Table of Contents
Ⅰ. Midterm Settlement of Accounts
1.

Midterm Settlement of Accounts

Appendix 1
3

Ⅱ. Operating Forecast for Full Fiscal Year andSummary of Midterm Settlement of Accounts
1.

Operating Forecast for Full FY12/2023(Previous Year's Results vs Revised Forecast)5

2.

Operating Forecast for Full FY12/2023(Initial Forecast vs Revised Forecast)

6

3.

Midterm Results for FY12/2023

7

1.

JHR's Investment Targets

28

2.

Simultaneous Pursuit of Stability and Upside Potential

29

3.

External Growth Strategy

30

4.

Internal Growth Strategy

31

5.

Financial Strategy

32

6.

Benefits Program for Unitholders

33

Appendix 2

Ⅲ. Status of Hotel Operations

JHR's Characteristics and Strategy

Information of Properties

1.

Portfolio

35

2.

Portfolio Diversification

36

3.

Trend of Asset Size

37

4.

Rent Structures

38

5.

Property List

39

6.

Summary of Lease Contracts

41

7.

Portfolio Map

44

8.

Trend of RevPAR Index and
Status of Infection by COVID-19 in Japan

45

Hotel Indexes (January 2022 to July 2023)

46

1.

Performance of The 25 Hotels with Variable Rent, etc.

92.

Revised Forecast vs Initial Forecast for FY2023

11

3.

Internal Growth by Active Asset Management

124.

Active Asset Management through Collaboration with HMJ

13

5.

Rebranding and Renovation

14

6.

Renovation Plans

15

7.

Capital Expenditure (CAPEX) and Depreciation

16

8.

Acquisition of Property in 2023

17

9.

9.

ESG Initiatives

18

10. Balance Sheet
Appendix 3

Ⅳ. Financial Conditions
1.

Financial Conditions

20

Ⅴ. Market Environment

47

Investors Composition and Investment Unit Price

1.

Major Unitholders and Classifications of Unitholders

49

2.

Changes in Investment Unit Price and Market Capitalization

50

1.

Status of Domestic Accommodation Demand24

2.

Status of Inbound Visitors

25

1.

Summary of the Asset Management Company

52

3.

Status of New Supply of Hotels

26

2.

Features and Governance of the Asset Management Company

53

Appendix 41

Summary of the Asset Management Company

Ⅰ. Midterm Settlement of Accounts

1. Midterm Settlement of Accounts
1. Summary of Full-Year Forecast for FY12/2023

3. Acquisition of Properties• Initial forecast was revised upward due to increased variable rents following the hotel market recovery• The dividend is expected to be more than 30% higher than the initial forecast and over the 70% levelin 2019, prior to the COVID-19 pandemic(Unit: JPY MM)

FY12/2023(Revised Forecast)• JHR made its first property acquisition since the COVID-19
pandemic during the first half of 2023. Using cash on hand, twohotels were acquired in January and March• Both of these properties have rent structures that offer stability
with fixed rents while providing an upside potential throughvariable rents linked to sales

vs FY2022

vs Initial
Forecast(*1)

vs FY201924,928+67.2%+14.2%(11.8%)

Real Estate Operating
Revenue

24,928+67.2%+14.2%(11.8%)

Fixed Rent, etc.

15,819+117.7%+3.2%(7.5%)

Variable Rent

9,108

+19.1%+40.0%(18.5%)Net Income

11,416+327.3%+32.3%(25.3%)

Acquisition Price

JPY2,050MM

JPY8,400MM

Dividend per Unit (JPY)

2,652+288.9%+32.3%(28.1%)(as of the end of June 2023)

Appraisal Value

JPY2,140MM

JPY10,100MM

5.6%

3.7%

Operating Revenue

Property NameNOI Yield

2. Changes in DPU and NAV
(JPY)
4,000
3,000
2,000
1,000

3,690

90,000(88.9%)

2,652+288.9%4. Financial Soundness▶ Conservative Financial Management

Changes in NAV(*3) per Unit
(JPY)

(reference)

2,005+86.3%(10.7%)
682
410
366

60,00083,286

77,524

77,68877,36077,761(6.9%) +0.2% (0.4%) +0.5%

30,0000(1,000)(297)※ (363)※
FY12/2019 FY12/2020 FY12/2021 FY12/2022 FY12/2023 FY12/2023(20th Period) (21st Period) (22nd Period) (23rd Period) (24th Period) (24th Period)
RevisedInitialForecast
Forecast

0

Sotetsu Fresa Inn
Shimbashi-Karasumoriguchi

Exterior
Appearance(Annualized yield based on
forecast for full year 2023)(*1) Comparison with the full-year forecast for FY12/2023 announced on February 22, 2023.

Changes in DPU (Result/Forecast)

UAN kanazawa

FY12/2019 FY12/2020 FY12/2021 FY12/2022 FY12/2023• All matured loans were refinanced in the first half of 2023.
Moreover, some loans were refinanced with long-term (3 to 5
years) loans• Both JCR and R&I upgraded JHR's outlook of rating fromnegative to stable(as of the end of June 2023)
LTV(total asset base)

41.4%

Credit Rating

Costs for Interestbearing Debt

1.0%Japan Credit Rating
Agency, Ltd. (JCR)

Average Life of Debt

(20th Period) (21st Period) (22nd Period) (23rd Period) (24th Period)
Forecast※ Rough estimate in case gain on sale was excluded(*2)(*2) Rough estimate calculated by excluding the amount equivalent to the gain on sale of Sotetsu Fresa Inn Shimbashi-Karasumoriguchi from the distributableprofit in FY12/2020 and the amount equivalent to the gain on sale of ibis Tokyo Shinjuku from the distributable profit in FY12/2021 respectively.
(*3) NAV per unit is rounded down to the nearest unit.

3

Refinance

First Half
(result)
Second Half(plan)

2.5 year

A+ (stable)

JPY

25.9BnRating and Investment
Information, Inc. (R&I)

JPY

23.7BnA (stable)

Ⅱ. Operating Forecast for Full Fiscal Year andSummary of Midterm Settlement of Accounts

1. Operating Forecast for Full FY12/2023 (Previous Year's Results vs Revised Forecast)[Reference]

Properties(Unit: JPY MM)

FY12/2022(23rd Period)

FY12/2023(24th Period)

Result(A)

Revised Forecast(B)

Difference from
FY2019 Result

Result(C)%(B)–(C)

Main Factors of Difference fromthe Previous Year's Results%

Fixed Rent

41

43

2

–

43

–

–

Acquisition Price

363,542

373,992

10,4502.9%

374,508(516)(0.1%)

Operating Revenue

14,912

24,92810,01567.2%

28,278(3,349)(11.8%)

14,912

24,92810,01567.2%

28,278(3,349)(11.8%)

42.1%

6,279

58.4% 14,547

8,268

131.7%

56.3%

15,931(1,383)(8.7%)

Other Income

6.6%

986

5.1%

1,272

285

28.9%

4.1%

1,170

101

8.7%

• The Accor Group Hotels(*3)

Variable Rent

51.3%

7,646

36.5%

9,108

1,462

19.1%

39.5%

11,176(2,067)(18.5%)• The Ishin Group Hotels(*3)+JPY93MM

10,963

20,479

9,516

86.8%

24,087(3,607)(15.0%)• Other existing hotels/tenants+JPY440MM

3.0%

5.5%

2.5pt

6.4%

(1.0pt)• 2 properties acquired in 2023

+JPY19MM

4,787

4,986

198

4,557

428

1

1

0

2

(0)

57

112

54

246

(134)

6,116

15,379

9,263

19,281(3,901)

1.7%

4.1%

2.4pt

5.1%

(1.0pt)

1,819

2,091

271

2,132

(41)

Operating Income

4,296

13,2888,991

209.3%

17,148(3,860)(22.5%)

Ordinary Income

2,672

11,4178,744

327.2%

15,291(3,873)(25.3%)

1

1

(0)

1

(0)

Fixed Rent

NOI(*2)NOI Yield
Profit and Loss

(B)–(A)FY12/2019(20th Period)

No. of Properties

Real Estate Operating
Revenue

Depreciation
Asset Retirement
Obligations Expenses
Loss on Retirement ofNoncurrent Assets
NOI after Depreciation(*2)

NOI Yield after
Depreciation
Other Operating
Expenses

Others151.5%+JPY8,030MM• Other existing hotels/tenants(JPY66MM)• 2 properties acquired in 2023(*4)+JPY304MM(Total) +JPY8,268MM
Variable Rent
• The 16 HMJ Hotels(JPY78MM)+JPY987MM※ Difference in total rents by each hotel group vsprevious year's results(JPY MM)(20.2%)

2,671

11,4168,744

327.3%

15,290(3,873)(25.3%)

376

431

54

14.5%

1,176

(745)

(63.4%)

Total Dividends

3,046

11,8468,800

288.9%

16,466(4,619)(28.1%)

Number of Units Issued(Unit)

4,467,006

4,467,006––

4,462,347

4,659

0.1%

Dividend per Unit (JPY)

682

2,652

1,970

288.9%

3,690(1,038)(28.1%)

5• The 16 HMJ Hotels(*3)(Total) +JPY1,462MM

Use of Negative
Goodwill

Net Income

Dividend

Difference fromFY2022 Result

Fixed
Rent

Variable
Rent

Total

+8,030(78)+7,952The Accor Group Hotels

–

+987

+987

The Ishin Group Hotels

–

+93

+93

+8,030+1,001+9,032

The 16 HMJ Hotels(*5)Total(*1) For details, please refer to the Midterm Financial Report for FY12/2023 (hereinafter
called "Midterm Financial Report FY2023"), dated August 24, 2023.
(*2) Each is calculated using the following formula: NOI (Net Operating Income) =Real estate operating revenue − Real estate operating costs + Depreciation +Loss on retirement of noncurrent assets + Asset retirement obligations expenses.
NOI after depreciation = Real estate operating revenue − Real estate operating costs(*3) Please refer to (Note 2) on page 9 for information of The 16 HMJ Hotels, The Accor
Group Hotels and The Ishin Group Hotels. The same shall apply hereinafter.
(*4) The impact in amounts by the acquisition of UAN kanazawa on January 31, 2023 andSotetsu Fresa Inn Shimbashi-Karasumoriguchi on March 24, 2023. The same shallapply hereinafter.
(*5) In the lease contracts with The HMJ Group, rent structures were changed to the fullvariable rent structure from February 2020 to December 2022 due to the COVID-19
pandemic. However, from January 2023, the rent structures were changed to the
fixed rent with variable rent structures as stipulated in the contracts before pandemic.
Please refer to (Note 2) on page 9 for the definition of The HMJ Group.

2. Operating Forecast for Full FY12/2023 (Initial Forecast vs Revised Forecast)

Properties(Unit: JPY MM)

FY12/2023(24th Period)

FY12/2023(24th Period)

Initial Forecast(*1)(A)

Revised Forecast
(B)

%

42

43

1

–

Acquisition Price

365,592

373,992

8,400

2.3%

Real Estate Operating
Revenue
Fixed Rent
Other Income

21,83724,928

3,091

14.2%

21,83724,928

3,091

14.2%

65.6%

14,32758.4%

14,547

220

1.5%

4.6%

1,005

5.1%

1,272

266

29.8%

36.5%

0.6pt

5,018

4,986

(31)

1

1

–

11

112

100

12,624

15,379

2,754

3.5%

4.1%

0.7pt

2,058

2,091

33

Operating Income

10,566

13,2882,721

Ordinary Income

8,629

11,417

2,787

Others1

1(0)

Net Income

8,628

11,416

2,787

32.3%

330

431

100

30.5%

8,956

11,846

2,890

32.3%

4,467,006

4,467,006

–

–

2,005

2,652

647

32.3%

Use of Negative Goodwill
Total Dividends
Number of Units Issued (Unit)
Dividend per Unit (JPY)6• The 16 HMJ Hotels+JPY2,128MM+JPY4MM

5.5%

Other Operating Expenses

Variable Rent

+JPY228MM

4.8%

NOI Yield after Depreciation+JPY220MM• 2 properties acquired in 2023

16.0%

NOI after Depreciation+JPY204MM(Total)+JPY120MM

2,823

(*2)

• 2 properties acquired in 2023

• Other existing hotels/tenants

20,479Asset Retirement Obligations
Expenses
Loss on Retirement ofNoncurrent Assets+JPY15MM• The Ishin Group Hotels

17,656

Depreciation• Other existing hotels/tenants+JPY122MM

40.0%

NOI Yield

Fixed Rent

26.6%

2,604

NOI(*2)6,504

Main Factors of Difference fromthe Initial Forecast• The Accor Group Hotels

9,108

Variable Rent

Profit and Loss

(B)–(A)

No. of Properties

Operating Revenue

Dividend

Variance with Initial Forecast(Total) +JPY2,604MM※ Difference in total rents by each hotel group vsinitial forecast(JPY MM)
Fixed
Rent

Variable
Rent

Total

The 16 HMJ Hotels–+2,128+2,128The Accor Group Hotels

–

+122

+122

25.8%

The Ishin Group Hotels

–

+120

+120

32.3%

Total

–

+2,371+2,731

21.8%(*1) For details of the initial forecast, please refer to "Notice Concerning Operating
Forecast and Forecast of Dividend for FY12/2023 (24th Period)" dated
February 22, 2023.
(*2) Each is calculated using the following formula: NOI (Net Operating Income) =Real estate operating revenue − Real estate operating costs + Depreciation +Loss on retirement of noncurrent assets + Asset retirement obligations
expenses.
NOI after depreciation = Real estate operating revenue − Real estate
operating costs

3. Midterm Results for FY12/2023[Reference]
FY12/2022(23rd Period)

FY12/2023(24th Period)

Midterm Result(A)

Midterm Result(B)(B)–(A)

No. of Properties

41

43

2

–

43

–

–

Acquisition Price

363,542

373,992

10,4502.9%

374,508(516)(0.1%)

5,431

11,2885,856

107.8%

12,719(1,431)(11.3%)

5,431

11,2885,856

107.8%

12,719(1,431)(11.3%)

3,139 64.2%

7,250

4,110

130.9%

59.3%

7,537

(287)

(3.8%)

4.8%

544

115

27.0%

4.5%

576

(32)

(5.6%)

1,863 31.0%

3,494

1,630

87.5%

36.2%

4,606

(1,111)(24.1%)

3,514

9,198

5,684

161.7%

10,679

(1,481)(13.9%)

Properties(Unit: JPY MM)

Operating Revenue
Real Estate Operating
Revenue
Fixed Rent
Other Income

7.9%

Variable Rent

34.3%

NOI(*2)
Profit and Loss

57.8%

428

Difference fromFY2022 Result

FY12/2019(20th Period)

Difference from
FY2019 Result

Midterm Result(C)%(B)–(C)

Main Factors of Difference fromthe Previous Year's Results%

Fixed Rent
• The 16 HMJ Hotels+JPY4,015MM• Other existing hotels/tenants(JPY19MM)• 2 properties acquired in 2023

JPY115MM(Total) +JPY4,110MM
Variable Rent
• The 16 HMJ Hotels+JPY634MM• The Accor Group Hotels+JPY534MM• The Ishin Group Hotels+JPY59MM

