Japan Hotel REIT Investment Corporation (TSE: 8985)

Midterm Financial Results
FY12/2022 (23rd Period)

Japan Hotel REIT Investment Corporation
Japan Hotel REIT Advisors Co., Ltd.
https://www.jhrth.co.jp/en/

August 24, 2022

Table of Contents
Ⅰ. Highlights
1. Highlights
Ⅱ. Operating Forecast for the Full Fiscal Year andSummary of Midterm Settlement of Accounts
1. Operating Forecast for the Full Year Ending
December 2022
2. Midterm Results for the Fiscal Year Ending
December 2022
Ⅲ. Status of Hotel Operations
1. Trend of RevPAR Index and
Status of Infection by COVID-19 in Japan
2. Performance of The 25 Hotels with Variable Rent, etc.
3. Correspondence to HMJ Group
4. Initiatives by the HMJ Group for the Recovery Period
5. Rebranding and Other Measures
6. Active Asset Management for Post COVID-19
7. Capital Expenditure and Depreciation
8. ESG Initiatives

Appendix 1
3

5
6

14
15

Ⅳ. Financial Conditions
1. Financial Conditions

18

Ⅴ. Market Environment
１．Status of Domestic Accommodation Demand
２．Status of Inbound Visitors
３．Status of New Supply of Hotels

22
23
24

Ⅵ. Takeaways
1. Takeaways

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
8
9
10
11
12
13

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. The Five HMJ Hotels ̶ Highlights

44

8. Portfolio Map

45

9. Balance Sheet

46

Investors Composition and Investment Unit Price

1. Major Unitholders and Classifications of Unitholders

48

2. Changes in Investment Unit Price and Market Capitalization

49

Appendix ４

1

Information of Properties

1. Portfolio

Appendix 3

26

JHR's Characteristics and Strategy

Summary of the Asset Management Company

1. Summary of the Asset Management Company

51

2. Features and Governance of the Asset Management Company

52

Ⅰ. Highlights

1. Highlights
Summary of Full Year Forecast for FY2022

Main Initiatives(Unit: JPY MM)

FY2022(forecast)vs FY2021

vs FY2019

Correspondence to Lessees/Operators

13,337(2.2%)(52.8%)• Lease Contract with HMJ Group(*2) was changed to fullvariable rent until the end of 2022

13,33728.6%(52.8%)

Fixed Rent

7,192

(1.3%)(57.9%)• In addition to measures to reduce hotel operating costs incooperation with HMJ Group, we implement measures toincrease revenues for the hotel market recovery period

Variable Rent

6,145

99.0%

(45.0%)

Gain on Sale ofProperties

ー(100.0%)ー

1,158(10.7%)(92.4%)

Use of Negative Goodwill

332(0.8%)(71.7%)

Dividend per Unit (JPY)333(9.0%)(91.0%)

Operating Revenue
Real Estate Operating
Revenue

Net Income

Changes in DPU and NAV
Changes in DPU
(JPY)
4,000

3,690

90,000(88.9%)

3,000

83,2862,000(10.7%)

410

1,000

77,525(6.9%)
60,000333

77,688+0.2%

78,056(297)※
FY12/2019(20th Period)

FY12/2020(21st Period)(363)※
FY12/2021
FY12/2022(22nd Period) (23rd Period)(Forecast)• Maintain good relationship with lender and will refinance thefull amount of the loan

+0.5%

ESG
30,000• Selected as GRESB Asia Hotel Sector Leader for second
consecutive year0
-1,000• Improved hotel brand value through renovation, optimizationof operations, quality enhancement of breakfast menu, etc.

• Ensure healthy and stable finance(9.0%)

366• Rebranded 3 properties to Oriental Hotels of HMJ Group (in2021)

Finance

Changes in NAV per Unit
(JPY)

Rebranding

0

FY12/2019(20th Period)

FY12/2020(21st Period)

FY12/2021(22nd Period)※ Rough estimate in case gain on sales of properties was excluded(*1)

End of June
2022
(Midterm of
23rd Period)• Promote TCFD action and conduct Climate Change scenario
analysis(*1) Rough estimate calculated by excluding the amount equivalent to the gain on sales of Sotetsu Fresa Inn Shimbashi-Karasumoriguchi from the distributable profit in FY12/2020 and the amount equivalent to the gain on sales of ibis Tokyo Shinjuku
from the distributable profit in FY12/2021 respectively.
(*2) HMJ Group refers to Hotel Management Japan Co., Ltd. (hereinafter called "HMJ") or subsidiaries of HMJ. The same shall apply hereinafter.

3

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

1. Operating Forecast for the Full Year Ending December 2022
[Reference]

Properties(Unit: JPY MM)

FY12/2021(22nd Period)

FY12/2022(23rd Period)

Actual(A)

Forecast(B)

41

No. of Properties

41

Actual(C)%–

Difference from
FY2019 Actual–(B)–(C)

43

Main Factors of Difference from thePrevious Year's Results%(2)

Fixed Rent–

• The Ishin Group Hotels(*3)+JPY114MM• The Two HMJ Rebranded Hotels(*4)(JPY168MM)

363,542

363,542––

374,508 (10,966)(2.9%)

Operating Revenue

13,633

13,337(296)(2.2%)

28,278 (14,941)(52.8%)

10,374

13,337

2,962

28.6%

28,278 (14,941)(52.8%)

6,413 47.0%

6,273

(140)

(2.2%)

56.3%

15,931(9,657)(60.6%)

Variable Rent

918

46

5.3%

4.1%

1,170

(252)

(21.5%)• The 14 HMJ Hotels(*6)• The Accor Group Hotels(*7)

61.8%

Fixed Rent
Other Income
Variable Rent
Gain on Sales ofProperties, etc.

8.4%
29.8%

872

6.9%

3,088 46.1%

6,145

3,056

99.0%

39.5%

(5,031)(45.0%)–––

24,087 (14,635)(60.8%)+JPY93MM• Property sold in 2021

(JPY33MM)

2.6%

0.8pt

6.4%

(3.8pt)

4,804

4,733

(70)

4,557

175

Others

1

1

0

2

(0)

• Gain on sales of properties

16

13

(2)

246

(232)

NOI after Depreciation(*2)

1,544

4,703

3,159

NOI Yield after
Depreciation
Other Operating
Expenses

0.4%

1.3%

0.9pt

1,843

1,876

32

1.8%

Operating Income

2,959

2,827

(132)

Ordinary Income

1,298

1,159

(138)

Extraordinary Income

–

–

–

–

–

Others

1

1

–

1

–

1,296

1,158

(138)

(10.7%)

15,290 (14,131)(92.4%)

335

332

(2)

(0.8%)

1,176

(843)

(71.7%)

16,466 (14,978)(91.0%)Net Income
Use of Negative Goodwill

19,281 (14,577)(Total) +JPY3,056MM

5.1%(3.9pt)

2,132

(256)

(12.0%)(4.5%)

17,148 (14,321)(83.5%)(10.6%)

15,291 (14,131)(92.4%)

1,634

1,487

(147)

(9.0%)

4,467,006

4,467,006––

4,462,347

4,659

0.1%

Dividend per Unit (JPY)

366

333

(33)

(9.0%)

3,690(3,357)(91.0%)

5(JPY3,258MM)(75.6%)

Number of Units Issued(Unit)

Total Dividends+JPY152MM• Other hotels and tenants

1.8%

204.6%+JPY2,895MM(JPY51MM)

3,085

Asset Retirement
Obligations Expenses
Loss on Retirement ofNoncurrent Assets(JPY140MM)• The Ishin Group Hotels

9,452

Depreciation(JPY92MM)(Total)

6,366

48.5%

+JPY6MM• Property sold in 2021(*5)–

NOI Yield(3,258) (100.0%)

11,176• Other hotels and tenants

3,258

NOI(*2)

Profit and Loss

(B)–(A)FY12/2019(20th Period)

Acquisition Price

Real Estate Operating
Revenue

Dividend

Difference fromFY2021 Actual(*1) For detail, please refer to Midterm Financial Report for the Fiscal Year Ending
December 31, 2022 (January 1, 2022–December 31, 2022) dated August 24, 2022.
(*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) The Ishin Group Hotels refers to 4 Hotels, which are the b ikebukuro, the b Hachioji,
the b Hakata and the b Suidobashi. The same shall apply hereinafter.
(*4) The Two HMJ Rebranded Hotels refers to 2 hotels, which are Hotel Oriental Express
Fukuoka Tenjin and Oriental Hotel Universal City, changed their lessees to thesubsidiaries of HMJ by rebranding in 2021. The same shall apply hereinafter.
(*5) Stating the impact by the sale of ibis Tokyo Shinjuku sold on December 15, 2021.
(*6) The 14 HMJ Hotels refers to 14 hotels, which are The Five HMJ Hotels plus Oriental
Hotel Okinawa Resort & Spa, Sheraton Grand Hiroshima, which is major facility of
ACTIVE-INTER CITY HIROSHIMA, Oriental Hotel Fukuoka Hakata Station, Holiday
Inn Osaka Namba, Hilton Tokyo Narita Airport, International Garden Hotel Narita,
Hotel Nikko Nara, Hotel Oriental Express Osaka Shinsaibashi and Hilton Tokyo
Odaiba. The Five HMJ Hotels refers to Kobe Meriken Park Oriental Hotel, Oriental
Hotel tokyo bay, Namba Oriental Hotel, Hotel Nikko Alivila, Oriental Hotel Hiroshima.
The same shall apply hereinafter.
(*7) The Accor Group Hotels refers to 5 hotels, which are ibis Styles Kyoto Station, ibis
Styles Sapporo, Mercure Hotel Sapporo, Mercure Hotel Okinawa Naha and Mercure
Hotel Yokosuka. The same shall apply hereinafter.

2. Midterm Results for the Fiscal Year Ending December 2022
[Reference]
FY12/2021(22nd Period)

FY12/2022(23rd Period)

Mid-term Results(A)

Mid-term Results(B)(B)–(A)

No. of Properties

42

41

(1)

–

Acquisition Price

370,031363,542(6,489)Operating Revenue

4,589

5,431

4,589

Properties(Unit: JPY MM)

Real Estate Operating
Revenue

FY12/2019(20th Period)

Difference from
FY2019 Actual

Main Factors of Difference from thePrevious Year's Results

Mid-term Results(C)(B)–(C)

43

(2)

–

(1.8%)

374,508 (10,966)(2.9%)

842

18.3%

12,719(7,288)(57.3%)

5,431

842

18.3%

12,719(7,288)(57.3%)%%

Fixed Rent

72.0%

3,302

57.8%

3,139

(162)

(4.9%)

59.3%

7,537

(4,397)(58.3%)

Other Income

9.7%

445

7.9%

428

(16)

(3.8%)

4.5%

576

(147)

(25.7%)

Variable Rent

18.3%

841

34.3%

1,863

1,021

121.5%

36.2%

4,606

(2,742)(59.5%)

2,513

3,514

1,000

39.8%

10,679(7,165)(67.1%)

2,334

2,312

(21)

2,165

146

Asset Retirement
Obligations Expenses

0

0

0

1

(0)

Loss on Retirement ofNoncurrent Assets

7

0

(6)

218

(218)

171

1,200

1,028

8,294

(7,093)

Other Operating
Expenses

871

876

5

1,001

(124)

Operating Income

(699)

323

1,023

7,293

(6,969)Non-Operating Income

76

12

(63)

9

2

Non-Operating Expenses

864

807

(57)

948

(141)

Ordinary Income(1,488)

(470)

1,017

－

6,354

(6,824) (107.4%)

Net Income(1,488)

(471)

1,017

－

6,353

(6,824) (107.4%)

Fixed Rent

NOI(*2)
Profit and Loss

Difference fromFY2021 Actual

Depreciation

NOI after Depreciation(*2)

598.7%－

6• The Two HMJ Rebranded Hotels(JPY168MM)• The Ishin Group Hotels+JPY57MM• Other hotels and tenants(JPY1MM)• Property sold in 2021(*3)(JPY50MM)(Total)Variable Rent
• The 14 HMJ Hotels+JPY947MM• The Accor Group Hotels(JPY37MM)• The Ishin Group Hotels+JPY45MM• Other hotels and tenants+JPY70MM• Property sold in 2021
(85.5%)(JPY162MM)(JPY3MM)(Total) +JPY1,021MM(95.6%)(*1) For detail, please refer to Midterm Financial Report for the Fiscal Year Ending
December 31, 2022 (January 1, 2022–December 31, 2022) dated August 24, 2022.
(*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) Stating the impact by the sale of ibis Tokyo Shinjuku sold on December 15, 2021.

