which the leased area is not described in the lease contract,leasable area represents the area described in the registration of the building. Furthermore, when the leasable area in the lease contract is indicated intsubo units, the figure in the table has been converted to the area in metric units (3.30578 square meters per one tsubo). The same shall apply
hereinafter.
In principle, total leased area represents the leased area described in the lease contract of the building. For properties in which the leased area is notdescribed in the lease contract, leased area shows the area described in the registration of the building. Furthermore, when the leased area in the lease
contract is indicated in tsubo units, the figure in the table has been converted to the area in metric units (3.30578 square meters per one tsubo).
However, for properties for which master lease contracts under the pass-through scheme are concluded in which trustee receives the same amount ofrents, etc. with rents, etc. from end tenants as is in principle, the total area for which lease contracts have been concluded with end tenants and which
are actually leased is indicated. The same shall apply hereinafter.
Occupancy rate indicates the percentage of leased area to leasable area of respective real estate properties in trust as of the end of each fiscal period or
midterm period. The same shall apply hereinafter.

- 35 -

c. Details of assets under management (information on major real estate)
Major real estate of which total annual rent accounts for 10% or more of the total annual rent (Note 1) of the entire portfolio is
as follows.

Property name

Total number oftenants

Hilton Tokyo Bay

Total annual rent1

Total leased area

64,928.83 m2(Note 3)(Note 2)

Total leasablearea

Change in occupancy rate
for the past five years

64,928.83 m2(Note 3)

December 2016

100.0%

December 2017100.0%

December 2018

100.0%

December 2019100.0%

December 2020

100.0%

June 2021

100.0%(Note 1) “Total annual rent” is the total amount of (i) the amount arrived at when monthly fixed rent (rent of the building itself only,
excluding common area maintenance charges and signage and parking usage fees; not factoring in any change in rent during
the fiscal year) in lease contracts at the end of the midterm period under review is multiplied by 12, (ii) the actual amounts ofrevenue sharing, variable rent and income from management contracts for the midterm period under review, and (iii)assumed amounts of revenue sharing, variable rent and income from management contracts for the second half of the fiscal
year stated in the outlook of the operating results disclosed in the Financial Report dated February 25, 2021.
(Note 2) Total annual rent for Hilton Tokyo Bay is not disclosed as consent for disclosure has not been obtained from the tenant.
(Note 3) The building of Hilton Tokyo Bay is co-owned with other right holders, and JHR owns co-ownership interest for 64,928.83
square meters (JHR owns 9/10 of co-ownership interest).
d. Details of assets under management (NOI, etc.)
PropertyNo.

Name

Rent type(Note 1)

Real estate
operating revenue(JPY 1,000)969

NOI
NOI after depreciation(Note 2)
(Note 3)
(JPY 1,000)(JPY 1,000)(123,965)(267,192)

1

Kobe Meriken Park Oriental Hotel

Variable/Fixed (Note 4)2

Oriental Hotel tokyo bay

Variable/Fixed (Note 4)-(59,239)

3

Namba Oriental Hotel

Variable/Fixed (Note 4)

140,717

88,10817,321

4

Hotel Nikko Alivila

Variable/Fixed (Note 4)

49,816(24,348)(160,265)

5

Oriental Hotel Hiroshima

Variable/Fixed (Note 4)

22,609513(43,018)

6

ibis Tokyo Shinjuku

Management contract

67,20912,928(42,133)

8

The Beach Tower Okinawa

Fixed

255,504

232,689

171,847
87,123(240,276)

9

Hakone Setsugetsuka

Fixed147,469

134,832

10

Dormy Inn Kumamoto

Fixed

97,23085,457

61,52012

the b suidobashi

Variable/Fixed

6,499

510

(12,433)

13

Fixed

31,997

27,604

21,202

Fixed

120,000

112,000

99,00015

dormy inn·global cabin Asakusa
Hakata Nakasu Washington Hotel Plaza(Note 5)
Nara Washington Hotel Plaza (Note 5)

Fixed

75,00067,00048,000

16

R&B Hotel Ueno Hirokoji

48,64541,34533,02918

Comfort Hotel Tokyo Higashi Nihombashi

135,763

119,473

101,078

22

Smile Hotel Nihombashi Mitsukoshimae

67,20059,33348,74724

Toyoko Inn Hakata-guchi Ekimae

FixedVariable/Fixed(Note 6)
Variable/Fixed(Note 6)
Fixed

70,51963,63654,53125

Chisun Hotel Kamata

Variable70(7,300)(23,067)

