Japan Hotel REIT Investment Corporation (TSE: 8985)

Financial Results

FY12/2019 (20th Period) February 20, 2020

Japan Hotel REIT Investment Corporation
Japan Hotel REIT Advisors Co., Ltd.

http://www.jhrth.co.jp/en/

Table of Contents
Appendix 1

Ⅰ. Settlement of Accounts for FY12/2019 — Highlights
1. FY12/2019 Highlights

3

Ⅱ. Summary of Settlement of Accounts andRevenue Forecast for the Full Fiscal Year
1. Results for FY12/2019

6

2. Revenue Forecast for FY12/2020

7

3. Balance Sheet

8

Ⅲ. External Growth
1. Successive External Growth10

2. Two New Properties Acquired in 201911

1. Portfolio

13

2. Portfolio Diversification

14

Ⅴ. Internal Growth

1. JHR's Investment Targets

34

2. Simultaneous Pursuit of Stability and Upside Potential

35

3. External Growth Strategy

36

4. Internal Growth Strategy

37

5. Financial Strategy

38

6. Sustainability Initiatives39

7. Benefits Program for Unitholders

41

Appendix 2

Ⅳ. Portfolio

JHR's Characteristics and Strategy

Information on Properties

1. Property List

43

2. Summary of Lease Contracts

45

3. Major CAPEX Ⅲ by Hotels

47

4. The Five HMJ Hotels — Highlights

48

5. Portfolio Map

49

Appendix 3

Investors Composition and Investment Unit Price

1. Rent Structures

16

2. Performance of the 20 Hotels with Variable Rent, etc.

17

3. RevPAR Variance to Previous Year by Region of
the 20 Hotels with Variable Rent, etc. for 2020

18

4. Active Asset Management19

1. Summary of the Asset Management Company

54

5. Capital Expenditure and Depreciation

22

2. Features and Governance of the Asset Management Company

55

24

Ⅶ. Market Environment
1. Market Environment

51

2. Changes in Investment Unit Price and Market Capitalization

52

Appendix 4

Ⅵ. Financial Conditions
1. Financial Conditions

1. Major Unitholders and Classification of Unitholders

29

1

Summary of the Asset Management Company

Ⅰ. Settlement of Accounts for FY12/2019 — Highlights

1. FY12/2019 Highlights
1. External Growth(*1)▶ Improvement in hotel performance and▶ Strategic property replacement

41 properties/JPY286.8Bn

End of FY12/2016

Acquisition in 20172017

◆Public Offering in June
Acquired

Total AcquisitionPrice

3 properties/
JPY32.6Bn

2018

Total Funds
Raised throughPublic Offerings

2018

2019

Variance

RevPAR (JPY)

13,833

13,444(2.8%)First Half

12,817

12,765(0.4%)

3 properties/-JPY10.1Bn
Sold

Second Half

14,831

14,113(4.8%)(*1)

GOP (JPY MM)

17,911

17,270(3.6%)

Sale in 2018

Total Book Value Total Sales Price ofof Sold Properties Sold Properties

Total gain on sale:

1.9Bn

10.1Bn JPY12.1Bn

JPY

41 properties/JPY309.3Bn
Total AcquisitionPrice

Acquired

2 properties/
JPY65.1Bn

 Forecast for FY12/2020
The 20 Hotels with Variable Rent, etc.

Acquisition in 2019◆Public Offering in January

Total Funds
Raised throughPublic Offerings

65.1Bn JPY33.3Bn

JPY

Hilton Tokyo Odaiba

Hotel Oriental Express
Osaka Shinsaibashi

(*1)
(*2)

End of FY12/2019

43 properties/JPY374.5Bn(*3)▶ Conservative financial management(as of the end of December 2019)
Costs forAverage Life ofInterest-bearing
Debt
Debt

LTV

40.6%

The 21 Hotels with Variable Rent, etc.

44 properties/JPY319.4Bn

JPY

2019

 Track Record

32.6Bn JPY18.6Bn◆Sale of Properties in August

End of FY12/2018

increase of rent through Active AssetManagement

JPY

End of FY12/2017

3. Strengthening of Financial Base

2. Internal Growth(*2,3)

2019

2020
(forecast)

Variance

RevPAR (JPY)

13,272

14,061+5.9%

First Half

12,491

12,506+0.1%

Second Half

14,041

15,600+11.1%GOP (JPY MM)

15,722

16,345

+4.0%

1.0%

5.2 years

 Status of Credit Rating
JCR

R&I

A+ (stable)

A (positive)※ The rating outlook of R&I changed to positivefrom stable in October 2019

 Reinforcement of Lender Formation• Increased borrowings from Development Bank ofJapan Inc.
⇒ 3.4% as of the end of December 2019
(Increased by 0.6% from the end of December
2018) Diversified Funding Methods by Issuance ofInvestment Corporation Bonds• Issuance of investment corporation bonds forindividual investors (the fourth time)(June 2019): Total JPY8.0Bn• Issuance of investment corporation bonds (Green
Bonds) (the first time as J-REITs specializing inhotels) (July 2019): Total JPY2.0Bn⇒ The proceeds were allocated to the funds for
repayment of loans procured for renovation ofOriental Hotel Fukuoka Hakata Station and willbe allocated for the funds for construction forrenovation, etc. of other hotels

Stating total amount of the acquisition price.
The 21 Hotels with Variable Rent, etc. are the 11 HMJ Hotels plus ibis Tokyo Shinjuku, ibis Styles Kyoto Station, ibis Styles Sapporo,
Mercure Sapporo, Mercure Okinawa Naha, Mercure Yokosuka, the b ikebukuro, the b hachioji, the b hakata and the b suidobashi.
The 11 HMJ Hotels are Kobe Meriken Park Oriental Hotel, Oriental Hotel tokyo bay, Namba Oriental Hotel, Hotel Nikko Alivila, Oriental Hotel
Hiroshima, Okinawa Marriott Resort & Spa, ACTIVE-INTER CITY HIROSHIMA (Sheraton Grand Hiroshima Hotel), Holiday Inn Osaka Namba,
Hilton Tokyo Narita Airport, International Garden Hotel Narita and Hotel Nikko Nara. The same shall apply hereinafter.
The 20 Hotels with Variable Rent, etc. are 20 hotels excluding Namba Oriental Hotel, which is planning to implement large-scale renovationfrom November 2020 from The 21 Hotels with Variable Rent, etc. The same shall apply hereinafter.

31. FY12/2019 Highlights (cont.)
Dividends per Unit Growth
(JPY)
4,000
3,500
3,000
2,500
2,000
1,500

The amount of sales effect(*)
3,420

98

+5.6%

+7.7%

2,975

3,890
204

3,683

(5.1%)

+1.6%

+0.1%

+15.0%
3,686(excluding theamount of sales effect)

2,877(excluding theamount of sales effect)

FY12/2015

FY12/2016

FY12/2017

FY12/2018

FY12/2019

FY12/2020(16th Period)(17th Period)(18th Period)(19th Period)(20th Period)(21st Period (forecast))

NAV per Unit Growth
(JPY)

+4.9%

+3.0%

+2.6%

63,38583,286

79,407

77,12975,20980,00070,000+18.7%

60,00050,00040,00030,000

3,750

3,690

FY12/2015

FY12/2016

FY12/2017

FY12/2018

FY12/2019(16th Period)(17th Period)(18th Period)(19th Period)(20th Period)(*) The amount of sales effect represents dividends per unit which increased due to sales of properties.

4

Ⅱ. Summary of Settlement of Accounts andRevenue Forecast for the Full Fiscal Year

1. Results for FY12/2019(Unit: JPY MM)
FY12/2018(19th Period)

FY12/2019(20th Period)

Properties

Actual(A)(B)–(A)

41

43

Acquisition Price

309,370

374,508

28,25328,27824

26,31828,278

1,959

Variable Rent
Gain on Sale ofProperties, etc.
NOI(*2)
Profit and Loss(*1)

No. of Properties
Operating Revenue
Real Estate Operating
Revenue
Fixed Rent, etc.

NOI Yield
Depreciation
Asset Retirement
Obligations Expenses
Loss on Retirement ofNoncurrent Assets
NOI after
Depreciation(*2)
NOI Yield after Depreciation
Other Operating
Expenses
Operating Income
Ordinary Income
Net Income

Dividend

Actual(B)

Variance

Use of Negative Goodwill
Reserve for Special
Advanced Depreciation
Total Dividends
Number of Units Issued(Unit)
Dividend per Unit (JPY)

56.2% 14,788 60.5% 17,101
43.8% 11,529 39.5% 11,176

Breakdown of Variance
Three
Oriental Hotel
Property
Existing
Properties
FukuokaAcquired in
Properties(*6)
Sold inHakata2019(*3)
(*4)
(*5)
2018
Station

%

2

2

–

–

65,138

–

–

0.1%

2,374

(2,214)

150

(286)

7.4%

2,374

(279)

150

(286)

2,312 15.6%(353) (3.1%)

2,367
7

(199)
(79)

0
150

144
(430)

65,138 21.1%

Major Causes of Variance ofExisting Properties
Fixed rent, etc.
• Increase in fixed-rent• Increase in rent from office andcommercial tenants, etc.
• Utilities income, etc.

JPY124MM
JPY27MM(JPY7MM)

Total
Variable rent
• Variable rent from the 21 Hotels
with Variable Rent, etc.
• Revenue sharing, etc.

JPY144MM(JPY569MM)
JPY138MM

1,934–(1,934)––(1,934)0–

22,1047.1%
4,091

24,087
6.4%
4,557

1,983
(0.7%)
465

9.0%

2,368

(251)

151

(284)

197

(34)

130

171

2

2

0

–

–

–

0

Use of Negative Goodwill(*8)

35

246

210

–

–

205

5

17,974

19,281

1,306

2,170

(216)

(185)

(461)

5.8%

5.1%

(0.7%)＜FY12/2018＞50-year amortization amount
JPY262MM
Correspondence to large-scale renovation work
JPY265MM
Loss on retirement of noncurrent assets
JPY35MM

216

7.3%

1,916

2,132

17,993
16,211
16,21017,14815,291
15,290(844) (4.7%)(920) (5.7%)(920) (5.7%)

–

563

1,176

612 108.8%(1,174)

–

1,174

–

15,602

16,466864

5.5%

4,010,847

4,462,347

451,500 11.3%

3,690(200) (5.1%)

3,890[3,686](*7)

Total (JPY430MM)

Total

JPY563MM＜FY12/2019＞50-year amortization amount
JPY262MM
Correspondence to dilution, etc.
JPY310MM
Correspondence to large-scale renovation work
JPY357MM
Loss on retirement of noncurrent assets JPY246MM
Total JPY1,176MM(*1) For detail, please refer to Financial Report for the Fiscal Year Ended December 31, 2019 (January 1, 2019–December 31, 2019) dated February 20, 2020.
(*2) Each figure is calculated by 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) Representing Hilton Tokyo Odaiba and Hotel Oriental Express Osaka Shinsaibashi, which JHR acquired in FY12/2019 (20th Period). The same shall apply hereinafter.
(*4) Representing R&B Hotel Higashi-nihonbashi, the b akasaka-mitsuke and the b Ochanomizu, which JHR sold in FY12/2018 (19th Period).
(*5) Large-scale renovation works causing the suspension of hotel operation were implemented at Oriental Hotel Fukuoka Hakata Station from October 1, 2018 to April 8, 2019. Stating the amount of impact of the renovation. The same shall apply hereinafter.
(*6) "The existing properties" above refers to 40 properties which excludes properties acquired in 2019 and Oriental Hotel Fukuoka Hakata Station from 43 properties owned by JHR as of February 20, 2020. The same shall apply hereinafter.
(*7) [ ] represents the amount of dividend per unit excluding the amount of sales effect (reference).
(*8) Please refer to P.26 for the use of negative goodwill (reserve for temporary difference adjustment).

6

2. Revenue Forecast for FY12/2020

Properties(Unit: JPY MM)

Actual(A)

Forecast(*1)(B)

Comparison with Previous Period(B)–(A)

Property Oriental Hotel
Existing
Variance Acquired in
Fukuoka
Properties
2019
Hakata Station

Major Causes of Variance ofExisting Properties
Fixed rent
• Fixed-rent increase

JPY29MM• Utilities income, etc.

(JPY11MM)

43

43

–

Acquisition Price

374,508

374,508–

Operating Revenue

28,27829,971

1,692

6.0%

950

480

261

Variable rent

28,27829,971

1,692

6.0%

950

480

261

• The 20 Hotels with Variable Rent, etc.

