Asset Management Report
For the Year Ended December 31, 2019Japan Hotel REIT Investment Corporation

Dear Investors,
Thank you for your support and patronage to Japan Hotel REIT Investment Corporation (JHR) and
its asset management company, Japan Hotel REIT Advisors Co., Ltd.
Having settled the accounts for the 20th fiscal period (from January 1, 2019 to December 31, 2019) of
JHR, we are pleased to present you with the status of management and detail of the settlement ofaccounts for the period.
In the 20th fiscal period, the number of inbound visitors (hereinafter called “inbound”) to Japan fromSouth Korea declined due to the deterioration of Japan-South Korea relations, but the number of
inbound to Japan reached an estimated 31.88 million (up 2.2% from the previous year) making a record
high, due to the factors including the increase in inbound due to the Rugby World Cup held in Japan.
In addition, despite typhoons and other natural disasters, the number of overnight guests at domestic
accommodation facilities in 2019 totaled 545 million guest nights (preliminary figures), and demand
for accommodations among Japanese people remained firm. On the other hand, accommodation
market was weak in the Kansai area and other areas due to the loosening supply-demand balancecaused by increase in new supply of hotels and the significant impact of the decline in the inboundfrom South Korea. Under these circumstances, JHR has been making efforts to improve revenue
through the active asset management strategies such as rebranding with large-scale renovation, review
of sales measures, and cost management.
As for the external growth in the 20th fiscal period, JHR acquired “Hilton Tokyo Odaiba”, whichbecame a flagship property (acquisition price: ¥62,400 million) of JHR and “Hotel Oriental Express
Osaka Shinsaibashi” (acquisition price: ¥2,738 million). As a result, JHR grew its asset size toapproximately ¥374.5 billion (total acquisition price).
As a result, JHR posted operating revenue of ¥28,278 million, ordinary income of ¥15,291 million andnet income of ¥15,290 million for the 20th fiscal period. Dividend per unit came to ¥3,690, minus
5.1% from the previous fiscal period. As dividend per unit in the previous fiscal period included a partof gain from sales of properties, excluding such amount, dividend per unit in the current fiscal period
remained at the same level as in the previous fiscal period.
As for the environment surrounding the hotel market, in addition to a decline in the number of inboundto Japan from South Korea since last year, there has been the coronavirus outbreak since the beginningof the year, and there are concerns that demand for hotel accommodations will decline until theoutbreak is over. On the other hand, the Tokyo 2020 Olympic and Paralympic Games will be finallyheld this summer, and the attractiveness of Japan and its tourism resources will be widely disseminatedoverseas. We believe that the advertising effect of the Olympic Games will be significant, and it will
boost the growth of Japan’s tourism industry in the mid to long term. Amid expectations for the mid
to long term growth in the hotel market, we at JHR, and Japan Hotel REIT Advisors Co., Ltd., its asset
management company, will make every effort for JHR’s further growth and enhancement of its
attractiveness by leveraging the expertise and know-how cultivated to date.
We would appreciate your continued support for us.

Kaname Masuda
Executive Director
Japan Hotel REIT Investment Corporation1

Hisashi Furukawa
Representative Director, President and CEO
Japan Hotel REIT Advisors Co., Ltd.

2JAPAN HOTEL REIT INVESTMENT CORPORATION
Contents:

I.

Asset Management Report

4This section (P1-P44) is the translation of the Asset Management Report for the 20th Period releasedon March 19, 2020 except for I.5.Investment policies and issues to be addressed and I.6. Significant
subsequent events and certain other sections which were partially updated based on translation of
Securities Report dated March 27, 2020 and other reasons. This English translation is provided for
information purposes only. If any discrepancy is identified between this translation and the Japaneseoriginal, the Japanese original shall prevail.

II. Financial Statements
For the Years ended December 31, 2019 and 2018
Balance Sheets

45

Statements of Income

47

Statements of Changes in Net Assets

48

Statements of Cash Flows49

Notes to Financial Statements

51

Independent Auditor’s Report663

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

16th period
December 2015

17th period
December 2016

18th period
December 201719th period
December 2018

20th period
December 2019

(Note 1)

JPY1M

17,343

22,10725,47528,25328,278[Real estate operating revenue]

JPY1M[17,033][22,107][25,475][26,318][28,278]
11,129Operating expenses[Real estate operating costs]
Operating income
Ordinary income
Net income(Note 2)

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

JPY1M

6,354

8,221

9,717

10,260

JPY1M[5,002][6,589][7,911][8,344][8,997]

JPY1M

10,98813,88515,757

17,993

17,148

JPY1M

9,295

12,22014,006

16,211

15,291

JPY1M

9,294

12,12314,005

16,21015,290JPY1M

240,356

317,878

352,183

350,556

415,722[27.8][32.3][10.8][(0.5)][18.6]
236,522[%]

129,914

181,989

201,963

203,372[%][29.5][40.1][11.0][0.7][16.3]

Unitholders’ capital

JPY1M

85,470134,829

153,516

153,516

186,894

Number of investment units issued andoutstandingUnits

3,144,227

3,761,907

4,010,847

4,010,847

4,462,347

JPY

41,31848,37650,35450,70553,004

JPY

3,036

3,462

3,606

4,041

3,447

Total dividends

JPY1M

9,354

12,865

14,771

15,602

16,466

Dividend per unit

JPY

2,975

3,420

3,683

3,890

3,690

[Earnings dividend per unit]

JPY

2,975

3,420

3,683

3,890

3,690

[Dividend per unit resulted fromexcess of earnings]

JPY

–

–

–

–

–

%

4.3

4.4

4.2

4.6

4.0

%

8.1

7.8

7.3

8.0

7.0

%

54.1

57.3

57.3

58.0

56.9

JPY1M

[Period-on-period change]

Net assets per unit
Net income per unit

(Note 3)

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

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

[%]

[0.7]

[3.2]

[0.1]

[0.7]

[(1.1)](Note 7)

%

100.6

106.1

105.5

96.2

107.7

[Additional information]
NOI(Note 8)JPY1M

14,82918,82921,424

22,10424,087

FFO per unit

(Note 9) (Note 10)

JPY

3,748

4,103

4,454

4,588

4,503

FFO multiple(Note 10) (Note 11)

Times

23.9

19.2

17.0

17.1

18.0

Times

9.1

14.2

15.6

18.0

17.5

JPY1M

102,772

126,179

140,399

136,671

168,754

42.8

39.7

39.9

39.0

40.6

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

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

%

36

41

44

41

43

493,758.78

587,481.02

687,124.54

678,714.48

746,329.68

Tenants

113

128

131

126

125

％

99.9

99.9

99.9

99.9

99.9

Depreciation

JPY1M

2,772

3,294

3,725

4,091

4,557

Capital expenditures

JPY1M

1,811

2,619

2,898

3,056

6,767

Number of operating days

Days

365

366

365

365

365

Total leasable aream2

Number of tenants at end of period(Note 14)

Occupancy rate at end of period(Note 15)

(Note 1)
(Note 2)
(Note 3)

Properties

Operating revenue does not include consumption tax, etc.
Net income for the 16th fiscal period includes gain on sale of real estate properties (¥305 million). Net income for the
19th fiscal period includes gain on sale of real estate properties (¥1,934 million).
The computation of net income per unit is based on the weighted-average number of units outstanding during the year.

4

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

Ratio of ordinary income to total assets = Ordinary income / ((Total assets at beginning of period + Total assets at end of
period) / 2) × 100
Return on unitholders’ equity = Net income / ((Net assets at beginning of period + Net assets at end of period) / 2) × 100
Ratio of net assets to total assets = Net assets at end of period / Total assets at end of period × 100
Payout ratio = Total dividends (excess of earnings exclusive) / Net income × 100
NOI = Real estate operating revenue − Real estate operating costs + Depreciation + Loss on retirement of noncurrent
assets + Asset retirement obligations expenses
FFO per unit = (Net income + Depreciation + Loss on retirement of noncurrent assets + Asset retirement obligations
expenses ± Loss or gain on sale of real estate properties ± Extraordinary loss or income (excluding loss on disaster)) /Number of investment units issued and outstanding
For the 16th fiscal period, FFO per unit, FFO multiple and debt service coverage ratio are calculated excluding gain onsale of real estate properties (¥305 million). For the 19th fiscal period, FFO per unit, FFO multiple and debt service
coverage ratio are calculated excluding gain on sale of real estate properties (¥1,934 million).
FFO multiple = Investment unit price at end of period / Annualized FFO per unit
Debt service coverage ratio = (Income before income taxes + Depreciation + Loss on retirement of noncurrent assets +Asset retirement obligations expenses ± Loss or gain on sale of real estate properties ± Extraordinary loss or income(excluding loss on disaster) + Amortization of investment corporation bond issuance costs + Amortization of investment
unit issuance expenses ± Loss or gain on derivative instruments + Interest expense + Interest expense on investment
corporation bonds) / (Interest expense + Interest expense on investment corporation bonds + Total of contractual principal
repayments (excluding lump-sum principal repayments))
Ratio of interest-bearing debt to total assets = Interest-bearing debt at end of period / Total assets at end of period × 100(Note 14)

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

(Note 15)

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

2. Asset management operation for the fiscal period under review(1) Brief history and principal activities
Japan Hotel REIT Investment Corporation (hereinafter referred to as “JHR”) was established under the Act on
Investment Trusts and Investment Corporations (Act No. 198 of 1951, as amended; hereinafter referred to as
the “Investment Trusts Act”) on November 10, 2005 and was listed on the Real Estate Investment Trust(“REIT”) section of the Tokyo Stock Exchange (Securities code: 8985) on June 14, 2006.
JHR entrusts the asset management to Japan Hotel REIT Advisors Co., Ltd. (hereinafter referred to as the “AssetManagement Company”). Focusing on the importance of hotels as social infrastructure and their profitability
as investment real estate properties, JHR has primarily invested in real estate related assets which are inthemselves wholly or partially used as hotels or real estate equivalents of such real estate or which are backed
by such real estate or real estate equivalents (hereinafter referred to as the “Real Estate for Hotels, etc.”).
JHR, the former Nippon Hotel Fund Investment Corporation (hereinafter referred to as the “former NHF”),
merged with the former Japan Hotel and Resort, Inc. (hereinafter referred to as the “former JHR”) with aneffective date of April 1, 2012 (hereinafter referred to as the “Merger”) and changed its name to Japan Hotel
REIT Investment Corporation. Since the Merger by the end of the fiscal period, JHR has carried out nine public
offerings for capital increase and continuously acquired “highly-competitive hotels” in mainly “strategic
investment target areas” where domestic and inbound leisure demand can be expected over the medium to longterm.
By implementing the aforementioned growth strategy, JHR has expanded its asset size while improving thequality of its portfolio through new property acquisitions of 26 properties amounting to ¥275,160 million (onan acquisition price basis) in total in approximately a little less than eight years since the Merger. As a result,as of the end of the fiscal period under review, JHR had a portfolio of 43 properties with a combined acquisition
price of ¥374,508 million and the total number of investment units issued and outstanding stood at 4,462,347
units.

5

(2) Investment performance for the fiscal period under review
In 2019, the domestic tourism market has remained strong although the impact of the future course of tradeissues on the world economy and the impact of future prospects of the Chinese economy among others were
carefully watched. The demand for accommodation remained solid as the cumulative number of overnight
guests at domestic accommodation facilities in 2019 totaled 545 million guest nights (preliminary release),
surpassing the figure for 2018 when the figure reached record high. The number of foreign visitors to Japan(hereinafter referred to as “inbound”) was estimated 31.88 million (up 2.2% from the previous year) during theyear marking a record high, due to a large increase in the number of visitors from China, Southeast Asia, theU.S. and Europe offsetting the significant drop in the number of visitors from South Korea. On the other hand,as new supply of hotels increased against the backdrop of strong demand for accommodation, the loosening
supply-demand balance resulted in a weak accommodation market particularly in the Kansai area.
The hotel investment market continued to be in a brisk state, with continual attention paid to Japan’s tourism
industry and hotel industry against the backdrop of the expected growth in demand for accommodation. JHR
has continuously expanded its asset size capitalizing on the strengths such as high recognition as Japan’s largest
J-REIT specializing in hotels, capability to propose various acquisition schemes and cooperation with HotelManagement Japan Co., Ltd. (hereinafter referred to as “HMJ”), a group company of the Asset Management
Company.
During the fiscal year under review, JHR acquired Hilton Tokyo Odaiba (acquisition price: ¥62,400 million), a
scarce large-scale full-service hotel positioned as JHR’s flagship property; and Hotel Oriental Express Osaka
Shinsaibashi (acquisition price: ¥2,738 million), a hotel which HMJ has been involved with since the beginningof development and has managed utilizing its market knowledge and operational know-how. Amid someoverheated mood in the hotel investment market, JHR improved the portfolio quality through acquisitions ofhighly competitive properties that can differentiate themselves from others.
As to the performance of hotels owned by JHR, RevPAR (Note 1) and GOP (gross operating profit) of the 21
hotels with variable rent, etc.(Note 2) fell below the previous year mainly due to a decrease in room sales atsome hotels impacted by factors such as the increase in new hotel supply and the decrease of visitors fromSouth Korea.
While taking measures to increase fixed and variable rent through the active asset management strategy, whichis the proactive pursuit of greater profitability and asset value of owned hotels such as the large-scale renovationof Oriental Hotel Fukuoka Hakata Station (Note 3) which reopened in April 2019 after the renovation. JHR also
has endeavored to generate greater earnings by appropriately reviewing the costs of each item such as real estate
operating costs, general and administrative expenses and borrowing costs, etc. through negotiations with
relevant parties and other measures. For further details of management indicators for the 21 hotels with variable
rent, etc., please refer to “<Reference 2> Hotel operation indexes, sales and GOP”in 7. Reference information.
(Note 1) RevPAR: Represents revenue per available room, which is calculated by dividing revenue for rooms for a certain period(including service charges) by the total number of rooms available for sale during the period, and equals the product of
average daily rate (ADR) and occupancy rate. The same shall apply hereinafter.
(Note 2) The hotel group combining the hotels which JHR leases to HMJ (Kobe Meriken Park Oriental Hotel, Oriental Hoteltokyo bay, Namba Oriental Hotel, Hotel Nikko Alivila and Oriental Hotel Hiroshima, (hereinafter referred to as “TheFive HMJ hotels”)), with the hotels which JHR leases to HMJ subsidiaries (Okinawa Marriott Resort & Spa, Sheraton
Grand Hiroshima Hotel (main facility of ACTIVE-INTER CITY HIROSHIMA), Oriental Hotel Fukuoka Hakata Station,
Holiday Inn Osaka Namba, Hilton Tokyo Narita Airport, International Garden Hotel Narita, Hotel Nikko Nara, Hotel
Oriental Express Osaka Shinsaibashi and Hilton Tokyo Odaiba) is called the HMJ Group Hotels. 12 Hotels excluding
Hotel Oriental Express Osaka Shinsaibashi and Hilton Tokyo Odaiba from the HMJ Group Hotels are called The Twelve
HMJ Hotels. The 21 hotels with variable rent, etc. refers to the HMJ Group Hotels excluding Oriental Hotel Fukuoka
Hakata Station, Hotel Oriental Express Osaka Shinsaibashi and Hilton Tokyo Odaiba which cannot be compared withthe previous fiscal year due to renovation or new acquisition, plus ibis Tokyo Shinjuku, ibis Styles Kyoto Station, ibis
Styles Sapporo, Mercure Sapporo, Mercure Okinawa Naha, Mercure Yokosuka, the b suidobashi, the b ikebukuro, the bhachioji and the b hakata. The same shall apply hereinafter.
(Note 3) Former Hotel Centraza Hakata underwent large-scale renovation work accompanying the suspension of hotel operations
from October 1, 2018 and has been operated as Oriental Hotel Fukuoka Hakata Station since April 9, 2019. The same
shall apply hereinafter.

6

(3) Funding conditions
JHR took out loans of ¥30,000 million in total in April 2019, in addition to procuring ¥33,378 million by way
of capital increase through public offering in January 2019 and third-party allotment in February 2019; andacquired two properties, Hotel Oriental Express Osaka Shinsaibashi and Hilton Tokyo Odaiba in February and
April 2019, respectively.
In March 2019, JHR took out loans of ¥6,000 million in total mainly to refinance existing investment
corporation bonds that had matured and existing borrowings that were due for repayment. Furthermore, in April
2019, JHR took out loans of ¥1,800 million mainly for renovation of Oriental Hotel Fukuoka Hakata Station.
JHR issued investment corporation bonds of ¥8,000 million targeting individual investors in June 2019 andallocated the funds to the early repayment of existing loans.
In addition, in July 2019, JHR issued green bonds (investment corporation bonds for institutional investors) of¥2,000 million for the first time among J-REITs specializing in hotels mainly for the purpose of repaying
existing borrowings allocated to capital expenditures and constructions of equipment which contribute toenvironment, including reduction of CO2 and water consumption, out of the renovation cost for Oriental Hotel
Fukuoka Hakata Station.
Furthermore, JHR took out loans of ¥7,200 million for the refinance and partial early repayment of existingloans in September 2019.
Consequently, as of the end of the fiscal year under review, balance of interest-bearing debt totaled ¥168,754
million, comprised of current portion of long-term loans payable of ¥12,782 million, long-term loans payableof ¥114,372 million and investment corporation bonds of ¥41,600 million, and the ratio of interest-bearing debt
to total assets at end of year (Note) stood at 40.6%.
JHR reduced borrowing costs and extended maturity dates through the aforementioned series of fundprocurement. Along with such, JHR concluded loans with fixed interest rates as well as interest rate swap
contracts to hedge against risks of interest rates rising in the future. These actions brought the fixed rate ratio
on total interest-bearing debt at end of year to 97.8%.
(Note) Ratio of interest-bearing debt to total assets at end of period = Balance of interest-bearing debt at end of period / Total
assets at end of period x 100

As of December 31, 2019, JHR’s issuer ratings were as follows.
As of October 17, 2019, Rating and Investment Information, Inc. (hereinafter referred to as “R&I”) changed
the outlook of JHR’s issuer rating from “A (Stable)” to “A (Positive).”
Rating agency

RatingOutlookJapan Credit Rating Agency, Ltd.