2,312

2,440

128

2,165

275

• Other existing hotels/tenants+JPY395MM

Asset Retirement
Obligations Expenses

0

0

0

1

(0)

• 2 properties acquired in 2023

+JPY6MM

Loss on Retirement ofNoncurrent Assets

0

17

16

218

(201)

1,200

6,739

5,539

8,294

(1,554)

Other Operating
Expenses

876

979

102

1,001

(21)

Operating Income

323

5,759

5,436

7,293

(1,533)Non-operating Income

12

5

(6)

9

(4)

Non-operating Expenses

807

868

61

948

(80)

Ordinary Income

(470)

4,897

5,368

–

6,354

(1,456)(22.9%)Net Income

(471)

4,896

5,368

–

6,353

(1,456)(22.9%)

Depreciation

NOI after
Depreciation(*2)

461.3%–

7(Total) +JPY1,630MM(18.7%)(21.0%)(*1) For details, please refer to Midterm Financial Report FY2023.
(*2) Each is calculated using the following formula: NOI (Net Operating Income) =Real estate operating revenue − Real estate operating costs + Depreciation +Loss on retirement of noncurrent assets + Asset retirement obligations
expenses.
NOI after depreciation = Real estate operating revenue − Real estate
operating costs

Ⅲ. Status of Hotel Operations

1. Performance of The 25 Hotels with Variable Rent, etc. (1) Expect ADR-driven RevPAR recovery through ADR-focused sales strategy and revenue management

Performance and Forecast of Major Indicators (Rooms Department)(*1)
Occupancy (right axis)

Total of The 25 Hotels with Variable Rent, etc.(*2)(JPY)
20,00015,55515,00010,0005,000
0

vs 2019First Half

16,618

(JPY)
100%

6,063

12,628

85.4%

55.8%

76.0%

2019
Result2022
Result2023
ResultOccupancy(34.7%)(11.0%)

ADR(30.1%)+6.8%

RevPAR(54.4%)(5.0%)

50%(JPY)

17,084

0%

5,000
0

vs 2019

18,753

14,676

6,716

0

vs 2019

Second Half
15,01818,771(JPY)
100%

25,00020,00014,243

85.9%

54.6%

76.0%

2019
Result2022
Result2023
ResultOccupancy(36.4%)(11.6%)

ADR(28.1%)+9.8%

RevPAR(54.2%)(2.9%)

50%

15,00010,000
5,000

0%

0

vs 2019

20,00016,33415,00015,563

14,918
11,140
87.3%

74.2%

82.9%

2019
Result2022
Result2023
Revised Forecast

Occupancy(15.0%)(5.0%)

ADR(12.1%)+9.9%

RevPAR(25.3%)+4.3%

Second Half

(JPY)
100%

12,292

15,00010,000First Half

10,0005,000

The 16 HMJ Hotels

20,00017,084

RevPAR (left axis)

15,00010,872
13,28620,000ADR (left axis)

19,015

17,192

21,293

10,000
5,000

0%

0

vs 2019

25,00050%

12,625
88.4%

73.4%

82.8%

2019
Result2022
Result2023
Revised Forecast

Occupancy(16.9%)(6.3%)

ADR(9.6%)+12.0%

RevPAR(24.9%)

+4.9%

100%

14,107

50%

8,623
86.4%

65.1%

79.5%

2019
Result2022
Result2023
Revised Forecast

Occupancy(24.7%)(8.0%)

ADR(18.8%)+8.7%

RevPAR(38.9%)(0.0%)

Full Year
18,071

10,000

0

vs 20190%

20,088100%

15,95350%

15,121

15,0005,000
0%17,75013,255

14,109(JPY)
100%

20,00017,635

16,80950%

Full Year

15,751
87.2%

9,694
64.1%

79.4%

2019
Result2022
Result2023
Revised Forecast

Occupancy(26.4%)(8.9%)

ADR(16.3%)+11.2%

RevPAR(38.5%)+1.3%

0%(*1) The "Revised Forecast for FY2023" refers to “Operating forecast for the full FY12/2023 (24th Period)" stated in the Midterm Financial Report for FY2023. For details of "Results for FY2023 (first half)" and "Revised Forecast for FY2023," please refer tothe Midterm Financial Report for FY2023. The same shall apply to page 9 to 11.
(*2) The 25 Hotels with Variable Rent, etc. are the following hotels: 5 hotels of Kobe Meriken Park Oriental Hotel, Oriental Hotel Tokyo Bay, Namba Oriental Hotel, Hotel Nikko Alivila, and Oriental Hotel Hiroshima ("The Five HMJ Hotels") which is leasedby Hotel Management Japan Co., Ltd. ("HMJ"), plus 11 hotels of Oriental Hotel Okinawa 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, Hilton Tokyo Odaiba, Hotel Oriental Express Fukuoka Tenjin and Oriental Hotel Universal City which are leased bygroup company of HMJ (Together with HMJ, "The HMJ Group") (Together with The Five HMJ Hotels, "The 16 HMJ Hotels"), plus 4 hotels of the b ikebukuro, the b hachioji, the b hakata, and the b suidobashi ("The Ishin Group Hotels") and 5 hotels of
ibis Styles Kyoto Station, ibis Styles Sapporo, Mercure Sapporo, Mercure Okinawa Naha, and Mercure Yokosuka ("The Accor Group Hotels"). The same shall apply hereinafter.

91. Performance of The 25 Hotels with Variable Rent, etc. (2) Expect GOP improvement through sales increase and cost management

Sales/Performance and Forecast of GOP
Rooms Dept.

Food & Beverage Dept.

Total of The 25 Hotels with Variable Rent, etc.
2019
Result(JPY MM)

2022
Result2023
Revised Forecast

50,00050,00020,447

2022
Result39,10040,00040,0003,217

indicate GOP ratio (vs sales)

2023
Revised Forecast

37,09537,066

19,060

Sales

GOP

2,692

19,348

Sales

GOP

33.1%
Sales

12,723
16,78031,21730,7850

GOP

18,970 7,757

0

34.3%
Sales

GOP

22.3%
Sales

GOP

33.0%
Sales

GOP

＜Ratio of Increase/Decrease vs 2019＞＜Ratio of Increase/Decrease vs 2019＞2022 Result

18,47910,00010,00022.7%

16,95334,752
3,059

20,00020,00022,673 8,874
35.3%

50,862

3,807

30,00030,00013,21010,00010,00053,941

17,69821,697060,00060,0002,853

30,00030,0000

2019
Result(JPY MM)

57,645

3,958

40,00040,00020,00020,000* Figures in

70,00070,00061,47150,00050,000GOP

The 16 HMJ Hotels

70,00070,00060,00060,000

Others2022 Result

2023 Revised Forecast

2023 Revised Forecast

Total Sales(36.4%)(6.2%)

Total Sales(35.6%)(5.7%)

Rooms Dept.

(38.8%)+0.1%

Rooms Dept.

(38.4%)+1.4%

Food & Beverage Dept.

(35.4%)(13.4%)

Food & Beverage Dept.

(34.2%)(12.4%)

Others(18.7%)(27.9%)

Others(19.6%)(29.3%)

GOP(59.1%)(12.2%)

GOP(58.0%)(9.2%)

10

2. Revised Forecast vs Initial Forecast for FY2023
 Expect Sales and GOP to exceed initial forecast and GOP ratio's significant improvement

Sales(*)
Rooms Dept.

GOP(*)

Food & Beverage Dept.

Others* Figures in

Total of The 25 Hotels with Variable Rent, etc.
(JPY MM)First Half

Second Half

60,00050,000

+1.2%

+5.5%

40,00026,221

30,00024,85920,000

1,348
7,845

1,484
8,272

15,666

16,465

02023
Result2023
InitialForecast

The 16 HMJ Hotels(JPY MM)First Half

31,06331,424

1,421
9,504

1,369
9,426

20,138

20,6292023
InitialForecast

2023
Revised
Forecast

Second Half

2,769

2,853

17,34917,69835,8042023
InitialForecast

49,41750,00040,000

+1.0%

+5.3%

27,45827,740

1,347
9,139

1,289
9,055

30,00021,95923,12220,000

1,277
7,531

1,403
7,898

13,152

13,821

16,972

17,3962023
InitialForecast

2023
Result2023
InitialForecast

2023
Revised
Forecast

0

5,000
0

(JPY MM)
20,00050,862

2,623

2,692

16,67016,95330,124

31,2172023
InitialForecast

2023
Revised
Forecast

Full Year
+16.3%
19,06015,0002023
Revised
Forecast+2.9%

60,000

Second Half

20,00037,095Full YearFirst Half

25,00010,00070,00010,000(JPY MM)+3.1%
57,64555,92370,00010,000

Full Year

indicate GOP ratio (vs sales)

16,390+9.2%+27.4%
6,407

8,164

10,896

9,983

25.8%

31.1%

32.1%

34.7%

29.3%

33.1%

2023
InitialForecast

2023
Result2023
InitialForecast

2023
Revised
Forecast

2023
InitialForecast

2023
Revised
Forecast

First Half

Second Half

Full Year
+16.7%
16,78015,00010,0005,000

014,372+9.6%+28.0%

5,600

7,166

8,772

9,614

25.5%

31.0%

31.9%

34.7%

29.1%

33.0%

2023
InitialForecast

2023
Result2023
InitialForecast

2023
Revised
Forecast

2023
InitialForecast

2023
Revised
Forecast(*) For details of the "Initial Forecast for FY2023", please refer to "Notice Concerning Operating Forecast and Forecast of Dividend for FY12/2023 (24th Period)" dated February 22, 2023.

11

3. Internal Growth by Active Asset Management Realize upside potential through Active Asset Management

Active Asset Management

Hotels1
Increase sales byimprovement ofhotel management

Increase of
Hotel Sales

Reduction of
Operating Costs
of Hotels

2
Review of cost by
restructuring

Stimulate and acquire leisure demand through the creation ofunique attractiveness of each hotel and highly competitive
products
Aim to improve hotel management through changes in hotel
operator, rebranding, and upgrades, etc. in order to increase
hotel sales
Review the various costs and improve the revenue structure
Aim to maximize GOP through efficient management

 Initiatives by The HMJ Groupto improve sales
 Rebranding and Renovation

 Restructuring by The HMJ Group

Improve GOP

REIT

3
Increase ofReal Estate
Operating
Revenue
Reduction ofReal Estate
Operating Costs

Revision in rent
structure, etc.

Aim to increase the rent that JHR receives by raising the rent
burden ratio at the time of rebranding and other measures

 Changed rent structure byrebranding Introduction of variable rent at
the time of lease contract revision

Reduction of costs for property management, trust, management contract fee, and ground rent, etc.

Improve NOI

Maximize DPU
12

4. Active Asset Management through Collaboration with HMJ
 JHR is among the first hotel investors to implement restructuring plans centered on cost reductions at The HMJ Group, a strategic operator
 Pursuing strategic initiatives aimed at significant growth during the market recovery period to maximize JHR's portfolio advantages(high-priced, full-service, resort features)

2020

Restructuring

Rebranding/Renovation

Improvement of Sales

 Agreed in August 2020 to execute restructuring
plans in line with a change in the lease contract
with The HMJ Group 3 hotels described below were rebranded to The HMJ Group Aim to improve the rent burden ratio through the revisionof the rent structure, and improve ADR through revenue
management, renovation, etc.
 Aggressively implement CAPEX within depreciation cost

 Began initiatives to recover and improve sales
earlier than its competitors, with The HMJ Group's
financial position improved through restructuring

Major Rebranding/Renovation (2021–2022)

Sales Improvement Plans in Progress Achieved cost reduction plans by the end of2022

Cost Reduction Initiatives
Personnel costs

2021

2022

Rebranding

Rebranding

Outsourcing costs

Oriental Hotel Okinawa Resort & Spa• Review of specifications of outsourced
operation, the unification of standards,
etc.
• Insourcing of operations outsourced

Create attractive products throughutilizing the hotel's character andsuperiority

Hotel Oriental Express Fukuoka
Tenjin• Streamlining, cutback and closure of
unprofitable divisions(s)• Streamlining through integration of backoffices and common operations• Introduction of Smart Check-in system• Promotion of operational efficiency byincreasing the number of multitasking
employees• Staff reductions through the abovemeasures and further promotion ofoperational streamlining

former HOTEL ASCENT FUKUOKA/Jun. 2021
• Realized growth of ADR through upgrade of
hotel grade from economy to mid-price１

Oriental Hotel Universal City

former Hotel Keihan Universal City/Dec. 2021
• Completed the rebranding and the renovationsof the entire building, including 330 guest rooms
and establishment of new premium twin rooms

Experience-oriented programs toencourage guest to explore various
attractions in hotel facilities andsurrounding areas• "Regional Co-creation Program" throughalliance with local communities andenterprises•

Strengthen Hotel Superiority
through Active Asset Management

Rebranding•

Project to make hotel breakfast more
attractive•

Establishment of amenity baseRenovation•

A wider suite of welcome services• Upgrade of some existing rooms to executive
rooms and the opening of a new Executive
Lounge• Renovations of executive rooms

Sales & promotion strategy focusedon increasing unit priceformer Okinawa Marriott Resort & Spa/Oct. 2021
• In addition to rebranding, renovations of hotel
lobby, swimming pool and guest rooms on two
club floors were completed

2

Kobe Meriken Park Oriental Hotel

Achieve the planned cost reductions
and remain focused on cost control

2023
From 2023, the lease contracts withThe HMJ Group will readopt theoriginal rent structure.

Aggressively promote strategic CAPEX investmentsfrom 2023
 Kobe Meriken Park Oriental Hotel(guest rooms/restaurant) Oriental Hotel Tokyo Bay (guest rooms/restaurant) Oriental Hotel Okinawa Resort & Spa (guest rooms)

13

3

•

Multi-directional sales within Japan andlocations where guests depart•Strengthening of approaches to high-unit
price markets and promoting the further
development of the market

5. Rebranding and Renovation
 Achieved ADR well above 2019 levels through hotel rebranding and renovations
Rebranded Hotels
NameRenovated Hotel(former HOTEL ASCENT FUKUOKA)(former Hotel Keihan Universal City)

Oriental Hotel Universal City

Oriental Hotel Okinawa Resort & Spa

June 2021

July 2021

October 2021

Hotel Oriental Express Fukuoka Tenjin(former Okinawa Marriott Resort & Spa)

Kobe Meriken Park Oriental Hotel

Exterior
Appearance

Opening Date after
Rebranding

Major Changes/
UpgradesScope of
Renovations

ADR Actual(vs. 2019)－• Changed the lessee to The HMJ Group • With the expiration of the franchise• Upgraded of hotel grade from
• Built a new executive lounge andagreement(*1) with the Marriott Group,
economy to mid-priceand changed the rent structure fromupgraded some existing guest rooms"fixed rent + revenue sharing" to• Changed the lessee to The HMJ Groupthe hotel was rebranded as "Oriental
to executive rooms
and changed the rent structure from"fixed rent + variable rent"
Hotel" under The HMJ Group"fixed rent" to "fixed rent + variable
rent"• The entire hotel building(Completed in June 2021)• The entire hotel building(Completed in July 2022)• Hotel lobby, swimming pool
• Newly established an executive lounge(Completed in March 2022)(Completed in July 2021)• Club lounge and two floors of guest• Renovation of executive rooms
rooms (Completed in December 2022)(Completed in July 2022)(Lobby)(Hotel entrance)(Swimming pool)(Guest room)(Lobby)(Club lounge)(Before renovation)(After renovation)

Jan. – Jul.
2019

Jan. – Jul.
2023

Jan. – Jul.
2019

Jan. – Jul.
2023

Jan. – Jul.
2019

Jan. – Jul.
2023

Jan. – Jul.
2019

Jan. – Jul.
2023

JPY7,160

JPY10,447

JPY17,807

JPY25,112

JPY20,327

JPY24,152

JPY32,415(*2)

JPY47,097(*2)(+45.9%)(+41.0%)(+18.8%)(+45.3%)(*1) The franchise agreement with the Marriott Group is an agreement between the hotel operator and Global Hospitality Licensing S.a r.l., the franchisor of the international brand "Marriott."(*2) ADR results of Kobe Meriken Park Oriental Hotel are as follows (1) for January to July 2019: ADR of 29 rooms, which were upgraded to executive rooms, (2) for January to July 2023: 33 rooms include additional
4 rooms which were converted from bride and groom waiting rooms to executive rooms.

