Asset Management Report
For the Year Ended December 31, 2020

Japan Hotel REIT Investment Corporation

Dear Investors,
Thank you for your support and patronage to Japan Hotel REIT Investment Corporation (JHR) and
its asset management company, Japan Hotel REIT Advisors Co., Ltd.
Having settled the accounts for the 21st fiscal period (from January 1, 2020 to December 31, 2020) of
JHR, we are pleased to present you with the status of management and detail of the settlement ofaccounts for the period.
The fiscal period under review was a very tough year generally for the tourism industry, including thelodging industry, as the number of inbound tourists declined sharply due to restrictions on admission
for inbound visitors in response to the worldwide spread of COVID-19, and the number of Japanese
tourists declined significantly due to the government's declaration of a State of Emergency. “Go To
Travel” campaign was launched in July 2020 as a measure to stimulate tourism demand, and there
were signs of a recovery in domestic lodging demand in the second half of the same year. However,
COVID-19 began to expand again in November and “Go To Travel” campaign was temporarilysuspended in December, and domestic travel and lodging demand began to decline again. Under suchenvironment, all hotels owned by JHR experienced a significant year-on-year decline in hotel
performance for the fiscal period under review.
In the harsh business environment brought by the spread of COVID-19, JHR communicated closelywith the lessees and operators that operates each hotel. For some hotels, JHR took measures totemporarily close their operations, and worked to reduce costs by thoroughly improving the efficiency
of its operation system, thereby securing hotel revenues. With the HMJ Group, JHR's largest lessee
and strategic partner, in light of the large-scale restructuring implemented by them, JHR substantiallyrevised its lease contracts in order to make the relationship between the two more sustainable in a
medium-to long-term perspective.
On July 1, 2020, JHR sold Sotetsu Fresa Inn Shimbashi-Karasumoriguchi and recorded a gain on saleof real estate properties of JPY3,158 million to actualize a portion of unrealized gains on assets andenhanced liquidity on hand. Furthermore, on October 29, 2020, we reached an agreement with abuilding owner adjacent to HOTEL ASCENT FUKUOKA, which is owned by JHR, and through theexchange of a part of the real estate owned by both parties, we recorded a gain on the exchange of realestate properties of JPY184 million as well as devised to improve asset value by the whole ownershipof real estate.
As a result, JHR posted operating revenue of ¥13,838 million, ordinary income of ¥1,398 million andnet income of ¥1,527 million for the 21st Period. Dividend per unit came to ¥410.
We expect the hotel market to continue to face challenging conditions until the spread of the infectionsof COVID-19 is settled down. In the future, if the COVID-19 converges due to the popularization of
vaccinations and other factors, it is expected that the government will resume “Go To travel” campaign
and other measures, and the domestic travel demand of Japanese people will greatly recover. Also,with regard to inbound demand, we believe that inbound lodging demand will expand over the medium
to long term after the outbreak of COVID-19 is converged since there is a medium-to long-term trendof rising income levels in Asian countries, and Japan has high popularity in foreign countries due to
its large appeal as a destination for travel. JHR and its asset management company, Japan Hotel REIT
Advisors Co., Ltd., will make full efforts to further grow and improve the attractiveness of JHR
through responding to major changes in the hotel industry by leveraging the high level of expertiseand know-how cultivated to date.

1

We would appreciate your continued support for us.

Kaname Masuda
Executive Director
Japan Hotel REIT Investment Corporation
Hisashi Furukawa
Representative Director, President and CEO
Japan Hotel REIT Advisors Co., Ltd.

2JAPAN HOTEL REIT INVESTMENT CORPORATION
Contents:

I.

Asset Management Report

4This section (P1-P42) is the translation of the Asset Management Report for the 21st Period releasedon March 22, 2021 except for, if any, the update on I.6. Significant subsequent events. If any
discrepancy is identified between this translation and the Japanese original, the Japanese original shallprevail.

II. Financial Statements
For the Years ended December 31, 2020 and 2019
Balance Sheets

43

Statements of Income

45

Statements of Changes in Net Assets

46

Statements of Cash Flows

47

Notes to Financial Statements

49

Independent Auditor’s Report663

I. ASSET MANAGEMENT REPORT
Outline of Asset Management Operation
1. Operating results and financial position, etc.
Fiscal period
Account closing date
Operating revenue

17th period
December 2016

18th period
December 201719th period
December 2018

20th period
December 2019

21st period
December 2020

(Note 1)

JPY1M

22,10725,47528,25328,278

13,838[Real estate operating revenue]

JPY1M[22,107][25,475][26,318][28,278][10,495]

Operating expenses

JPY1M

8,221

9,717

10,26011,12910,662

JPY1M[6,589][7,911][8,344][8,997][8,717]

Operating income

JPY1M

13,88515,757

17,993

17,1483,176

Ordinary income

JPY1M

12,22014,006

16,211

15,291

1,398

JPY1M

12,12314,005

16,21015,290

1,527

JPY1M

317,878

352,183

350,556

415,722400,296[32.3][10.8][(0.5)][18.6][(3.7)]

181,989

201,963

203,372

236,522

221,201[40.1][11.0][0.7][16.3][(6.5)][Real estate operating costs]

Net income(Note 2)

Total assets[Period-on-period change]
Net assets

[%]
JPY1M

[Period-on-period change][%]

Unitholders’ capital

JPY1M

134,829

153,516

153,516

186,894

186,894

Number of investment units issued andoutstandingUnits

3,761,907

4,010,847

4,010,847

4,462,347

4,462,347

Net assets per unit

JPY

48,37650,35450,70553,00449,570

JPY

3,462

3,606

4,041

3,447

342

Total dividends

JPY1M

12,865

14,771

15,602

16,466

1,829

Dividend per unit

Net income per unit

(Note 3)

JPY

3,420

3,683

3,890

3,690

410

[Earnings dividend per unit]

JPY

3,420

3,683

3,890

3,690

410

[Dividend per unit resulted fromexcess of earnings]

JPY

–

–

–

–

–

%

4.4

4.2

4.6

4.0

0.3

%

7.8

7.3

8.0

7.0

0.7

%

57.3

57.3

58.0

56.9

55.3

Ratio of ordinary income to total assets(Note 4)Return on unitholders’ equity(Note 5)

Ratio of net assets to total assets(Note 6)[Period-on-period change]
Payout ratio

[%]

[3.2]

[0.1]

[0.7]

[(1.1)][(1.6)](Note 7)

%

106.1

105.5

96.2

107.7

119.8
6,547

[Additional information]
NOI(Note 8)JPY1M

18,82921,424

22,10424,087

FFO per unit

(Note 9) (Note 10)

JPY

4,103

4,454

4,588

4,503

632

FFO multiple(Note 10) (Note 11)

Times

19.2

17.0

17.1

18.0

83.9

Times

14.2

15.6

18.0

17.5

3.3

JPY1M

126,179

140,399

136,671

168,754

168,754

39.7

39.9

39.0

40.6

42.2

Debt service coverage ratio(Note 10) (Note 12)

Interest-bearing debt
Ratio of interest-bearing debt to total(Note 13)
assetsNumber of investment properties

%

41

44

41

43

42

587,481.02

687,124.54

678,714.48

746,329.68

741,083.02

Tenants

128

131

126

125

121

％

99.9

99.9

99.9

99.9

99.9

Depreciation

JPY1M

3,294

3,725

4,091

4,557

4,761

Capital expenditures

JPY1M

2,619

2,898

3,056

6,767

1,665

Number of operating days

Days

366

365

365

365

366

Total leasable aream2

Number of tenants at end of period(Note 14)

Occupancy rate at end of period(Note 15)

(Note 1)
(Note 2)

(Note 3)

Properties

Operating revenue does not include consumption tax, etc.
Net income for the 19th fiscal period includes gain on sale of real estate properties (¥1,934 million). Net income for the
21st fiscal period includes gain on sale of real estate properties (¥3,158 million) and gain on exchange of real estate
properties (¥184 million).
The computation of net income per unit is based on the weighted-average number of units outstanding during the year.

4

(Note 4)(Note 5)(Note 6)(Note 7)(Note 8)(Note 9)(Note 10)(Note 11)
(Note 12)(Note 13)

Ratio of ordinary income to total assets = Ordinary income / ((Total assets at beginning of period + Total assets at end of
period) / 2) × 100
Return on unitholders’ equity = Net income / ((Net assets at beginning of period + Net assets at end of period) / 2) × 100
Ratio of net assets to total assets = Net assets at end of period / Total assets at end of period × 100
Payout ratio = Total dividends (excess of earnings exclusive) / Net income × 100
NOI = Real estate operating revenue − Real estate operating costs + Depreciation + Loss on retirement of noncurrent
assets + Asset retirement obligations expenses
FFO per unit = (Net income + Depreciation + Loss on retirement of noncurrent assets + Asset retirement obligations
expenses - gain on sale of real estate properties - gain on exchange of real estate properties ± Extraordinary loss or income(excluding loss on disaster)) / Number of investment units issued and outstanding
For the 19th fiscal period, FFO per unit, FFO multiple and debt service coverage ratio are calculated excluding gain onsale of real estate properties (¥1,934 million). For the 21st fiscal period, FFO per unit, FFO multiple and debt service
coverage ratio are calculated excluding gain on sale of real estate properties (¥3,158 million) and gain on exchange ofreal estate properties (¥184 million) and extraordinary income (¥130 million).
FFO multiple = Investment unit price at end of period / Annualized FFO per unit
Debt service coverage ratio = (Income before income taxes + Depreciation + Loss on retirement of noncurrent assets +Asset retirement obligations expenses - gain on sale of real estate properties - gain on exchange of real estate properties± Extraordinary loss or income (excluding loss on disaster) + Amortization of investment corporation bond issuancecosts + Amortization of investment unit issuance expenses ± Loss or gain on derivative instruments + Interest expense+ Interest expense on investment corporation bonds) / (Interest expense + Interest expense on investment corporation
bonds + Total of contractual principal repayments (excluding lump-sum principal repayments))
Ratio of interest-bearing debt to total assets = Interest-bearing debt at end of period / Total assets at end of period × 100(Note 14)

Number of tenants at end of period indicates the total number of tenants based on the lease contracts for respective realestate properties in trust (excluding tenants of parking lots, etc.) as of the end of each fiscal period. However, forproperties with pass-through master lease contracts in which JHR receives the same amount of rents, etc. paid by end
tenants as is in principle, the total number of the end tenants (excluding tenants of parking lots, etc.) is indicated.

(Note 15)

Occupancy rate at end of period indicates the percentage of leased area to leasable area of respective real estate properties
in trust as of the end of each fiscal period.

2. Asset management operation for the fiscal period under review(1) Brief history and principal activities
Japan Hotel REIT Investment Corporation (hereinafter referred to as “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 the asset management to Japan Hotel REIT Advisors Co., Ltd. (hereinafter referred to as the “AssetManagement Company”). Focusing on the importance of hotels as social infrastructure and their profitability
as investment real estate properties, JHR has primarily invested in real estate related assets which are inthemselves wholly or partially used as hotels or real estate equivalents of such real estate or which are backed
by such real estate or real estate equivalents (hereinafter referred to as the “Real Estate for Hotels, etc.”).
JHR, the former Nippon Hotel Fund Investment Corporation (hereinafter referred to as the “former NHF”),
merged with the former Japan Hotel and Resort, Inc. (hereinafter referred to as the “former JHR”) with aneffective date of April 1, 2012 (hereinafter referred to as the “Merger”) and changed its name to Japan Hotel
REIT Investment Corporation. Since the Merger by the end of the fiscal period, JHR has carried out nine public
offerings for capital increase and continuously acquired “highly-competitive hotels” in mainly “strategic
investment target areas” where domestic and inbound leisure demand can be expected over the medium to longterm.
By implementing the aforementioned growth strategy, JHR has expanded its asset size while improving thequality of its portfolio through new property acquisitions of 26 properties amounting to ¥275,160 million (onan acquisition price basis) in total in approximately a little less than nine years since the Merger. As a result, asof the end of the fiscal period under review, JHR had a portfolio of 42 properties with a combined acquisition
price of ¥370,031 million and the total number of investment units issued and outstanding stood at 4,462,347
units.

5

(2) Investment performance for the fiscal period under review
The Japanese economy in the fiscal period under review (from January 1, 2020 to December 31, 2020) remainedin a difficult situation since February 2020, as economic activities were significantly restrained both in andoutside Japan due to the impact by the spread of novel coronavirus (COVID-19). The domestic accommodationand tourism market was heavily impacted by a significant decrease in the number of foreign visitors to Japan(hereinafter referred to as “inbound visitors”), which was estimated to be 4.11 million in 2020 (-87.1% year onyear), due to travel restrictions to Japan from abroad, etc., as well as by the nationwide self-restraint pertaining
various events and suspension of operations at large theme parks in accordance with the government’s
declaration of a state of emergency, resulting in a sharp drop in domestic demand. Accordingly, the cumulative
number of overnight guests at domestic accommodation facilities in 2020 fell by 48.6% year on year to 306
million guest nights (preliminary release). Domestic demand for accommodation showed a sign of recovery in
the latter half of the year thanks to the “Go To Travel” campaign, a government measure to stimulate domestic
tourism demand that started in late July 2020, but the earnings environment surrounding hotels remain uncertainas temporary suspension of the campaign was decided in December due to the re-spread of COVID-19 from
November.
As to the performance of hotels owned by JHR under these circumstances, RevPAR (Note 1) and GOP (grossoperating profit) of all hotels including The 24 hotels with Variable Rent, etc. (Note 2) for the fiscal period fellsignificantly below the figures of the previous year due to the impact of the spread of COVID-19.
To cope with the hardship, JHR maintained close communication with the lessees and operators 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 hotel lessee and a group company of the Asset Management Company, and its subsidiaries (hereinaftercollectively called the “HMJ Group”), implemented large-scale restructuring of labor costs, outsourcing costs
and other costs. Having achieved larger cost reductions in the fiscal period under review compared with fiscal
2019, the HMJ Group is expected to reduce costs consistently in the following fiscal period and thereafter.
Based on this, JHR concluded a fixed-term building lease contract with the HMJ Group as of August 25, 2020,
agreeing to exempting fixed rent of each hotel operated by the HMJ Group from February 2020 through theend of 2021 (fixed rent and variable rent will be employed as before for 2022 and thereafter).
As for The Ishin Group Hotels (Note 3), its performance worsened due to the impact of the spread of COVID19, making it difficult for JHR to collect fixed rent as designated in the lease contract. Accordingly, JHR decided
to change the rent structure in the lease contract with respective lessees of The Ishin Group Hotels for April
2020 and thereafter, in consideration of its impact on rent not only for the fiscal period under review but also
for the future.
Moreover, JHR decided that it is appropriate to partly realize unrealized gain of owned assets to record it asgain on sale of real estate properties and enhance the liquidity on hand. Accordingly, JHR sold Sotetsu Fresa
Inn Shimbashi-Karasumoriguchi as of July 1, 2020, recording ¥3,158 million as gain on sale of real estate
properties. JHR also exchanged the land that is part of the site of HOTEL ASCENT FUKUOKA with the realestate beneficial interest in trust of the land that is part of an adjacent building (hereinafter referred to as the“Exchange Transaction”) as of October 29, 2020. As a result of the Exchange Transaction, the mutual leaseholdownership was terminated and JHR acquired full ownership of HOTEL ASCENT FUKUOKA. This transaction
contributed to higher asset value, and JHR recorded ¥184 million as gain on exchange of real estate properties.
Furthermore, JHR made a drastic review of its capital expenditures, including large-scale renovation work
planned for the fiscal period under review, and worked to reduce such cost items as real estate operating costs
and general and administrative expenses.
For further details of management indicators for the 24 hotels with variable rent, etc., please refer to“<Reference 2> Hotel operation indexes, sales and GOP”in 7. Reference information.
(Note 1) RevPAR: Represents revenue per available room, which is calculated by dividing revenue for rooms 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 2) The hotel group combining the hotels which JHR leases to HMJ (Kobe Meriken Park Oriental Hotel, Oriental Hoteltokyo bay, Namba Oriental Hotel, Hotel Nikko Alivila and Oriental Hotel Hiroshima, (hereinafter referred to as “TheFive HMJ hotels”)), with the hotels which JHR leases to HMJ subsidiaries (Okinawa Marriott Resort & Spa, Sheraton
Grand Hiroshima Hotel (main facility of ACTIVE-INTER 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

6Kyoto Station, ibis Styles Sapporo, Mercure Sapporo, Mercure Okinawa Naha, Mercure Yokosuka, the b suidobashi, theb ikebukuro, the b hachioji and the b hakata. The same shall apply hereinafter.
(Note 3) The Ishin Group Hotels refers to the four hotels comprising the b suidobashi, the b ikebukuro, the b hachioji and the bhakata. The same shall apply hereinafter.

(3) Funding conditions
In the fiscal period under review (from January 1, 2020 to December 31, 2020), JHR took out loans of ¥4,700
million in total to refinance existing borrowings that were due for repayment in January 2020. Moreover, also
for the purpose of refinancing existing borrowings that were due for repayment, JHR took out loans of ¥1,092
million in total in June, ¥11,847 million in total in September, and ¥935 million in December 2020, respectively.
Consequently, as of the end of the fiscal period under review, balance of interest-bearing debt totaled ¥168,754
million, including short-term loans payable of ¥12,782 million, current portion of long-term loans payable of¥10,800 million, long-term loans payable of ¥103,572 million, current portion of investment corporation bondsof ¥1,500 million and investment corporation bonds of ¥40,100 million, and the ratio of interest-bearing debt
to total assets at end of year (Note) stood at 42.2%. The ratio of fixed interest rate debt to the total interestbearing debt at the end of the fiscal period under review was at 91.0%.
(Note) Ratio of interest-bearing debt to total assets at end of period = Balance of interest-bearing debt at end of period / Total
assets at end of period x 100

JHR’s issuer ratings are as follows.
Japan Credit Rating Agency, Ltd. (JCR) changed the outlook of long-term issuer rating for JHR from “A+(Stable)” to “A+ (Negative)” on December 25, 2020. Rating and Investment Information, Inc. (R&I) changed
the outlook of issuer rating for JHR from “A (Stable)” to “A (Negative)” on January 5, 2021.
Rating agency

RatingOutlookJapan Credit Rating Agency, Ltd. (JCR)

A＋(Negative)

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

A(Negative)(4) Financial results
As a result of the abovementioned asset management, operating revenue, operating income and ordinary income
were ¥13,838 million, ¥3,176 million and ¥1,398 million, respectively, for the fiscal period under review (12month period from January 1, 2020 to December 31, 2020). Net income was ¥1,527 million.
With regard to dividends, it was decided that ¥1,829 million was distributed, which was calculated by adding areversal of reserve for temporary difference adjustment (appropriation for dividends) of ¥305 million tounappropriated retained earnings of ¥1,527 million. Consequently, ¥1,829 million was distributed as dividend
and the dividend per unit came to ¥410.
For details of the appropriation for dividends for the fiscal period under review, please refer to “<Reference 3>
Dividend per unit and appropriation for dividends” in 7. Reference information.

7

3. Changes in unitholders’ capital, etc.
The table below indicates increases (decreases) in the number of investment units issued and outstanding andunitholders’ capital of JHR in the past five years.
Date

Capital transaction

Number of units issued(Units)Unitholders’ capital(JPY1M)

Note

Increase(decrease)

Balance

Increase(decrease)

Balance

170,000

3,314,227

13,98699,456(Note 1)

7,680

3,321,907

631

100,088(Note 2)January 20,
2016

Capital increase through public
offering of investment units

February 17,
2016

Capital increase through third-party
allotment of investment units

July 27,
2016

Capital increase through public
offering of investment units

428,260

3,750,167

33,813

133,902(Note 3)

August 23,
2016

Capital increase through third-party
allotment of investment units

11,7403,761,907

926

134,829(Note 4)

July 5,2017

Capital increase through public
offering of investment units

236,000

3,997,907

17,715

152,544(Note 5)

August 2,
2017

Capital increase through third-party
allotment of investment units

12,9404,010,847

971

153,516(Note 6)

January 23,
2019

Capital increase through public
offering of investment units

447,800

4,458,647

33,104

186,620(Note 7)

February 20,
2019

Capital increase through third-party
allotment of investment units

3,700

4,462,347

273

186,894(Note 8)(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)(Note 8)New investment units were issued through public offering with an issue price per unit of ¥85,020 (issue value of¥82,273) in order to raise funds for the acquisition of new properties, etc.
New investment units were issued through third-party allotment with an issue value per unit of ¥82,273 in order to raise
funds for the acquisition of new properties, etc.
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 raise 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 raise
funds for allocation to part of 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 raise 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 raise
funds for allocation to part of future acquisitions of specified assets, part of repayment of loans, or repair expenses andcapital 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 raise 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 raise
funds for allocation to part of the acquisition of new properties.

