This English translation is provided for information purposes only. If any discrepancy is identified between this translation andthe Japanese original, the Japanese original shall prevail.
March 4, 2021
REIT Issuer:
Japan Hotel REIT Investment Corporation (TSE code: 8985)
Kaname Masuda, Executive Director
Asset Management Company:
Japan Hotel REIT Advisors Co., Ltd.
Hisashi Furukawa, President & CEO
Contact:
Makoto Hanamura
Executive Director
Head of Planning Group, Operations Division
TEL: +81-3-6422-0530
Notice Concerning Issuance of New Investment Units by Way of Third-Party Allotment
Japan Hotel REIT Investment Corporation (hereinafter called “JHR”) informs you that JHR has resolved at the Board of Directors
meeting today (hereinafter called the “Resolution at the Board of Directors Meeting”) to issue new investment units by way ofthird-party allotment (hereinafter called the “Third-Party Allotment”) as follows:1.

2.

Summary of issuance of new investment units(1)
Number of investment units to be offered:(2)
Issue price:

4,659 units¥64,400.- per unit

(3)
(4)
(5)
(6)
(7)
(8)
(9)

Total issue price:
Offering and allocation methods:
Subscription period (Subscription date):
Payment date:
Allottee and number of investment units to be allotted:
Subscription unit:¥300,039,600.By way of third-party allotment
March 12, 2021 (Friday)
March 16, 2021 (Tuesday)
SC J-REIT Investments GK: 4,659units
1 unit or more in multiples of 1 unit

Underwriter:

SMBC Nikko Securities Inc.

(10)

Each of the provisions above shall be subject to the condition that the securities registration statement filed in accordancewith the Financial Instruments and Exchange Act (Act No.25 of 1948. Including subsequent revisions. The same shallapply hereinafter.) takes effect.

Change in total number of investment units issued after new issuance this time
Total number of investment units issued as of today
Increase in number of investment units by the Third-Party Allotment
Total number of investment units issued after the Third-Party Allotment

4,462,347 units
4,659 units
4,467,006 units

Note: This press release has been prepared for the purpose of announcing to the public certain matters relating to the issuance of new investment units of JHR by way ofthird-pary allotment, and not for the purpose of soliciting any investment. JHR asks that investors make investment decisions only after they have referred to theprospectus for the issuance of new investment units and secondary offering of investment units as well as amendments thereto (if any) prepared by JHR, and that theinvestment decisions are made at their discretion and responsibility.

13.