14

6. Renovation Plans
 Implement renovations sequentially to increase sales of guest rooms and restaurants through strategic CAPEX(*)

Guest Room Renovation

Restaurant Renovation• Renovate Grand Cinq, the hotel's main restaurant, to create ahigher-grade feeling and improve work efficiency• Separate toilet, wash basin and bath tab in prefabricatedbathroom combination to improve merchantability※ Example of Renovation(Oriental Deluxe)

Oriental HotelTokyo Bay
(2023–2025)(Image after renovation)(After renovation)

Oriental HotelTokyo Bay
(Oct. 2023)(Before renovation)• Establish guest rooms with lounge access along with therenovation

Kobe
Meriken Park
Oriental Hotel(2023–2026)※ Example of Renovation(Twin room)

Kobe
Meriken Park
Oriental Hotel(Sep.–Dec.
2023)(After renovation)(Before renovation)

Oriental Hotel
Okinawa
Resort & Spa(2023–2024)• Enhances the restaurant's appeal with the layout that takes
advantage of its unique location surrounded by the sea andarranging a live feeling(Image after renovation)(Before renovation)

 Measures with intangible services• After rebranding, implement renovation of all unrenovated guest
rooms sequentially※ Example of Renovation(Corner guest room)(Before renovation)• Enhance dining quality and entertainment by strengthening the lineup of
the signature menus, which are cooked and served in front of the guests(After renovation)(Before renovation)

Roast beef carved
in front of the guests(*) The renovation plan for 2024 and beyond has not been institutionally determined by JHR and is subject to change in the future.

15

Dressing freshly boiled pasta on
Parmigiano cheese

Fluffy Mont Blanc chestnut cakefreshly prepared and servedin front of the guests

7. Capital Expenditure (CAPEX) and Depreciation
 Appropriate CAPEX within depreciation
 CAPEX Ⅲ to be implemented in FY12/2023(JPY MM)
5,000

4,557
Depreciation
4,000

3,000

3,725

2,898
469

2,000

4,091

475

476

4,986
4,848

4,497
1,172

Oriental Hotel Fukuoka
Hakata Station
Cost for large-scalerenovation works

393 3,147

3,367

830

999

1,798

2,226
1,456

3,197
2,536

2,868

Restaurant renovation(Buffet-style restaurant
Santa Monica's Wind)

JPY110MM

Renewal of guest room interiors(11th and 12th floors)
Restaurant renovation(Buffet-style restaurant
Grand Cinq)

JPY315MM
JPY63MM

Total

JPY472MM
JPY1,172MM※ The Definition of CAPEX
capital investment related to renewal ofbuildings, facilities, and equipment
CAPEX Ⅰ
which is required to maintain proper
values of properties

1,328

CAPEX Ⅱ

0

Asset Size(*)(JPY MM)JPY212MM

Renewal of guest room interiors(8th to 13th floors)

1,665

1,954

Renewal of guest room interiors(12th and 13th floors)

Oriental Hotel Okinawa Resort & Spa

1,690

781

Kobe Meriken Park Oriental Hotel

Oriental Hotel Tokyo Bay

1,300
807

100
237
1,000

4,787

6,766
3,619

3,056

4,761

4,804

319,474309,370

374,508

370,031363,542

363,542

373,992

FY12/2017

FY12/2018

FY12/2019

FY12/2020

FY12/2021

FY12/2022

FY12/2023(forecast)strategic capital investment for renewalsof guest rooms, banquet rooms,
CAPEX Ⅲ restaurant and others in order tomaintain or to improve thecompetitiveness of the hotels(*) Asset size is based on the aggregate acquisition price of the properties at the end of each fiscal period. The same shall apply hereinafter.

16

capital investment for fixtures, furnitureand equipment that are not directly
related to building structures or facilities
but necessary for operating hotels

8. Acquisition of Property in 2023
 JHR made its first property acquisition since the COVID-19 pandemic using cash on hand
 Stability is secured by fixed rent. Pursue upside potential through variable rents linked to sales

Sotetsu Fresa Inn Shimbashi-Karasumoriguchi

UAN kanazawa• Excellent location with easy access to many tourist
attractions such as Kenrokuen Garden and 21st Century
Museum of Contemporary Art, Kanazawa• Located in the center of Tokyo, with excellent transportation
accessibility. The property belongs to a market expected to
grow further with the redevelopment of the surrounding area

• All rooms are double or twin with an average room size ofmore than 30 square meters, which is particularly suitablefor capturing the leisure demand of inbound visitors• Mainly single/double rooms suitable for business and leisuredemand in line with the characteristics of the Shimbashi area
• The hotel's rent structure can secure stability by fixed rent
and can expect upside through variable rent linked to its
sales of accommodation• The hotel's rent structure can secure stability by fixed rent
and can expect upside through variable rent linked to its
sales of accommodation
Acquisition Date

January 31, 2023

Acquisition Price

JPY2,050MM

Appraisal Value

JPY2,140MM

Hotel Type

Limited-service

Grade

Upper-middle

Location

Kanazawa city, Ishikawa

Acreage of Land2023 Forecast(annualized)(*1)
Fixed Rent

JPY108MM

Variable Rent(*2)

JPY19MM

Rent

NOI

JPY115MM

729.91 sqm

Total Floor AreaSpace

2,606.85 sqm

Structure andStories

S with flat roof, 6 stories
above ground

Completion

September 2017

No. of Guest
Rooms

47

Rent Structure

Fixed rent + Revenue sharing

Hotel Lessee

Solare Hotels and Resorts Co.,Ltd.

NOI Yield

5.6%

NOI Yield after
Depreciation

4.6%(*1) Annualized figures for the property in therevenue forecast for FY12/2023.
(*2) In case room sales exceeds base amount(JPY270MM), the amount arrived bymultiplying 30% to the exceeded amount.

17

Acquisition Date

March 24, 2023

Acquisition Price

JPY8,400MM

Appraisal Value

JPY10,100MM

Hotel Type

Limited-service

GradeMid-price

Location

Minatoku-ku, Tokyo

Acreage of Land(*3)

759.01 sqm

Total Floor AreaSpace

5,476.39 sqm

2023 Forecast(annualized)(*4)
Fixed Rent(*5)

JPY277MM

Variable Rent(*6)

JPY69MM

Rent

NOINOI Yield

JPY309MM
3.7%

Structure andStoriesNOI Yield after
3.4%
S/SRC with flat roof, 16 floors
Depreciation
above ground and 1 basementfloor(*3) Comprised of owned land and land leased

Completion

March 2008

No. of Guest
Rooms

220

Rent Structure

Fixed rent + Revenue sharing

Hotel Lessee

Sotetsu Hotel Development
Co., Ltd.

for use. The total area of JHR's owned
land and land leased for use is shown.
(*4) Annualized figures related to the property
in revenue forecast for FY12/2023.
(*5) Includes non-hotel tenant rents andexcludes other income (utilities income,etc.).
(*6) In addition to the fixed rent, revenue
sharing will be charged if certain
conditions are met.

9. ESG Initiatives
 JHR formulated the policy on sustainability in December 2017. Aiming for medium to long-term growth in harmony and coexistencewith society and the environment, JHR implements initiatives to improve sustainability through appropriate responses to ESG issues

Timeline of Achievements

GRESB Real Estate Assessment(*5)
Acquired "Green Star" for five consecutive years from 20182017  Establishment of Sustainability Policy
2018  Two properties—
Hotel Nikko Alivila and
Mercure Okinawa Naha—acquired BELS(*1)
certification▶ In 2022, JHR was selected for"Sector Leader" inAsian hotel sector

Hotel Nikko Alivila

Mercure Okinawa Naha

▶ Acquired "4-star"in GRESB Rating Received an "A" rating indicating excellent environmentallyfriendly management, in the SMBC Environmental
Assessment Loan(*2)

Establishment of GHG Reduction Targets

2019  Issued Hotel Green Bonds (nickname)and used the procured funds to carryout construction works to save energy

30% reduction of GHG emissions per floor area
Oriental Hotel
Fukuoka Hakata Station

Okinawa Marriott
Resort & Spa

2020  Hilton Tokyo Odaiba acquired a CASBEE(*3)"B+ (good)" building certification(GHG emissions intensity)(*6) by 2050
(compared to FY2017(*7))

ESG Disclosure Information on JHR Website
https://www.jhrth.co.jp/en/esg/index.html

Hilton Tokyo Odaiba※ ESG report was published at the end of March 2023

2021  Oriental Hotel Fukuoka Hakata Stationacquired CASBEE "B+ (good)" building
certification
 Identified JHR's seven materialities
related to ESG (key issues)

for three consecutive years

Oriental Hotel
Fukuoka Hakata Station

 JHRA expressed its support for the TCFD(*4) recommendations
2022  Released Initiatives for Four Disclosure themes recommended by TCFD
2023  Established GHG reduction targets

18(*1) BELS (Building-Housing Energy-efficiency Labeling System) is a display system of energy conservation
performance of a building set by Ministry of Land, Infrastructure, Transport and Tourism.
(*2) "SMBC Environmental Assessment Loan" is a loan in which of companies SMBC sets the conditions based on
assessment of the status of environmental considerations based on environmental assessment standards
developed independently by SMBC and the Japan Research Institute, Limited.
(*3) CASBEE (Comprehensive Assessment System for Built Environment Efficiency) is a method for evaluating andrating the environmental performance of buildings. It is a system that comprehensively evaluates the quality of abuilding, including environmental considerations such as energy conservation, use of materials and equipmentwith low environmental impact, as well as indoor comfort and landscaping.
(*4) TCFD is an abbreviation for Task Force on Climate-related Financial Disclosures.
(*5) The GRESB is an annual benchmarking program to evaluate ESG considerations of property companies and realestate funds. The GRESB Real Estate Assessment is distinguished by its comprehensive evaluation of initiatives forsustainability of property companies, REITs and real estate funds, not of individual properties. GRESB rating is arelative evaluation based on comprehensive scores and the highest ranks is "5-star."(*6) Properties owned by JHR are managed by hotel lessees, etc. GHG emissions of JHR fall under Scope 3, Category
13, Leased Assets (Downstream).
(*7) The GHG emissions (GHG emissions intensity) for FY2017 (Baseline fiscal year, April 2017–March 2018) is 0.135(t-CO2/m2).

Ⅳ. Financial Conditions

1. Financial Conditions (1)Main Financial Indicators

Repayment Schedule of Interest-bearing Debt

(as of the end of June 2023)

LTV (total asset base)

41.4%

Cost for interest-bearing debt(*1)

1.0%

Average life of interest-bearing debt(*2)
Free cash(*3)(as of the end of June 2023)(JPY MM)

30,0002.5 years

20,00011.8Bn10,000JPY

Unrealized gain

JPY

0Changes in Costs for Interest-bearing Debt(*1) and
Average Life of Interest-bearing Debt(*2)
Average Life of Debt
2.0%

Costs for Interest-bearing Debt

3.5

1.0%

1.0%

1.0%

1.0%

0.5%
0.0%

(year)

5.0

4.3

1.5%

2.8

2.5

1.0%

1.0%

4.0
3.0
2.0
1.0

End of

End of

End of

End of

End of June 2023

FY12/2019

FY12/2020

FY12/2021

FY12/2022(Midterm of(20th Period)(21st Period)(22nd Period)(23rd Period)

24th Period)

Investment Corporation Bonds

29,00023,76221,80037,08923,7622,800

24,58010,00013,10019,000

2023

2024

2025

2026

17,00017,00019,000

8,000
8,000

2027

2028

2029

Refinancing Result and Schedule in 2023
6.0

5.2

Loans

3,000

11,480127.9Bn(*4)

40,08940,000

0.0

Repayment Date

Balance

Full Year(plan)

JPY49,745MMFirst Half(*5)(result)

JPY25,983MM

Second Half(plan)

JPY23,762MM(*1) Weighted-average costs for interest-bearing debt (including up-front fee, etc.) as of the end of each period/year.
Rounded off to one decimal place.
(*2) Average life of interest-bearing debt as of the end of each period/year.
(*3) Represent the balance of cash and deposits, excluding various reserves in trust, etc.
(*4) Unrealized gains are calculated by subtracting book value from appraisal value. The same shall apply hereinafter.
(*5) In addition, loans in amount of JPY800 million were prepaid on January 31, 2023.

20

1. Financial Conditions (2)Lender List for Interest-bearing Debt

Breakdown of Interest-bearing Debt
(as of the end of June 2023)(Unit: JPY MM)
Lenders/Bond Name
Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
SBI Shinsei Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Resona Bank, Limited
Development Bank of Japan Inc.
Fukuoka Bank, Ltd.
The Nomura Trust and Banking Co., Ltd.
Aozora Bank, Ltd.
The Chiba Bank, Ltd.
MUFG Bank, Ltd.
The Nishi-Nippon City Bank, Ltd.
Hiroshima Bank, Ltd.
The Minato Bank, Ltd.
The Tokyo Star Bank, Limited
Sompo Japan Insurance Inc.
The Shizuoka Bank, Ltd.
Kansai Mirai Bank, Limited
The Hokuriku Bank, Ltd.