[Fluctuation in market price of investment units]
The highest and lowest prices (closing price) during each fiscal period of the investment units of JHR on the Tokyo
Stock Exchange REIT section are as follows:(yen)
Fiscal period

17th period

18th period

19th period

20th period

21st period

Account closing month

December 2016

December 2017

December 2018

December 2019

December 2020

91,80082,400Highest price

103,400

81,20085,000

Lowest price

70,90071,10075,00075,90024,700Price at end of period

78,60075,60078,40081,20053,0008

4. Dividends, etc.
Earnings dividend for the period under review was decided in accordance with the monetary distribution policy
stipulated in Article 34, paragraph 1 of JHR’s Articles of Incorporation. And ¥1,829,562,270, which excludes
fractions of less than one yen of dividend per unit from ¥1,833,485,071, which was calculated by adding a reversalof the reserve for temporary difference adjustment of ¥305,694,382 to unappropriated retained earnings of¥1,527,790,689 as of end of the fiscal period under review, was distributed. Consequently, the dividend per unit
came to ¥410.
(yen)
Classification
Unappropriated retained
earnings
Retained earnings

17th period

18th period

19th period

20th period

21st period(From January 1, 2016
to December 31, 2016)(From January 1, 2017
to December 31, 2017)(From January 1, 2018
to December 31, 2018)(From January 1, 2019
to December 31, 2019)(From January 1, 2020
to December 31, 2020)

12,126,057,948

14,005,489,588

16,213,482,816

15,290,314,375

1,527,790,689

411,048

3,048,696–

744,789

3,922,801
1,829,562,270

Total cash dividends

12,865,721,940

14,771,949,501

15,602,194,830

16,466,060,430[Dividend per unit][3,420][3,683][3,890][3,690][410]

12,865,721,940

14,771,949,501

15,602,194,830

16,466,060,430

1,829,562,270[3,420][3,683][3,890][3,690]

[410]

–

–

–

–

–

[–]

[–]

[–]

[–]

[–]

–

–

–

–

–

[–]

[–]

[–]

[–]

[–]

–

–

–

–

–

[–]

[–]

[–]

[–]

[–]

Of the above, total earnings
dividends[Earnings dividend per unit]
Of the above, total return ofcapital contributions[Return of capital
contributions per unit]
Of total return of capital
contributions, total
distributions from allowancefor temporary difference
adjustment[Of return of capital
contributions per unit,
distributions from allowancefor temporary difference
adjustment per unit]
Of total return of capital
contributions, total
distributions from theunitholders’ capital for tax
purpose[Of return of capital
contribution per unit,
distributions from theunitholders’ capital for tax
purpose per unit]

95. Investment policies and issues to be addressed
General investment outlook
It is forecasted that the Japanese economy will remain in a difficult situation for some time under the impact of
COVID-19, as the government again declared a state of emergency in January 2021. The domestic accommodationand tourism market is also forecast to remain in a harsh environment due to a continuing significant decrease in
the number of inbound visitors as well as a decrease in domestic tourists. Under such circumstances, 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,
and implementing sales measures in response to new demand including “staycation” and “workation.” Especiallyfor the hotels with variable rent, etc. centering on the HMJ Group Hotels, JHR will endeavor to maximize GOP ofeach hotel and thus maximize the rent JHR can receive as a result.
In addition, it is assumed that JHR will receive requests for rent reduction, etc. from the lessees that have been
impacted by the spread of infection of COVID-19, etc. To cope with such requests, JHR will examine what has
been requested from respective lessees, details of the existing lease contracts with them, rent levels compared withthe market rent, the possibility to collect the reduced rent portion in the future, and their financial conditions. By
doing so, JHR will respond to the requests individually after discussing with each lessee and operator, while
carefully considering the possibility of replacing operators.
On the other hand, JHR believes that domestic tourism demand will gradually recover going forward thanks to thedevelopment and distribution of vaccinations against COVID-19 and resumption of “Go To Travel” campaign by
the government, among other factors. Moreover, given the large potential demand for overseas tourism globallyand in particular, improvement in income levels in Asian countries as well as the popularity of Japan as travel
destination, accommodation demand from inbound visitors to Japan is expected to recover over a medium to longterm. As such, there is no change in the view of JHR that the accommodation and tourism market will expand overthe medium to long term. On the belief that the location and competitiveness of individual hotels as well as thecapabilities of the operators (the ability to differentiate from other hotels, improve profitability including costmanagement and capture recovering demand, etc.) will lead to differentiation of performance among hotels, JHR
will continue to implement strategies to differentiate its hotels as it has done to date.
In the meanwhile, as a result from the spread of COVID-19, the spread of contactless new behavior pattern suchas web conferencing, etc. may cause structural changes in 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 the recognition of such circumstances, JHR intends to work with the Asset Management Company
to implement strategies to differentiate hotels owned by JHR in the market by utilizing the experience it has
cultivated as a J-REIT specializing in hotel 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” through implementation of active asset management strategy, which proactively pursues greater
profitability and asset value of its properties by way of a variety of measures such as expanding international
brands and coordinating with HMJ.
For properties with fixed rent contracts, JHR will continue to focus on setting and maintaining appropriate rents
based on the rent levels in the market where respective hotels are located or each tenant’s creditworthiness andability to bear the rent costs. And JHR aims at raising rents (including introduction of revenue sharing structure)in accordance with the conditions of the accommodation market. For the moment, with possible requests for
reduction of fixed rent, etc. from the lessees that were heavily impacted by the spread of infection of COVID-19,
JHR intends to appropriately cope with the situation through discussions with respective lessees and operators.
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 January 2021, for Chisun Hotel Kamata (former Hotel Vista Kamata Tokyo), JHR conducted rebranding of theproperty upon the termination of the lease contract. Moreover, for Hotel Keihan Universal City and HOTELASCENT FUKUOKA, JHR plans to conduct their rebranding in accordance with the expiration and earlytermination of the lease contracts. As to rebranding of Hotel Keihan Universal City and HOTEL ASCENT10FUKUOKA, inviting the HMJ Group as new lessee, JHR will work to operate them efficiently through suchmeasures as coordination with existing HMJ Group Hotels, sharing of management resources with neighboring
hotels and utilization of the hotel operation know-how accumulated in the past. By doing so, JHR aims to maximize
earnings from them.
A. 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, Marriott, Sheraton,
Mercure and Holiday Inn or 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
through improved performance of these hotels. JHR coordinates with the operators in an effort to enhance thehotel performances by requesting them to implement marketing initiatives to attract a wider range of demandwith considerations given to the recovery of leisure demand from domestic and inbound visitors, measures tomaintain and increase room rates, and realization of the synergy effects like cost reductions from owning
multiple properties, among other issues.
On the other hand, under the impact of the spread of infection 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 operatorsof respective hotels to promote drastic reform of the hotel earnings structure through cost-cutting measurescentered on thoroughly enhancing efficiency of the operating system, while continuing efforts on healthconsideration for the guests and employees of respective hotels and environmental sanitation management. JHR
will also promote various measures to restore hotel earnings, such as the creation of appropriate products in
response to major changes in the market environment and the preparation of hotel facility environments, etc.
Moreover, in an attempt to recover and enhance hotel earnings, JHR will accurately grasp the situation of theaccommodation and tourism market and changing customer needs and conduct strategic capital expenditures(CAPEX) in an appropriate manner as needed.
B. Properties under fixed rent contracts
JHR will pursue efforts to set and maintain reasonable rent levels by appropriately monitoring operating
conditions of these hotels and by paying careful attention to each tenant’s ability to bear the rent costs. At thesame time, JHR will appropriately respond to requests to reduce fixed rent from the lessees that were greatly
affected by the spread of infection of COVID-19. In addition, JHR will carry out investments for the purpose ofcontinuous maintenance and renewal of facilities and equipment to ensure each hotel becomes prominent in themarket and to maintain and increase the value of its assets.
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) in areas 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 and with future
growth potential in mind in order to achieve upside.
Upon acquiring properties, JHR will focus on the infrastructure aspects of the relevant Hotel Assets such asbuildings and facilities, the services aspects such as the credibility (including the ability of the hotel lessee to bearrent costs) as well as operation and management capabilities of hotel lessee and operator, and the aspect of location
whose superiority serves as the base for demand stability and growth potential.
Specifically, JHR will target to invest in “full-service hotels” and “resort hotels” that pose barriers to new opening
due to such factors as operation and management know-how required for operating the hotels and limitations interms of capital to be invested in and location. As for “limited-service hotels,” JHR emphasizes the credibility andoperation capabilities of the hotel lessee and operator as well as the building age, location, guestroom compositionand profitability 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 ofcompetitiveness relies only on prices.
In the hotel investment market, the environment continues to be difficult for the hotel operation under the impact
of COVID-19, and hotel transactions remain on a stagnant trend due to a sense of uncertainty over the domestic
11accommodation and tourism market. Under such circumstances, JHR believes that it must be prudent ininvestigating property acquisitions. Moreover, JHR plans to investigate property dispositions as needed, from theviewpoint of securing its earnings and financial soundness. On the other hand, there is a possibility of an increasein special investment opportunities unlike before, such as sales of assets due to rapid deterioration in the financial
position of operators, sales of hotels categorized as non-core assets due to deterioration in performance of main
business of its owners, sales of hotels completed or scheduled to be completed without operators, etc. JHR will
flexibly deal with such investment opportunities by utilizing the efficient hotel operation platform of HMJ or byother measures. 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 inboundvisitors, many investors who have been on the sideline may resume investment in hotels, and competition overacquisition may become active again. Going forward, while closely monitoring market trends from many angles
and responding to changes in hotel earnings structures and the investment environment according to circumstances,
JHR will work to acquire highly competitive properties by leveraging its strengths and advantages, as well as
utilizing the HMJ platform for certain properties in pursuit of expansion of asset size that accompanies
improvement of the portfolio quality.
Finance strategy
Under the basic policy of carrying out conservative financial strategy which places importance on securement offinancial stability and soundness, JHR intends to communicate more closely than before with existing financial
institutions with which it does business in order to maintain and enhance the relationships of trust, while
endeavoring to diversify the means of financing. It aims to conduct financial operations by keeping the ratio ofinterest-bearing debt to total assets at no larger than 50% for the time being as in the past. In addition, when seeking
new borrowing for property acquisitions or refinancing existing debt, JHR will work to disperse maturity dates of
its debt as well as further reinforce its formation of lenders while considering the balance with the funding costand further diversify funding methods, such as issuance of investment corporation bonds (including green bonds)..
Moreover, while JHR believes that no abrupt change is likely to occur to the interest rate level in the current
situation, it aims to maintain and enhance financial stability and soundness in preparation for future change in thefinancial market environment, by taking into account the dispersion of maturity dates while working to optimize
financing costs and, when necessary, conducting interest rate risk management including interest rate fixation.
While being impacted by COVID-19, JHR will work to securely achieve refinancing of existing borrowings by
paying attention to financing costs while maintaining good relationships with respective lenders. In addition, JHR
will conduct appropriate control of capital expenditures and secure liquidity on hand in an effort to strengthen its
financial foundation.
Policy on handling of negative goodwill
From the fiscal period ended December 31, 2017 (18th period), JHR started appropriation for dividends throughreversal of reserve for temporary difference adjustment in connection with partial amendments to the “Ordinanceon Accounting of Investment Corporations” (Cabinet Office Ordinance No. 47 of 2006, as amended; hereinafterreferred to as the “Ordinance on Accountings of Investment Corporations”) and the “Regulation for Real Estate
Investment Trusts and Real Estate Investment Corporations” of The Investment Trusts Association, Japan. JHR
stipulated a policy to reverse ¥262 million (hereinafter called the “50-year amortization amount of negative
goodwill”), which is an amount equivalent to 2% (1/50) of the balance of the reserve for temporary difference
adjustment for the fiscal period ended December 31, 2017, to pay out as dividends every year, with the balance ofthe reserve for temporary difference adjustment remaining at the time of reversal set as the maximum reversal
amount (Note 1).
Furthermore, in cases of incurrence of losses caused by property dispositions, impairment loss of assets, dilutionof dividend per unit due to the issuance of new investment units through public offerings, etc., loss on retirementof noncurrent assets, and suspension of sales and such due to large-scale renovations with significant impact onrevenues, 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 1). As for the fiscal period ending December 31,
2021 (22nd period), JHR expects ¥330 million, which is the total of the 50-year amortization amount of negative
goodwill (¥262 million), loss on retirement of noncurrent assets (¥11 million) and amortization of the trademark
rights for the Oriental Hotel brand, etc. (Note 2) (¥56 million), as additional amounts to dividends by reversing
12

negative goodwill.
(Note 1) The policy may change due to a resolution of the board of directors. etc., and it does not guarantee the method ofreversing the reserve for temporary difference adjustment, and amounts to be reversed, etc., in the future.
(Note 2) JHR acquired the trademark rights on May 15, 2020 as announced in “Notice Concerning Acquisition of New Assets(Trademark Rights of “Oriental Hotel” brand, etc.)” on May 15, 2020. The trademark rights are amortized over 10
years using the straight-line method.

Initiatives for Sustainability
In recent years, there has been growing importance of the risks and opportunities of ESG (Environment, Socialand Governance) issues in 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 enhance unitholder value and to further raise the attractiveness of JHR. In addition, JHR believes that it isindispensable to establish favorable relationships with its stakeholders including unitholders, hotel users (guests),
lessees, operators, business partners including property managers, etc., local communities, officers and employeesof 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) evaluation for the two properties of Hotel Nikko Alivila and Mercure Okinawa Naha in February
2018 as first such cases for hotel properties owned by J-REITs (Note 1). In September 2018, JHR became the first
J-REIT specializing in hotels to be recognized by GRESB (Note 2) for its environmental awareness andsustainability initiatives and acquired “Green Star” in the GRESB Real Estate Assessment for the three consecutive
years since then. Moreover, in April 2020, Hilton Tokyo Odaiba acquired CASBEE Certification for Buildings,
the first such recognition for an existing hotel property. JHR was also selected for Sector Leader of Asian Hotel
Sector in the GRESB Real Estate Assessment conducted in 2020. 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 refinance loans procured for funding
capital expenditures and constructions cost, etc. which contribute to the 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
J-REIT specializing in hotels issuing green bonds.
In addition, as an effort under the expanding spread of COVID-19, JHR worked together with the lessees to provide
two hotels which it owns in Tokyo as facilities to accept patients with mild or no symptoms who do not require
hospital treatment among the patients infected with COVID-19.
Recognizing its social responsibility towards local communities as a J- REIT specializing in hotels, JHR willproactively 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 disclosed information(Note 2) GRESB is an annual benchmarking assessment to measure ESG (Environmental, Social and Governance) integration ofreal estate companies and funds. It evaluates initiatives for sustainability of real estate companies, 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.

6. Significant subsequent events
Issuance of new investment units
JHR resolved to issue new investment units by way of third-party allotment at the Board of Directors meeting heldon March 4, 2021. Payment for the new investment units was completed on March 16, 2021, and the investment
units were issued under the following terms and conditions. As a result, JHR’s unitholders’ capital stands at¥187,194,209,409, with the number of investment units issued and outstanding at 4,467,006 units.
(1) Issuance of new investment units (third-party allotment)
Number of investment units
issued:4,659 units

13Paid-in amount (issue value):¥64,400 per unit

Total paid-in amount (total issue
value):¥300,039,600

Payment date:

March 16, 2021

Allottee:

SC J-REIT Investments GK(2) Use of proceeds
JHR plans to allocate the proceeds from the issuance of new investment units by way of third-party allotmentof ¥300,039,600 to part of the funds for capital expenditures.

14

7. Reference information<Reference 1>
Major indicators of the hotel business for the fiscal period ended December 31, 2020
The following tables indicate the figures related to the hotel business of the HMJ Group Hotels for theoperating period from January 1, 2020 through December 31, 2020, based on the data provided by thehotel lessees, etc. Furthermore, while the indicators of the hotels are among the indicators that show theoperating status of the rooms departments, they do not necessarily represent the operating revenue andthe ability to bear rent, etc. of the respective hotels, as the daily rates of the respective rooms available
for sale and profit margins, etc. are not uniform, among other reasons. As such, the indicators are no
more than the reference figures.
Kobe Meriken Park Oriental Hotel tokyo
Oriental Hotelbay

Namba Oriental
Hotel

Hotel Nikko
AlivilaRatio to
total
sales

(Note 4)

Ratio to
total
sales

(Note 4)

Ratio to
total
sales

(Note 4)

The Five HMJ
hotelsTotal/Average

Oriental Hotel
Hiroshima

Ratio toRatio tototal
(Note 4)
total
sales
sales

Ratio to
total
sales

Occupancy rate

48.8%

－

40.3%

－

17.1%

－

40.7%

－

51.5%

－

40.0%

－

ADR (Note 1)

18,914－

15,293－

13,663－24,169

－

8,166

－

16,895－

RevPAR (Note 2)

9,225

－

6,167

－

2,330

－

9,837

－

4,208

－

6,756

－

Total sales(millions of yen)

2,853

100.0%

2,291

100.0%

918

100.0%

2,636

100.0%

826

100.0%

9,525

100.0%

Rooms department

1,091

38.2%

1,153

50.3%

220

24.0%

1,429

54.2%

350

42.3%

4,243

44.5%

Food & beveragedepartment

1,385

48.5%

740

32.3%

16

1.7%

837

31.8%

405

49.0%

3,382

35.5%

Tenant department

77

2.7%

144

6.3%

622

67.8%

2

0.1%

22

2.6%

868

9.1%

Other departments(Note 3)

300

10.5%

255

11.1%

60

6.6%

367

13.9%

50

6.1%

1,033

10.8%

GOP
(millions of yen)

195

6.8%

(149)

(6.5%)

463

50.4%

294

11.1%

(108)

(13.0%)

695

7.3%

Okinawa Marriott
Resort & Spa(Note 4)

Oriental Hotel
Fukuoka Hakata
StationSheraton Grand
Hiroshima Hotel

Ratio toRatio tototal (Note 4,5) total
sales
sales

(Note 4)

International
Garden Hotel
NaritaHoliday Inn Osaka
Namba

Hilton Tokyo Narita
AirportRatio to
total
sales

(Note 4)Ratio
to totalsales

Ratio to
total
sales

(Note 4)

Ratio to
total
sales

Occupancy rate

31.7%

－

38.9%

－

44.5%

－

16.5%

－

43.3%

－

36.0%

－

ADR (Note 1)

19,171－

22,663－

13,058－

11,792－

12,281

－

7,989

－

RevPAR (Note 2)

6,083

－

8,818

－

5,814

－

1,951

－

5,320

－

2,875

－

Total sales(millions of yen)

1,403

100.0%

1,670

100.0%

1,145

100.0%

272

100.0%

1,653

100.0%

712

100.0%

Rooms department

804

57.3%

768

46.0%

470

41.1%

224

82.3%

1,067

64.6%

487

68.5%

Food & beveragedepartment

338

24.1%

797

47.7%

346

30.2%

－

－

404

24.4%

143

20.1%

Tenant department

32

2.3%

－

－

257

22.4%

34

12.5%

38

2.3%

4

0.6%

Other departments(Note 3)

229

16.3%

104

6.3%

72

6.3%

14

5.2%

144

8.7%

77

10.8%

GOP
(millions of yen)(70)

(5.0%)

243

14.5%

385

33.6%

27

10.0%

148

9.0%

143

20.1%

15

Hotel Nikko Nara

Hotel Oriental
Express Osaka
Shinsaibashi

Hilton Tokyo Odaiba(Note 4)

Ratio to
total
sales

Ratio to
total
sales

(Note 6)Ratio
to totalsales

Occupancy rate

29.7%

－

10.8%

－

32.6%

－

35.8%

－

ADR (Note 1)

12,818

－

7,736

－

27,458－16,081－

RevPAR (Note 2)

3,812

－

833

－

8,951

－

5,757

－

Total sales(millions of yen)

1,071

100.0%

49

100.0%

3,646

100.0%

21,146100.0%

Rooms department

460

43.0%

38

76.5%

1,484

40.7%

10,046

47.5%

Food & beveragedepartment

539

50.3%

2

4.0%

1,584

43.4%

7,535

35.6%

Tenant department

11

1.1%

－

－

131

3.6%

1,375

6.5%

Other departments(Note 3)

61

5.7%

10

19.5%

447

12.3%

2,190

10.4%

(102)

(9.5%)(35)(69.9%)(109)(3.0%)

1,326

6.3%

GOP
(millions of yen)

(Note 1)
(Note 2)

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

Ratio to
total
sales

The HMJ Group
HotelsTotal/Average(Note 4)(Note 4)

ADR: Represents average daily rate, which is calculated by dividing total rooms revenue for a certain period (including
service charges) by the total number of rooms sold during the period.
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.
Figures for the Other departments include sales of the Product sales department.
The properties were temporarily closed for a certain period of time during the fiscal period under review due to the impact
of COVID-19, but the occupancy rate has been calculated by including the closed period.
The indicated figures are for Sheraton Grand Hiroshima Hotel, the main facility of ACTIVE-INTER CITY HIROSHIMA.
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, etc.
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.