Fixed Rent, etc.

60.5% 17,101 60.0% 17,987

885

5.2%

842

25

18

Variable Rent

39.5% 11,176 40.0% 11,984

807

7.2%

108

455

243

4.9%

670

471

43

NOI
Profit and Loss

FY12/2020(21st Period)

No. of Properties

Real Estate Operating
Revenue

NOI Yield
Depreciation

Total

24,08725,273

1,185

6.4%

6.7%

0.3%

4,557

4,859

302

139

55

108

Asset Retirement
Obligations Expenses
Loss on Retirement ofNoncurrent Assets

2

2

0

–

(0)

(0)

246

18

(228)

–

(205)

(23)

NOI after Depreciation

19,281

20,392

1,111

531

621

(41)

5.1%

5.4%

0.3%

Other Operating
Expenses

2,132

2,264

131

–

Operating Income

17,14818,128979

5.7%

Ordinary Income

15,291

16,239948

6.2%

Net Income

15,290

16,238

948

6.2%

1,176

496

16,466

16,733267

1.6%

Number of Units Issued(Unit)

4,462,347

4,462,347––

Dividend per Unit (JPY)

3,690

3,750

60

1.6%

NOI Yield after Depreciation

Use of Negative Goodwill
Dividend

FY12/2019(20th Period)

Total Dividends

5.8%

JPY18MMJPY589MM• Variable rent of Namba Oriental Hotel(planned to implement the large-scale renovation) (JPY320MM)• Revenue sharing, etc.

(JPY25MM)
Total

JPY243MM

Use of Negative Goodwill(*2)＜FY12/2019＞50-year negative goodwill amortization

JPY262MM

Adjustment for dilution

JPY310MM

Correspondence to large-scale renovation work

JPY357MM

Loss on retirement of noncurrent assets

JPY246MM
Total JPY1,176MM＜FY12/2020 (plan)＞(679) (57.8%)50-year negative goodwill amortization

JPY262MM

Correspondence to large-scale renovation work

JPY216MM

Loss on retirement of noncurrent assets

JPY18MMTotal(*1) For detail, please refer to Financial Report for the Fiscal Year Ended December 31, 2019 (January 1, 2019–December 31, 2019) dated February 20, 2020.
(*2) Please refer to P.26 for the use of negative goodwill (reserve for temporary difference adjustment).

7

JPY496MM

3. Balance Sheet(Unit: JPY MM)
FY12/2018
FY12/2019
End of
End ofFiscal Year
Fiscal Year(as of) December 31, December 31,
2018
2019

ASSETS
Current Assets

Cash and Deposits(*1)
Operating Accounts
Receivables
OthersNoncurrent Assets
Net Property andEquipment

Variance

40,26637,762(2,503)37,18434,343(2,840)

1,941

1,485

(455)

Current Portion of Investment Corporate
Bonds Payable

2,000

–

(2,000)11,117

12,782

1,665

638

31

309,993377,608

67,614

Accounts Payable

1,028

1,313

285

Advances Received

882

909

27

107,874

118,128

10,254

Land in Trust

163,151

219,901

56,749

1,864

2,493

629

33,91533,804

(110)

3,188

3,280

92

162

162

–

Leasehold andSecurity Deposits

(393)

607

Buildings in Trust(*2)

Other Assets

16,627305

67,633

Intangible Assets

17,020Operating Accounts Payable

2,779

340,522

OthersCurrent Liabilities

Others

3,025

3,117

92

Deferred Assets

296

351

55

Current Portion of Long-term Loans Payable

52

137

84

130,163

162,572

32,408Investment Corporation Bonds

31,60041,60010,000Long-term Loans Payable

91,954

114,372

22,418

5,634

5,722

87

514

416

(97)

OthersLong-term Liabilities

Tenant Leasehold and Security Deposits
Derivative Liabilities
OthersTOTAL LIABILITIESUnitholders' Capital
Reserve for Temporary Difference
Adjustment
Reserve for Special Account for Tax Purpose
Reduction Entry
Unappropriated Retained Earnings
Others

350,556

415,722

65,165

460

461

1

147,184

179,200

32,015

153,516

186,894

33,37821,746

21,746–

12,357

11,794

(563)

–

1,174

1,174

16,213

15,290

(923)

(461)

(377)

84

203,372

236,522

33,150350,556

415,722

65,165NET ASSETS
Capital Surplus

TOTAL ASSETS

Variance

2,474

272,889(*3)

LIABILITIESFY12/2018
FY12/2019
End of
End ofFiscal Year
Fiscal Year(as of) December 31, December 31,
2018
2019

TOTAL NET ASSETSTOTAL 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.

8

Ⅲ. External Growth1. Successive External Growth Improvement of the quality of JHR's portfolio and successive external growth through strategic asset replacement
Growth in Asset Size(*1), etc. (JPY MM)+21.1%+27.1%+11.4%(3.2%)+30.2%

225,723

173,429

158,902130,883

122,285+9.1%
286,801

319,474309,370

April 2012 FY12/2012 FY12/2013 FY12/2014 FY12/2015 FY12/2016 FY12/2017 FY12/2018(merger)(13th Period)(14th Period)(15th Period)(16th Period)(17th Period)(18th Period)(19th Period)

374,508

FY12/2019(20th Period)

NOI Yield(*2)

–

6.2%

6.2%

6.3%

6.6%

6.6%

6.7%

7.1%

6.4%

NOI Yield after
Depreciation(*2)

–

4.5%

4.8%

5.0%

5.3%

5.4%

5.5%

5.8%

5.1%

NAV per Unit–

JPY32,321

JPY36,074

JPY46,272

JPY63,385

JPY75,209

JPY77,129

JPY79,407

JPY83,286

No. of Properties

28

28

28

30

36

41

44

41

43

No. of Acquisition

2

2

3

9

5

3

2

Acquisition Price

JPY10.8Bn

JPY32.6Bn

JPY15.7Bn

JPY57.0Bn

JPY61.0Bn

JPY32.6Bn

JPY65.1Bn

No. of Dispositions

2

2

1

3

3

JPY0.8Bn

JPY2.6Bn

JPY0.7Bn

JPY4.8Bn

JPY12.1Bn

Sale Price(*1) Asset size is based on the aggregate acquisition price of the properties at the end of each fiscal period. The same shall apply hereinafter.
(*2) NOI yield for FY12/2012 is hypothetical annualized based on actual NOI after merger.

10

Aim for Successive Growth+7.0%+21.4%

2. Two New Properties Acquired in 2019
 An acquisition of largest(*1) asset in our portfolio and trophy asset
for JHR Scarce large-scale full-service hotel in the middle of Tokyo Located in "Osaka Minami" area, one of Kansai's foremost tourist
destinations
 Can accommodate two or more person in all guest rooms

Hilton Tokyo Odaiba

Hotel Oriental Express Osaka Shinsaibashi

Changes in Major Indicators(*3)

Changes in Major Indicators(*2)(JPY)
40,000ADR (left axis)

30,10830,202

RevPAR (left axis)

34,96929,26330,00020,00010,0000
GOP (JPY MM)% of InboundVisitors(*4)
(*1)
(*2)
(*3)
(*4)
(*5)

28,30926,55830,336

Occupancy Rates (right axis)

40,86029,48831,08533,981

25,13526,65027,957

94.0%

87.9%

86.8%

85.9%

90.4%

89.9%

83.2%

2018

2019

2020 (F)20192020 (F)20192020 (F)

3,097

2,644

3,423

54.0% 50.3%

First Half

(JPY)
12,000

100%
75%

9,000

50%

6,000

25%

3,000

0%

0

Second Half

GOP (JPY MM)% of InboundVisitors(*5)

ーADR (left axis)

9,927

9,331

9,611

Occupancy Rates (right axis)

9,275

8,967

9,385

100%
75%

8,632

8,407

8,535

8,868

8,414

7,954

87.0%

90.5%

91.5%

92.3%

90.7%

88.7%

92.2%

2018

2019

2020 (F)20192020 (F)20192020 (F)

104

156

151

94.4% 97.1%

ー

8,654

50%
25%

Based on the acquisition price.
Hilton Tokyo Odaiba is planning to implement large-scale renovation works from September 2020 through December 2020.
Hotel Oriental Express Osaka Shinsaibashi opened in April 2018, the figures for 2018 state the figures from April to December 2018.
Based on numbers of guest rooms sold.
Based on room sales.

11

9,293

RevPAR (left axis)

First Half

Second Half

0%

Ⅳ. Portfolio

1. Portfolio 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
Portfolio Summary

Strategic Investment Areas and Locations of Properties
Properties acquired in 2019

Total Assets
JPY374.5Bn

Existing properties
Strategic Investment Areas

Hokkaido Area
No. of Hotels

Okinawa Area

43 Hotels(34 in Strategic Investment Areas)

No. of Guest Rooms

11,705 Rooms

Tokyo & the Bay Area(*1)

FukuokaArea(*1) Bay Area includes the coastal area of Tokyo Bay in Kanagawa and Chiba prefectures.
(*2) Osaka/Kyoto Area refers to Osaka and Kyoto prefectures.

Osaka/Kyoto Area(*2)
Tokyo 23 wards

13

2. Portfolio Diversification
 Widely diversified and high-quality portfolio Appeal to inbound visitors by international brands
By Area and Rent(*1)(V)(F)(V) 1.6%

By Hotel Brand(*2)

(V)

(F)

0.7%
3.2%

Others4.5%(F)(Kyoritsu Maintenance)

16.7%

4%

2.2%
(F)
(V)

Chugoku

3.1%

5.2%
Chubu

6.5%

5.2%

(excluding Okinawa)

7.5%

7%
SheratonKanto(excluding Tokyo)

8.0%

By Grade(*2)

Osaka

(V)

(V)

8.7%
(F)

(V)
3.3%

4%

By Hotel Type(*2)

5%

6.2%

4.0%

5%

Economy

10.3%

(F)

Mariott

International Brand: 55%

13.8%

22.5%

Kansai31%(F)(excluding Osaka)

3.9%

Holiday Inn (IHG)

HiltonOkinawa
13.6%

8%

8%

4.0%

Tokyo

8.3%
(V)

Hotel Nikko

the b

20.7%

Kyushu16%

ibis/Mercure (Accor)

(V)

4.9%

(F)

Oriental Hotel3%

Hokkaido

4.3%

14%

Dormy Inn, etc.

(F)

Variable Rent (V)

59.5%

40.5%

(*1) Based on the annualized rent in revenue forecast of FY12/2020(*2) Based on the acquisition price

Resort21%

21%

Mid-price

7.0%

Fixed Rent (F)Luxury42%

14

Limitedservice
33%

Uppermiddle

Full-service

33%

47%

Ⅴ. Internal Growth1. Rent Structures
Stability

Upside(FY12/2020 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–

JPY2,832MM(9.4%)

JPY3,927MM(13.0%)

JPY18,479MM(61.2%)

JPY1,894MM(6.3%)

JPY3,080MM(10.2%)

JPY30,214MM(100.0%)

Fixed Rent,
etc.(*2) (%)

JPY2,832MM(9.4%)

JPY3,382MM(11.2%)

JPY10,796MM(35.7%)

JPY536MM(1.8%)JPY439MM(1.5%)

JPY17,987MM(59.5%)

Variable Rent(%)–

JPY545MM(1.8%)

JPY7,682MM(25.4%)

JPY1,358MM(4.5%)

JPY2,641MM(8.7%)

JPY12,227MM(40.5%)

Low

Low

High

High

High

–

CAPEX Paid by JHR

1) Renewal of building
and facilities

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

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

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

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

No. of Properties

11

6

18

3

5

43

Acquisition Price(%)

JPY37,300MM(10.0%)JPY44,216MM(11.8%)

JPY245,628MM(65.6%)

JPY17,723MM(4.7%)

JPY29,640MM(7.9%)JPY374,508MM(100.0%)

The Beach Tower Okinawa

Hilton Tokyo Bay

The Twelve HMJ Hotels(*3)

Hilton Nagoya

ibis Tokyo Shinjuku

Hotel Francs

Hotel Keihan Universal City

the b ikebukuro

Mercure Yokosuka

ibis Styles Kyoto Station

CANDEO HOTELS
UENO-KOEN

Sotetsu Fresa Inn ShimbashiKarasumoriguchi

the b hachioji

Chisun Inn Kamata

ibis Styles Sapporo

HOTEL ASCENT FUKUOKA

Smile Hotel
Nihombashi Mitsukoshimae

the b hakata

Mercure Sapporo

the b suidobashi

Mercure Okinawa Naha

Type of
Rent

Real Estate Operating
Revenue (%)(breakdown)(annualized forecast for
FY12/2020)

Involvement inHotel Operation

Hotelsand other hotels

Hotel Vista Kamata Tokyo
Comfort Hotel Tokyo
Higashi Nihombashi

Hilton Tokyo Odaiba
Hotel Oriental Express Osaka
Shinsaibashi(*1) Rent structure is categorized according to the rent contract for hotels of each asset owned by JHR.
(*2) 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.
(*3) The Twelve HMJ Hotels are the 11 HMJ Hotels plus Oriental Hotel Fukuoka Hakata Station.