A＋

StableRating and Investment Information, Inc.

A

Positive(4) Financial results
As a result of the abovementioned asset management, operating revenue, operating income and ordinary income
were ¥28,278 million, ¥17,148 million and ¥15,291 million, respectively, for the fiscal period under review (12month period from January 1, 2019 to December 31, 2019). Net income was ¥15,290 million.
With regard to dividends, it was decided that ¥16,466 million was distributed, which was calculated by adding
a reversal of reserve for temporary difference adjustment (appropriation for dividends) of ¥1,176 million tounappropriated retained earnings of ¥15,290 million. Consequently, ¥16,466 million was distributed as dividend
and the dividend per unit came to ¥3,690.
For details of the appropriation for dividends for the fiscal period under review, please refer to “<Reference 3>
Dividend per unit and appropriation for dividends” in 7. Reference information.

7

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

Capital transaction

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

Note

Increase(decrease)

Balance

Increase(decrease)

Balance

200,000

2,991,281

14,97473,999(Note 1)

9,041

3,000,322

676

74,676(Note 2)140,000

3,140,322

10,50085,177(Note 3)

3,905

3,144,227

292

85,470(Note 4)

170,000

3,314,227

13,98699,456(Note 5)7,680

3,321,907

631

100,088(Note 6)

January 27,
2015

Capital increase through public
offering of investment units

February 18,
2015

Capital increase through third-party
allotment of investment units

June 22,2015

Capital increase through public
offering of investment units

July 23,2015

Capital increase through third-party
allotment of investment units

January 20,
2016

Capital increase through public
offering of investment units

February 17,
2016

Capital increase through third-party
allotment of investment units

July 27,
2016

Capital increase through public
offering of investment units

428,260

3,750,167

33,813

133,902(Note 7)

August 23,
2016

Capital increase through third-party
allotment of investment units

11,7403,761,907

926

134,829(Note 8)July 5,2017

Capital increase through public
offering of investment units

236,000

3,997,907

17,715

152,544(Note 9)August 2,
2017

Capital increase through third-party
allotment of investment units

12,9404,010,847

971

153,516(Note 10)January 23,
2019

Capital increase through public
offering of investment units

447,800

4,458,647

33,104

186,620(Note 11)February 20,
2019

Capital increase through third-party
allotment of investment units

3,700

4,462,347

273

186,894(Note 12)(Note 1)
(Note 2)

(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)(Note 8)(Note 9)(Note 10)(Note 11)
(Note 12)

New investment units were issued through public offering with an issue price per unit of ¥77,415 (issue value of¥74,874) in order to raise funds for the acquisition of new properties, etc.
New investment units were issued through third-party allotment with an issue value per unit of ¥74,874 in order to raise
funds for allocation to part of future acquisitions of specified assets, part of other repayment of loans, or capital
expenditures to maintain or improve competitiveness of existing properties.
New investment units were issued through public offering with an issue price per unit of ¥77,512 (issue value of¥75,007) in order to raise funds for the acquisition of new properties, etc.
New investment units were issued through third-party allotment with an issue value per unit of ¥75,007 in order to raise
funds for allocation to part of future acquisitions of specified assets, part of other repayment of loans, or capital
expenditures to maintain or improve competitiveness of existing properties.
New investment units were issued through public offering with an issue price per unit of ¥85,020 (issue value of¥82,273) in order to raise funds for the acquisition of new properties, etc.
New investment units were issued through third-party allotment with an issue value per unit of ¥82,273 in order to raise
funds for the acquisition of new properties, etc.
New investment units were issued through public offering with an issue price per unit of ¥81,536 (issue value of¥78,956) in order to raise funds for the acquisition of new properties, etc.
New investment units were issued through third-party allotment with an issue value per unit of ¥78,956 in order to raise
funds for allocation to part of future acquisitions of specified assets, part of other repayment of loans, or capital
expenditures to maintain or improve competitiveness of existing properties.
New investment units were issued through public offering with an issue price per unit of ¥77,518 (issue value of¥75,065) in order to raise funds for the acquisition of new properties, etc.
New investment units were issued through third-party allotment with an issue value per unit of ¥75,065 in order to raise
funds for allocation to part of future acquisitions of specified assets, part of repayment of loans, or repair expenses andcapital expenditures to maintain or improve competitiveness of existing properties.
New investment units were issued through public offering with an issue price per unit of ¥76,342 (issue value of¥73,927) in order to raise funds for the acquisition of new properties, etc.
New investment units were issued through third-party allotment with an issue value per unit of ¥73,927 in order to raise
funds for allocation to part of the acquisition of new properties.

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

16th period

17th period

18th period

19th period

20th period

Account closing month

December 2015

December 2016

December 2017

December 2018

December 2019

Highest price

93,800103,400

81,20085,00091,800

Lowest price70,60070,90071,10075,00075,900Price at end of period

89,50078,60075,60078,40081,2009

4. Dividends, etc.
Earnings dividend for the period under review was decided in accordance with the monetary distribution policy
stipulated in Article 34, paragraph 1 of JHR’s Articles of Incorporation. And ¥16,466,060,430, which excludes
fractions of less than one yen of dividend per unit from ¥16,466,805,219, which was calculated by adding areversal of the reserve for temporary difference adjustment of ¥1,176,490,844 to unappropriated retained earningsof ¥15,290,314,375 as of end of the fiscal period under review, was distributed. Consequently, the dividend perunit came to ¥3,690.
(yen)Classification
Unappropriated retained
earnings
Retained earnings

16th period

17th period

18th period

19th period

20th period(From January 1, 2015
to December 31, 2015)(From January 1, 2016
to December 31, 2016)(From January 1, 2017
to December 31, 2017)(From January 1, 2018
to December 31, 2018)(From January 1, 2019
to December 31, 2019)

9,296,121,922

12,126,057,948

14,005,489,588

16,213,482,816

15,290,314,375

2,894,304

411,048

3,048,696–

744,789

Total cash dividends

9,354,075,325

12,865,721,940

14,771,949,501

15,602,194,830

16,466,060,430[Dividend per unit][2,975][3,420][3,683][3,890][3,690]9,354,075,325

12,865,721,940

14,771,949,501

15,602,194,830

16,466,060,430[2,975][3,420][3,683][3,890][3,690]

–

–

–

–

–

[–]

[–]

[–]

[–]

[–]

–

–

–

–

–

[–]

[–]

[–]

[–]

[–]

–

–

–

–

–

[–]

[–]

[–]

[–]

[–]

Of the above, total earnings
dividends[Earnings dividend per unit]
Of the above, total return ofcapital contributions[Return of capital
contributions per unit]
Of total return of capital
contributions, total
distributions from allowancefor temporary difference
adjustment[Of return of capital
contributions per unit,
distributions from allowancefor temporary difference
adjustment per unit]
Of total return of capital
contributions, total
distributions from theunitholders’ capital for tax
purpose[Of return of capital
contribution per unit,
distributions from theunitholders’ capital for tax
purpose per unit]105. Investment policies and issues to be addressed
General investment outlook
Due to the global spread of the novel coronavirus (COVID-19), the number of infected people in Japan andoverseas has been increasing. There have been various events happening due to the spread, such as the request by
the government to refrain from holding various events, closures of theme parks, the restrictions on travel fromsome countries, and the expansion of countries subject to restrictions on entry to Japan from foreign countries, etc.
Therefore, travel demand by inbound to Japan from foreign countries including China has been significantly
declining, and demand for accommodation and banquets among Japanese people has been also decreasing. As aresult, the business environment surrounding hotels has changed dramatically. In the face of such circumstances,
concerns have arisen about the impact on the respective hotels owned by JHR. However, the extent of the impact
cannot be estimated at present. On the other hand, if the problem of the novel coronavirus settles, the demand foraccommodation and banquets is expected to recover, and there is no change in JHR's belief that the tourism
industry is a growing industry. For future hotel operations, JHR believes that the location and competitiveness of
individual hotels and operator’s capability to differentiate their hotels from others and to improve earning
capability by controlling costs, etc. are the factors to widen the difference in performance among the hotels. Under
recognition of such circumstances, JHR intends to work with the Asset Management Company to implement
strategies to differentiate hotels owned by JHR in the market by utilizing experience which JHR has cultivated as
J-REIT specializing in hotel investment, and manage assets based on the approach described below.
Internal growth
JHR will work to secure “stability” mainly with fixed rent contracts, while at the same time aim for “upside
potential” through implementation of active asset management strategy, which proactively pursues greater
profitability and asset value of its properties by way of a variety of measures such as expanding international
brands and coordinating with HMJ.
For properties with fixed rent contracts, JHR will focus on setting, maintaining and increasing appropriate rents
based on the rent levels in the market where respective hotels are located or each tenant’s ability to bear the rent
costs, and plans to aim at raising rents (including introduction of revenue sharing structure) in accordance with theconditions of the accommodation market.
For hotels under variable rent contracts and under a management contract structure, JHR is working to increase
variable rent and reduce management contract fees by implementing the active asset management strategy.
A. Properties under variable rent contracts
JHR works to enhance the profitability of its properties under variable rent contracts through its active asset
management strategy. JHR has adopted world-leading international brands such as Hilton, Marriott, Sheraton,
Mercure and Holiday Inn or leading brands in Japan including Oriental Hotel and Hotel Nikko that are operated
in various areas throughout the country and, together with excellent operators, aims to increase variable rent
through improved performance of these hotels. JHR coordinates with the operators in an effort to enhance thehotel performances by requesting them to implement marketing initiatives to attract a wider range of demandwith considerations given to solid domestic leisure demand and increasing leisure demand from inbound,measures to maintain and increase room rates, and realization of the synergy effects like cost reductions fromowning multiple properties, among other issues. Moreover, JHR conducts strategic capital expenditure such as
renovating guest rooms, etc. for improving property competitiveness primarily for hotels with high growth
expectations, in an attempt to further enhance hotel earnings led by the growth in RevPAR. As such, JHR plans
to implement large-scale renovation for Hilton Tokyo Odaiba and Namba Oriental Hotel in 2020.
B. Properties under fixed rent contracts
JHR will increase its efforts to appropriately monitor operating conditions of these hotels and, by paying carefulattention to each tenant’s ability to bear the rent costs, conduct negotiations with the tenants of hotels at which
the ability to bear rent costs has been enhanced through better performances so that the improvement in hotel
earnings would lead to an increase in JHR’s earnings, such as revising rents upward and introducing revenue
sharing structure. In addition, JHR will carry out investments for the purpose of continuous maintenance,
renewal and improvement to ensure each hotel becomes prominent in the market and to maintain and increase
the value of its assets.
11External growth
In terms of external growth strategy, JHR will keep target to acquire highly-competitive Real Estate for Hotels,
etc. (Hotel Assets) in areas which can expect “domestic and inbound leisure demand” over the medium to longterm as JHR has done to date. In addition, JHR will build a portfolio which can secure stable revenues and with
future growth potential in mind in order to achieve upside gains.
Upon acquiring properties, JHR will focus on the infrastructure aspects of the relevant Hotel Assets such asbuildings and facilities, the services aspects such as the credibility of the hotel lessee and operator (including theability of the hotel lessee to bear rent costs) as well as operation and management capabilities, and the properties’
location superiority that serves as the base for demand stability and growth potential.
Specifically, JHR will target to invest in “full-service hotels” and “resort hotels” that pose barriers to new opening
due to such factors as operation and management know-how required for operating the hotels and limitations interms of invested capital and location. As for “limited-service hotels,” JHR emphasizes the credibility andoperation capabilities of the hotel lessee and operator as well as the building age, location, guestroom compositionand profitability of the properties. Moreover, JHR will take a particularly selective approach to hotels specialized
for accommodation and of a budget type (low price zone) that mainly offers single rooms and where the source ofcompetitiveness relies only on prices.
In the hotel investment market, harsh competition over acquisition is ongoing due to competitions with J-REITs
and non-listed private J-REITs that invest in hotels, overseas investors and others. JHR will aim for expansion ofasset size that accompanies an improvement in the quality of its portfolio by acquiring highly competitive
properties while leveraging its strength and advantages and also utilizing the HMJ platform in some cases.
Finance strategy
Under the basic policy of carrying out conservative financial strategy which places importance on securement offinancial stability and soundness, JHR intends to maintain and enhance the relationships of trust with existing
financial institutions with which it does business while endeavoring to diversify the means of financing. It aims to
conduct financial operations by keeping the ratio of interest-bearing debt to total assets at no larger than 50% for
the time being as in the past. In addition, when seeking new borrowing for property acquisitions or refinancing
existing debt, JHR will work to disperse maturity dates of its debt as well as further reinforce and expand its baseof lenders and further diversify funding methods, such as issuance of investment corporation bonds (including
green bonds), while considering the balance with the funding costs.
Moreover, while JHR understands that no abrupt change is likely to occur to the interest rate level in the current
situation, it aims to further improve its financial foundation by managing risk of interest rates market throughextending maturity dates and fixing rates, etc., in preparation for addressing any change in the financial market
environment.
Policy on handling of negative goodwill
Starting from the fiscal year ended December 31, 2017 (18th period), JHR started appropriation for dividends
through reversal of reserve for temporary difference adjustment in connection with partial amendments to the“Ordinance on Accounting of Investment Corporations” (Cabinet Office Ordinance No. 47 of 2006, as amended;hereinafter referred to as the “Ordinance on Accountings of Investment Corporations”) and the “Regulation forReal Estate Investment Trusts and Real Estate Investment Corporations” of The Investment Trusts Association,
Japan. JHR stipulated a policy to reverse ¥262 million, which is an amount equivalent to 2% (1/50) of the balanceof the reserve for temporary difference adjustment for the fiscal year ended December 31, 2017 (hereinafter called
the “50-year amortization amount of negative goodwill”), to pay out as dividends every year, with the balance ofthe reserve for temporary difference adjustment remaining at the time of reversal set as the maximum reversal
amount (Note).
Furthermore, in cases of incurrence of losses caused by property dispositions, impairment loss of assets, dilutionof dividend per unit due to the issuance of new investment units through public offerings, etc., loss on retirementof noncurrent assets, and suspension of sales and such due to large-scale renovations with significant impact onrevenues, JHR stipulated a policy to reverse additional portion of the negative goodwill on top of the 50-year
amortization amount of negative goodwill (¥262 million) (Note).
(Note)The policy may change due to a resolution of the board of directors. etc., and it does not guarantee the method of

12

reversing the reserve for temporary difference adjustment, and amounts to be reversed, etc., in the future.

Initiatives for Sustainability
In recent years, there has been growing importance of the risks and opportunities of ESG (Environment, Socialand Governance) issues in the investment management industry from the standpoint of long-term sustainability.
JHR recognizes that conducting real estate investment management based on consideration for ESG is important
to enhance unitholder value and to further raise the attractiveness of JHR. In addition, JHR believes that it isindispensable to establish favorable relationships with its stakeholders including unitholders, hotel users (guests),
lessees, operators, business partners including property managers, etc., local communities, officers and employeesof the Asset Management Company and others and to fulfill our social responsibilities expected from each of them.
In order to put such ideas into practice, JHR, along with the Asset Management Company, has established a“Sustainability Policy” as guidance to ESG initiatives. We have promoted efforts to reduce environmental impact
at properties in our portfolio based on this policy, and received the Building-Housing Energy-efficiency Labeling
System (BELS) evaluation for the two properties of Hotel Nikko Alivila and Mercure Okinawa Naha in February
2018 as first such cases for hotel properties owned by J-REITs (Note 1). Furthermore, in September 2018, JHR
became the first J-REIT specializing in hotels (Note 1) that was recognized by GRESB for its environmental
awareness and sustainability initiatives, and acquired “Green Star,” the highest ranking, in the GRESB Real Estate
Assessment (Note 2). JHR was evaluated as “3 Stars” in GRESB Rating in September 2019.
Furthermore, JHR issued green bonds in July 2019 to allocate funds mainly to refinance loans procured for funding
capital expenditures and constructions cost, etc. which contribute to the environment, including reduction of CO2
and water consumption in the renovation work at Oriental Hotel Fukuoka Hakata Station. It was the first case of a
J-REIT specializing in hotels issuing green bonds.
Recognizing its social responsibility towards local communities as a J- REIT specializing in hotels, JHR willproactively carry out social contribution activities capitalizing on the characteristics of the hotel sector and each
hotel.
(Note 1) Investigated by the Asset Management Company based on disclosed information(Note 2) GRESB, which stands for Global Real Estate Sustainability Benchmark, is an annual benchmarking program to evaluate
Environment, Social and Governance (ESG) awareness of real estate companies and funds. It evaluates initiatives forsustainability of real estate companies, REITs and real estate funds, not of individual properties. The GRESB Rating
makes relative assessment based on total scores, with 5 Stars being the highest ranking.