16

<Reference 2>
Hotel operation indexes, sales and GOP
The numerical figures are based on figures obtained from hotel lessees, etc. Please note that these figures have notbeen audited or gone through other procedures. No guarantee is made as to the accuracy or completeness of the
figures and information.
<1> The 24 Hotels with Variable Rent
Fiscal period ended December 31, 2019
Comparison withprevious period

ActualOccupancy rate

ADR

RevPAR

Sales(millions of yen)

GOP
(millions of yen)

Fiscal period ended December 31, 2020
Comparison withprevious period

ActualFirst half

85.1%(2.9)pt

34.0%(51.1)pt

Second half

86.9%

0.5pt

40.8%

(46.1)pt

Full year

86.0%(0.0)pt

37.4%(48.6)pt

First half

15,691

0.4%

13,362(14.8)%

Second half

17,263(3.4)%

13,354(22.6)%

Full year

16,492(1.6)%

13,357(19.0)%First half

13,348(3.0)%

4,536(66.0)%

Second half

14,993(2.9)%

5,445(63.7)%

Full year

14,178(2.9)%

4,993(64.8)%First half

28,259(2.0)%

10,718(62.1)%

Second half

31,453(2.0)%

13,378(57.5)%

Full year

59,712(2.0)%

24,096(59.6)%First half

9,067

(5.6)%(213)(102.4)%

Second half

11,804(2.8)%

1,867(84.2)%

Full year

20,871(4.0)%

1,654(92.1)%<2> The HMJ Group Hotels
Fiscal period ended December 31, 2019
Comparison withprevious period

ActualOccupancy rate

ADR

RevPAR

Sales(millions of yen)

GOP
(millions of yen)First half

85.3%

Second half
Full year

Fiscal period ended December 31, 2020
Comparison withprevious period

Actual(3.0)pt

33.1%(52.2)pt

87.9%

1.4pt

38.4%

(49.5)pt

86.6%(0.8)pt

35.8%(50.8)pt

First half

17,587(0.7)%

15,222(13.4)%

Second half

19,635(4.5)%

16,814(14.4)%

Full year

18,635(2.7)%

16,081(13.7)%First half

15,005(4.1)%

5,045(66.4)%

Second half

17,263(3.0)%

6,460(62.6)%

Full year

16,143(3.5)%

5,757(64.3)%First half

24,050(2.4)%

9,167(61.9)%

Second half

27,137(2.0)%

11,978(55.9)%

Full year

51,187(2.2)%

21,146(58.7)%First half

7,230(6.1)%(370)(105.1)%

Second half

9,886(2.0)%

1,696(82.8)%

Full year

17,116(3.8)%

1,326(92.3)%

17

<Reference 3>

Dividend per unit and appropriation for dividends

Dividend per unit for the fiscal periods ended December 31, 2019 and December 31, 2020 were calculated basedon the assumptions described below.
(millions of yen)
Fiscal period ended
December 31, 2019

Fiscal period ended
December 31, 2020

Unappropriated retained earnings

15,2901,527

Total of reserve for temporary difference adjustments (negative goodwill)
used

1,176

305

Negative goodwill – 50-year amortization amount (Note 1)

262

262

Loss on retirement of noncurrent assets (Note 2)

246

5

Correspondence to large-scale renovation works (Note 3)357-

Adjustment for dilution (Note 4)

310-

Amortization of trademark rights (Note 5)
Total dividends
Total number of investment units issued (Units)
Dividend per unit-

37

16,466

1,829

4,462,347

4,462,347

3,690

410

(JPY)

(Note 1) JHR reverses ¥262 million (hereinafter called the “50-year amortization amount of negative goodwill”) to payout as
dividends, with the remaining balance of the reserve for temporary difference adjustment set as the maximum amount, forevery year.
(Note 2) The amount recognized as a loss on retirement of noncurrent assets are appropriated by reserve for temporary difference
adjustment (negative goodwill).
(Note 3) Oriental Hotel Fukuoka Hakata Station implemented large-scale renovation works accompanied by suspension of hotel
operation from October 1, 2018 to April 8, 2019. Taking into consideration the impact on dividend by the suspension of
hotel operation due to the renovation, reserve for temporary difference adjustment (negative goodwill) is appropriated.
(Note 4) Adjustment for dilution of dividend per unit due to issuance of new investment units.
(Note 5) The trademark rights for the Oriental Hotel brand, etc. are amortized over 10 years using the straight-line method. For theamount to be amortized in the fiscal period under review, reserve for temporary difference adjustment (negative goodwill)is appropriated.

<Reference 4>Balance of reserve for temporary difference adjustment

The balance of reserve for temporary difference adjustment (negative goodwill) after appropriation for dividends
for the fiscal period ended December 2020 is as follows.
Balance of reserve for temporary difference adjustment as of December 31, 2020
Appropriation for dividends for the fiscal period ended December 31, 2020
Balance of reserve for temporary difference adjustment after appropriation for dividends for the
fiscal period ended December 31, 202018

(millions of yen)
10,617(305)
10,311

Overview of JHR
1. Unitholders’ capital
17th period

18th period

19th period

20th period

21st period

As ofDecember 31, 2016

As ofDecember 31, 2017

As ofDecember 31, 2018

As ofDecember 31, 2019

As ofDecember 31, 2020

Total number of authorized units(Units)

20,000,000

20,000,000

20,000,000

20,000,000

20,000,000

Number of investment units issued andoutstanding(Units)

3,761,907

4,010,847

4,010,847

4,462,347

4,462,347

134,829

153,516

153,516

186,894

186,894

31,37135,04631,15530,574

35,117

Account closing date

Unitholders’ capital(JPY1M)
Number of unitholders(Persons)

2. Matters regarding investment units
Major unitholders of JHR as of December 31, 2020 were as follows:
Number of units held
(Units)Name

Percentage (Note)(%)

The Master Trust Bank of Japan, Ltd. (Trust Account)739,108

16.56%

Custody Bank of Japan, Ltd. (Trust Account)

429,005

9.61%

The Nomura Trust and Banking Co., Ltd. (Investment Trust Account)

226,474

5.07%

Custody Bank of Japan, Ltd. (Securities Investment Trust Account)

162,196

3.63%

BNYM AS AGT/CLTS 10 PERCENT

158,778

3.55%

SDSS K INVESTCO LIMITED

117,567

2.63%

ELLIOTT INTERNATIONAL LP

93,886

2.10%

THE BANK OF NEW YORK 133970

67,259

1.50%

THE BANK OF NEW YORK MELLON 140044

63,797

1.42%

STATE STREET BANK WEST CLIENT TREATY 505234

63,476

1.42%

2,121,546

47.54%

Total(Note)The percentage indicates the ratio of the number of units held to the number of units issued and outstanding, rounded down
to the two decimal places.

3. Matters regarding officers, etc.
(1) Officers, etc. as of December 31, 2020 were as follows:
Position

Name

Major concurrent post outside
JHR

Total amount of remuneration foreach position during thecorresponding fiscal period(JPY1000)

Executive Director

Kaname Masuda (Note 1)

Representative Partner, Masuda &Partners Law Office

6,600Supervisory Director

Tetsuya Mishiku (Note 1)

Representative Attorney, Mishiku& Nagamachi Law Office

3,600Supervisory Director

Hiroto Kashii (Note1)

–

3,600

Supervisory Director

Mayumi Umezawa (Note1)

Independent auditor

KPMG AZSA LLC(Note 1)

(Note 2)

Representative of Umezawa
Accountant Office–

3,600
25,250None of the Executive Director and the Supervisory Directors own investment units of JHR in their own name or anotherperson’s name. Moreover, although the Supervisory Directors may be officers in corporations other than those listed above,
there are no conflicts of interest between those corporations including those listed above and JHR.
In case the number of Executive Director does not meet the requirement stipulated by laws and regulations, Hisashi
Furukawa, Representative Director of the Asset Management Company, was elected as Substitute Executive Director,
based on the resolution made by the 9th General Meeting of Unitholders of JHR held on November 22, 2019.

(2) Policy for decisions on dismissal or non-reappointment of independent auditor
19

We have a policy to determine, at a General Meeting of Unitholders, whether to dismiss the independent auditor
pursuant to provisions of the Investment Trusts Act, and to determine whether or not to reappoint theindependent auditor taking into comprehensive consideration the audit quality, audit fees and other various
matters.
4. Asset management company, custodian and general administrators
The asset management company, etc. as of December 31, 2020 were as follows:
Consignment classification

Name

Asset management company

Japan Hotel REIT Advisors Co., Ltd.

Custodian

Sumitomo Mitsui Trust Bank, Limited

General administrator (administration of the unitholders’registry, etc., book keeping, etc., tax payments, etc.,
Sumitomo Mitsui Trust Bank, Limitedorganizational operations, etc., and administration of the special
account management agency)
General administrator (administration regarding investment
corporation bonds)

Sumitomo Mitsui Trust Bank, Limited
Mizuho Bank, Ltd.
Resona Bank, Limited
MUFG Bank, Ltd.

General administrator (tax return preparation, etc.)

PwC Tax Japan

20

Status of Investment Assets
1. Composition of assets
20th period(As of December 31, 2019)
Type ofassetsHotel Type
(Note 1)

Prefectural
location

Name of property, etc.

Total amount of
Total amount ofRatio to total
Ratio to total
assets held
assets held
assets (%)
assets (%)(JPY1M)(JPY1M)(Note 3)(Note 3)(Note 2)

Osaka

Tokyo

Limitedservice hotel

Hokkaido

Fukuoka

Real estatein trust

26,985

6.5

26,870

6.7

Namba Oriental Hotel

14,5393.5

14,437

3.6

Hotel Oriental Express Osaka Shinsaibashi

2,817

0.7

2,805

0.7

ibis Tokyo Shinjuku

7,908

1.9

7,830

2.0

CANDEO HOTELS UENO-KOEN

6,644

1.6

6,606

1.7

the b ikebukuro

6,584

1.6

6,578

1.6

Sotetsu Fresa Inn ShimbashiKarasumoriguchi (Note 4)

4,801

1.2

-

-

Comfort Hotel Tokyo Higashi Nihombashi

3,527

0.8

3,491

0.9

the b hachioji

2,680

0.6

2,664

0.7

Smile Hotel Nihombashi Mitsukoshimae

2,022

0.5

2,042

0.5

R&B Hotel Ueno Hirokoji

1,822

0.4

1,806

0.5

Chisun Hotel Kamata(former Hotel Vista Kamata Tokyo)(Note 5)

1,452

0.3

1,447

0.4

the b suidobashi

1,194

0.3

1,173

0.3

dormy inn・global cabin Asakusa

941

0.2

934

0.2

Chisun Inn Kamata

769

0.2

768

0.2

ibis Styles Sapporo

6,561

1.6

6,492

1.6

Mercure Sapporo

5,792

1.4

5,735

1.4

HOTEL ASCENT FUKUOKA

5,161

1.2

5,450

1.4

the b hakata

2,340

0.6

2,329

0.6

Hakata Nakasu Washington Hotel Plaza

2,022

0.5

2,038

0.5

Toyoko Inn Hakata-guchi Ekimae

1,419

0.3

1,401

0.4

ibis Styles Kyoto Station

6,650

1.6

6,623

1.7

Okinawa

Mercure Okinawa Naha

2,833

0.7

2,801

0.7

Kumamoto Dormy Inn Kumamoto

2,139

0.5

2,170

0.5

Nara Washington Hotel Plaza

1,798

0.4

1,764

0.4

121,41029.2

116,265

29.0

Hilton Tokyo Odaiba

63,42915.3

63,376

15.8

Oriental Hotel tokyo bay

17,486

4.2

17,190

4.3

Hilton Tokyo Narita Airport

13,205

3.2

13,088

3.3International Garden Hotel Narita

9,162

2.2

9,127

2.3

Hotel Francs

3,178

0.8

3,145

0.8

ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel)(Note 6)

17,327

4.2

17,215

4.3

Subtotal
Tokyo

Chiba

Hiroshima

Oriental Hotel Hiroshima

4,099

1.0

4,048

1.0

Aichi

Hilton Nagoya

15,6503.8

15,695

3.9

Nara

Hotel Nikko Nara

10,355

2.5

10,254

2.6

Hyogo

Kobe Meriken Park Oriental Hotel

9,678

2.3

9,482

2.4

FukuokaOriental Hotel Fukuoka Hakata Station

9,560

2.3

9,251

2.3

Kanagawa

Mercure Yokosuka

1,621

0.4

1,606

0.4

174,75642.0

173,483

43.3

Hotel Nikko Alivila

17,904

4.3

17,790

4.4

Okinawa Marriott Resort & Spa

14,924

3.6

14,745

3.7

The Beach Tower Okinawa

6,581

1.6

6,490

1.6

Chiba

Hilton Tokyo Bay

26,408

6.4

26,289

6.6

Osaka

Hotel Keihan Universal City

5,905

1.4

5,830

1.5

Kanagawa

Hakone Setsugetsuka

3,689

0.9

3,616

0.9

Subtotal
Okinawa
Resort hotel(Note 2)

Holiday Inn Osaka Namba

Kyoto

Nara

Full-service
hotel

21st period(As of December 31, 2020)21

20th period(As of December 31, 2019)
Type ofassetsHotel Type
(Note 1)

Prefectural
location

Name of property, etc.

Total amount of
Total amount ofRatio to total
Ratio to total
assets held
assets held
assets (%)
assets (%)(JPY1M)(JPY1M)(Note 3)(Note 3)(Note 2)

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

21st period(As of December 31, 2020)(Note 2)

Subtotal

75,41318.1

74,763

18.7

Real estate in trust – Total

371,580

89.4

364,51291.1

Deposits and other assets (Note 7)

44,142

10.6

35,783

8.9

Total assets

415,722100.0

400,296

100.0

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 of assets held” shows the amount calculated by deducting accumulated depreciationfrom acquisition price (including expenses incidental to acquisition).
“Ratio to total assets” shows the ratio of each asset held to total assets, rounded off to one decimal place.
Sotetsu Fresa Inn Shimbashi-Karasumoriguchi was sold on July 1, 2020.
Hotel Vista Kamata Tokyo changed its name to Chisun Hotel Kamata on January 1, 2021 due to rebranding following
cancellation of lease contract. In this report, the same shall apply hereinafter.
ACTIVE-INTER CITY HIROSHIMA is classified in accordance with the hotel type of Sheraton Grand Hiroshima Hotel,
its main facility.
Includes machinery and equipment, tools, furniture and fixtures, construction in progress, construction in progress in trust,and intangible assets (excluding leasehold rights in trust and fixed-term leasehold rights in trust).

22

2. Major portfolio assets
An overview of the portfolio assets of JHR (42 properties in total) as of December 31, 2020 are as follows.
PropertyNo.

1

Name of property, etc.

Kobe Meriken Park Oriental Hotel(Note 5)

Book value(JPY1M)

Leasable area(m2)

Leased area(m2)

(Note 1)

(Note 2)

(Note 3)

9,654

32,663.90

Tenantoccupancy
ratio
(%)

Ratio of rental
revenue to total
rental revenue
(%)

Major
use

(Note 4)32,663.90

100.0

1.7

Hotel

2

Oriental Hotel tokyo bay

17,367

44,833.11

44,833.11

100.0

(1.3)

Hotel

3

Namba Oriental Hotel

14,51319,364.33

19,364.33

100.0

4.0

Hotel

4

Hotel Nikko Alivila (Note 6)

18,01938,024.98

38,024.98

100.0

2.5

Hotel

5

Oriental Hotel Hiroshima

4,112

13,752.22

13,752.22

100.0

(0.9)

Hotel

6

ibis Tokyo Shinjuku

7,903

6,801.84

6,801.84

100.0

1.3

Hotel

8

The Beach Tower Okinawa (Note 7)

6,495

20,140.01

20,140.01

100.0

4.9

Hotel

9

Hakone Setsugetsuka

3,622

10,655.03

10,655.03

100.0

2.8

Hotel

10

Dormy Inn Kumamoto

2,170

7,701.19

7,701.19

100.0

1.9

Hotel

12

the b suidobashi

1,186

3,097.25

3,097.25

100.0

0.2

Hotel

13

dormy inn・global cabin Asakusa

934

2,014.90

2,014.90

100.0

0.6

Hotel

14

Hakata Nakasu Washington Hotel Plaza

2,038

5,602.04

5,602.04

100.0

2.3

Hotel

15

Nara Washington Hotel Plaza

1,765

5,271.54

5,271.54

100.0

1.4

Hotel

16

R&B Hotel Ueno Hirokoji

1,806

3,060.31

3,060.31

100.0

0.9

Hotel

18

Comfort Hotel Tokyo Higashi Nihombashi

3,491

5,765.27

5,765.27

100.0

2.6

Hotel

22

Smile Hotel Nihombashi Mitsukoshimae

2,042

3,167.82

3,167.82

100.0

1.4

Hotel

Main building: Main building:
3,581.66
3,581.66
Annex:
Annex:
868.36868.36

100.0

1.3

Hotel

3,831.80

100.0

0.9

Hotel

24

Toyoko Inn Hakata-guchi Ekimae

1,401

25

Chisun Hotel Kamata(former Hotel Vista Kamata Tokyo)

1,458

26

Chisun Inn Kamata771

1,499.87

1,499.87

100.0

0.2

Hotel

29

Hotel Keihan Universal City (Note 8)

5,833

16,212.40

16,212.40

100.0

5.3

Hotel

31

Hilton Tokyo Bay (Note 9)26,30164,928.83

64,928.83

100.0

18.8

Hotel

32

ibis Styles Kyoto Station

6,641

5,003.99

5,003.99

100.0

0.4

Hotel

33

ibis Styles Sapporo

6,522

14,992.49

14,735.17

98.3

0.9

Hotel

34

Mercure Sapporo

5,789

15,189.42

14,561.13

95.9

1.5

Hotel

35

Mercure Okinawa Naha

2,841

10,884.25

10,884.25

100.0

0.0

Hotel

37

the b ikebukuro (Note 10)6,593

5,650.01

5,650.01

100.0

1.8

Hotel

39

the b hachioji (Note 10)

2,681

7,847.65

7,847.65

100.0

1.9

Hotel

40

the b hakata (Note 10)

2,347

3,986.09

3,986.09

100.0

0.3

Hotel

41

Hotel Francs

3,145

19,213.39

19,213.39

100.0

2.9

Hotel

42

Mercure Yokosuka (Note 11)

1,634

16,881.82

16,881.82

100.0

1.1

Hotel

43

Okinawa Marriott Resort & Spa

14,87836,430.15

36,430.15

100.0

0.4

Hotel

44

ACTIVE-INTER CITY HIROSHIMA(Note 12)

17,294

31,181.03

31,130.58

99.8

8.5

Hotel

45

CANDEO HOTELS UENO-KOEN(Note 13)

6,613

7,934.26

7,934.26

100.0

3.3

Hotel

46

Oriental Hotel Fukuoka Hakata Station

9,473

18,105.42

18,105.42

100.0

3.6

Hotel

47

Holiday Inn Osaka Namba

26,941

11,501.10

11,501.10

100.0

0.5

Hotel

48

HOTEL ASCENT FUKUOKA

5,451

8,238.75

8,238.75

100.0

4.5

Hotel

49

Hilton Nagoya (Note 14)

15,69647,942.71

47,942.71

100.0

7.8

Hotel

50

Hilton Tokyo Narita Airport

13,34356,817.28

56,817.28

100.0

1.2

Hotel

51

International Garden Hotel Narita

9,196

21,814.93

21,814.93

100.0

1.3

Hotel

52

Hotel Nikko Nara (Note 15)

10,35721,011.31

21,011.31

100.0

0.3

Hotel

53

Hotel Oriental Express Osaka Shinsaibashi

2,816

2,710.55

2,710.55

100.0

0.1

Hotel

54

Hilton Tokyo Odaiba

63,60764,907.76

64,907.76

100.0

2.5

Hotel

366,760

741,083.02

740,146.96

99.9

97.6

Total

(Note 1)

3,831.80

Book value includes real estate in trust, machinery and equipment, tools, furniture and fixtures, construction in progress,
construction in progress in trust, and intangible assets.

23

(Note 2)

In principle, 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 in tsubo units, the figure in the table has been
converted to the area in metric units (3.30578 square meters per one tsubo).

(Note 3)

In principle, leased area represents the leased area described in the lease contract of the building. For properties in which
the leased area is not described in the lease contract, leased area shows the area described in the registration of thebuilding. 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 whichmaster lease companies have concluded lease contracts with lessees, etc. under the pass-through scheme in which JHR
receives the same amount of rents, etc. paid by end tenants as is in principle, the total area for which lease contracts havebeen concluded with end tenants and which are actually leased is indicated. In this report, the same shall apply hereinafter.

(Note 4)

Represents the ratio of rental revenue to total real estate operating revenue for the fiscal period under review. In
calculating, the figures are rounded off to one decimal place. Please note that the sum of the ratio of rental revenue tototal rental revenue is 97.6% because the relevant ratios of the trademark rights for the Oriental Hotel brand, etc. and of
Sotetsu Fresa Inn Shimbashi-Karasumoriguchi that was sold in the 21st fiscal period are not included.
Kobe Meriken Park Oriental Hotel is a building owned in the form of a compartmentalized ownership by two owners(JHR and Kobe City). The area in this table shows the portion owned exclusively by JHR (including an accessory buildingof 764.83 square meters).
Leasable area and leased area for Hotel Nikko Alivila include an accessory building of 120.10 square meters and exclude
a building of 493.50 square meters rented by JHR from Kabushiki Kaisha Okinawa Umi No Sono.
Leasable area and leased area for The Beach Tower Okinawa include the floor area of a warehouse in a two-story lightgauge steel annex building (91.20 square meters).
The building of Hotel Keihan Universal City is a building with compartmentalized ownership for Universal CityWalk
Osaka, which comprises two hotel buildings, business facilities, commercial facilities and others, as a single building.
For the leasable area and leased area of the property, the leased area under the lease contract of the hotel is indicated.
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).
The b ikebukuro, the b hachioji and the b hakata are properties with pass-through master lease contracts in which JHR
receives the same amount of rents, etc. paid by end tenants as is in principle. In this report, the same shall apply hereinafter.
The building of Mercure Yokosuka is a building with compartmentalized ownership for Bay Square Yokosuka Ichibankan,
which comprises a hotel, a theater, stores, apartments, office spaces and parking lots, as a single building. For the leasablearea and leased area of the property, the leased area under the lease contract of the hotel is indicated.
The building of ACTIVE-INTER CITY HIROSHIMA is a building with compartmentalized ownership for ACTIVEINTER CITY HIROSHIMA, which comprises Sheraton Grand Hiroshima Hotel, office spaces, stores, parking lots andbicycle parking lots etc., as a single building. For the leasable area and leased area of the property, the leased area under
the lease contracts of the hotel, office spaces and stores are indicated.
Leasable area and leased area of CANDEO HOTELS UENO-KOEN indicate the total floor area described in thecertificate of inspection, based on the building lease contract with the hotel lessee. Furthermore, the figure includes thefloor area for the mechanical parking facilities.
The building of Hilton Nagoya is a compartmentalized ownership of AMMNAT SQUARE, which consists of a hotel
building (including retail space), office building and car parking space, etc., as a single building. Leasable area and leased
area indicate the sum total of the leased area for the hotel building, the office building and the retail space described in
the lease contracts.
The building of Hotel Nikko Nara is a compartmentalized ownership of the entire building of Redeveloped Building 1
in front of JR Nara Station, which consists of hotel building, retail space and car parking space, etc. JHR’s share of voting
right of the building is 223/353 (approximately 63.2%).
The omitted property numbers are the numbers for assets that have been transferred.