26

Chisun Inn Kamata

29

Oriental Hotel Universal City (Note 7) (Note 8)

31

Hilton Tokyo Bay

32

ibis Styles Kyoto Station (Note 7)

Variable
Variable/Fixed(Note 6)
Variable/Fixed(Note 6)
Management contract

33

ibis Styles Sapporo (Note 7)

Management contract

34

Mercure Sapporo (Note 7)

Management contract

35

Mercure Okinawa NahaManagement contract-(28,115)(59,716)37

the b ikebukuro

Variable/Fixed

169,338

155,109139,28239

the b hachioji

Variable/Fixed

22,336

9,788(6,897)40

the b hakata

Variable/Fixed

17,761

11,245

103

41

Hotel Francs

Fixed

150,000

119,016

95,84414- 36 -

421(3,099)(7,826)

290,788234,452

186,149

989,235

847,882

754,430

23,193(19,990)(38,026)

25,132(38,935)(79,477)

55,243(66,887)(112,292)

Property
No.

Name

Rent type(Note 1)

NOI
(Note 2)(JPY 1,000)
79,273

NOI after depreciation(Note 3)
(JPY 1,000)
61,32742

Mercure Yokosuka

43

Variable/Fixed (Note 4)-(42,120)(179,550)

Variable/Fixed (Note 4)

408,764

228,078

117,191

45

Okinawa Marriott Resort & Spa
ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel)
CANDEO HOTELS UENO-KOEN

Fixed

174,985

161,900

141,739

46

Oriental Hotel Fukuoka Hakata Station

Variable/Fixed (Note 4)

81,313(43,183)(253,874)

47

Holiday Inn Osaka Namba (Note 7)

Variable/Fixed (Note 4)48

Hotel Oriental Express Fukuoka Tenjin (Note 9)49

Hilton Nagoya

50

Hilton Tokyo Narita Airport

51
52

44

53
54

Variable

Real estate
operating revenue(JPY 1,000)
124,002-(24,501)(105,166)

Variable/Fixed

274,043

206,261

184,654

Variable

352,822

65,360(21,967)

Variable/Fixed (Note 4)-(42,457)(147,853)

International Garden Hotel Narita

Variable/Fixed (Note 4)

76,57654,329(20,189)

Hotel Nikko Nara
Hotel Oriental Express Osaka Shinsaibashi(Note 7)
Hilton Tokyo Odaiba

Variable/Fixed (Note 4)-(24,144)(98,497)

Variable/Fixed (Note 4)-(7,022)(13,753)

Variable/Fixed (Note 4)-(165,255)(306,978)4,573,905

2,498,490

184,486

Total(Note 1)

Under “Rent type,” “Fixed” is a property under a fixed rent structure, “Variable” is a property under a variable rent structure, “Management contract”
is a property under a management contract structure, and “Variable/Fixed” is a property under a combination of fixed and variable rent structures.
(Note 2) NOI = Real estate operating revenue − Real estate operating costs + Depreciation + Loss on retirement of noncurrent assets + Asset retirement
obligations expenses(Note 3) NOI after depreciation (net real estate operating income) = Real estate operating revenue − Real estate operating costs(Note 4) For The HMJ Group Hotels, only variable rent is paid in the fiscal year ending December 2021 and no fixed rent will be incurred.
(Note 5) For Hakata Nakasu Washington Hotel Plaza and Nara Washington Hotel Plaza, consent on disclosure of rent in units of thousand yen has not beenobtained from the lessees and numbers are thus rounded down to the nearest million yen.
(Note 6) For Comfort Hotel Tokyo Higashi Nihombashi, Smile Hotel Nihombashi Mitsukoshimae, Oriental Hotel Universal City (former name: Hotel Keihan
Universal City) and Hilton Tokyo Bay, the rent structure is one that has set not only fixed rent, but also partly has rent based on a revenue sharing
structure.
(Note 7) Temporarily closed for some time during the midterm period under review due to the impact of the spread of the infection by COVID-19.
(Note 8) Rent type for Hotel Keihan Universal City that applies through to June 30, 2021, is indicated. Rent type for Oriental Hotel Universal City will bevariable/fixed from July 1, 2021 onward, however, the variable rent will be incurred in the fiscal year ending December 2022 onward.
(Note 9) Rent type for Hotel Oriental Express Fukuoka Tenjin that applies from June 18, 2021, is indicated. The variable rent will be incurred in the fiscal year
ending December 2022 onward. Rent type for Hotel ASCENT FUKUOKA was fixed before June 17, 2021.
(Note 10) The property numbers of assets that were sold before the end of the previous fiscal year are intentionally omitted.