Ⅲ. Status of Hotel Operations

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

2020

2021

2022(*3)

Full Year: 34.7

Full Year: 32.3

Full Year: 56.5

First Half: 33.5

100

Second Half: 35.8

First Half: 23.8

Second Half: 39.6

First Half: 45.6

Second Half: 66.0

101.1

70.9
59.1

55.7
36.4
25.6

41.2

43.8
24.2 21.1

21.4 23.6
6.2 4.8

41.4
28.4

22.8 23.4 22.6

44.1
32.1 29.7 34.3

54.0 54.0
44.8

62.0 60.2

66.8 68.2 68.2

73.6

44.2 42.9
32.5

11.7

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.
(No. of cases)

250,000

Quasi-Emergency Measures
State of
Emergency

200,000

150,000

Go To Travel Go To Travel
Campaign
Campaign
includingTokyo

State of
Emergency

State of
Emergency

7th Wave

6,000

6th Wave

4,000

5th Wave

Number of Severe Cases in Japan (right axis)

3rd Wave
1st Wave

Quasi-Emergency
Measures

5,000

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

100,000

50,000State of
Emergency

4th Wave

3,000
2,000

2nd Wave

1,000

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.
Source: Ministry of Health, Labour and Welfare(*1) The 25 Hotels with variable rent refers to 25 hotels, which are "The Ishin Group Hotels" plus "The Accor Group Hotels" plus The 16 HMJ Hotels. The 16 hotels are The 14 HMJ Hotels and The Two HMJ Rebranded
Hotels. The same shall apply hereinafter.
(*2) The RevPAR for each period is indexed with the same period in 2019 as 100.
(*3) Index for August through December 2022, 2nd half 2022 and Full year 2022 are estimate as of date of this document.

8

2. Performance of The 25 Hotels with Variable Rent, etc.
Performance and Forecast of Major Indicators
Occupancy (right axis)

ADR (left axis)

Total of The 25 Hotels with Variable Rent, etc.
20,00013,144

12,143

4,457

5,000

6,063

14,0899,846

14,91813,286

5,340 5,913

3,169

100%

(JPY MM)

21,69720,00016,334
13,034

10,755 10,872

RevPAR (left axis)

Full Year

17,084

15,55515,00010,000

Second HalfFirst Half

(JPY)

Performance and Forecast of GOP

13,083

11,625

12,675
7,971

14,10915,00050%
10,0007,206

4,901 4,552
5,000

1,711

2,367

2019
Result2020
Result2021
Resultvs 2019(92.1%) (89.1%) (66.8%)

85.4% 33.9% 29.5% 55.8% 87.3% 41.0% 48.7% 69.9% 86.4% 37.5% 39.2% 62.9%
0

2019
Resultvs 2019
RevPAR vs previous
year

2020
Result2021
Result2022
Result2019
Result(66.5%) (76.2%) (54.4%)ー2020
Result2021
Result2022
Forecast

2019
Result(64.2%) (60.4%) (34.0%)(28.9%) +91.4%

ー2020
Result2021
Result2022
Forecast

0%0(65.3%) (67.7%) (43.5%)+10.7% +66.5%

ー(7.1%)

vs previous
year+75.1%－

2022
Forecast+38.4% +204.4%

The 16 HMJ Hotels

20,000

Full Year

19,01517,084
14,64915,00010,000

Second HalfFirst Half

(JPY)

15,833
12,615 12,292

14,038

4,842
5,000

6,716

18,071
15,28813,537

15,00050%
10,0005,454 5,035

3,333

18,47914,514
8,995

15,751

6,058 6,709(JPY MM)
20,000

11,23816,80914,676

16,239

100%

6,414

5,000

1,373

2,014

2019
Result2020
Result2021
Resultvs 2019(92.6%) (89.1%) (65.3%)

85.9% 33.1% 26.4% 54.6% 88.4% 38.3% 47.8% 69.2% 87.2% 35.7% 37.2% 62.0%0

2019
Resultvs 2019
RevPAR vs previous
year

2020
Result2021
Result2022
Result(67.0%) (77.3%) (54.2%)
ー(31.2%) +101.5%

2019
Result2020
Result2021
Result2022
Forecast

2019
Result(64.0%) (60.1%) (33.1%)
ー2020
Result2021
Result2022
Forecast(65.4%) (68.0%) (42.9%)+10.7% +67.5%

ー9(7.7%)+78.7%

0%

0

vs previous
year

－

2022
Forecast+46.7% +218.4%

3. Correspondence to HMJ Group
Changes in Lease Contract

Cost Reduction by HMJ Group Lease contracts(*1) with HMJ Group, a strategic operator of JHR, werechanged to full variable rent structure until the end of 2022
 After 2023, the previous rent scheme will be applied
2020

Changed to variable rent only on and after February

2021

Variable rent only

2022

Variable rent only

2023
Onwards

 HMJ Group agrees to implement cost reduction measures in
conjunction with lease contract changes
 JPY1.5Bn in cost reduction measures originally planned have been
implemented by 2021
 Additional cost reduction of JPY0.5Bn are progressing as planned

Measures to Reduce Cost
Personal
Cost•

Streamlining, cutback and closure of unprofitabledepartment

Fixed Rent

Same amount as the previous lease
contract (JPY8.03Bn)•

Streamlining through integration of back office andcommon operations

Variable Rent

Set variable rent ratio with appropriate rent
burden ratio (Approx. 85.5% of GOP)(*2)•

Introduction of smart check in•

Streamlining by promotion of multi-task•

Reduce work force by measures above•

Review specification of outsourced operation,
integration of standard, etc.

•

Insourcing outsourced operation

Actual/estimate rent and simulation of The 14 HMJ Hotels(*3)

Outsourcing
Cost(Unit: JPY Bn)
Total

Fixed
Rent

Variable
Rent2019 (Actual)

15.26

8.03

7.23

2020 (Actual)

1.85

0.79

1.05

Permanent cost savings(estimated on an annually basis after market recovery)2021 (Actual)

2.11

－

2.11

※ Estimated based on the performance of The 14 HMJ hotels in 20192022 (Estimate)

5.01

－

5.01

Cost reduction
measures
implemented

15.93(+4.3%)(*5)

8.03

7.90

Until 2021
(Implemented)

After additional
reductionmeasures16.38(+7.3%)(*5)

8.03

8.35

After 2022
(in progress)

Roughestimate
when
RevPAR in
2019 isassumed(*4)

Personal Cost

1.1 BnApprox. JPY

Outsourcing Cost

0.5Bn

Additional cost saving: Approx. JPY(*1) Lease contracts for The 14 HMJ Hotels.
(*2) When AGOP of each hotel exceeds AGOP base amount, the variable rent is calculated by multiplying the exceeded amount by the variable rent ratio set for each hotel.
(*3) For actual result of 2019, the rents of Hotel Oriental Express Osaka Shinsaibashi and Hilton Tokyo Odaiba were annualized. The fixed rent of Hilton Tokyo Odaiba was calculated at JPY1.6Bn.
(*4) The figure was calculated based on certain assumptions based on hotel performance in 2019. The figure may differ depending on the actual GOP results.
(*5) Stating the increase rate compared with the actual result in 2019 for each estimate.

10

0.4Bn

Approx. JPY

4. Initiatives by the HMJ Group for the Recovery Period
 In addition to implementing restructuring plans centered on cost reductions, HMJ promotes strategic measures aimed at making asignificant advance during the market recovery period

Enhancement of Customer Attraction

Measures by HMJ Group to Strengthen Brand Value
Providing accommodation plans featuring the characteristics ofthe hotel

Launch of "Club Oriental"• Launch of the "Club Oriental" membership organization to actively expand
promotions as a group and enhance customer attraction through its own
channels• Offering plans that reflect the appeal of location and facilities at each hotel
for each season▶ Hotel Nikko Alivila
Clear SUP
Experience:
Elegant
underwater
exploration fromabove the water

Expand PR and Marketing activities• Strengthen sales recovery measures ahead of competitors with strategic
marketing costs⁃ Aggressive promotions for each hotel and season⁃ Expand media exposure, such as TV and magazines, by strengthening
media relations, etc.

Snorkelingexperience tocome in touchwith the fishesof Okinawa▶ Hilton Tokyo Odaiba• Start marketing in the digital domain through SNS, etc., to appeal toyounger and high digital literate customers

Accommodation
plan withterrace lounge
which can haveenough ofpanoramic viewof Tokyo Bay

Efficient sales promotion by consolidating the sales department
into the headquarters• Develop cross-promotion activities at the HMJ Group hotels by consolidating
the sales functions of each hotel to the head officePlan to enjoy"Hocance"(*2), a
luxurious stay atheart of city in aterrace suitewith a jet bath

"Strategy of Co-Creation with Local Communities" to discoverlocal attractions• Capture more domestic demand by strengthening sales promotion for school
trips, large corporate clients, and agents• Provide hotel products that can contribute to local communities throughutilization of tourism resources under alliance with local peoples and enterprises

Preparation for Recovery of Inbound▶ Oriental Hotel Okinawa Resort & Spa"Yanbaru Ranger plan: Protecting and nurture
together" Let's go to the World Natural Heritage
Site for "Adventure and Discovery"

Strengthen cooperation with overseas agents• Increase the number of customers by creating superior products and sales
reinforcement of sales promotion▶ Oriental Hotel Fukuoka Hakata Station"Package plan with original goods of Hakata Gion
Yamakasa Nishi Nagare" Experience to sprinkle
water (Kioimizu) on powerfully running portableshrine (Kakiyama)• Cultivate new customers through attending business meetings and otherevents(*1) The plans listed on this page are the actual achievement to the date of this document and sale of these tour packages are subject be suspended or changed.
(*2) "Hocanse" is a coined word combined the words "hotel" and "vacation." It means enjoying the hotel's unique services and atmosphere, such as spa, room interiors, amenities, and luxurious meals to enjoy the stayitself at hotel as vacation, not ordinally stay at hotel.