(Note 5)(Note 6)(Note 7)(Note 8)(Note 9)(Note 10)(Note 11)

(Note 12)(Note 13)

(Note 14)

(Note 15)

(Note 16)

24

3. Details of property assets, etc.
(1) Details of property assets
The details of real estate properties, etc. held by JHR as of December 31, 2020 were as follows:
PropertyNo.

Name of property, etc.

Location (Displayed address)

Assessedvalue at end
Form of ownership of period(JPY1M)

Book value(JPY1M)

Appraisal
agency(Note 2)

(Note 3)(Note 1)

1

Kobe Meriken Park Oriental
Hotel

5-6 Hatobacho, Chuo-ku, Kobe-shi, Hyogo

Beneficial interestin trust

13,900

9,654

JR

2

Oriental Hotel tokyo bay

8-2 Mihama 1-chome, Urayasu-shi, Chiba

Beneficial interestin trust

32,10017,367

JR

3

Namba Oriental Hotel

8-17 Sennichimae 2-chome, Chuo-ku,
Osaka-shi, Osaka

Beneficial interestin trust

31,40014,513JR

4

Hotel Nikko Alivila

600 Aza Gima, Yomitan-son, Nakagamigun, Okinawa

Beneficial interestin trust

28,80018,019JR

5

Oriental Hotel Hiroshima

6-10 Tanakamachi, Naka-ku, Hiroshimashi, Hiroshima

Beneficial interestin trust

4,130

4,112

JR

6

ibis Tokyo Shinjuku

10-5 Nishi-Shinjuku 7-chome, Shinjuku-ku, Beneficial interestTokyoin trust

9,900

7,903

JR

8-6 Aza Mihama, Chatan-cho, Nakagamigun, Okinawa

Beneficial interestin trust

10,000

6,495

JR

8

The Beach Tower Okinawa(Note 4)

9

Hakone Setsugetsuka

1300 Goura, Hakone-machi,
Ashigarashimo-gun, Kanagawa

Beneficial interestin trust

5,300

3,622

JR

10

Dormy Inn Kumamoto

3-1 Karashimacho, Kumamoto-shi,
Kumamoto

Beneficial interestin trust

3,030

2,170

JR

12

the b suidobashi

25-27 Hongo 1-chome, Bunkyo-ku, Tokyo

Beneficial interestin trust

2,280

1,186

JR

13

dormy inn・global cabin
Asakusa

3-4 Hanakawado 1-chome, Taito-ku, Tokyo

Beneficial interestin trust

1,280

934

JM

14

Hakata Nakasu Washington
Hotel Plaza

8-28 Nakasu 2-chome, Hakata-ku,
Fukuoka-shi, Fukuoka

Beneficial interestin trust

4,510

2,038

JR

15

Nara Washington Hotel Plaza

31-1 Shimosanjo-cho, Nara-shi, Nara

Beneficial interestin trust

2,430

1,765

JR

16

R&B Hotel Ueno Hirokoji

18-8 Ueno 1-chome, Taito-ku, Tokyo

Beneficial interestin trust

1,910

1,806

JM

18

Comfort Hotel Tokyo Higashi 10-11 Nihonbashi-bakurocho 1-chome,
Nihombashi
Chuo-ku, Tokyo

Beneficial interestin trust

5,390

3,491

JM

22

Smile Hotel Nihombashi
Mitsukoshimae

4-14 Nihonbashi-Honcho 1-chome, Chuoku, Tokyo

Beneficial interestin trust

2,930

2,042

JM

24

Toyoko Inn Hakata-guchi
EkimaeMain building: 15-5 Hakataekimae 1chome, Hakata-ku, Fukuoka-shi, Fukuoka
Annex: 1-15 Hakataekimae 1-chome,
Hakata-ku, Fukuoka-shi, Fukuoka

Beneficial interestin trust

2,750

1,401

T

25

Chisun Hotel Kamata(former Hotel Vista Kamata
Tokyo)

20-11 Nishikamata 8-chome, Ota-ku, Tokyo

Beneficial interestin trust

2,010

1,458

T

26

Chisun Inn Kamata23-13 Kamata 4-chome, Ota-ku, Tokyo

Beneficial interestin trust

1,370

771

T

29

Hotel Keihan Universal City

2-78 Shimaya 6-chome, Konohana-ku,
Osaka-shi, Osaka

Beneficial interestin trust

15,400

5,833

R

31

Hilton Tokyo Bay

1-33 Maihama, Urayasu-shi, Chiba

Beneficial interestin trust

39,90026,301

D

32

ibis Styles Kyoto Station

47-1, 47-2 Higashikujo Kamitonodacho,
Minami-ku, Kyoto-shi, Kyoto

Beneficial interestin trust

10,200

6,641

D

33

ibis Styles Sapporo

10-10 Minami 8-jo Nishi 3 chome, Chuo-ku,
Sapporo-shi, Hokkaido

Beneficial interestin trust

11,100

6,522

JR

34

Mercure Sapporo

2-4 Minami 4-jo Nishi 2-chome, Chuo-ku,
Sapporo-shi, Hokkaido

Beneficial interestin trust

10,500

5,789

JR

35

Mercure Okinawa Naha

3-19 Tsubogawa 3-chome, Naha-shi,
Okinawa

Beneficial interestin trust

6,940

2,841

JR

37

the b ikebukuro39-4 Higashi-ikebukuro 1-chome, Toshima- Beneficial interest
ku, Tokyo
in trust

6,980

6,593

JR

39

the b hachioji

6-12 Myojincho 4-chome, Hachioji-shi,
Tokyo

2,560

2,681

JR

25

Beneficial interestin trust

Property
No.

Name of property, etc.

Location (Displayed address)

Assessedvalue at end
Form of ownership of period(JPY1M)

Book value(JPY1M)

Appraisal
agency(Note 2)

(Note 3)(Note 1)40

the b hakata

3-9 Hakata-eki Minami 1-chome, Hakataku, Fukuoka-shi, Fukuoka

Beneficial interestin trust

4,330

2,347

JR

41

Hotel Francs

10-2 Hibino 2-chome, Mihama-ku, Chibashi, Chiba

Beneficial interestin trust

4,080

3,145

D

42

Mercure Yokosuka

27 Honcho 3-chome, Yokosuka-shi,
Kanagawa

Beneficial interestin trust

3,310

1,634

D

43

Okinawa Marriott Resort &Spa

1490-1 Kise, Nago-shi, Okinawa

Beneficial interestin trust

17,20014,878JR

44ACTIVE-INTER CITYHIROSHIMA

12-1 Wakakusa-cho, Higashi-ku,
Hiroshima-shi, Hiroshima

Beneficial interestin trust

21,00017,294D

45

CANDEO HOTELS UENOKOEN

2-13 Negishi 1-chome, Taito-ku, Tokyo

Beneficial interestin trust

7,430

6,613

D

46

Oriental Hotel Fukuoka
Hakata Station

4-23 Hakata-eki Chuogai, Hakata-ku,
Fukuoka-shi, Fukuoka

Beneficial interestin trust

15,200

9,473

D

47

Holiday Inn Osaka Namba

5-15 Soemon-cho, Chuo-ku, Osaka-shi,
Osaka

Beneficial interestin trust

26,50026,941

JR

48

HOTEL ASCENT FUKUOKA

3-3-14 Tenjin, Chuo-ku, Fukuoka-shi,
Fukuoka

Beneficial interestin trust

6,650

5,451

D

49

Hilton Nagoya

1-3-3 Sakae, Naka-ku, Nagoya-shi, Aichi

Beneficial interestin trust

15,00015,696D50

Hilton Tokyo Narita Airport

456 Kosuge, Narita-shi, Chiba

Beneficial interestin trust

13,40013,343

JR

51

International Garden Hotel
Narita241-1 Yoshikura, Narita-shi, Chiba

Beneficial interestin trust

9,500

9,196

JR

52

Hotel Nikko Nara

8-1 Sanjyohonmachi, Nara-shi, Nara

Beneficial interestin trust

9,790

10,357

D

53

Hotel Oriental Express Osaka 2-13 Minamisenba 3-chome, Chuo-ku,
Osaka-shi, Osaka
Shinsaibashi

Beneficial interestin trust

2,840

2,816

D

54

Hilton Tokyo Odaiba

Beneficial interestin trust

68,10063,607

JR

493,330

366,760

9-1 Daiba 1-chome, Minato-ku, Tokyo
Total(Note 1)

(Note 2)
(Note 3)(Note 4)(Note 5)

Assessed value at end of period shows appraisal value as of the end of the fiscal period under review as the date ofvaluation, in accordance with JHR’s Articles of Incorporation, the Ordinance on Accounting of Investment Corporations
and regulations set forth by The Investment Trusts Association, Japan.
Book value includes amounts of real estate in trust, machinery and equipment, tools, furniture and fixtures, constructionin progress, construction in progress in trust, and intangible assets.
The letters indicate the appraisers for the properties as follows:
JR: Japan Real Estate InstituteJM: 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.
Due to the lack of a displayed address, “location” in the registration or registration record is shown.
The omitted property numbers are the numbers for assets that have been transferred.

26

(2) Transition of real estate leasing business, etc.
An overview of leasing business of real estate, etc. owned by JHR is as follows:
20th period(From January 1, 2019 to December 31, 2019)
PropertyNo.

Name of property, etc.

Number oftenants
at end ofperiod(Note 1)

Tenantoccupancy
rate
at end ofperiod(%)

Real estate
operatingrevenueduring theperiod(JPY1M)

Ratio tototal realestateoperatingrevenue(%)

21st period(From January 1, 2020 to December 31, 2020)
Number oftenants
at end ofperiod(Note 1)

(Note 2)Tenantoccupancy
rate
at end ofperiod(%)

Real estate
operatingrevenueduring theperiod(JPY1M)

Ratio tototal realestateoperatingrevenue(%)(Note 2)

1

Kobe Meriken Park Oriental
Hotel

1

100.0

1,256

4.4

1

100.0

176

1.7

2

Oriental Hotel tokyo bay

1

100.0

1,883

6.7

1

100.0

(134)

(1.3)

3

Namba Oriental Hotel

1

100.0

1,406

5.0

1

100.0

415

4.0

4

Hotel Nikko Alivila

1

100.0

1,977

7.0

1

100.0

263

2.5

5

Oriental Hotel Hiroshima

1

100.0

472

1.7

1

100.0

(96)

(0.9)

6

ibis Tokyo Shinjuku

4

100.0

704

2.5

4

100.0

141

1.3

8

The Beach Tower Okinawa

1

100.0

511

1.8

1

100.0

511

4.9

9

Hakone Setsugetsuka

1

100.0

294

1.0

1

100.0

294

2.8

10

Dormy Inn Kumamoto

1

100.0

194

0.7

1

100.0

194

1.9

12

the b suidobashi

1

100.0

103

0.4

1

100.0

21

0.2

13

dormy inn・global cabin
Asakusa

1

100.0

63

0.2

1

100.0

63

0.6

14

Hakata Nakasu Washington
Hotel Plaza

1

100.0

240

0.9

1

100.0

240

2.3

15

Nara Washington Hotel Plaza

2

100.0

151

0.5

2

100.0

150

1.4

16

R&B Hotel Ueno Hirokoji

1

100.0

97

0.3

1

100.0

97

0.9

18

Comfort Hotel Tokyo Higashi
Nihombashi

2

100.0

287

1.0

2

100.0

272

2.6

22

Smile Hotel Nihombashi
Mitsukoshimae

1

100.0

154

0.5

1

100.0

147

1.4

24

Toyoko Inn Hakata-guchi
Ekimae

1

100.0

141

0.5

1

100.0

141

1.3

25

Chisun Hotel Kamata(former Hotel Vista Kamata
Tokyo)

1

100.0

112

0.4

1

100.0

97

0.9

26

Chisun Inn Kamata

1

100.0

80

0.3

1

100.0

22

0.2

29

Hotel Keihan Universal City

1

100.0

746

2.6

1

100.0

558

5.3

30

Sotetsu Fresa Inn ShimbashiKarasumoriguchi (Note 3)

4

100.0

446

1.6

-

-

232

2.2

31

Hilton Tokyo Bay

1

100.0

2,220

7.9

1

100.0

1,978

18.8

32

ibis Styles Kyoto Station

2

100.0

459

1.6

2

100.0

45

0.4

33

ibis Styles Sapporo

4

98.3

661

2.3

4

98.3

92

0.9

34

Mercure Sapporo

12

95.4

797

2.8

11

95.9

154

1.5

35

Mercure Okinawa Naha

1

100.0

342

1.2

1

100.0

-

0.0

37

the b ikebukuro

4

100.0

356

1.3

4

100.0

187

1.8

39

the b hachioji

11

100.0

185

0.7

10

100.0

204

1.9

40

the b hakata

2

100.0

228

0.8

2

100.0

33

0.3

41

Hotel Francs

1

100.0

300

1.1

1

100.0

300

2.9

42

Mercure Yokosuka

1

100.0

360

1.3

1

100.0

112

1.1

43

Okinawa Marriott Resort & Spa

1

100.0

937

3.3

1

100.0

45

0.4

44

ACTIVE-INTER CITYHIROSHIMA

38

99.6

1,624

5.7

40

99.8

895

8.5

45

CANDEO HOTELS UENOKOEN

1

100.0

349

1.2

1

100.0

349

3.3

46

Oriental Hotel Fukuoka Hakata
Station

1

100.0

740

2.6

1

100.0

373

3.6

47

Holiday Inn Osaka Namba

1

100.0

967

3.4

1

100.0

48

0.5

48

HOTEL ASCENT FUKUOKA

6

100.0

447

1.6

6

100.0

468

4.5

49

Hilton Nagoya

4

100.0

1,452

5.1

4

100.0

816

7.8

27

20th period(From January 1, 2019 to December 31, 2019)
PropertyNo.

Number oftenants
at end ofperiodName of property, etc.

(Note 1)

Tenantoccupancy
rate
at end ofperiod(%)

Real estate
operatingrevenueduring theperiod(JPY1M)

21st period(From January 1, 2020 to December 31, 2020)

Ratio tototal realestateoperatingrevenue(%)

Number oftenants
at end ofperiod(Note 1)

(Note 2)Tenantoccupancy
rate
at end ofperiod(%)

Real estate
operatingrevenueduring theperiod(JPY1M)

Ratio tototal realestateoperatingrevenue(%)(Note 2)50

Hilton Tokyo Narita Airport

1

100.0

912

3.2

1

100.0

123

1.2

51

International Garden Hotel
Narita

1

100.0

604

2.1

1

100.0

136

1.3

52

Hotel Nikko Nara

1

100.0

625

2.2

1

100.0

35

0.3

53

Hotel Oriental Express Osaka
Shinsaibashi

1

100.0

109

0.4

1

100.0

9

0.1

54

Hilton Tokyo Odaiba

1

100.0

2,264

8.0

1

100.0

258

2.5

Total

125

99.9

28,278

100.0

121

99.9

10,48099.9(Note 1)

Number of tenants indicates the total number of tenants based on the lease contracts for respective real estate in trust(excluding tenants of parking lots, etc.) as of the end of each fiscal period. However, for properties for which master lease
companies have concluded lease contracts with lessees, etc. under the pass-through scheme in which JHR receives thesame amount of rents, etc. paid by end tenants as is in principle, the number of end tenants is indicated. For properties
with sub-lease-type master lease contracts in which JHR receives predetermined rents despite fluctuations in rents fromend tenants, the number of the master lease companies is indicated as tenants.

(Note 2)

Represents the ratio of real estate operating revenue of each property to total real estate operating revenue. In calculating,the figures are rounded off to the first decimal place. Please note that the sum of the ratio to total real estate operating
revenue 99.9% because the relevant ratio of the trademark rights for the Oriental Hotel brand, etc. is not included.

(Note 3)

Sotetsu Fresa Inn Shimbashi-Karasumoriguchi was sold on July 1, 2020.

(Note 4)The property numbers of assets that were transferred before the previous fiscal period are intentionally omitted.

4. Details of securities assets
There are no applicable securities held by JHR as of December 31, 2020.
5. Contractual amounts and fair values of specified transactions
The contractual amounts and fair values of specified transactions as of December 31, 2020 were as follows:
Classification

Amounts of contract, etc.
(JPY1M) (Note 1)

Transaction

Over 1 year
Transactions other thanmarket transactions

Interest rate swap transactions
Payable fixed rate / Receivable floating rate
Total

(Note 1)
(Note 2)

Fair value(JPY1M)(Note 2)

104,566

93,766(789)

104,566

93,766(789)

Contractual amounts, etc. of interest rate swap transactions are based on notional principal amounts, etc.
Fair value is based on the price, etc. provided by counterparty financial institutions.

6. Other assets
All of the beneficial interest in trust mainly invested in real estate held by JHR is included in “3. Details of property
assets, etc.” presented above. There were no other major specified assets that are considered to be JHR’s maininvestments in the portfolio of JHR as of December 31, 2020.
7. Asset holdings by country and region
There is nothing to be reported on countries and regions other than Japan.

28

Capital Expenditures for Portfolio Properties
1. Planned capital expenditures (Note)
The following table shows major estimated capital expenditures items for renovation work planned as of the endof the fiscal period under review for investment real estate properties (in trust) held by JHR. Expenditures are
expected to total ¥3,534 million, which consists of capital expenditures of ¥3,522 million (Note) and repair
expenses of ¥12 million, for the next fiscal period.
Name of property, etc.
(Location)

Purpose

Kobe Meriken Park Oriental
Hotel(Kobe-shi, Hyogo)

Renovation of prefabricatedbathrooms in guest rooms

Dormy Inn Kumamoto(Kumamoto-shi, Kumamoto)

Scheduled period

Estimated construction costs(JPY1M)
Total amount

Total amount
paid

From April 2021
to July 2021

55-

Renewal of air conditioning
equipment

From March 2021
to July 2021

80-

Hotel Keihan Universal City
(Osaka-shi, Osaka)

Renovation of guest rooms

From April 2021
to July 2021

160-

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

Painting of exterior walls

From March 2021
to April 2021

60-

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

Renovation of guest rooms,
etc.

From October 2021
to December 2021

500-

HOTEL ASCENTFUKUOKA(Fukuoka-shi, Fukuoka)

Renovation of guest rooms,
etc.

From April 2021
to June 2021

265-

HOTEL ASCENTFUKUOKA(Fukuoka-shi, Fukuoka)

Renewal of furniture in guest
rooms etc.

From April 2021
to June 2021

55-

HOTEL ASCENTFUKUOKA(Fukuoka-shi, Fukuoka)

Renewal of heat-source
equipment for air
conditioning facilities

From April 2021
to May 2021

73-

International Garden Hotel
Narita(Narita-shi, Chiba)

Renewal of air conditioning
units

From October 2021
to November 2021

55-

Hilton Tokyo Odaiba(Minato-ku, Tokyo)

Renewal of central
monitoring device

From March 2021
to June 2021

63-

Hilton Tokyo Odaiba(Minato-ku, Tokyo)

Renovation of informationand telecommunicationequipment

From April 2021
to June 2021

100

-

1,467

-

Total
(Note)New construction and renewal work includes that for buildings, attached facilities, etc. as well as items classified as furnitureand fixtures. The scheduled period of the above planned renovation work and whether or not the renovation work will be
performed may change.

2. Capital expenditures during the period (Note)
For investment real estate properties (in trust) held by JHR, major construction work conducted during the fiscal
period under review that represents capital expenditures is as below. Capital expenditures for the fiscal period
under review totaled ¥1,665 million, and repair expenses that were accounted for as expense in the fiscal period
under review totaled ¥29 million. In aggregate, ¥1,694 million of construction work was carried out.
29Name of property, etc. (Location)

Purpose

PeriodConstruction costs(JPY1M)

Hotel Nikko Alivila(Nakagami-gun, Okinawa)

Additional installation of sewage tank

From March 2020
to June 2020

72

Dormy Inn Kumamoto(Kumamoto-shi, Kumamoto)

Renewal of air conditioning equipment

From May 2020
to June 2020

67

Hilton Tokyo Bay(Urayasu-shi, Chiba)

Renewal of air conditioning equipment

From May 2020
to July 2020

52

HOTEL ASCENT FUKUOKA(Fukuoka-shi, Fukuoka)

Renewal of air conditioning equipment

From March 2020
to March 2020

90

Hilton Nagoya(Nagoya-shi, Aichi)

Work on plumbing equipment

From March 2020
to May 2020

57

Hilton Nagoya(Nagoya-shi, Aichi)

Renewal of elevators

From June 2020
to December 2020

51

Hilton Tokyo Odaiba(Minato-ku, Tokyo)

Renovation of banquet rooms

From December 2019
to March 2020

92
483

Total
(Note)New construction and renewal work includes that for buildings, attached facilities, etc. as well as items classified as furnitureand fixtures.