- 37 -

B. Income statements for individual real estate properties (in trust) under management
The following are the individual income statements for real estate properties (in trust) under management for the midterm
period under review (from January 1, 2021 to June 30, 2021). Figures are rounded down to the nearest thousand yen in
principle, but are otherwise noted if circumstances do not allow for the figures to be stated in units of thousand yen.
Property No.

-

Property name

Portfolio total(Note 1)

1
Kobe
Meriken Park
Oriental Hotel

2

3

4

5

Oriental Hoteltokyo bay

Namba
Oriental Hotel

Hotel Nikko
AlivilaOriental Hotel
Hiroshima

Number of operating days

-

181

181

181

181

181

(A) Real estate operating revenue subtotal

4,573,905

969-

140,717

49,816

22,609Fixed rent

3,302,542

-

-

-

-

-

Variable rent

841,452--

140,717

49,816

22,609Other revenue

429,910

969

-

-

-

-

(B) Real estate operating costs subtotal

4,389,418

268,162240,276

123,396

210,082

65,627

Land lease and other rent expenses

433,307

96,351--42,074-

Property taxes

981,618

25,07855,79649,94428,267

20,315

Outsourcing expenses

312,058

480

480

480

960

480

Nonlife insurance

38,757

2,482

2,456

970

1,847

794

Depreciation and amortization

2,305,965

143,191

180,490

70,282

135,91343,478Loss on retirement of noncurrent assets

7,227

34

546

505

3

53

Other costs

310,483

543

506

1,213

1,015

505

(C) Net real estate operating income = (A) − (B)184,486(267,192)(240,276)

17,321(160,265)(43,018)(Reference) Occupancy rate

99.9%

100.0%

100.0%

100.0%

100.0%

100.0%(Reference) Number of tenants

119

1

1

1

1

1

Property No.

6

8

ibis
The Beach Tower
Tokyo Shinjuku
Okinawa(Note 1)

Property name

9

10

12

13

HakoneSetsugetsuka

Dormy Inn
Kumamoto

the bsuidobashi

dormy inn·global
cabin Asakusa

Number of operating days

181

181

181

181

181

181

(A) Real estate operating revenue subtotal

67,209255,504

147,469

97,2306,499

31,997

Fixed rent

50,569255,504

147,169

97,2306,499

31,697

Variable rent

3,297

-

-

-

-

-

Other revenue

13,342

-

300

-

-

300

(B) Real estate operating costs subtotal

109,343

83,65660,34635,70918,933

10,795Land lease and other rent expenses

-

-

-

-

-

-

Property taxes

17,657

19,746

11,236

9,814

4,011

3,025

Outsourcing expenses

21,486

-

-

-

600

600

Nonlife insurance

434

848

494

326

148

87

Depreciation and amortization

55,062

60,84147,70823,937

12,944

6,402

Loss on retirement of noncurrent assets

-

-

-

-

-

-

Other costs

14,703

2,220

906

1,631

1,230

680

(C) Net real estate operating income = (A) − (B)(42,133)

171,847

87,123

61,520(12,433)

21,202(Reference) Occupancy rate

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%(Reference) Number of tenants

4

1

1

1

1

1

- 38 -

Property No.

14

15

16

18

22

24

R&B Hotel
Ueno
Hirokoji

Comfort HotelTokyo Higashi
Nihombashi

Smile Hotel
Nihombashi
Mitsukoshimae

Toyoko Inn
Hakata-guchi
Ekimae

181

181

181

181

Number of operating days

181

Nara
Washington
Hotel Plaza(Note 2)
181(A) Real estate operating revenue subtotal

120,000

75,00048,645

135,763

67,20070,519Fixed rent

120,000

73,00048,252130,160

67,20070,519Variable rent

-

-

-

-

-

-

Other revenue

0

1,000

393

5,602

-

-

(B) Real estate operating costs subtotal

21,00026,00015,616

34,684

18,452

15,987

Land lease and other rent expenses

-

-

-

-

-

-

Property taxes

6,000

5,000

6,054

13,293

6,505

5,547

Outsourcing expenses

0

1,000

420

807

600

540

Nonlife insurance

0

0

127

315

143

182

Depreciation and amortization

13,00018,0008,316

18,394

10,585

9,104

Loss on retirement of noncurrent assets

-

-

-

-

-

-

Other costs

0

0

698

1,874

618

613

(C) Net real estate operating income = (A) − (B)99,00048,00033,029101,078

48,74754,531(Reference) Occupancy rate

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%(Reference) Number of tenants

1

2

1

2

1

1

Hakata Nakasu
Washington Hotel
Plaza (Note 2)

Property name

Property No.