Purpose and rationale of issuance
As one of the Japan’s largest J-REIT specializing in hotel, JHR considers providing attractive investment opportunities for hotel
assets related to the Japanese tourism industry as an important mission, and aims to maximize unitholder value and enhanceunitholder returns by pursuing stability and upside potential (*1). In recent years, JHR has been realized sustainable growth due tothe steady leisure demand of Japanese people backed by rising income levels and increasing intention for leisure, as well as
increase in number of foreign visitors to Japan (hereinafter called "inbound tourists") backed by implementation of policies by thegovernment which aimed to become advanced countries for tourism and the response to these initiatives.
However, in 2020, due to the impact of the global spread of COVID-19, the Japanese economy was significantly affected and thehotel market deteriorated sharply due to the restraint of domestic and overseas economic activities, decrease in inbound tourists, aswell as nationwide voluntary refrain from various events and the suspension of operations at large-scale theme parks following thedeclaration of the State of Emergency by the governmenet. Under these circumstances, as for the performance of the hotels owned
by JHR in the fiscal year ended December 2020, RevPAR (*2) and GOP (gross operating profit) of all hotels, including The 24
Hotels with Variable Rent, etc. (*3), were significantly decreased in comparison with the previous fiscal year, due to the impact of
the spread of COVID-19.
In 2021, the Japanese economy is expected to remain challenging for the time being due to the impact of COVID-19, including theState of Emergency declared again by the government in January. In addition, the domestic accommodation and tourism market
are also expected to continue to face a challenging environment due to the continued substantial decrease in inbound tourists andthe decrease in domestic travelers.
Under these circumstances, JHR communicated closely with the lessees and operators of each hotel that operate the hotels owned
by JHR in an effort to secure hotel revenues, including a reduction in operating costs. In particular, Hotel Management Japan Co.,
Ltd. (hereinafter called "HMJ"), the largest lessee, and its subsidiaries (collectively, hereinfater called the "HMJ Group"),underwent major restructuring, including personnel expenses and outsourcing expenses, after discussion and consideration withJHR. As a result, the HMJ Group has achieved substantial cost reductions in the operation of hotels owned by JHR in 2020
compared to 2019, and expects constant cost reduction hereafter. In addition, JHR has focused to ensure financial stability by
maintaining close communication with the financial institutions to which it borrows.
On the other hand, there is still a high degree of uncertainty regarding the future outlook for the impact of COVID-19 on the hotel
market. Therefore, JHR is striving to develop and implement measures to secure profits, such as further improvement of the hotelmanagement organization and implementation of sales and marketing measures in response to changes in the market. Under suchcircumstances, through the discussions with the financial institutions to which JHR borrows, JHR decided to conduct a third-party
allotment with SC J-REIT Investments GK as the allottee, which belongs to SC CAPITAL PARTNERS group (hereinafter calledthe "Sponsor Group") (*4), the sponsor (shareholder) of Japan Hotel REIT Advisors Co., Ltd. (hereinafter called “JHRA”). The
purpose of the Third-Party Allotment is to contribute for enhancment of the JHR’s unitholder value for medium-to long-term
perspective through further strengthening the financial base of JHR by utilizaiton of the financial resources of the Sponsor Group,
strengthening the relationship between JHR and the Sponsor Group, which is to be allocated through communitiy of interest, andstrengthening the relationship between JHR and the financial institutions to which it borrows through the demonstration ofcommittement by the Sponsor Group's to JHR.
As announced by JHR in the “Financial Report for the Fiscal Year Ended December 31, 2020 (January 1, 2020- December 31,2020)” dated February 25, 2021, the two properties of Hotel ACENT FUKUOKA and Hotel Keihan Universal City are scheduled
to be rebranded with changes in lessees. The proceeds of the Third-Party Allotment will be used for the part of the fund for thecapital expenditures, such as guestroom renovations associated with the rebranding.

Note: This press release has been prepared for the purpose of announcing to the public certain matters relating to the issuance of new investment units of JHR by way ofthird-pary allotment, and not for the purpose of soliciting any investment. JHR asks that investors make investment decisions only after they have referred to theprospectus for the issuance of new investment units and secondary offering of investment units as well as amendments thereto (if any) prepared by JHR, and that theinvestment decisions are made at their discretion and responsibility.

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(*1)

Upside refers to an increase in revenue due to variable rent and other factors brought by improvement of hotel performance, andupside potential refers to upside feasibility.

(*2)

RevPAR: Represents revenue per available room, which is calculated by dividing revenue for rooms for a certain period (includingservice charges) by the total number of rooms available for sale during the period.

(*3)

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), with the hotels which JHR leases to subsidiaries of HMJ(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.” 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 bikebukuro, the b hachioji and the b hakata.

(*4)

The planned allottee will receive investment from a corporation which belongs to the Sponsor Group, which is the sponsor(shareholder) of JHRA on the payment date of the Third-Party Allottment. After such investment, the planned allotee will also belong
to the Sponsor Group. Therefore, in this press release, it is assumed that the planned allottee belongs to the Sponsor Group.

4.

Amount, intended use and payment schedule of funds to be raised(1) Amount of funds to be raised (estimated net amount JHR will receive)¥287,039,600.- (*)(*) Amount of funds to be raised (estimated net amount JHR will receive) ¥287,039,600.- = total amount of funds to be raised¥300,039,600.- － various costs for issuance of new investment units ¥13,000,000.- (estimated amount)(2) Specific use and payment schedule of funds to be raised
Specific use
Plan to fund a part of capital expenditures

Amount¥287 million

Payment schedule
July 2021(*) Procured funds are planned to be deposited in financial institutions until its payment for intended use.

5.

Concept on the rationality of the use of funds
Proceeds from the Third-Party Allotment will be appropriated as part of capital expenditures as described in "4. Amount,intended use and payment schedule of funds to be raised (2) Specific use and payment schedule of funds to be raised " above.
Implementation of the capital expenditures by the proceeds of the Third-Party Allotment is considered to be a reasonable use offunds as they contribute to the medium-to long-term growth of JHR and enhancement of its unitholder value.