Investment Corporation Bonds

Total of Bank Loans
Investment Corporation Bonds(for institutional investors)
6th Investment Corporation Bonds without Collateral
8th Investment Corporation Bonds without Collateral
9th Investment Corporation Bonds without Collateral
12th Investment Corporation Bonds without Collateral
13th Investment Corporation Bonds without Collateral
Total of Investment Corporation Bonds(for institutional investors)
Investment Corporation Bonds (for individual
investors)
7th Investment Corporation Bonds without Collateral
10th Investment Corporation Bonds without Collateral
11th Investment Corporation Bonds without Collateral
Total of Investment Corporation Bonds(for individual investors)
Total of Investment Corporation Bonds

Total of Interest-bearing Debt

Balance(as of the end of
December 2022)
Balance%

33,23819,81818,55814,143
9,982
6,034
4,636
4,548
3,352
2,732
2,700
2,684
1,854
1,000
–
1,464
588
–
–
127,331

Balance(as of the end ofJune 2023)
Balance%20.2%
32,80512.1%
19,658
11.3%
18,558
8.6%
14,029
6.1%
9,965
3.7%
5,985
2.8%
4,636
2.8%
4,160
2.0%
3,352
1.7%
2,732
1.6%
2,700
1.6%
2,500
1.1%
1,854
0.6%
1,026
–
1,000
0.9%
1,000
0.4%
571
–
500
–
300
77.5% 127,331

20.0%
12.0%
11.3%
8.5%
6.1%
3.6%
2.8%
2.5%
2.0%
1.7%
1.6%
1.5%
1.1%
0.6%
0.6%
0.6%
0.3%
0.3%
0.2%
77.5%

Variance

21.4%

22.5%

(433)
(160)
–
(114)
(17)
(49)
–
(388)
–
–
–
(184)
–
26
1,000
(464)
(17)
500
300
–

26.0%

12.0%
74.0%

66.7%

77.5%

Short-term

Loans
Investment
Corporation Bonds

Long-termLong-term(scheduled repayment
within one year)

Fixed Interest Rate
Variable Interest Rate(*) Long-term represents debts with original maturity over one year, and short-term represents debts
with original maturity within one year.

Changes in LTV
LTV (total asset base)
50%

40.6%

Appraised LTV

42.2%

41.8%

41.4%

41.4%

34.2%

33.9%

34.0%

33.2%
End of June 2023

40%
30%

32.1%

3,000
1,100
1,000
2,000
2,800

1.8%
0.7%
0.6%
1.2%
1.7%

3,000
1,100
1,000
2,000
2,800

1.8%
0.7%
0.6%
1.2%
1.7%

–
–
–
–
–

9,900

6.0%

9,900

6.0%

–

9,000
10,000
8,000

5.5%
6.1%
4.9%

9,000
10,000
8,000

5.5%
6.1%
4.9%

–
–
–

Japan Credit Rating Agency, Ltd.
(JCR)

A+

(negative → stable)

27,00016.4%

27,000

16.4%

–
–
–

A

(negative → stable)

36,90022.5% 36,900
22.5%
164,231 100.0% 164,231 100.0%

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

20%

End of

End of

End of

End of

FY12/2019

FY12/2020

FY12/2021

FY12/2022(Midterm of(20th Period)(21st Period)(22nd Period)(23rd Period)

24th Period)

Status of Credit Rating

21* Changed on March 14, 2023
* Changed on April 11, 2023

1. Financial Conditions (3)Changes in Appraisal Value (Unrealized Gains)(JPY Bn)
500
400

Book Value
Unrealized Gains
439.3 437.5
398.7
113.8

300

122.1

525.9
151.5

493.3
126.5

130.7

485.4
127.1

Changes in Appraisal Value

483.1

495.2

125.0

127.9

Appraisal(*1)
No. of Acquisition
Price
Property(*2)(JPY MM)End of June
2023

200

284.9

100

317.2

306.7

374.3

366.7

358.3

End ofDecember2022
End ofDecember
2021
End ofDecember2020
End ofDecember
2019

367.3

358.0

0

Ratio of
Unrealized
Gains
No. ofProperties

39.9%

38.5%

42.6%

40.5%

34.5%

35.5%

34.9%

34.8%

41

44

41

43

42

41

41

43

FY12/2016 FY12/2017 FY12/2018 FY12/2019 FY12/2020 FY12/2021
FY12/2022(17th Period) (18th Period) (19th Period) (20th Period) (21st Period) (22nd Period) (23rd Period)

Appraisal
Value(JPY MM)

Variance
Variance ofAppraisal CAP Rate of Cap
(*3)
Rate
Value
(*3)

Net Cash Varianceof NetFlow(JPY MM) Cash Flow
(*3)

41

363,542

483,040(0.0%)

4.5%(0.0pt)21,861(0.2%)

41

363,542

483,110(0.5%)

4.5%(0.0pt)21,897(1.2%)

41

363,542

485,480

+0.4%

4.6%

(0.0pt)22,158+0.0%

41362,465

483,430(4.6%)

4.6%+0.0pt22,151(2.3%)

41

362,465

506,760

–

4.5%

–

22,682–(*1) Based on the appraisal report at each period.
(*2) These figures are for 41 properties, excluding UAN kanazawa and Sotetsu Fresa Inn Shimbashi-Karasumoriguchi,
from the 43 properties owned by JHR as of June 30, 2023.
(*3) Cap rate, variance of cap rate and net cash flow are rounded off.

End ofJune 2023(Midterm of
24th Period)

Negative Goodwill<Policy for Use of Negative Goodwill>＜Amount planned to be used in FY12/2023＞

1. Add JPY262 million (50-year amortization amount ofnegative goodwill) to dividends every fiscal year
2. In addition to above, dividends will be increased in
response to the following
•
•
•
•
•

Cope with loss on sales caused by property dispositions
Cope with loss on retirement of noncurrent assets
Cope with dilution of dividend per unit
Cope with inconsistency between tax and accounting treatments(Amortization of fixed-term leasehold of land, amortization ofasset retirement obligations, etc.)
Cope with suspension of sales and such due to large-scalerenovation works with significant impact on revenues

50-year amortization amount on negative goodwill :JPY262MM

Cope with loss on retirement of noncurrent assets :JPY112MM

Amortization of trademark rights:

JPY56MM

Total amount:

JPY431MM

Estimated Balance of Negative Goodwill
after the end of December 2023(*4)

JPY9,169MM(*4) The amount after deducting the amount appropriated to dividend payment for FY12/2023 from the balance at theend of the period.

22

Ⅴ. Market Environment

1. Status of Domestic Accommodation Demand Domestic accommodation demand remains at roughly the same level as in 2019 from October 2022 onwards

Changes in Number of Overnight Guests in Japan (by calendar year)(Guest nights in millions)
600
500
No. of Inbound Overnight Guests
No. of Japanese Overnight Guests

400

492

510

538

69

80

94

596
116
332

300

480

444

430

423

200
100
0

* Ratio of Japanese overnight guests

20

318
4

311

313

450
17
272
47

434

225

2016

2017

2018

2019

2020

2021

2022

1H 2023

85.9%

84.4%

82.5%

80.6%

93.9%

98.6%

96.3%

82.7%

Trend of Number of Japanese Overnight Guests in Domestic Accommodation Facilities (by month)(Guest nights in millions)60

No. of Japanese Overnight Guests

108%
103%

102%

50

87%

20
10
0

90%

36

35

59%

57%
43%

25

27%

28

65%
34

28

37

51% 51%
29

16

56%

49%

29
22

17

18

57% 55%

54%

20

20

83%

80%

72%

27

23

21%
11

53%

90%
78%

70%

40
30

vs 20193732

31

79% 82%

87%

92%

86%
46

66%

39

96%

120%
109%
105%
103% 104%
102%
104%
100%
97%
95%
91%
100%

33

32

36

39

39

42

42

33

43

41
33

35

40
36

80%
37

28

40%

23

22

20%

9

Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun.
2020

60%

2021

2022

Source: Statistics of Overnight Travel by Japan Tourism Agency(*) Rounded off to the nearest millions of overnight guests. Numbers for January to May 2023 are second preliminary figure, numbers for June 2023 are first preliminary figure.

24

2023

0%

2. Status of Inbound Visitors
 The number of Inbound visitors has increased since entry restrictions were significantly eased in October 2022
 In July 2023, the total number of inbound visitors recovered to 77.6% compared to the same month in 2019. Expect further recovery with theeasing of travel restrictions in China

Changes in Number of Inbound Visitors
Number of International Visitors to Japan(Thousands people)
3,000

vs 2019120%

77.6% 100%

2,000

80%

1,500

60%

1,000

40%

500

20%

0

0%

Jan.
Feb.
Mar.
Apr.
May
Jun.
Jul.
Aug.
Sep.
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
Apr.
May
Jun.
Jul.
Aug.
Sep.
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
Apr.
May
Jun.
Jul.
Aug.
Sep.
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
Apr.
May
Jun.
Jul.
Aug.
Sep.
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
Apr.
May
Jun.
Jul.
Aug.
Sep.
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
Apr.
May
Jun.
Jul.

2,500

2018

2019

2020

2021

Number of Inbound Visitors to Japan and Composition Per Year
2018

(Composition)

2019(Composition)

2022(Thousands people)(Composition)

Jan.-Jul.
2023

2023

Composition of Inbound Visitors after Removal of
Entry Restrictions from May to July 2023

(Composition)

China

8,380

27%

9,594

30%

189

5%

908

7%

South Korea

7,539

24%

5,585

18%

1,013

26%

3,755

29%

Taiwan

4,757

15%

4,891

15%

331

9%

2,193

17%

Hong Kong

2,208

7%

2,291

7%

269

7%

1,126

9%

Thailand

1,132

4%

1,319

4%

198

5%

547

4%

Singapore

437

1%

492

2%

132

3%

278

2%

Vietnam

389

1%

495

2%

284

7%

346

3%

UK

334

1%

424

1%

57

2%

177

1%

U.S.

1,526

5%

1,724

5%

324

8%

1,171

9%

Australia

552

2%

622

2%

89

2%

310

2%

Others

3,937

13%

4,445

14%

946

25%

2,221

17%

31,192100%

31,882

100%

3,832

100%

13,033

100%

Total

2022

Others16%

Australia 2%
U.S.

27%

Hong Kong
9%

Source: Number of International Visitors to Japan by Japan National Tourism Organization (JNTO)(*) Rounded off to the nearest thousands of people. The figures for 2018, 2019 and 2022 are final, those for January to May 2023 are provisional, and those for June and July 2023 are estimates.

25

10%

South Korea

10%
UK 1%
Vietnam 2%
Singapore 2%
Thailand 3%

China

Taiwan18%

3. Status of New Supply of Hotels
 New supply for 2023 is reduced around 1,500 rooms in comparison to the estimate made 6 months ago

Supply of Rooms in Hotels/Ryokans in Japan
As of the end of July 2023
＜Japan＞(No. of rooms)
80,00060,00040,00032,988Actual

20,00020,137 15,820

60,00033,79440,00032,988ActualSupply Forecast

54,051 59,079 49,115
29,874 27,153
21,75720,000

11,5410＜Japan＞(No. of rooms)
80,00054,051 59,079 49,115
30,030 27,196

Reference: as of the end of January 2023(*2)

Supply Forecast

32,781
12,0620

Ratio of New Supply

+2.1%

+3.4%

+3.6%

+2.9%

+1.7%

+1.5%

+1.1%

+0.9%

+1.8%

Ratio of New Supply

+2.1%

+3.4%

+3.6%

+2.9%

+1.7%

+1.5%

+1.2%

+0.7%

+2.4%

Excl. Tokyo, Osaka

+1.7%

+2.5%

+2.7%

+2.1%

+1.6%

+1.3%

+0.8%

+0.6%

+1.7%

Excl. Tokyo, Osaka

+1.7%

+2.5%

+2.7%

+2.1%

+1.6%

+1.3%

+0.9%

+0.4%

+2.0%

(%: change from theprevious year)

2017

2018

2019

2020

2021

2022

2023

2024

2025-

(%: change from theprevious year)

2017

2018

2019

2020

2021

2022

2023

2024

2025-

＜Tokyo＞(No. of rooms)
20,0005,866

20,0005,000

11,833 11,105 12,483

15,000

3,293

5,430

3,698

2,001

10,000

4,039

5,866

3,137

5,000

1,651

0

(including
undetermined plan)＜Tokyo＞(No. of rooms)

11,833 11,105 12,483

15,00010,000(including
undetermined plan)

5,430

4,189

3,999

981

0

Ratio of New Supply

+3.8%

+7.4%

+6.5%

+6.8%

+1.7%

+2.7%

+1.8%

+1.0%

+1.9%

Ratio of New Supply

+3.8%

+7.4%

+6.5%

+6.8%

+1.7%

+2.7%

+2.1%

+0.5%

+1.9%

(%: change from theprevious year)

2017

2018

2019

2020

2021

2022

2023

2024

2025-

(%: change from theprevious year)

2017

2018

2019

2020

2021

2022

2023

2024

2025-

4,851

4,998

4,375

＜Osaka＞(No. of rooms)
12,000
9,000
6,000

8,329

(including
undetermined plan)

10,721

12,000

6,205

5,018

＜Osaka＞(No. of rooms)

3,369

3,000

4,923
2,212

0

4,998

9,000

4,446

6,000

8,329

10,721
6,205

5,018

3,369

3,000

4,191

(including
undetermined plan)

2,254

0

Ratio of New Supply

+6.3%

+9.9%

+11.6%

+6.0%

+3.1%

+2.0%

+4.3%

+4.2%

+3.6%

Ratio of New Supply

+6.3%

+9.9%

+11.6%

+6.0%

+3.1%

+2.0%

+4.3%

+4.2%

+3.5%

(%: change from theprevious year)

2017

2018

2019

2020

2021

2022

2023

2024

2025-

(%: change from theprevious year)

2017

2018

2019

2020

2021

2022

2023

2024

2025-

(including
undetermined plan)(including
undetermined plan)

Source: Estimated by the Asset Management Company using data from "Public Health Administration Report" by Ministry of Health, Labour and Welfare (MHLW), a weekly hotel & restaurant magazine (HOTERES), and Nikkei Telecom.
(*1) Ratio of new supply is the ratio of new rooms to be supplied in a year to the stock of rooms (Hotels/Ryokans) at the beginning of the year. With regard to the above data, please note that in case the number of rooms are stated as "to be
determined" by hotels, the asset management company has used 180, the average number of new supply of hotel rooms, for calculation.
(*2) Based on data available as of the end of January 2023.

26

Appendix 1
JHR's Characteristics and Strategy

1. JHR's Investment Targets
Strong ability in acquiring properties

Aim to increase dividend
for mid to long term Highly recognized as Japan's largest J-REIT specializing
in hotels
 High presence and credibility in the property market bycontinuously acquiring properties Capability to propose various acquisition schemes and to
execute acquisitions

High capability in achieving internal growthHighcapability inachievinginternal
growthStrongability inacquiringproperties

 Management approach through active asset management
strategies that achieves a good balance between stability
and upside potential
 Increase hotel revenue through collaboration with highquality operators
 Attract inbound demand through enhanced international
brand portfolio
 Strengthen and maintain competitiveness by investing inappropriate capital expenditures

Stablefinancingcapability

Stable financing capability
 Secure sound and stable finance Diversify financing methods28

2. Simultaneous Pursuit of Stability and Upside Potential
 JHR pursues both stability and upside potential by steadily implementing growth strategies

Ensure Stable Revenue

Pursue UpsideManagement
contract structure

Fixed rent structure

Variable rent
structure

Revenue sharing
structure

Active Asset Management Strategies

 Appropriate monitoring of hotel operation
 Capital expenditures to maintain competitiveness and asset value

 Change in rent structures and rebranding Strategic capital expenditures, etc.

Maintain and improve rent-paying capacity of tenants, etc.

Increase in rental income, etc. throughimprovement in hotels' performance

Proportion of Rental Income

Proportion of Rent Structures

2019 Results(annualized)(as of June 30, 2023)

2023
Revised Forecast
Fixed rent only

Variable rent, etc.(*)

38.4%

Fixed rent, etc.

61.6%
(*)

9 properties

Variable rent, etc.(*)

36.5%

Fixed rent, etc.