16

Total

–

2. Performance of the 20 Hotels with Variable Rent, etc.
Total of the 20 Hotels with Variable Rent, etc.

Total of the 10 HMJ(*) Hotels

Changes in Major Indicators(JPY)
20,000Occupancy (right axis)
15,592

15,00010,00013,559

(1.3%)(2.1%)

Changes in Major Indicators
ADR (left axis)
15,391

13,272

+4.5%

+5.9%

RevPAR (left axis)
100%

16,07780%
60%

14,061

40%

5,000
0

20%

87.0%

86.2%

87.5%

2018

2019

2020 (forecast)

Changes in GOP

20,00015,00017,999 (2.6%) 17,537 +5.4% 18,490

15,679(2.4%)

15,297+6.1% 16,234

10,000
5,000
0

87.1%

87.2%

87.8%

2018
2018

2019
2019

2020 (forecast)2020（予想）(JPY MM)
14,000

16,101

16,345

15,722

13,000+4.0%(2.4%)

12,14014,00012,00012,00011,00010,00010,00011,96620192020(forecast)2020（予想）(*) The 10 HMJ Hotels are 10 hotels excluding Namba Oriental Hotel from the 11 HMJ Hotels.

17

2018
2018

12,377+3.4%(1.4%)

2018

100%
80%
60%
40%

Changes in GOP(JPY MM)
18,00016,000

0%

(JPY)

2019
2019

2020
(forecast)2020（予想）

20%0%

3. RevPAR Variance to Previous Year by Region of the 20 Hotels with Variable Rent, etc. for 2020
 Diverse Portfolio
Total of 20 properties<2018 vs 2019: -2.1%>+11.1%+0.1%

Hokkaido (2 properties)<2018 vs 2019: +1.9%>

Properties owned by JHR+12.2%
+3.6%

+5.9%

+8.2%

First Half ofSecond Half of Full Year 2020
2020 (forecast) 2020 (forecast)(forecast)First Half ofSecond Half of Full Year 2020
2020 (forecast) 2020 (forecast)(forecast) ibis Styles Sapporo
 Mercure Sapporo

Hiroshima (2 properties)<2018 vs 2019: +0.8%>
Okinawa (3 properties)<2018 vs 2019: -7.3%>+13.6%

+3.5%

+9.4%

First Half ofSecond Half of Full Year 2020
2020 (forecast) 2020 (forecast)(forecast) Hotel Nikko Alivila
 Okinawa Marriott Resort & Spa Mercure Okinawa Naha

+0.9%

-2.3%
First Half ofSecond Half of Full Year 2020
2020 (forecast) 2020 (forecast)(forecast) Oriental Hotel Hiroshima
 ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel)

First Half ofSecond Half of Full Year 2020
2020 (forecast) 2020 (forecast)(forecast) the b hakata+2.8%First Half ofSecond Half of Full Year 2020
2020 (forecast) 2020 (forecast)(forecast)

Fukuoka (1 property)<2018 vs 2019: -4.1%>
+7.3%
+1.6%
-3.8%

+4.5%

Narita (2 properties)<2018 vs 2019: +6.8%>+10.0%+4.1%

 Hilton Tokyo Narita Airport
 International Garden Hotel Narita

Tokyo and Bay Area (5 properties)<2018 vs 2019: -1.6%>+15.5%+6.9%

Osaka, Kyoto (2 properties)<2018 vs 2019: -10.3%>+5.9%

 Oriental Hoteltokyo bay
 ibis Tokyo Shinjuku-2.1%
 the b ikebukuro
First Half ofSecond Half of Full Year 2020
 the b hachioji2020 (forecast) 2020 (forecast)(forecast) the b suidobashi

-0.3%

-6.1%

First Half ofSecond Half of Full Year 2020  Holiday Inn Osaka Namba
2020 (forecast) 2020 (forecast)(forecast)(*) Stating major hotels in each area out of the 20 Hotels with Variable Rent, etc.

 ibis Styles Kyoto Station

18

4. Active Asset Management
 Implement Active Asset Management at both hotel and REIT sides
 Accelerate internal growth through both revenue enhancement and cost control

HotelsExamples of Active Asset Management
Improvement of Hotel
Revenue
Reduction of Hotel
Operating Costs

 Strategic capital expenditure (e.g., renovation of rooms to increase RevPAR) Rebranding according to each hotel's characteristics
 Synergy from sharing guest by hotels located nearby in the same group Renewal of a hotel booking system Integration of back-office operations at hotels located in nearby area
 Optimization of staffing● Cost reduction by joint purchasing in the same group
 Reduction of utility costs

REIT

Improve GOP

Improvement of Real
Estate Operating Revenue Rent increase by revision of rent scheme, etc.
⇒ The Five HMJ Hotels(*), CANDEO HOTELS UENO-KOEN,
Comfort Hotel Tokyo Higashi Nihombashi, HOTEL ASCENT FUKUOKA,
Oriental Hotel Fukuoka Hakata Station and rent from non-hotel tenant, etc.

Reduction of Real Estate
Operating Costs

 Reduction of cost for Property Management and Trust, management contract fee,and ground rent, etc.
Improve NOI

Maximize DPU(*) The Five HMJ Hotels are Kobe Meriken Park Oriental Hotel, Oriental Hotel tokyo bay, Namba Oriental Hotel, Hotel Nikko Alivila and Oriental Hotel Hiroshima.

19

4. Active Asset Management (cont.) Promote internal growth through renovation and rebrand, etc.
 Plan to appropriate the negative goodwill in case the operation is suspended due to large-scale renovations
Hilton Tokyo Odaiba

Namba Oriental Hotel
Future Project

Future Project

Completed Project(December 2019 to February 2020)(September 2020 to December 2020)

Summary

Summary(November 2020 to March 2021)

Summary

Amount invested: JPY92MM

Amount to invest: Approximately JPY3.0Bn (plan) Amount to invest: Approximately JPY2.6Bn (plan)

Scope: Banquet hall ("Seaside Banquet Rooms"
with Tokyo Bay views)

Scope: Guest room, front lobby, exteriorpedestrian alley from station, pool

Aim
•

•

※The entire building is expected to close during
the renovation period

Aim

Maximize the spectacular ocean view ofRainbow Bridge by removing the window
framesCreating an open banquet hall with a sense ofunity with a wide seaside-facing balcony⇒ Increase the number of banquets and weddings••

Improve ADR by differentiating itself throughrenovation taking advantage of one of theworld's most spectacular panoramic ocean
view

Aim
•

Improve ADR by differentiating itself throughrenovation with a superior design in afavorable location in central Namba•

Add value by renovating the lobby and thegarden•Improve operating efficiency and reducing
costs by changing the layout

Provide consistent quality for guest stay andincrease value to stay at the hotel

Renovation of Banquet Halls at Hilton Tokyo Odaiba＜After＞

Scope: Guest room, front lobby, hotel entrance,
tenant area, etc.

＜After＞＜Before＞

20

4. Active Asset Management (cont.) Promote internal growth through renovation, rebrand, etc.

 Increase rent through revision of rent scheme, etc.

Oriental Hotel Fukuoka Hakata Station

Track Record of Rent Scheme Revision (after Apr. 2014)

Summary
Renovation Term: October 1, 2018 to April 8, 2019

※ Hotel operation was suspended during the renovation period

Investment: Approximately JPY3.1Bn

Apr. 2014•

Smile Hotel Nihombashi Mitsukoshimae
Fixed-rent
Fixed and Revenue Sharing

Jul. 2014•

Hotel Keihan Universal City
Fixed-rent
Fixed and Revenue Sharing

Dec. 2014•

ibis Styles Sapporo
Changed to Management Contract•

the b suidobashi
Fixed-rent•

Renovated the whole building and rebranded including an increase in thenumber of guest rooms•

Changed the hotel grade from mid-price to upper-grade hotel

Jul. 2015•

Sustained DPU level by utilizing the negative goodwill during the suspensionof the hotel operation

Jul. 2017•

CANDEO HOTELS UENO-KOEN
Fixed-rent Increase

Jan. 2018•

Comfort Hotel Tokyo Higashi Nihombashi
Fixed-rent
Fixed and Revenue Sharing•

ibis Styles Kyoto Station
Reduction of Management Contract Fee•

Hilton Tokyo Bay
Revision of Rent (Increase)

Apr. 2019•

HOTEL ASCENT FUKUOKA
Fixed-rent/
Fixed-rent Increase/
Traditional Lease
Fixed-leaseAug. 2019•

Mercure Yokosuka
Revision of Rent (Effectively increase)

Oct. 2019•the b suidobashi
Revision of Rent (Increase)•

Oriental Hotel Fukuoka Hakata Station
Revision of Rent (Increase)••ibis Styles Sapporo
Mercure Sapporo
Reduction of Management Contract Fee(JPY)
20,00015,00010,0005,000
0Occupancy (right axis)

ADR (left axis)

RevPAR (left axis)

18,633
13,330100%
75%

15,921

12,59794.5%

50%January to September 2018 April to December 2019

＜After＞＜Before＞

Jan. 2019

25%

85.4%

0%

＜After＞＜Before＞

Dec. 201921

Fixed and Variable-rent

5. Capital Expenditures and Depreciation
 Strengthen competitiveness and improve asset value by continuing investment in CAPEXClarification of CAPEX
CAPEX Ⅰ
(JPY MM)

5,000
4,500
4,000

CAPEX ⅡCAPEX Ⅲ

capital investment related to renewal of buildings, facilities, and equipment which is
required to maintain proper values of properties
capital investment for fixtures furniture and equipment that are not directly related to building
structures or facilities but necessary for operating hotels
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

4,091

Cost for Large-scale Renovation Works

2,772

2,898
2,619

2,500
2,000

1,811
36

1,500

640

783

3,056
476

469
475

393

Oriental Hotel
Fukuoka
Hakata Station

6,775
3,775

234

3,147

862

HiltonTokyo Odaiba

3,000

999
1,690

781

511
1,954

1,134

6,766

2,200

1,000
500

4,557

3,619

3,294

3,500
3,000

3,725

4,859

1,798

1,324

2,678

2,226
1,456

800

0

Asset Size
(JPY MM)

225,723

286,801

319,474309,370

374,508

374,508

FY12/2015

FY12/2016

FY12/2017

FY12/2018

FY12/2019

FY12/2020 (forecast)(*) The planned amount of large-scale renovation works for the entire property of Namba Oriental Hotel is not included in the capital expenditure for FY12/2020 due to the construction beingscheduled for completion in March 2021.

22

Ⅵ. Financial Conditions

1. Financial Conditions
Changes in LTV (total asset base)

Term of Interest-bearing Debt
As of the end of Dec. 2018

50%
45%

Long-term(scheduled repayment
within one year)

42.8%
39.7%

40%

39.9%

39.0%

40.6%

(*) Long-term represents debts
with original maturity over
one year.
End of

End of

End of

End of

End of

FY12/2015

FY12/2016

FY12/2017

FY12/2018

FY12/2019(16th Period)(17th Period)(18th Period)(19th Period)(20th Period)

1.5%
1.5%

3.7

5.0
1.2%

Costs for Interest-bearing Debt
4.7

4.8

1.1%

1.1%

5.2

End of

End of

End of

End of

End of

FY12/2015

FY12/2016

FY12/2017

FY12/2018

FY12/2019(16th Period)(17th Period)(18th Period)(19th Period)(20th Period)(*1) Weighted-average costs for interest-bearing debt (including up-front fee, etc.) as of the end ofeach period. Rounded off to one decimal place.
(*2) Average life of debt as of the end of each period(as of the end of December 2019)(JPY MM)
30,0004.0

Loans21,6502.0

20,0003,000

1.0

15,0000.0

10,00016,90012,782 12,300
1,500

0

24

15,772

19,00010,00017,350 17,000

6,000

10,800 10,900

5,000

28,000Investment Corporation Bonds

25,000

3.0

0.5%

97.8%

Repayment Schedule of Interest-bearing Debt

6.0
5.0

1.0%

As of the end of
Dec. 2019

97.7%(year)

1.0%

0.0%

92.4%

As of the end of
Dec. 2018

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

90.4%

Fixed Interest Rate Ratio(*) LTV as of the end of each period.