6. Significant subsequent events
Impact of the novel coronavirus
The global spread of the novel coronavirus infection has caused a significant decrease in the travel demand by Chineseand other foreign tourists visiting Japan. Moreover, domestic demand for travel, parties and banquets, etc. has also
decreased as voluntary restraint on going out is spreading among Japanese people due to the request by the Japanese
government.
In the face of such circumstances, concerns have arisen about the negative impact on the revenues and valuation of thehotels owned by JHR. However, the overall financial impact and duration cannot be estimated at this time.

13

7. Reference information<Reference 1>
Major indicators of the hotel business for the fiscal year ended December 31, 2019
The following tables indicate the figures related to the hotel business of the HMJ Group Hotels for theoperating period from January 1, 2019 through December 31, 2019, based on the data provided by thehotel lessees, etc. Furthermore, while the indicators of the hotels are among the indicators that show theoperating status of the rooms departments, they do not necessarily represent the operating revenue andthe ability to bear rent, etc. of the respective hotels, as the daily rates of the respective rooms available
for sale and profit margins, etc. are not uniform, among other reasons. As such, the indicators are no
more than the reference figures.
Kobe Meriken Park Oriental Hotel tokyo
Oriental Hotelbay
Ratio to
total
sales

Namba Oriental
Hotel

Ratio to
total
sales

Hotel Nikko
AlivilaRatio to
total
sales

The Five HMJ
hotelsTotal/Average

Oriental Hotel
Hiroshima

Ratio to
total
sales

Ratio to
total
sales

Ratio to
total
sales

Occupancy rate

84.8%

－

98.1%

－

92.9%

－

84.8%

－

88.5%

－

90.5%

－

ADR (Note 1)

19,337－

21,230－18,602－

30,614

－

9,932

－

21,067－

RevPAR (Note 2)

16,397－

20,837－

17,290－25,961

－

8,788

－

19,066－

Total sales(millions of yen)

5,433

100.0%

6,758

100.0%

2,589

100.0%

6,264

100.0%

2,110

100.0%

23,153100.0%

Rooms department

1,909

35.1%

3,886

57.5%

1,628

62.9%

3,762

60.1%

728

34.5%

11,914

51.5%

Food & beveragedepartment

3,256

59.9%

2,322

34.4%

116

4.5%

1,856

29.6%

1,314

62.3%

8,863

38.3%

Tenant department

77

1.4%

222

3.3%

796

30.8%

2

0.0%

23

1.1%

1,120

4.8%

Other departments(Note 3)

191

3.5%

328

4.8%

48

1.9%

644

10.3%

45

2.1%

1,256

5.4%

1,317

24.2%

2,166

32.1%

1,549

59.8%

2,376

37.9%

384

18.2%

7,793

33.7%

GOP
(millions of yen)

Okinawa Marriott
Resort & Spa
Ratio to
total
sales

Oriental Hotel
Fukuoka Hakata
StationSheraton Grand
Hiroshima Hotel
Ratio to
total
sales

(Note 4)(Note 5)

Holiday Inn Osaka
Namba

Hilton Tokyo Narita
AirportRatio to
total
sales

Ratio to
total
sales

Ratio to
total
sales

International
Garden Hotel
NaritaRatio
to totalsales

Occupancy rate

80.6%

－

91.3%

－

64.4%

－

91.2%

－

88.8%

－

82.5%

－

ADR (Note 1)

21,805－

20,676－

18,633－

16,597－

12,768

－

8,712

－

RevPAR (Note 2)

17,577－

18,872－

11,995－

15,134－

11,337

－

7,191

－

Total sales(millions of yen)

3,693

100.0%

3,442

100.0%

1,994

100.0%

1,784

100.0%

3,431

100.0%

1,541

100.0%

Rooms department

2,316

62.7%

1,639

47.6%

968

48.5%

1,735

97.2%

2,268

66.1%

1,215

78.8%

Food & beveragedepartment

961

26.0%

1,706

49.6%

748

37.5%

－

－

1,063

31.0%

315

20.4%

Tenant department

58

1.6%

0

0.0%

263

13.2%

37

2.1%

52

1.5%

6

0.4%

Other departments(Note 3)

358

9.7%

97

2.8%

16

0.8%

12

0.7%

48

1.4%

5

0.3%

1,131

30.6%

1,097

31.9%

803

40.3%

1,074

60.2%

1,092

31.8%

634

41.1%

GOP
(millions of yen)

14

Hotel Nikko Nara

Hotel Oriental
Express Osaka
Shinsaibashi

Ratio to
total
sales

Hilton Tokyo Odaiba

Ratio to
total
sales

The HMJ Group
HotelsTotal/Average

Ratio to
total
sales

(Note 6)Ratio
to totalsales

Occupancy rate

79.3%

－

90.5%

－

87.9%

－

86.6%

－

ADR (Note 1)

13,039

－

9,293

－

30,202－

18,635－

RevPAR (Note 2)

10,337

－

8,407

－

26,558－16,143－

Total sales(millions of yen)

2,874

100.0%

395

100.0%

8,880

100.0%

51,187100.0%

Rooms department

1,245

43.3%

381

96.4%

4,391

49.5%

28,071

54.8%

Food & beveragedepartment

1,586

55.2%

14

3.5%

4,093

46.1%

19,34837.8%

Tenant department

26

0.9%

－

－

241

2.7%

1,804

3.5%

Other departments(Note 3)

16

0.6%

0

0.1%

155

1.7%

1,964

3.8%

GOP
(millions of yen)

694

24.2%

156

39.5%

2,642

29.8%

17,116

33.4%(Note 1)

(Note 2)

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

ADR: Represents average daily rate, which is calculated by dividing total rooms revenue for a certain period (including
service charges) by the total number of rooms sold during the period.
Service charges are 10% for 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), International Garden Hotel Narita, Hotel Nikko Nara and Oriental Hotel Fukuoka
Hakata Station; 12% for Hilton Tokyo Narita Airport; and 13% for Hilton Tokyo Odaiba. Holiday Inn Osaka Namba andHotel Oriental Express Osaka Shinsaibashi do not request service charges. Described in unit of yen. The same shall apply
hereinafter.
RevPAR: Represents revenue per available room, which is calculated by dividing total rooms revenue for a certain period(including service charges) by the total number of rooms available for sale during the period. Revenue per available room
equals the product of ADR and occupancy rate. Described in unit of yen. The same shall apply hereinafter.
Figures for the Other departments include sales of the Product sales department.
The indicated figures are for Sheraton Grand Hiroshima Hotel, the main facility of ACTIVE-INTER CITY HIROSHIMA.
While Oriental Hotel Fukuoka Hakata Station (former Hotel Centraza Hakata) undertook large-scale renovation work
accompanied by suspension of hotel operation from October 1, 2018 through the reopening on April 9, 2019, the occupancy
rate is calculated including the suspension period.
For Total/Average of the HMJ Group Hotels, figures are calculated by JHR as reference since no figures have been
provided by the hotel lessees, etc.
The occupancy rate is rounded off to one decimal place, while ADR and RevPAR are rounded off to single units. Sales
and GOP are rounded off to the nearest million yen. For the ratio to total sales, the ratio of sales in each department to total
sales is rounded off to one decimal place.

15

<Reference 2>
Hotel operation indexes, sales and GOP
The numerical figures are based on figures obtained from hotel lessees, etc. Please note that these figures have notbeen audited or gone through other procedures. No guarantee is made as to the accuracy or completeness of the
figures and information.
<1> 21 Hotels with Variable Rent
Fiscal year ended December 31, 2018
Comparison withprevious period

ActualOccupancy rate

ADR

RevPAR

Sales(millions of yen)

GOP
(millions of yen)

Fiscal year ended December 31, 2019
Comparison withprevious period

ActualFirst half

87.3%

0.3pt

86.5%

(0.7)pt

Second half

87.1%(1.4)pt

86.5%(0.6)pt

Full year

87.2%(0.6)pt

86.5%(0.7)pt

First half

14,6852.2%

14,7490.4%

Second half

17,0200.4%

16,316(4.1)%

Full year

15,861

1.1%

15,539(2.0)%First half

12,817

2.6%

12,765(0.4)%

Second half

14,831(1.2)%

14,113(4.8)%

Full year

13,8330.5%

13,444(2.8)%First half

22,9580.8%

23,124

0.7%

Second half

26,257(1.2)%

25,320(3.6)%

Full year

49,215(0.3)%

48,444(1.6)%First half

7,715

2.6%

7,709

(0.1)%

Second half

10,196

0.3%

9,561

(6.2)%

Full year

17,911

1.3%

17,270(3.6)%<2> Oriental Hotel Fukuoka Hakata Station
Fiscal year ended December 31, 2018
Comparison withprevious period

ActualOccupancy rate

ADR

RevPAR

Sales(millions of yen)

GOP
(millions of yen)

(Note)

Fiscal year ended December 31, 2019
Comparison withprevious period

ActualFirst half

94.7%

1.0pt

39.1%

(55.6)pt

Second half

47.0%

(48.4)pt

89.2%

42.2ptFull year

70.7%(23.9)pt

64.4%(6.3)pt

First half

13,323

8.4%

19,38545.5%

Second half

13,343(1.5)%

18,30937.2%

Full year

13,3303.1%

18,63339.8%

First half

12,621

9.6%

7,588

(39.9)%

Second half

6,274

(51.5)%

16,330160.3%

Full year

9,422(22.9)%

11,995

27.3%

First half

1,199(5.3)%

673(43.9)%

Second half

637

(46.8)%

1,321

107.4%

Full year

1,836(22.5)%

1,994

8.6%

First half

494

3.9%

131

(73.4)%

Second half

141

(69.8)%

671

375.9%

Full year635(32.6)%

803

26.3%

Oriental Hotel Fukuoka Hakata Station undertook large-scale renovation work accompanied by suspension of hotel operationfrom October 1, 2018 through April 8, 2019.

16

<3> Hotel Oriental Express Osaka Shinsaibashi
Fiscal year ended December 31, 2018
ActualOccupancy rate

ADR

RevPAR

Sales(millions of yen)

GOP
(millions of yen)

(Note 1)
(Note 2)

Fiscal year ended December 31, 2019

Comparison withprevious period

Comparison withprevious period

ActualFirst half

－

－

92.3%

－

Second half

－

－

88.7%

－

Full year

－

－

90.5%

－

First half

－

－

9,611

－

Second half

－

－

8,967

－

Full year

－

－

9,293

－

First half

－

－

8,868

－

Second half

－

－

7,954

－

Full year

－

－

8,407

－

First half

－

－

205

－

Second half

－

－

190

－

Full year

－

－

395

－

First half

－

－

84

－

Second half

－

－

72

－

Full year

－

－

156

－

Hotel Oriental Express Osaka Shinsaibashi was acquired on February 1, 2019. The figures of the fiscal year ended
December 2019 are for the full year calculated by adding the figures prior to the acquisition by JHR.
As Hotel Oriental Express Osaka Shinsaibashi opened on April 2, 2018, its figures for the fiscal year ended December 31,
2018 and earlier are not stated.

<4> Hilton Tokyo Odaiba
Fiscal year ended December 31, 2018
Comparison withprevious period

ActualOccupancy rate

ADR

RevPAR

Sales(millions of yen)

GOP
(millions of yen)

(Note)

Fiscal year ended December 31, 2019
Comparison withprevious period

ActualFirst half

95.2%

0.9pt

85.9%

(9.3)pt

Second half

92.9%(3.0)pt

89.9%(2.9)pt

Full year

94.0%(1.1)pt

87.9%(6.1)pt

First half

28,831

6.8%

29,263

1.5%

Second half

31,3968.6%

31,085(1.0)%

Full year

30,1087.6%

30,202

0.3%

First half

27,451

7.7%

25,135(8.4)%

Second half

29,154

5.3%

27,957(4.1)%

Full year

28,3096.4%

26,558(6.2)%First half

4,591

9.5%

4,258

(7.3)%

Second half

5,008

7.3%

4,622

(7.7)%

Full year

9,599

8.3%

8,880

(6.9)%First half

1,374

21.7%

1,143

(16.9)%

Second half

1,723

15.2%

1,500

(13.0)%

Full year

3,097

18.0%

2,642

(14.7)%

Hilton Tokyo Odaiba was acquired on April 8, 2019. The figures of the fiscal years ended December 31, 2018 and December
31, 2019 are for the full year calculated by adding the figures prior to the acquisition by JHR.

17

<Reference 3>

Dividend per unit and appropriation for dividends

Dividend per unit for the fiscal years ended December 31, 2018 and December 31, 2019 were calculated based on
the assumptions described below.
(millions of yen)
Fiscal year ended
December 31, 2018

Fiscal year ended
December 31, 2019

Unappropriated retained earnings

16,213

15,290Reserve for special advanced depreciation(Note 1)(1,174)

-

563

1,176

262

262

Loss on retirement of noncurrent assets (Note 3)

35

246

Correspondence to large-scale renovation works (Note 4)

265

357

Total of reserve for temporary difference adjustments (Note 2) (negative
goodwill) used
Negative goodwill – 50-year amortization amount (Note 2)

Adjustment for dilution (Note 5)
Total dividends
Total number of investment units issued (Units)
Dividend per unit-

310

15,602

16,466

4,010,847

4,462,347

3,890

3,690

(JPY)

(Note 1) R&B Hotel Higashi-nihonbashi, the b akasaka-mitsuke and the b Ochanomizu were sold on August 10, 2018. ¥1,174 millionof the gain on sale by the sales was retained as reserve for special advanced depreciation within the limit to maintain conduit
status stipulated by Article 67-15 of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957; as amended;hereinafter called “ the Act on Special Measures Concerning Taxation” The same shall apply hereinafter.) by applying“Special provisions for taxation in the case where a special account is set up in connection with transfer of specified assets”(Article 65-8 in the Act on Special Measures Concerning Taxation).
(Note 2) Starting from the fiscal year ended December 31, 2017 (18th period), JHR commenced paying out dividends throughreversal of reserve for temporary difference adjustment in connection with partial amendments to the “Ordinance on
Accounting of Investment Corporations” and the “Regulation for Real Estate Investment Trusts and Real Estate Investment
Corporations” of The Investment Trusts Association, Japan. Specifically, JHR transferred the remaining balance of dividend
reserve (¥13,127 million) attributable to the gain on negative goodwill in the cash dividends statements for the fiscal year
ended December 31, 2016 (17th period) to “reserve for temporary difference adjustment” and reverses ¥262 million(hereinafter called the “50-year amortization amount of negative goodwill”), which is an amount equivalent to 2% (1/50)of the remaining balance of the reserve for temporary difference adjustment, to payout as dividends, with the remainingbalance of the reserve for temporary difference adjustment set as the maximum amount, for every year from the fiscal year
ended December 31, 2017 (18th period).
(Note 3) The amount recognized as a loss on retirement of noncurrent assets are appropriated by reserve for temporary difference
adjustment (negative goodwill) and have no impact on the dividend per unit.
(Note 4) Former Hotel Centraza Hakata implemented large-scale renovation work accompanied by suspension of hotel operation
starting October 1, 2018 and resumed its operation as Oriental Hotel Fukuoka Hakata Station on April 9, 2019. Taking into
consideration the impact on dividend by the suspension of hotel operation due to the renovation, reserve for temporary
difference adjustment (negative goodwill) is appropriated.
(Note 5) Adjustment for dilution of dividend per unit due to issuance of new investment units.

<Reference 4>Balance of reserve for temporary difference adjustment (negative goodwill)

The balance of reserve for temporary difference adjustment (negative goodwill) after appropriation for dividends
for the fiscal year ended December 2019 is as follows.
Balance of reserve for temporary difference adjustment as of December 31, 2019
Appropriation for dividends for the fiscal year ended December 31, 2019
Balance of reserve for temporary difference adjustment after appropriation for dividends for the
fiscal year ended December 31, 201918

(millions of yen)
11,794(1,176)
10,617

Overview of JHR
1. Unitholders’ capital
16th period

17th period

18th period

19th period

20th period

As ofDecember 31, 2015

As ofDecember 31, 2016

As ofDecember 31, 2017

As ofDecember 31, 2018

As ofDecember 31, 2019

Total number of authorized units(Units)

20,000,000

20,000,000

20,000,000

20,000,000

20,000,000

Number of investment units issued andoutstanding(Units)3,144,227

3,761,907

4,010,847

4,010,847

4,462,347

85,470134,829

153,516

153,516

186,894

25,182

31,37135,04631,15530,574

Account closing date

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

2. Matters regarding investment units
Major unitholders of JHR as of December 31, 2019 were as follows:
Number of units held
(Units)Name

Percentage (Note)(%)

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

697,10215.62%

Japan Trustee Services Bank, Ltd. (Trust Account)

526,83911.80%

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

334,947

7.50%

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

213,302

4.78%

BNYM AS AGT/CLTS 10 PERCENT

140,401

3.14%

Trust & Custody Services Bank, Ltd. (Securities Investment Trust
Account)

134,779

3.02%

STATE STREET BANK WEST CLIENT TREATY 505234

59,918

1.34%

Shikoku Railway Company

56,989

1.27%

JPMorgan Securities Japan Co., Ltd.

52,951

1.18%

Japan Securities Finance Co., Ltd.
Total
(Note)

46,6001.04%

2,263,828

50.73%The percentage indicates the ratio of the number of units held to the number of units issued and outstanding, rounded down
to the two decimal places.