30

3. Cash reserves for the long-term repairs and maintenance plan (reserve for repairs and maintenance)
JHR accumulates cash reserves from cash flows for each fiscal period as detailed below to utilize for medium- tolong-term future expenditures on large-scale repairs and maintenance projects based on long-term repairs andmaintenance plans prepared for each property.
(millions of yen)
17th period

18th period

19th period

20th period

21st period(From January 1, 2016
to December 31, 2016)(From January 1, 2017
to December 31, 2017)(From January 1, 2018
to December 31, 2018)(From January 1, 2019
to December 31, 2019)(From January 1, 2020
to December 31, 2020)

Balance at beginning of period

657

791

946

951

1,060

Provision during the period

133

154

15

116

25

Fiscal period

Reversal during the period

-

-

9

8

10

Amount carried forward

791

946

951

1,060

1,075

Expenses and Liabilities
1. Details of expenses related to asset management, etc.
(thousands of yen)
20th period(From January 1, 2019 to
December 31, 2019)(a) Asset management fees

(Note 1)

1,781,691

21st period(From January 1, 2020 to
December 31, 2020)(Note 2)

1,479,381(b) Asset custody and administrative service fee

119,138

125,986(c) Officers’ compensation

14,40017,400(d) Other operating expenses
Total(Note 1)
(Note 2)

217,357

322,710

2,132,586

1,945,477

For asset management fees for the 20th fiscal period, besides the above amounts, there are ¥488,535 thousand of fees
included in the acquisition price of investment properties, etc. in acquiring properties.
For asset management fees for the 21st fiscal period, besides the above amounts, there are ¥7,647 thousand of fees forproperty acquisition included in the acquisition price of the relevant investment property, and ¥42,615 thousand of feesfor property sale deducted from the gain on sale of real estate properties.

31

2. Loans payable
The status of loans by contractual agreement and by financial institution as of December 31, 2020 was as follows:
Category

Borrowingdate

LenderBalance at Balance at Average
beginning
end ofinterestof period
periodrate (%)(JPY1M) (JPY1M) (Note 1)

Sumitomo Mitsui Banking
Corporation

－

2,787

Shinsei Bank, Limited

－

1,470

－

3,470

－

1,485

Resona Bank, Limited

－

1,600

Development Bank of Japan Inc.
Short-term
loans
Aozora Bank, Ltd.
payableSubtotal

－

650

－

285

－

11,747－100

Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank,
LimitedThe Chiba Bank, Ltd.

September 30,
2020

September 30,
2020

Subtotal
December 30,
2020

MUFG Bank, Ltd.

－

100

－

935

Subtotal－

935

Short-term loans payable – Total－

12,782

648

648

2,516

2,516

2,516

2,516

Sumitomo Mitsui Trust Bank,
Limited

1,120

1,120

Subtotal

6,800

6,800

800

－

1,600

－

1,100

－

970

－

800

－

500

－

285

－

6,055

－

600

600

1,200

1,200

850

850

Shinsei Bank, Limited

750

750

Sumitomo Mitsui Trust Bank,
Limited600

600

Subtotal

4,000

4,000

935

－

Sumitomo Mitsui Banking
Corporation
Resona Bank, Limited
Shinsei Bank, Limited

March 31,2014

Sumitomo Mitsui Banking
Corporation
Mizuho Bank, Ltd.
Resona Bank, Limited
Shinsei Bank, Limited

September 30,
2014

Sumitomo Mitsui Trust Bank,
LimitedLong-term
Development Bank of Japan Inc.
loans
payable Aozora Bank, Ltd.
Subtotal
Sumitomo Mitsui Banking
Corporation
Mizuho Bank, Ltd.
Resona Bank, Limited

September 30,
2014

December 30,
2014

MUFG Bank, Ltd.
Subtotal

935

－

32

Maturity
date

Repayment
methodUse

Remarks

0.37%

September
30, 2021

Lump-sum
repayment(Note 4)

Unsecured,
unguaranteed

0.31%

September
30, 2021

Lump-sum
repayment(Note 4)

Unsecured,
unguaranteed

0.59%

June 30,
2021

Lump-sum
repayment(Note 4)

Unsecured,
unguaranteed

1.15%(Note 2)

March 31,2021

Lump-sum
repayment(Note 4)

Unsecured,
unguaranteed

0.92%(Note 2)September
30, 2020

Lump-sum
repayment(Note 3)(Note 5)

Unsecured,
unguaranteed

1.04%(Note 2)September
30, 2021

Lump-sum
repayment(Note 5)

Unsecured,
unguaranteed

0.56%

December30, 2020

Lump-sum
repayment(Note 4)

Unsecured,
unguaranteedCategory

Borrowingdate

LenderBalance at Balance at Average
beginning
end ofinterestof period
periodrate (%)(JPY1M) (JPY1M) (Note 1)

Sumitomo Mitsui Banking
Corporation

1,400

－

Mizuho Bank, Ltd.

1,500

－

500

－

500

－

Sumitomo Mitsui Trust Bank,
Limited500－

The Chiba Bank, Ltd.

300－

Shinsei Bank, Limited
Resona Bank, Limited

January 30,
2015

4,700

－

Sumitomo Mitsui Banking
Corporation

Subtotal

1,700

1,700

Mizuho Bank, Ltd.

3,000

3,000

1,050

1,050

1,000

1,000

1,000

1,000

150

150

7,900

7,900

1,500

1,500

Shinsei Bank, Limited
Resona Bank, Limited

January 30,
2015

Sumitomo Mitsui Trust Bank,
Limited
Aozora Bank, Ltd.
Subtotal
Sumitomo Mitsui Banking
Corporation

March 31,
2015

1,500

1,500

1,000

1,000

500

500

1,500

1,500

100

－

992

－

Subtotal

1,092－

Sumitomo Mitsui Trust Bank,
Limited

960

960

960

960

Long-term
loans
Aozora Bank, Ltd.
payableSubtotal
July 10, 2015

MUFG Bank, Ltd.
Subtotal
Sumitomo Mitsui Banking
Corporation
The Hiroshima Bank, Ltd.

Resona Bank, Limited

September 30,
2015

September 24,
2015

The Nomura Trust and Banking
Co., Ltd.
Subtotal
Sumitomo Mitsui Banking
Corporation
Shinsei Bank, Limited

September 30,
2015

Subtotal
Sumitomo Mitsui Banking
Corporation
Mizuho Bank, Ltd.
SubtotalMarch 28,
2016

960

960

2,880

2,880

703

703

189

189

892

892

1,050

1,050

1,050

1,050

2,100

2,100

33

Maturity
date

Repayment
methodUse

Remarks

0.38% January 31,(Note 2)2020

Lump-sum
repayment(Note 5)

Unsecured,
unguaranteed

0.90% January 31,(Note 2)2022

Lump-sum
repayment(Note 3)(Note 5)

Unsecured,
unguaranteed

0.93%(Note 2)

March 31,2022

Lump-sum
repayment(Note 6)

Unsecured,
unguaranteed

0.95%(Note 2)June 30,2022

Lump-sum
repayment(Note 6)

Unsecured,
unguaranteed

0.52%

June 30,
2020

Lump-sum
repayment(Note 4)

Unsecured,
unguaranteed

1.07%(Note 2)September
29, 2023

Lump-sum
repayment(Note 4)

Unsecured,
unguaranteed

1.07%(Note 2)September
29, 2023

Lump-sum
repayment(Note 3)(Note 4)

Unsecured,
unguaranteed

0.77%

March 29,2024

(Note 4)

Unsecured,
unguaranteed(Note 2)Lump-sum
repayment(Note 3)

Category

Borrowingdate

Lender
The Nomura Trust and Banking
Co., Ltd.
The Chiba Bank, Ltd.
Development Bank of Japan Inc.

March 31,2016

The Bank of Fukuoka, Ltd.
Subtotal
Sumitomo Mitsui Banking
Corporation
Mizuho Bank, Ltd.
Shinsei Bank, Limited

March 31,2016

Balance at Balance at Average
beginning
end ofinterestof period
periodrate (%)(JPY1M) (JPY1M) (Note 1)
1,200

1,200

600

600

550

550

300

300

2,650

2,650

1,200

1,200

1,000

1,000

1,000

1,000

0.68%
(Note 2)

Resona Bank, Limited

500

500

The Nomura Trust and Banking
Co., Ltd.

500

500

4,200

4,200

800

800

Subtotal
Sumitomo Mitsui Trust Bank,
LimitedMarch 31,2016

Subtotal
Development Bank of Japan Inc.

March 31,2016

Subtotal
Sumitomo Mitsui Banking
Corporation
Long-term Shinsei Bank, Limitedloans
payable Mizuho Bank, Ltd.
Resona Bank, Limited

September 1,
2016

800

800

500

500

0.77%
(Note 2)

0.66%

500

2,900

2,900

1,700

1,700

1,700

1,700
(Note 6)

Unsecured,
unguaranteed

September
30, 2024

Lump-sum
repayment(Note 6)

Unsecured,
unguaranteed

September
30, 2024

Lump-sum
repayment(Note 6)

Unsecured,
unguaranteed

0.59%

September
30, 2024

Lump-sum
repayment(Note 6)

Unsecured,
unguaranteed

0.71%

September
30, 2024

Lump-sum
repayment(Note 6)

Unsecured,
unguaranteed

0.46%

June 30,
2023

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

500

1,200

1,200

9,500

9,500

1,300

1,300

Development Bank of Japan Inc.
Subtotal

September 1,
2016

Aozora Bank, Ltd.
Subtotal
Sumitomo Mitsui Banking
Corporation
The Chiba Bank, Ltd.
Subtotal

July 12, 2017

0.56%
(Note 2)

1,300

1,300

2,000

2,000

0.56%

2,000

2,000

(Note 2)

700

700

700

700

500

500

500

500

1,750

1,750

500

500

2,250

2,250

34

(Note 3)Lump-sum
repayment

500

September 1,
2016

Unsecured,
unguaranteed

Lump-sum
repayment

September
30, 2025

The Chiba Bank, Ltd.

Subtotal(Note 4)

March 31,2023

Unsecured,
unguaranteed

0.74%

September 1,
2016

Unsecured,
unguaranteed(Note 4)(Note 2)

MUFG Bank, Ltd.

(Note 4)Lump-sum
repayment

500

Subtotal

Lump-sum
repayment

March 29,
2024

500

September 1,
2016

March 29,2024

Unsecured,
unguaranteed

1,000

Subtotal

Remarks(Note 4)1,000

Sumitomo Mitsui Trust Bank,
Limited

Use

Lump-sum
repayment

The Nomura Trust and Banking
Co., Ltd.

The Bank of Fukuoka, Ltd.

Repayment
methodMarch 29,2024

(Note 2)

0.57%
500

MaturitydateCategory

Borrowingdate

LenderSumitomo Mitsui Banking
Corporation
Shinsei Bank, Limited
Mizuho Bank, Ltd.

August 1,
2017

Resona Bank, Limited
Subtotal
Sumitomo Mitsui Trust Bank,
LimitedAugust 1,
2017

SubtotalAugust 1,
2017

MUFG Bank, Ltd.
Subtotal
Development Bank of Japan Inc.

August 1,
2017

Subtotal
The Bank of Fukuoka, Ltd.

August 1,
2017

SubtotalAugust 1,
2017

Aozora Bank, Ltd.
Subtotal
THE NISHI-NIPPON CITY
BANK, LTD.
Long-term
Subtotalloans
payable Shinsei Bank, Limited

August 1,
2017
August 1,
2017

Subtotal
Sumitomo Mitsui Banking
Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank,
Limited

September 19,
2017

Shinsei Bank, Limited
Subtotal
Sumitomo Mitsui Banking
Corporation
Shinsei Bank, Limited

November 15,
2017

Subtotal
Sumitomo Mitsui Banking
Corporation
Shinsei Bank, Limited
Development Bank of Japan Inc.

November 15,
2017

The Bank of Fukuoka, Ltd.
Subtotal
Sumitomo Mitsui Banking
Corporation
SubtotalMarch 30,
2018

Balance at Balance at Average
beginning
end ofinterestof period
periodrate (%)(JPY1M) (JPY1M) (Note 1)
1,250

1,250

1,250

1,250

1,250

1,250

500

500

4,250

4,250

1,000

1,000

0.73%

1,000

1,000

(Note 2)

700

700

0.68%

700

700

(Note 2)

500

500

500

500

500

500

0.73%

500

500

(Note 2)

500

500

0.73%

500

500

(Note 2)

1,000

1,000

0.73%

1,000

1,000

(Note 2)

300

300

0.68%

300

300

(Note 2)

1,200

1,200

500

500

460

460

390

390

2,550

2,550

2,500

2,500

1,500

1,500

4,000

4,000

1,500

1,500

500

500

300

300

150

150

2,450

2,450

1,700

1,700

1,700

1,700

35

0.85%
(Note 2)

0.75%

0.65%
(Note 2)0.57%
(Note 2)0.65%
(Note 2)

0.41%

Maturity
date

Repayment
methodSeptember
30, 2026

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

September
30, 2025

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

September
30, 2025

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

September
30, 2025

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

September
30, 2025

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

September
30, 2025

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

September
30, 2025

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

September
30, 2025

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

March 31,2025

Lump-sum
repayment

Unsecured,(Note 4) unguaranteed

March 29,2024

Lump-sum
repayment

Unsecured,(Note 4) unguaranteed

March 31,2025

Lump-sum
repayment

Unsecured,(Note 4) unguaranteed

March 31,2023

Lump-sum
repayment

Unsecured,(Note 4) unguaranteed

Use

RemarksCategory

Borrowingdate

LenderBalance at Balance at Average
beginning
end ofinterestof period
periodrate (%)(JPY1M) (JPY1M) (Note 1)

Sumitomo Mitsui Banking
Corporation

650

650

Shinsei Bank, Limited

950

950

500

500

THE NISHI-NIPPON CITY
BANK, LTD.

250

250

Sompo Japan Insurance Inc.

500

500

Subtotal

2,850

2,850

500

500

500

500

500

500

500

500

1,700

1,700

1,400

1,400

500

500

300

300

3,900

3,900

500

500

500

500

500

500

1,000

1,000

The Chiba Bank, Ltd.

The Hiroshima Bank, Ltd.

April 26, 2018

April 26, 2018

Subtotal
The Shizuoka Bank, Ltd.

September 28,
2018

Subtotal
Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui Trust Bank,
LimitedShinsei Bank, Limited

September 28,
2018

Mizuho Bank, Ltd.
Subtotal
The Bank of Fukuoka, Ltd.
The Chiba Bank, Ltd.
THE NISHI-NIPPON CITY
BANK, LTD.
Long-term
Sompo Japan Insurance Inc.
loans
payableSubtotal

April 8, 2019

Maturity
date

Repayment
method0.41%

March 31,2023

Lump-sum
repayment

Unsecured,(Note 4) unguaranteed

0.52%

March 31,2023

Lump-sum
repayment

Unsecured,(Note 4) unguaranteed

0.55%

September
29, 2023

Lump-sum
repayment

Unsecured,(Note 4) unguaranteed

September
30, 2027

Lump-sum
repayment

Unsecured,(Note 4) unguaranteed

March 29,2024

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

March 31,2027

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

March 31,2028

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

0.95%(Note 2)

0.38%

2,500

2,500

Sumitomo Mitsui Banking
Corporation

2,500

2,500

Shinsei Bank, Limited

1,500

1,500

1,500

1,500

0.72%
(Note 2)

Mizuho Bank, Ltd.

April 8, 2019

Sumitomo Mitsui Trust Bank,
Limited

1,000

1,000

Development Bank of Japan Inc.

1,000

1,000

7,500

7,500

Sumitomo Mitsui Banking
Corporation

4,000

4,000

Shinsei Bank, Limited

3,000

3,000

Mizuho Bank, Ltd.

3,000

3,000

Sumitomo Mitsui Trust Bank,
Limited

2,500

2,500

1,000

1,000

500

500

Development Bank of Japan Inc.

1,000

1,000

The Bank of Fukuoka, Ltd.

1,000

1,000

Aozora Bank, Ltd.

1,000

1,000

THE NISHI-NIPPON CITY
BANK, LTD.

1,000

1,000

Subtotal

18,00018,000SubtotalResona Bank, Limited
The Nomura Trust and Banking
Co., Ltd.

April 8, 2019

36

0.82%
(Note 2)Use

RemarksCategory

Borrowingdate

Lender

The Chiba Bank, Ltd.

Balance at Balance at Average
beginning
end ofinterestof period
periodrate (%)(JPY1M) (JPY1M) (Note 1)

September 30,
2019

The Hiroshima Bank, Ltd.
Subtotal

200

200

1,400

1,400

1,600

1,600

Sumitomo Mitsui Banking
Corporation

550

550

Shinsei Bank, Limited

450

450

1,400

1,400

200

200

200

200

700

700

The Bank of Fukuoka, Ltd.

1,100

1,100

The Nomura Trust and Banking
Co., Ltd.

1,000

1,000

Subtotal

5,600

5,600

Long-term loans payable – Total

127,154

114,372

Total loans payable

127,154

127,154

Mizuho Bank, Ltd.
Long-term
Sumitomo Mitsui Trust Bank,
loans
LimitedpayableResona Bank, Limited

September 30,
2019

Development Bank of Japan Inc.

(Note 1)
(Note 2)

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

0.23%

0.68%
(Note 2)

Maturity
date

Repayment
methodSeptember
30, 2024

Lump-sum
repayment

Unsecured,(Note 7) unguaranteed

September
30, 2027

Lump-sum
repayment

Unsecured,(Note 7) unguaranteed

Use

Remarks

The average interest rate is a weighted average of interest rates during the period, rounded off to second decimal places.
As JHR has conducted interest rate swap transactions in order to hedge against interest rate fluctuation risks, the interest
rate of loans subject to such interest rate swap transactions is presented as the rate obtained by taking into account theeffect of interest rate swaps, rounded off to second decimal places.
JHR made partial early repayment of the loan on April 26, 2018.
The funds were appropriated for refinancing of borrowings and related expenses, etc.
The funds were appropriated for acquisition of the beneficial interest of real estate in trust, repayment of borrowings andrelated expenses, etc.
The funds were appropriated for acquisition of the beneficial interest of real estate in trust and related expenses, etc.
The funds were appropriated for refinancing and early repayment of borrowings.
In order to list each loan payable, ¥10,800 million of the current portion of long-term loans payable in the balance sheets
is included in long-term loans payable in the above table.
Sompo Japan Nipponkoa Insurance Inc. changed its name to Sompo Japan Insurance Inc. as of April 1, 2020.

3. Investment corporation bonds
Status of investment corporation bonds as of December 31, 2020 was as follows:
Name

Issuance
date

Balance at
beginning of
period(JPY1M)

Balance at
end ofperiod(JPY1M)

Fourth unsecured investment
corporation bonds

December19, 2014

1,500

1,500

Fifth unsecured investment
corporation bonds

October 23,
2015

6,000

Sixth unsecured investment
corporation bonds

March 22,2016

Seventh unsecured
investment corporation bonds

November29, 2016

Interest
rate

Maturity
date

Repayment
methodUse

0.860

December17, 2021

Lump-sum
repayment(Note 1)

6,000

0.820

October
21, 2022

Lump-sum
repayment(Note 2)

3,000

3,000

0.935

March 19,2026

Lump-sum
repayment(Note 2)

9,000

9,000

0.600

November27, 2026

Lump-sum
repayment(Note 3)37(%)

Remarks
Unsecured,
unguaranteed(Note 5)
Unsecured,
unguaranteed(Note 6)
Unsecured,
unguaranteed(Note 5)
Unsecured,
unguaranteed(Note 6)

Unsecured,
unguaranteed(Note 5)
Unsecured,
unguaranteed(Note 5)
Unsecured,
unguaranteed(Note 6)

Eighth unsecured investment
corporation bonds

November29, 2016

1,100

1,100

0.600

November27, 2026

Lump-sum
repayment(Note 3)

Ninth unsecured investment
corporation bonds

November24, 2017

1,000

1,000

0.530

November22, 2024

Lump-sum
repayment(Note 2)Tenth unsecured investment
corporation bonds

February 21,
201810,00010,0000.840

February21, 2028

Lump-sum
repayment(Note 1)Eleventh unsecured
investment corporation bonds

June 14,
2019

8,000

8,000

0.854

June 14,2029

Lump-sum
repayment(Note 2)

Unsecured,
unguaranteed(Note 6)

Twelfth unsecured investment
corporation bonds (green
bonds)

July 31,
2019

2,000

2,000

0.400

July 31,2024

Lump-sum
repayment(Note 4)

Unsecured,
unguaranteed(Note 5)41,60041,600Total(Note 1)

The funds were appropriated for repayment of existing borrowings and acquisition of real estate or the beneficial interestof real estate in trust, etc.

(Note 2)

The funds were appropriated to partly fund the repayment of existing borrowings.

(Note 3)

The funds were appropriated for redemption of the second unsecured investment corporation bonds, repayment ofexisting borrowings and acquisition of real estate or the beneficial interest of real estate in trust, etc.

(Note 4)

The funds were appropriated for repayment of existing borrowings that were appropriated for capital expenditures andconstructions costs which contribute to environment, including reduction of CO2 and water consumption.