25

26

29

31

32

Property name

Chisun Hotel
KamataChisun Inn
KamataOriental Hotel
Universal City
(Note 3)

HiltonTokyo Bay

33

ibis Styles
ibis Styles
Kyoto Station
Sapporo(Note 1) (Note 3) (Note 1) (Note 3)

Number of operating days

181

181

181

181

181

181

(A) Real estate operating revenue subtotal

70

421

23,19325,132

Fixed rent--

989,235
Undisclosed(Note 4)
Undisclosed(Note 4)
Undisclosed(Note 4)

21,167

10,359

-

-

2,026

14,773

Variable rent-

421

Other revenue

70-

290,788
Undisclosed(Note 4)
Undisclosed(Note 4)
Undisclosed(Note 4)(B) Real estate operating costs subtotal

23,137

8,248

104,638

234,805

61,220104,609Land lease and other rent expenses--

10,55561,860--Property taxes

5,858

2,390

22,47870,371

10,53518,508Outsourcing expenses

600

540

962

5,947

31,95830,670Nonlife insurance

171

72

1,135

2,478

270

716

Depreciation and amortization

15,767

4,727

48,30293,451

18,03640,541

Loss on retirement of noncurrent assets

-

-

-

-

-

-

Other costs

740

518

21,204696

419

14,173(C) Net real estate operating income = (A) − (B)(23,067)(7,826)

186,149

754,430(38,026)(79,477)(Reference) Occupancy rate

100.0%

100.0%

100.0%

100.0%

100.0%

98.3%(Reference) Number of tenants

1

1

1

1

2

4

- 39 -

Property No.

34

35

MercureMercureSapporoOkinawa Naha
(Note 1) (Note 3)(Note 1)

Property name

37

39

40

41

the b
ikebukuro

the bhachioji

the bhakataHotel Francs

Number of operating days

181

181

181

181

181

181

(A) Real estate operating revenue subtotal

55,243-

169,338

22,336

17,761150,000

Fixed rent

27,168-51,337

18,825

17,761150,000

Variable rent--

117,205---

Other revenue

28,075

-

795

3,510

-

-

(B) Real estate operating costs subtotal

167,535

59,71630,05529,233

17,65754,155Land lease and other rent expenses

-

163

-

-

-

-

Property taxes

24,601

11,64011,04010,525

5,025

28,829Outsourcing expenses

68,272

15,073

600

640

600

900

Nonlife insurance

837

587

298

334

184

810

Depreciation and amortization

45,40431,60015,827

16,685

11,141

23,171

Loss on retirement of noncurrent assets

-

-

-

-

-

-

Other costs

28,419

651

2,289

1,048

705

442

(C) Net real estate operating income = (A) − (B)(112,292)(59,716)

139,282(6,897)103

95,844(Reference) Occupancy rate

95.7%

100.0%

100.0%

100.0%

100.0%

100.0%(Reference) Number of tenants

11

1

3

9

2

1

Property No.

42

43

44

45

46

47

Property nameMercureYokosuka

Okinawa Marriott
Resort & Spa

ACTIVE-INTERCITY
HIROSHIMACANDEOHOTELS
UENO-KOEN

Oriental Hotel
Fukuoka Hakata
StationHoliday Inn
Osaka Namba(Note 3)

Number of operating days

181

181

181

181

181

181

(A) Real estate operating revenue subtotal

124,002-408,764

81,313-Fixed rent--

245,908

174,985
Undisclosed(Note 4)--

Variable rent

109,606-

68,89481,313-

Other revenue

14,395-93,962

Undisclosed(Note 4)--(B) Real estate operating costs subtotal

62,674

179,550

291,573

33,245335,187

105,166

Land lease and other rent expenses

-

-

-

-

111,103-

Property taxes

17,007

38,73359,924

11,363

10,38822,512

Outsourcing expenses

9,951

1,200

49,186

600

1,500

780

Nonlife insurance

1,110

1,764

2,398

353

975

789

Depreciation and amortization

17,945

137,430

110,887

20,161

203,795

80,665

Loss on retirement of noncurrent assets

-

-

-

-

6,084

-

Other costs

16,659422

69,176

768

1,340

420

(C) Net real estate operating income = (A) − (B)61,327(179,550)

117,191

141,739(253,874)(105,166)(Reference) Occupancy rate

100.0%

100.0%

99.5%

100.0%

100.0%

100.0%(Reference) Number of tenants

1

1

40

1

1

1

- 40 -

Property No.