2.0%

7.6%

9.6%

Long-term

35%
30%

As of the end of Dec. 201915,772

18,650 19,000

13,10017,000 18,000

8,000

4,250
2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

1. Financial Conditions (cont.)
Lender List for Interest-bearing Debt
Lenders/Bond Name

Breakdown of Interest-bearing Debt

Balance(as of the end of
December 2018)(Unit: JPY MM)
Balance(as of the end of
December 2019) Variance

Balance%

Balance%

Sumitomo Mitsui Banking Corporation

26,431

19.3%

31,901

18.9%

5,470

Shinsei Bank, Ltd.

15,035

11.0%

19,015

11.3%

3,980

Mizuho Bank, Ltd.

15,03011.0%

19,000

11.3%

3,970

Sumitomo Mitsui Trust Bank, Limited

10,5407.7%

13,640

8.1%

3,100

Resona Bank, Limited

9,360

6.8%

10,1266.0%

766Development Bank of Japan Inc.

3,780

2.8%

5,750

3.4%

1,970

Fukuoka Bank, Ltd.

3,610

2.6%

4,750

2.8%

1,140

The Nomura Trust and Banking Co., Ltd.

4,190

3.1%

4,660

2.8%

470

MUFG Bank, Ltd.

4,135

3.0%

4,135

2.5%

0

Aozora Bank, Ltd.

2,435

1.8%

3,435

2.0%

1,000

The Chiba Bank, Ltd.

2,670

2.0%

3,100

1.8%

430

Hiroshima Bank, Ltd.

2,927

2.1%

2,892

1.7%

(35)

The Nishi-Nippon City Bank, Ltd.

1,600

1.2%

2,750

1.6%

1,150

Sompo Japan Nipponkoa Insurance Inc.

828

0.6%

1,500

0.9%

672

The Shizuoka Bank, Ltd.

500

0.4%

500

0.3%

0

75.4% 127,154

75.3%

24,083

Investment Corporation Bonds

Total of Bank Loans
103,071
Investment Corporation Bonds(for institutional investors)
3rd Investment Corporation Bonds without Collateral
2,000

1.5%

–

–

(2,000)

4th Investment Corporation Bonds without Collateral

1,500

1.1%

1,500

0.9%

0

6th Investment Corporation Bonds without Collateral

3,000

2.2%

3,000

1.8%

0

8th Investment Corporation Bonds without Collateral

1,100

0.8%

1,100

0.7%

0

9th Investment Corporation Bonds without Collateral

1,000

0.7%

1,000

0.6%

0

12th Investment Corporation Bonds without Collateral

–

–

2,000

1.2%

2,000

8,600

6.3%

8,600

5.1%

0

6,000

4.4%

6,000

3.6%

0

7th Investment Corporation Bonds without Collateral

9,000

6.6%

9,000

5.3%

0

10th Investment Corporation Bonds without Collateral

10,000

7.3%

10,0005.9%

011th Investment Corporation Bonds without Collateral

–

–

8,000

4.7%

8,000
8,000

Total of Investment Corporation Bonds(for institutional investors)

As of the end of Dec. 2018
Loans
Investment
Corporation Bonds

24.7%

75.3%

Status of Credit Rating
Japan Credit Rating Agency, Ltd.
(JCR)

A+ (stable)

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

A

(positive)※ The rating outlook of R&I changed to positive from stable in October 2019

Status of Reserve for Special Advanced Depreciation
 A part of gain on sale of three properties sold in 2018 are retained

Total of Investment Corporation Bonds(for individual investors)

25,00018.3%

33,00019.6%

Total of Investment Corporation Bonds

33,60024.6%

41,600

24.7%

8,000

136,671 100.0% 168,754 100.0%

32,083

Total of Interest-bearing Debt

24.6%

75.4%

Investment Corporation Bonds(for individual investors)
5th Investment Corporation Bonds without Collateral

As of the end of Dec. 2019

Reserve for special
advanced depreciation

25

JPY1,174MM

1. Financial Conditions (cont.)
Negative Goodwill

Changes in Appraisal Value (Unrealized Gains)<Policy for Use of Negative Goodwill>(JPY Bn)

1. Add JPY262 million (50-year amortization amount ofnegative goodwill) to dividends every period•

500

Cope with losses 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＜Amount used in FY12/2019＞50-year amortization amount on negative goodwill
Adjustment for dilution
Cope with large-scale renovation works
Cope with loss on retirement of noncurrent assets
Total amount
Balance of Negative Goodwill
after the end of December 2019

＜Amount to be used in FY12/2020＞

50-year amortization amount on negative goodwill
Cope with large-scale renovation works
Cope with loss on retirement of noncurrent assets
Total amount
Balance of Negative Goodwill
after the end of December 2020 (forecast)

525.9

Unrealized Gains

2. In addition to above, dividends will be increased in
response to the following••••

Book Value

439.3

437.5

122.1

130.7

151.5

398.7

400

302.1

300

113.8

78.7
:
:
:
:
:

205.4

JPY262MM
JPY310MM
JPY357MM
JPY246MM
JPY1,176MM

200

100

JPY262MM
JPY216MM
JPY18MMJPY496MM

170.5

317.2

306.7

38.5%

42.6%

223.3

0

Ratio of
Unrealized
Gains

JPY10,120MM(*) The breakdown of the amount used for "cope with large-scale renovation works" in FY12/2019:
JPY357MM for Oriental Hotel Fukuoka Hakata Station
The breakdown of the amount to be used for "cope with large-scale renovation works" in FY12/2020:
JPY44MM for Hilton Tokyo Odaiba, and JPY172MM for Namba Oriental Hotel

374.3
284.9

JPY10,617MM
:
:
:
:

34.8

20.4%

35.2%

39.9%

FY12/2014
FY12/2015
FY12/2016
FY12/2017
FY12/2018
FY12/2019(15th Period) (16th Period) (17th Period) (18th Period) (19th Period) (20th Period)(*) Unrealized gains are calculated by subtracting book value from appraisal value.

26

40.5%

Memo

27

Ⅶ. Market Environment

1. Market Environment
 The number of inbound visitors continues to increase While the number of inbound visitors from South Korea
significantly decreased, inbound visitors from China and manyother countries reached a record highChanges in Number of Inbound Visitors(Thousands)

35,000

Number of Inbound Visitors
Tourists

Changes in Inbound Visitors by Country(unit: million people)

+2.2%
+8.7%

30,00010

31,191 31,882

28,691+19.4%
27,76624,03925,000+21.8%

15,00013,413

5,000

0

8,358

16,969Hong Kong

8(Asian countries other thanabove and Europe, US, etc.)

Others4
3

10,880

2

7,962
6,041

2012

Taiwan5

10,363
10,0009

6
21,049+47.1%South Korea

725,441

19,73720,000

China

1

2013

2014

2015

2016

2017

2018

0

2019

2012

2013

2014

2015

2016

2017

2018

2019

Source: Visitor Arrivals by Country/Area & Purpose of Visit (provisional figures) by Japan National
Tourism Organization (JNTO)(*) The numbers for Jan.–Oct. 2019 are provisional numbers, and Nov.–Dec. are estimated numbers.

Source: Number of International Visitors to Japan by Japan National Tourism Organization (JNTO)(*) The numbers for Jan.–Oct. 2019 are provisional numbers, and Nov.–Dec. are estimated numbers.

29

1. Market Environment (cont.) Lodging demand increased due to inbound visitors
 The number of overnight guests has been solid Supply of rooms has been increasing, mainly in Tokyo andOsaka, but the supply after 2021 is expected to decrease

Changes in Number of Overnight Guests in Japan

Supply of Rooms in Hotels/Ryokans in Japan(Guest nights in millions)

600

500

No. of Japanese Overnight Guests
No. of Inbound Overnight Guests

+1.3%
+5.6%
545
538
+3.5%
(2.3%)
+6.5%
510
504
+1.6%
492
+6.0%
474
466
439

80,00053,812 59,572

60,00040,00020,000016,517(%: change from theprevious year)

413
200

100

0

432

429

438

423

430

444

2016

2017

2012

2013

2014

2015

69
2016

2019

2020

2021

6,107

Ratio of New Supply +4.1%

80
2017

(%: change from theprevious year)

94
2018

2016

2019

Source: Statistics of Overnight Travel by Japan Tourism Agency(*) Rounded off to the nearest millions of people.
Numbers for Jan.–Nov. 2019 are second preliminary figure, numbers for Dec. 2019 are
first preliminary figure. The annual revised report, which reflects newly opened hotels in
2019, etc. is schedule to be released on June 30, 2020.

3,000

2017

2018

8,329

2019

2020

2021

2022

2023~

11,003
8,082

5,018

4,257

1,402

0

Ratio of New Supply +1.8%(%: change from theprevious year)

2,267＜Osaka＞

9,000
6,000

1,348

+3.8% +7.4% +6.5% +9.5% +3.1% +0.7% +1.1%

12,000

102

2023~

6,273

5,866

(No. of Rooms)

+8.3%

2022

11,833 11,095

15,00010,000

2018

5,000

+18.3%+5.8% +14.8%

10,21927,937＜Tokyo＞ 17,344

0+46.4%+33.8%+27.3%
66
45
33
26

27,408+2.1% +3.4% +3.6% +3.7% +1.5% +0.6% +1.5%+0.7% +1.7% +2.5% +2.7% +2.7% +1.2% +0.4% +1.5%

20,000443

CAGR (Compound Average Growth Rate)of Japanese overnight guests+1.0%

Supply Forecast

63,49832,988(No. of Rooms)

300

ActualRatio of New Supply +1.1%
Excl. Tokyo, Osaka

400＜Japan＞(No. of Rooms)

2016

2,347

3,419

+6.3% +9.9% +11.9% +7.8% +3.8% +2.0% +2.9%
2017

2018

2019

2020

2021

2022

2023~

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.
(*) Ratio of new supply is the ratio of new rooms to be supplied in a year to the stock of rooms 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.

30

1. Market Environment (cont.) Many venues are located in Tokyo, where there are many
properties owned by JHR

 The number of inbound visitors in past host countries has
increased even after the Olympics

Tokyo 2020 Games
Venue Maps and Properties owned by JHR

Changes in Number of International Tourist Arrivals
after Olympics and Paralympics

ibis Tokyo
Shinjuku

Olympic Stadium(Opening and Closing
Ceremonies)

1.8

dormy inn・global cabin Asakusa

1.7

Comfort Hotel Tokyo Higashi Nihombashi

Smile Hotel Nihombashi Mitsukoshimae★

Greece (Athens Olympics in 2004)
UK (London Olympics in 2012)
China (Beijing Olympics in 2008)
Brazil (Rio de Janeiro Olympics in 2016)(times)the b suidobashi
the b
R&B Hotel Ueno-hirokoji
ikebukuro
CANDEO HOTELS UENO-KOEN

1.6

Sotetsu Fresa Inn
Shimbashi-Karasumoriguchi

Oriental Hoteltokyo bay★

1.5

HiltonTokyo Bay

Hotel
Francs1.4

Chisun Inn Kamata
Hotel Vista
Kamata Tokyo

1.1

SapporoDome

Ariake Tennis Park

Prepared by the Asset Management Company based on the official website by The Tokyo
Organising Committee of the Olympic and Paralympic Games(*) Tokyo 2020 Games represents Tokyo Olympics and Paralympics: Properties owned by JHR,
: Venues for games or facilities related to the Olympics,★ : Places where the cauldrons would be placed

Source:Source:31Prepared by the Asset Manager based on the data from "International tourism, number ofarrivals" by World Bank and "Tourism Highlights 2019 Edition" by UNWTO(*1) The data were statistics in the past and those will be not guaranteed for the change after Tokyo
Olympics and Paralympics.
(*2) Figures for two years after in Brazil are preliminary figures.

after

Four years

after

Three years

after

Two years

after

One yearOlympic
Olympic
year
year

ago

one yearago

Two years

ago

Three years

0.9

ago

1.0

Olympic:
July 24 toAugust 9
Paralympic:
August 25 to
September 6

Four years

Aomi Urban
Sports Park

IBC/MPC Tokyo
International Exhibition Centre(Tokyo Big Sight)ago★

Five years

ibis Styles
Sapporo1.2

MercureSapporoago

Odori ParkSix years

ShiokazePark

Sapporoas theMarinePark

Yumenoshima
Park Archery
Field

Selected
Selectedas

Tatsumi Water
Ariake Arena Polo Centre
Ariake Gymnastics Centre

Ariake Urban
Sports Park

Hilton Tokyo
OdaibaOdaibaTokyo Aquatics
Centrethehostcitycity
host

Olympic Village

1.3

1. Market Environment (cont.) Various international events, conferences and infrastructure
improvements are scheduled in and after 2020. Further growth of
the tourism industry is expected Major domestic airports are expected to attract more inboundvisitors by increasing the number of the international flights
 Haneda and Narita Airports in Tokyo metropolitan area are
expected to reach 1 million fights per year as total

Coming Major Events Related to Tourism, etc. in Japan
International Events,
Conferences, etc.