(Note 5)A special pari passu clause among specified investment corporation bonds is attached to the bonds.

(Note 6)

A special pari passu clause among investment corporation bonds is attached to the bonds.

4. Short-term investment corporation bonds
Not applicable.
5.

Subscription rights to new investment units
Not applicable.

38

Purchase and Sale during the Period
1. Purchase and sale, etc. of real estate, etc., asset-backed securities, etc. infrastructure assets, etc., andinfrastructure-related assets
Acquisition
Asset type

Name of property, etc.

Acquisition
date

Sale

Acquisition
price(JPY1M)

Sale date

Sale price(JPY1M)(Note 1)

(Note 1)

Book value(JPY1M)

Gain (loss) on
sale(JPY1M)

The trademark rights

The trademark rights for the
Oriental Hotel brand, etc.

May 15,
2020

550

―

―

―

―

Beneficial interest ofreal estate in trust

Sotetsu Fresa Inn ShimbashiKarasumoriguchi――

July 1,
2020

8,000

4,790

3,158

HOTEL ASCENT FUKUOKA(part of site) (Note 2)

October 29,
2020

653

October 29,
2020

523

333

―

1,203

―

8,523

5,123

Real estate/Beneficial interest ofreal estate in trust

Total(Note 1)
(Note 2)

184
(Note 2)
3,343

Acquisition price and Sale price indicates contracted amount of the property in the purchase and sale agreement, etc.
excluding related expenses (brokerage fees, taxes, etc.) incurred on the acquisition of such property.
JHR exchanged the land that is part of the site of HOTEL ASCENT FUKUOKA with the real estate beneficial interest in
trust of the land that is part of an adjacent building. In doing so, JHR acquired real estate in kind and additionally entrusted
it. The amount obtained by excluding the book value and the expenses related to the exchange transaction from thetransaction price was recorded as gain on exchange of real estate properties. The same shall apply hereinafter.

2. Purchase and sale of other assets, etc.
Assets other than real estate, etc., asset-backed securities, etc., infrastructure assets, etc. and infrastructure- related
assets are mostly bank deposits and bank deposits in trust.
3. Investigation into prices, etc. of specified assets(1) Real estate properties, etc.
Acquisition/
sale

Asset type

Name of property, etc.

Sale

Sotetsu Fresa Inn
Beneficial interest of
Shimbashireal estate in trust
Karasumoriguchi

Acquisition

Real estate

Sale

HOTEL ASCENT
Beneficial interest of FUKUOKA (part of site)
real estate in trust

Acquisition/
sale dateJuly 1,2020

October 29,
2020

Acquisition/
sale priceAppraisalvalue(JPY1M)(JPY1M)(Note 1)

(Note 2)

8,000

8,950

653

660

523

523

Date ofappraisal

Appraisal agency

December 31,
2019

DAIWA REALESTATEAPPRAISAL CO.,LTD.

July 1, 2020

Japan Real Estate
Institute(Note 1)

Acquisition price and sale price indicate contracted amount of the property in the purchase and sale agreement, etc.
excluding related expenses (brokerage fees, taxes, etc.) incurred on the acquisition or sale of such property.

(Note 2)

The above appraisals were evaluated by applying the “Real Estate Appraisal Standards, Chapter 3: Valuation for price ofreal estate for securitization.”(2)

Transaction of securities

Not applicable.
(3) Other
Not applicable.

394. Transactions with interested parties, etc. (Note 1)(1) Transactions(millions of yen)Price, etc. (Note 2) (Note 3)

Category

Acquisition price, etc.

Total amountSale price, etc.

1,203

Real estate operating revenue
8,523

10,495

Breakdown of transactions with interested parties, etc.
Hotel Management Japan Co., Ltd.

–

[–%]

635

[6.1%]

Kyoritsu Maintenance Co., Ltd.

–

[–%]

–

[–%]

1,063

[10.1%]

Hotel Centraza Co., Ltd.

–

[–%]

–

[–%]

373

[3.6%]

K.K. A.I.C Hiroshima Management

–

[–%]

–

[–%]

325

[3.1%]

Tokyo Humania Enterprise KK

–

[–%]

–

[–%]

258

[2.5%]KK Narita Yoshikura Operations

–

[–%]

–

[–%]

136

[1.3%]KK Narita Kosuge Operations

–

[–%]

–

[–%]

123

[1.2%]OW Hotel Operations KK

–

[–%]

–

[–%]

48

[0.5%]

Lagoon resort Nago Co., Ltd.

–

[–%]

–

[–%]

45

[0.4%]

Hotel Management Co., Ltd.

–

[–%]

–

[–%]

35

[0.3%]

Hotel Oriental Express Co., Ltd.

–

[–%]

–

[–%]

9

[0.1%]

550 [45.7%]

–

[–%]

3,054

[29.1%]

Total(Note 1)

(Note 2)
(Note 3)(2)550 [45.7%]

Interested parties, etc. are the Asset Management Company’s interested parties, etc. stipulated in Article 201, paragraph
1 of the Investment Trust Act (hereinafter referred to as “Interested parties, etc.”). The amounts in “(1) Transactions”
above and “(2) Amounts of fees paid, etc.” below include transactions with the Interested parties, etc. as well as majortransactions with sponsor-related parties stipulated in the Asset Management Company’s company code for transactions
with sponsor-related parties, which include 1. Interested parties, etc., 2. The Asset Management Company’s shareholders,
3. Companies, etc. that take a 50% or more stake in a shareholder that holds 50% or more of the shares in the AssetManagement Company, 4. Companies in which a shareholder of the Asset Management Company have a 50% or more
stake, 5. Companies with which the Asset Management Company has concluded an asset management agreement, a
discretionary investment agreement or an investment advisory agreement, 6. Entity or persons who ceased to fall under
1. through 5. within 3 months, and 7. Entity or persons who are deemed appropriate by the compliance officer of theAsset Management Company to be treated as sponsor-related parties in light of the company code for transactions withsponsor-related parties and the purpose of these rules.
Acquisition price, etc. and sale price, etc. indicate contracted amounts of the property in the purchase and sale agreement,
etc. excluding related expenses (brokerage fees, taxes, etc.) incurred on the acquisition or sale of such property.
The figures in brackets show the ratio of the relevant amount to the total amount, rounded off to one decimal place.

Amount of fees paid, etc.
(thousands of yen)Classification

Outsourcing
expenses (Note)(Note)

Total amountsof fees paid,
etc.
(A)
423,852

Breakdown of transactions withinterested parties, etc.
Counter party
Hotel Management Japan Co., Ltd.
Tokyo Humania Enterprise KK

Amount of payment(B)

Ratio to total
amountB/A (%)

5,760

1.4

120

0.0

Includes base fees under the property management agreement as well as outsourcing expenses related to routine maintenanceand management of buildings and facilities and management contract fees, etc.

5. Transactions with the Asset Management Company in other businesses of the Asset Management
Company
The Asset Management Company does not concurrently conduct any of the class 1 financial instruments
transaction business, class 2 financial instruments transaction business, building lots and buildings transaction
business, or real estate specified joint enterprise business, and there are no applicable transactions.

40II. Financial Information
1. Assets, liabilities, equity, and profit and loss
For the status of assets, liabilities, equity (contribution), and profit and loss, please refer to “Balance Sheets,”“Statements of Income,” “Statements of Changes in Net Assets,” and “Notes to Financial Statements.”
2. Changes in calculation method of depreciation
Not applicable.
3．Changes in evaluation method of real estate, etc. and infrastructure assets, etc.
Not applicable.
Status of beneficiary certificates of investment trusts set up by asset management company, etc.
Japan Hotel REIT Advisors Co., Ltd., the asset management company of JHR, has acquired JHR’s investment
units as indicated below.
(1) Status of acquisition, etc.
Date

Number of units acquired

Number of units disposed

Number of units held

(units)(units)(units)January 20, 2016

2,500

―

2,500

July 5, 2017

1,200

―

3,700

Accumulated total

3,700

―

3,700

(2) Status of holding units
Number ofunits held at
end of period(units)Total investment
at end of period(thousands ofyen)(Note 1)

Ratio to total units
issued(%)(Note 2)

(Reference)
Total number of units
issued at end of period(units)17th
fiscalperiodFrom January 1, 2016 to
December 31, 2016

2,500

212,5500.06

3,761,907

18thfiscalperiodFrom January 1, 2017 to
December 31, 2017

3,700

305,5710.09

4,010,847

19th
fiscalperiodFrom January 1, 2018 to
December 31, 2018

3,700

305,5710.09

4,010,847

20thfiscalperiodFrom January 1, 2019 to
December 31, 2019

3,700

305,571

0.08

4,462,347

21stfiscalperiodFrom January 1, 2020 to
December 31, 2020

3,700

305,571

0.08

4,462,347(Note 1)

Total investment at end of period indicates the acquisition price.

41

(Note 2)

Ratio to total units issued is percentage of investment units held at end of period to the total investment units issued
at end of period and is rounded down to second decimal place.

Other(1) Announcements
There were no major conclusions, changes, etc. of the principal agreements that were approved or reported atmeetings of JHR’s Board of Directors during the fiscal period under review.
Moreover, the 10th General Meeting of Unitholders of JHR was held on December 23, 2020. The major items
approved at the General Meeting of Unitholders are summarized below.

AgendaSummary

Partial amendments to the Articles
of Incorporation

A new provision was established to specify that, of the proposals for resolutions at the general
meeting of unitholders that may have a major impact on the management of JHR and on theinterest of unitholders, those for which submitting conflicting counterproposals is considereddifficult by its nature shall be excluded from the deemed approval system that is stipulated in
Article 93, paragraph 1 of the Investment Trusts Act and Article 14, paragraph 1 of JHR's
Articles of Incorporation, with the aim of more directly reflecting the intention of unitholders.

(2) Status, etc. of corporation owning foreign real estate
Not applicable.
(3) Status, etc. of real estate owned by foreign real property holding corporations
Not applicable.
(4) Other
Unless otherwise noted, amounts and ratios in this report are rounded down and rounded off to the stated unit,
respectively.

42

JAPAN HOTEL REIT INVESTMENT CORPORATION
Balance Sheets
As of December 31, 2020 and 2019
Thousands of yen
As ofDecember 31,
2020
ASSETS
Current assets:
Cash and deposits (Notes 5 and 6)
Cash and deposits in trust (Notes 5 and 6)
Operating accounts receivable (Note 6)
Prepaid expenses
Income taxes receivable
Derivative assets (Notes 6 and 19)
Other current assets
Total current assets

As ofDecember 31,
2019¥ 19,382,019 ¥ 22,449,911
9,171,145
11,894,019
672,415
2,779,730
533,150550,28142
54573
82,69888,04529,841,471
37,762,616

Property and equipment, at cost (Notes 18 and 20):
Machinery and equipment
Tools, furniture and fixtures
Construction in progress
Buildings in trust (Note 15)
Structures in trust
Machinery and equipment in trust
Tools, furniture and fixtures in trust
Land in trust
Construction in progress in trust

622,365
4,373,456
2,761
137,193,115
2,772,035
683,995
133,628
216,410,533
83,507362,275,397(28,971,718)
333,303,679

579,731
4,211,971
136,930,501
2,721,962
675,362
136,526
219,901,119
18,384365,175,561(24,652,749)
340,522,811

Intangible assets:
SoftwareTrademark rights
Leasehold rights in trust (Note 20)
Fixed-term leasehold rights in trust (Note 20)
Other intangible assets (Note 20)
Total intangible assets

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

227,600
28,532,362
5,036,941
7,756
33,804,661

Other assets:
Security deposits
Leasehold and security deposits in trust
Long-term prepaid expenses
Derivative assets (Notes 6 and 19)
Reserve fund for repairs and maintenance
Investment unit issuance costs
Investment corporation bond issuance costs
Total other assets

12,520150,223
2,449,539
314,067
56,111
177,418
3,159,879

12,520150,223
2,766,474
43,870307,513140,631
211,194
3,632,429¥400,296,404¥415,722,517

Less: Accumulated depreciation
Net property and equipment

Total assets(Continued)

43

JAPAN HOTEL REIT INVESTMENT CORPORATION
Balance Sheets
As of December 31, 2020 and 2019
Thousands of yen
As ofDecember 31,
2020

As of
December 31,
2019

LIABILITIES AND NET ASSETS
Current liabilities:
Operating accounts payable
Short-term loans payable (Notes 6 and 7)
Current portion of investment corporation bonds (Notes 6 and 8)
Current portion of long-term loans payable (Notes 6, 7 and 19)
Accrued expenses
Income taxes payable
Consumption taxes payable
Advances received
Dividends payable
Deposits received
Derivative liabilities (Notes 6 and 19)
Other current liabilities
Total current liabilities¥ 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¥ 1,485,375
12,782,000
651,435
1,210
661,048909,293
15,852
8,696
17,22995,331
16,627,473

Long-term liabilities:
Investment corporation bonds (Notes 6 and 8)
Long-term loans payable (Notes 6, 7 and 19)
Tenant leasehold and security deposits (Note 6)
Tenant leasehold and security deposits in trust (Note 6)
Derivative liabilities (Notes 6 and 19)
Deferred tax liabilities (Note 16)
Asset retirement obligations (Note 9)
Total long-term liabilities

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

41,600,000
114,372,000
1,040,520
4,681,825
416,600
13,981
447,677
162,572,605

Total liabilities

179,095,095

179,200,079

186,894,169

186,894,169

21,746,398

21,746,398

10,617,580
1,174,860
11,792,441
1,527,790
35,066,630
221,960,800

11,794,071
1,174,860
12,968,932
15,290,314
50,005,645
236,899,815(759,492)(759,492)(377,376)(377,376)

221,201,308

236,522,438¥400,296,404¥415,722,517

Net assets (Note 10):Unitholders’ equity:
Unitholders’ capital
Units authorized: 20,000,000 units
Units issued and outstanding; 4,462,347 units as of December 31,
2020 and 2019
Surplus:Capital surplus
Voluntary reserve:
Reserve for temporary difference adjustment (Note 11)
Reserve for advanced depreciation
Reserve for special advanced depreciation
Total voluntary reserve
Unappropriated retained earnings
Total surplus
Total unitholders’ equity
Valuation and translation adjustments:
Deferred gains (losses) on hedges (Note 19)
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets
See notes to financial statements.

44

JAPAN HOTEL REIT INVESTMENT CORPORATIONStatements of Income
For the years ended December 31, 2020 and 2019
Thousands of yen
For the year
For the year
ended
ended
December 31, December 31,
2019
2020
Operating revenue:
Real estate operating revenue (Note 12)
Other real estate operating revenue (Note 12)
Gain on sale of real estate properties (Note 13)
Gain on exchange of real estate properties (Note 14)
Total operating revenue
Operating expenses:
Real estate operating costs (Note 12)
Asset management fee
Asset custody and administrative service fee
Directors’ compensation
Other operating expenses
Total operating expenses¥ 9,603,724
892,001
3,158,381
184,725
13,838,832¥ 27,107,988
1,170,561
28,278,550

8,717,332
1,479,381
125,986
17,400322,710
10,662,810

8,997,408
1,781,691
119,138
14,400217,357
11,129,995

3,176,022

17,148,555

278
3,535
34,21795
1,138
39,266357
4,361
28,063
1,239
549
12,382
46,953

963,502316,795
399,645
33,776
84,5204,802
13,9891,817,032
1,398,255

940,789284,524
483,761
30,298151,922378
12,3091,903,983
15,291,524

130,000
130,000-

Income before income taxes

1,528,255

15,291,524

Income taxes (Note 16):
Current
Total income taxes

1,210
1,210

1,210
1,210

1,527,045

15,290,314

Operating income
Non-operating income:Interest income
Gain on forfeiture of unclaimed dividends
Gain on insurance claims
Refunded taxes on property and equipment
Interest on tax refunds
Gain on derivative instruments
Total non-operating income
Non-operating expenses:
Interest expense
Interest expense on investment corporation bonds
Borrowing costs
Amortization of investment corporation bond issuance costs
Amortization of investment unit issuance costs
Loss on derivative instruments
Other
Total non-operating expenses
Ordinary income
Extraordinary income:Gain from collection of security deposits
Total extraordinary income

Net income
See notes to financial statements.

45

JAPAN HOTEL REIT INVESTMENT CORPORATIONStatements of Changes in Net Assets
For the years ended December 31, 2020 and 2019

Balance, January 1, 2019
Changes of items during the year:
Issuance of new investment units
Reversal of reserve for temporary
difference adjustment
Provision of reserve for special
advanced depreciation
Dividends paid
Net income
Net changes in items other thanunitholders’ equity
Total changes in amount during theyear
Balance, December 31, 2019
Changes of items during the year:
Reversal of reserve for temporary
difference adjustment
Provision of reserve for advanced
depreciation
Reversal of reserve for special
advanced depreciation
Dividends paid
Net income
Net changes in items other thanunitholders’ equity
Total changes in amount during theyear
Balance, December 31, 2020

Thousands of yen
Unitholders’ equity
Surplus
Voluntary reserve
Reserve forReserve for
specialadvancedadvanceddepreciation
depreciation

Unitholders’capitalCapital surplus

Reserve fortemporarydifference
adjustment¥ 153,516,129¥ 21,746,398¥ 12,357,644 ¥

33,378,040

-

-

-

-

-

Total voluntary
reserve

Unappropriatedretained earnings-¥ 12,357,644

¥

-

-

-

-

-

(563,572)--(563,572)

563,572

-

-

-

-

1,174,860-

1,174,860-(1,174,860)(15,602,194)
15,290,314(15,602,194)
15,290,314

-

-

-

-

-

-

-

-

33,378,040¥ 186,894,169¥ 21,746,398(563,572)¥ 11,794,071-

1,174,860¥ 1,174,860

611,287¥ 12,968,932--(1,176,490)--(1,176,490)

1,176,490

-

-

-

-

1,174,860-

1,174,860(1,174,860)

-

-

-

-

-

(1,174,860)-(1,174,860)-

1,174,860(16,466,060)
1,527,045(16,466,060)
1,527,045

-

-

-

-

-

-

-

-

-

-

(1,176,490)

1,174,860(1,174,860)(1,176,490)(13,762,523)(14,939,014)¥ 186,894,169¥ 21,746,398¥ 10,617,580-¥ 11,792,441

-

¥

¥

1,174,860¥¥

Thousands of yen
Unitholders’equityTotal unitholders’equity¥ 203,833,655
Balance, January 1, 2019
Changes of items during the year:
Issuance of new investment units
33,378,040
Reversal of reserve for temporary
difference adjustment
Provision of reserve for special
advanced depreciation
Dividends paid
(15,602,194)
Net income
15,290,314
Net changes in items other thanunitholders’ equity
Total changes in amount during the
33,066,160
year
Balance, December 31, 2019
¥ 236,899,815
Changes of items during the year:
Reversal of reserve for temporary
difference adjustment
Provision of reserve for advanced
depreciation
Reversal of reserve for special
advanced depreciation
Dividends paid
(16,466,060)
Net income
1,527,045
Net changes in items other thanunitholders’ equity
Total changes in amount during the(14,939,014)
year¥ 221,960,800
Balance, December 31, 2020

Valuation and translation adjustments
Deferred gains
Total valuation(losses) on
and translation
hedgesadjustments¥¥¥(461,435)¥(461,435)

Total net assets¥

203,372,219--

33,378,040

-

-

-

-

-

(15,602,194)
15,290,314

84,05984,05984,05984,059(377,376)¥

84,059(377,376)¥

33,150,219
236,522,438

-

-

-

-

-

-

-

-

(16,466,060)
1,527,045(382,115)(382,115)(382,115)(382,115)(759,492)¥(382,115)(759,492)

See notes to financial statements.

46¥(15,321,130)
221,201,308¥¥

16,213,482(923,168)
15,290,314

1,527,790

Total surplus¥¥¥

50,317,525(311,880)
50,005,645

35,066,630

JAPAN HOTEL REIT INVESTMENT CORPORATIONStatements of Cash Flows
For the years ended December 31, 2020 and 2019
Thousands of yen
For the year
For the year
ended
ended
December 31,
December 31,
2019
2020
Cash flows from operating activities:
Income before income taxes
Depreciation and amortization
Gain on exchange of real estate properties
Loss on retirement of noncurrent assets(Gain) Loss on derivative instruments
Amortization of investment corporation bond issuance costs
Amortization of investment unit issuance costs
Decrease of property and equipment due to sale
Decrease of property and equipment in trust due to sale
Gain from collection of security deposits
Interest income
Interest expense
Interest on tax refunds(Increase) decrease in operating accounts 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 operating activities¥ 1,528,255
4,761,907(184,725)
5,701
3,663
33,776
84,5201,010
4,789,585(130,000)(278)
1,280,297(95)
2,107,315
17,130316,935
1,693,683(124,063)(517,659)(485,938)
414(153,173)
15,028,266
312(1,280,097)
95(1,197)
13,747,378¥ 15,291,524
4,557,414
246,890(12,004)
30,298151,922(357)
1,225,314(549)(305,608)(22,789)(78,478)(240,644)
116,600
164,127
27,2401,380
69,494
21,221,777
482(1,220,857)
549(1,230)20,000,722

Cash flows from investing activities:
Purchase of property and equipment
Purchase of property and equipment in trust
Purchase of intangible assets
Payments of reserve fund for repairs and maintenance
Proceeds from collection of security deposits
Repayment of tenant leasehold and security deposits
Proceeds from tenant leasehold and security deposits in trust
Repayment of tenant leasehold and security deposits in trust
Net cash used in investing activities(476,704)(1,858,016)(604,760)(36,549)
130,000
64,941(296,047)¥ (3,077,137)(1,332,712)(71,102,935)(89,263)(40,453)(496)
329,120(228,114)¥ (72,464,854)(Continued)

47

JAPAN HOTEL REIT INVESTMENT CORPORATIONStatements of Cash Flows
For the years ended December 31, 2020 and 2019
Thousands of yen
For the year
For the year
ended
ended
December 31,
December 31,
2019
2020
Cash flows from financing activities:
Proceeds from short-term loans payable
Repayments of short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from investment corporation bonds
Repayments of investment corporation bondPayments for investment corporation bond issuance costs
Proceeds from issuance of investment units
Dividends paid
Net cash provided by (used in) financing activities¥ 18,574,000(5,792,000)(12,782,000)(16,461,008)(16,461,008)¥

8,000,000(8,000,000)
37,000,000(12,917,000)
10,000,000(2,000,000)(69,102)33,209,706(15,600,256)
49,623,347

Net decrease in cash and cash equivalents(5,790,766)(2,840,785)

Cash and cash equivalents at beginning of year

34,343,930

37,184,716

Cash and cash equivalents at end of year (Note 5)¥ 28,553,164¥ 34,343,930

See notes to financial statements.