48

49

Hotel Oriental
Express Fukuoka
TenjinProperty name50

51

Hilton Nagoya

Hilton Tokyo
Narita Airport

52

53

Hotel Oriental
Express Osaka
Hotel Nikko Nara
Shinsaibashi(Note 3)

International
Garden Hotel
NaritaNumber of operating days

181

181

181

181

181

181

(A) Real estate operating revenue subtotal

274,043-

76,576--

Fixed rent

183,896

-

-

-

-

Variable rent--

76,576--

Other revenue

90,146352,822
Undisclosed(Note 4)
Undisclosed(Note 4)
Undisclosed(Note 4)

-

-

-

-

(B) Real estate operating costs subtotal

89,389374,790

147,853

96,76598,497

13,753

Land lease and other rent expenses-

111,200

-

-

-

-

Property taxes

15,72050,65438,26019,534

20,286

5,579

Outsourcing expenses

6,897

50,021

1,260

1,140

1,200

1,080

Nonlife insurance

353

2,427

2,457

1,097

1,716

113

Depreciation and amortization

21,60787,328105,396

74,51974,353

6,730

Loss on retirement of noncurrent assets

-

-

-

-

-

-

Other costs

44,811

73,156

479

474

942

249

(C) Net real estate operating income = (A) − (B)184,654(21,967)(147,853)(20,189)(98,497)(13,753)(Reference) Occupancy rate

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%(Reference) Number of tenants

6

4

1

1

1

1

Property No.

54

Property name

Hilton Tokyo
OdaibaNumber of operating days

181

(A) Real estate operating revenue subtotal-

Fixed rent-

Variable rent-

Other revenue-(B) Real estate operating costs subtotal

306,978

Land lease and other rent expenses-

Property taxes

161,641

Outsourcing expenses

60

Nonlife insurance

3,135

Depreciation and amortization

141,722

Loss on retirement of noncurrent assets-

Other costs

418(C) Net real estate operating income = (A) − (B)(306,978)(Reference) Occupancy rate

100.0%(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)

(Reference) Number of tenants
1
Variable rent includes income from management contracts. For details of the management contract, please refer to “C. Overview of the hotelbusiness; a. Rent structures of hotels with variable rent, management contract or revenue sharing” on page 42.
Consent on disclosure of rent in units of thousand yen has not been obtained from the lessee and numbers are thus rounded down to the nearest
million yen.
Temporarily closed for some time during the midterm period under review due to the impact of the spread of COVID-19.
Undisclosed as consent on disclosure has not been obtained from the tenant with whom a lease contract has been concluded.
The property numbers of assets that were sold before the end of the previous fiscal year are intentionally omitted.

- 41 -

C. Overview of the hotel businessa. Rent structures of hotels with variable rent, management contract or revenue sharing
Property
No.

The
HMJ
Group
Hotels

The
Accor
Group
Hotels
The
Ishin
Group
HotelsOther
hotelswithvariablerentorrevenuesharing

Name

Rent type

Method of calculating variable rent and income from management contracts
FY2021

1

Kobe Meriken Park Oriental Hotel

AGOP (Note 2) x 86.0%

2

Oriental Hotel tokyo bay

AGOP x 79.0%

3

Namba Oriental Hotel

4

Hotel Nikko Alivila

AGOP x 74.0%5Oriental Hotel Hiroshima

AGOP x 89.0%

43

Okinawa Marriott Resort & Spa

Variable/Fixed

AGOP x 89.0%

44

ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel)

Variable/Fixed(Note 1)AGOP x 93.0%

46

Oriental Hotel Fukuoka Hakata Station

Variable/Fixed

AGOP x 97.0%

47

Holiday Inn Osaka Namba

Variable/Fixed

AGOP x 98.0%

48

Hotel Oriental Express Fukuoka Tenjin(Note 4)

Variable/Fixed

Not applicable

50

Hilton Tokyo Narita Airport

Variable/Fixed

AGOP x 95.0%

51

International Garden Hotel Narita

Variable/Fixed

AGOP x 95.0%

52

Hotel Nikko Nara

Variable/Fixed

AGOP x 95.0%

53

Hotel Oriental Express Osaka Shinsaibashi

Variable/Fixed

AGOP x 87.0%

54

Hilton Tokyo Odaiba

Variable/Fixed

AGOP x 97.0%

6
32
33
34
35
42
12
37
39
40

ibis Tokyo Shinjuku
ibis Styles Kyoto Station
ibis Styles Sapporo
Mercure Sapporo
Mercure Okinawa Naha
Mercure Yokosuka
the b suidobashi
the b ikebukuro
the b hachioji
the b hakata