Variable rent, etc.(*)

63.5%

34 properties

Variable rent, Rent from revenue sharing andIncome from management contracts

(*)

29

Fixed rent + variable rent structure,
Fixed rent + revenue sharing structure,
Variable rent structure and management contract structure

3. External Growth Strategy
Recognition of External
Environment
Trend of the Hotel
Investment Market
 Domestic and inbound leisure demand ison the recovery trend since Japan
reclassified COVID-19's category toClass 5 in May 2023 and entry
restrictions for inbound visitors weresignificantly mitigated. Some areas andhotels are showing recovery beyond thepre-pandemic level. Further
improvement in hotel revenues is
expected with increased visitors from
China.
 As for the hotel transaction market, notonly foreign funds, etc., but domestic
investors, including J-REITs, started toconsider hotel investment more actively
with expectations for the hotel market's
recovery and growth potential, as wellas an easing attitude to finance for hotel
assets by financial institutions. Given
these conditions, hotel transactions may
become more active.
 For acquisition of hotels, it is important
to differentiate each hotel since thecompetitiveness of hotels is becoming
more evident in accordance with the
hotel specifications, locations, and theabilities of hotel operators.

Basic Policies
 Acquire highly competitive hotel real estate, etc. in areas that have potential to attract "demand by both
domestic and inbound leisure customers" in the medium to long term Improve profitability, stability, and quality of the overall portfolio

Key Measures
 Emphasize the superiority of buildings and facilities (infrastructure), operations (services), locations of hotel
real estate, etc.
• The prime investment targets are "full-service hotels" and "resort hotels" that have high barriers to entry
due to operation and management know-how, capital outlay and locations• For "limited-service hotels," the creditworthiness of the hotel lessee, the age of the building, location,
guest room composition and profitability are important• For limited-service hotels that specialize in selling single rooms, we will consider acquiring them
individually, taking into account the specifications and upside potential of the hotel• In particular, we will actively consider purchasing hotels that can be expected to grow internally throughan aggressive asset management strategy and hotels that can be expected to generate synergies withexisting properties Strategic investment areas• Hokkaido area, Tokyo and bay area(*1), Osaka/Kyoto area(*2), Fukuoka area, and Okinawa area
 Investigate and plan the internal growth strategy in property acquisition• At the time of contract renewal, etc., investigate appropriate rent levels and structures as well as thepotential for cost savings and building and facility improvement• Promote internal growth by collaborating with lessees and operators, especially when the hotel has
variable rent structure, etc.
 Respond to various investment opportunities by utilizing HMJ's efficient hotel operation platform, know-how
for operational improvement, etc.
(*1) Bay Area includes the coastal area of Tokyo Bay in Kanagawa and Chiba prefectures. The same shall apply hereinafter.
(*2) Osaka/Kyoto Area refers to Osaka and Kyoto prefectures. The same shall apply hereinafter.

30

4. Internal Growth Strategy
Recognition of External
Environment
Hotel Market Environment

Basic Policies
 Pursue both stability and upside potential by steadily implementing active asset management strategies

 With the further easing of behavioral
restrictions, domestic leisure demandremains strong even after thetermination of the national travelsubsidy program, and the pace ofinbound recovery is gaining momentum.
We believe the hotel market will further
accelerate toward a full-fledged
recovery.
 Although there are supply-demand
imbalances depending on markets dueto the continued supply of new hotels
against the backdrop of robust hotel
demand during the pre-pandemic period,
we believe there are no changes to themedium to long-term trend of
expansion in the tourism market
accompanying economic growth in the
Asia region in the post-COVID-19
society.
 While the market is entering a fullfledged recovery phase, upward
pressure on costs and expenses has
occurred. We believe it is key toincrease unit prices by appropriately
passing on higher costs, conducting
renovation, providing added value,
implementing appropriate marketingstrategies, etc.

Key Measures Planning and execution of the active asset management in order to realize pursuit in upside revenue• Make strategic CAPEX which will improve profitability and strengthen competitiveness mainly at hotels
with high growth potential• Raise rent and change to rent structures that can achieve upside revenue• Reduction of management contract fee of properties under management contract• Increase hotel revenue through collaboration with high-quality operators• Attract inbound demand through rebranding to international brands• Make proactive proposals to build effective hotel operating structures which aim to maximize GOP, fromthe perspective of both hotel sales and expenses• Stimulate and capture domestic demand by creating products utilizing the characteristics of each hotel inline with the current market environment Planning and execution of strategic CAPEX which secure steady revenue, and monitoring of lessees• Analyze the creditworthiness of hotel lessees, understand income and expenditures of hotels, closely
observe and improve rent-paying capacity• Maintain and improve rent-paying capacity of tenants, etc. through capital expenditures, which lead tomaintain and improve competitiveness and asset value

31

5. Financial Strategy
Recognition of External
Environment
Trend of Financing Environment
and Interest Rates
 J-REIT public offerings in the first half of2023 were slightly lower than in thesame period of the previous year in
number and total amount. The TSE
REIT Index remained at a lower level inthe first 3 months of 2023 due towariness over rising interest rates, but
it turned upward from April onward on
the expectation that the new Bank ofJapan governor will maintain theprevious monetary policy for the time
being. As a result, the index has largely
recovered to the level at the end of2022.
 As the economic impact of COVID-19 on
the economy has become limited andthe recovery trend in hotel performanceis remarkable, financial institutions aretaking a more positive stance.

Basic Policies
 Ensure healthy and stable finance Strengthen lender formation and relationships with financial institutions
 Diversify financing methods

Key Measures
 Maintain good relationship with financial institutions
 Extend borrowing periods and optimize funding costs to improve financial stability
 Diversify financing methods such as public offerings and issuance of investment corporation bonds
 Maintain LTV level at a maximum of 50% (total asset base) for the time being Although both short-term and longterm interest rates remain at low due tothe monetary easing policy, certain
caution remains required for changes inlong-term interest rates due to policychanges by the Bank of Japan andoverseas factors.

32

6. Benefits Program for Unitholders
JHR implemented benefits program for unitholders to obtain a better understanding on hotels undermanagement, improve their satisfaction and expand the investor baseEligible recipients of complimentary couponsComplimentary coupons will be sent to those who hold ten or more JHR units
at the end of June every year (end of the midterm settlement)<FY2023>
Eligible unitholders: 10,879
Valid period: One year between January 1, 2024 to December 31, 2024

Details of the benefits program
Five complimentary coupons for accommodations and fivecomplimentary coupons for restaurants(*)
10% discount from the best rate for accommodation by each
hotel and 10% discount for restaurants(*) Complimentary coupons for restaurants are only available at selected hotels.

Hotels that offer the Benefits Program (21 Hotels)
The 16 HMJ Hotels

Kobe Meriken Park
Oriental Hotel

ACTIVE-INTER CITYHIROSHIMA (Sheraton
Grand Hiroshima Hotel)

Hotel Nikko Nara

Oriental HotelTokyo Bay

Oriental Hotel Fukuoka
Hakata Station

Namba
Oriental Hotel

Holiday Inn
Osaka Namba

Hotel Oriental Express
Osaka Shinsaibashi

The Accor Group Hotels

Hotel Nikko Alivila

Oriental Hotel
Hiroshima

Hilton Tokyo Narita Airport

Hilton Tokyo Odaiba

Oriental Hotel
Universal City

33

Oriental Hotel Okinawa
Resort & Spa

International Garden Hotel Narita

Hotel Oriental Express
Fukuoka Tenjin

ibis Styles Kyoto Station

ibis Styles Sapporo

Mercure Sapporo

Mercure Okinawa Naha

Mercure Yokosuka

Appendix 2
Information of Properties

1. Portfolio Portfolio consisted of competitive hotels in areas with strong leisure lodging demand Selectively invest in locations with high growth potential of leisure demand such as Strategic Investment Areas

Portfolio Summary

Strategic Investment Areas and Locations of Properties(as of the end of June 2023)

Total Assets
JPY373.9Bn

Property Acquired in 2023
Existing properties
Strategic Investment Areas

Hokkaido Area
No. of Hotels

Okinawa Area

43 Hotels(33 in Strategic Investment Areas)

No. of Guest Rooms

11,546 Rooms

Tokyo & Bay Area

Fukuoka
Area
Osaka/Kyoto Area

Tokyo 23 wards

35

2. Portfolio Diversification
 Widely diversified and high-quality portfolio Appeal to inbound visitors by international brands(as of the end of June 2023)

By Area
Chubu
4.6%
Chugoku
5.7%

By Hotel Brand

Hokkaido
3.4%

Dormy Inn, etc.
(Kyoritsu Maintenance)
4.0%

Tokyo
26.4%

Kyushu(excluding Okinawa)
5.6%

Others
12.1%
Oriental Hotal
(HMJ)
23.2%

the b
3.4%
ibis/Mercure(Accor)6.4%

Okinawa
11.9%

Kansai(excluding Osaka)
8.0%

International
Brand:
49.5%

Kanto(excluding Tokyo)
20.6%

Osaka
13.8%

By Hotel Grade

Hotel Nikko
7.8%
Holiday Inn
(IHG)
7.2%
Sheraton
4.6%

Hilton31.3%

By Hotel Type

Economy 3.4%
LuxuryResort

20.7%

20.9%

Mid-price

Limitedservice
32.4%

42.5%
Upper-middle

Full-service

33.5%

46.7%

(*) Calculated based on acquisition price. Percentages are rounded off to the nearest whole number.

36

3. Trend of Asset Size
 Improvement of the quality of JHR's portfolio and successive external growth through strategic asset replacement

Trend of JHR's Total Asset Size, etc. (JPY MM)+21.1%+11.4%(1.2%)(1.8%)

0.0%

+2.9%

(3.2%)+27.1%+9.1%

374,508

363,542

373,992

April 2012 FY12/2012 FY12/2013 FY12/2014 FY12/2015 FY12/2016 FY12/2017 FY12/2018 FY12/2019 FY12/2020 FY12/2021 FY12/2022

End ofJune 2023+21.4%+7.0%

122,285(merger)

319,474

286,801

363,542309,370

225,723

173,429

158,902130,883

370,031(13th Period) (14th Period) (15th Period) (16th Period) (17th Period) (18th Period) (19th Period) (20th Period) (21st Period) (22nd Period) (23rd Period) (Midterm of
24h Period)

No. ofProperties

28

28

28

30

36

41

44

41

43

42

No. ofAcquisition

－

2

2

3

9

5

3

－

2

－

－

AcquisitionPrice－ JPY10.8Bn JPY32.6Bn JPY15.7Bn JPY57.0Bn JPY61.0Bn JPY32.6Bn－ JPY65.1Bn－

JPY0.7Bn

No. of
Dispositions

－

2

2

1

3

－

－

3

－

1

1

－

－

Sale Price－

JPY0.8Bn

JPY2.6Bn

JPY0.7Bn

JPY4.8Bn－－ JPY12.1Bn－

JPY8.0Bn JPY11.3Bn－－

Unrealized
Gains(*1)－

JPY2.2Bn

JPY9.8Bn JPY34.8Bn JPY78.7Bn JPY113.8Bn JPY122.1Bn JPY130.7Bn JPY151.5Bn JPY126.5Bn JPY127.1Bn JPY125.0Bn JPY127.9Bn

41

41

43

－

2

(*2)

(*2)

(*1) Unrealized gains are calculated by subtracting book value from appraisal value.
(*2) JHR acquired land that is part of the Oriental Hotel Universal City site for JPY753MM on July 30, 2021.

37－ JPY10.4Bn

Aim for Successive Growth+30.2%

4. Rent Structures
Stability

Upside(FY12/2023 forecast)Rent Structure(*1)

Fixed rent

Fixed rent +Revenue sharing

Fixed rent + Variable rent

Variable rentManagement contract

Type of Contract

Lease contract

Lease contract

Lease contract

Lease contract

Management contract

Fixed

○

○

○

–

–

–

Variable–

A certain percentage of sales
exceeding the threshold

A certain percentage of
hotel GOP

A certain percentage of hotelrevenue or hotel GOP

Hotel GOP–

JPY2,150MM(8.6%)

JPY2,932MM(11.8%)

JPY16,486MM(66.2%)

JPY1,715MM(6.9%)

JPY1,609MM(6.5%)

JPY24,895MM(100.0%)

Fixed Rent,
etc.(*3) (%)

JPY2,150MM(8.6%)

JPY2,726MM(11.0%)

JPY9,993MM(40.1%)JPY616MM(2.5%)

JPY298MM(1.2%)

JPY15,786MM(63.4%)

Variable Rent(%)–

JPY205MM(0.8%)

JPY6,493MM(26.1%)

JPY1,099MM(4.4%)

JPY1,310MM(5.3%)

JPY9,108MM(36.6%)

Involvement inHotel Operation

Low

Low

High

High

High

–

CAPEX Borne by
JHR(*4)

1) Renewal of building andfacilities

1) Renewal of building
and facilities<3) Strategic investment>

1) Renewal of building andfacilities
2) Fixtures and equipment
3) Strategic investment

1) Renewal of building andfacilities
2) Fixtures and equipment
3) Strategic investment

1) Renewal of building andfacilities
2) Fixtures and equipment
3) Strategic investment–

No. of Properties

9

5

21

4

4

43

Acquisition Price(%)

JPY30,041MM(8.0%)JPY42,354MM(11.3%)

JPY259,964MM(69.5%)

JPY19,235MM(5.1%)

JPY22,397MM(6.0%)JPY373,992MM(100.0%)

The Beach Tower Okinawa
Hotel Francs
CANDEO HOTELS
Ueno Koen
and other hotels

Hilton Tokyo Bay
Smile Hotel
Nihombashi Mitsukoshimae
Comfort Hotel Tokyo
Higashi Nihombashi
UAN kanazawa
Sotetsu Fresa Inn
Shimbashi-Karasumoriguchi

The 16 HMJ Hotels
The Ishin Group Hotels
dormy inn Kumamoto

Hilton Nagoya
Mercure Yokosuka
Chisun Hotel Kamata
Chisun Inn Kamata

ibis Styles Kyoto Station
ibis Styles Sapporo
Mercure Sapporo
Mercure Okinawa Naha

–

Type

(breakdown)

Real Estate
Operating Revenue(*2)(%)

Hotels

(*1)
(*2)
(*3)
(*4)

Rent structures were classified based on lease contract of hotels owned by JHR as of June 30, 2023.
Based on the revenue forecast for FY12/2023, which was announced on August 24, 2023. Revenue from trademark rights is excluded.
Fixed rent includes fixed rent and utility income based on rent contract of non-hotel portion (offices, signage, car parks, retail shops, etc.) of assets owned by JHR.
CAPEX is categorized based on an outline and detail is individually stipulated in the lease contract of each hotel.