48

JAPAN HOTEL REIT INVESTMENT CORPORATION
Notes to Financial Statements
For the years ended December 31, 2020 and 2019
1. Organization and Basis of Presentationa. Organization
Japan Hotel REIT Investment Corporation (“JHR”), formerly known as Nippon Hotel Fund Investment Corporation(the “Former NHF”), was established under the Act on Investment Trusts and Investment Corporations (the “Investment
Trust Act”) on November 10, 2005 and was listed on the Real Estate Investment Trust (“REIT”) Section on the Tokyo
Stock Exchange (Securities code: 8985) on June 14, 2006. JHR is externally managed by a licensed asset managementcompany, Japan Hotel REIT Advisors Co., Ltd. (hereinafter referred to as the “Asset Management Company”).
Focusing on the importance of hotels as social infrastructure and their profitability as investment real estate properties,
JHR has primarily invested in real estate related assets which are in themselves wholly or partially used as hotels orreal estate equivalents of such real estate or which are backed by such real estate or real estate equivalents.
In the fiscal period ended December 31, 2012, the Former NHF, as the surviving entity, merged with Japan Hotel andResort, Inc. (the “Former JHR”), as the dissolved entity, with an effective date of April 1, 2012 (the “Merger”). In
conjunction with the Merger, the Former NHF changed its name to Japan Hotel REIT Investment Corporation.
Through the Merger, nine properties held by the Former JHR were succeeded by JHR. As a result, as of the effective
date of the Merger, JHR’s property portfolio expanded to 28 properties. As of December 31, 2020, JHR has ownershipinterests in 42 properties.
b. Basis of presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in the Financial
Instruments and Exchange Law and their related accounting regulations, and in conformity with accounting principles
generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the application anddisclosure requirements of International Financial Reporting Standards.
The accompanying financial statements have been reformatted and translated into English (with certain reclassifications
and expanded descriptions) from the financial statements of JHR prepared in accordance with Japanese GAAP and
filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments
and Exchange Law. Certain supplementary information included in the statutory Japanese language financial statements,
but not necessarily required for fair presentation, is not presented in the accompanying financial statements. JHR has
not prepared consolidated financial statements, as JHR has no consolidating subsidiaries or entities.
As permitted by the regulations under the Financial Instruments and Exchange Law of Japan, the amounts are rounded
down to the nearest thousands or millions. As a result, the totals shown in the accompanying financial statements do
not necessarily agree with the sums of the individual amounts.
2. Summary of Significant Accounting Policies
a. Cash and cash equivalents
Cash and cash equivalents in the statements of cash flows consist of cash on hand, cash in trust accounts, bank deposit
and trust deposit, which can be withdrawn at any time, and short-term investments with a maturity of three months orless when purchased, which can easily be converted to cash and subject to minimal risk of change in value.
b. Property and equipment
Property and equipment are stated at cost. Depreciation of property and equipment is calculated using the straight-line
method over their estimated useful lives. The useful lives of major property and equipment components are as follows:
Machinery and equipment:
2 to 17 years
Tools, furniture and fixtures:
2 to 20 years
Buildings in trust:
2 to 64 years
Structures in trust:
2 to 64 years
Machinery and equipment in trust:
3 to 32 years
Tools, furniture and fixtures in trust:
2 to 27 years49

c. Intangible assets
Intangible assets are stated at cost and amortized using the straight-line method. The amortization period of major
intangible assets is as follows.
Software (internal use): 5 years
Trademark rights: 10 years
Fixed-term leasehold rights in trust: 41 or 49 years (remaining contractual period at the time of acquisition)
Leasehold rights in trust are intangible assets with indefinite useful lives.
d. Investment unit issuance costs
Investment unit issuance costs are capitalized and amortized using the straight-line method over three years.
e. Investment corporation bond issuance costs
Investment corporation bond issuance costs are capitalized and amortized using the effective interest rate method over
the respective term of the bond.
f. Taxes on property and equipment
Taxes imposed on properties such as property taxes, city planning taxes, and depreciable asset taxes are allocated to therespective reporting period and expensed as “Real estate operating costs.” Cash paid for those properties related taxes
to the transferor of real properties at acquisition is not recorded as “Real estate operating costs” but capitalized as partof the acquisition cost of the relevant property. The amount of such taxes capitalized in the acquisition cost of real
properties was not applicable for the year ended December 31, 2020 and ¥249,415 thousand for the year ended
December 31, 2019.
g. Derivatives and hedging activities
JHR enters into certain derivative transactions in accordance with its financial policy in order to manage risks, which
are defined in the Articles of Incorporation, mainly arising from adverse fluctuations in interest rates on loans payable.
Derivative financial instruments are carried at fair value with changes in the unrealized gain or loss charged or credited
to operations, except for those which meet the criteria for hedge accounting in which case the unrealized gain or loss
is deferred as a component of net assets.
JHR evaluates hedge effectiveness by comparing the cumulative changes in cash flow of hedging instruments and thehedged items and assessing the ratio between the changes.
h. Beneficial interests of real estate in trust
For beneficial interests of real estate in trust, all assets and liabilities held in trust accounts as well as all income
generated and expenses incurred from assets in trust are presented in the relevant balance sheet and statement of income
accounts.
i. Consumption taxes
Consumption taxes are excluded from the transaction amounts.
3. Additional information

Impact of COVID-19
With the number of infections starting to increase again since November 2020, and despite growing expectations forcontainment of infections as vaccination started in Europe and the U.S., the worldwide spread of the infection by
COVID-19 and the deterioration in social and economic conditions caused by COVID-19 have not yet settled, andrecovery in hotel performance is expected to take more time.
Under such circumstances, some of the lessees whose business performance has worsened have requested reductionof fixed rent or postponement of fixed rent payments, leading to the risk of JHR’s operating revenue decreasing.
Although it is uncertain and difficult to foresee when COVID-19 will be contained, JHR made accounting estimates
related to impairment accounting for noncurrent assets by assuming that the impact by COVID-19 will continue
through the fiscal period ending December 31, 2021, followed by recovery in performance after a certain period oftime, based on the information available as of the date of preparation of the financial statements.
However, as it is difficult to accurately predict when COVID-19 will be contained and how large its impact will be,
JHR’s financial position, results of operations and cash flows may be affected in case the recovery is delayed.

50

4. Accounting Standards Issued but Not Yet Applied・“Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (ASBJ) Statement No. 29
revised on March 31, 2020)
・“Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30 revised on
March 31, 2020)
・“Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19
revised on March 31, 2020)(1) Overview
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) in
the United States have jointly developed comprehensive accounting standards for revenue recognition and issued“Revenue from Contracts with Customers” (IFRS 15 by IASB and Topic 606 by FASB) in May 2014. Given thesituation where IFRS 15 is applied from fiscal periods beginning on or after January 1, 2018 and that Topic 606 is
applied from fiscal periods beginning after December 15, 2017, the ASBJ has developed comprehensive accounting
standards for revenue recognition and issued them together with the implementation guidance.
The basic policy for the ASBJ when it developed the accounting standards for revenue recognition was to establish
the standards by incorporating the basic principles of IFRS 15 as a starting point, from the perspective ofcomparability between financial statements, which is one of the benefits of maintaining consistency with IFRS 15.
The basic policy also allowed to add alternative treatments to the extent that comparability is not impaired, if
consideration should be given to current practices that have been used thus far in Japan.
(2) Scheduled date of application
The above standards will be applied from the beginning of the fiscal period ending December 31, 2022.
(3) Impact of applying the accounting standards
The impact on the financial statements of applying the standards, etc. is currently under review.
・“Accounting Standard for Fair Value Measurement" (ASBJ Statement No. 30 issued by ASBJ on July 4, 2019)
・“Accounting Standard for Financial Instruments” (ASBJ Statement No. 10 revised on July 4, 2019)
・“Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31 issued
by ASBJ on July 4, 2019)
・“Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19
revised on March 31, 2020)(1) Overview
IASB and FASB have established detailed guidance for fair value measurement (IFRS 13 “Fair Value Measurement”
under the IFRS and Topic 820 “Fair Value Measurement” of the Accounting Standards Codification under the U.S.
accounting standards) containing almost the same content. In light of this, the ASBJ worked to secure consistencyof the Japanese accounting standards with these internationally recognized accounting standards, mainly in termsof the guidance on and disclosure of the fair value of financial instruments, and announced the Accounting Standard
for Fair Value Measurement, etc.
The basic policy of ASBJ for the development of the Accounting Standard for Fair Value Measurement was to adopt
all provisions of IFRS 13 as a rule from the viewpoint of improving the comparability between the financial
statements of the Japanese and foreign companies by using a unified measurement approach. Moreover, inconsideration of the practices that have been used in Japan to date, ASBJ determined to establish other treatments
for certain items, to the extent that they do not significantly impair the comparability between the financial
statements.
(2) Scheduled date of application
The above standards will be applied from the beginning of the fiscal period ending December 31, 2022.
(3) Impact of applying the accounting standards
The impact on the financial statements of applying the standards is currently under review.

51

・“Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No. 31 issued by ASBJ on March
31, 2020)(1) Overview
With regard to the “sources of estimation uncertainty” for which disclosure is required under Paragraph 125 of theInternational Accounting Standards (“IAS”) 1 “Presentation of Financial Statements” (“IAS 1”) issued by IASB in
2003, requests were made for ASBJ to consider requiring such disclosures in the form of notes under the Japanese
GAAP as it would be useful information for users of financial statements. Accordingly, ASBJ has developed andpublished the Accounting Standard for Disclosure of Accounting Estimates (the “Accounting Standard”).
The basic policy of ASBJ for the development of the Accounting Standard was to provide general principles(disclosure objectives), instead of expanding required information in the notes individually, and let companies
determine specific disclosure contents in light of the disclosure objectives. In developing the Accounting Standard,
ASBJ referred to the provisions of the Paragraph 125 of the IAS 1.
(2) Scheduled date of application
The above standard will be applied from the end of the fiscal period ending December 31, 2021.
・“Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections” (ASBJ
Statement No. 24 (revised 2020) issued by ASBJ on March 31, 2020)(1) Overview
Given the recommendation to consider enhancement of note information regarding the “accounting principles andprocedures adopted in cases when provisions of relevant accounting standards are not clear,” ASBJ has madenecessary amendments and published the Accounting Standard for Accounting Policy Disclosures, Accounting
Changes and Error Corrections.
Furthermore, ASBJ has determined that, when enhancing the note information regarding the “accounting principles
and procedures adopted in cases when provisions of relevant accounting standards are not clear,” the provisions in
the Notes on Corporate Accounting Principles (Note 1-2) shall be followed as before in order to avoid any impact
on the practices taken to date when the provisions of relevant accounting standards are clear.
(2) Scheduled date of application
The above standard will be applied from the end of the fiscal period ending December 31, 2021.
5. Cash Flow Information
Cash and cash equivalents as of December 31, 2020 and 2019 in the statements of cash flows consisted of thefollowing:Thousands of yen
As of December
As of December
31, 2020
31, 2019
Cash and deposits¥
19,382,019¥
22,449,911
9,171,145
11,894,019
Cash and deposits in trust¥
28,553,164¥
34,343,930
Cash and cash equivalents
6. Financial Instruments
a. Status of financial instruments(1) Policy for financial instruments
JHR is an investment corporation set forth in Article 2, paragraph 12 of the Investment Trust Act, managing
investments mainly in specified assets as prescribed in the Investment Trust Act. As a policy, JHR procures funds
through issuance of investment units, etc. and loans from financial institutions in order to make investments inspecified assets. JHR does not utilize surplus funds to invest in financial instruments except for short-term deposits
and other equivalent short-term financial instruments. JHR may enter into derivative transactions in order to hedge
against interest rate risk, but not for speculative trading purposes.
(2) Details of financial instruments, their risks, and risk management system

52

Operating accounts receivable are exposed to credit risks of customers. To address the risks, JHR monitors payment
dates and balances by customers in order to detect and mitigate any suspicious accounts in a timely manner.
The floating rate loans payable are exposed to risks of interest rate fluctuations. In order to mitigate interest raterisks, JHR may enter into derivative transactions, if it is judged that fixing interest payment is necessary.
Derivative transactions are conducted principally in accordance with rules prescribed by JHR and risk management
rules applied by the Asset Management Company. Derivative transactions are arranged by the finance section of theAsset Management Company by using financial institutions with high credit ratings through approval and resolution
by authorized personnel and a meeting committee structure set forth in its decision-making standards and resolutionof JHR’s board of directors.
Loans payable expose JHR to liquidity risks. The finance section of the Asset Management Company prepares andupdates projections and actual cash flows on a monthly basis to manage liquidity risks and monitors compliancewith restrictive covenants set forth in the loan agreements. JHR manages liquidity risks by managing the ratio ofshort-term and long-term loans payable, etc. considering the current financial environment and other conditions
through approval and resolution by authorized personnel and meeting committee structure in the Asset Management
Company and resolution of JHR’s board of directors.
b. Fair value of financial instruments
Carrying amounts of financial instruments on the balance sheets, their fair values, and the differences as of December
31, 2020 and 2019 were as follows. Financial instruments whose fair values are difficult to estimate are not includedin the table. See Note (2) below.

(i) Cash and deposits(ii) Cash and deposits in trust(iii) Operating accounts receivable
Total

Thousands of yen
As of December 31, 2020
Carrying amount
Fair value¥
19,382,019 ¥
19,382,019 ¥
9,171,145
9,171,145
672,415
672,415¥
29,225,579 ¥
29,225,579 ¥(iv) Short-term loans payable(v) Current portion of investment corporation
bonds(vi) Current portion of long-term loans payable(vii) Investment corporation bonds(viii) Long-term loans payable
Total

¥

12,782,000¥

1,500,000
10,800,000
40,100,000
103,572,000
168,754,000(ix) Derivative transactions (*)¥(i) Cash and deposits(ii) Cash and deposits in trust(iii) Operating accounts receivable
Total

Thousands of yen
As of December 31, 2019
Carrying amount
Fair value¥
22,449,911¥
22,449,911 ¥
11,894,019
11,894,019
2,779,730
2,779,730¥
37,123,661 ¥
37,123,661 ¥

53¥

12,782,000

Difference
-

¥

-

¥

1,468,350
10,800,000
34,415,280
103,572,000
163,037,630¥(31,650)(5,684,720)(5,716,370)(789,147) ¥(789,147)¥-

Difference-

(iv) Short-term loans payable(v) Current portion of investment corporation
bonds(vi) Current portion of long-term loans payable(vii) Investment corporation bonds(viii) Long-term loans payable
Total

¥

-

¥

12,782,000
41,600,000
114,372,000
168,754,000(ix) Derivative transactions (*)

¥

¥

-

¥

-

¥

12,782,000
41,480,400
114,372,000
168,634,400¥(119,600)(119,600)(389,386) ¥(389,386)¥-(*) Receivables and payables arising from derivative transactions are presented on a net basis and amounts in parenthesis denote net payables.

Notes:(1) Methods to measure fair value of financial instruments and derivative transactions(i) Cash and deposits, (ii) Cash and deposits in trust, (iii) Operating accounts receivable, (iv) Short-term loans
payableThe carrying value is deemed to approximate the fair value since the instruments are scheduled to be settled in ashort period of time.
(v) Current portion of investment corporation bonds, (vii) Investment corporation bonds
The fair value of these instruments is measured based on the market price.
(vi) Current portion of long-term loans payable, (viii) Long-term loans payable
The carrying value is deemed to approximate the fair value since the interest rate on long-term loans payable arefloating interest rates which are adjusted periodically to reflect market interest rates.
(ix) Derivative transactions
The information on the fair value of derivative transactions is presented in Note 19.
(2) Information on financial instruments whose fair values are difficult to estimate as of December 31, 2020 and 2019
was as follows:
Thousands of yen
As of December
As of December
31, 2020
31, 2019
Carrying amount
Tenant leasehold and security deposits¥
1,040,520¥
1,040,520
Tenant leasehold and security deposits in trust
4,356,804
4,681,825¥
5,397,324¥
5,722,345
Total
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
price and their actual deposit periods from a tenant’s move-in to move-out are not estimable, thus making areasonable estimate of future cash flows difficult.
(3) Redemption schedule for monetary claims as of December 31, 2020 and 2019:

As of December 31, 2020
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Total

Due within
one year¥19,382,911
9,171,145
672,415¥29,225,579

Due after
one to two
years
¥
¥
-

54

Thousands of yen
Due after
Due after
two to three three to four
years
years
¥
- ¥
¥
- ¥
-

Due after
four to five
years
¥
¥
-

Due after
five years¥¥-

As of December 31, 2019
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Total

Due within
one year¥22,449,911
11,894,019
2,779,730¥37,123,661

Due after
one to two
years
¥
¥
-

Thousands of yen
Due after
Due after
two to three three to four
years
years
¥
- ¥
¥
- ¥
-

Due after
four to five
years
¥
¥
-

Due after
five years¥¥-(4) Schedule for repayment of loans payable and redemption of investment corporation bonds as of December 31, 2020
and 2019.

As of December 31, 2020
Short-term loans payable
Current portion of investment
corporation bonds
Current portion of long-termloans payable
Investment corporation bonds
Long-term loans payable
Total

As of December 31, 2019
Short-term loans payable
Current portion of investment
corporation bonds
Current portion of long-termloans payable
Investment corporation bonds
Long-term loans payable
Total

Thousands of yen
Due after
Due after
two to three three to four
years
years
¥
- ¥
-

Due within
one year¥12,782,000

Due after
one to two
years
¥
-

1,500,000--

10,800,000¥25,082,000

6,000,000
10,900,000¥16,900,000

15,772,000¥15,772,000

Due within
one year¥-

Due after
one to two
years
¥
-

-

-

-

12,782,000¥12,782,000

1,500,000
10,800,000¥12,300,000

6,000,000
10,900,000¥16,900,00055

Due after
four to five
years
¥
-

Due after
five years
¥
-

-

-

-

3,000,000
18,650,000¥21,650,000

19,000,000¥19,000,000

31,100,000
39,250,000¥70,350,000

Thousands of yen
Due after
Due after
two to three three to four
years
years
¥
- ¥
-

Due after
four to five
years
¥
-

Due after
five years
¥
-

-

-

-

15,772,000¥15,772,000

3,000,000
18,650,000¥21,650,000

31,100,000
58,250,000¥89,350,000

7. Short-Term and Long-Term Loans Payable
Short-term and long-term loans payable as of December 31, 2020 and 2019 consisted of the following:

Maturity date
Short-term loans payable:
0.37% Unsecured loan, payable in a lump-sum at maturity
0.31% Unsecured loan, payable in a lump-sum at maturity
0.59% Unsecured loan, payable in a lump-sum at maturity
Sub-total
Long-term loans payable:
1.15% Unsecured loan, payable in a lump-sum at maturity (*1)
0.92% Unsecured loan, payable in a lump-sum at maturity (*1,2)
1.04% Unsecured loan, payable in a lump-sum at maturity (*1)
0.56% Unsecured loan, payable in a lump-sum at maturity
0.38% Unsecured loan, payable in a lump-sum at maturity (*1)
0.90% Unsecured loan, payable in a lump-sum at maturity (*1,2)
0.93% Unsecured loan, payable in a lump-sum at maturity (*1)
0.95% Unsecured loan, payable in a lump-sum at maturity (*1)
0.52% Unsecured loan, payable in a lump-sum at maturity
1.07% Unsecured loan, payable in a lump-sum at maturity (*1)
1.07% Unsecured loan, payable in a lump-sum at maturity (*1,2)
0.77% Unsecured loan, payable in a lump-sum at maturity (*1,2)
0.77% Unsecured loan, payable in a lump-sum at maturity (*1)
0.68% Unsecured loan, payable in a lump-sum at maturity (*1,2)
0.66% Unsecured loan, payable in a lump-sum at maturity (*1)
0.57% Unsecured loan, payable in a lump-sum at maturity
0.74% Unsecured loan, payable in a lump-sum at maturity (*1)
0.56% Unsecured loan, payable in a lump-sum at maturity (*1)
0.56% Unsecured loan, payable in a lump-sum at maturity (*1)
0.59% Unsecured loan, payable in a lump-sum at maturity
0.71% Unsecured loan, payable in a lump-sum at maturity
0.46% Unsecured loan, payable in a lump-sum at maturity
0.85% Unsecured loan, payable in a lump-sum at maturity (*1)
0.73% Unsecured loan, payable in a lump-sum at maturity (*1)
0.68% Unsecured loan, payable in a lump-sum at maturity (*1)
0.75% Unsecured loan, payable in a lump-sum at maturity
0.73% Unsecured loan, payable in a lump-sum at maturity (*1)
0.73% Unsecured loan, payable in a lump-sum at maturity (*1)
0.73% Unsecured loan, payable in a lump-sum at maturity (*1)
0.68% Unsecured loan, payable in a lump-sum at maturity (*1)
0.65% Unsecured loan, payable in a lump-sum at maturity (*1)
0.57% Unsecured loan, payable in a lump-sum at maturity (*1)
0.65% Unsecured loan, payable in a lump-sum at maturity (*1)
0.41% Unsecured loan, payable in a lump-sum at maturity
0.41% Unsecured loan, payable in a lump-sum at maturity
0.52% Unsecured loan, payable in a lump-sum at maturity
0.55% Unsecured loan, payable in a lump-sum at maturity
0.95% Unsecured loan, payable in a lump-sum at maturity (*1)
0.38% Unsecured loan, payable in a lump-sum at maturity
0.72% Unsecured loan, payable in a lump-sum at maturity (*1)
0.82% Unsecured loan, payable in a lump-sum at maturity (*1)
0.23% Unsecured loan, payable in a lump-sum at maturity
0.68% Unsecured loan, payable in a lump-sum at maturity (*1)
Sub-total
Total of short-term and long-term loans payable