3. Matters regarding officers, etc.
(1) Officers, etc. as of December 31, 2019 were as follows:
Position

Name

Major concurrent post outside
JHR

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

Executive Director

Kaname Masuda (Note 1)

Representative Partner, Masuda &Partners Law Office

6,600Supervisory Director

Tetsuya Mishiku (Note 1)

Representative Attorney, Mishiku& Nagamachi Law Office

3,600Supervisory Director

Hiroto Kashii (Note1)

–

3,600

Supervisory Director

Representative of Umezawa
Mayumi Umezawa (Note1) (Note2)
Accountant Office

Independent auditor

KPMG AZSA LLC (Note 3)(Note 1)

(Note 2)
(Note 3)–600
48,600None of the Executive Director and the Supervisory Directors own investment units of JHR in their own name or anotherperson’s name. Moreover, although the Supervisory Directors may be officers in corporations other than those listed above,
there are no conflicts of interest between those corporations including those listed above and JHR.
Based on the resolution by the 9th General Meeting of Unitholders of JHR held on November 22, 2019, Mayumi Umezawa
newly took office as Supervisory Director of JHR as of the same date.
Remuneration for the independent auditor includes fees for services other than those stipulated in Article 2, paragraph 1of the Certified Public Accountants Act amounting to ¥22,100 thousand, such as preparation of comfort letters associatedwith the capital increase through the public offerings and the issuance of investment corporation bonds.

19

(Note 4)

In case the number of Executive Director does not meet the requirement stipulated by laws and regulations, Hisashi
Furukawa, Representative Director of the Asset Management Company, was elected as Substitute Executive Director,
based on the resolution made by the 9th General Meeting of Unitholders of JHR held on November 22, 2019.

(2) Policy for decisions on dismissal or non-reappointment of independent auditor
We have a policy to determine, at a General Meeting of Unitholders, whether to dismiss the independent auditor
pursuant to provisions of the Investment Trusts Act, and to determine whether or not to reappoint theindependent auditor taking into comprehensive consideration the audit quality, audit fees and other various
matters.
4. Asset management company, custodian and general administrators
The asset management company, etc. as of December 31, 2019 were as follows:
Consignment classification

Name

Asset management company

Japan Hotel REIT Advisors Co., Ltd.

Custodian

Sumitomo Mitsui Trust Bank, Limited

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

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

General administrator (tax return preparation, etc.)

PwC Tax Japan

20

Status of Investment Assets
1. Composition of assets
19th period(As of December 31, 2018)
Type ofassetsHotel Type
(Note 1)

Prefectural
location

Name of property, etc.

20th period(As of December 31, 2019)

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

27,033

7.7

26,985

6.5

Namba Oriental Hotel

14,552

4.2

14,539

3.5

-

-

2,817

0.7

ibis Tokyo Shinjuku

7,940

2.3

7,908

1.9

CANDEO HOTELS UENO-KOEN

6,681

1.9

6,644

1.6

the b ikebukuro

6,584

1.9

6,584

1.6

Sotetsu Fresa Inn ShimbashiKarasumoriguchi (Note 4)

4,821

1.4

4,801

1.2

Comfort Hotel Tokyo Higashi Nihombashi

3,557

1.0

3,527

0.8

the b hachioji

2,686

0.8

2,680

0.6

Smile Hotel Nihombashi Mitsukoshimae

2,030

0.6

2,022

0.5

R&B Hotel Ueno Hirokoji

1,766

0.5

1,822

0.4

Hotel Vista Kamata Tokyo

1,465

0.4

1,452

0.3

the b suidobashi

1,198

0.3

1,194

0.3

dormy inn・global cabin Asakusa (Note 5)

952

0.3

941

0.2

Chisun Inn Kamata

779

0.2

769

0.2

ibis Styles Sapporo

6,620

1.9

6,561

1.6

Mercure Sapporo

5,853

1.7

5,792

1.4

HOTEL ASCENT FUKUOKA

5,178

1.5

5,161

1.2

the b hakata

2,340

0.7

2,340

0.6

Hakata Nakasu Washington Hotel Plaza

2,033

0.6

2,022

0.5

Toyoko Inn Hakata-guchi Ekimae

1,437

0.4

1,419

0.3

Kyoto

ibis Styles Kyoto Station

6,665

1.9

6,650

1.6

Okinawa

Mercure Okinawa Naha

2,860

0.8

2,833

0.7

Kumamoto Dormy Inn Kumamoto

2,165

0.6

2,139

0.5

Nara

1,802

0.5

1,798

0.4

119,01033.9

121,410

29.2

Osaka

Hotel Oriental Express Osaka Shinsaibashi

Tokyo

Limitedservice hotel

Hokkaido

Fukuoka

Real estatein trust

Nara Washington Hotel Plaza
Subtotal

Tokyo

Chiba

Full-service
hotel

Hiroshima

Hilton Tokyo Odaiba--

63,42915.3

Oriental Hotel tokyo bay

17,7905.1

17,486

4.2

Hilton Tokyo Narita Airport

13,253

3.8

13,205

3.2

International Garden Hotel Narita

9,195

2.6

9,162

2.2

Hotel Francs

3,187

0.9

3,178

0.8

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

17,4875.0

17,327

4.2

Oriental Hotel Hiroshima

4,106

1.2

4,099

1.0

Aichi

Hilton Nagoya

15,605

4.5

15,6503.8

Nara

Hotel Nikko Nara

10,4423.0

10,355

2.5

Hyogo

Kobe Meriken Park Oriental Hotel

9,772

2.8

9,678

2.3

7,178

2.0

9,560

2.3

Fukuoka
Kanagawa

Oriental Hotel Fukuoka Hakata Station(Note 7)

Mercure Yokosuka

1,642

0.5

1,621

0.4

109,661

31.3

174,756

42.0

Hotel Nikko Alivila

17,9895.1

17,904

4.3

Okinawa Marriott Resort & Spa

14,875

4.2

14,924

3.6

The Beach Tower Okinawa

6,677

1.9

6,581

1.6

Chiba

Hilton Tokyo Bay

26,098

7.4

26,408

6.4

Osaka

Hotel Keihan Universal City

5,930

1.7

5,905

1.4

Kanagawa

Hakone Setsugetsuka

3,722

1.1

3,689

0.9

75,29521.5

75,413

18.1

Subtotal
Okinawa
Resort hotel(Note 2)

Holiday Inn Osaka Namba

Subtotal

21

19th period(As of December 31, 2018)
Type ofassetsHotel Type
(Note 1)

Prefectural
location

Name of property, etc.

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

Real estate in trust – Total(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)(Note 8)20th period(As of December 31, 2019)(Note 2)

303,967

86.7

371,580

Deposits and other assets (Note 8)

46,58913.3

44,142

89.4
10.6

Total assets

350,556100.0

415,722100.0

Hotels are categorized as limited-service hotels, full-service hotels or resort hotels according to the manner of operation.
For real estate in trust, “Total amount of assets held” shows the amount calculated by deducting accumulated depreciationfrom acquisition price (including expenses incidental to acquisition).
“Ratio to total assets” shows the ratio of each asset held to total assets, rounded off to one decimal place.
Hotel Sunroute Shinbashi was renamed to Sotetsu Fresa Inn Shimbashi-Karasumoriguchi on April 23, 2019. In this report,
the same shall apply hereinafter.
Dormy Inn EXPRESS Asakusa was renamed to dormy inn・global cabin Asakusa on August 4, 2019. In this report, thesame shall apply hereinafter.
ACTIVE-INTER CITY HIROSHIMA is classified in accordance with the hotel type of Sheraton Grand Hiroshima Hotel,
its main facility.
Hotel Centraza Hakata was renamed to Oriental Hotel Fukuoka Hakata Station on April 9, 2019. In this report, the same
shall apply hereinafter.
Includes machinery and equipment, tools, furniture and fixtures, construction in progress in trust, and intangible assets(excluding leasehold rights in trust and fixed-term leasehold rights in trust).

22

2. Major portfolio assets
An overview of the portfolio assets of JHR (43 properties in total) as of December 31, 2019 are as follows.
PropertyNo.

1

Name of property, etc.

Kobe Meriken Park Oriental Hotel(Note 5)

Book value(JPY1M)

Leasable area(m2)

Leased area(m2)

(Note 1)

(Note 2)

(Note 3)

9,888

32,663.90

Tenantoccupancy
ratio
(%)

Ratio of rental
revenue to total
rental revenue
(%)

Major
use

(Note 4)32,663.90

100.0

4.4

Hotel

2

Oriental Hotel tokyo bay

17,69944,833.11

44,833.11

100.0

6.7

Hotel

3

Namba Oriental Hotel

14,64019,364.33

19,364.33

100.0

5.0

Hotel

4

Hotel Nikko Alivila (Note 6)

18,16838,024.98

38,024.98

100.0

7.0

Hotel

5

Oriental Hotel Hiroshima

4,171

13,752.22

13,752.22

100.0

1.7

Hotel

6

ibis Tokyo Shinjuku

8,013

6,801.84

6,801.84

100.0

2.5

Hotel

8

The Beach Tower Okinawa (Note 7)

6,587

20,140.01

20,140.01

100.0

1.8

Hotel

9

Hakone Setsugetsuka

3,696

10,655.03

10,655.03

100.0

1.0

Hotel

10

Dormy Inn Kumamoto

2,139

7,701.19

7,701.19

100.0

0.7

Hotel

12

the b suidobashi

1,213

3,097.25

3,097.25

100.0

0.4

Hotel

13

dormy inn・global cabin Asakusa

941

2,014.90

2,014.90

100.0

0.2

Hotel

14

Hakata Nakasu Washington Hotel Plaza

2,022

5,602.04

5,602.04

100.0

0.9

Hotel

15

Nara Washington Hotel Plaza

1,800

5,271.54

5,271.54

100.0

0.5

Hotel

16

R&B Hotel Ueno Hirokoji

1,822

3,060.31

3,060.31

100.0

0.3

Hotel

18

Comfort Hotel Tokyo Higashi Nihombashi

3,527

5,765.27

5,765.27

100.0

1.0

Hotel

22

Smile Hotel Nihombashi Mitsukoshimae

2,022

3,167.82

3,167.82

100.0

0.5

Hotel

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

100.0

0.5

Hotel

24

Toyoko Inn Hakata-guchi Ekimae

1,419

25

Hotel Vista Kamata Tokyo

1,453

3,831.80

3,831.80

100.0

0.4

Hotel

26

Chisun Inn Kamata772

1,499.87

1,499.87

100.0

0.3

Hotel

29

Hotel Keihan Universal City (Note 8)

5,905

16,212.40

16,212.40

100.0

2.6

Hotel

30

Sotetsu Fresa Inn ShimbashiKarasumoriguchi

4,802

5,246.66

5,246.66

100.0

1.6

Hotel

31

Hilton Tokyo Bay (Note 9)26,42264,928.83

64,928.83

100.0

7.9

Hotel

32

ibis Styles Kyoto Station

6,675

5,003.99

5,003.99

100.0

1.6

Hotel

33

ibis Styles Sapporo

6,601

14,992.49

14,735.17

98.3

2.3

Hotel

34

Mercure Sapporo

5,857

15,189.42

14,483.81

95.4

2.8

Hotel

35

Mercure Okinawa Naha

2,887

10,884.25

10,884.25

100.0

1.2

Hotel

37

the b ikebukuro (Note 10)6,608

5,650.01

5,650.01

100.0

1.3

Hotel

39

the b hachioji (Note 10)

2,699

7,847.65

7,847.65

100.0

0.7

Hotel

40

the b hakata (Note 10)

2,361

3,986.09

3,986.09

100.0

0.8

Hotel

41

Hotel Francs

3,178

19,213.39

19,213.39

100.0

1.1

Hotel

42

Mercure Yokosuka (Note 11)

1,658

16,881.82

16,881.82

100.0

1.3

Hotel

43

Okinawa Marriott Resort & Spa

15,10636,430.15

36,430.15

100.0

3.3

Hotel

44

ACTIVE-INTER CITY HIROSHIMA(Note 12)

17,436

31,181.03

31,041.95

99.6

5.7

Hotel

45

CANDEO HOTELS UENO-KOEN(Note 13)

6,652

7,934.26

7,934.26

100.0

1.2

Hotel

46

Oriental Hotel Fukuoka Hakata Station

9,847

18,105.42

18,105.42

100.0

2.6

Hotel

47

Holiday Inn Osaka Namba

27,126

11,501.10

11,501.10

100.0

3.4

Hotel

48

HOTEL ASCENT FUKUOKA

5,161

8,238.75

8,238.75

100.0

1.6

Hotel

49

Hilton Nagoya (Note 14)

15,651

47,942.71

47,942.71

100.0

5.1

Hotel

50

Hilton Tokyo Narita Airport

13,49956,817.28

56,817.28

100.0

3.2

Hotel

51

International Garden Hotel Narita

9,245

21,814.93

21,814.93

100.0

2.1

Hotel

52

Hotel Nikko Nara (Note 15)

10,44221,011.31

21,011.31

100.0

2.2

Hotel

53

Hotel Oriental Express Osaka Shinsaibashi

2,829

2,710.55

2,710.55

100.0

0.4

Hotel

54

Hilton Tokyo Odaiba

63,65264,907.76

64,907.76

100.0

8.0

Hotel

374,314746,329.68

745,227.67

99.9

100.0

Total

23

(Note 1)(Note 2)

Book value includes real estate in trust, machinery and equipment, tools, furniture and fixtures, construction in progressin trust, and intangible assets.
In principle, leasable area represents leasable area of the building, which does not include leasable area of land (including
parking lots on ground), based on a lease contract or plan for each real estate in trust. For properties in which the leased
area is not described in the lease contract, leasable area represents the area described in the registration of the building.
Furthermore, when the leasable area in the lease contract is indicated in tsubo units, the figure in the table has been
converted to the area in metric units (3.30578 square meters per one tsubo).

(Note 3)

In principle, leased area represents the leased area described in the lease contract of the building. For properties in which
the leased area is not described in the lease contract, leased area shows the area described in the registration of thebuilding. Furthermore, when the leased area in the lease contract is indicated in tsubo units, the figure in the table has
been converted to the area in metric units (3.30578 square meters per one tsubo). However, for properties for whichmaster lease companies have concluded lease contracts with lessees, etc. under the pass-through scheme in which JHR
receives the same amount of rents, etc. paid by end tenants as is in principle, the total area for which lease contracts havebeen concluded with end tenants and which are actually leased is indicated. In this report, the same shall apply hereinafter.

(Note 4)

Represents the ratio of rental revenue to total real estate operating revenue for the fiscal period under review. In
calculating, the figures are rounded off to one decimal place.
Kobe Meriken Park Oriental Hotel is a building owned in the form of a compartmentalized ownership by two owners(JHR and Kobe City). The area in this table shows the portion owned exclusively by JHR (including an accessory buildingof 764.83 square meters).
Leasable area and leased area for Hotel Nikko Alivila include an accessory building of 120.10 square meters and exclude
a building of 493.50 square meters rented by JHR from Kabushiki Kaisha Okinawa Umi No Sono.
Leasable area and leased area for The Beach Tower Okinawa include the floor area of a warehouse in a two-story lightgauge steel annex building (91.20 square meters).
The building of Hotel Keihan Universal City is a building with compartmentalized ownership for Universal CityWalk
Osaka, which comprises two hotel buildings, business facilities, commercial facilities and others, as a single building.
For the leasable area and leased area of the property, the leased area under the lease contract of the hotel is indicated.
The building of Hilton Tokyo Bay is co-owned with other right holders, and JHR owns co-ownership interest for
64,928.83 square meters (JHR owns 9/10 of co-ownership interest).
The b ikebukuro, the b hachioji and the b hakata are properties with pass-through master lease contracts in which JHR
receives the same amount of rents, etc. paid by end tenants as is in principle. In this report, the same shall apply hereinafter.
The building of Mercure Yokosuka is a building with compartmentalized ownership for Bay Square Yokosuka Ichibankan,
which comprises a hotel, a theater, stores, apartments, office spaces and parking lots, as a single building. For the leasablearea and leased area of the property, the leased area under the lease contract of the hotel is indicated.
The building of ACTIVE-INTER CITY HIROSHIMA is a building with compartmentalized ownership for ACTIVEINTER CITY HIROSHIMA, which comprises Sheraton Grand Hiroshima Hotel, office spaces, stores, parking lots andbicycle parking lots etc., as a single building. For the leasable area and leased area of the property, the leased area under
the lease contracts of the hotel, office spaces and stores are indicated.
Leasable area and leased area of CANDEO HOTELS UENO-KOEN indicate the total floor area described in thecertificate of inspection, based on the building lease agreement with the hotel lessee. Furthermore, the figure includes
the floor area for the mechanical parking facilities.
The building of Hilton Nagoya is a compartmentalized ownership of AMMNAT SQUARE, which consists of a hotel
building (including retail space), office building and car parking space, etc., as a single building. Leasable area and leased
area indicate the sum total of the leased area for the hotel building, the office building and the retail space described in
the lease agreement.
The building of Hotel Nikko Nara is a compartmentalized ownership of the entire building of Redeveloped Building 1
in front of JR Nara Station, which consists of hotel building, retail space and car parking space, etc. JHR’s share of voting
right of the building is 223/353 (approximately 63.2%).
The omitted property numbers are the numbers for assets that have been transferred.