6.

Rationale for the conditions of the issuance(1) Basis for calculation of the issue price
The issue price was set at ¥64,400.- the closing price of JHR's investment units (the "Investment Units") on the Tokyo StockExchange, Inc. (the "Tokyo Stock Exchange") on March 3, 2021, the business day immediately before the date of theResolution at the Board of Directors Meeting. There is no discount on the issue price from the closing price above.
The isse price, ¥64,400.- is 4.8% premium from the average closing price of ¥61,477.- (rounded down to the nearest yen)during the month immediately preceding the date of the Resolution at the Board of Directors Meeting (from February 4, 2021
to March 3, 2021), 15.5% premium from the average closing price of ¥55,735 (rounded down to the nearest yen) for the 3months immediately preceding the date of Resolution at the Board of Directors Meeting (from December 4, 2020 to March 3,2021), and 19.0% premium from the average closing price of ¥54,105 (rounded down to the nearest yen) for the 6 monthNote: This press release has been prepared for the purpose of announcing to the public certain matters relating to the issuance of new investment units of JHR by way ofthird-pary allotment, and not for the purpose of soliciting any investment. JHR asks that investors make investment decisions only after they have referred to theprospectus for the issuance of new investment units and secondary offering of investment units as well as amendments thereto (if any) prepared by JHR, and that theinvestment decisions are made at their discretion and responsibility.

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immediately preceding the date of Resolution at the Board of Directors Meeting (from September 4, 2020 to March 3, 2021).
(2) Basis for the rationale behind the number of investment units to be issued and the scale of dilution of investment units
When determining the number of new investment units to be issued in the Third-Party Allotment, JHR decided to make thenumber of new investment units to be issued in the Third-Party Allotment to 4,659 units based on a comprehensive
consideration of the extent of the impact of dilution of investment units through the Third-Party Allotment on existing
unitholders, the planned amount of capital expenditures to be incurred regardless of whether the Third-Party Allotment isimplemented, and the improvement of financial stability, etc. In the event that all of the new investment units of 4,659 units areissued in the Third-Party Allotment, dilution will occur at a rate of 0.11% with respect to the number of outstanding investment
units as of today of 4,462,347 units.
However, JHR believes that the implementation of the Third-Party Allocation will contribute to the improvement of the JHR’s
unitholders value and the improvement of financial stability from a medium-to long-term perspective through making sponsor
spport more effective by sharing mutual interest with the Sponsor Group, which SC J-REIT Investments GK, the plannedd
allottee, belongs to. For the reasons stated above, we believe that the volume of issuance and the scale of dilution of investment
units through the Third-Party Allotment are reasonable.
7. Rationale for selection of the allottee, etc.
(1) Summary of the allottee (*1)(1)
(2)

NameAddress(3)

Representative

(4)
(5)
(6)
(7)

Basis for establishment, etc.
Purpose of incorporation
Date of incorporation
Capital amount
Investor, investment ratio andoverview of the investor

(8)

(9)

(10)

Overview of the operating
partner

Relationships between JHR,
JHRA and the funds

SC J-REIT Investments GK
22-10-201, 3-chome, Toranomon, Minato-ku, Tokyo
Representative partner: Aoyama Sogo Accounting Firm Co., Ltd.
Executive manager: Masaki AguniJapanese law
Hoding and trading of investment securities
February 5, 2021
¥100,000 (as of today)
Aoyama Sogo Accounting Firm Co., Ltd. 100%
(The company is entrusted fund administration service, etc.)
Aoyama Sogo Accounting Firm Co., Ltd.
Name
Address
Representative

2-10-4, Toranomon, Minato-ku, Tokyo
Founding Partner & CEO Masaki Aguni
Funds administration services, support for advancementoveaseas and advance into Japan, financial and tax
advisory services¥51 million

Business
CapitalRelationships
between JHR,
JHRA and thefunds
Relationships
between JHR,
JHRA and theoperating partnerNot applicableNot applicable(*1) The planned allottee is planned to receive investment from a company belongs to the Sponsor Group, which is the sponsor (shareholder) ofJHRA as of the payment date of the third-party allotment. After such investment, the planned allottee will also belong to the Sponsor
Group.
(*2) We have confirmed that the planned allottee, the officer or major shareholders (major investors) of the planned allotee have no relationshipwith organized crime group, etc. and have submitted a confirmation to the Tokyo Stock Exchange to that effect.
Note: This press release has been prepared for the purpose of announcing to the public certain matters relating to the issuance of new investment units of JHR by way ofthird-pary allotment, and not for the purpose of soliciting any investment. JHR asks that investors make investment decisions only after they have referred to theprospectus for the issuance of new investment units and secondary offering of investment units as well as amendments thereto (if any) prepared by JHR, and that theinvestment decisions are made at their discretion and responsibility.