11

5. Rebranding and Other Measures
Rebranding to HMJ Group
Name

Hotel Oriental Express Fukuoka Tenjin(former HOTEL ASCENT FUKUOKA)

Exterior/
Rebranded
Date

Points of
the Change

Oriental Hotel Universal City
(former Hotel Keihan Universal City)

Grand opening:
June 18, 2021

Oriental Hotel Okinawa Resort & Spa(former Okinawa Marriott Resort & Spa)

Pre-opening:
July 1, 2021

Rebrand opening:
October 1, 2021

Grand opening:
December 23, 2021

Grand opening:
March 19, 2022

 The grade of the hotels has been changed from
economy to mid-price Changed the lessee to The HMJ Group inaccordance with the withdrawal of the former
lessee. More efficient operations will be carried out
through sharing back offices with The HMJ Group
Hotels located in Fukuoka
 Changed rent structure to "fixed rent + variable
rent" from "fixed rent only" Changed the lessee to The HMJ Group inaccordance with the expiration of the lease
contract with the former lessee. Operation
leveraging the advantages of operating multiple
hotels in Osaka As an official hotel of USJ, expect early recovery bydomestic demand Changed rent structure to "fixed rent + variable
rent" from "fixed rent + revenue sharing" The name was changed to Oriental Hotel Okinawa
Resort & Spa of The HMJ Group in line with theexpiration of the franchise agreement(*1) with the
Marriott group Gradually conducting renovation at lobby, pool,guest rooms, etc.

Lobby

Entrance

Pool

Guest Room

Lobby

Club Lounge

After

NOI Yield
Assumption

Result of 20196.1%

Market recovery period(*2)

8.3%

Result of 2019Market recovery period(*2)

11.1%

18.4%

Result of 20195.7%

Market recovery period(*2)

9.4%

Others The Ishin Group Hotels: Changed lease contract (Change of fixed rent)(*3) in April 2020
 Chisan Hotel Kamata (former Hotel Vista Kamata Tokyo): Changed lessee and lease contract (Variable rent connected with GOP) in January 2021(*1) Stating a contract between the hotel operating company and Global Hospitality Licensing S.a r.l., a franchisor of the international brand, Marriott.
(*2) Market recovery period refers to the timing when market recover to the level that RevPAR reach the same level with the result in 2019. Yield is rough estimate calculated based on assumption of RevPAR in 2019.
Numbers may change by various factors.
(*3) Total annual fixed rent of 4 hotels are set as follows. Exempted from April to December in 2020, JPY1MM per year for 2021 and JPY214MM per year after 2022.

12

6. Active Asset Management for Post COVID-19
 Potential upside by active asset management
Initiatives for Post COVID-19

Hotels1

Improvement ofHotel Revenue

Increase sales
by improvementof hotelmanagement

Stimulate and acquire leisure demand through unique attractivenessof each hotels and creation of highly competitive productsReview of costby restructuring

Review the cost structure and improve the revenue structure

Aim to improve hotel management through changes in hotel operator,
rebranding, and upgrades, etc. in order to increase hotel sales

2

Reduction of
Operating Costs of Hotels

Aim to maximize GOP through efficient management

Improve GOP

REIT

3

Improvement ofReal Estate Operating Revenue

Reduction ofReal Estate Operating Costs

Revise in rent
scheme, etc.

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

Reduction of cost for property management, trust, management contract fee, andground rent, etc.

Improve NOI

Maximize DPU
13

7. Capital Expenditure and Depreciation
 Appropriate CAPEX within depreciation
Clarification of CAPEX(JPY MM)CAPEX Ⅰ

capital investment related to renewal of buildings, facilities, and equipment which is
required to maintain proper values of propertiesCAPEX Ⅱ

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

CAPEX Ⅲ

strategic capital investment for renewals of guest rooms, banquet rooms, restaurant
and others in order to maintain or to improve the competitiveness of the hotels

Depreciation

5,000

4,557
4,091

4,000

3,000

3,725

2,898
469

2,000

475

4,804

4,761

6,766

1,349

3,619Oriental Hotel Fukuoka
3,056
476

393

3,367

Hakata Station

3,147
830

Cost for large-scalerenovation works

999
1,690

781

1,665
3,366

100
237
1,000

4,733
4,716

1,954

1,798

2,536

2,226
1,456

1,328

0

Asset Size(*)(JPY MM)

319,474309,370

374,508

370,031363,542

363,542

FY12/2017

FY12/2018

FY12/2019

FY12/2020

FY12/2021

FY12/2022(forecast)(*) Asset size is based on the aggregate acquisition price of the properties at the end of each fiscal period. The same shall apply hereinafter.

14

8. ESG Initiatives (JHR)
 JHR formulated policy on sustainability in December 2017. Aiming for medium to long term growth in harmony and coexistence withsociety and the environment, JHR implements initiatives to improve sustainability through appropriate responses to ESG issues

Initiatives for Climate Change

GRESB Real Estate Assessment(*3)• In November 2021, JHRA stated its expression of support for the TCFD(*1) recommendations

Acquired "Green Star" for four consecutive years from 2018

• Disclosed Initiatives for 4 disclosure themes recommended by TCFD in August 2022
Disclosure
ThemesGovernance▶ In 2021, JHR was selected for"Sector Leader" inAsian hotel sector

Description
JHR has established the following governance structure including ESG Promotion Committee toaddress climate-related risks and opportunities

Strategy

Using future climate projections published by the IEA, IPCC(*2), and other organizations as the main
source of information, two patterns were established: 1.5℃ and 4℃ scenarios. Evaluated financial
impacts of risks and opportunities identified for each scenario

RiskManagement

The ESG Promotion Committee takes the lead in identifying and assessing climate-related risks, anddiscusses and decides on business strategies, including risk management and response measures.
Formulate action plans based on the strategy and manage the progress of actions

Metrics andTargets

Set targets to promote energy use efficiency through low-carbon portfolio and environmental andenergy conservation measures, including reductions in greenhouse gas (GHG) emissions

for two consecutive years▶ Acquired "4-star"in GRESB Rating

Definition of Materiality
From the dual standpoints of stakeholders' expectations and impact on
its business, JHR has defined seven items of materiality (key issues)
related to ESG for JHR.
Materiality

E

Related SDGs

1. Tackling climate change
2. Reducing water consumption and waste
3. Communication with stakeholders such as
local communities

S

4. Ensuring safety/peace of mind andpromoting well-being at hotels
5. Creating pleasant workplacesG

6. Implementing thorough corporate governance
7. Proactive information disclosure and dialogue

ESG Disclosure Information on JHR Website
https://www.jhrth.co.jp/en/esg/index.html(*1) TCFD is an abbreviation for Task Force on Climate-Related Financial Disclosures.
(*2) IEA is an abbreviation for International Energy Agency and IPCC is abbreviation for Intergovernmental Panel on Climate Change.
(*3) The GRESB is an annual benchmarking program to evaluate ESG considerations of property companies and real estate funds. The GRESB Real Estate Assessment is distinguished by its comprehensive evaluation of initiatives for sustainability ofproperty companies, REITs and real estate funds, not of individual properties. GRESB rating is a relative evaluation based on comprehensive scores and the highest being "5-star."15

8. ESG Initiatives (Each Hotels)
 Conduct various ESG-conscious initiatives in the hotels owned by JHR
Initiatives to Improve Satisfaction of Guests

Initiatives to Contribute for Local Areas
Promotion of Local Production and Local Consumption(Provide menu with local foods)

Integration and Expansion of Amenities (Amenity Base)• Established amenity base, which is exclusive space where guest can selectamenities to be used inside guest rooms by itself. Reduce unnecessary
waste by use of necessary items only
(Oriental Hotel tokyo bay)

• Support farming in the nearby area through provision of menu with local
foods in restaurants• Expanding the hotels offering this service(Oriental Hotel Okinawa Resort & Spa)

(Oriental Hotel tokyo bay)

Mizore-jiru (soup) of sardine
from Choshi

Introduction of Self Service in Luggage Storage (guest lockers)

Acqua pazza by seafoodfrom Chiba Prefecture(Kobe Meriken Park Oriental Hotel)

Bouillabaisse with seafoodfrom Setouchi(Oriental Hotel Okinawa Resort & Spa)

(3 hotels including Oriental Hotel tokyo bay)
• Reduce waiting time for guests throughintroduction of self service on luggage
storage when they check in• Able to feel safe under "with COVID-19"
environment since entrance is controlled
by QR code which doesn't require contact

Island pork steak

Initiatives for Employees by DX

Yushi–Dofu (tofu)

Efforts to Prevent the Spread of COVID-19 at Each Hotel
Accommodation of COVID-19 Patients with Mild or
No Symptoms at Hotels

Making business manuals into applications• Visualized operations by introducing anapplication that digitizes employee
manuals• Accepted in total 9 hotels

Introduction of Automatic Check-in Machine• Improved efficiency of human resource
training and service quality• Introduced in 7 hotels including Oriental
Hotel tokyo bay※Screen image

16

Ⅳ. Financial Conditions

1. Financial Conditions (1)Main Financial Indicators

Repayment Schedule of Interest-bearing Debt

(as of the end of June 2022)

LTV (total asset base)

42.1%

Cost for interest-bearing debt(*1)

1.0%(as of the end of June 2022)(JPY MM)

Average life of interest-bearing debt

Investment Corporation Bonds

30,24328,00030,00023,625

3.1 years

(*2)

Loans

40,00020,00021,536

6,000

3,000

19,00017,35017,00010,00030,243

Free cash(*3)

JPY

Unrealized gain

JPY

21.1Bn10,000128.7Bn

2.0%

4.8

Costs for Interest-bearing Debt

3.5

3.1

18,000

2023

2024

2025

2026

8,000
8,000

2027

2028

2029

(year)

4.0

Repayment
Date

BalanceFirst Half
(result)

JPY15,234MM

3.0

1.0%

1.1%

1.0%

1.0%

1.0%

1.0%

Second Half
(schedule)

2.0

0.5%
1.0
0.0%

17,000Refinancing Result and Schedule in 2022

5.0

4.3

1.5%

13,100

4,250
2022

6.0

5.2

19,0000Changes in Costs for Interest-bearing Debt(*1) and
Average Life of Interest-bearing Debt(*2)
Average Life of Debt

18,536

17,625

FY12/2018(19th Period)

FY12/2019(20th Period)

FY12/2020(21st Period)

FY12/2021(22nd Period)

End of June 2022
(Midterm of
23rd Period)

0.0

JPY23,625MM(Loans: JPY17,625MM/Investment Corporation Bonds: JPY6,000MM)(*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.

18

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

Changes in LTV (total asset base)(as of the end of June 2022)(Unit: JPY MM)
Lenders/Bond Name

Balance(as of the end of
December 2021)
Balance%

Balance(as of the end ofJune 2022)
Balance%

19.7%

Variance

Sumitomo Mitsui Banking Corporation

32,32319.6%

32,53219.7%

209

Mizuho Bank, Ltd.

19,33011.7%

19,455

11.8%

125

Shinsei Bank, Ltd.

18,558

11.3%

18,558

11.3%–

Sumitomo Mitsui Trust Bank, Limited

13,795

8.4%

13,884

8.4%

89

Resona Bank, Limited

9,882

6.0%

9,882

6.0%

–

Development Bank of Japan Inc.

5,885

3.6%

5,885

3.6%

–

Fukuoka Bank, Ltd.

4,636

2.8%

4,636

2.8%

–

The Nomura Trust and Banking Co., Ltd.

4,548

2.8%

4,548

2.8%

–

Aozora Bank, Ltd.

3,352

2.0%

3,352

2.0%

–

The Chiba Bank, Ltd.

2,732

1.7%

2,732

1.7%

–

MUFG Bank, Ltd.

3,123

1.9%

2,700

1.6%

(423)

The Nishi-Nippon City Bank, Ltd.