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

(Note 12)(Note 13)

(Note 14)

(Note 15)

(Note 16)

24

3. Details of property assets, etc.
(1) Details of property assets
The details of real estate properties, etc. held by JHR as of December 31, 2019 were as follows:
PropertyNo.

Name of property, etc.

Location (Displayed address)

Assessedvalue at end
Form of ownership of period(JPY1M)

Book value(JPY1M)

Appraisal
agency(Note 2)

(Note 3)(Note 1)

1

Kobe Meriken Park Oriental
Hotel

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

Beneficial interestin trust

16,200

9,888

JR

2

Oriental Hotel tokyo bay

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

Beneficial interestin trust

37,80017,699JR

3

Namba Oriental Hotel

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

Beneficial interestin trust

32,90014,640JR

4

Hotel Nikko Alivila

600 Aza Gima, Yomitan-son, Nakagamigun, Okinawa

Beneficial interestin trust

32,90018,168

JR

5

Oriental Hotel Hiroshima

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

Beneficial interestin trust

4,400

4,171

JR

6

ibis Tokyo Shinjuku

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

10,2008,013

JR8-6 Aza Mihama, Chatan-cho, Nakagamigun, Okinawa

Beneficial interestin trust

10,100

6,587

JR

8

The Beach Tower Okinawa(Note 4)

9

Hakone Setsugetsuka

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

Beneficial interestin trust

5,310

3,696

JR

10

Dormy Inn Kumamoto

3-1 Karashimacho, Kumamoto-shi,
Kumamoto

Beneficial interestin trust

3,060

2,139

JM

12

the b suidobashi

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

Beneficial interestin trust

2,440

1,213

JR

13

dormy inn・global cabin
Asakusa

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

Beneficial interestin trust

1,330

941

JM

14

Hakata Nakasu Washington
Hotel Plaza

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

Beneficial interestin trust

4,520

2,022

JR

15

Nara Washington Hotel Plaza

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

Beneficial interestin trust

2,440

1,800

JR

16

R&B Hotel Ueno Hirokoji

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

Beneficial interestin trust

2,010

1,822

JM

18

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

Beneficial interestin trust

5,830

3,527

JM

22

Smile Hotel Nihombashi
Mitsukoshimae

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

Beneficial interestin trust

3,160

2,022

JM

24

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

Beneficial interestin trust

2,750

1,419

T

25

Hotel Vista Kamata Tokyo

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

Beneficial interestin trust

1,990

1,453

T

26

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

Beneficial interestin trust

1,430

772

T

29

Hotel Keihan Universal City

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

Beneficial interestin trust

13,900

5,905

R

30

Sotetsu Fresa Inn ShimbashiKarasumoriguchi

10-2 Shinbashi 4-chome, Minato-ku, Tokyo

Beneficial interestin trust

8,950

4,802

D

31

Hilton Tokyo Bay

1-33 Maihama, Urayasu-shi, Chiba

Beneficial interestin trust

40,50026,422D

32

ibis Styles Kyoto Station

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

Beneficial interestin trust

10,900

6,675

D

33

ibis Styles Sapporo

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

Beneficial interestin trust

11,200

6,601

JR

34

Mercure Sapporo

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

Beneficial interestin trust

11,000

5,857

JR

35

Mercure Okinawa Naha

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

Beneficial interestin trust

7,190

2,887

JR

37

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

7,350

6,608

JR

25

Property
No.

Name of property, etc.

Location (Displayed address)

Assessedvalue at end
Form of ownership of period(JPY1M)

Book value(JPY1M)

Appraisal
agency(Note 2)

(Note 3)(Note 1)39

the b hachioji

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

Beneficial interestin trust

2,790

2,699

JR

40

the b hakata

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

Beneficial interestin trust

4,610

2,361

JR

41

Hotel Francs

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

Beneficial interestin trust

4,140

3,178

D

42

Mercure Yokosuka

27 Honcho 3-chome, Yokosuka-shi,
Kanagawa

Beneficial interestin trust

3,590

1,658

D

43

Okinawa Marriott Resort &Spa

1490-1 Kise, Nago-shi, Okinawa

Beneficial interestin trust

17,90015,106JR

44

ACTIVE-INTER CITYHIROSHIMA

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

Beneficial interestin trust

21,90017,436D

45

CANDEO HOTELS UENOKOEN

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

Beneficial interestin trust

7,650

6,652

D

46

Oriental Hotel Fukuoka
Hakata Station

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

Beneficial interestin trust

15,300

9,847

D

47

Holiday Inn Osaka Namba

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

Beneficial interestin trust

27,20027,126

JR

48

HOTEL ASCENT FUKUOKA

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

Beneficial interestin trust

6,620

5,161

D

49

Hilton Nagoya

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

Beneficial interestin trust

15,70015,651D

50

Hilton Tokyo Narita Airport

456 Kosuge, Narita-shi, Chiba

Beneficial interestin trust

13,70013,499JR

51International Garden Hotel
Narita241-1 Yoshikura, Narita-shi, Chiba

Beneficial interestin trust

9,660

9,245

JR

52

Hotel Nikko Nara

8-1 Sanjyohonmachi, Nara-shi, Nara

Beneficial interestin trust

10,90010,442

D

53

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

Beneficial interestin trust

2,990

2,829

D

54

Hilton Tokyo Odaiba

Beneficial interestin trust

69,50063,652

JR

525,910374,3149-1 Daiba 1-chome, Minato-ku, Tokyo
Total(Note 1)

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

Assessed value at end of period shows appraisal value as of the end of the fiscal period under review as the date ofvaluation, in accordance with JHR’s Articles of Incorporation, the Ordinance on Accounting of Investment Corporations
and regulations set forth by The Investment Trusts Association, Japan.
Book value includes amounts of real estate in trust, machinery and equipment, tools, furniture and fixtures, constructionin progress in trust, and intangible assets.
The letters indicate the appraisers for the properties as follows:
JR: Japan Real Estate InstituteJM: JLL Morii Valuation &Advisory K.K.
T:
The Tanizawa Sōgō Appraisal Co., Ltd.
R:
Rich Appraisal Institute Co., Ltd.
D:DAIWA REAL ESTATE APPRAISAL CO., LTD.
Due to the lack of a displayed address, “location” in the registration or registration record is shown.
The omitted property numbers are the numbers for assets that have been transferred.

26

(2) Transition of real estate leasing business, etc.
An overview of leasing business of real estate, etc. owned by JHR is as follows:
19th period(From January 1, 2018 to December 31, 2018)
PropertyNo.

Name of property, etc.

Number oftenants
at end ofperiod(Note 1)

Tenantoccupancy
rate
at end ofperiod(%)

Real estate
operatingrevenueduring theperiod(JPY1M)

Ratio tototal realestateoperatingrevenue(%)

20th period(From January 1, 2019 to December 31, 2019)
Number oftenants
at end ofperiod(Note 1)

Tenantoccupancy
rate
at end ofperiod(%)

Real estate
operatingrevenueduring theperiod(JPY1M)

Ratio tototal realestateoperatingrevenue(%)

1

Kobe Meriken Park Oriental
Hotel

1

100.0

1,210

4.6

1

100.0

1,256

4.4

2

Oriental Hotel tokyo bay

1

100.0

1,888

7.2

1

100.0

1,883

6.7

3

Namba Oriental Hotel

1

100.0

1,629

6.2

1

100.0

1,406

5.0

4

Hotel Nikko Alivila

1

100.0

2,048

7.8

1

100.0

1,977

7.0

5

Oriental Hotel Hiroshima

1

100.0

424

1.6

1

100.0

472

1.7

6

ibis Tokyo Shinjuku

4

100.0

660

2.5

4

100.0

704

2.5

8

The Beach Tower Okinawa

1

100.0

511

1.9

1

100.0

511

1.8

9

Hakone Setsugetsuka

1

100.0

294

1.1

1

100.0

294

1.0

10

Dormy Inn Kumamoto

1

100.0

194

0.7

1

100.0

194

0.7

12

the b suidobashi

1

100.0

109

0.4

1

100.0

103

0.4

13

dormy inn・global cabin
Asakusa

1

100.0

63

0.2

1

100.0

63

0.2

14

Hakata Nakasu Washington
Hotel Plaza

1

100.0

240

0.9

1

100.0

240

0.9

15

Nara Washington Hotel Plaza

2

100.0

150

0.6

2

100.0

151

0.5

16

R&B Hotel Ueno Hirokoji

1

100.0

97

0.4

1

100.0

97

0.3

17

R&B Hotel Higashi-nihonbashi(Note 2)

-

-

74

0.3

-

-

-

-

18

Comfort Hotel Tokyo Higashi
Nihombashi

2

100.0

270

1.0

2

100.0

287

1.0

22

Smile Hotel Nihombashi
Mitsukoshimae

1

100.0

153

0.6

1

100.0

154

0.5

24

Toyoko Inn Hakata-guchi
Ekimae

1

100.0

141

0.5

1

100.0

141

0.5

25

Hotel Vista Kamata Tokyo

1

100.0

115

0.4

1

100.0

112

0.4

26

Chisun Inn Kamata

1

100.0

82

0.3

1

100.0

80

0.3

29

Hotel Keihan Universal City

1

100.0

822

3.1

1

100.0

746

2.6

30

Sotetsu Fresa Inn ShimbashiKarasumoriguchi

4

100.0

426

1.6

4

100.0

446

1.6

31

Hilton Tokyo Bay

1

100.0

1,992

7.6

1

100.0

2,220

7.9

32

ibis Styles Kyoto Station

2

100.0

548

2.1

2

100.0

459

1.6

33

ibis Styles Sapporo

4

98.3

662

2.5

4

98.3

661

2.3

34

Mercure Sapporo

14

98.1

820

3.1

12

95.4

797

2.8

35

Mercure Okinawa Naha

1

100.0

456

1.7

1

100.0

342

1.2

36

the b akasaka-mitsuke (Note 2)

-

-

146

0.6

-

-

-

-

37

the b ikebukuro

4

100.0

361

1.4

4

100.0

356

1.3

38

the b ochanomizu (Note 2)

-

-

58

0.2

-

-

-

-

39

the b hachioji

12

100.0

203

0.8

11

100.0

185

0.7

40

the b hakata

2

100.0

250

1.0

2

100.0

228

0.8

41

Hotel Francs

1

100.0

300

1.1

1

100.0

300

1.1

42

Mercure Yokosuka

1

100.0

310

1.2

1

100.0

360

1.3

43

Okinawa Marriott Resort & Spa

1

100.0

1,169

4.4

1

100.0

937

3.3

44

ACTIVE-INTER CITYHIROSHIMA

39

99.8

1,526

5.8

38

99.6

1,624

5.7

45

CANDEO HOTELS UENOKOEN

1

100.0

349

1.3

1

100.0

349

1.2

46

Oriental Hotel Fukuoka Hakata
Station

1

100.0

589

2.2

1

100.0

740

2.6

47

Holiday Inn Osaka Namba

1

100.0

1,114

4.2

1

100.0

967

3.4

27

19th period(From January 1, 2018 to December 31, 2018)
PropertyNo.

Number oftenants
at end ofperiodName of property, etc.

(Note 1)

Tenantoccupancy
rate
at end ofperiod(%)

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

Real estate
operatingrevenueduring theperiod(JPY1M)

Ratio tototal realestateoperatingrevenue(%)

Number oftenants
at end ofperiod(Note 1)

Tenantoccupancy
rate
at end ofperiod(%)

Real estate
operatingrevenueduring theperiod(JPY1M)

Ratio tototal realestateoperatingrevenue(%)

48

HOTEL ASCENT FUKUOKA

5

96.8

432

1.6

6

100.0

447

1.6

49

Hilton Nagoya

4

100.0

1,390

5.3

4

100.0

1,452

5.1

50

Hilton Tokyo Narita Airport

1

100.0

785

3.0

1

100.0

912

3.2

51

International Garden Hotel
Narita

1

100.0

608

2.3

1

100.0

604

2.1

52

Hotel Nikko Nara

1

100.0

629

2.4

1

100.0

625

2.2

53

Hotel Oriental Express Osaka
Shinsaibashi

-

-

-

-

1

100.0

109

0.4

54

Hilton Tokyo Odaiba

-

-

-

-

1

100.0

2,264

8.0

Total

126

99.9

26,318

100.0

125

99.9

28,278100.0(Note 1)

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

(Note 2)JHR sold R&B Hotel Higashi-nihonbashi, the b akasaka-mitsuke and the b ochanomizu on August 10, 2018.

(Note 3)The property numbers of assets that were transferred before the previous fiscal period are intentionally omitted.

4. Details of securities assets
There are no applicable securities held by JHR as of December 31, 2019.
5. Contractual amounts and fair values of specified transactions
The contractual amounts and fair values of specified transactions as of December 31, 2019 were as follows:
Classification

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

Transaction

Over 1 year
Transactions other thanmarket transactions

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

(Note 1)
(Note 2)

Fair value(JPY1M)(Note 2)

116,148

104,566(389)

116,148

104,566(389)

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

6. Other assets
All of the beneficial interest in trust mainly invested in real estate held by JHR is included in “3. Details of property
assets, etc.” presented above. There were no other major specified assets that are considered to be JHR’s maininvestments in the portfolio of JHR as of December 31, 2019.
7. Asset holdings by country and region
There is nothing to be reported on countries and regions other than Japan.

28

Capital Expenditures for Portfolio Properties
1. Planned capital expenditures (Note 1)
The following table shows major estimated capital expenditures items for renovation work planned as of the endof the fiscal period under review for investment real estate properties (in trust) held by JHR. Expenditures are
expected to total ¥6,830 million, which consists of capital expenditures of ¥6,775 (Note 2) million and repair
expenses of ¥55 million, for the next fiscal period.
Name of property, etc.
(Location)

Purpose

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

Renovation of prefabricatedbathrooms in guest rooms

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

Scheduled period

Estimated construction costs(JPY1M)
Total amount

Total amount
paid

From April 2020
to July 2020

55-

Conversion of back-office toguest rooms

From June 2020
to July 2020

120-

Hotel Nikko Alivila(Yomitan-son, Nakagamigun, Okinawa)

Additional installation of
sewage tank

From March 2020
to April 2020

65

9

Hotel Nikko Alivila(Yomitan-son, Nakagamigun, Okinawa)

Renewal of elevator
controller, etc.

From
December 2020
to December 2020

65-

Dormy Inn Kumamoto(Kumamoto-shi, Kumamoto)

Renewal of air conditioning
facilities

From May 2020
to June 202070-

Hilton Tokyo Bay(Urayasu-shi, Chiba)

Renewal of air conditioning
facilities

From May 2020
to July 2020

68-

HOTEL ASCENTFUKUOKA(Fukuoka-shi, Fukuoka)

Renewal of air conditioning
facilities

From April 2020
to April 202089-

Hilton Nagoya(Nagoya-shi, Aichi)

Work on plumbing
equipment

From March 2020
to March 2020

57-

Hilton Nagoya(Nagoya-shi, Aichi)

Renewal of elevators

From
February 2020
to December 2020

57-

Hilton Tokyo Narita Airport(Narita-shi, Chiba)

Renewal of telephoneswitchboard

From
November 2020
to November 2020

50-

Hilton Tokyo Narita Airport(Narita-shi, Chiba)

Renovation of guest rooms(guestrooms on the 11th
floor)

From
November 2020
to November 2020

120-

International Garden Hotel
Narita(Narita-shi, Chiba)

Renewal of air conditioning
units

From March 2020
to October 2020

55-

Hilton Tokyo Odaiba(Minato-ku, Tokyo)

Renovation of banquet rooms

From
December 2019
to February 2020

92-

Hilton Tokyo Odaiba(Minato-ku, Tokyo)

Renewal of central
monitoring device

From July 2020
to July 2020

64-

Hilton Tokyo Odaiba(Minato-ku, Tokyo)

Renewal of guest rooms, etc.

From
September 2020
to December 2020

3,000

22

29

Name of property, etc.
(Location)
Namba Oriental Hotel(Osaka-shi, Osaka)PurposeScheduled period

Large-scale renovation works
for entire property

From
November 2020
to March 2021

Total

Estimated construction costs(JPY1M)
Total amount

Total amount
paid

2,600

6

6,628

38

(Note 1) New construction and renewal work includes that for buildings, attached facilities, etc. as well as items classified as furnitureand fixtures. The scheduled period of the above planned renovation work and whether or not the renovation work will be
performed may change.
(Note 2) The estimated construction costs for the large-scale renovation works for entire property of Namba Oriental Hotel is notincluded in the capital expenditures for the next fiscal period, as the construction work will be completed in March 2021.