Future Airport Development Plan for Major Domestic Airport

Others• "Large-scale Development at Tokyo Disneyland",2020 • Tokyo Olympics andnew areas and facilities are planned to open
Paralympics Games(Beauty and the Beast, etc. is themed)(nationwide)• New area is planned to open in Universal Studio(July 24 to August 9,
August 25 to September 6) Japan (Nintendo-themed)• Tokyo International Cruise Terminal is planned toopen in Odaiba (July)

Narita International Airport

 March 29, 2020
Setting up new flight and increase
the number of flights to cities inNorth America, Europe, Australia
and Asia, etc.

 2029Construction of a new runway andextension of the existing runways

Number of international flights(10,000
times)

2021 • World Masters Games 2021
Kansai (May 14 to May 30)• 19th FINA World Aquatics
Championships 2021 Fukuoka(July to August)2022 • Badminton WorldChampionships (Tokyo)

Haneda Airport

12
8• New Shinkansen route opens in Kyushu(Takeo Onsen～Nagasaki)• Extension of Hokuriku Shinkansen(Kanazawa and Tsuruga)• Tokyo BRT (Bus Rapid Transit) service starts(Tokyo city center～Seaside "Rinkai" area)

2023• "Large-scale expansion project at Tokyo Disney
Sea", new theme port is planned to open("Fantasy Springs")

2024• Mixed-use infrastructure development including a
convention center in Rinku Central Park
(Izumisano-City, Osaka)• Openings of Yumeshima Station of Osaka MetroLine and tower building at Yumeshima Station

0

2027

• Linear Chuo Shinkansen line commences operation• Open of Haneda Airport Access Line2031

• Extension of the Hokkaido Shinkansen line to
Sapporo (Shin Hakodate Hokuto～Sapporo)(*) As events are those scheduled as of January 31, 2020 and may be changed.

Current

20

Plan

Number of flights
500,000
times/year

60

40

Approximately
1.7 times

40

256,000
times/year
Approximately
2.0 times

Current

Plan※＜Reference＞ London Area Airports: 1,210,000 times/year
New York Area Airports: 1,320,000 times/year

Other Airport Development Plan
March 26, 2020

• Operating of the second runway

around July 2020

• Expand the CIQ (Customs, Immigration,and Quarantine)

KansaiInternational
Airport2021 to 2025

• Large-scale renovation is planned for the
first time since its opening in 1994
• Renovation of Terminal 1

Fukuoka Airport

March 2025

• Operating of the second runway

Naha Airport• Integrated Resorts start their operations
2025 • World EXPO 2025
in Osaka, Kansai (184 days) (Undecided)(April 13 to October 13)
2029

60,000times/year(80 flights/day)

99,000times/year(130 flights/day)(10,000
times)

32

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 in 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 methods

34

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(Annualized effect of forecast for FY12/2020)(as of February 20, 2020)

Fixed rent only(*)

Fixed rent

Variable rent(*)

59.5%

40.5%

11 properties
Variable rent, etc.(*)

32 properties

Variable rent, Rent from revenue sharing andIncome from management contracts

(*)

35

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
 Amid gradually recovering economy,
domestic leisure demand remained firm.
However, hotel revenue in some area
showed a sluggish growth due tofactors such as a declined in inboundvisitors to Japan in some regions by thepolitical issue between Japan and South
Korea, and natural disasters, etc.
 However, following the last year's
Rugby World Cup 2019 in Japan, theTokyo Olympic and Paralympic Gamesare scheduled to be held this year, andhotel assets continue to attract strong
attention as an investment target. In
addition, competition for acquisitions in
the hotel investment market is severe,due to the decline in yields on otherasset classes and the increase in thenumber of players in hotel investment
and hotel development, including new
private funds.
 As inbound visitors have trended
upward, new hotel supply continues toincrease at a certain volume, and thecompetitiveness of the hotel isbecoming clearer depending on the
hotel's specifications, locations, and thecapabilities of the hotel operators,
making it important to differentiate each
hotel from its competitors.

Basic Policies
 Acquire highly competitive hotel real estate, etc. in areas that have potential to attract "demand byboth 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 of hotel
real estate, etc.
• The prime investment targets are "full-service hotels" and "resort hotels" that have high barriers to entry due tooperation 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, taking into accountthe hotel specifications and the possibility of achieving the upside.
• Especially, proactively review the purchase of hotels that have potential for internal growth by implementing
active asset management or the possibility of synergy effect with the existing 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, andpossibilities to improve buildings and facilities• Particularly, if the hotel pays variable rent, etc., promote internal growth through collaboration with lessees
and/or operators

36

4. Internal Growth Strategy
Recognition of External
Environment
Hotel Market Environment
 In addition to stable domestic
leisure demand, due to thegovernment policy to promote
tourism nation, the number of
inbound tourists, mainly from
Asian countries, is continuing torise. Amid such growth
expectation for Japan's tourism
and hotel industries, although
there are needs to carefully
monitor some impact by supply of
new hotels and Minpaku (private
lodging for a fee), demand foraccommodation is expected tostay firm.

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

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• Attract inbound demand through rebranding to international brands• Make proactive proposals to build effective hotel operating structures which aim to maximize GOP,
from the perspective of both hotel sales and expenses• Increase hotel revenue through collaboration with high-quality operators
 Planning and execution of strategic CAPEX which secure steady revenue, and monitoring of lessees• Analyze the creditworthiness of hotel lessees, understand hotel income and expenditures, closely
observe and improve rent-paying capacity• Maintain and improve rent-paying capacity of tenants, etc. through capital expenditures, which leadto maintain and improve competitiveness and asset value37

5. Financial Strategy
Recognition of External
Environment
Trend of Financing Environment
and Interest Rates
 In 2019, both the number ofpublic offerings (including IPOs)
and the amount of fund procuredby J-REIT were below theprevious year's level, but theTokyo Stock Exchange REIT Index
remained firm and conditions
remained favorable.
 As for investment corporation
bonds, issuance of green bonds
increased. Long-term interest
rates continued to be low andinterest rate for bonds remainedlow.
 There is no particular change inthe lending attitude of financial
institutions. Both short-term andlong-term interest rates remain at
low levels. Although drasticchange may not happen in thefinancial environment, someattention should be paid tofluctuations in long-term interest
rates mainly due to international
factors.

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

Key Measures
 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
including green bonds
 Improve financial stability by extending and diversifying repayment periods and fixing interest rates,etc.
 Optimize borrowing costs

38

6. Sustainability Initiatives
Aiming for achieving a mid to long-term growth that coexists with society and environment and enhancing sustainability
through appropriate actions for ESG issues
Sustainability Policy

Acquisition of BELS Certification(*1)

 JHR and JHRA stipulated "Sustainability Policy",
which defines material issues and initiatives forsustainability in our business JHR obtained a BELS certification for two properties, Hotel Nikko Alivila and Mercure Okinawa Naha, forthe first among J-REIT owned hotels

Sustainability Policy

Hotel Nikko Alivila

Mercure Okinawa Naha Monitoring and improvement ofenvironmental performance in our portfolio
 Promotion of comfortable, healthy, secureand safe hotels
 Promotion of ESG in value chains Consideration for and contribution to local
communities
 Initiatives for our officers and employees Compliance as corporate citizens
 Improvement of transparency andengagement with our stakeholders

GRESB Real Estate Assessment(*2)
 JHR received a "Green Star" designation. It was highly
evaluated in both "Management & Policy" and"Implementation & Measurement" areas with regards toinitiatives for environmental considerations
and sustainability (September 2019)▶ Highest ranking
Acquired

Green StarSMBC Environment Assessment Loan(*3)
 Acquisition of "A" grade• SMBC Environmental Assessment
Loan evaluated JHR's excellent
initiatives for environmental
considerations in asset
management(March 2018)▶ "GRESB Rating"Acquired

3-starIssuance of Green Bonds
 Issuance of unsecured investment
corporation bonds as Green Bonds for the
first among J-REITs specializing in hotels(July 2019)• Amount: JPY2.0Bn• Duration: 5 years
 Usage of the Green Bonds proceeds• For refinance of loans for renovation ofOriental Hotel Fukuoka Hakata Station• To fund construction works, etc. forrenovation etc. of the other hotels(*1) BELS (Building-Housing Energy-Efficiency Labeling System) is a display system of energy conservation performance of a building set by Ministry of Land, Infrastructure, Transport and Tourism.
(*2) 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 of property 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-stars".
(*3) "SMBC Environmental Assessment Loan" assesses status of corporate initiatives for environmental considerations, on loan execution and establishment of lending conditions, based on environmental assessment
criteria developed independently by Sumitomo Mitsui Banking Corp. and the Japan Research Institute, Limited.

39

6. Sustainability Initiatives (cont.)
Energy-saving Work for Restaurant Renovations
For Okinawa Marriott Resort & Spa

Energy-saving Work for Large-scale Renovations
For Oriental Hotel Fukuoka Hakata Station

 Renovation for All-Day Dining (July 2019) Rebranded and Reopened (April 2019)• Introduced highly energy-efficient equipment for kitchen andair-conditioning, etc.

• Changed from central air conditioning to individual air
conditioning• Enhancing customer satisfaction as well as considering theenvironment• Replaced plumbing installation to improve water efficiency• Changed all lightings to LEDs
⇒ 16% reduction of CO2 emissions after renovation of the entire
building

 Introduction of LED lightings⇒ 75% reduction of CO2 emissions after the renovation＜After＞

 Replacement of air conditionings⇒ 46% reduction of CO2 emissions after the renovation＜Before＞

 Upgrade of washing and sterilizing equipment⇒ 45% reduction of CO2 emissions figures after therenovation＜Entrance＞＜Interior＞

Initiatives for smoking ban for all rooms
 The 21 Hotels with Variable Rent, etc.
• JHR has been successively implementing to convert all hotel rooms
into non-smoking rooms at all owned hotels• Non-smoking room ratio (based on the room numbers):

89% (the beginning of 2018) ⇒ 97% (the end of December 2019)(*) These figures related to the CO2 emissions are estimated by the Asset Management
Company based on expert reports.