Millions of yen
As of December
As of December
31, 2020
31, 2019
AmountSeptember 30, 2021
September 30, 2021
June 30, 2021¥

11,747100
935
12,782¥-

March 31, 2021
September 30, 2020
September 30, 2021
December 30, 2020
January 31, 2020
January 31, 2022
March 31, 2022
June 30, 2022
June 30, 2020
September 29, 2023
September 29, 2023
March 29, 2024
March 29, 2024
March 31, 2023
March 29, 2024
March 29, 2024
September 30, 2025
September 30, 2024
September 30, 2024
September 30, 2024
September 30, 2024
June 30, 2023
September 30, 2026
September 30, 2025
September 30, 2025
September 30, 2025
September 30, 2025
September 30, 2025
September 30, 2025
September 30, 2025
March 31, 2025
March 29, 2024
March 31, 2025
March 31, 2023
March 31, 2023
March 31, 2023
September 29, 2023
September 30, 2027
March 29, 2024
March 31, 2027
March 31, 2028
September 30, 2024
September 30, 2027

¥

6,800
4,000
7,900
1,500
1,500
2,880
892
2,100
2,650
4,200
800
500
9,500
1,300
2,000
700
500
2,250
4,250
1,000
700
500
500
500
1,000
300
2,550
4,000
2,450
1,700
2,850
500
500
3,900
2,500
7,500
18,0001,600
5,600
114,372
127,154

¥

6,800
6,055
4,000
935
4,700
7,900
1,500
1,500
1,092
2,880
892
2,100
2,650
4,200
800
500
9,500
1,300
2,000
700
500
2,250
4,250
1,000
700
500
500
500
1,000
300
2,550
4,000
2,450
1,700
2,850
500
500
3,900
2,500
7,500
18,0001,600
5,600
127,154
127,154¥¥

Stated interest rate, which is a rate per annum, represents the weighted average rate during the year ended December 31, 2020, or the most recent year, basedon the number of days and outstanding balance of the loans payable. The interest rate is rounded off to the nearest second decimal place.

56

Notes:(*1) As JHR has conducted interest rate swap transactions in order to hedge against interest rate fluctuation risks, theinterest rate of loans subject to such interest rate swap transactions is presented as the rate obtained by taking into
account the effect of interest rate swaps (interest rate fixation), rounded off to second decimal places.
(*2) JHR made partial early repayment of these loans payable on April 26, 2018.
8. Investment Corporation Bonds
Investment corporation bonds as of December 31, 2020 and 2019 consisted of the following:
Millions of yen
As of
As of
December 31,
December 31,
2020
2019
Unsecured 4th investment corporation bond at interest rate of 0.86%, dueon December 17, 2021
Unsecured 5th investment corporation bond at interest rate of 0.82%, dueon October 21, 2022
Unsecured 6th investment corporation bond at interest rate of 0.935%, dueon March 19, 2026
Unsecured 7th investment corporation bond at interest rate of 0.60%, dueon November 27, 2026
Unsecured 8th investment corporation bond at interest rate of 0.60%, dueon November 27, 2026
Unsecured 9th investment corporation bond at interest rate of 0.53%, dueon November 22, 2024
Unsecured 10th investment corporation bond at interest rate of 0.84%, due
on February 21, 2028
Unsecured 11th investment corporation bond at interest rate of 0.854%, dueon June 14, 2029
Unsecured 12th investment corporation bond (green bonds) at interest rateof 0.40%, due on July 31, 2024

¥

¥

Total

1,500

¥

1,500

6,000

6,000

3,000

3,000

9,000

9,000

1,100

1,100

1,000

1,000

10,00010,000

8,000

8,000

2,000

2,000

41,600¥41,6009. Asset Retirement Obligations
a. Outline of the asset retirement obligations
JHR recognized asset retirement obligations as it is obliged to restore the land of Oriental Hotel Fukuoka Hakata Station(former Hotel Centraza Hakata), acquired on April 1, 2016, and HOTEL ASCENT FUKUOKA, acquired on August19, 2016, to the original state in accordance with each of the fixed-term land leasehold agreements. For the asset
retirement obligations of HOTEL ASCENT Fukuoka, the obligations have been expired with the termination of the
fixed-term land leasehold agreement due to the exchange of part of the site as of October 29, 2020.
b. Calculation method of the asset retirement obligations
JHR calculated the amount of asset retirement obligations by estimating the expected periods of use of 34 years and 48
years based on the remaining useful lives of the related buildings and using the discount rates of 0.484% and 0.394%,
respectively.
c. Changes in the total amount of the asset retirement obligations
Thousands of yen
For the year ended
For the year ended
December 31, 2020
December 31, 2019
Balance at beginning of year
Adjustment due to accretion expense
Decrease due to expiration of asset retirement
obligations
Balance at end of year

57

¥

¥

447,677
1,989(114,505)
335,161¥¥445,6222,054
447,67710. Net Assets
JHR maintains at least ¥50,000 thousand as the minimum net assets as required by the Investment Trust Act.
Dividends and other movements in unappropriated retained earnings related to each period that were decided after thebalance sheet date are summarized as follows:Yen
For the year ended
For the year ended
December 31, 2020
December 31, 2019Total
Per unit
Total
Per unit
I Unappropriated retained
earnings¥
1,527,790,689¥ 15,290,314,375
II Reversal of voluntary reserve
Reversal of reserve fortemporary difference adjustment(*1)
305,694,382¥
68
1,176,490,844¥
263
Reversal of reserve for special
advanced depreciation(*2)¥
1,174,860,958¥
263
III Dividends
1,829,562,270¥
410
16,466,060,430¥
3,690
IV Voluntary reserve
Provision of reserve foradvanced depreciation(*2)
1,174,860,958
V Retained earnings carried¥
3,922,801¥
744,789
forward (I+II-III-IV)
Notes:(*1) JHR applied the transitional measures of Paragraph 3 of the Supplementary Provisions of the “Ordinance on
Accounting of Investment Corporations” (Cabinet Office Ordinance No. 27 of 2015) from the fiscal period
ended December 31, 2016. As a result, ¥13,127,153,216 of the dividend reserve, representing the remainingbalance of the gain on negative goodwill recorded in a prior fiscal period, was transferred to the “Reserve fortemporary difference adjustment” account through the appropriation of profit for the year ended December 31,
2016. Starting from the year ended December 31, 2017, JHR plans to reverse the reserve every year in an amountthat shall be at least 2% of the transferred amount (¥262,543,065) but not exceeding the remaining amount of
the reserve at that point in conformity with applicable rules and regulations.
For the year ended December 31, 2019, reversal of reserve for temporary difference adjustment of¥1,176,490,844 was decided, which was calculated as ¥262,600,000 of the basic reversal plus ¥246,890,844
equivalent to loss on retirement of noncurrent assets and ¥357,000,000 for the large-scale renovation at Oriental
Hotel Fukuoka Hakata Station (former Hotel Centraza Hakata) and ¥310,000,000 for adjustment to dilution ofdividend per unit due to capital increase through public offering.
For the year ended December 31, 2020, reversal of reserve for temporary difference adjustment of ¥305,694,382
has been decided, which is the amount calculated by adding ¥5,701,616 equivalent to loss on retirement of
noncurrent assets and ¥37,392,766 equivalent to amortization of trademark rights to ¥262,600,000 of the basic
reversal.
(*2) For the year ended December 31, 2019, JHR decided to reverse the “Reserve for special advanced depreciation”
in the amount of ¥1,174,860,958 and to provide the same amount for the “Reserve for advanced depreciation”
based on Article 65-7 of the Special Taxation Measures Act of Japan, following the acquisition of applicable
assets during the year.
11. Provision and Reversal of Reserve for Temporary Difference Adjustment
Changes in the balance of reserve for temporary difference adjustment during the years ended December 31, 2020 and2019 consisted of the following (thousands of yen):
Balance as
Provision
Reversal
Balance as ofRationale for provision orOriginalof January
during theduring theDecember
Sourcereversalamount1, 2020year
year
31, 2020
Dividend
13,127,153 11,794,071
1,176,490
10,617,580 Allocation for dividend
reserve

58

Source

Original
amountBalance asof January
1, 2019

Provision
during theyear

Dividend
13,127,153 12,357,644
reserve(Note) See (*1) of Note 10 above for further descriptions.

Reversalduring theyear

Balance as ofDecember31, 2019

Rationale for provision orreversal

563,572

11,794,071

Allocation for dividend

12. Real Estate Operating Revenue and Costs
The components of “Real estate operating revenue” and “Real estate operating costs” for the years ended December
31, 2020 and 2019 were as follows:
Thousands of yen
For the year ended For the year ended
December 31,
December 31,
2020
2019
Operating revenue:
Real estate operating revenue:
Fixed rent¥
7,640,060¥
15,931,097
Variable rent
1,902,240
8,675,885
61,4232,501,004
Income from management contract (*1)
Sub-total
9,603,724
27,107,988
Other real estate operating revenue:
Parking lots
116,458
161,660
Other incidental revenue
83,051
63,016
Utilities
546,450803,012
146,041
142,873
Other
892,001
1,170,561
Sub-total
10,495,725
28,278,550
Total operating revenue
Real estate operating costs:
Land lease and other rent expenses
890,001
898,207
Property taxes
1,915,565
1,658,930
Outsourcing expenses (*2)
423,852
653,041
Nonlife insurance
67,271
51,030Depreciation and amortization
4,761,907
4,557,414
Loss on retirement of noncurrent assets
5,701
246,890
Repairs
29,26141,410Utilities
559,044818,290
Trust fees
42,48044,67927,511
22,245
Other
8,997,408
8,717,332
Total real estate operating costs¥
1,778,393¥
19,281,141
Net real estate operating income
Notes:(*1) Pursuant to management contracts with a certain hotel operator, JHR receives revenue in the amount equivalent
to the properties’ gross operating profit, or GOP, while it pays management contract fees to the operator. In theevent a property’s GOP for the relevant period is a negative number, then JHR is required to pay an amount equal
to such negative number to the operator. Even though some of the revenue JHR receives under management
contracts is variable, it recognizes such revenue as income from management contracts and not as variable rent.
(*2) Outsourcing expenses include management contract fees of ¥70,119 thousand for the year ended December 31,
2020 and ¥296,029 thousand for the year ended December 31, 2019.

59

13. Gain on Sale of Real Estate Properties
The components of “Gain on sale of real estate properties” for the year ended December 31, 2020 were as follows:

Proceeds from sale of properties
Costs of sale of properties
Other selling expenses
Gain on sale of real estate properties

Thousands of yen
For the year ended
December 31, 2020
Sotetsu Fresa Inn
ShimbashiKarasumoriguchi¥
8,000,000
4,790,596
51,021¥
3,158,381

There was no gain or loss on sale of real estate properties for the year ended December 31, 2019.
14. Gain on Exchange of Real Estate Properties
The components of “Gain on exchange of real estate properties” for the year ended December 31, 2020 were as follows:
Thousands of yen
For the year ended
December 31, 2020
HOTEL ASCENTFUKUOKA(part of site)
Value of properties transferred forexchange
Costs of properties transferred forexchange
Other transferring expenses
Gain on exchange of real estate
properties¥

523,000
333,359
4,915¥

184,725

There was no gain or loss on exchange of real estate properties for the year ended December 31, 2019.
15. Advanced Depreciation of Property and Equipment
The accumulated advanced depreciation of property and equipment deducted from acquisition costs due to government
subsidies received as of December 31, 2020 and 2019 were as follows:
Thousands of yen
As of
As of
December 31, 2020
December 31, 2019¥24,921¥
24,921

Buildings in trust6016. Income Taxes
Significant components of deferred tax assets and liabilities as of December 31, 2020 and 2019 were as follows:
Thousands of yen
As of December
As of December
31, 2020
31, 2019
Deferred tax assets
Valuation difference on assets acquired by merger
Amortization of fixed-term leasehold rights
Asset retirement obligations
Amortization of trademark rights
Deferred losses on hedges
Subtotal deferred tax assets
Valuation allowance
Total deferred tax assets¥

Deferred tax liabilities
Deferred gains on hedges
Total deferred tax liabilities¥¥

1,696,476¥
206,151
15,53011,763238,937
2,168,860(2,168,860)- ¥-1,712,010
162,810
14,951
128,306
2,018,079(2,018,079)
13,981
13,981¥

Reconciliation between the effective statutory tax rate and the actual effective tax rate reflected in the accompanying
statements of income for the years ended December 31, 2020 and 2019 was as follows:
For the year
ended December
31, 2020
31.46%(34.09)
2.63
0.08
0.08%

Effective statutory tax rate
Deduction for dividends paid
Change in valuation allowance
Other – net
Actual effective tax rate

For the year
ended December
31, 2019
31.51%(31.72)
0.20
0.03
0.01%

17. Amounts per Unit
Net income per unit for the years ended December 31, 2020 and 2019 was as follows:
Thousandsof yenNet
incomeNumber ofunits
Weightedaverage units

1,527,045

4,462,347¥

342¥ 15,290,314

4,434,849

¥

3,447

For the year ended December 31, 2020
Basic net income per unit - Net income attributable tocommon unitholders¥

Yen
Net income
per unit

For the year ended December 31, 2019
Basic net income per unit - Net income attributable tocommon unitholders

Notes:(1) The computation of net income per unit is based on the weighted-average number of units outstanding during theyear.
(2) Diluted net income per unit is not presented since there are no potentially dilutive units for the years ended
December 31, 2020 and 2019.

61

Net assets per unit as of December 31, 2020 and 2019 were as follows:
Yen
As of December
31, 2020¥
49,570Net assets per unit

As of December
31, 2019¥
53,004

18. Leases
As Lessor:
JHR leases its real estate properties to third parties under non-cancellable operating leases. Minimum rental revenue
under the non-cancellable operating leases as of December 31, 2020 and 2019 were as follows:
Thousands of yen
As of December
As of December
31, 2020
31, 2019¥
990,152¥
1,459,034
1,213,075
2,106,234¥
2,203,227¥
3,565,268

Due within one year
Due after one year
Total
19. Derivatives and Hedging Activities

a. Derivative transactions to which hedge accounting is not applied
Derivative transactions to which hedge accounting was not applied as of December 31, 2020 and 2019 were as follows:

As of December 31, 2020
Interest rate swaps(fixed rate payment,
floating rate receipt)

As of December 31, 2019
Interest rate swaps(fixed rate payment,
floating rate receipt)

Classification
Transactions
other thanmarkettransactions

Classification
Transactions
other thanmarkettransactions

Contract
amount(*1)

Thousands of yen
Contract
amountdue after one
year¥ 3,494,000¥ 3,494,000

Contract
amount(*1)

Thousands of yen
Contract
amountdue after one
year¥ 3,494,000¥ 3,494,000

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Fair value(*2)¥(29,655)

Fair value(*2)¥(25,992)

b. Derivative transactions to which hedge accounting is applied
Derivative transactions to which hedge accounting was applied as of December 31, 2020 and 2019 were as follows:
Thousands of yen
Contract
Contract
amountAs of December 31,
Method of hedge
amountdue after one
Fair value
2020
accounting
Hedged item
(*1)
year
(*2)
Interest rate swaps
Long-term(fixed rate payment,
Deferral method¥ 101,072,000¥ 90,272,000 ¥ (759,492)
loans payable
floating rate receipt)

As of December 31,
2019
Interest rate swaps(fixed rate payment,
floating rate receipt)

Method of hedge
accounting
Deferral method

Hedged item
Long-termloans payable

Contract
amount(*1)

Thousands of yen
Contract
amountdue after one
year¥ 112,654,000¥ 101,072,000

Fair value(*2)¥(363,394)

Notes:(*1) The contract amounts of the interest rate swap is presented based on the contracted amount or notional principal
amounts on the contract, etc. as of the end of the fiscal period. Also, the contract amounts of derivative transactions
do not indicate market risk exposure related to derivative transactions.
(*2) The fair value is measured at the quoted price obtained from the counterparty financial institutions.
20. Investment and Rental PropertiesJHR 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:

HotelsJanuary 1,
2020¥
374,314,498

Thousands of yen
Carrying amount
Net increase
December 31,(decrease) (*1)
2020¥
(7,030,802) ¥ 367,283,696

Fair value (*2)
December 31,
2020¥ 493,330,000

Notes:(*1) Decrease during 2020 principally represents the sale of Sotetsu Fresa Inn Shimbashi-Karasumoriguchi (¥4,790
million) and recording of depreciation.
(*2) Fair value of properties as of December 31, 2020 is generally the appraisal value determined by outside licensed
real estate appraisers.

HotelsJanuary 1,
2019¥306,789,379

Thousands of yen
Carrying amount
Net increase
December 31,(decrease) (*1)
2019¥
67,525,119 ¥ 374,314,498

Fair value (*2)
December 31,
2019¥ 525,910,000

Notes:(*1) Increase during 2019 principally represents the acquisition of Hotel Oriental Express Osaka Shinsaibashi for¥2,841 million and Hilton Tokyo Odaiba for ¥63,468 million.
(*2) Fair value of properties as of December 31, 2019 is generally the appraisal value determined by outside licensed
real estate appraisers.
Real estate operating revenue and costs for the years ended December 31, 2020 and 2019 related to the rental properties
were as follows:63

Hotels

Thousands of yen
For the year ended December 31, 2020
Real estate
Real estate
operating revenue
operating costs
Net real estate(*)(*)
operating income¥
10,495,725¥
8,717,332 ¥
1,778,393

HotelsThousands of yen
For the year ended December 31, 2019
Real estate
Real estate
operating revenue
operating costs
Net real estate(*)(*)
operating income¥
28,278,550¥
8,997,408 ¥
19,281,141

Note:(*) “Real estate operating revenue” and “Real estate operating costs” are income from real estate operation (including
other real estate operating revenue) and corresponding expenses (such as depreciation, property taxes, trust fees,and repairs and maintenance expenses), and are included in “Operating revenue” and “Real estate operating costs,”
respectively.
21. Segment Informationa. Segment information
The segment information has been omitted because JHR has only one segment, which is the investment andmanagement business of hotel real estate.
b. Related information(1) Information about products and services for the years ended December 31, 2020 and 2019
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.
(2) Information about geographical areas for the years ended December 31, 2020 and 2019(i) Operating revenue
Information about geographical areas has been omitted because operating revenue in Japan accounted for more than
90% of total operating revenue.
(ii) Property and equipment
Information about property and equipment has been omitted because the amount of property and equipment locatedin Japan accounted for more than 90% of net property and equipment.
(3) Information about major customers<For the year ended December 31, 2020>
Name of customer

Segment
Hotel real estate
investment and management
Hotel real estate
investment and management

Hotel Management Japan Co., Ltd. (*1)
THE DAI-ICHI BUILDING CO., LTD.

Thousands of yen
Operating revenue¥

1,990,793

Undisclosed (*2)<For the year ended December 31, 2019>
Name of customer

Segment
Hotel real estate
investment and management
Hotel real estate
investment and management

Hotel Management Japan Co., Ltd. (*1)
AAPC Japan K.K.

Thousands of yen
Operating revenue¥

15,221,983¥

2,996,251

Note:(*1) Operating revenue includes the operating revenue from customers belonging to the business group of the said
customer.

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(*2) Undisclosed as the consent on disclosure has not been obtained from the lessee.
22. Subsequent Events
Issuance of new investment units
JHR resolved to issue new investment units by way of third-party allotment at the Board of Directors meeting heldon March 4, 2021. Payment for the new investment units was completed on March 16, 2021, and the investment
units were issued under the following terms and conditions. As a result, JHR’s unitholders’ capital stands at¥187,194,209,409, with the number of investment units issued and outstanding at 4,467,006 units.
(1) Issuance of new investment units (third-party allotment)
Number of investment units
issued:4,659 units

Paid-in amount (issue value):¥64,400 per unit

Total paid-in amount (total issue
value):¥300,039,600

Payment date:

March 16, 2021

Allottee:

SC J-REIT Investments GK(2) Use of proceeds
JHR plans to allocate the proceeds from the issuance of new investment units by way of third-party allotmentof ¥300,039,600 to part of the funds for capital expenditures.

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