2. Capital expenditures during the period (Note)
For investment real estate properties (in trust) held by JHR, major construction work conducted during the fiscal
period under review that represents capital expenditures is as below. Capital expenditures for the fiscal period
under review totaled ¥6,767 million, and repair expenses that were accounted for as expense in the fiscal period
under review totaled ¥41 million. In aggregate, ¥6,809 million of construction work was carried out.
Name of property, etc. (Location)

Purpose

PeriodConstruction costs(JPY1M)

R&B Hotel Ueno Hirokoji(Taito-ku, Tokyo)

Renewal of air conditioning units

From October 2018
to January 201953

Hilton Tokyo Bay(Urayasu-shi, Chiba)

Land preparation for parking lot

From December 2018
to May 2019

419

Hilton Tokyo Bay(Urayasu-shi, Chiba)

Renewal of disaster prevention facilities

From September 2019
to December 201933

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

Renovation of restaurants

From May 2019
to July 2019298

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

Replacement of air-conditioning facilities
for guestrooms

From November 2019
to December 201912

Oriental Hotel Fukuoka Hakata
Station (former Hotel Centraza
Hakata)(Fukuoka-shi, Fukuoka)

Large-scale renovation work for entire
property

From October 2018
to April 2019

3,147

Holiday Inn Osaka Namba(Osaka-shi, Osaka)

Renovation of guest rooms (guestrooms
on the 10th and 11th floors)

From May 2019
to May 201972

Holiday Inn Osaka Namba(Osaka-shi, Osaka)

Renovation of guest rooms (guestrooms
on the 8th and 9th floors)

From December 2019
to December 201972

Hilton Nagoya(Nagoya-shi, Aichi)

Renewal of water supply piping

From August 2018
to March 201916

Hilton Nagoya(Nagoya-shi, Aichi)

Renewal of water supply piping

From July 2019
to November 2019

25
4,149

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

30

3. Cash reserves for the long-term repairs and maintenance plan (reserve for repairs and maintenance)
JHR accumulates cash reserves from cash flows for each fiscal period as detailed below to utilize for medium- tolong-term future expenditures on large-scale repairs and maintenance projects based on long-term repairs andmaintenance plans prepared for each property.
(millions of yen)
16th period

17th period

18th period

19th period

20th period(From January 1, 2015
to December 31, 2015)(From January 1, 2016
to December 31, 2016)(From January 1, 2017
to December 31, 2017)(From January 1, 2018
to December 31, 2018)(From January 1, 2019
to December 31, 2019)

Balance at beginning of period

493

657

791

946

951

Provision during the period

185

133

154

15

116

Fiscal period

Reversal during the period

20

-

-

9

8

Amount carried forward

657

791

946

951

1,060

Expenses and Liabilities
1. Details of expenses related to asset management, etc.
(thousands of yen)
19th period(From January 1, 2018 to
December 31, 2018)(a) Asset management fees

(Note 1)

1,577,515

20th period(From January 1, 2019 to
December 31, 2019)(Note 2)

1,781,691(b) Asset custody and administrative service fee

110,273

119,138(c) Officers’ compensation

13,40014,400(d) Other operating expenses
Total(Note 1)
(Note 2)214,828

217,357

1,916,017

2,132,586

For asset management fees for the 19th fiscal period, besides the above amounts, there are ¥60,750 thousand of fees
deducted from the gain on sale of real estate properties in selling properties.
For asset management fees for the 20th fiscal period, besides the above amounts, there are ¥488,535 thousand of fees
included in the acquisition price of investment properties, etc. in acquiring properties.

31

2. Loans payable
The status of loans by contractual agreement and by financial institution as of December 31, 2019 was as follows:
Category

Borrowingdate

LenderSumitomo Mitsui Banking
Corporation

Balance at Balance at Average
beginning
end ofinterestof period
periodrate (%)(JPY1M) (JPY1M) (Note 1)
648

648

2,516

2,516

2,516

2,516

Sumitomo Mitsui Trust Bank,
Limited

1,120

1,120

Subtotal

6,800

6,800

600

－

Mizuho Bank, Ltd.

1,200

－

Resona Bank, Limited

434－

Shinsei Bank, Limited

720

－

600

－

1,000

－

The Nomura Trust and Banking
Co., Ltd.

500－

The Hiroshima Bank, Ltd.

435－

Sompo Japan Nipponkoa
Insurance Inc.

328－

Development Bank of Japan Inc.

500－

SubtotalLong-term
loans
Sumitomo Mitsui Banking
payable Corporation

6,317

－

800

800

Mizuho Bank, Ltd.

1,600

1,600

1,100

1,100

Resona Bank, Limited
Shinsei Bank, Limited

March 31,2014

Sumitomo Mitsui Banking
Corporation

Sumitomo Mitsui Trust Bank,
LimitedThe Bank of Fukuoka, Ltd.

September 30,
2014

Resona Bank, Limited
Shinsei Bank, Limited

September 30,
2014

970

970

Sumitomo Mitsui Trust Bank,
Limited800

800

Development Bank of Japan Inc.

500

500

Aozora Bank, Ltd.

285

285

6,055

6,055

600

600

1,200

1,200

850

850

Shinsei Bank, Limited

750

750

Sumitomo Mitsui Trust Bank,
Limited600

600

Subtotal

4,000

4,000

935

935

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

September 30,
2014

December 30,
2014

MUFG Bank, Ltd.
Subtotal

935

935

32

Maturity
date

Repayment
methodUse

Remarks

1.15%(Note 2)

March 31,2021

Lump-sum
repayment(Note 6)

Unsecured,
unguaranteed(Note 3)September
30, 2019

Lump-sum
repayment(Note 7)

Unsecured,
unguaranteed

0.92%(Note 2)September
30, 2020

Lump-sum
repayment(Note 4)(Note 7)

Unsecured,
unguaranteed

1.04%(Note 2)September
30, 2021

Lump-sum
repayment(Note 7)

Unsecured,
unguaranteed

0.57%

December30, 2020

Lump-sum
repayment(Note 6)

Unsecured,
unguaranteedCategory

Borrowingdate

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

Sumitomo Mitsui Banking
Corporation

1,400

1,400

Mizuho Bank, Ltd.

1,500

1,500

500

500

500

500

Sumitomo Mitsui Trust Bank,
Limited500

500

The Chiba Bank, Ltd.

300

300

Shinsei Bank, Limited
Resona Bank, Limited

January 30,
2015

4,700

4,700

Sumitomo Mitsui Banking
Corporation

Subtotal

1,700

1,700

Mizuho Bank, Ltd.

3,000

3,000

1,050

1,050

1,000

1,000

1,000

1,000

150

150

7,900

7,900

1,500

1,500

Shinsei Bank, Limited
Resona Bank, Limited

January 30,
2015

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

March 31,2015

Subtotal

1,500

1,500

1,000

1,000

500

500

1,500

1,500

100

100

992

992

Subtotal

1,092

1,092

Sumitomo Mitsui Trust Bank,
Limited

960

960

960

960

Aozora Bank, Ltd.
Long-term
MUFG Bank, Ltd.
loans
payableJuly 10, 2015
Subtotal

Sumitomo Mitsui Banking
Corporation
The Hiroshima Bank, Ltd.

Resona Bank, Limited

September 30,
2015

September 24,
2015

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

September 30,
2015

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

February 29,
2016

960

960

2,880

2,880

703

703

189

189

892

892

500

－

1,000

－

250

－

250

－

2,000

－

33

Maturity
date

Repayment
methodUse

Remarks

0.38% January 31,(Note 2)2020

Lump-sum
repayment(Note 7)

Unsecured,
unguaranteed

0.90% January 31,(Note 2)2022

Lump-sum
repayment(Note 4)(Note 7)

Unsecured,
unguaranteed

0.93%(Note 2)

March 31,2022

Lump-sum
repayment(Note 8)

Unsecured,
unguaranteed

0.95%(Note 2)June 30,2022

Lump-sum
repayment(Note 8)

Unsecured,
unguaranteed

0.52%

June 30,
2020

Lump-sum
repayment(Note 6)

Unsecured,
unguaranteed

1.07%(Note 2)September
29, 2023

Lump-sum
repayment(Note 6)

Unsecured,
unguaranteed

1.07%(Note 2)September
29, 2023

Lump-sum
repayment(Note 4)(Note 6)

Unsecured,
unguaranteed

0.21%

March 29,2019

Lump-sum
repayment(Note 8)

Unsecured,
unguaranteed(Note 2)Category

Borrowingdate

LenderSumitomo Mitsui Banking
Corporation
Mizuho Bank, Ltd.

March 28,
2016

Subtotal

Balance at Balance at Average
beginning
end ofinterestof period
periodrate (%)(JPY1M) (JPY1M) (Note 1)
480

－

480

－

0.19%
(Note 2)

960

－

530

－

270

－

230

－

110

－

1,140

－

1,050

1,050

1,050

1,050

2,100

2,100

1,200

1,200

600

600

550

550

300

300

2,650

2,650

1,200

1,200

1,000

1,000

1,000

1,000

0.68%

Resona Bank, Limited

500

500

(Note 2)The Nomura Trust and Banking
Co., Ltd.

500

500

4,200

4,200

800

800

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

March 31,2016

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

March 28,
2016

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

March 31,2016

The Bank of Fukuoka, Ltd.
Subtotal
Sumitomo Mitsui Banking
Corporation
Long-term Mizuho Bank, Ltd.
loans
Shinsei Bank, Limited
payableMarch 31,2016

Subtotal
Sumitomo Mitsui Trust Bank,
LimitedMarch 31,2016

Subtotal
Development Bank of Japan Inc.

March 31,2016

Subtotal

800

800

500

500

0.19%
(Note 2)0.77%
(Note 2)0.77%
(Note 2)0.66%
(Note 2)

0.57%
500

500

Sumitomo Mitsui Banking
Corporation

2,900

2,900

Shinsei Bank, Limited

1,700

1,700

1,700

1,700

1,000

1,000

0.74%
(Note 2)

Mizuho Bank, Ltd.
Resona Bank, Limited

September 1,
2016

The Nomura Trust and Banking
Co., Ltd.

500

500

The Chiba Bank, Ltd.

500

500

1,200

1,200

9,500

9,500

1,300

1,300

The Bank of Fukuoka, Ltd.
Subtotal
Sumitomo Mitsui Trust Bank,
LimitedSubtotal

September 1,
2016

1,300

1,300

34

0.56%
(Note 2)

MaturitydateMarch 29,2019

March 29,2019

March 29,2024

March 29,2024

March 31,2023

Repayment
methodLump-sum
repayment

Use

Remarks(Note 6)

Unsecured,
unguaranteed(Note 6)

Unsecured,
unguaranteed(Note 6)

Unsecured,
unguaranteed(Note 6)

Unsecured,
unguaranteed(Note 6)

Unsecured,
unguaranteed(Note 4)Lump-sum
repayment

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

Lump-sum
repayment(Note 4)

March 29,2024

Lump-sum
repayment(Note 6)

Unsecured,
unguaranteed

March 29,2024

Lump-sum
repayment(Note 6)

Unsecured,
unguaranteed

September
30, 2025

Lump-sum
repayment(Note 8)

Unsecured,
unguaranteed

September
30, 2024

Lump-sum
repayment(Note 8)

Unsecured,
unguaranteedCategory

Borrowingdate

Lender

September 1,
2016

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

September 1,
2016

Subtotal
September 1,
2016

Aozora Bank, Ltd.
Subtotal
Sumitomo Mitsui Banking
Corporation

July 12, 2017

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

August 1,
2017

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

SubtotalAugust 1,
2017

MUFG Bank, Ltd.
SubtotalLong-term
loans
payable Development Bank of Japan Inc.

August 1,
2017

Subtotal
The Fukuoka Bank, Ltd.

August 1,
2017

SubtotalAugust 1,
2017

Aozora Bank, Ltd.
Subtotal
THE NISHI-NIPPON CITY
BANK, LTD.

August 1,
2017

Subtotal
Shinsei Bank, Limited

August 1,
2017

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

September 19,
2017

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

November 15,
2017

Balance at Balance at Average
beginning
end ofinterestof period
periodrate (%)(JPY1M) (JPY1M) (Note 1)
2,000

Maturity
date

Repayment
methodUse

Remarks

September
30, 2024

Lump-sum
repayment(Note 8)

Unsecured,
unguaranteed

0.59%

September
30, 2024

Lump-sum
repayment(Note 8)

Unsecured,
unguaranteed

0.71%

September
30, 2024

Lump-sum
repayment(Note 8)

Unsecured,
unguaranteed

0.47%

June 30,
2023

Lump-sum
repayment

Unsecured,(Note 8) unguaranteed

September
30, 2026

Lump-sum
repayment

Unsecured,(Note 8) unguaranteed

September
30, 2025

Lump-sum
repayment

Unsecured,(Note 8) unguaranteed

September
30, 2025

Lump-sum
repayment

Unsecured,(Note 8) unguaranteed

September
30, 2025

Lump-sum
repayment

Unsecured,(Note 8) unguaranteed

September
30, 2025

Lump-sum
repayment

Unsecured,(Note 8) unguaranteed

September
30, 2025

Lump-sum
repayment

Unsecured,(Note 8) unguaranteed

September
30, 2025

Lump-sum
repayment

Unsecured,(Note 8) unguaranteed

September
30, 2025

Lump-sum
repayment

Unsecured,(Note 8) unguaranteed

March 31,2025

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

March 29,2024

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

2,000

0.56%

2,000

2,000

(Note 2)

700

700

700

700

500

500

500

500

1,750

1,750

500

500

2,250

2,250

1,250

1,250

1,250

1,250

1,250

1,250

500

500

4,250

4,250

1,000

1,000

0.73%

1,000

1,000

(Note 2)

700

700

0.68%

700

700

(Note 2)

500

500

500

500

500

500

0.73%

500

500

(Note 2)

500

500

0.73%

500

500

(Note 2)

1,000

1,000

0.73%

1,000

1,000

(Note 2)

300

300

0.68%

300

300

(Note 2)

1,200

1,200

500

500

460

460

390

390

2,550

2,550

2,500

2,500

1,500

1,500

4,000

4,000

35

0.85%
(Note 2)

0.75%

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

Borrowingdate

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

November 15,
2017

The Fukuoka Bank, Ltd.
Subtotal
Sumitomo Mitsui Banking
Corporation

March 30,
2018

Subtotal

Balance at Balance at Average
beginning
end ofinterestof period
periodrate (%)(JPY1M) (JPY1M) (Note 1)
1,500

1,500

500

500

300

300

150

150

2,450

2,450

1,700

1,700

1,700

1,700

Sumitomo Mitsui Banking
Corporation

650

650

Shinsei Bank, Limited

950

950

500

500

250

250

500

500

2,850

2,850

500

500

500

500

500

500

500

500

1,700

1,700

1,400

1,400

500

500

300

300

3,900

3,900

350

－

The Chiba Bank, Ltd.

April 26, 2018

THE NISHI-NIPPON CITY
BANK, LTD.
Sompo Japan Nipponkoa
Insurance Inc.
Subtotal
The Hiroshima Bank, Ltd.

April 26, 2018

Subtotal
The Shizuoka Bank, Ltd.

September 28,
2018

Subtotal
Sumitomo Mitsui Banking
Corporation
Long-term
Sumitomo Mitsui Trust Bank,
loans
LimitedpayableShinsei Bank, Limited

September 28,
2018

Mizuho Bank, Ltd.
Subtotal
The Bank of Fukuoka, Ltd.

November 30,
2018

Subtotal

Maturity
date

Repayment
methodMarch 31,2025

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

0.42%

March 31,2023

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

0.42%

March 31,2023

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

0.52%

March 31,2023

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

0.55%

September
29, 2023

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

September
30, 2027

Lump-sum
repayment

Unsecured,(Note 6) unguaranteed

0.65%(Note 2)0.95%
(Note 2)

0.34%
350

－

350

－

350

－

－

500

－

500

－

500

－

1,000

－

2,500

Sumitomo Mitsui Banking
Corporation

－

2,500

Shinsei Bank, Limited

－

1,500

－

1,500

0.72%
(Note 2)

THE NISHI-NIPPON CITY
BANK, LTD.

November 30,
2018

Subtotal
The Bank of Fukuoka, Ltd.
The Chiba Bank, Ltd.
THE NISHI-NIPPON CITY
BANK, LTD.
Sompo Japan Nipponkoa
Insurance Inc.

April 8, 2019

SubtotalMizuho Bank, Ltd.

April 8, 2019

Sumitomo Mitsui Trust Bank,
Limited－

1,000

Development Bank of Japan Inc.

－

1,000

－

7,500

Subtotal

36

December30, 2019

Lump-sum
repayment(Note 5)Use

Remarks

Unsecured,(Note 9) unguaranteed

0.34%

December30, 2019

Lump-sum
repayment

Unsecured,(Note 9) unguaranteed

0.38%

March 29,2024

Lump-sum
repayment

Unsecured,(Note 8) unguaranteed

March 31,2027

Lump-sum
repayment

Unsecured,(Note 8) unguaranteedCategory

Borrowingdate

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

Sumitomo Mitsui Banking
Corporation

－

4,000

Shinsei Bank, Limited

－

3,000

Mizuho Bank, Ltd.

－

3,000

Sumitomo Mitsui Trust Bank,
Limited

－

2,500

－

1,000

－

500

Development Bank of Japan Inc.

－

1,000

The Bank of Fukuoka, Ltd.

－

1,000

Aozora Bank, Ltd.

－

1,000

THE NISHI-NIPPON CITY
BANK, LTD.

－

1,000

Subtotal－

18,000

－

200

－

1,400

Resona Bank, Limited
The Nomura Trust and Banking
Co., Ltd.

Long-term The Chiba Bank, Ltd.
loans
payable The Hiroshima Bank, Ltd.

April 8, 2019

September 30,
2019

－

1,600

Sumitomo Mitsui Banking
Corporation

Subtotal－

550

Shinsei Bank, Limited－

450

Mizuho Bank, Ltd.

－

1,400

－

200

－

200

Development Bank of Japan Inc.

－

700

The Bank of Fukuoka, Ltd.

－

1,100

The Nomura Trust and Banking
Co., Ltd.