2,684

1.6%

2,684

1.6%

–

10.4%

Loans
Investment
Corporation Bonds

LTV (total asset base)

1,854

1.1%

1,854

1.1%

–

0.9%

1,464

0.9%

–

488

0.3%

488

0.3%

–

75.7% 124,654

75.7%

–

40%
30%

Investment Corporation Bonds

8th Investment Corporation Bonds without Collateral

1,100

3,000

1.8%

–

0.7%

1,100

0.7%

–

9th Investment Corporation Bonds without Collateral

1,000

0.6%

1,000

0.6%

–

12th Investment Corporation Bonds without Collateral
Total of Investment Corporation Bonds(for institutional investors)
Investment Corporation Bonds(for individual investors)
5th Investment Corporation Bonds without Collateral

2,000

1.2%

2,000

1.2%

–

7,100

4.3%

7,100

4.3%

–

6,000

3.6%

6,000

3.6%

–

7th Investment Corporation Bonds without Collateral

9,000

5.5%

9,000

5.5%

–

10th Investment Corporation Bonds without Collateral

10,000

6.1%

10,000

6.1%–

11th Investment Corporation Bonds without Collateral
8,000
Total of Investment Corporation Bonds
33,000(for individual investors)
Total of Investment Corporation Bonds
40,100

4.9%

8,000

4.9%

–

20.0%

33,000

20.0%

–

24.3%

40,10024.3%–

164,754 100.0% 164,754 100.0%–

Total of Interest-bearing Debt

Long-term(scheduled repayment
within one year)

Long-term

Fixed Interest Rate
Variable Interest Rate

Changes in LTV

1,464

1.8%

Short-term

78.5%(*) Long-term represents debts with original maturity over one year, and short-term represents debts
with original maturity within one year.

Sompo Japan Insurance Inc.

Total of Bank Loans
124,654
Investment Corporation Bonds(for institutional investors)
6th Investment Corporation Bonds without Collateral
3,000

69.9%

75.7%

Hiroshima Bank, Ltd.
The Shizuoka Bank, Ltd.

21.5%

24.3%

50%

39.0%

20%

40.6%

31.2%

32.1%

FY12/2018(19th Period)

FY12/2019(20th Period)

Appraised LTV

42.2%

41.8%

42.1%

34.2%

33.9%

33.9%

FY12/2020(21st Period)

FY12/2021(22nd Period)

End of June 2022
(Midterm of
23rd Period)

Status of Credit Rating

19

Japan Credit Rating Agency, Ltd.
(JCR)

A+ (negative)

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

A

(negative)

1. Financial Conditions (3)Changes in Appraisal Value

Changes in Appraisal Value (Unrealized Gains)(JPY Bn)

Book Value

500

398.7
400

302.1
300

113.8

Unrealized Gains
439.3
122.1

437.5

525.9

493.3

151.5

126.5

(Based on 41 hotels owned by JHR at the end of June 2022)

486.0

485.4
127.1

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

128.7

130.7

(*3)

End of June
2022

78.7

200

223.3

100

284.9

317.2

306.7

374.3

366.7

358.3

End ofDecember
2021
End ofDecember2020
End ofDecember
2019

357.3

0
Ratio of
Unrealized
Gains
No. ofProperties

Variance
Appraisal Variance of
Variance of Net Cashof NetValue
Flow
Appraisal CAP Rate Cap Rate
(*3)
(*3)
(JPY MM)
Value(JPY MM) Cash Flow

35.2%

39.9%

38.5%

42.6%

40.5%

34.5%

35.5%

36.0%

36

41

44

41

43

42

41

41

FY12/2015 FY12/2016 FY12/2017 FY12/2018 FY12/2019 FY12/2020 FY12/2021(16th Period) (17th Period) (18th Period) (19th Period) (20th Period) (21st Period) (22nd Period)(*) Unrealized gains are calculated by subtracting book value from appraisal value.

41

363,542

486,080

+0.1%

4.6%

(0.0pt)22,121(0.2%)

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) Numbers in this table are for 41 properties after exclusion of Sotetsu Fresa Inn Shimbashi-Karasumoriguchi and ibis
Tokyo Shinjuku.
(*3) Cap rate, variance of cap rate and net cash flow are rounded off.

End ofJune 2022(Midterm of
23rd Period)

Negative Goodwill<Policy for Use of Negative Goodwill>＜Amount planned to be used in FY12/2022＞

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 :JPY13MM

Amortization of trademark rights:

JPY56MM

Total amount:

JPY332MM

Estimated Balance of Negative Goodwill
after the end of December 2022

20

JPY9,643MM

Ⅴ. Market Environment

1. Status of Domestic Accommodation Demand Prior to the COVID-19 pandemic, domestic accommodation demand was generally at 80% of the total demand Domestic accommodation demand for June 2022 have recovered to 93% level of same month in 2019
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

492

510

69

80

400

596

538

116

94

332

300

318
4

311

313

2020
2020年

2021
2021年

100
0

* Ratio of Japanese overnight guests

190
3

480

444

430

423

200

20

2016
2016年

2017
2017年

2018
2018年

2019
2019年

85.9%

84.4%

82.5%

80.6%

187
1H 20222022年1ｰ6⽉

Trend of Number of Japanese Overnight Guests in Domestic Accommodation Facilities (by month)
No. of Japanese Overnight Guests(Guest nights in millions)

60

108%
103%

87% 90%

50
40
30
20
10

70%

59%
36

43%

35
25

27%
21%
11

9

23
16

28

28

78%
65%

57% 53%34

vs 2019

51% 51%

37
29

72%
56%

27
17

102%
90%
84%
80%

18

49%

29
22

20

67%

57% 55%

54%

20

32

31
22

37

39
28

80% 84%

87%

93%

120%
100%
80%

33

33

36

34

60%
40%

23

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.
2020

2021

Source: Statistics of Overnight Travel by Japan Tourism Agency(*) Rounded off to the nearest millions of overnight guests. Numbers for January to May 2022 are second preliminary figure, numbers for June 2022 are first preliminary figure.

22

2022

2. Status of Inbound Visitors Due to the impact by spread of infection by COVID-19, inbound visitors were significantly reduced. Number for the first half2022 reduced by 96.9% from the first half 2019
 On the other hand, gradual easing of entry restriction is continuing
Changes in Number of Inbound Visitors
Full YearFirst Half (Jan.－Jun.)(Thousands people)

35,00028,691

30,00025,00031,191

31,882(99.2%)(vs 2019)

24,03920,000(96.9%)(vs 1H 2019)

16,63315,00010,000
4,115

5,000

3,946
96

507

2021年
1H
2021
1－6⽉

2022年
1H
(*1)
(*1)
2022
1－6⽉

245

0
2016年
2016

2017年
2017

2018年
2018

2019年
2019

2020年
2020

2021年
2021

Source: Number of International Visitors to Japan by Japan National Tourism Organization (JNTO)

2019年
1H
2019
1－6⽉

2020年
1H
2020
1－6⽉

※Trend of entry restrictions
Mar. 12Maximum number of entrant per day(people)Annualized(*3) (thousands people)

(*2)

2021
Aug. 16Nov. 26-

Dec. 1-Mar. 1-2022
Mar. 14Apr. 10-

Jun. 1-

2,000

3,500

5,000

3,500

5,000

7,000

10,00020,000

730

1,277

1,825

1,277

1,825

2,555

3,650

7,300

Source: Asset Management Company based on various reports by media, etc.
(*1) The numbers for January to May 2022 are provisional numbers, and the number s for June are estimated numbers.
(*2) Include re-entry reentry by Japanese citizen and foreigner with qualification for stay.
(*3) Annualized by following calculation. Maximum number of allowed per day x 365. Therefore, this number is not actual maximum number of entrant allowed for the year.

23

3. Status of New Supply of Hotels
 New supply for 2022 is reduced around 2,000 rooms in comparison to the estimate made 6 months ago
Supply of Rooms in Hotels/Ryokans in Japan
As of the end of July 2022
(No. of rooms)
80,000＜Japan＞

20,000

Supply Forecast

54,289 58,709 49,223

60,00040,000

Actual

32,98829,388 28,493

16,517

Reference: as of the end of January 2022(*2)(No. of rooms)
80,00040,00018,654

15,243

Supply Forecast

54,051 59,079 49,115

60,00040,46520,0000＜Japan＞

Actual

32,98835,977

29,681 30,293

16,517

12,9100

Ratio of New Supply

+1.1%

+2.1%

+3.4%

+3.6%

+2.9%

+1.7%

+1.6%

+1.0%

+2.2%

Ratio of New Supply

+1.1%

+2.1%

+3.4%

+3.6%

+2.9%

+1.7%

+1.7%

+0.7%

+2.0%

Excl. Tokyo, Osaka

+0.7%

+1.7%

+2.5%

+2.7%

+2.1%

+1.6%

+1.4%

+0.8%

+1.6%

Excl. Tokyo, Osaka

+0.7%

+1.7%

+2.5%

+2.7%

+2.1%

+1.6%

+1.3%

+0.6%

+1.5%

2024-

(%: change from theprevious year)

2016

2017

2018

2019

2020

2021

2022

2023

2024-

(%: change from theprevious year)

2016

2017

2018

2019

2021

2022

＜Tokyo＞(No. of rooms)
20,0002023(including
undetermined plan)

6,107

5,866

4,775

6,374

+4.1%

+3.8%

+7.4%

+6.5%

+6.8%

+1.6%

+2.4%

+1.2%

(%: change from theprevious year)

2016

2017

2018

2019

2020

2021

2022

2023

＜Osaka＞

+4.1%

+3.8%

+7.4%

+6.5%

+6.8%

+1.6%

+2.7%

+1.1%

+2.7%

(%: change from theprevious year)

2016

2017

2018

2019

2020

2021

2022

2023

2024-

1,402

＜Osaka＞(No. of rooms)
12,000

2,252

4,051

1,507

0

8,445

8,329
6,205

5,018

6,000
3,000

(including
undetermined plan)

10,721

9,000

3,369

2,223

2024-

6,205

5,018

5,537

5,330

+3.1%

9,893

8,329

6,000

3,137

Ratio of New Supply(including
undetermined plan)

10,721

9,000

5,866

0

Ratio of New Supply(No. of rooms)
12,000

6,107

5,000

1,861

0

3,000

10,0002,464(including
undetermined plan)

11,833 11,105 12,483

15,000

3,137

5,000

＜Tokyo＞(No. of rooms)
20,00011,833 11,105 12,483

15,00010,000

2020

3,369

1,402

5,213
1,805

0

Ratio of New Supply

+1.8%

+6.3%

+9.9%

+11.6%

+6.0%

+3.1%

+2.0%

+3.5%

+8.3%

Ratio of New Supply

+1.8%

+6.3%

+9.9%

+11.6%

+6.0%

+3.1%

+4.6%

+1.5%

+7.0%

(%: change from theprevious year)

2016

2017

2018

2019

2020

2021

2022

2023

2024-

(%: change from theprevious year)

2016

2017

2018

2019

2020

2021

2022

2023

2024-

(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) The figures were announced in the Financial Results Briefing for the fiscal year ended December 2021.

24

Ⅵ. Takeaways

1. Takeaways
Pre
COVID-19

With
COVID-19

Post
COVID-19

ChangeSense ofSocial &values/economic

Lifestyleactivity

Leisuredemand(quantity andquality)

FinancialmarketSociety

Guests'Investment

needs

opportunity

Hotel market

Respond flexibly to change
Aim to become a front-runneradopting to
the "post COVID-19" period

Survivethe "with COVID-19" period
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 August 24, 2022)

2021 Results(annualized)
Fixed rent only

Variable rent, etc.(*)

Variable rent, etc.(*)

38.4%

29.9%

Fixed rent, etc.