40⇒ Promote to provide a healthy and comfortable environment for
both hotel guests and hotel staff

7. Benefits Program for Unitholders
JHR implemented benefits program for unitholders to obtain a better understanding, improve their satisfaction and expand the investor
base. JHR also expanded the benefits program in 2019 by adding two newly acquired hotels, aggregated coverage to 20 hotels.
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)<FY2019>
Eligible unitholders: 12,120
Valid period: One year between October 1, 2019 to September 30, 2020

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
The 14 HMJ Hotels

Kobe Meriken Park
Oriental Hotel

Oriental Hoteltokyo bay

Namba
Oriental Hotel

ACTIVE-INTER CITY
Oriental Hotel Fukuoka
HIROSHIMA (Sheraton
Hakata Station
Grand Hiroshima Hotel)

Hotel Nikko Nara

Holiday Inn
Osaka Namba

Newly Added

Oriental Hotel
Hiroshima

The Six Accor Hotels

Hotel Nikko Alivila

Hilton Tokyo
Narita Airport

Hilton Tokyo Odaiba

Okinawa Marriott
Resort & Spa

International Garden Hotel Narita

Hotel Oriental Express Osaka Shinsaibashi

41

ibis Tokyo Shinjuku

ibis Styles Kyoto Station

Mercure Sapporo

ibis Styles Sapporo

Mercure Okinawa Naha

Mercure Yokosuka

Appendix 2
Information on Properties

1. Property List (1/2)(as of the end of December 2019)
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)

20th Period(as of June 30, 2019)
Appraisal
Value(JPY MM)CAP Rate

20th Period(as of December 31, 2019) Investment
Ratio
Appraisal
(*6)
Value
CAP Rate(JPY MM)

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

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

NOI Yield(actual)(*8)

1

Kobe Meriken Park Oriental Hotel (*9)

Full-service

Upper-middle

323

Hyogo

24.5

10,9009,888

16,200

5.1%

16,2004.8%

2.9%

1,256,795

1,003,298

669,037

9.2%

2

Oriental Hotel tokyo bay

Full-service

Mid-price

511

Chiba

24.7

19,90017,69934,9004.4%

37,800

4.4%

5.3%

1,883,870

1,765,658

1,357,731

8.9%

3

Namba Oriental Hotel

Limited-service

Mid-price

258

Osaka

23.8

15,00014,64032,9004.1%

32,9004.1%

4.0%

1,406,836

1,299,612

1,139,547

8.7%

4

Oriental Hotel Hiroshima

Full-service

Upper-middle

227

Hiroshima

26.3

4,100

4,171

4,370

7.5%

4,400

4.9%

1.1%

472,555

428,306

340,288

10.4%

5

Hotel Nikko Alivila

ResortLuxury397

Okinawa

25.8

18,90018,16832,9004.8%

32,9004.8%

5.0%

1,977,644

1,829,606

1,512,840

9.7%

6The Beach Tower Okinawa

ResortMid-price

280

Okinawa

15.8

7,610

6,587

10,000

4.4%

10,1004.4%

2.0%

511,028

468,191

335,312

6.2%

7

Hakone Setsugetsuka

ResortMid-price

158

Kanagawa 13.3

4,070

3,696

5,300

4.9%

5,310

4.9%

1.1%

294,957

271,037

177,854

6.7%

8

Dormy Inn Kumamoto

Limited-service

Mid-price

291

Kumamoto 11.9

2,334

2,139

3,060

5.6%

3,060

5.6%

0.6%

194,460

173,568

130,770

7.4%

9

the b suidobashi

Limited-service

Mid-price

99

Tokyo

33.4

1,120

1,213

1,940

4.1%

2,440

4.1%

0.3%

103,848

89,84061,7938.0%

10dormy inn・global cabin Asakusa (*10)

Limited-service

Economy

75

Tokyo

22.8

999

941

1,330

3.9%

1,330

3.9%

0.3%

63,99554,89941,3595.5%

11Hakata Nakasu Washington Hotel Plaza

Limited-service

Mid-price

247

Fukuoka

24.8

2,130

2,022

4,520

4.4%

4,520

4.4%

0.6%

240,000

224,000

198,000

10.5%

12Nara Washington Hotel Plaza

Limited-service

Mid-price

204

Nara

19.8

2,050

1,800

2,440

5.0%

2,440

5.0%

0.5%

151,000

134,000

97,000

6.6%

13

R&B Hotel Ueno-hirokoji

Limited-service

Economy

187

Tokyo

17.8

1,720

1,822

2,010

3.9%

2,010

3.9%

0.5%

97,292

83,017

66,694

4.8%

14

Comfort Hotel Tokyo Higashi
Nihombashi

Limited-service

Economy

259

Tokyo

11.9

3,746

3,527

5,830

4.3%

5,830

4.3%

1.0%

287,814

256,887

220,539

6.9%

15

Smile Hotel Nihombashi Mitsukoshimae

Limited-service

Economy

164

Tokyo

22.8

2,108

2,022

3,160

4.0%

3,160

4.0%

0.6%

154,623

138,482

118,017

6.6%

16

Toyoko Inn Hakata-guchi Ekimae

Limited-service

Economy257

Fukuoka

18.3

1,652

1,419

2,780

4.5%

2,750

4.5%

0.4%

141,039

127,703

109,484

7.7%

17

Hotel Keihan Universal City

ResortMid-price

330

Osaka

18.5

6,000

5,905

13,9004.9%

13,9004.9%

1.6%

746,118

668,997583,302

11.1%

18

Chisun Inn Kamata

Limited-service

Economy

70

Tokyo

16.7

823

772

1,450

4.5%

1,430

4.5%

0.2%

80,87673,891

62,7139.0%

19Hotel Vista Kamata Tokyo

Limited-service

Economy

105

Tokyo

27.9

1,512

1,453

2,040

4.5%

1,990

4.5%

0.4%

112,476

98,166

72,951

6.5%

20Sotetsu Fresa Inn ShimbashiKarasumoriguchi (*11)

Limited-service

Mid-price

220

Tokyo

11.8

4,800

4,802

8,970

3.9%

8,950

3.9%

1.3%

446,477

383,039

361,093

8.0%

21

Hilton Tokyo Bay

ResortLuxury

828

Chiba

31.5

26,05026,42240,4004.3%

40,5004.3%

7.0%2,220,187

1,938,334

1,765,290

7.4%

22

ibis Tokyo Shinjuku

Limited-service

Mid-price

206

Tokyo

39.3

7,243

8,013

10,2004.0%

10,2004.0%

1.9%

704,537

497,729385,256

6.9%

23

ibis Styles Kyoto Station

Limited-service

Mid-price

215

Kyoto

10.8

6,600

6,675

11,600

4.3%

10,9004.3%

1.8%

459,002412,032

373,486

6.2%

24

ibis Styles Sapporo

Limited-service

Mid-price278

Hokkaido

9.4

6,797

6,601

11,200

4.7%

11,2004.7%

1.8%

661,063

525,459442,798

7.7%

43

1. Property List (2/2)(as of the end of December 2019)
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)

20th Period(as of June 30, 2019)
Appraisal
Value(JPY MM)CAP Rate

20th Period(as of December 31, 2019) Investment
Ratio
Appraisal
(*6)
Value
CAP Rate(JPY MM)

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

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

NOI Yield(actual)(*8)

25

Mercure Sapporo

Limited-service

Mid-price285

Hokkaido

10.7

6,000

5,857

11,000

4.6%

11,0004.6%

1.6%

797,832

523,042

430,996

8.7%

26

Mercure Okinawa Naha

Limited-service

Mid-price

260

Okinawa

10.4

3,000

2,887

7,760

4.6%

7,190

4.6%

0.8%

342,013

270,481

209,569

9.0%

27

the b ikebukuro

Limited-service

Mid-price

175

Tokyo

37.5

6,520

6,608

7,350

4.2%

7,350

4.2%

1.7%

356,173

328,770

296,705

5.0%

28

the b hachioji

Limited-service

Mid-price

196

Tokyo

33.4

2,610

2,699

2,790

5.1%

2,790

5.1%

0.7%

185,672

160,629

129,084

6.2%

29

the b hakata

Limited-service

Mid-price

175

Fukuoka

22.3

2,300

2,361

4,710

4.3%

4,610

4.3%

0.6%

228,379

215,725

194,1319.4%

30Hotel Francs

Full-service

Mid-price

222

Chiba

28.4

3,105

3,178

4,090

4.6%

4,140

4.6%

0.8%

300,000

237,023

193,824

7.6%

31

Mercure Yokosuka

Full-service

Mid-price

160

Kanagawa 26.2

1,650

1,658

3,000

4.6%

3,590

4.6%

0.4%

360,970

250,373

212,998

15.2%

32

Okinawa Marriott Resort & Spa

ResortUpper-middle

361

Okinawa

14.9

14,95015,106

18,7004.9%

17,9004.9%

4.0%

937,465

853,261

569,108

5.7%

33

ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel)

Full-service

Luxury238

Hiroshima

9.3

17,32017,436

21,700

4.5%

21,9004.5%

4.6%

1,624,836

1,182,632

966,133

6.8%

34

CANDEO HOTELS UENO-KOEN

Limited-service

Mid-price

268

Tokyo

10.0

6,705

6,652

7,630

4.0%

7,650

4.0%

1.8%

349,975

323,962

283,942

4.8%

35

Oriental Hotel Fukuoka Hakata Station(*12)

Full-service

Upper-middle

221

Fukuoka

34.5

7,197

9,847

14,000

4.6%

15,3004.6%

1.9%

740,062494,731(65,231)6.9%

36Holiday Inn Osaka Namba

Limited-service

Mid-price

314

Osaka

11.4

27,00027,12627,200

4.3%

27,200

4.3%

7.2%

967,957

920,119

728,343

3.4%

37

HOTEL ASCENT FUKUOKA

Limited-service

Economy263

Fukuoka

20.7

4,925

5,161

6,630

4.8%

6,620

4.8%

1.3%

447,198

302,154

266,423

6.1%

38

Hilton Nagoya

Full-service

Luxury

460

Aichi

30.9

15,25015,651

16,0004.2%

15,7004.2%

4.1%

1,452,768

746,661

591,860

4.9%

39

Hilton Tokyo Narita Airport

Full-service

Upper-middle

548

Chiba

26.4

13,175

13,49913,7004.6%

13,700

4.6%

3.5%

912,491

826,763621,261

6.3%

40International Garden Hotel Narita

Full-service

Mid-price

463

Chiba

23.6

9,125

9,245

9,650

4.8%

9,660

4.8%

2.4%

604,422560,153

422,311

6.1%

41

Hotel Nikko Nara

Full-service

Upper-middle

330

Nara

21.8

10,373

10,442

11,2004.8%

10,9004.8%

2.8%

625,869

576,007434,069

5.6%

42

Hotel Oriental Express Osaka
Shinsaibashi

Limited-service

Mid-price

124

Osaka

1.9

2,738

2,829

3,050

4.6%

2,990

4.6%

0.7%

109,991

107,162

95,381–

43

Hilton Tokyo Odaiba

Full-service

Upper-middle

453

Tokyo

24.0

62,40063,652

69,4003.7%

69,500

3.7%

16.7%

2,264,830

2,261,016

2,075,257–––

11,705–21.8

374,508374,314522,960

4.5%

525,9104.5%

100.0%

28,278,550 24,087,502 19,281,141

6.4%

Total or Average (43 properties)
(*1)
(*2)
(*3)
(*4)
(*5)
(*6)
(*7)

Under the category of Hotel Type, "Full-service" is full-service hotel, "Resort" is resort hotel, and "Limited-service" is limited-service hotel.
Mainly based on ADR, etc., JHR has classified the hotels into four categories as "luxury," "upper-middle," "mid-price," and "economy."
Average age: Weighted average calculated as follows. The sum of (acquisition price of each property x property age)/total acquisition price.
The acquisition price in the Purchase & Sale Agreement for the Beneficial Interest in Trust, etc. is indicated. (Consumption tax, amount equivalent to consumption tax, brokerage fee, and other purchase-related costs are excluded.)Book value as of the end of December 2019.
Investment ratio indicate percentage of the acquisition price of each asset to the total acquisition price. Numbers beyond one decimal place is rounded off.
Actual for one year from January to December 2019. 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. Since No.42 and 43 were acquired during theperiod, numbers after acquisition is indicated.
(*8) NOI yield for the portfolio is calculated as follows: Total NOI for FY12/2019 (actual) ÷ total acquisition price of properties held as of the end of FY12/2019. As No. 42 and 43 were acquired during the period, NOI yield (actual) is not calculated.
(*9) The number of guest rooms at Kobe Meriken Park Oriental Hotel was changed from 319 to 323 on December 30, 2019.
(*10) The name of the hotel was changed from Dormy Inn EXPRESS Asakusa on August 4, 2019.
(*11) The name of the hotel was changed from Hotel Sunroute Shinbashi on April 23, 2019.
(*12) The name of the hotel was changed from Hotel Centraza Hakata on April 9, 2019. The hotel grade was changed from "Mid-price" to "Upper-middle."

44

2. Summary of Lease Contracts (1/2)(as of the end of December 2019)
No.

Property Name

1

Kobe Meriken Park Oriental Hotel

2

Oriental Hotel tokyo bay

3Namba Oriental Hotel

4

Oriental Hotel Hiroshima

5

Hotel Nikko Alivila

6

The Beach Tower Okinawa

7

Hakone Setsugetsuka

Lease
Type

Fixedlease

Fixedlease
Fixedlease

Rent
Structure(*1)

LesseeContractual Rent
(*2)

15

(Fixed rent) JPY3,221MM/year +(Variable rent) When the total GOP of The
Dec. 2034 Five HMJ Hotels exceeds GOP baseamount (JPY3,351MM), the excess x 85%
is paid

Fixed

20

Jun. 2026 JPY42MM/month

Fixed

20

Oct. 2026 JPY24MM/month

Fixed + Variable

Hotel Management Japan Co., Ltd.

Okura Nikko HotelManagement Co., Ltd.