－

1,000

－

5,600

Long-term loans payable – Total

103,071

127,154

Total loans payable

103,071

127,154

Sumitomo Mitsui Trust Bank,
LimitedResona Bank, Limited

September 30,
2019

Subtotal(Note 1)
(Note 2)

(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)(Note 8)(Note 9)0.82%
(Note 2)

0.23%

0.68%
(Note 2)

Maturity
date

Repayment
methodMarch 31,2028

Lump-sum
repayment

Unsecured,(Note 8) unguaranteed

September
30, 2024

Lump-sum
repayment

Unsecured,(Note 10) unguaranteed

September
30, 2027

Lump-sum
repayment

Unsecured,(Note 10) unguaranteed

Use

Remarks

The average interest rate is a weighted average of interest rates during the period, rounded off to second decimal places.
As JHR has conducted interest rate swap transactions in order to hedge against interest rate fluctuation risks, the interest
rate of loans subject to such interest rate swap transactions is presented as the rate obtained by taking into account theeffect of interest rate swaps, rounded off to second decimal places.
Of these loans payable, the interest rate on the portion totaling ¥1,317 million is, in effect, fixed at 0.80225% per annum
for the period from September 30, 2014 through September 30, 2019 due to the execution of an interest rate swap
agreement on September 26, 2014. Moreover, the interest rate on the portion totaling ¥5,000 million is in effect, fixed at
0.94875% per annum for the period from March 30, 2018 through September 30, 2019 due to the execution of an interest
rate swap agreement on September 26, 2014.
JHR made partial early repayment of the loan on April 26, 2018.
JHR additionally borrowed ¥900 million loan on April 26, 2019 and made early repayment of ¥450 million on June 17,2019 and ¥800 million on July 31, 2019, respectively.
The funds were appropriated for refinancing of borrowings and related expenses, etc.
The funds were appropriated for acquisition of the beneficial interest of real estate in trust, repayment of borrowings andrelated expenses, etc.
The funds were appropriated for acquisition of the beneficial interest of real estate in trust and related expenses, etc.
The funds were appropriated for renovation of Oriental Hotel Fukuoka Hakata Station (former Hotel Centraza Hakata)and related expenses, etc.

37

(Note 10) The funds were appropriated for refinancing and early repayment of borrowings.
(Note 11) In order to list each loan payable, ¥12,782 million of the current portion of long-term loans payable in the balance sheets
is included in long-term loans payable in the above table.

3. Investment corporation bonds
Status of investment corporation bonds as of December 31, 2019 was as follows:
Name

Issuance
date

Balance at
beginning of
period(JPY1M)

Balance at
end ofperiod(JPY1M)

Third unsecured investment
corporation bonds

March 19,
2014

2,000

-

Fourth unsecured investment
corporation bonds

December19, 2014

1,500

Fifth unsecured investment
corporation bonds

October 23,
2015

Sixth unsecured investment
corporation bonds

Interest
rate

Maturity
date

Repayment
methodUse

Remarks

0.920

March 19,2019

Lump-sum
repayment(Note 1)

Unsecured,
unguaranteed(Note 5)

1,500

0.860

December17, 2021

Lump-sum
repayment(Note 2)

6,000

6,000

0.820

October
21, 2022

Lump-sum
repayment(Note 1)March 22,
2016

3,000

3,000

0.935

March 19,2026

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

November29, 2016

9,000

9,000

0.600

November27, 2026

Lump-sum
repayment(Note 3)Eighth unsecured investment
corporation bonds

November29, 2016

1,100

1,100

0.600

November27, 2026

Lump-sum
repayment(Note 3)

Ninth unsecured investment
corporation bonds

November24, 2017

1,000

1,000

0.530

November22, 2024

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

February 21,
201810,00010,0000.840

February21, 2028

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

June 14,
2019

-

8,000

0.854

June 14,2029

Lump-sum
repayment(Note 1)

Unsecured,
unguaranteed(Note 6)

Twelfth unsecured investment
corporation bonds (green
bonds)

July 31,
2019

-

2,000

0.400

July 31,2024

Lump-sum
repayment(Note 4)

Unsecured,
unguaranteed(Note 5)33,60041,600Total

Unsecured,
unguaranteed(Note 5)
Unsecured,
unguaranteed(Note 6)
Unsecured,
unguaranteed(Note 5)
Unsecured,
unguaranteed(Note 6)
Unsecured,
unguaranteed(Note 5)
Unsecured,
unguaranteed(Note 5)
Unsecured,
unguaranteed(Note 6)(Note 1)

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

(Note 2)

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

(Note 3)

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

(Note 4)

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

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

(Note 6)

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

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

(%)

Subscription rights to new investment units
Not applicable.
38

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

Name of property, etc.

Beneficial interest ofreal estate in trust

Hotel Oriental Express Osaka
Shinsaibashi

Beneficial interest ofreal estate in trust

Hilton Tokyo Odaiba

Acquisition
date

Sale

Acquisition
price(JPY1M)

Sale date

Sale price(JPY1M)

Book value(JPY1M)

Gain (loss) on
sale(JPY1M)(Note)

February 1,
2019

2,738

―

―

―

―

April 8,2019

62,400

―

―

―

―

―

65,138

―

―

―

―

Total

(Note)

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

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

Asset type

Name of property, etc.

Acquisition/
sale date

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

(Note 2)

Date ofappraisal

Appraisal agency

DAIWA REALESTATEAPPRAISAL CO.,LTD.
Japan Real Estate
Institute

Acquisition

Beneficial interest of Hotel Oriental Express
real estate in trust
Osaka Shinsaibashi

February 1,
2019

2,738

3,050

October 1,
2018

Acquisition

Beneficial interest of
Hilton Tokyo Odaiba
real estate in trust

April 8,2019

62,40065,800

October 1,
2018(Note 1)

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

(Note 2)

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

Transaction of securities

Not applicable.
(3) Other
Name of the party that conducted the investigation
KPMG AZSA LLC
Overview of results and method of the investigation
For the period from January 1, 2019 to December 31, 2019, JHR requested an investigation of threeinterest rate swap transaction. Based on Article 201-2 of the Investment Trusts Act, JHR entrusted theinvestigation to KPMG AZSA LLC with regard to such information as the comparable price, counterparty’s
name, contract amounts and transaction period, and received a report on the agreed upon procedures as aresult of the investigation based on the “Practical Guidelines on the Agreed Upon Procedures for theInvestigation into Prices, Etc. of Specified Assets for Investment Trusts and Investment Corporations”
39

(Professional Practice Guidelines 4460) issued by The Japanese Institute of Certified Public Accountants.
This investigation does not constitute a part of the audit of the financial statements, nor provide any
assurance or guarantee on the appropriateness of the price or the effectiveness of the internal control system.
4. Transactions with interested parties, etc. (Note 1)(1) Transactions(millions of yen)
Category

Price, etc. (Note 2) (Note 3)
Acquisition price, etc.

Total amountSale price, etc.

65,138

Real estate operating revenue–

28,278

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

–

[–%]

–

[–%]

6,996

[24.7%]

Tokyo Humania Enterprise KK

–

[–%]

–

[–%]

2,264

[8.0%]

Kyoritsu Maintenance Co., Ltd.

–

[–%]

–

[–%]

1,063

[3.8%]

K.K. A.I.C Hiroshima Management

–

[–%]

–

[–%]

1,063

[3.8%]OW Hotel Operations KK

–

[–%]

–

[–%]

967

[3.4%]

Lagoon resort Nago Co., Ltd.

–

[–%]

–

[–%]

937

[3.3%]KK Narita Kosuge Operations

–

[–%]

–

[–%]

912

[3.2%]

Hotel Centraza Co., Ltd.

–

[–%]

–

[–%]

740

[2.6%]

Hotel Management Co., Ltd.

–

[–%]

–

[–%]

625

[2.2%]KK Narita Yoshikura Operations

–

[–%]

–

[–%]

604

[2.1%]

Hotel Oriental Express Co., Ltd.

–

[–%]

–

[–%]

109

[0.4%]

–

[–%]

–

[–%]

16,285[57.6%]

Total(Note 1)

(Note 2)
(Note 3)

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

40

(2)

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

Outsourcing
expenses (Note)(Note)

Total amountsof fees paid,
etc.
(A)653,041

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

Amount of payment(B)

Ratio to total
amountB/A (%)

5,760

0.9

87

0.0

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

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

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

Number of units acquired

Number of units disposed

Number of units held

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

2,500

―

2,500

July 5, 2017

1,200

―

3,700

Accumulated total

3,700

―

3,700

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

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

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

2,500

212,5500.06

3,761,907

18thfiscalperiodFrom January 1, 2017 to
December 31, 2017

3,700

305,5710.09

4,010,847

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

3,700

305,5710.09

4,010,847

20thfiscalperiodFrom January 1, 2019 to
December 31, 2019

3,700

305,571

0.08

4,462,347(Note 1)
(Note 2)

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

42

Other(1) Announcements
The following shows the summary of major conclusions, changes, etc. of the principal agreements that wereapproved or reported at meetings of JHR’s Board of Directors during the fiscal period under review.
Approval date

Item

January 16, 2019Conclusion of an underwriting
agreement for new investment
units in association with theissuance of new investment
units

April 24, 2019

Shelf registration andcomprehensive resolution on theissuance of investment
corporation bonds andentrustment of accompanying
administration

Summary
Due to the issuance of new investment units, general administration foroffering the investment units in Japan was entrusted to SMBC Nikko
Securities Inc., Daiwa Securities Co. Ltd., Mizuho Securities Co., Ltd.,
Goldman Sachs Japan Co., Ltd., Nomura Securities Co., Ltd., FFG
Securities Co., Ltd., Nishi-Nippon City Tokai Tokyo Securities Co., Ltd.
and Chibagin Securities Co., Ltd. Moreover, general administration foroffering the investment units overseas was entrusted to SMBC Nikko
Capital Markets Limited, Goldman Sachs International, Mizuho
International plc and Daiwa Capital Markets Europe Limited as joint
lead managers for the overseas offering.
A comprehensive resolution was made on the issuance of investment
corporation bonds with the issuance period between May 9, 2019 andMay 8, 2021 with the total amount issued of within ¥100.0 billion. At
the same time, a resolution was made on the issuance of investment
corporation bonds of within ¥20 billion, and the decision on mattersregarding the issuance of investment corporation bonds, including theadministration related to issuance and entrustment of operations, wasleft to the discretion of the Executive Director.
In accordance with the modifications to the Articles of Incorporation
resolved at the 9th General Meeting of Unitholders of JHR, partial
modifications were made to the asset management agreement as follows:

November 22, 2019

Partial amendment to the asset
management agreement

・In view of the expansion of opportunities to invest in securities andmonetary claims, etc., necessary amendments were made to enable
investments to be made on an opportune basis.
・Necessary amendment were made to add certain assets other than realestate-related assets to the calculation of the acquisition fee and thetransfer fee; and others.

The 9th General Meeting of Unitholders of JHR was held on November 22, 2019. The major items approved at theGeneral Meeting of Unitholders are summarized below.
AgendaSummary
Partial amendments were made to the Articles of Incorporation due to the following reasons.
・In view of the expansion of opportunities to invest in securities and monetary claims, etc.,

Partial amendments to the Articles
of Incorporationnecessary amendments were made to enable investments to be made on an opportune
basis.
・Necessary amendment were made to add certain assets other than real estate-related assets
to the calculation of the acquisition fee and the transfer fee; and others.

Election of one Executive Director

Kaname Masuda was again elected as Executive Director. His term of office commences on
November 22, 2019 and continues until the end of the general meeting of unitholders which
will be held within 30 days from the day immediately following the day on which two years
have passed since his election and at which a vote will be held on the election of Executive
Director(s).

43AgendaSummary

Election of three Supervisory
Directors

Tetsuya Mishiku, Hiroto Kashii and Mayumi Umezawa were elected as Supervisory Directors.
The term of office of the elected Supervisory Directors commences on November 22, 2019 andcontinues until the end of the general meeting of unitholders which will be held within 30 days
from the day immediately following the day on which two years have passed since their election
and at which a vote will be held on the election of Supervisory Directors.

Election of one Substitute Executive
Director

Hisashi Furukawa, Representative Director of the Asset Management Company, was again
elected as Substitute Executive Director.

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

44

JAPAN HOTEL REIT INVESTMENT CORPORATION
Balance Sheets
As of December 31, 2019 and 2018
Thousands of yen
As ofDecember 31,
2019
ASSETS
Current assets:
Cash and deposits (Notes 5 and 6)
Cash and deposits in trust (Notes 5 and 6)
Operating accounts receivable (Note 6)
Prepaid expenses
Income taxes receivable
Derivative assets (Notes 6 and 18)
Other current assets
Total current assets

As ofDecember 31,
2018¥ 22,449,911 ¥ 25,706,559
11,894,019
11,478,156
2,779,730
2,474,121
550,281
527,491
54
34
573
2,229
88,04577,98737,762,616
40,266,582

Property and equipment, at cost (Notes 17 and 19):
Machinery and equipment
Tools, furniture and fixtures
Buildings in trust (Note 14)
Structures in trust
Machinery and equipment in trust
Tools, furniture and fixtures in trust
Land in trust
Construction in progress in trust

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

398,134
3,121,628
122,605,307
2,535,539
598,790
136,526
163,151,369
765,363
293,312,661(20,423,041)
272,889,620

Intangible assets:
SoftwareLeasehold rights in trust (Note 19)
Fixed-term leasehold rights in trust (Note 19)
Other intangible assets (Note 19)
Total intangible assets

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

199,563
28,532,362
5,175,217
8,436
33,915,580

Other assets:
Security deposits
Leasehold and security deposits in trust
Long-term prepaid expenses
Derivative assets (Notes 6 and 18)
Reserve fund for repairs and maintenance
Investment unit issuance costs
Investment corporation bond issuance costs
Total other assets

12,520150,223
2,766,474
43,870307,513140,631
211,194
3,632,429

12,520150,223
2,687,996
45,125292,508
124,220
172,390
3,484,984¥415,722,517¥350,556,767

Less: Accumulated depreciation
Net property and equipment

Total assets(Continued)

45

JAPAN HOTEL REIT INVESTMENT CORPORATION
Balance Sheets
As of December 31, 2019 and 2018
Thousands of yen
As ofDecember 31,
2019

As of
December 31,
2018

LIABILITIES AND NET ASSETS
Current liabilities:
Operating accounts payable
Current portion of investment corporation bonds (Notes 6 and 8)
Current portion of long-term loans payable (Notes 6, 7 and 18)
Accrued expenses
Income taxes payable
Consumption taxes payable
Advances received
Dividends payable
Deposits received
Derivative liabilities (Notes 6 and 18)
Other current liabilities
Total current liabilities¥ 1,485,375
12,782,000
651,435
1,210
661,048909,293
15,852
8,696
17,22995,331
16,627,473¥ 1,941,008
2,000,000
11,117,000
530,377
1,210
496,921882,052
18,275
7,315
17,608
9,013
17,020,784

Long-term liabilities:
Investment corporation bonds (Notes 6 and 8)
Long-term loans payable (Notes 6, 7 and 18)
Tenant leasehold and security deposits (Note 6)
Tenant leasehold and security deposits in trust (Note 6)
Derivative liabilities (Notes 6 and 18)
Deferred tax liabilities (Note 15)
Asset retirement obligations (Note 9)
Total long-term liabilities

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

31,600,000
91,954,000
1,041,016
4,593,946
514,339
14,838445,622130,163,763

Total liabilities

179,200,079

147,184,548

186,894,169

153,516,129

21,746,398

21,746,398

11,794,071
1,174,860
12,968,932
15,290,314
50,005,645
236,899,815

12,357,644
12,357,644
16,213,482
50,317,525
203,833,655(377,376)(377,376)(461,435)(461,435)

Total net assets

236,522,438

203,372,219

Total liabilities and net assets¥415,722,517¥350,556,767

Net assets (Note 10):Unitholders’ equity:
Unitholders’ capital
Units authorized: 20,000,000 units
Units issued and outstanding; 4,462,347 units and 4,010,847 units asof December 31, 2019 and 2018, respectively
Surplus:Capital surplus
Voluntary reserve:
Reserve for temporary difference adjustment (Note 11)
Reserve for special advanced depreciation
Total voluntary reserve
Unappropriated retained earnings
Total surplus
Total unitholders’ equity
Valuation and translation adjustments:
Deferred gains (losses) on hedges (Note 18)
Total valuation and translation adjustments

See notes to financial statements.

46

JAPAN HOTEL REIT INVESTMENT CORPORATIONStatements of Income
For the years ended December 31, 2019 and 2018
Thousands of yen
For the year
For the year
ended
ended
December 31, December 31,
2018
2019
Operating revenue:
Real estate operating revenue (Note 12)
Other real estate operating revenue (Note 12)
Gain on sale of real estate properties (Note 13)
Total operating revenue
Operating expenses:
Real estate operating costs (Note 12)
Asset management fee
Asset custody and administrative service fee
Directors’ compensation
Other operating expenses
Total operating expenses
Operating income¥ 27,107,988
1,170,561
28,278,550¥ 25,140,735
1,178,141
1,934,974
28,253,850

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

8,344,364
1,577,515
110,273
13,400214,828
10,260,381

17,148,555

17,993,469

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

357
4,361
28,063
1,239
549
12,382
46,953

225
3,583
4,627
10,354
118
12,84331,752

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

818,631
246,329525,031
27,751
147,887
39,417
8,529
1,813,577
16,211,644

Income before income taxes

15,291,524

16,211,644

Income taxes (Note 15):
Current
Total income taxes

1,210
1,210

1,210
1,210

¥ 15,290,314¥ 16,210,434

Net income
See notes to financial statements.