38

Total

5. Property List (1/2)(as of the end of June 2023)
Appraisal ValueNo.

Property Name

Hotel Type
(*1)

Grade
(*2)

No. of
Guest
Rooms

LocationAge(*3)

Acquisition
Price(JPY MM)(*4)

Book Value(JPY MM)(*5)

23rd Period(as of December 31, 2022)
Appraisal
Value(JPY MM)

24th Period(as of June 30, 2023)

CAP Rate

Appraisal
Value(JPY MM)CAP Rate

Investment
Ratio
(*6)

Revenue from
Real Estate
Operation(JPY1,000)
(*7)

NOI
(JPY1,000)(*7)

P/L from
Real Estate
Operation(JPY1,000)(*7)

NOI Yield(estimate)(*8)

1

Kobe Meriken Park Oriental Hotel

Full-service

Upper-middle

323

Hyogo

28.0

10,9009,366

14,1004.8%

14,1004.8%

2.9%

243,656

119,807(16,392)

5.2%

2

Oriental Hotel Tokyo Bay

Full-service

Mid-price

511

Chiba

28.2

19,90017,05431,7004.4%

31,700

4.4%

5.3%

725,292

665,085504,710

7.4%

3

Namba Oriental Hotel

Limited-service

Mid-price

258

Osaka

27.3

15,00014,261

31,0004.1%

31,0004.1%

4.0%

584,084

529,313471,725

7.3%

4

Hotel Nikko Alivila

ResortLuxury397

Okinawa

29.2

18,90017,711

28,1004.8%

28,1004.8%

5.1%

345,074

271,315

128,718

6.6%

5

Oriental Hotel Hiroshima

Full-service

Upper-middle

227

Hiroshima

29.8

4,100

4,058

4,150

4.9%

4,150

4.9%

1.1%

288,142

265,848

223,266

6.9%

6

The Beach Tower Okinawa

ResortMid-price

280

Okinawa

19.3

7,610

6,371

9,960

4.4%

9,960

4.4%

2.0%

255,504

233,863

177,167

6.1%

7

Hakone Setsugetsuka

ResortMid-price

158

Kanagawa

16.7

4,070

3,560

5,260

4.9%

5,260

4.9%

1.1%

147,469

134,895

87,4886.6%

8dormy inn Kumamoto

Limited-service

Mid-price

291

Kumamoto

15.4

2,334

2,159

2,930

5.6%

3,230

5.6%

0.6%

97,23086,08958,6977.4%

9the b suidobashi

Limited-service

Mid-price

99

Tokyo

36.8

1,120

1,153

2,270

4.1%

2,270

4.1%

0.3%

41,10235,781

21,7597.4%

10

dormy inn EXPRESS Asakusa (*9)

Limited-service

Economy

75

Tokyo

26.3

999

919

1,300

4.0%

1,290

4.0%

0.3%

32,53728,017

21,736

5.6%

11

Washington Hotel Plaza Hakata,
NakasuLimited-service

Mid-price

247

Fukuoka

28.3

2,130

2,076

4,520

4.4%

4,510

4.4%

0.6%

120,000

112,000

99,000

10.5%

12Washington Hotel Plaza Nara

Limited-service

Mid-price

204

Nara

23.3

2,050

1,733

2,430

5.0%

2,430

5.0%

0.5%

75,00066,00047,000

6.5%

13

R&B Hotel Ueno-hirokoji

Limited-service

Economy

187

Tokyo

21.2

1,720

1,805

1,800

4.1%

1,800

4.1%

0.5%

48,645

41,18332,365

4.8%

14

Comfort Hotel Tokyo Higashi
Nihombashi

Limited-service

Economy

259

Tokyo

15.4

3,746

3,407

5,370

4.4%

5,360

4.4%

1.0%

317,449

301,961

283,335

11.3%

15

Smile Hotel Nihombashi
Mitsukoshimae

Limited-service

Economy

164

Tokyo

26.3

2,108

2,015

2,940

4.1%

2,940

4.1%

0.6%

71,753

63,34652,989

5.8%

16

Toyoko Inn Hakata-guchi Ekimae

Limited-service

Economy257

Fukuoka

21.8

1,652

1,355

2,760

4.5%

2,730

4.5%

0.4%

70,51963,49654,417

7.7%

17

Chisun Hotel Kamata

Limited-service

Economy

105

Tokyo

31.4

1,512

1,458

2,050

4.8%

2,080

4.7%

0.4%

56,582

49,04532,614

5.2%

18

Chisun Inn Kamata

Limited-service

Economy

70

Tokyo

20.2

823

778

1,380

4.6%

1,390

4.5%

0.2%

33,12328,96322,707

6.2%

19

Oriental Hotel Universal City

ResortMid-price

330

Osaka

22.0

6,753

7,599

17,8004.8%

17,8004.8%

1.8%

649,753620,059

470,84219.0%

20

Hilton Tokyo Bay

ResortLuxury

828

Chiba

35.0

26,05026,09340,500

4.3%

39,9004.3%

7.0%

990,117

848,090748,107

6.5%

21

ibis Styles Kyoto Station

Limited-service

Mid-price

215

Kyoto

14.2

6,600

6,581

9,990

4.3%

9,990

4.3%

1.8%

142,929

122,883

105,939

4.0%

22

ibis Styles Sapporo

Limited-service

Mid-price278

Hokkaido

12.9

6,797

6,375

11,100

4.7%

11,1004.7%

1.8%

175,479

121,645

80,4205.2%

23

Mercure Sapporo

Limited-service

Mid-price285

Hokkaido

14.2

6,000

5,653

10,5004.7%

10,5004.7%

1.6%

229,027

128,236

83,5986.3%

24

Mercure Okinawa Naha

Limited-service

Mid-price

260

Okinawa

13.9

3,000

2,781

6,940

4.7%

6,940

4.7%

0.8%

79,186

53,634

16,8104.9%

39

5. Property List (2/2)(as of the end of June 2023)
Appraisal ValueNo.

Property Name

Hotel Type
(*1)

Grade
(*2)

No. of
Guest
Rooms

LocationAge(*3)

Acquisition
Price(JPY MM)(*4)

Book Value(JPY MM)(*5)

23rd Period(as of December 31, 2022)
Appraisal
Value(JPY MM)

24th Period(as of June 30, 2023)

CAP Rate

Appraisal
Value(JPY MM)CAP Rate

Investment
Ratio
(*6)

Revenue from
Real Estate
Operation(JPY1,000)
(*7)

NOI
(JPY1,000)(*7)

P/L from
Real Estate
Operation(JPY1,000)(*7)

NOI Yield(estimate)
(*8)

25

the b Ikebukuro

Limited-service

Mid-price

175

Tokyo

41.0

6,520

6,574

7,180

4.2%

7,200

4.2%

1.7%

160,141

146,787

133,617

4.2%

26

the b Hachioji

Limited-service

Mid-price

196

Tokyo

36.9

2,610

2,684

2,570

5.1%

2,570

5.1%

0.7%

79,456

67,344

48,3735.0%

27

the b Hakata

Limited-service

Mid-price

175

Fukuoka

25.8

2,300

2,333

4,320

4.3%

4,320

4.3%

0.6%

92,86586,33675,4687.5%

28

Hotel Francs

Full-service

Mid-price

222

Chiba

31.9

3,105

3,143

4,100

4.7%

4,100

4.7%

0.8%

150,000

119,700

94,9337.7%

29

Mercure Yokosuka

Full-service

Mid-price

160

Kanagawa

29.7

1,650

1,613

3,240

4.6%

3,240

4.6%

0.4%

149,507

90,36972,1888.4%

30

Oriental Hotel Okinawa Resort & Spa

ResortUpper-middle

361

Okinawa

18.4

14,95015,611

17,9004.9%

18,1004.9%

4.0%274,999

232,70748,5344.6%

31

ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel)

Full-service

Luxury238

Hiroshima

12.8

17,32017,086

20,7004.6%

20,7004.6%

4.6%

756,094490,946

375,171

5.4%

32

CANDEO HOTELS Ueno Koen

Limited-service

Mid-price

268

Tokyo

13.5

6,705

6,529

7,460

4.0%

7,460

4.0%

1.8%

174,985

161,775

140,973

4.8%

33

Oriental Hotel Fukuoka Hakata Station

Full-service

Upper-middle

221

Fukuoka

38.0

7,197

8,685

15,000

4.6%

15,0004.6%

1.9%

647,109523,822

328,09715.8%

34

Holiday Inn Osaka Namba

Limited-service

Mid-price

314

Osaka

14.9

27,00026,626

26,6004.3%

26,6004.3%

7.2%

310,052

284,865

224,8973.0%

35

Hotel Oriental Express Fukuoka Tenjin

Limited-service

Mid-price

263

Fukuoka

24.2

5,248

5,783

6,520

4.7%

6,520

4.7%

1.4%

266,332

216,065

165,895

8.1%

36

Hilton Nagoya

Full-service

Luxury

460

Aichi

34.3

15,25015,492

14,9004.2%

14,900

4.2%

4.1%

595,124

249,275

155,971

3.5%

37

Hilton Tokyo Narita Airport

Full-service

Upper-middle

548

Chiba

29.9

13,175

13,15812,300

4.6%

12,300

4.6%

3.5%

227,760

187,606

81,331

3.1%

38International Garden Hotel Narita

Full-service

Mid-price

463

Chiba

27.1

9,125

9,000

9,080

4.8%

9,110

4.8%

2.4%

239,973

218,237

135,687

4.9%

39

Hotel Nikko Nara

Full-service

Upper-middle

330

Nara

25.3

10,373

10,100

9,500

4.8%

9,500

4.8%

2.8%

219,926

195,827

120,7504.1%

40Hotel Oriental Express Osaka
Shinsaibashi

Limited-service

Mid-price

124

Osaka

5.4

2,738

2,796

2,890

4.7%

2,890

4.7%

0.7%

80,19873,05964,791

5.7%

41

Hilton Tokyo Odaiba

Full-service

Upper-middle

453

Tokyo

27.5

62,40063,23268,0003.7%

68,000

3.7%

16.7%

898,045

728,056

574,163

2.9%

42

UAN kanazawa (*10)

Limited-service

Upper-middle

47

Ishikawa

5.8

2,050

2,072

–

–

2,140

4.6%

0.5%

51,48350,22440,0995.6%

43

Sotetsu Fresa Inn
Shimbashi-Karasumoriguchi (*10)

Limited-service

Mid-price

220

Tokyo

15.3

8,400

8,480

–

–

10,1003.9%

2.2%

77,62567,17659,814

3.7%

Total or Average––

11,546–24.7

373,992

367,338

483,110–495,280–

100.0%

11,272,007

9,181,896 6,751,328

5.5%

(*1)
(*2)
(*3)
(*4)
(*5)
(*6)
(*7)
(*8)

Under the category of Hotel Type, "Full-service" is a full-service hotel, "Resort" is a resort hotel, and "Limited-service" is a limited-service hotel.
Mainly based on ADR, etc., JHR has classified the hotels into four categories as "luxury," "upper-middle," "mid-price," and "economy."
The age of each property as of June 30, 2023. Average age: Weighted average calculated as follows. The sum of (acquisition price of each property x property age)/total acquisition price.
The acquisition price in the Purchase & Sale Agreement for the Beneficial Interest in Trust or real estate. (Consumption tax, an amount equivalent to consumption tax, brokerage fee, and other purchase-related costs are excluded.)Book value as of the end of June 2023.
The ratio of the acquisition price of each property to the total acquisition price of properties held as of June 30, 2023, rounded to one decimal place.
Actual for 6 months from January to June 2023. Since the lessees did not agree to disclose numbers in units of JPY1,000 for No. 11 and 12, amounts are rounded down to the nearest JPY million.
NOI yield (estimate) is calculated based on NOI (estimate) for full year FY12/2023. NOI yield (estimate) for No. 42 and 43 are calculated by annualized NOI (estimate) for FY12/2023 of each property. NOI yield (estimate) of portfolio is calculated asfollows: Total NOI (estimate) for FY12/2023 / total acquisition price of properties held as of the end of June 2023.
(*9) The name has changed from dormy inn・global cabin Asakusa on April 1, 2023.
(*10) Since these properties were acquired in FY2023, the appraisal values ​at the end of FY2022 are omitted in the table and excluded from the total figures.

40

6. Summary of Lease Contracts (1/3)(as of the end of June 2023)
Lease
Type

Rent
Structure(*1)

Fixedlease

Fixed +
Variable

No.

Property Name

1

Kobe Meriken Park Oriental Hotel

2

Oriental Hotel Tokyo Bay

3

Namba Oriental Hotel

4

Oriental Hotel Hiroshima

5

Hotel Nikko Alivila

6

The Beach Tower Okinawa

Fixedlease

7

Hakone Setsugetsuka

Fixedlease

Hotel Operator/
Lease/ Expiration
Date of
Hotel Consulting andMCManagement Company Term Contract

LesseeContractual Rent(*2)

Rent Modification Summary

Rent Modification Summary(After acquisition)

Rent Modification Schedule(2023 to 2024)

TimingCondition

2023

2024

15

For The Five HMJ Hotels JPY3,221MM/year +Dec. 2034 when Hotel AGOP exceeds JPY4,120MM, theexcess x 85% is paid

In principle, the same rent will
be applied until expiration of
the contract.

Jan. 2023

Modified Structure

–

–

Fixed

20

Jun. 2026 JPY42MM/month

The same rent will be applied
until expiration of the contract.

–

–

–

–

Fixed

20

Oct. 2026 JPY24MM/month

The same rent will be applied
until expiration of the contract.

–

–

–

–

3

Mar. 2026

Rent can be modified throughmutual agreement.

Apr. 2023

Same(Introduced variable rent)––

Hotel Management Japan Co., Ltd.

Okura Nikko HotelManagement Co., Ltd.

Kyoritsu Maintenance Co., Ltd.

JPY16MM/month + when Hotel GOP exceeds
JPY400MM, the excess x 40% is paid

8

dormy inn Kumamoto

Fixedlease

Fixed +
Variable

9

dormy inn EXPRESS Asakusa (*4)

Lease

Fixed

3

Mar. 2026 JPY5MM/month

Rent can be modified throughmutual agreement every three
years.

Apr. 2023

Same

–

–

10

Washington Hotel Plaza Hakata,
Nakasu

Lease

Fixed

3

Mar. 2024 JPY20MM/month

Rent can be modified throughmutual agreement.

Apr. 2021

Same–

To be expired(Mar.)

11

Washington Hotel Plaza Nara

Lease

Fixed

3

Mar. 2026 JPY11MM/month

Rent can be modified throughmutual agreement.

Mar. 2023

Same

–

–

12

R&B Hotel Ueno-hirokoji

Lease

Fixed

20

Apr. 2025 JPY8MM/month

Rent can be modified throughmutual agreement.

Apr. 2011

Increased(+3.0%)––

13

Comfort Hotel Tokyo Higashi
Nihombashi

Fixedlease

Fixed +
Revenuesharing

Greens Co., Ltd.

20

Jan. 2028 JPY21MM/month + Revenue sharing

Rent can be modified throughmutual agreement every five
years.

Apr. 2018

Same(Introduced
revenue sharing)

–

–

14

Smile Hotel Nihombashi
Mitsukoshimae

Lease

Fixed +
Revenuesharing

THE KAMOGAWA GRAND HOTEL, LTD.

3

Mar. 2026 JPY11MM/month + Revenue sharing

Rent can be modified throughmutual agreement.

Mar. 2023

Same

–

–

15

Toyoko Inn Hakata-guchi Ekimae

Lease

Fixed

Toyoko Inn Co., Ltd.

30

Sep. 2031 JPY11MM/month

No rule has been stipulated.