Dormy Inn Kumamoto

Fixedlease

Fixed

9

dormy inn・global cabin Asakusa

Lease

Fixed

10

Hakata Nakasu Washington Hotel
Plaza

Lease

Fixed

11

Nara Washington Hotel Plaza

Lease

Fixed

12

R&B Hotel Ueno-hirokoji

Lease

Fixed

13

Comfort Hotel Tokyo Higashi
Nihombashi

Fixedlease

Fixed + Revenue
sharing

14

Smile Hotel Nihombashi
Mitsukoshimae

Lease

15

Toyoko Inn Hakata-guchi Ekimae

16

8

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

Kyoritsu Maintenance Co., Ltd.

12

Mar. 2023 JPY16MM/month

20

Mar. 2020 JPY5MM/month

Rent Modification Summary

Rent Modification Summary(After acquisition)
TimingCondition

2020

2021

Same

Renewed

–

–

–

–

–

–

–

–

–

In principle, the same rent will beapplied until expiration of theJan. 2020
contract.

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

Rent can be modified through mutual
Apr. 2017agreement every three years.
Rent can be modified through mutual
Apr. 2017agreement every three years.
Rent can be modified through mutual
Apr. 2018agreement.

Same
Same

3

Mar. 2021 JPY20MM/month

20

Mar. 2020 JPY11MM/month20

Apr. 2022 JPY8MM/month

Greens Co., Ltd.

20

Jan. 2028 JPY21MM/month + Revenue sharing

Rent can be modified through mutual
Apr. 2018agreement every five years.

Fixed + Revenue
sharing

THE KAMOGAWA GRAND HOTEL, LTD

20

Mar. 2020 JPY11MM/month + Revenue sharing

Rent can be modified through mutual
Apr. 2017agreement.

Lease

Fixed

Toyoko Inn Co., Ltd.

30

Sep. 2031 JPY11MM/month

No rule has been stipulated.

Oct. 2007

Hotel Keihan Universal City

Lease

Fixed + Revenue
sharing

Increased(+9.4%)

K.K. Hotel Keihan

20Jun. 2021 Nondisclosure(*4)

Nondisclosure(*4)

Jul. 201417

Chisun Inn Kamata

Fixedlease

Variable

7

Hotel GOP x 86%
Dec. 2026 (If the amount is below zero, it will be
JPY0)

–

18

Hotel Vista Kamata Tokyo

Lease

Fixed + Revenue
sharing

4

Dec. 2021 JPY7MM/month + Revenue sharing

19

Sotetsu Fresa Inn ShimbashiKarasumoriguchi

Fixedlease
Fixedlease

In principle, the same rent will beapplied until expiration of thecontract.

15

Mar. 2023 JPY18MM/month + Revenue sharing

No rule has been stipulated.
Rent can be modified throughmutual agreement.

20

Hilton Tokyo Bay

21

ibis Tokyo Shinjuku–

22

ibis Styles Kyoto Station–

23

ibis Styles Sapporo–

24

Mercure Sapporo–

25

Mercure Okinawa Naha

26

Mercure Yokosuka

27

the b ikebukuro28

the b hachioji

29

the b hakata

30

the b suidobashi–
Fixedlease
Fixedlease
Fixedlease
Fixedlease
Fixedlease

Washington Hotel K.K.

Solare Hotels &Resorts Co., Ltd.

SHR Hotels, Co., Ltd.

Vista Hotel Management Co., Ltd.

Fixed + Revenue
Sotetsu Hotel Development Co., Ltd.(*3)
sharing
Fixed + Revenue
THE DAI-ICHI
Hilton International
sharing
BUILDING CO., LTD.
Company
Management
contract
Management
contract
Management–
AAPC Japan K.K.
contract
Management
contract
Management
contract
Variable

AAPC Japan K.K.

Rent Modification Schedule(2020 to 2021)

Rent can be modified through mutual–
agreement.
Rent can be modified through mutual
Apr. 2011agreement.

Underdiscussion(Apr.)To be expired(Mar.)Same––

To be expired(Mar.)

Increased(+3.0%)
Same(Introduced
revenue sharing)––
To be expired(Mar.)
–

–

–

–

–

To be expired(Mar.)–––

Modified Structure–

To be expired(Jun.)

Jan. 2020

Same

Renewed–Jul. 2015

Modified Structure–

To be expired(Dec.)

–

–

–

–

Same

4

Dec. 2022 JPY163MM/month + Revenue sharing

Jan. 2019

Renewed(Increased)

–

–

12

Jun. 2024 Amount equivalent to hotel GOP–

Jul. 2012

Modified Structure

–

–

5

Dec. 2024 Amount equivalent to hotel GOP

–

–

–

–

–

5

Dec. 2024 Amount equivalent to hotel GOP

–

–

–

–

–

15

Sep. 2029 Amount equivalent to hotel GOP

–

–

–

–

–

–

–

–

10

Apr. 2024 Amount equivalent to hotel GOP

5Aug. 2024 Linked to hotel GOP

Fixed + Variable

Ishin Ikebukuro Operations K.K.

7

Jan. 2022 JPY163MM/year + Linked to hotel GOP

Fixed + Variable

Ishin Hachioji Operations, Y.K.

7

Jan. 2022 JPY98MM/year + Linked to hotel GOP

Fixed + Variable

Ishin Hakata Operations K.K.

7

Jan. 2022 JPY82MM/year + Linked to hotel GOP

Fixed + Variable

Ishin Suidobashi Operations K.K.

7

Dec. 2026 JPY85MM/year + Linked to hotel GOP

45

The same rent will be applied until
RenewedAug. 2019
expiration of the contract.
(Effectively increased)
The same rent will be applied until––
expiration of the contract.
The same rent will be applied until––
expiration of the contract.
The same rent will be applied until––
expiration of the contract.
Conditions changed
The same rent will be applied until
Jan. 2020
expiration of the contract.
(Increased)

–

–

–

–

–

–

–

–

–

–

Renewed–2. Summary of Lease Contracts (2/2)(as of the end of December 2019)
No.
31
32

33
34

Property Name
Hotel Francs
Okinawa Marriott Resort & Spa

ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel)

CANDEO HOTELS UENO-KOEN

Lease
Type

Rent
Structure(*1)

Fixedlease

Fixed

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

LesseeK.K. Bridal Produce

19

Fixedlease

Fixed + Variable

Lagoon resort Nago Co., Ltd.

5

Fixedlease

Fixed + Variable

Luxury Hotels
K.K. A.I.C Hiroshima
International of HongManagement
Kong Limited

11

Fixedlease

Fixed

Candeo Hospitality Management, Inc.

20

35

Oriental Hotel Fukuoka
Hakata Station

Fixedlease

Fixed + Variable

Hotel Centraza Co., Ltd.

15

36

Holiday Inn Osaka Namba

Fixedlease

Fixed + Variable

OW Hotel Operations KK

15

37

HOTEL ASCENT FUKUOKA

Fixedlease

Fixed

K.K.ASCENT.

7

38

Hilton Nagoya

Lease

Variable

39

Hilton Tokyo Narita
AirportFixedlease

Fixed + Variable

KK NaritaKosuge Operations

20

40

International Garden Hotel Narita

Fixedlease

Fixed + Variable

KK NaritaYoshikura Operations

10

41

Hotel Nikko Nara

Fixedlease

Fixed + Variable

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

342

Hotel Oriental Express Osaka
Shinsaibashi

Fixedlease

Fixed + Variable

K.K. HOTEL ORIENTAL EXPRESS

1043Hilton Tokyo Odaiba

Fixedlease

Fixed + Variable

Tokyo Humania Enterprise Inc.

11

(*1)

Nagoya Hilton Co.,Ltd.

Hilton International
Company

41

Contractual Rent(*2)

Oct. 2024 JPY25MM/month(Fixed rent) JPY550MM/year +(Variable rent) When the total GOP
Dec. 2020
exceeds GOP base amount (JPY700MM),
the excess x 90% is paid
(Fixed rent) JPY348MM/year +(Variable rent) When the total GOP
Dec. 2026
exceeds GOP base amount (JPY468MM),
the excess x 82.5% is paid
Feb. 2030 Nondisclosure(*4)

Rent Modification Summary

Rent Modification Summary(After acquisition)
TimingCondition

2020

2021

–

–

–

–

In principle, the same rent will beapplied until expiration of thecontract.

––

To be expired(Dec.)–

In principle, the same rent will beapplied until expiration of thecontract.

–

–

–

–

Nondisclosure(*4)––

Conditions changed(Increased)

Renewed

–

–

–

–

Renewed(Increased)

–

–

–

–

–

–

–

–

–

–

–

–

To be expired(Dec.)

–

–

–

–

–

–

–

–

–

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

Rent can be modified through mutual
Jul. 2016agreement every three years.

(Fixed rent) JPY425MM/year +In principle, the same rent will be(Variable rent) When the total GOP
Dec. 2034
applied until expiration of theJan. 2020
exceeds GOP base amount (JPY442MM),
contract.
the excess x 98% is paid
(Fixed rent) JPY576MM/year +In principle, the same rent will be(Variable rent) When the total GOP
Oct. 2031
applied until expiration of the–exceeds GOP base amount (JPY650MM),
contract.
the excess x 92.5% is paid
(Fixed rent) ① JPY17MM per month from
April 1, 2019 to April 30, 2019,
Rent can be modified through mutual
Apr. 2019
Mar. 2026 ② JPY20MM per month from May 1, 2019agreement every three years.
to March 30, 2020, ③ JPY22MM per monthfrom April 1, 2020 to March 31, 2026
Rent can be modified through mutual–
Dec. 2029 Nondisclosure(*4)
agreement.
(Fixed rent) JPY444MM/year +In principle, the same rent will be(Variable rent) When the total GOP
Jun. 2037
applied until expiration of the–exceeds GOP base amount (JPY550MM),
contract.
the excess x 86.5% is paid
(Fixed rent) JPY336MM/year +In principle, the same rent will be(Variable rent) When the total GOP
Jun. 2027
applied until expiration of the–exceeds GOP base amount (JPY360MM),
contract.
the excess x 98% is paid
(Fixed rent) JPY420MM/year +In principle, the same rent will be(Variable rent) When the total GOP
Dec. 2020
applied until expiration of the–exceeds GOP base amount (JPY470MM),
contract.
the excess x 91.5% is paid
(Fixed rent) JPY110MM/year +In principle, the same rent will be(Variable rent) When the total GOP
applied until expiration of theexceeds GOP base amount (JPY128MM),
contract.
the excess x 91% is paid
(Fixed rent) JPY3,100MM/year,
JPY1,600MM/year on and after January 1,
2022(Variable rent)• Until December 31, 2019: When AGOP(*5)
exceeds AGOP base amountIn principle, the same rent will be
Dec. 2029 (JPY2,450MM), the excess x 30% is paid applied until expiration of the• On and after January 1, 2020: Whencontract.
AGOP exceeds AGOP base amount(JPY2,970MM), the excess x 30% is paid
• On and after January 1, 2022: When
AGOP exceeds AGOP base amount(JPY1,660MM), the excess x 98% is paid
Mar. 2028

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)
(*3)
(*4)
(*5)
(*6)

46

Rent Modification Schedule(2020 to 2021)

Amount including car park and CAM without tax
The lessee is changed to Sotetsu Hotel Management CO., LTD. on May 1, 2019.
The detailed content of the contract is not disclosed as consent on disclosure has not been obtained from the lessee.
AGOP (adjusted GOP) is the amount calculated by subtracting certain fees and other items from GOP.
The conditions of the new contracts are stated for the following properties which contracts were expired on andbefore December 31, 2019 and the new contracts were signed or renewed, and started from January 1, 2020:
No.1–5, 17, 30, 35

3. Major CAPEX Ⅲ by Hotels* (Numbers in parentheses are CAPEX amounts: JPY MM)
FY12/2012
Kobe Meriken
Park Oriental
Hotel

–

Oriental Hoteltokyo bay–

Namba Oriental
Hotel

–

Hotel Nikko
Alivila

–FY12/2013–

FY12/2014

FY12/2020 Plan

Guest rooms on 7F
Private rooms at
Restaurant (30) Conversion of space(50)
restaurant andConversion of brides'of backyard to
Balconies on each Bridal salon (76)balcony, etc. on 3F
room to guest
guest rooms
floor (62)(19)
rooms (40)(120)
Bar (85)
Guest rooms on 4F
Guest rooms on 11F
–
–
–
(101)
to 12F (140)––

Guest rooms on 9F Guest rooms on Guest rooms on 6F
(91)
(78)
7F (77)–––

Guest rooms on 3F to
8F of North building
and 3F to 5F ofcentral building (333)–

Guest rooms on 9F(55)
Restaurant (31)

–

–

–

Guest rooms on
7F to 10F (43)Banquet room on 4F(38)–

Chapel (10)–Guest rooms on
3F to 10F (192)