Management
contract(Note 5)

Amount equivalent to GOP

18

Comfort Hotel Tokyo Higashi Nihombashi

22

Smile Hotel Nihombashi Mitsukoshimae

25

Chisun Hotel Kamata

26

Chisun Inn Kamata

29

Oriental Hotel Universal City
(formerly, Hotel Keihan Universal City)(Note 7)31

Hilton Tokyo Bay

49(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)

Hilton Nagoya

Variable/Fixed

AGOP x 91.0%

VariableAmount linked to GOP (Note 6)

Variable/Fixed

Amount linked to GOP (Note 6)

FY2022 and after(‘Total AGOP of The Five HMJ
Hotels – base amount (¥4,120
million/year (Note 3))) x 85.0%(AGOP – base amount (¥655
million/year)) x 95.0%(AGOP – base amount (¥360
million/year)) x 90.0%(AGOP – base amount (¥442
million/year)) x 98.0%(AGOP – base amount (¥580
million/year)) x 97.0%(AGOP – base amount (¥165
million/year)) x 97.0%(AGOP – base amount (¥450
million/year)) x 93.0%(AGOP – base amount (¥360
million/year)) x 98.0%(AGOP – base amount (¥440
million/year)) x 95.0%(AGOP – base amount (¥128
million/year)) x 91.0%(AGOP – base amount (¥1,660
million/year)) x 98.0%

Fixed +
Amount that is a certain percentage of sales exceeding the threshold
Revenue sharing (Note 6)
Fixed +
Amount that is a certain percentage of sales exceeding the threshold
Revenue sharing (Note 6)
Amount that is the monthly GOP multiplied by 86.0%
Variable(¥0 if the amount is below ¥0).
Amount that is the monthly GOP multiplied by 86.0%
Variable(¥0 if the amount is below ¥0).
Fixed +
Amount that is a certain percentage of sales exceeding the threshold
Revenue sharing (Note 6)
Fixed +
Amount that is a certain percentage of sales exceeding the threshold
Revenue sharing (Note 6)
Variable
Variable rents linked to hotel sales, etc. (Note 6)

The indicated figures are for Sheraton Grand Hiroshima Hotel, the main facility of ACTIVE-INTER CITY HIROSHIMA.
AGOP (adjusted GOP) is the amount calculated by subtracting certain fees and other items from GOP. The same shall apply hereinafter.
For the purpose of payments of variable rent from each hotel, etc. JHR has set individual GOP base amount for each hotel. The breakdown of the AGOP
base amount of The Five HMJ Hotels (¥4,120 million/year) is as follows.
Kobe Meriken Park Oriental Hotel ¥690,000 thousands, Oriental Hotel tokyo bay ¥1,060,000 thousands, Namba Oriental Hotel ¥890,000 thousands,
Hotel Nikko Alivila ¥1,250,000 thousands, and Oriental Hotel Hiroshima ¥230,000 thousands.
Rent that was applied from June 18, 2021 onward is indicated.
The management contract structure is a structure for hotel real estate owned by JHR in which JHR entrusts an operator to operate the hotel and takes in
the outcome of that business as real estate operating revenue. Specifically, JHR, the owner of the hotel real estate, concludes a management contract with
an operator and entrusts the operator with the tasks necessary to run the hotel business. JHR receives the hotel revenue achieved from the hotel business(operation) by the operator and, at the same time, pays a management fee to the operator. This hotel revenue achieved is recognized as “real estate
operating revenue through management contract” and is equivalent to the rent that is the real estate operating revenue under the leasing structure.
The detailed content of the contract is not disclosed as consent on disclosure has not been obtained from the lessee.
Rent type for Hotel Keihan Universal City that applies through to June 30, 2021, is indicated. Rent type for Oriental Hotel Universal City is variable/fixedfrom July 1, 2021 onward. The variable rent for the fiscal year 2021 is not applicable, and the variable rent for the fiscal year 2022 onward is as follows:(AGOP – base amount (¥370 million/year)) x 95.0%.

- 42 -

b.