Fixed rent, etc.

61.6%

70.1%

(*)

10 properties
Variable rent, etc.(*)

31 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
 Although Covid-19 has not been
converged yet, signs of a recovery trend
in domestic demand have gradually
begun to appear as restrictions on
activities have been eased. Even though
the market environment remains
unstable due to the possibility ofre-spread of infection by mutant strains
and rising prices of raw materials, hotelrevenues are expected to continue its
improvement, driven by the recovery ofdomestic leisure demand.
 As for the hotel transaction market, while
many investors remain cautious about
hotel investment due to the uncertaintyof the hotel market, foreign funds, etc.
are actively considering hotel investment
with expectations of a hotel market
recovery and an easing attitude toprovide finance for hotel asset byfinancial institutions. Such conditions maylead to a gradual increase in hoteltransactions.
 For medium to long term, demand fordomestic and overseas accommodations
are expected to recover as a result of
promotion of vaccination anddevelopment of effective therapeutic
drugs for COVID-19. As the market
recovers, the hotel investment may berevitalized again. However, thecompetitiveness of hotels is becoming
more evident in accordance with the
hotel specifications, locations, and theabilities of hotel operators, and it isimportant to differentiate each hotel.

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), and locations ofhotel 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• In the case of "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 specialized in selling single rooms, consider acquisition individually, and take thehotel specifications and the possibility of achieving the upside into account• Especially, proactively review the purchase of hotels that have potential for internal growth byimplementing active asset management strategy or hotels that synergy effect are expected with theexisting properties Strategic investment areas• Hokkaido area, Tokyo and bay area, Osaka/Kyoto area, Fukuoka area, and Okinawa area
 Investigation and planning of the internal growth strategy upon property acquisition• Investigate the appropriate rent level and rent structure upon renewal, etc., cost reduction possibilities,
and possibilities to improve buildings and facilities• Particularly, if the hotel pays variable rent, etc., promote internal growth through collaboration withlessees and/or operators
 Use HMJʻs efficient hotel operation platform and know-hows to improve operation, etc. to respond to newinvestment opportunities which never seen before (such as sales of hotels with intention to off-balance
asset or sales without operators, etc.), because these were caused by the impact of COVID-19

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

 The impact of COVID-19 on Japan's
tourism and hotel industries is stillongoing. On the other hand, the hotel
market is expected to enter a real
recovery phase as demand, especiallydomestic demand, is showing trend ofrecovery and the acceptance of inboundtourists is expected to increase gradually.
 Although there are supply-demand
imbalances depending on the market due
to the continued supply of new hotels
against the backdrop of robust hotel
demand in recent years, we believe there
are no changes to the medium to longterm trend of expansion in the tourism
market accompanying economic growthin the Asia region.
 Even under the severe market
environment, hotel operators that havemaintained sound management andimproved their revenue structure are
expected to expand aggressive strategies
during the market recovery period to be
more competitive.

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
 Compared to the first half of 2021, thenumber and total amount of public
offerings by J-REIT in the first half of

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

2022 exceeded those in the first half of2021. Although the TSE REIT Index
temporarily plunged to the 1,800-pointlevel under headwinds such as the 6th
wave of COVID-19, accelerated interest

Key Measures

rate hikes in the U.S., Russiaʻs invasionof Ukraine, and high inflation, the decline
was limited to -4.8% due to inflows offoreign capital and domestic buying
on dips.
 Amid the prolonged impact of the
COVID-19, the financial institutions
maintain a supportive attitude. On theother hand, some sectors including hotels,
financial institutions continuously
expressed cautious stance to provide
long-term loan but upward pressure on
interest rates was reduced.

 Secure the internal reserve and further strengthen the financial base by controlling capital expenditures,etc.
 Maintain good relationship with financial institutions
 Maintain LTV level at a maximum of 50% (total asset base) for the time being
 Diversify financing methods such as public offerings and issuance of investment corporation bonds
 Improve financial stability by diversifying repayment periods and fixing interest rates, etc. as necessary Optimize borrowing costs

 Both short-term and long-term interest
rates remain at low levels due to themonetary easing policy.

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)<FY2022>
Eligible unitholders: 12,286
Valid period: One year between January 1, 2023 to December 31, 2023

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

Hilton Tokyo Odaiba

Namba
Oriental Hotel

Holiday Inn
Osaka Namba

Oriental Hotel
Hiroshima

The Accor Group Hotels

Hotel Nikko Alivila

Hilton Tokyo Narita Airport

Hotel Oriental Express
Osaka Shinsaibashi

Oriental Hotel
Universal City

33

Oriental Hotel Okinawa
Resort & Spa

International Garden Hotel Narita

Hotel Oriental Express
Fukuoka Tenjin

Mercure Sapporo

ibis Styles Sapporo

Mercure Okinawa Naha

ibis Styles Kyoto Station

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 2022)
Existing properties

Total Assets

Strategic Investment Areas

JPY363.5Bn
Hokkaido Area
No. of Hotels

Okinawa Area

41 Hotels(32 in Strategic Investment Areas)

No. of Guest Rooms

11,279 Rooms

Tokyo & Bay Area(*1)

Fukuoka
Area

Osaka/Kyoto Area(*2)(*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.

35

Tokyo 23 wards

2. Portfolio Diversification
 Widely diversified and high-quality portfolio Appeal to inbound visitors by international brands(as of August 24, 2022)

By Area and Rent
Hokkaido
Chubu
3.5%
Chugoku 4.2%
Kyushu5.9%

By Hotel Brand
OthersDormy Inn, etc.

Tokyo

(Kyoritsu Maintenance)

24.8%

10%
Oriental Hotel

4%

(HMJ)

the b 3%(excluding Okinawa)24%

ibis/Mercure

5.7%(Accor)Okinawa7%

12.2%

Hotel Nikko
8%

KansaiKanto(excluding Osaka)(excluding Tokyo)

8.2%

21.2%

Osaka

International
Brand:
51%

Holiday Inn
HiltonSheraton

32%

14.2%

By Grade5%

By Hotel Type

Economy 4%

Mid-price
41%

LuxuryResort21%

22%

Limitedservice
30%

Uppermiddle

Full-service

34%

48%

(*) Calculated based on acquisition price.

36

(IHG)
7%

3. Trend of Asset Size
 Improvement of the quality of JHR's portfolio and successive external growth through strategic asset replacement
Growth in Asset Size, etc. (JPY MM)+21.1%+11.4%(1.2%)(1.8%)

0.0%(3.2%)+27.1%+30.2%
+9.1%

+7.0%

122,285

April 2012
(merger)

286,801

130,883

158,902173,429

319,474

374,508

370,031309,370

363,542

363,542

225,723

FY12/2012 FY12/2013 FY12/2014 FY12/2015 FY12/2016 FY12/2017 FY12/2018 FY12/2019 FY12/2020 FY12/2021(13th Period) (14th Period) (15th Period) (16th Period) (17th Period) (18th Period) (19th Period) (20th Period) (21st Period) (22nd Period)

June 2022(Midterm of
23rd Period)

No. ofProperties

28

28

28

30

36

41

44

41

43

42

41

41

No. ofAcquisition

－

2

2

3

9

5

3

－

2

－

1

－

Acquisition
Price

－

JPY10.8Bn

JPY32.6Bn

JPY15.7Bn

JPY57.0Bn

JPY61.0Bn

JPY32.6Bn－

JPY65.1Bn－

JPY0.8Bn－

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(*)－

JPY2.2Bn

JPY9.8Bn

JPY34.8Bn

JPY78.7Bn JPY113.8Bn JPY122.1Bn JPY130.7Bn JPY151.5Bn JPY126.5Bn JPY127.1Bn

JPY128.7Bn(*) Unrealized gains are calculated by subtracting book value from appraisal value.

37

Aim for Successive Growth+21.4%

4. Rent Structures
Stability

Upside(FY12/2022 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–

JPY2,345MM(17.6%)

JPY2,386MM(17.9%)

JPY6,979MM(52.5%)

JPY1,103MM(8.3%)JPY489MM(3.7%)

JPY13,303MM(100.0%)

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

JPY2,345MM(17.6%)

JPY2,386MM(17.9%)

JPY1,714MM(12.9%)JPY461MM(3.5%)

JPY251MM(1.9%)

JPY7,158MM(53.8%)

Variable Rent
(%)

–

–

JPY5,265MM(39.6%)JPY642MM(4.8%)

JPY237MM(1.8%)

JPY6,145MM(46.2%)

Low

Low

High

High

High

–

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–

Type of
Rent

Real Estate Operating
Revenue(*2)(%)(breakdown)(forecast for FY12/2022)

Involvement inHotel Operation

1) Renewal of building and
CAPEX Paid by JHR
facilities

Total

No. of Properties

10

3

20

4

4

41

Acquisition Price(%)

JPY32,375MM(8.9%)

JPY31,904MM(8.8%)

JPY257,630MM(70.9%)

JPY19,235MM(5.3%)

JPY22,397MM(6.2%)

JPY363,542MM(100.0%)

The Beach Tower Okinawa

Hilton Tokyo Bay

The 14 HMJ Hotels(*4)

Hilton Nagoya

ibis Styles Kyoto Station

Hotel Francs

Smile Hotel
Nihombashi Mitsukoshimae

The Ishin Group Hotels

Mercure Yokosuka

ibis Styles Sapporo

Oriental Hotel Universal City

Chisun Hotel Kamata

Mercure Sapporo

Hotel Oriental Express
Fukuoka Tenjin

Chisun Inn Kamata

Mercure Okinawa Naha

HotelsCANDEO HOTELS
UENO-KOEN
and other hotels

Comfort Hotel Tokyo
Higashi Nihombashi(*1) Rent structure is categorized according to the rent contract for hotels of each asset owned by JHR.
(*2) Revenue arise from trademark rights are excluded.
(*3) Fixed rent includes fixed rent and utility income based on rent contract of non-hotel portion (offices, signage, car parks, retail shops, etc.) of asset owned by JHR.
(*4) During February 2020 through December 2022, The 14 HMJ Hotels adopting full variable rent structure.