Guest rooms on
3F to 10F (312)

–

–

–

Guest rooms on
10F to 11F (72)
Guest rooms on
8F to 9F (72)

–

–

–

Ibis Tokyo
Shinjuku

Lobby and
restaurant on 2F,
and guest rooms
on 3,5,7,9F (170)––

Hilton Tokyo
OdaibaFY12/2019––

Okinawa Marriott
Resort & Spa
Oriental Hotel
Fukuoka
Hakata Station

FY12/2018–

Restaurant(45)
Corner rooms
on 5F to 8F(10)–

the b Ikebukuro

FY12/2017

Chapel (36)Banquet room on 23F(10)ibis Styles
SapporoMercure Hotel
Sapporo

FY12/2016–

Oriental Hotel
Hiroshima

Holiday Inn
Osaka Namba

FY12/2015–

Guest rooms on 1F,
etc.
(16)

Guest rooms on
Guest rooms on 13F 17F to 18F (14)Increase number of
to 14F (14)seats in café (8.5)

–

–

–

–

–

–

Guest rooms on
4,6,7,12F (115)

–

–

–

–

–

–

Vacant space on 1F
(28)

–

–

–

–

–

–

Banquet room (15)

–

–

–

–

–

–

–

–

Guest rooms on
3F to 10F, etc. (18)

–

–

–

–

–

–

–

–

–

Restaurant (142)

–

–

–

–

–

–

–

–

Large-scalerenovation works(1,690)

–

–

–

–

–

–

–

–

–

47

Banquet room (92)
Large-scalerenovation works(3,000)4. The Five HMJ Hotels — Highlights
Change in GOP and GOP ratio(JPY MM)
10,000

6,296

6,000

GOP ratio

5,136

5,696

5,645

5,158

4,000
2,000
0

27.0%

CY200824.3%
CY200926.6%

CY2010

25.5%

26.5%

CY2011CY2012

6,155

6,302

28.0%

28.3%

CY2013

CY2014

6,941

7,765

7,591

8,033

45%
7,793

7,546
35%

29.9%

CY201531.8%

CY201632.8%

CY201734.2%

CY2018

33.7%

32.2%

CY2019CY2020(forecast)(forecast)

90.5%

88.8%

25%

GOP ratio

GOP

8,000

GOP

15%

Change in KPI

20,000ADR
77.9%
17,97077.8%
18,463

RevPAR
73.8%
17,197OCC
80.4%

15,98076.7%

15,846

82.7%

16,20015,00010,00013,99914,367

CY2007

CY2008

12,696

12,845

CY2009CY201012,160CY2011

13,400CY2012

86.1%

17,29786.9%

17,551

14,886

15,245

CY2013

CY2014

87.7%
19,212

88.4%

91.0%

89.9%

20,153

19,85622,197
19,954

16,84317,80718,06021,067
19,066

22,135
19,664

80%
60%
40%
20%

CY2015

CY2016

CY2017

CY2018CY2019CY2020(forecast)(forecast)(*) Namba Oriental Hotel is planned to close the entire building and suspend its hotel operation due to the large-scale renovation from November 2020 through March 2021.
Stating the figures reflecting the impact of the suspension of hotel sales for the fiscal year ending December 2020.

48

100%

0%

OCC

ADR・RevPAR(JPY)
25,0005. Portfolio Map
Total Assets(as of February 20, 2020)

Limited-service hotel

JPY374.5Bn

Full-service hotel

1

2

3

4

5

6

Kobe Meriken Park
Oriental Hotel

Oriental Hoteltokyo bay

Namba
Oriental Hotel Hotel Nikko Alivila
Oriental Hotel Hiroshima

7

8

Resort hotel

No. of Hotels

43 Hotels

24

25

11

12

13

14

The Beach
HakoneTower Okinawa Setsugetsuka

9

10

15

16

the b
suidobashi

Comfort Hotel Smile Hoteldormy inn・ Hakata Nakasu Nara Washington R&B Hotel
Toyoko Inn
Hotel Plaza
Ueno-hirokoji Tokyo Higashi Nihombashi
global cabin Washington
Hakata-guchi
Nihombashi
Mitsukoshimae Ekimae
Asakusa
Hotel Plaza

Dormy Inn
Kumamoto

17

18

Hotel Keihan
Universal City

Chisun Inn
KamataNo. of
Guest Rooms

11,705 Rooms

23

28

20

21

Hotel Vista
Kamata Tokyo

Sotetsu Fresa
Inn ShimbashiKarasumoriguchi

22

23

24

Hilton Tokyo Bay

ibis Tokyo
Shinjuku

ibis Styles
ibis Styles
Kyoto Station Sapporo

27

25

26

MercureSapporoMercurethe b ikebukuro
Okinawa Naha

2 30

3 17 36 42

11 16
29 35 37

7

39 40

31

21

38

8

19

1

12 41

35

28

29

30

31

32

33

the b hachioji

the b hakata

Hotel Francs

MercureYokosuka

Okinawa Marriott
Resort & Spa

ACTIVE-INTER CITY
CANDEOHIROSHIMA (Sheraton HOTELSGrand Hiroshima Hotel)

34

Tokyo 23 wards

4 33
13 34

27
22
5
32
26

9
20

15

10
14

Oriental Hotel
Fukuoka
UENO-KOEN Hakata Station

Acquisition in 2019
36

37

38

39

Holiday Inn
Osaka Namba

HOTEL ASCENT Hilton Nagoya Hilton TokyoFUKUOKA
Narita Airport

40

41

42

43

International
Garden Hotel
NaritaHotel Nikko Nara

Hotel Oriental
Express Osaka
Shinsaibashi

Hilton Tokyo Odaiba

43

6
18
19

49

Appendix 3
Investors Composition and Investment Unit Price1. Major Unitholders and Classifications of Unitholders
Top 10 Major Unitholders
As of the end of June 2019

As of the end of December 2019
No. of Units%(*)

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

697,102

15.62

2

Japan Trustee Service Bank, Ltd. (Trust)

526,839

11.80

3

J.P. Morgan Bank Luxembourg S.A. 384500

334,947

7.50

4The Nomura Trust and Banking Co., Ltd. (Investment Trust)

213,302

4.78

2.95

5

140,401

3.14

122,1422.73

6

134,779

3.02

State Street Bank and Trust Company 505223

64,452

1.44

59,918

1.34

1.43

7

State Street Bank West Client-Treaty 505234

64,127

BNYM AS AGT Clients 10 PERCENT
Trust and Custody Services Bank, Ltd.
(Securities Investment Trust)State Street Bank West Client-Treaty 505234

Shikoku Railway Company

1.27

Shikoku Railway Company

1.27

56,989856,9891.18

1.22

JPMorgan Securities Japan Co., Ltd.

52,951

54,823

946,6001.04

2,280,456

51.10

2,263,828

50.73

No. of Units

%(*)

Rank

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

721,861

16.17

1

2

Japan Trustee Service Bank, Ltd. (Trust)

531,521

11.91

3

J.P. Morgan Bank Luxembourg S.A. 384500

337,322

7.55
4.37

131,797

6

The Nomura Trust and Banking Co., Ltd. (Investment Trust)
Trust and Custody Services Bank, Ltd.
(Securities Investment Trust)
BNYM AS AGT Clients 10 PERCENT

195,422

7
8
9

Name

Rank

1

4
5

10 CBNY DFA International Real Estate Securities Portfolio
Total

Name

10 Japan Securities Finance Co., Ltd.
Total(*) The total units held by each investor to the total units issued by JHR as of the end of June 2019 and the end of December 2019 respectively. (Rounded off to two decimal places.)

Owners of the Investment Units
As of the end of June 2019
OwnersNo. ofInvestors

Individuals & Others

28,383358,329

Financial Institutions(Incl. Securities Firms)

138

1,930,626

Other Domestic Firms

352

113,176

Foreign Firms &Individuals

370

2,060,216

Total

No. ofUnits

29,243 4,462,347

No. of Investors

0.4%

1.2%
1.2%

8.0%

46.1%
97.0%
Individuals &Others

As of the end of December 2019

No. of Units

43.2%

OwnersNo. ofInvestors

Individuals & Others

29,670406,900

Financial Institutions(Incl. Securities Firms)

155

2,090,477

Other Domestic Firms

357

113,795

Foreign Firms &Individuals

392

1,851,175

Total

2.5%
Financial Institutions(Incl. Securities Firms)

Other Domestic
Firms

No. ofUnits

30,574 4,462,347

No. of Investors

0.5%

No. of Units

1.1%
1.2%

9.1%

41.4%
46.8%
97.0%

2.5%

Foreign Firms &Individuals(*) Percentage of investors is percentage of owners 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 off to one decimal place).

51

2. Changes in Investment Unit Price and Market Capitalization
Changes in the investment unit priceand market capitalization

Jun. 2015
Jan. 2016
PO(*2) JPY10.7Bn PO(*2) JPY14.6Bn(Based on the closing price)
Price of the investment unit:

JPY73,100

Total market capitalization:

JPY326.1Bn(JPY)
120,000

100,000(Based on the closing price of January 31, 2020)
(*1)

(*2)

Price of the real estate investment securities
may fall depending on the fluctuations of
60,000
price of the real estate under management
or profitability, etc., and investors may
40,000suffer losses. Investors may also suffer
losses through the bankruptcy ordeteriorated financial condition of the issuer.
20,000With reference to the risk of investment in
JHR units, please see Securities Report
dated March 20, 2019 and Midterm0
Securities Report dated September 18, 2019.
Including OA

Comparison withREIT Index and TOPIX of
Tokyo Stock Exchange
(TSE)
(*)

80,000100 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.

600

Market Capitalization
Investment Unit Price of JHR

Apr. 2013
PO JPY20.5Bn

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

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

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

Sep. 2014
PO JPY10.1Bn

Jan. 2019
PO(*2) JPY33.3Bn(JPY MM)450,000

300,000

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

0

Investment Unit Price of JHR

TSE REIT Index

500

400

300

200

100

0

52

TOPIX

Appendix 4
Summary of the Asset Management Company

1. Summary of the Asset Management Company
Company

Japan Hotel REIT Advisors Co., Ltd.

Location

Ebisu Neonato 4F, 4-1-18 Ebisu, Shibuya-ku, Tokyo 150-0013

Establishment
CapitalShareholders
Representative Director

August 10, 2004
JPY300MM as of December 31, 2019
Rockrise Sdn Bhd, Kyoritsu Maintenance Co., Ltd., ORIX Corporation
Hisashi Furukawa
Building Lots and Buildings Transaction Business Operator, Governor of Tokyo (4) No. 83613
Discretionary Transaction Agent by Minister of Land, Infrastructure, Transport and Tourism No. 38

Registration and Licenses

Financial Instruments Trading Company, 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
AuditorBoard of Directors' Meeting

Investment (andOperation) Committee

Compliance Committee
Representative Director
Compliance Office

Investment Division

Acquisitions

Public REIT

Operations Division

Private Fund

Planning

54

Finance

Accounting &Reporting

Personnel and
Administration

2. Features and Governance of the Asset Management Company
Mission Statement"Provide attractive hotel investment opportunities to investors as specialist in investment and management of hotel assets. Gain
trust from our stakeholders, and contribute to local communities and society through investing and managing hotel assets."

Code of Conduct
As an independent asset management company, all employees and officers at JHRA should have a "spirit of challenge" aiming
to constantly provide high added value.
Also, "teamwork" is inevitable to provide high added value.
JHRA recognizes "challenge" and "teamwork" as essential value which our code of conduct is based upon.

Challenge

Teamwork Respect teamwork and collaborate with team-mates Be a self-starter, take initiative and demonstrate drive Respect others. Respect values and opinions of others Set high goal and strive Promote "sharing" (idea, knowledge, information, goal,
achievement, joy of achievement, lesson, etc.)

 Respect creativity and innovation
 Promote challenge, free from fear of failure Make effort for open, frank and sincere communication

55

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 No employee of JHRA is a seconded employee from sponsor.
 Part-time directors from our main sponsor, SC CAPITAL PARTNERS group and non-sponsor-related full-time directors
each account for half of JHRA's board of directors.
 With regard to transactions with sponsor-related parties and JHR, JHRA has set strict decision-making rules.
In principle, in addition to obtaining approval by Compliance Committee which includes an outside specialist, who isauthorized to dismiss proposals, JHRA is required to obtain approval from JHR's board of directors' meetings(directors are all third-party members who do not have any relationship with the sponsor-related parties).
 As 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
upon its own judgement.

56

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

57