Oct. 2007

Increased(+9.4%)––

16

Chisun Hotel Kamata

Fixedlease

Variable5

Dec. 2025

Hotel GOP x 86%(If the amount is below JPY0, it will be JPY0)–

Jan. 2021

Change in lessee andModified Structure

–

–

7

Dec. 2026

Hotel GOP x 86%(If the amount is below JPY0, it will be JPY0)–

Jan. 2020

Same

–

–

10.5 Dec. 2031

JPY350MM/year + when Hotel AGOP exceeds
JPY370MM, the excess x 95% is paid

In principle, the same rent will
be applied until expiration of
the contract.

Jul. 2021

Change in lessee andModified Structure

–

–

17

Chisun Inn Kamata

Fixedlease

Variable

18

Oriental Hotel Universal City

Fixedlease

Fixed +
Variable

Washington Hotel K.K.

Solare Hotels &Resorts Co., Ltd.

SHR Hotels, Co., Ltd.

K.K. Osaka Sakurajima Operations41

6. Summary of Lease Contracts (2/3)(as of the end of June 2023)
No.

Property Name

Hotel Operator/
Lease/ Expiration
Date of
Hotel Consulting andMCManagement Company Term Contract

Lease
Type

Rent
Structure(*1)

LesseeFixedlease

Fixed +
Revenuesharing

THE DAI-ICHI
BUILDING CO., LTD.

Hilton International
Company

Contractual Rent(*2)

Rent Modification Summary

Rent Modification Summary(After acquisition)

Rent Modification Schedule(2023 to 2024)

TimingCondition

2023

2024

Rent can be modified throughmutual agreement.

Jan. 2019

Renewed(Increased)

–

–

6

Dec. 2028 JPY163MM/month + Revenue sharing

Management
contract

12

Dec. 2024 Amount equivalent to hotel GOP

–

–

–

–

To be expired(Dec.)–

Management
contract10Dec. 2024 Amount equivalent to hotel GOP

–

–

–

–

To be expired(Dec.)

Mercure Sapporo–

Management
contract

15

Sep. 2029 Amount equivalent to hotel GOP

–

–

–

–

–

23

Mercure Okinawa Naha–Management
contract

10

Apr. 2024 Amount equivalent to hotel GOP

–

–

–

–

To be expired(Apr.)

24

Mercure Yokosuka

Fixedlease

Variable

AAPC Japan K.K.

5

Aug. 2024 Linked to hotel GOP

The same rent will be applied
until expiration of the contract.

Aug. 2019

Renewed(Increased)–

To be expired(Aug.)

25

the b ikebukuro

Fixedlease

Fixed +
Variable

Ishin Ikebukuro Operations K.K.

9.5

Jul. 2024 JPY80MM/year + Linked to hotel AGOP

The same rent will be applied
until expiration of the contract.

Oct. 2020

Fixed rent was changed(Reduction)–

To be expired(Jul.)

26

the b hachioji

Fixedlease

Fixed +
Variable

Ishin Hachioji Operations, Y.K.

9.5

Jul. 2024 JPY45MM/year + Linked to hotel AGOP

The same rent will be applied
until expiration of the contract.

Oct. 2020

Fixed rent was changed(Reduction)–

To be expired(Jul.)

27

the b hakata

Fixedlease

Fixed +
Variable

Ishin Hakata Operations K.K.

9.5

Jul. 2024 JPY59MM/year + Linked to hotel AGOP

The same rent will be applied
until expiration of the contract.

Oct. 2020

Fixed rent was changed(Reduction)–

To be expired(Jul.)

28

the b suidobashi

Fixedlease

Fixed +
Variable

Ishin Suidobashi Operations K.K.

7

Dec. 2026 JPY30MM/year + Linked to hotel AGOP

The same rent will be applied
until expiration of the contract.

Oct. 2020

Fixed rent was changed(Reduction)

–

–

29

Hotel Francs

Fixedlease

Fixed

K.K. BP19

Oct. 2024 JPY25MM/month

The same rent will be applied
until expiration of the contract.

–

–

–

To be expired(Oct.)

30

Oriental Hotel Okinawa Resort &Spa

Fixedlease

Fixed +
Variable

Lagoon resort Nago Co., Ltd.

10

Dec. 2030

JPY550MM/year + when Hotel AGOP exceeds
JPY655MM, the excess x 95% is paid

In principle, the same rent will
be applied until expiration of
the contract.

Jan. 2023

Modified Structure

–

–

31

ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel)

Fixedlease

Fixed +
Variable

Luxury Hotels
International of
Hong Kong Limited

11

Dec. 2026

JPY348MM/year + when Hotel AGOP exceeds
JPY360MM, the excess x 90% is paid

In principle, the same rent will
be applied until expiration of
the contract.

Jan. 2023

Modified Structure

–

–

32

CANDEO HOTELS Ueno Koen

Fixedlease

Fixed

Candeo Hospitality Management, Inc.

20

Feb. 2030 Nondisclosure(*3)

Rent can be modified throughmutual agreement every three
years.

Jul. 2016

Nondisclosure(*3)

–

–

33

Oriental Hotel Fukuoka Hakata
StationFixedlease

Fixed +
Variable

Hotel Centraza Co., Ltd.

15

Dec. 2034

JPY425MM/year + when Hotel AGOP exceeds
JPY442MM, the excess x 98% is paid

In principle, the same rent will
be applied until expiration of
the contract.

Jan. 2023

Modified Structure

–

–

34

Holiday Inn Osaka Namba

Fixedlease

Fixed +
VariableOW Hotel Operations KK

15

Oct. 2031

JPY576MM/year + when Hotel AGOP exceeds
JPY580MM, the excess x 97% is paid

In principle, the same rent will
be applied until expiration of
the contract.

Jan. 2023

Modified Structure

–

–

35

Hotel Oriental Express Fukuoka
TenjinFixedlease

Fixed +
Variable

K.K Fukuoka Tenjin Operations

10.5 Dec. 2031

JPY150MM/year + when Hotel AGOP exceeds
JPY165MM, the excess x 97% is paid

In principle, the same rent will
be applied until expiration of
the contract.

Jun. 2021

Change in lessee andModified Structure

–

–

19

Hilton Tokyo Bay

20

ibis Styles Kyoto Station–

21

ibis Styles Sapporo

22–

AAPC Japan K.K.

K.K. A.I.C Hiroshima
Management42

6. Summary of Lease Contracts (3/3)(as of the end of June 2023)
No.

Property Name

Lease
Type

Rent
Structure(*1)

LesseeNagoya Hilton Co.,Ltd.

Hotel Operator/
Lease/ Expiration
Date of
Hotel Consulting andMCManagement Company Term Contract
Hilton International
Company

Contractual Rent
(*2)
(*3)

Rent Modification Summary
Rent can be modified throughmutual agreement.

Rent Modification Summary(After acquisition)

Rent Modification Schedule(2023 to 2024)

TimingCondition

2023

2024

–

–

–

–

41

Dec. 2029 Nondisclosure

KK NaritaKosuge Operations

20

Jun. 2037

JPY444MM/year + when Hotel AGOP exceeds
JPY450MM, the excess x 93% is paid

In principle, the same rent will
be applied until expiration of the Jan. 2023
contract.

Modified Structure––

Fixed +
Variable

KK NaritaYoshikura Operations

10

Jun. 2027

JPY336MM/year + when Hotel AGOP exceeds
JPY360MM, the excess x 98% is paid

In principle, the same rent will
be applied until expiration of
the contract.

Jan. 2023

Modified Structure––

Fixedlease

Fixed +
Variable

Hotel Management
Okura Nikko Hotel
Co., Ltd.
Management Co., Ltd.

10

Dec. 2030

JPY420MM/year + when Hotel AGOP exceeds
JPY440MM, the excess x 95% is paid

In principle, the same rent will
be applied until expiration of
the contract.

Jan. 2023

Modified Structure––

Hotel Oriental Express Osaka
Shinsaibashi

Fixedlease

Fixed +
Variable

K.K. HOTEL ORIENTAL EXPRESS

10

Mar. 2028

JPY110.4MM/year + when Hotel AGOP exceeds
JPY128MM, the excess x 91% is paid

In principle, the same rent will
be applied until expiration of
the contract.

Jan. 2023

Modified Structure

–

–

41

Hilton Tokyo Odaiba

Fixedlease

Fixed +
Variable

Tokyo Humania Enterprise Inc.

11

Dec. 2029

JPY1,600MM/year + when Hotel AGOP exceeds
JPY1,660MM, the excess x 98% is paid

In principle, the same rent will
be applied until expiration of
the contract.

Jan. 2023

Modified Structure

–

–

42

UAN kanazawa

Fixedlease

Fixed +
Revenuesharing

Solare Hotels andResorts Co., Ltd.

SHR Hotels Co., Ltd.

25

Oct. 2042

JPY9MM/month + when annual room sales
exceeds JPY270MM, the excess x 30% is paid

In principle, the same rent will
be applied until expiration of
the contract.

–

–

–

–

43

Sotetsu Fresa Inn
Shimbashi-Karasumoriguchi

Fixedlease

Fixed +
Revenuesharing

Sotetsu Hotel
Development
Co., Ltd.

Sotetsu HotelManagement CO., LTD.

3

Mar. 2026 JPY17MM/month + Revenue sharing

The same rent will be applied
until expiration of the contract.

–

–

–

–

36

Hilton Nagoya

Lease

Variable

37

Hilton Tokyo Narita Airport

Fixedlease

Fixed +
Variable

38

International Garden Hotel Narita

Fixedlease39

Hotel Nikko Nara

40(*1) Rent structure is as follows:
Fixed: Fixed rent
Variable: Variable rentManagement contract: Management contract
Fixed + Variable: Property paying both fixed and variable rent
Fixed + Revenue sharing: When the sales of the hotel exceed pre-determined amount, additional rent is paid(*2) Amount including car park and CAM without tax.
(*3) The detailed content of the contract is not disclosed as consent on disclosure has not been obtained from the lessee.
(*4) The name has changed from dormy inn・global cabin Asakusa on April 1, 2023.

43

7. Portfolio Map
 Portfolio consisting of competitive hotels in areas with strong leisure lodging demand Selectively invest in locations with high growth potential of leisure demand such as Strategic Investment Areas(as of June 30, 2023)

Total Assets

JPY373.9Bn

Strategic Investment Areas

2

3

Kobe Meriken Park
Oriental Hotel

Oriental HotelTokyo Bay

4

5

6

7

Hotel Nikko
AlivilaOriental Hotel
Hiroshima

The BeachTower Okinawa

8

9

dormy inn
Kumamoto

the bsuidobashi

Existing properties

No. of Hotels

Limited-service hotel

43 Hotels

Full-service hotel

22 23

Resort hotel

Namba
Oriental Hotel

10

11

12

dormy inn
EXPRESSAsakusa

Washington
Washington
Hotel Plaza
Hotel Plaza
Hakata, Nakasu Nara

HakoneSetsugetsuka

13

14

15

16

17

18

19

R&B Hotel
Ueno-hirokoji

Comfort HotelTokyo Higashi
Nihombashi

Smile Hotel
Nihombashi
Mitsukoshimae

Toyoko Inn
Hakata-guchi
EkimaeChisun Hotel
KamataChisun Inn
KamataOriental Hotel
Universal City

Hokkaido Area

No. of Guest Rooms

11,546 Rooms
42
26

21

3 19 34 40

21

22

23

24

25

26

27

Hilton Tokyo Bay

ibis Styles
Kyoto Station

ibis Styles
SapporoMercureSapporoMercureOkinawa Naha

the b ikebukuro

the b hachioji

the b hakata

28
37 38

7

Fukuoka
Area
11 16

29

27 33 35

20

Tokyo & Bay Area

Osaka/Kyoto Area

2 20

28

29

30

31

32

Hotel Francs

Mercure Yokosuka

Oriental Hotel
Okinawa
Resort & Spa

ACTIVE-INTER CITYHIROSHIMA (Sheraton
Grand Hiroshima Hotel)

33

34

35

Oriental Hotel
Fukuoka
Hakata Station

Holiday Inn
Osaka Namba

Hotel Oriental Express
Fukuoka Tenjin

36
12 39

8
5 31

1

Tokyo 23 wards
25
9

30
4

1

43

6

24

Okinawa Area

13 32

10
14

CANDEOHOTELS
Ueno Koen

Acquisition in 2023
36

37

38

39

40

41

42

43

Hilton Nagoya

Hilton Tokyo
Narita Airport

International
Garden Hotel
NaritaHotel Nikko Nara

Hotel Oriental
Express Osaka
Shinsaibashi

Hilton Tokyo Odaiba

UAN kanazawa

Sotetsu Fresa Inn
ShimbashiKarasumoriguchi

15
41

17 18

44

8. Trend of RevPAR Index and Status of Infection by COVID-19 in Japan
Trend of RevPAR Index(*1) of The 25 Hotels with Variable Rent, etc. in Comparison with 2019/Number of New Cases of Infection by COVID-19 in Japan(*2)

2020

2021

2022

2023(*3)

Full Year: 34.7

Full Year: 32.3

Full Year: 61.1

Full Year: 100.0

First Half: 33.5

Second Half: 35.8

First Half: 23.8

Second Half: 39.6

First Half: 45.6

Second Half: 74.7

First Half: 95.0

Second Half:
104.3

100

Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul.

(No. of Cases)
250,000

Quasi-Emergency Measures
State of
Emergency

200,000

150,000

Go To Go To Travel
TravelCampaign
Campaign including
Tokyo

0

State of
Emergency

State of
Emergency

5th Wave

Number of Severe Cases in Japan (right axis)

3rd Wave

1st Wave

7th Wave

8th Wave

New Go To
TravelCampaign

October 11

Number of New Cases of COVID-19 in Japan (left axis)

100,000

50,000State of
Emergency

Quasi-Emergency
Measures

6th Wave• Significant easing ofborder measures• Elimination of entry limit• Lifting of the ban on
personal travel

New Go To
Travel Campaign

6,000
5,000

May 8

• Reclassification of
COVID-19 as Class 5
infectious diseases
from Class 2

4th Wave

4,000
3,000
2,000

2nd Wave

1,000

Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul.

Source: Ministry of Health, Labour and Welfare(*1) The RevPAR for each period is indexed with the same period in 2019 as 100.
(*2) The data was last updated on May 8, 2023, when Japan reclassified COVID-19's category to Class 5 infectious disease.
(*3) Index for second half 2023 and full year 2023 are estimate as of the date of this document.

4509. Hotel Indexes (January 2022 to July 2023)
 Recent RevPAR exceeded the pre-pandemic period in 2019 due to ADR-focused revenue management

Key Indexes for the 25 Hotels with Variable Rent (vs 2019)
30%

ADR

20%
10%

RevPAR

0%(10%)

Occupancy

(20%)
(30%)
(40%)
(50%)
(60%)
(70%)
(80%)
2022

2023

Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul.

