NEWS RELEASE
Jun 02, 2021

R&I Affirms AA-, Stable: Nippon Accommodations Fund Inc.
Rating and Investment Information, Inc. (R&I) has announced the following:
ISSUER:

Nippon Accommodations Fund Inc.
Issuer Rating: AA-, Affirmed
Rating Outlook: Stable

RATIONALE:
Nippon Accommodations Fund Inc. (NAF) is a real estate investment trust that was listed in 2006. The
REIT invests primarily in rental apartments in Tokyo 23 wards. Mitsui Fudosan Co., Ltd. serves as asponsor.
NAF has been investing in "Park Axis Series" properties developed by the Mitsui Fudosan Group. It
newly acquired five properties in Tokyo and Yokohama for a total of 18.5 billion yen from the period ended
August 2020 onward. NAF's rental apartments, of which about 88% are located in Tokyo 23 wards, aregood assets with the average property age of 14.6 years (as of April 2021). Its portfolio is well diversified,
as shown by an asset size of 328.2 billion yen invested in 131 properties.
The average month-end occupancy rate during the period ended February 2021 stands at 96.4%,
down year on year. It is attributable to slightly weak tenant demand for units designed for single residents
in central Tokyo as a result of a decline in net in-migration to Tokyo 23 wards affected by the COVID-19
outbreak. Meanwhile, the occupancy rate recovered during the period until end-February, backed by thesponsor group's successful leasing activities in addition to solid demand for compact units and units forfamilies. The average rate of rent changes at tenant turnover therefore remained positive. Going forward,
NAF will likely be able to maintain high occupation rates and secure stable cash flow, even though rent
growth is slower than that in the past few years.
Since the COVID-19 pandemic has had only a relatively small impact on the performance of rental
apartments, investment demand is increasing and selling prices are kept strong. That said, given thesponsor's rich pipeline, NAF is able to achieve high-quality external growth while avoiding excessivecompetition on an ongoing basis.
NAF conducted a public offering in December 2020 for the first time in five years. The LTV ratio as ofFebruary 2021 was 50.2%. The ratio has been controlled at around 50% over the past six years. With theappraisal value rising, unrealized gains have grown to about 37% of the book value.
NAF has stable funding sources which mainly consist of long-term fixed-rate loans from majordomestic financial institutions. The average remaining term of long-term debts is 4.6 years (as of February2021), with due dates staggered. Its financing costs are low compared to those of other REITs.
The Rating Outlook is Stable. NAF has established a quality portfolio by focusing on investments inproperties developed by the sponsor in Tokyo 23 wards. Though occupancy rates declined slightly due tothe impact of the COVID-19 pandemic, NAF still enjoys highly stable earnings. The leverage level ismanaged within the target range, and the funding base is robust.
The primary rating methodology applied to this rating is provided at "Rating Methodology for REITs".
The methodology is available at the web site listed below, together with other rating methodologies thatare taken into consideration when assigning the rating.
https://www.r-i.co.jp/en/rating/about/rating_method.html■Contact: Sales and Marketing Division, Customer Service Dept.
■Media Contact : Corporate Planning Division (Public Relations)Rating and Investment Information, Inc.

TEL.+81-(0)3-6273-7471 E-mail. infodept@r-i.co.jp
TEL.+81-(0)3-6273-7273

TERRACE SQUARE, 3-22 Kanda Nishikicho, Chiyoda-ku, Tokyo 101-0054, Japan https://www.r-i.co.jp

Credit ratings are R&I's opinions on an issuer's general capacity to fulfill its financial obligations and the certainty of the fulfillment of its individual obligations as promised (creditworthiness) and are notstatements of fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment.
R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties. R&I is notliable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by the issuer. For details,
please refer to https://www.r-i.co.jp/en/docs/policy/site.html.
© Rating and Investment Information, Inc.

NEWS RELEASE
R&I RATINGS:ISSUER:RATING:

Nippon Accommodations Fund Inc. (Sec. Code: 3226)
Issuer Rating
AA-, Affirmed

RATING OUTLOOK:

StableUnsec. Str. Bonds No.3

Issue Date

Maturity Date

Issue Amount (mn)

Jul 16, 2020

Jul 16, 2025

JPY 2,000

RATING:

AA-, Affirmed

Unsec. Str. Bonds No.4

Issue Date

Maturity Date

Issue Amount (mn)

Jul 16, 2020

Jul 16, 2030

JPY 2,000

RATING:AA-, Affirmed■Contact: Sales and Marketing Division, Customer Service Dept.
■Media Contact : Corporate Planning Division (Public Relations)Rating and Investment Information, Inc.

TEL.+81-(0)3-6273-7471 E-mail. infodept@r-i.co.jp
TEL.+81-(0)3-6273-7273

TERRACE SQUARE, 3-22 Kanda Nishikicho, Chiyoda-ku, Tokyo 101-0054, Japan https://www.r-i.co.jp

Credit ratings are R&I's opinions on an issuer's general capacity to fulfill its financial obligations and the certainty of the fulfillment of its individual obligations as promised (creditworthiness) and are notstatements of fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment.
R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties. R&I is notliable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by the issuer. For details,
please refer to https://www.r-i.co.jp/en/docs/policy/site.html.
© Rating and Investment Information, Inc.