Major indicators of the hotel business
The following tables indicate the figures related to the hotel business of the HMJ Group Hotels for the operating period fromJanuary 1, 2021, through June 30, 2021, based on the data provided by the hotel lessees. While these indicators of the hotels
are among the indicators that show the operating status of the rooms departments, please note that they do not necessarily
represent the operating revenue and the ability to bear rent, etc. of the respective hotels, as the room rates and profit margins,etc. of the respective rooms available for sale are not uniform, among other reasons. As such, the indicators are no more than
the reference figures.
Kobe
Meriken Park
Oriental Hotel
Ratio tototal sales(%)

Oriental Hoteltokyo bay
Ratio tototal sales
(%)

Namba
Oriental Hotel Hotel Nikko Alivila(Note 4)
Ratio toRatio tototal sales
total sales(%)(%)

Oriental Hotel
Hiroshima
Ratio tototal sales(%)

The Five HMJ
HotelsTotal/Average
Ratio tototal sales(%)

Occupancy rate

31.1%

－

26.0%

－

22.0%

－

20.8%

－

52.7%

－

28.7%

－

ADR
(Note 1)

15,280－12,623

－

5,584

－

23,532

－

8,269

－

13,126－

RevPAR(Note 2)

4,755

－

3,281

－

1,229

－

4,900

－

4,361

－

3,767

－

Total sales

1,153

100.0

868

100.0

371

100.0

961

100.0

377

100.0

3,731

100.0

Rooms department

278

24.1

304

35.0

57

15.5

352

36.6

179

47.5

1,170

31.4

Food & beveragedepartment

586

50.8

239

27.5

0

0.0

215

22.4

85

22.6

1,125

30.1

Tenant department

36

3.1

52

6.0

293

79.0

1

0.1

5

1.3

387

10.4

Other departments(Note 3)

254

22.0

274

31.5

20

5.4

393

40.9

108

28.6

1,049

28.1

(86)

(7.4)

(116)

(13.3)

155

41.7

70

7.3

25

6.7

48

1.3

GOP

Sheraton Grand
Oriental Hotel
Holiday Inn Osaka
Hiroshima Hotel
Fukuoka Hakata
Namba(Note 5)
Station(Note 4)
Ratio toRatio toRatio toRatio tototal sales
total sales
total sales
total sales
(%)
(%)
(%)
(%)

Okinawa Marriott
Resort & Spa

Hilton Tokyo
Narita Airport
Ratio tototal sales(%)

International
Garden Hotel
NaritaRatio tototal sales(%)

Occupancy rate

24.2%

－

25.4%

－

39.4%

－

－

－

39.8%

－

43.6%

－

ADR
(Note 1)

17,494－

21,446

－

9,627

－

－

－

10,707

－

7,133

－

RevPAR(Note 2)

4,238

－

5,449

－

3,796

－

0

－

4,264

－

3,107

－

Total sales

611

100.0

671

100.0

428

100.0

19

100.0

712

100.0

385

100.0

Rooms department

277

45.3

235

35.0

152

35.5

0

0.0

423

59.4

260

67.6

Food & beveragedepartment

122

20.0

350

52.2

113

26.5

－

－

159

22.4

78

20.3

Tenant department

19

3.1

－

－

96

22.5

17

89.7

12

1.6

1

0.3

Other departments(Note 3)

193

31.6

86

12.9

67

15.6

2

10.3

118

16.6

45

11.8

(109)

(17.8)

91

13.5

84

19.6

(15)

(77.9)

21

3.0

81

20.9

GOP

- 43 -

Hotel Oriental
Express
Hilton Tokyo Odaiba
Osaka Shinsaibashi(Note 4)
Ratio toRatio toRatio tototal sales
total sales
total sales
(%)
(%)
(%)

Hotel Nikko Nara

The HMJ Group
HotelsTotal/Average(Note 6)
Ratio tototal sales(%)

Occupancy rate

14.1%

－

－

－

28.3%

－

27.7%

－

ADR
(Note 1)

12,169－－－21,702－

13,048－

RevPAR(Note 2)

1,719

－

－

－

6,136

－

3,618

－

Total sales

344

100.0

1

100.0

1,411

100.0

8,313

100.0

Rooms department

103

29.9

－

－

503

35.6

3,123

37.6

Food & beveragedepartment

170

49.6

－

－

470

33.3

2,588

31.1

Tenant department

2

0.7

－

－

39

2.8

573

6.9

Other departments(Note 3)

68

19.8

1

100.0

399

28.3

2,029

24.4

(101)

(29.5)

(12)

－

(225)

(15.9)

(136)

(1.6)

GOP
(Note 1)