4(2) Rationale for the election of the allottee
Please refer to “3. Purpose and rationale” of issuance above for the reasons for selecting SC J-REIT Investments GK as theallottee.
(3) Allottee’s policy on holding of the investment units
JHR has confirmed with the planned allottee that it intends to continue to hold the investment units to be acquired through theThird-Party Allotment unless there are special circumstances, except for sales, etc. to the corporation belonging to the Sponsor
Group. In addition, the planned allottee agreed with JHR and JHRA that the planned allotee will not, in principle, sell theinvestment units to third parties without the prior written approval of JHR and JHRA (except for sales,etc. to the corporation
belonging to the Sponsor Group, which are subject to the same duties as restrictions on sales, etc. imposed on the planned alotte
for the period from the acquisition of the investment units to the date of 180 days after the payment date).
8. Major unitholders and investment unit ownership ratio(1) Major shareholders and investment unit ownership ratio ater the Third-Party Allotment
Before the Third-Party Allotment
After the Third-Party Allotment (*2)(as of December 31, 2020)
The Master Trust Bank of Japan, Ltd. (Trust)
16.56%The Master Trust Bank of Japan, Ltd. (Trust)
16.54%
Custody Bank of Japan, Ltd. (Trust)

9.61%

Custody Bank of Japan, Ltd. (Trust)

9.60%

The Nomura Trust and Banking Co., Ltd.
(Investment Trust)
Custody Bank of Japan, Ltd. (Securities
Investment Trust)
BNYM AS AGT/CLTS 10 PERCENT

5.07%

5.06%

3.55%

The Nomura Trust and Banking Co., Ltd.
(Investment Trust)
Custody Bank of Japan, Ltd. (Securities
Investment Trust)
BNYM AS AGT/CLTS 10 PERCENT

3.55%

SDSS K INVESTCO LIMITED

2.63%

SDSS K INVESTCO LIMITED

2.63%

ELLIOTT INTERNATIONAL LP

2.10%

ELLIOTT INTERNATIONAL LP

2.10%

THE BANK OF NEW YORK 133970

1.50%

THE BANK OF NEW YORK 133970

1.50%

THE BANK OF NEW YORK MELLON
140044
STATE STREET BANK WEST CLIENT TREATY 505234

1.42%

THE BANK OF NEW YORK MELLON
140044
STATE STREET BANK WEST CLIENT TREATY 505234

1.42%

(*1)
(*2)

3.63%

1.42％

3.63%

1.42％

The percentage of investment units held is rounded down to the nearest second decimal place.
This chart shows the impact of Third-Party Alootment based on an assumption that there are no changes from the contents of the Investors'
Registry dated December 31, 2020. The chart may not match with the actual status of the investors.

(2) Matters relating to the satisfaction of conduit
Not applicable
9.

Future prospects
The impact of the Third-Party Allotment on the status of operations for the fiscal year ending December 31, 2021 (22nd Period)
is subtle, and there are no changes to the forecast of the operations announced by JHR in the “Financial Report for the Fiscal Year
Ended December 31, 2020 (January 1, 2020- December 31, 2020)” dated February 25, 2021.

*Website of Japan Hotel REIT Investment Corporation: https://www.jhrth.co.jp/en/
Note: This press release has been prepared for the purpose of announcing to the public certain matters relating to the issuance of new investment units of JHR by way ofthird-pary allotment, and not for the purpose of soliciting any investment. JHR asks that investors make investment decisions only after they have referred to theprospectus for the issuance of new investment units and secondary offering of investment units as well as amendments thereto (if any) prepared by JHR, and that theinvestment decisions are made at their discretion and responsibility.

5