Occupancy(42.2%)(47.8%)(35.9%)(33.2%)(26.0%)(25.3%)(23.3%)(21.1%)(17.1%)(14.4%)(8.6%)(5.2%)(19.1%)(10.7%)(3.9%)(11.2%)(10.4%)(11.5%)(11.3%)

ADR(22.6%)(37.9%)(31.1%)(35.7%)(27.1%)(27.6%)(19.2%)(18.7%)(16.6%)(13.3%)(5.1%)

+3.9%

+4.7%

(1.0%)+9.9%(0.1%)+11.5%+13.4%+16.3%

RevPAR(55.2%)(67.5%)(55.8%)(57.1%)(46.0%)(46.0%)(38.0%)(35.9%)(30.9%)(25.8%)(13.3%)(1.6%)(15.3%)(11.6%)+5.6%(11.3%)(0.1%)

+0.4%

+3.2%

46

10. Balance Sheet(Unit: JPY MM)
FY12/2022
End ofFiscal Year(as of) December 31,
2022

ASSETS
Current Assets(*1)

Cash and Deposits

Operating Accounts Receivables

FY12/2023
End of
Midterm
June 30,
2023

Variance

34,55325,805(8,748)29,51522,708(6,806)

Operating Accounts Payable

4,442

2,498

(1,944)

Short-term Loans

LIABILITIESFY12/2022
End ofFiscal Year(as of) December 31,
2022

Current Liabilities

595

598

2

362,115370,352

8,237

Current Portion of Long-term Loans Payable

Net Property and Equipment

325,988335,373

9,384

Buildings in Trust(*2)

111,217112,203986

Land in Trust

OthersNoncurrent Assets

212,263

220,946

8,682

Others(*3)

2,508

2,223

(284)

Intangible Assets

32,49432,355

(138)

3,632

2,623

(1,008)

152

152

ー

Others

3,480

2,471

(1,008)Deferred Assets

130

113

(17)

Other Assets
Leasehold and Security Deposits

FY12/2023
End of
Midterm
June 30,
2023

Variance

56,812

2,647

1,943

312

(1,631)35,11335,070(43)

54,165ーーー

15,432

19,681

4,249

Accounts Payable

970

950

(19)

Advances Received

664

719

54

Current Portion of Investment Corporation Bond

42

79

37

119,059

114,710(4,348)Investment Corporation Bonds

36,90036,900ーLong-term Loans Payable

76,786

72,580(4,206)

4,660

4,802

142

OthersLong-term Liabilities

Tenant Leasehold and Security Deposits

ー

16

16

713

412

(301)

173,225

171,523(1,701)

187,194

187,194

ー

21,746

21,746ーReserve for Temporary Difference Adjustment

9,976

9,600

(376)

Reserve for Special Advanced Depreciation

1,174

1,174

ー

Unappropriated Retained Earnings

2,672

4,899

2,226

Derivative Liabilities
OthersTOTAL LIABILITIESNET ASSETS
Unitholders' Capital
Capital Surplus

OthersTOTAL NET ASSETSTOTAL ASSETS

396,799396,271(528)

TOTAL LIABILITIES AND NET ASSETS(*1) Cash and deposits in trust is included.
(*2) The sum of buildings in trust, structures in trust, machinery and equipment in trust, tools, furniture and fixtures in trust, and construction in progress in trust.
(*3) The sum of machinery and equipment, tools, furniture and fixtures, and construction in progress.

47

809

133

(676)

223,574

224,748

1,173

396,799396,271(528)

Appendix 3
Investors Composition and Investment Unit Price1. Major Unitholders and Classifications of Unitholders
Top 10 Major Unitholders
As of the end of December 2022

As of the end of June 2023

Name

Rank

No. of Units

%(*)

Rank

1

Name

No. of Units%(*)

836,943

18.73

1

The Master Trust Bank of Japan, Ltd. (Trust)

815,025

18.24

2

Custody Bank of Japan, Ltd. (Trust)

731,291

16.37

2

The Master Trust Bank of Japan, Ltd. (Trust)

834,23218.67

3232,834

5.21

3

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

228,824

5.12

107,498

2.40

4

SSBTC CLIENT OMNIBUS ACCOUNT

97,541

2.18

5The Nomura Trust and Banking Co., Ltd. (Investment Trust)
THE CHASE MANHATTAN BANK, N.A. LONDON SPECIALACCOUNT NO.1
JPMorgan Securities Japan Co., Ltd.

80,4601.80

5BNYM AS AGT/CLTS 10 PERCENT

88,582

1.98

6

BNYM AS AGT/CLTS 10 PERCENT

75,875

1.69

4

Custody Bank of Japan, Ltd. (Trust)

6

STATE STREET BANK CLIENT - TREATY 505234

74,597

1.66

7

STATE STREET BANK AND TRUST COMPANY 505103

63,887

1.43

7State Street Bank and Trust Company 505223

73,811

1.65

8STATE STREET BANK CLIENT - TREATY 505234

73,503

1.64

8

JP MORGAN CHASE BANK 385781

60,138

1.34

GOLDMAN SACHS INTERNATIONAL

60,1001.34

59,0461.32

2,403,890

53.81

9

68,691

1.53

968,5991.53

10 JP MORGAN CHASE BANK 385632

2,327,587

52.10

STATE STREET BANK AND TRUST COMPANY 505103

10 SSBTC CLIENT OMNIBUS ACCOUNT
Total

Total

(*) Ownership ratio shows the total units held by each investor to the total units issued by JHR as of the end of December 2022 and the end of June 2023, respectively (rounded down to two decimal places).

Classifications of Unitholders
As of the end of December 2022
OwnersNo. ofInvestors

No. ofUnits

Individuals & Others

26,688341,673

Financial Institutions(Incl. Securities Firms)

77

2,074,883

Other Domestic Firms

323

112,158

Foreign Firms &Individuals
Total

485

1,938,292

27,573 4,467,006

No. of Investors

0.2%

1.1%
1.7%

As of the end of June 2023

No. of Units

7.6%

43.3%

46.4%

96.7%

No. ofInvestors

No. ofUnits

Individuals & Others

26,137335,383

Financial Institutions(Incl. Securities Firms)

77

2,121,319

Other Domestic Firms

316

107,541

Foreign Firms &Individuals

502

1,902,763

Total

2.5%
Individuals &OthersOwnersFinancial Institutions(Incl. Securities Firms)

Other Domestic
Firms

27,032 4,467,006

No. of Investors

0.2%

1.1%
1.8%

No. of Units

7.5%

42.5%

47.4%

96.6%
2.4%

Foreign Firms &Individuals(*) Percentage of investors is percentage of investors in each segment to the total number of investors in JHR, and percentage of investment units is percentage of investment units owned by each segment to the total investment units issued as ofrespective date (both rounded down to one decimal place).

49

2. Changes in Investment Unit Price and Market Capitalization
Changes in the investment unit priceand market capitalization(Based on the closing price)
Price of the investment unit:

Market Capitalization
Investment Unit Price of JHR(JPY)

JPY70,600

120,000

JPY315.3Bn

100,000

Total market capitalization:(based on the closing price of July 31, 2023)(*1) Price of the real estate investment securities
may fall depending on the fluctuations of priceof the real estate under management or
profitability, etc., and investors may suffer
losses. Investors may also suffer losses
through the bankruptcy or deteriorated
financial condition of the issuer.
(*2) Including OA(*3) Indicate the third-party allotment conducted
March 2021, with sponsor group as allottee.

Comparison withREIT Index and TOPIX of
Tokyo Stock Exchange(TSE)(*) 100 is the closing price of JHR unit, REIT index
and TOPIX at TSE dated April 2, 2012. REIT
Index of TSE is an index of a weighted
average of the market capitalization of all
REITs listed on TSE.

80,00060,000Sep. 2014
PO JPY10.1Bn

Jun. 2015
PO(*2) JPY10.7Bn

Jul. 2016
PO(*2) JPY34.7Bn

Jan. 2019
PO(*2) JPY33.3Bn

Mar. 2021
TPA(*3) JPY0.3Bn(JPY MM)

Jan. 2015
PO(*2) JPY15.6Bn

Jan. 2016
PO(*2) JPY14.6Bn

Jun. 2017
PO(*2) JPY18.6Bn

Apr. 2013
PO JPY20.5Bn

450,000

300,000

Sep. 2012
PO(*2) JPY5.0Bn
150,000

40,00020,00000600

Investment Unit Price of JHR

TSE REIT Index

500

400

300

200

100

0

50

TOPIX

Appendix 4
Summary of the Asset Management Company

1. Summary of the Asset Management Company(as of June 30, 2023)
Company Name
Location
Establishment
CapitalShareholders
Representative Director

Japan Hotel REIT Advisors Co., Ltd.
Ebisu Neonato 4F, 4-1-18 Ebisu, Shibuya-ku, Tokyo 150-0013
August 10, 2004
JPY300MMSCJ One (S) Pte. Ltd., Kyoritsu Maintenance Co., Ltd., ORIX Corporation
Hisashi Furukawa
Building Lots and Buildings Transaction Business Operator, Governor of Tokyo (4) No. 83613
Discretionary Transaction Agent by Minister of Land, Infrastructure, Transport and Tourism No. 38

Registration and Licenses

Financial Instruments Business Operator, Director-General of Kanto Local Finance Bureau No. 334
Member of The Investment Trusts Association, Japan
Member of The Japan Investment Advisers Association<Organization Chart>

Shareholders Meeting
AuditorInvestment and Operation
Committee

Board of Directors
Compliance Committee
President & CEO
Compliance Office
Personnel &Administration Group

Business Promotion OfficeFinance and Planning
Division

Investment Division
Acquisitions Group

Public REIT Group

Private Fund Group

Planning Group52

Finance GroupAccounting Group2. Features and Governance of the Asset Management Company
Mission Statement

Code of Conduct
We define "Challenge" and "Teamwork" as the code of conduct for a teammember at JHRA.
In achieving our mission, "connect hotels, people and future," it is essential
to pursue all possibilities and continue exploring to create added value.

We explore the possibility of hotels.

We will always pursue possibilities through "challenge" by each department
and each employee and continue to create added value throughcooperation and collaboration based on "teamwork."

We create new value and lead hotels to a bright future.
We will be the pivot to connect people with various perspectives
and a pioneer for the future of hotel industry.

Challenge

We connect hotels, people, and a bright future.

 Be a self-starter, take initiative and demonstrate
drive Set high goal and strive to achieve goals

Ideas behind the new mission statement•

Through offering opportunities to invest in hotels, we will deliver
attractiveness of hotels to many people.

•

Utilizing our unique asset management know-how and skills,
we will create new value and contribute to the development of
the hotel industry.

•

We will enhance sustainability of hotels and contribute torealizing a society that is friendly to people, local community andenvironment.

•

We will earn trust of a wide range of various stakeholders
involved in the hotel and become the pivot to bring thestakeholders into harmony.

•

We will challenge the status quo, consider all the possibilities fora better solution and become a bridge to the bright future for the
hotels and people.

 Respect creativity and innovation
 Promote challenge, free from fear of failure

Teamwork Respect teamwork and collaborate with team-mates Respect others. Respect values and opinions of others
 Promote "sharing" (idea, knowledge, information,goal, achievement, joy of achievement, lesson, etc.)
 Make effort for open, frank and sincere
communication

53

2. Features and Governance of the Asset Management Company (cont.)
Advanced Expertise Ability to propose transaction schemes, execute transactions, and plan and execute unprecedented measures of asset
management based on an in-depth understanding of hotel operations and a track record of such asset management.
 Extensive experience in renovation and rebranding through collaboration with many hotel lessees and operators.
 Strong and long-term relationships with a large number of hotel lessees and hotel operators.
 High analytical skills and accurate judgment capacity based on rich information and data obtained through a broad
network and high credibility.

Ensured Independence There is no seconded employee from sponsor in JHRA.
 JHRA's Board of Directors consists of part-time directors from our main sponsor, SC Capital Partners Group, same numberof full-time directors who are not related to the sponsor, and one part-time auditor who is not related to the sponsor.
 We established a more rigorous decision-making process for transactions with sponsor-related parties. In principle, JHRA
undergoes deliberations and resolutions by the Investment and Operation Committee, the Compliance Committee which
includes an outside specialist authorized to dismiss proposals, and the Board of Directors Meeting of JHRA.
In addition, in cases where JHR conducts transactions with sponsor-related parties, such transactions shall be conductedupon the approval and resolution by the Board of Directors Meeting at JHR. The officers of JHR are all third parties
unrelated to the sponsor-related parties.
 Since our main sponsor, SC Capital Partners Group is also an independent asset management company, it fully
understands and respects the importance of JHRA's independency. JHRA conducts asset management business based
upon its judgment.

54

Disclaimer
This material is prepared and provided solely for the purpose of providing information of Japan Hotel REIT Advisors Co., Ltd ("JHRA") and not to offer, solicit, or do
business, etc. with specific financial instruments including purchase of investment units, or investment corporation bonds of Japan Hotel REIT Investment Corporation("JHR") or any other financial instruments to invest in private funds. Investors are asked to ensure that they make decisions on investment at their own discretion. If any
discrepancy is identified between this translation and the Japanese original, the Japanese original shall prevail.
This material is neither a disclosure document nor an investment report required under or prepared pursuant to the Financial Instruments and Exchange Act, Act on
Investment Trusts and Investment Corporations, Act on Provision of Financial Services and related government ordinances, cabinet office regulations, listing rules by
Tokyo Stock Exchange, regulations of The Investment Trusts Association, Japan, regulations of the Japan Investment Advisers Association or other related rules andregulations.
The statements of JHR and private funds in this material are based on the judgment, evaluation and forecast of JHRA. This material contains forward-looking statements
about financial conditions, operational results, and businesses of JHR, private funds and JHRA, as well as plans and intentions of JHR, private funds and JHRA. Suchforward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or performance of JHR, private funds and
JHRA to materially differ from those expressed or implied forecasts. Those forecasts are made based on present and future business strategies and assumptions relating
to the political, economic and other circumstances surrounding JHR, private funds and JHRA in the future.
Every effort has been made to ensure the accuracy of the information contained in this material. However, there can be no assurance that the information is accurate,complete, appropriate or fair. The information may be revised or retracted without prior notice.
Regarding the offering and trading of investment units, investment corporation bonds or any form of financial instruments to invest in private funds, financial institutions
may charge you pre-determined handling fees and other charges aside from the price of the investment units, investment corporation bonds or any form of financial
product to invest in private funds. JHRA does not handle the offering and trading of investment units, investment corporation bonds or any form of financial instruments
to invest in private funds.
JHR and private funds managed or advised by JHRA mainly invests in real estate-related assets, primarily hotels which are subject to change in values. Therefore,
holders of investment units, investment corporation bonds or investors of any form of financial instruments to invest in private funds may suffer losses due to economic
conditions including real estate market, securities market, economic situations including interest rate environment, the nature of investment units investment corporation
bonds or any financial instruments to invest in private funds, dependency on mechanisms and related persons of investment corporations or investment vehicle ofprivate funds, changes in legal systems related to real estate (include tax regulations, building regulations and others), damage caused to the real estate-related assets
by natural disasters, fluctuation in prices or profitability of the real estate-related assets, nature of the financial instrument under management, delisting of theinvestment units, or worsening financial position or insolvency.
The contents of this material may not be copied or reproduced without our prior permission.
Japan Hotel REIT Advisors Co., Ltd.
Financial Instruments Trading Company
Director-General of Kanto Local Finance Bureau No. 334
Member of The Investment Trust Association, Japan
Member of The Japan Investment Advisers Association

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