38–

5. Property List (1/2)(as of the end of June 2022)
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)

22nd Period(as of December 31, 2021)

23rd Period(as of June 30, 2022)

Appraisal
Value(JPY MM)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

27.0

10,9009,414

14,0004.8%

14,0004.8%

3.0%80,218(43,476)(190,027)

1.3%

2

Oriental Hotel tokyo bay

Full-service

Mid-price

511

Chiba

27.2

19,90016,96432,200

4.4%

32,100

4.4%

5.5%

218,288

159,712

3,435

2.6%

3

Namba Oriental Hotel

Limited-service

Mid-price

258

Osaka

26.3

15,00014,36031,4004.1%

31,200

4.1%

4.1%

166,768

113,861

45,3541.7%

4Oriental Hotel Hiroshima

Full-service

Upper-middle

227

Hiroshima

28.8

4,100

4,064

4,230

4.9%

4,200

4.9%

1.1%

295,904

274,145

232,095

11.7%

5

Hotel Nikko Alivila

ResortLuxury397

Okinawa

28.2

18,90017,73328,8004.8%

28,9004.8%

5.2%

47,089(26,235)(157,446)

3.0%

6

The Beach Tower Okinawa

ResortMid-price

280

Okinawa

18.3

7,610

6,428

9,980

4.4%

9,960

4.4%

2.1%

255,531234,445

178,086

6.2%

7

Hakone Setsugetsuka

ResortMid-price

158

Kanagawa

15.7

4,070

3,552

5,260

4.9%

5,260

4.9%

1.1%

147,469

134,928

85,980

6.6%

8

Dormy Inn Kumamoto

Limited-service

Mid-price

291

Kumamoto 14.4

2,334

2,177

2,950

5.6%

2,930

5.6%

0.6%

97,23086,29459,9247.4%

9

the b suidobashi

Limited-service

Mid-price

99

Tokyo

35.8

1,120

1,173

2,280

4.1%

2,270

4.1%

0.3%

15,0008,943(5,343)

1.6%

10

dormy inn・global cabin Asakusa

Limited-service

Economy

75

Tokyo

25.3

999

930

1,300

4.0%

1,300

4.0%

0.3%

32,53728,13521,931

5.6%

11

Hakata Nakasu Washington Hotel
Plaza

Limited-service

Mid-price

247

Fukuoka

27.3

2,130

2,050

4,530

4.4%

4,510

4.4%

0.6%

120,000

113,000

101,000

10.6%

12

Nara Washington Hotel Plaza

Limited-service

Mid-price

204

Nara

22.3

2,050

1,719

2,430

5.0%

2,430

5.0%

0.6%

75,00066,00048,000

6.5%

13

R&B Hotel Ueno-hirokoji

Limited-service

Economy

187

Tokyo

20.2

1,720

1,785

1,900

4.0%

1,850

4.1%

0.5%

48,65441,50133,094

4.8%

14

Comfort Hotel Tokyo Higashi
Nihombashi

Limited-service

Economy

259

Tokyo

14.4

3,746

3,439

5,340

4.4%

5,370

4.4%

1.0%

135,763

120,780

102,172

6.4%

15

Smile Hotel Nihombashi
Mitsukoshimae

Limited-service

Economy

164

Tokyo

25.3

2,108

2,020

2,930

4.1%

2,940

4.1%

0.6%

67,20059,06949,094

5.6%

16

Toyoko Inn Hakata-guchi Ekimae

Limited-service

Economy257

Fukuoka

20.8

1,652

1,373

2,760

4.5%

2,760

4.5%

0.5%

70,51963,691

54,5907.7%

17Oriental Hotel Universal City

ResortMid-price

330

Osaka

21.0

6,753

7,472

16,7004.9%

17,7004.8%

1.9%

178,499

151,023

38,007

4.4%

18

Chisun Inn Kamata

Limited-service

Economy

70

Tokyo

19.2

823

776

1,370

4.6%

1,370

4.6%

0.2%

3,826

310

(5,756)0.9%

19Chisun Hotel Kamata

Limited-service

Economy

105

Tokyo

30.4

1,512

1,453

2,020

4.8%

2,020

4.8%

0.4%

4,342

(2,784)(18,828)

0.9%

20

Hilton Tokyo Bay

ResortLuxury

828

Chiba

34.0

26,05026,08740,3004.3%

40,400

4.3%

7.2%

990,117849,617754,582

6.5%

21

ibis Styles Kyoto Station

Limited-service

Mid-price

215

Kyoto

13.2

6,600

6,600

9,990

4.3%

9,990

4.3%

1.8%

23,161(8,471)(24,953)

0.4%

22

ibis Styles Sapporo

Limited-service

Mid-price278

Hokkaido

11.9

6,797

6,426

11,100

4.7%

11,1004.7%

1.9%

34,419(8,176)(48,517)

1.4%

23

Mercure Sapporo

Limited-service

Mid-price285

Hokkaido

13.2

6,000

5,687

10,5004.7%

10,5004.7%

1.7%

65,180(10,953)(55,778)

1.1%

24

Mercure Okinawa Naha

Limited-service

Mid-price

260

Okinawa

12.9

3,000

2,796

6,950

4.7%

6,940

4.7%

0.8%

4,746

(14,756)(46,549)(0.7%)

39

5. Property List (2/2)(as of the end of June 2022)
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)

22nd Period(as of December 31, 2021)

23rd Period(as of June 30, 2022)

Appraisal
Value(JPY MM)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

40.0

6,520

6,566

7,230

4.2%

7,160

4.2%

1.8%

238,936

224,694

211,407

5.6%

26

the b hachioji

Limited-service

Mid-price

196

Tokyo

35.9

2,610

2,686

2,570

5.1%

2,560

5.1%

0.7%

33,326

21,289

3,394

1.8%

27

the b hakata

Limited-service

Mid-price

175

Fukuoka

24.8

2,300

2,351

4,340

4.3%

4,320

4.3%

0.6%

33,261

26,925

15,8432.3%

28

Hotel Francs

Full-service

Mid-price

222

Chiba

30.9

3,105

3,121

4,040

4.7%

4,040

4.7%

0.9%

150,000

118,969

96,4347.7%

29

Mercure Yokosuka

Full-service

Mid-price

160

Kanagawa

28.7

1,650

1,616

3,360

4.6%

3,360

4.6%

0.5%

88,136

37,164

18,6453.8%

30

Oriental Hotel Okinawa Resort & Spa

ResortUpper-middle

361

Okinawa

17.4

14,95015,10517,3004.9%

17,800

4.9%

4.1%

–

(41,504)(187,524)

0.9%

31

ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel)

Full-service

Luxury238

Hiroshima

11.8

17,32017,14020,7004.6%

20,7004.6%

4.8%

472,920

263,109

155,460

3.7%

32

CANDEO HOTELS UENO-KOEN

Limited-service

Mid-price

268

Tokyo

12.5

6,705

6,560

7,440

4.0%

7,440

4.0%

1.8%

174,985

162,063

141,910

4.8%

33

Oriental Hotel Fukuoka Hakata Station

Full-service

Upper-middle

221

Fukuoka

37.0

7,197

8,977

15,200

4.6%

15,2004.6%

2.0%

187,475

63,980(126,690)

4.5%

34

Holiday Inn Osaka Namba

Limited-service

Mid-price

314

Osaka

13.9

27,00026,72826,6004.3%

26,500

4.3%

7.4%

106,786

82,40922,5720.4%

35Hotel Oriental Express Fukuoka Tenjin

Limited-service

Mid-price

263

Fukuoka

23.2

5,248

5,845

6,520

4.8%

6,620

4.7%

1.4%

136,222

93,45949,354

3.6%

36Hilton Nagoya

Full-service

Luxury

460

Aichi

33.3

15,25015,53014,8004.2%

14,8004.2%

4.2%

430,075

126,206

36,402

1.7%

37

Hilton Tokyo Narita Airport

Full-service

Upper-middle

548

Chiba

28.9

13,175

13,164

13,6004.6%

13,5004.6%

3.6%

65,29025,132(75,448)0.1%

38International Garden Hotel Narita

Full-service

Mid-price

463

Chiba

26.1

9,125

9,050

9,520

4.8%

9,520

4.8%

2.5%

111,105

89,264

11,682

1.5%

39

Hotel Nikko Nara

Full-service

Upper-middle

330

Nara

24.3

10,373

10,194

9,800

4.8%

9,870

4.8%

2.9%

8,053

(15,335)(89,120)1.1%

40

Hotel Oriental Express Osaka
Shinsaibashi

Limited-service

Mid-price

124

Osaka

4.4

2,738

2,808

2,840

4.7%

2,890

4.7%

0.8%

–

(7,018)(14,868)(0.5%)

41

Hilton Tokyo Odaiba

Full-service

Upper-middle

453

Tokyo

26.5

62,40063,377

68,4003.7%

67,800

3.7%

17.2%

–

(164,625)(312,450)

0.6%

–

–

11,279–24.1

363,542357,316

485,480–

486,080–

100.0%

5,414,765 3,497,576 1,212,069

2.6%

Total or Average(*1) Under the category of Hotel Type, "Full-service" is full-service hotel, "Resort" is resort hotel, and "Limited-service" is limited-service hotel.
(*2) Mainly based on ADR, etc., JHR has classified the hotels into four categories as "luxury," "upper-middle," "mid-price," and "economy."(*3) Average age: Weighted average calculated as follows. The sum of (acquisition price of each property x property age)/total acquisition price.
(*4) The acquisition price in the Purchase & Sale Agreement for the Beneficial Interest in Trust or real estate is indicated. (Consumption tax, amount equivalent to consumption tax, brokerage fee, and other purchase-related costs are excluded.)(*5) Book value as of the end of June 2022.
(*6) Investment ratio indicate percentage of the acquisition price of each asset to the total acquisition price. Numbers beyond one decimal place is rounded off.
(*7) Actual for six months from January to June 2022. 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.
(*8) NOI yield (Estimate) is estimate for full year FY2022. NOI yield (estimate) of portfolio is calculated as follows: Total NOI for FY12/2022 (estimate) / total acquisition price of properties held as of the end of June 2022.

40

6. Summary of Lease Contracts (1/3)(as of the end of June 2022)
No.

Property Name

Lease
Type

Rent
Structure(*1)

LesseeHotel Operator/
Lease/ Expiration
Hotel Consulting andMC
Date ofManagement Company Term Contract

Contractual Rent(*2)

1

Kobe Meriken Park Oriental Hotel【2022】 Hotel AGOP x 86%(If the AGOP is below JPY0, it will be JPY0)【2023】 For The Five HMJ Hotels JPY3,221MM/
year + when Hotel AGOP exceeds JPY4,120MM,
the excess x 85% is paid

2

Oriental Hotel tokyo bay【2022】 Hotel AGOP x 79%(If the AGOP is below JPY0, it will be JPY0)【2023】 For The Five HMJ Hotels JPY3,221MM/
year + when Hotel AGOP exceeds JPY4,120MM,
the excess x 85% is paid

Hotel Management Japan Co., Ltd.
3

Namba Oriental Hotel

Fixedlease

Fixed +
Variable

15

Rent Modification Summary

Rent Modification Summary(After acquisition)
Timing【2022】Hotel AGOP x 91%(If the AGOP is below JPY0, it will be JPY0)
In principle, the same rent will
be applied until expiration of
Dec. 2034 【2023】 For The Five HMJ Hotels JPY3,221MM/
year + when Hotel AGOP exceeds JPY4,120MM, the contract.
the excess x 85% is paid

Condition

Modified Structure(variable rent only fromFebruary 2020 to December
Feb. 2022
2022)(variable rent ratio waschanged for 2023 onwards)

Rent Modification Schedule(2022 to 2023)
2022

2023

–

–

【2022】 Hotel AGOP x 89%(If the AGOP is below JPY0, it will be JPY0)【2023】 For The Five HMJ Hotels JPY3,221MM/
year + when Hotel AGOP exceeds JPY4,120MM,
the excess x 85% is paid

4

Oriental Hotel Hiroshima

5

Hotel Nikko Alivila

6

The Beach Tower Okinawa

Fixedlease

Fixed

20

Jun. 2026 JPY42MM/month

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

–

–

–

–

7

Hakone Setsugetsuka

Fixedlease

Fixed

20

Oct. 2026 JPY24MM/month

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

–

–

–

–

【2022】 Hotel AGOP x 74%(If the AGOP is below JPY0, it will be JPY0)【2023】 For The Five HMJ Hotels JPY3,221MM/
year + when Hotel AGOP exceeds JPY4,120MM,
the excess x 85% is paid

Okura Nikko HotelManagement Co., Ltd.

Kyoritsu Maintenance Co., Ltd.
8

Dormy Inn Kumamoto

Fixedlease

Fixed

12

Mar. 2023 JPY16MM/month

Rent can be modified throughmutual agreement every three
years.

Apr. 2020

Same–

To be expired(Mar.)

9

dormy inn・global cabin Asakusa

Lease

Fixed

3

Mar. 2023 JPY5MM/month

Rent can be modified throughmutual agreement every three
years.