ADR: Represents average daily rate, which is calculated by dividing total rooms revenue for a certain period (including service charges) by the total number ofrooms sold during the period.
Service charges are 10% for Kobe Meriken Park Oriental Hotel, Oriental Hotel tokyo bay, Namba Oriental Hotel, Hotel Nikko Alivila, Oriental Hotel
Hiroshima, Okinawa Marriott Resort & Spa, Sheraton Grand Hiroshima Hotel (main facility of ACTIVE-INTER CITY HIROSHIMA), International Garden
Hotel Narita, Hotel Nikko Nara and Oriental Hotel Fukuoka Hakata Station; 12% for Hilton Tokyo Narita Airport; and 13% for Hilton Tokyo Odaiba. Holiday
Inn Osaka Namba and Hotel Oriental Express Osaka Shinsaibashi do not request service charges. The same shall apply hereinafter.

(Note 2)

RevPAR: Represents revenue per available room, which is calculated by dividing total rooms revenue for a certain period (including service charges) by the
total number of rooms available for sale during the period. The same shall apply hereinafter.

(Note 3)Figures for the other departments include sales of the department for sale of goods.

(Note 4)Due to the impact of the spread of the infection by COVID-19, the temporary closure was implemented for certain period during the midterm period. However,(Note 5)The indicated figures are for Sheraton Grand Hiroshima Hotel, the main facility of ACTIVE-INTER CITY HIROSHIMA.

(Note 6)

For Total/Average of the HMJ Group Hotels, figures are calculated by JHR as reference since no figures have been provided by the hotel lessees.

the occupancy rate is calculated including the closure period.

(Note 7) The occupancy rate is rounded off to one decimal place, while ADR and RevPAR are rounded off to single units. Sales and GOP are rounded off to the nearest
million yen. For the ratio to total sales, the ratio of sales in each department to total sales is rounded off to one decimal place.

- 44 -

(2) Status of capital expenditures
a. Planned capital expenditures (Note)
The following table shows major estimated capital expenditures items for renovation work during the fiscal year planned asof the end of the midterm period under review. Capital expenditures are expected to total ¥2,226 million for the second half
and, in aggregate with the capital expenditures for the first half, capital expenditures are expected to total ¥3,522 million for
the full year.
Name of property, etc.
(Location)

PurposeScheduled period

Kobe Meriken Park Oriental Hotel

Renovation of prefabricated bathrooms

From April 2021

(Kobe-shi, Hyogo)
Dormy Inn Kumamotoin guest rooms(Kumamoto-shi, Kumamoto)to July 2021

Renewal of air-conditioning equipment

From March 2021
to July 2021

Estimated construction costs(JPY 1M)
Payment Total
Total
for the amountamountfirst half paid
57

－

－

80

－

－

Oriental Hotel Universal City
(Osaka-shi, Osaka)

Renovation of guest rooms, etc.

From April 2021
to December 2021

589

－

－

Okinawa Marriott Resort & Spa(Nago-shi, Okinawa)

Painting of exterior walls

From July 2021
to December 2021

44

－

－

International Garden Hotel Narita(Narita-shi, Chiba)

Renewal of air-conditioning equipment－－

From October 2021
to November 2021

Total
(Note)

38810

New construction and renewal work include those for buildings, attached facilities, etc. as well as items classified as furniture and fixtures. The
scheduled period of the above planned renovation work and whether the renovation work will be performed may change.

b. Capital expenditures during the period (Note)
Major construction work conducted by JHR during the midterm period under review that represents capital expenditures is
as below. Capital expenditures for the midterm period under review totaled ¥1,296 million, and repair expenses that were
accounted for as expense for the midterm period under review totaled ¥7 million. In aggregate, ¥1,303 million of
construction work was carried out.
Name of property, etc.
Construction costs
Purpose
Period(Location)(JPY 1M)
Oriental Hotel Universal City
(Osaka-shi, Osaka)
Hotel Oriental Express Fukuoka
Tenjin(Fukuoka-shi, Fukuoka)
Hotel Oriental Express Fukuoka
TenjinRenovation of guest rooms, etc.

From April 2021
to June 2021

Renewal of heat-source equipment for

From April 2021

air conditioning facilities

to June 2021

Renovation of guest rooms, etc.

(Fukuoka-shi, Fukuoka)
Hilton Tokyo Odaiba(Minato-ku, Tokyo)

Renewal of central monitoring device

From April 2021
to June 2021
From March 2021
to June 2021

Total
(Note)

134
67

351
63
617

New construction and renewal work include those for buildings, attached facilities, etc. as well as items classified as furniture and fixtures.

- 45 -