Apr. 2020

Same–

To be expired(Mar.)

10

Hakata Nakasu Washington Hotel
Plaza

Lease

Fixed

3

Mar. 2024 JPY20MM/month

Rent can be modified throughmutual agreement.

Apr. 2021

Same

–

–

11

Nara Washington Hotel Plaza

Lease

Fixed

3

Mar. 2023 JPY11MM/month

Rent can be modified throughmutual agreement.

Mar. 2020

Same–

To be expired(Mar.)

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. 2023 JPY11MM/month + Revenue sharing

Rent can be modified throughmutual agreement.

Mar. 2020

Same–

To be expired(Mar.)

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%)––

Washington Hotel K.K.

41

6. Summary of Lease Contracts (2/3)(as of the end of June 2022)
No.

Property Name

Lease
Type

Rent
Structure(*1)

16

Oriental Hotel Universal City (*4)

Fixedlease

Fixed +
Variable

17

Chisun Inn Kamata

Fixedlease

Variable

Hotel Operator/
Lease/ Expiration
Hotel Consulting andMC
Date ofManagement Company Term Contract

LesseeK.K. Osaka Sakurajima Operations

Solare Hotels &Resorts Co., Ltd.

18

Chisun Hotel Kamata (*5)

Fixedlease

Variable

19

Hilton Tokyo Bay

Fixedlease

Fixed +
Revenuesharing

20

ibis Styles Kyoto Station–

Management
contract

21

ibis Styles Sapporo–

Management
contract

THE DAI-ICHI
BUILDING CO., LTD.

–

Contractual Rent(*2)

JPY350MM/year + when Hotel AGOP exceeds
JPY370MM, the excess x 95% is paid (Fixed
10.5 Dec. 2031 rent payments from June 2021 to June 2022
are waived. The starting date for calculation ofvariable rent is January 1, 2022.)

Rent Modification Summary

Rent Modification Summary(After acquisition)

Rent Modification Schedule(2022 to 2023)

TimingCondition

2022

2023

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

Jul. 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

–

–

5

Dec. 2025

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

Jan. 2021

Change in lessee andModified Structure

–

–

4

Dec. 2022 JPY163MM/month + Revenue sharing

Rent can be modified throughmutual agreement.

Jan. 2019

Renewed(Increased)

To be expired(Dec.)–

12

Dec. 2024 Amount equivalent to hotel GOP

–

–

–

–

–

10

Dec. 2024 Amount equivalent to hotel GOP

–

–

–

–

–

SHR Hotels, Co., Ltd.

Hilton International
Company

AAPC Japan K.K.

22

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

–

–

–

–

–

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)

–

–

25

the b ikebukuro

Fixedlease

Fixed +
Variable

Ishin Ikebukuro Operations K.K.

9.5

Jul. 2024【2021】JPY38MM/year + Linked to hotel AGOP
【2022】JPY80MM/year + Linked to hotel AGOP

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

Oct. 2020

Fixed rent was changed(Reduction)

–

–

26

the b hachioji

Fixedlease

Fixed +
Variable

Ishin Hachioji Operations, Y.K.

9.5

Jul. 2024【2021】JPY21MM/year + Linked to hotel AGOP
【2022】JPY45MM/year + Linked to hotel AGOP

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

Oct. 2020

Fixed rent was changed(Reduction)

–

–

27

the b hakata

Fixedlease

Fixed +
Variable

Ishin Hakata Operations K.K.

9.5

Jul. 2024【2021】JPY28MM/year + Linked to hotel AGOP
【2022】JPY59MM/year + Linked to hotel AGOP

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

Oct. 2020

Fixed rent was changed(Reduction)

–

–

28

the b suidobashi

Fixedlease

Fixed +
Variable

Ishin Suidobashi Operations K.K.

5

Dec. 2026【2021】JPY13MM/year + Linked to hotel AGOP
【2022】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.

–

–

–

–

10

【2022】Hotel AGOP x 89%(If the amount is below JPY0, it will be JPY0)
Dec. 2030【2023】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.

–

–

11

Dec. 2026【2022】Hotel AGOP x 93%(If the amount is below JPY0, it will be JPY0)【2023】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.

–

–

30

Oriental Hotel Okinawa Resort &Spa (*6)

Fixedlease

Fixed +
Variable31

ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel)

Fixedlease

Fixed +
Variable

Lagoon resort Nago Co., Ltd.

K.K. A.I.C Hiroshima
Management

Luxury Hotels
International of
Hong Kong Limited

42

Modified Structure(variable rent only fromFebruary 2020 to December
Feb. 2022
2022)(variable rent ratio waschanged for 2023 onwards)
Modified Structure(variable rent only fromFebruary 2020 to December
Feb. 2022
2022)(variable rent ratio waschanged for 2023 onwards)

6. Summary of Lease Contracts (3/3)(as of the end of June 2022)
No.

32

Property NameCANDEO HOTELS UENO-KOEN

Lease
Type
Fixedlease

Rent
Structure
(*1)
Fixed

LesseeHotel Operator/
Lease/ Expiration
Hotel Consulting andMC
Date ofManagement Company Term Contract

Candeo Hospitality Management, Inc.

Contractual Rent
(*2)

20

Feb. 2030 Nondisclosure(*3)

Rent can be modified throughmutual agreement every three
years.
In principle, the same rent will
be applied until expiration of
the contract.

【2022】Hotel AGOP x 98%(If the amount is below JPY0, it will be JPY0)【2023】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.

33

Oriental Hotel Fukuoka Hakata
StationFixedlease

Fixed +
Variable

Hotel Centraza Co., Ltd.

15【2022】Hotel AGOP x 97%(If the amount is below JPY0, it will be JPY0)
Dec. 2034【2023】JPY425MM/year + when Hotel AGOP
exceeds JPY442MM, the excess x 98% is paid

34

Holiday Inn Osaka Namba

Fixedlease

Fixed +
VariableOW Hotel Operations KK

15

Oct. 2031

35

Hotel Oriental Express Fukuoka
Tenjin (*7)

Fixedlease

Fixed +
Variable

36

Hilton Nagoya

Lease

Variable

K.K Fukuoka Tenjin Operations

Nagoya Hilton Co.,Ltd.

Hilton International
Company

Rent Modification Summary

JPY150MM/year + when Hotel AGOP exceeds
JPY165MM, the excess x 97% is paid (Fixed
10.5 Dec. 2031 rent payments from June 2021 to June 2022 iswaived. The starting date for calculation ofvariable rent is January 1, 2022.)
41

37

Hilton Tokyo Narita Airport

Fixedlease

Fixed +
Variable

KK NaritaKosuge Operations

20

38

International Garden Hotel Narita

Fixedlease

Fixed +
Variable

KK NaritaYoshikura Operations

10

39

Hotel Nikko Nara

Fixedlease

Fixed +
Variable

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

1040

Hotel Oriental Express Osaka
Shinsaibashi

Fixedlease

Fixed +
Variable

K.K. HOTEL ORIENTAL EXPRESS

1041

Hilton Tokyo Odaiba

Fixedlease

Fixed +
Variable

Tokyo Humania Enterprise Inc.

11

Dec. 2029 Nondisclosure(*3)

Rent Modification Summary(After acquisition)
TimingCondition

2022

2023

Jul. 2016

Nondisclosure(*3)

–

–

–

–

–

–

Modified Structure(variable rent only fromFebruary 2020 to December
Feb. 2022
2022)(variable rent ratio waschanged for 2023 onwards)
Modified Structure(variable rent only fromFebruary 2020 to December
Feb. 2022
2022)(variable rent ratio waschanged for 2023 onwards)

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

Jun. 2021

Change in lessee andModified Structure––

Rent can be modified throughmutual agreement.

–

–

–

–

–

–

–

–

–

–

–

–

–

–

Modified Structure(variable rent only fromIn principle, the same rent will
February 2020 to December
be applied until expiration of the Feb. 2022
2022)
contract.
(variable rent ratio waschanged for 2023 onwards)
Modified Structure(variable rent only from【2022】Hotel AGOP x 95%
In principle, the same rent will
February 2020 to December(If the amount is below JPY0, it will be JPY0)
be applied until expiration ofFeb. 2022
Jun. 2027
2022)【2023】JPY336MM/year + when Hotel AGOP
the contract.
(variable rent ratio was
exceeds JPY360MM, the excess x 98% is paidchanged for 2023 onwards)
Modified Structure(variable rent only from【2022】Hotel AGOP x 95%
In principle, the same rent will
February 2020 to December(If the amount is below JPY0, it will be JPY0)
be applied until expiration ofFeb. 2022
Dec. 2030
2022)【2023】JPY420MM/year + when Hotel AGOP
the contract.
(variable rent ratio was
exceeds JPY440MM, the excess x 95% is paidchanged for 2023 onwards)
Modified Structure(variable rent only from【2022】Hotel AGOP x 87%
In principle, the same rent will
February 2020 to December(If the amount is below JPY0, it will be JPY0)
be applied until expiration ofFeb. 2022
Mar. 2028
2022)【2023】JPY110.4MM/year + when Hotel AGOP
the contract.
(variable rent ratio was
exceeds JPY128MM, the excess x 91% is paidchanged for 2023 onwards)
Modified Structure【2022】Hotel AGOP x 97%(variable rent only fromIn principle, the same rent will
(If the amount is below JPY0, it will be JPY0)
February 2020 to December
Dec. 2029
Feb. 2022
be applied until expiration of2022)【2023】JPY1,600MM/year + when Hotel AGOP
the contract.
exceeds JPY1,660MM, the excess x 98% is paid(variable rent ratio waschanged for 2023 onwards)【2022】Hotel AGOP x 95%(If the amount is below JPY0, it will be JPY0)
Jun. 2037【2023】JPY444MM/year + when Hotel AGOP
exceeds JPY450MM, the excess x 93% is paid(*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.

43

Rent Modification Schedule(2022 to 2023)

7. The Five HMJ Hotels ̶ Highlights
Changes in GOP and GOP ratio(JPY MM)
10,000GOP

GOP ratio

50%

8,000

6,296
GOP

4,000

27.0%

24.3%

5,696
26.6%

6,155

5,645

5,158

26.5%

25.5%

28.0%

28.3%

29.9%

7,765

8,033

31.8%

32.8%

34.2%

7,793

40%

23.5%

33.7%

7.3%

2,000

0
CY2008

CY2009CY2010CY2011CY2012

CY2013

CY2014

CY2015

CY2016

CY2017

CY2018CY2019

3,236

9.5%

30%

20%

GOP ratio

5,136

6,000

6,302

6,941

7,591

10%

695

851

CY2020CY20210%
CY2022(forecast)(forecast)

Changes in KPI(JPY)
28,00020,00077.9%
17,97077.8%
18,463

RevPAR
73.8%
17,197OCC
80.4%

15,98016,00012,00013,99914,367

12,696

12,845

76.7%

15,846

12,160

82.7%

86.1%

86.9%

87.7%

88.4%

91.0%

20,153

19,85689.9%
22,197

16,20013,40017,297

14,886

17,551

15,245

19,212

16,84317,80718,06019,954

90.5%

100%

21,067
16,895
19,06640.0%

14,471

6,756
CY2007

CY2008

CY2009CY2010CY2011CY2012

CY2013

CY2014

CY2015

CY2016

CY2017

CY2018CY2019(*) Since May 2019, in order to avoid dispersion on ADR and RevPAR between hotels caused by existence of service charge, numbers are changed to include service charge.

44

CY202080%

16,807

60%

40%

39.5%

8,000
4,000

69.8%

11,7275,715
CY2021

CY2022(forecast)(forecast)

20%

0%

OCC

ADR・RevPAR

24,000ADR

8. 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 August 24, 2022)

Total Assets

JPY363.5Bn

Strategic Investment Areas

1

2

3

4

5

Kobe Meriken Park
Oriental Hotel

Oriental Hoteltokyo bay

Namba
Oriental Hotel

Oriental Hotel
Hiroshima

10

11

12

13

the b
suidobashi

dormy inn・
global cabin
Asakusa

Hakata Nakasu
Washington
Hotel PlazaNara Washington R&B Hotel
Hotel Plaza
Ueno-hirokoji

18

19

20

Chisun Inn
KamataChisun Hotel
KamataHilton Tokyo Bay

6

7

8

Existing properties

No. of Hotels

Limited-service hotel

41 Hotels

Full-service hotel

22 23

Resort hotel

Hokkaido Area

No. of Guest Rooms

9

Hotel Nikko Alivila

The BeachTower Okinawa

HakoneSetsugetsuka

Dormy Inn
Kumamoto

14

15

16

17

Comfort HotelTokyo Higashi
Nihombashi

Smile Hotel
Nihombashi
Mitsukoshimae

Toyoko Inn
Hakata-guchi
EkimaeOriental Hotel
Universal City

21

22

23

24

25

ibis Styles
Kyoto Station

ibis Styles
SapporoMercureSapporoMercureOkinawa Naha

the b ikebukuro

11,279 Rooms
Tokyo & Bay Area

Osaka/Kyoto Area

26

21

3 17 34 40

37 38

7

Fukuoka
Area
11 16

29

27 33 35

2 20

27

28

29

30

31

32

the b hachioji

the b hakata

Hotel Francs

MercureYokosuka

Oriental Hotel
ACTIVE-INTER CITY
Okinawa Resort & Spa HIROSHIMA (Sheraton
Grand Hiroshima Hotel)

33

12 39
4 31

1

Tokyo 23 wards
25
9

30

24

26

36

8

5

28

13 32

10
14

CANDEOHOTELS
UENO-KOEN

Oriental Hotel
Fukuoka
Hakata Station

34

35

36

37

38

39

40

41

Holiday Inn
Osaka Namba

Hotel Oriental
Express
Fukuoka Tenjin

Hilton Nagoya

Hilton Tokyo
Narita Airport

International
Garden Hotel
NaritaHotel Nikko Nara

Hotel Oriental
Express Osaka
Shinsaibashi

Hilton Tokyo Odaiba

15

6

41
18 19

45

9. Balance Sheet(Unit: JPY MM)
FY12/2021
End ofFiscal Year(as of) December 31,
2021

FY12/2022
End of
Midterm
June 30,2022

FY12/2021
End ofFiscal Year(as of) December 31,
2021

Variance

ASSETS

FY12/2022
End of
Midterm
June 30,
2022

Variance

41,265

51,238

9,973

1,426

682

(744)

24,00232,436

8,434

LIABILITIES

32,64030,560(2,080)30,29628,067(2,229)

1,750

1,941

190

Short-term Loans

593

551

(41)

Current Portion of Investment Corporation Bond

6,000

6,000

ー

361,531360,789(742)

Current Portion of Long-term Loans Payable

8,434

11,172

2,738

Net Property and Equipment

326,143

325,203(940)

Accounts Payable

712

570

(141)

Buildings in Trust(*2)

111,807

110,853(953)

Advances Received

658

355

(303)

Land in Trust

212,263

212,263

ー

31

22

(8)

2,073

2,086

12

131,516

120,329(11,186)

32,70432,578(125)

Investment Corporation Bonds

34,10034,100

ー

2,683

3,006

323

Long-term Loans Payable

92,21881,046(11,172)

4,654

4,672

17

Current Assets
Cash and Deposits(*1)
Operating Accounts Receivables
OthersNoncurrent Assets

Others(*3)

Intangible Assets
Other Assets

152

152

ー

Others

2,531

2,854

Deferred Assets

151

133

Leasehold and Security Deposits

Current Liabilities
Operating Accounts Payable

OthersLong-term Liabilities

Tenant Leasehold and Security Deposits

323

Derivative Liabilities

202

28

(174)

(17)

Others

340

482

142

172,781

171,568(1,213)

187,194

187,194

ー

Capital Surplus

21,746

21,746ーReserve for Temporary Difference Adjustment

10,311

9,976

(335)

Reserve for Special Advanced Depreciation

1,174

1,174

ー

Unappropriated Retained Earnings

1,300

(470)

(1,770)

Others

(185)

293

478

221,542219,914(1,627)394,323

391,483(2,840)TOTAL LIABILITIESNET ASSETS
Unitholders' Capital

TOTAL NET ASSETSTOTAL ASSETS

394,323

391,483(2,840)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.

46

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 2021

As of the end of June 2022

Name

Rank

No. of Units

%(*)

Rank

Name

No. of Units

%(*)

1

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

723,372

16.19

1

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

757,896

16.96

2

Custody Bank of Japan, Ltd. (Trust)

473,663

10.60

2

Custody Bank of Japan, Ltd. (Trust)

664,123

14.86

3

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

196,659

4.40

3The Nomura Trust and Banking Co., Ltd. (Investment Trust)

217,540

4.86

4Custody Bank of Japan, Ltd. (Securities Investment Trust)

184,396

4.12

4SDSS K INVESTCO LIMITED

117,567

2.63

5

SDSS K INVESTCO LIMITED

117,567

2.63

5

BNYM AS AGT/CLTS 10 PERCENT

80,713

1.80

6

ELLIOTT INTERNATIONAL LP

76,823

1.71

6

STATE STREET BANK CLIENT - TREATY 505234

70,215

1.57

7

STATE STREET BANK CLIENT - TREATY 505234

71,249

1.59

7

STATE STREET BANK AND TRUST COMPANY 505103

68,416

1.53

8

THE BANK OF NEW YORK MELLON 140044

63,021

1.41

8

GOLDMAN SACHS INTERNATIONAL

64,2301.43

9SSBTC CLIENT OMNIBUS ACCOUNT

62,5471.40

9SSBTC CLIENT OMNIBUS ACCOUNT

62,291

1.39

59,668

1.33

10 JP MORGAN CHASE BANK 385781

58,8951.31

2,028,965

45.42

2,161,886

48.39

10 JP MORGAN CHASE BANK 385781
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 2021 and the end of June 2022, respectively (rounded down to two decimal places).

Classifications of Unitholders
As of the end of December 2021 No. of Investors
OwnersNo. ofInvestors

No. ofUnits

Individuals & Others

30,521

414,518

Financial Institutions(Incl. Securities Firms)

86

1,825,210

Other Domestic Firms

374

117,774

Foreign Firms &Individuals

500

2,109,504

Total

31,481 4,467,006

As of the end of June 2022

No. of Units

0.2% 1.1%
1.5%

9.2%

47.2%

40.8%

96.9%

No. ofInvestors

No. ofUnits

Individuals & Others

30,013397,277

Financial Institutions(Incl. Securities Firms)

72

1,772,086

Other Domestic Firms

367

116,608

Foreign Firms &Individuals

491

2,181,035

Total

2.6%
Individuals &OthersOwnersFinancial Institutions(Incl. Securities Firms)

Other Domestic
Firms

30,943 4,467,006

No. of Investors

No. of Units

0.2% 1.1%
1.5%

8.8%

48.8%

39.6%

96.9%
2.6%

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).

48

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:

JPY69,000

Total market capitalization:

JPY308.2Bn

Market Capitalization
Investment Unit Price of JHR(JPY)
120,000

100,000(based on the closing price of July 29, 2022)(*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. Withreference to the risk of investment in JHR
units, please see Securities Report dated
March 24, 2022.
(*2) Including OA

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

Jun. 2015
Jan. 2016
Jun. 2017
Jan. 2019
Mar. 2021
PO(*2) JPY10.7Bn PO(*2) JPY14.6Bn PO(*2) JPY18.6Bn PO(*2) JPY33.3Bn TPA(*3) JPY0.3Bn(JPY MM)

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

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

Apr. 2013
PO JPY20.5Bn

300,000

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

40,00020,00000(*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.

450,000

600

Investment Unit Price of JHR

TSE REIT Index

500

400

300

200

100

0

49

TOPIX

Appendix 4
Summary of the Asset Management Company

1. Summary of the Asset Management Company(as of July 1, 2022)
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

Registration and Licenses

Discretionary Transaction Agent by Minister of Land, Infrastructure, Transport and Tourism No. 38
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 Group51

Finance GroupAccounting Group2. Features and Governance of the Asset Management Company
 Since JHR marked 10th anniversary from its rebirth in April 2022, JHRA has redefined its mission statement for next ten
years while significant changes are ongoing in worldwide environment

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

Challenge

and a pioneer for the future of hotel industry.
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
communication52

2. Features and Governance of the Asset Management Company (cont.)
Advanced Expertise Ability to propose transaction scheme, execute transaction, and plan and execute unprecedented measures of asset
management based on in-depth understanding of hotel operation and track record of such asset management.
 Extensive experience of renovation and rebranding through collaboration with many hotel lessees and hotel operators.
 Strong and long-term relationships with a large number of hotel lessees and hotel operators.
 High analytical skills and accurate judgement 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
number of full-time directors who are not related to the sponsor, and one part-time auditor who is not related to thesponsor.
 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 who is 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 andunrelated 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 importance of JHRA's independency. JHRA conducts asset management business based uponits own judgement.

53

Disclaimer
This material is prepared and provided solely for the purpose of providing information and not to offer, solicit, or do business, etc. with specific products
including purchase of investment units, investment unit subscription rights, or investment corporation bonds of Japan Hotel REIT Investment Corporation("JHR") or any other particular products. 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 and related government ordinances, Cabinet Office regulations, listing rules by Tokyo Stock Exchange,
Regulations of The Investment Trusts Association, Japan, or other related rules and regulations.
This material contains forward-looking statements about financial conditions, operational results, and businesses of JHR, as well as plans and intentions of JHR
and its asset management company, Japan Hotel REIT Advisors Co., Ltd ("JHRA"). Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors that may cause actual results or performance of JHR to materially differ from those expressed or implied forecasts. Those
forecasts are made based on JHR's present and future business strategies and assumptions relating to the political and economic circumstances surrounding
JHR 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 isaccurate, complete, appropriate or fair. The information may be revised or retracted without prior notice.
Regarding the offering and trading of investment units, investment unit subscription rights or investment corporation bonds, financial institutions may charge
you pre-determined handling fees and other charges aside from the price of the investment units, investment unit subscription rights or investment corporation
bonds. Since neither JHR nor JHRA handles the offering and trading of investment units, investment unit subscription rights or investment corporation bonds,
please ask financial institutions for the amount, upper limit, and calculation methods of such fees and other charges.
JHR mainly invests in real estate-related assets, primarily hotels which are subject to change in values. Therefore, unitholders, holders of investment unit
subscription rights and investment corporation bonds may suffer losses due to economic conditions of the real estate market or securities market, economic
situations including interest rate environment, the nature of investment units, investment unit subscription rights, and investment corporation bonds,
dependency on mechanisms and related persons of investment corporations, 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 trust beneficiary rights under management, delisting of the investment units, or worsening financial position or insolvency of JHR.
For details, please refer to the Articles of Incorporation, Securities Registration Statement, Annual Securities Report and Extraordinary Report, etc. of JHR.
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

54

Memo

55