47

JAPAN HOTEL REIT INVESTMENT CORPORATIONStatements of Changes in Net Assets
For the years ended December 31, 2019 and 2018
Thousands of yen
Unitholders’ equity
Surplus
Voluntary reserve
Reserve for
special
Total voluntaryadvancedreservedepreciation

Unitholders’capitalCapital surplus

Reserve fortemporarydifference
adjustment

Balance, January 1, 2018
Changes of items during the year:
Reversal of reserve for temporary
difference adjustment
Dividends paid
Net income
Net changes in items other thanunitholders’ equity
Total changes in amount during theyear
Balance, December 31, 2018
Changes of items during the year:
Issuance of new investment units
Reversal of reserve for temporary
difference adjustment
Provision of reserve for special
advanced depreciation
Dividends paid
Net income
Net changes in items other thanunitholders’ equity
Total changes in amount during theyear¥ 153,516,129¥ 21,746,398¥ 13,127,153 ¥-¥ 13,127,153--(769,508)--(769,508)
-

-

-

-

-

-

¥ 153,516,129¥ 21,746,398(769,508)¥ 12,357,644-(769,508)¥ 12,357,644

33,378,040

-

-

-

-

-

-

(563,572)

-

-

-

-

-

-

33,378,040

Balance, December 31, 2019

¥ 186,894,169

Total surplus

Total unitholders’equity48,879,041¥ 202,395,170

769,508(14,771,949)
16,210,434(14,771,949)
16,210,434(14,771,949)
16,210,434

-

-

-

1,438,484
50,317,525

1,438,484¥ 203,833,655--

33,378,040(563,572)

563,572--

1,174,860-

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

-

-

-

-

-

-

-

(563,572)

1,174,860

611,287(923,168)(311,880)

33,066,160¥ 21,746,398¥ 11,794,071

1,174,860¥ 12,968,932

Thousands of yen
Valuation and translation adjustments
Deferred gains
Total valuation(losses) on
and translation
hedgesadjustments
Balance, January 1, 2018
Changes of items during the year:
Reversal of reserve for temporary
difference adjustment
Dividends paid
Net income
Net changes in items other thanunitholders’ equity
Total changes in amount during theyear
Balance, December 31, 2018
Changes of items during the year:
Issuance of new investment units
Reversal of reserve for temporary
difference adjustment
Provision of reserve for special
advanced depreciation
Dividends paid
Net income
Net changes in items other thanunitholders’ equity
Total changes in amount during theyear¥

Balance, December 31, 2019¥¥

(431,849)¥(431,849)¥¥

Total net assets¥

201,963,321--(14,771,949)
16,210,434(29,586)(29,586)(29,586)(29,586)(461,435)¥(29,586)(461,435)¥

1,408,897
203,372,219--

33,378,040

-

-

-

-

-

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

84,05984,05984,05984,059(377,376)¥

84,059(377,376)¥

33,150,219
236,522,438

See notes to financial statements.

48

Unappropriatedretained earnings¥¥¥

14,005,489

2,207,993
16,213,482

15,290,314

¥

¥

¥

50,005,645¥

236,899,815

JAPAN HOTEL REIT INVESTMENT CORPORATIONStatements of Cash Flows
For the years ended December 31, 2019 and 2018
Thousands of yen
For the year
For the year
ended
ended
December 31,
December 31,
2018
2019
Cash flows from operating activities:
Income before income taxes
Depreciation and amortization
Loss on disposal of property and equipment(Gain) Loss on derivative instruments
Amortization of investment corporation bond issuance costs
Amortization of investment unit issuance costs
Decrease of property and equipment due to sale
Decrease of property and equipment in trust due to sale
Decrease of intangible assets due to saleInterest income
Interest expense
Interest on tax refunds(Increase) decrease in operating accounts receivable(Increase) decrease in prepaid expenses(Increase) decrease in long-term prepaid expenses
Increase (decrease) in operating accounts payable
Increase (decrease) in accrued expenses
Increase (decrease) in consumption taxes payable
Increase (decrease) in advances received
Increase (decrease) in deposits received
Other
SubtotalInterest received
Interest paid
Interest received on tax refunds
Income taxes – refunded (paid)
Net cash provided by operating activities¥ 15,291,524
4,557,414
246,890(12,004)
30,298151,922(357)
1,225,314(549)(305,608)(22,789)(78,478)(240,644)
116,600
164,127
27,2401,380
69,494
21,221,777
482(1,220,857)
549(1,230)20,000,722¥ 16,211,644
4,091,929
35,972
26,57427,751
147,887
19,104
9,995,677
117,138(225)
1,064,961(118)(62,284)
44,621
320,330
286,480(139,228)(63,249)(18,206)(14,782)(106,639)
31,985,341
170(1,045,923)
118(1,211)30,938,494

Cash flows from investing activities:
Purchase of property and equipment
Purchase of property and equipment in trust
Purchase of intangible assets
Payments of reserve fund for repairs and maintenance
Refunds of leasehold and security deposits in trust
Repayment of tenant leasehold and security deposits
Proceeds from tenant leasehold and security deposits in trust
Repayment of tenant leasehold and security deposits in trust
Net cash used in investing activities(1,332,712)(71,102,935)(89,263)(40,453)(496)
329,120(228,114)¥ (72,464,854)(536,481)(2,399,742)(87,074)(40,330)
8,100
59,743(115,020)¥ (3,110,806)(Continued)

49

JAPAN HOTEL REIT INVESTMENT CORPORATIONStatements of Cash Flows
For the years ended December 31, 2019 and 2018
Thousands of yen
For the year
For the year
ended
ended
December 31,
December 31,
2018
2019
Cash flows from financing activities:
Proceeds from short-term loans payable
Repayments of short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from investment corporation bonds
Repayments of investment corporation bondPayments for investment corporation bond issuance costs
Proceeds from issuance of investment units
Dividends paid
Net cash provided by (used in) financing activities¥

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

5,000,000(8,000,000)
10,150,000(20,878,750)
10,000,000(68,082)(14,766,490)(18,563,322)

Net increase (decrease) in cash and cash equivalents(2,840,785)

9,264,365

Cash and cash equivalents at beginning of year

37,184,716

27,920,350

Cash and cash equivalents at end of year (Note 5)¥ 34,343,930¥ 37,184,716

See notes to financial statements.

50

JAPAN HOTEL REIT INVESTMENT CORPORATION
Notes to Financial Statements
For the years ended December 31, 2019 and 2018
1. Organization and Basis of Presentationa. Organization
Japan Hotel REIT Investment Corporation (“JHR”), formerly known as Nippon Hotel Fund Investment Corporation(the “Former NHF”), was established under the Act on Investment Trusts and Investment Corporations (the “Investment
Trust Act”) on November 10, 2005 and was listed on the Real Estate Investment Trust (“REIT”) Section on the Tokyo
Stock Exchange (Securities code: 8985) on June 14, 2006. JHR is externally managed by a licensed asset managementcompany, Japan Hotel REIT Advisors Co., Ltd. (hereinafter referred to as the “Asset Management Company”).
Focusing on the importance of hotels as social infrastructure and their profitability as investment real estate properties,
JHR has primarily invested in real estate related assets which are in themselves wholly or partially used as hotels orreal estate equivalents of such real estate or which are backed by such real estate or real estate equivalents.
In the fiscal period ended December 31, 2012, the Former NHF, as the surviving entity, merged with Japan Hotel andResort, Inc. (the “Former JHR”), as the dissolved entity, with an effective date of April 1, 2012 (the “Merger”). In
conjunction with the Merger, the Former NHF changed its name to Japan Hotel REIT Investment Corporation.
Through the Merger, nine properties held by the Former JHR were succeeded by JHR. As a result, as of the effective
date of the Merger, JHR’s property portfolio expanded to 28 properties. As of December 31, 2019, JHR has ownershipinterests in 43 properties.
b. Basis of presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in the Financial
Instruments and Exchange Law and their related accounting regulations, and in conformity with accounting principles
generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the application anddisclosure requirements of International Financial Reporting Standards.
The accompanying financial statements have been reformatted and translated into English (with certain reclassifications
and expanded descriptions) from the financial statements of JHR prepared in accordance with Japanese GAAP and
filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments
and Exchange Law. Certain supplementary information included in the statutory Japanese language financial statements,
but not necessarily required for fair presentation, is not presented in the accompanying financial statements. JHR has
not prepared consolidated financial statements, as JHR has no consolidating subsidiaries or entities.
As permitted by the regulations under the Financial Instruments and Exchange Law of Japan, the amounts are rounded
down to the nearest thousands or millions. As a result, the totals shown in the accompanying financial statements do
not necessarily agree with the sums of the individual amounts.
2. Summary of Significant Accounting Policies
a. Cash and cash equivalents
Cash and cash equivalents in the statements of cash flows consist of cash on hand, cash in trust accounts, bank deposit
and trust deposit, which can be withdrawn at any time, and short-term investments with a maturity of three months orless when purchased, which can easily be converted to cash and subject to minimal risk of change in value.
b. Property and equipment
Property and equipment are stated at cost. Depreciation of property and equipment is calculated using the straight-line
method over their estimated useful lives. The useful lives of major property and equipment components are as follows:
Machinery and equipment:
2 to 17 years
Tools, furniture and fixtures:
2 to 20 years
Buildings in trust:
2 to 64 years
Structures in trust:
2 to 64 years
Machinery and equipment in trust:
3 to 32 years
Tools, furniture and fixtures in trust:
2 to 27 years

51

c. Intangible assets
Intangible assets are stated at cost and amortized using the straight-line method. The amortization period of major
intangible assets is as follows.
Software (internal use): 5 years
Fixed-term leasehold rights in trust: 41 or 49 years (remaining contractual period at the time of acquisition)
Leasehold rights in trust are intangible assets with indefinite useful lives.
d. Investment unit issuance costs
Investment unit issuance costs are capitalized and amortized using the straight-line method over three years.
e. Investment corporation bond issuance costs
Investment corporation bond issuance costs are capitalized and amortized using the effective interest rate method over
the respective term of the bond.
f. Taxes on property and equipment
Taxes imposed on properties such as property taxes, city planning taxes, and depreciable asset taxes are allocated to therespective reporting period and expensed as “Real estate operating costs.” Cash paid for those properties related taxes
to the transferor of real properties at acquisition is not recorded as “Real estate operating costs” but capitalized as partof the acquisition cost of the relevant property. The amount of such taxes capitalized in the acquisition cost of real
properties was ¥249,415 thousand for the year ended December 31, 2019 and not applicable for the year ended
December 31, 2018.
g. Derivatives and hedging activities
JHR enters into certain derivative transactions in accordance with its financial policy in order to manage risks, which
are defined in the Articles of Incorporation, mainly arising from adverse fluctuations in interest rates on loans payable.
Derivative financial instruments are carried at fair value with changes in the unrealized gain or loss charged or credited
to operations, except for those which meet the criteria for hedge accounting in which case the unrealized gain or loss
is deferred as a component of net assets.
JHR evaluates hedge effectiveness by comparing the cumulative changes in cash flow of hedging instruments and thehedged items and assessing the ratio between the changes.
h. Beneficial interests of real estate in trust
For beneficial interests of real estate in trust, all assets and liabilities held in trust accounts as well as all income
generated and expenses incurred from assets in trust are presented in the relevant balance sheet and statement of income
accounts.
i. Consumption taxes
Consumption taxes are excluded from the transaction amounts.
3. Change in Presentation Method

JHR adopted “Partial Amendments to ‘Accounting Standard for Tax Effect Accounting’” (ASBJ Statement No. 28,
February 16, 2018) from the beginning of the fiscal year ended December 31, 2019. The method of presentation has
been changed, whereby deferred tax assets are presented under other assets and deferred tax liabilities are presented
under long-term liabilities.
As a result, deferred tax liabilities (¥583 thousand) that had previously been presented under current liabilities in thebalance sheet as of December 31, 2018 was reclassified and included in deferred tax liabilities (¥14,838 thousand)under long-term liabilities to conform to the current fiscal year’s presentation.

52

4. Accounting Standards Issued but Not Yet Applied・“Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (ASBJ) Statement No. 29
issued on March 30, 2018)
・“Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30 issued on
March 30, 2018)(1) Overview
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) in
the United States have jointly developed comprehensive accounting standards for revenue recognition and issued“Revenue from Contracts with Customers” (IFRS 15 by IASB and Topic 606 by FASB) in May 2014. Given thesituation where IFRS 15 is applied from fiscal years beginning on or after January 1, 2018 and that Topic 606 is
applied from fiscal years beginning after December 15, 2017, the ASBJ has developed comprehensive accounting
standards for revenue recognition and issued them together with the implementation guidance.
The basic policy for the ASBJ when it developed the accounting standards for revenue recognition was to establish
the standards by incorporating the basic principles of IFRS 15 as a starting point, from the perspective ofcomparability between financial statements, which is one of the benefits of maintaining consistency with IFRS 15.
The basic policy also allowed to add alternative treatments to the extent that comparability is not impaired, if
consideration should be given to current practices that have been used thus far in Japan.
(2) Scheduled date of application
The above standards will be applied from the beginning of the fiscal year ending December 31, 2022.
(3) Impact of applying the accounting standards
The impact on the financial statements of applying the standards is currently under review.
5. Cash Flow Information
Cash and cash equivalents as of December 31, 2019 and 2018 in the statements of cash flows consisted of thefollowing:Thousands of yen
As of December
As of December
31, 2019
31, 2018
Cash and deposits¥
22,449,911¥
25,706,559
11,894,019
11,478,156
Cash and deposits in trust¥
34,343,930¥
37,184,716
Cash and cash equivalents
6. Financial Instruments
a. Status of financial instruments(1) Policy for financial instruments
JHR is an investment corporation set forth in Article 2, paragraph 12 of the Investment Trust Act, managing
investments mainly in specified assets as prescribed in the Investment Trust Act. As a policy, JHR procures funds
through issuance of investment units, etc. and loans from financial institutions in order to make investments inspecified assets. JHR does not utilize surplus funds to invest in financial instruments except for short-term deposits
and other equivalent short-term financial instruments. JHR may enter into derivative transactions in order to hedge
against interest rate risk, but not for speculative trading purposes.
(2) Details of financial instruments, their risks, and risk management system
Operating accounts receivable are exposed to credit risks of customers. To address the risks, JHR monitors payment
dates and balances by customers in order to detect and mitigate any suspicious accounts in a timely manner.
The floating rate loans payable are exposed to risks of interest rate fluctuations. In order to mitigate interest raterisks, JHR may enter into derivative transactions, if necessary.
Derivative transactions are conducted principally in accordance with rules prescribed by JHR and risk management
rules applied by the Asset Management Company. Derivative transactions are arranged by the finance section of the53

Asset Management Company by using financial institutions with high credit ratings through approval and resolution
by authorized personnel and a meeting committee structure set forth in its decision-making standards and resolutionof JHR’s board of directors.
Loans payable expose JHR to liquidity risks. The finance section of the Asset Management Company prepares andupdates projections and actual cash flows on a monthly basis to manage liquidity risks and monitors compliancewith restrictive covenants set forth in the loan agreements. JHR manages liquidity risks by managing the ratio ofshort-term and long-term loans payable, etc. considering the current financial environment and other conditions
through approval and resolution by authorized personnel and meeting committee structure in the Asset Management
Company and resolution of JHR’s board of directors.
b. Fair value of financial instruments
Carrying amounts of financial instruments on the balance sheets, their fair values, and the differences as of December
31, 2019 and 2018 were as follows. Financial instruments whose fair values are difficult to estimate are not includedin the table. See Note (2) below.

(i) Cash and deposits(ii) Cash and deposits in trust(iii) Operating accounts receivable
Total(iv) Current portion of investment corporation
bonds(v) Current portion of long-term loans payable(vi) Investment corporation bonds(vii) Long-term loans payable
Total

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

12,782,000
41,600,000
114,372,000
168,754,000

¥

¥

¥

¥

(119,600)(119,600)(389,386) ¥(389,386)¥-¥(i) Cash and deposits(ii) Cash and deposits in trust(iii) Operating accounts receivable
Total

Thousands of yen
As of December 31, 2018
Carrying amount
Fair value¥
25,706,559 ¥
25,706,559 ¥
11,478,156
11,478,156
2,474,121
2,474,121¥
39,658,838 ¥
39,658,838 ¥¥(viii) Derivative transactions (*)¥-

12,782,000
41,480,400
114,372,000
168,634,400(viii) Derivative transactions (*)(iv) Current portion of investment corporation
bonds(v) Current portion of long-term loans payable(vi) Investment corporation bonds(vii) Long-term loans payable
Total

Difference

2,000,000
11,117,000
31,600,000
91,954,000
136,671,000

Difference-¥

2,002,200
11,117,000
31,785,870
91,954,000
136,859,070

¥

2,200
185,870
188,070(484,593) ¥(484,593)¥-(*) Receivables and payables arising from derivative transactions are presented on a net basis and amounts in parenthesis denote net payables.

Notes:(1) Methods to measure fair value of financial instruments(i) Cash and deposits, (ii) Cash and deposits in trust, (iii) Operating accounts receivable
The carrying value is deemed to approximate the fair value since the instruments are scheduled to be settled in ashort period of time.

54

(iv) Current portion of investment corporation bonds, (vi) Investment corporation bonds
The fair value of these instruments is measured based on the market price.
(v) Current portion of long-term loans payable, (vii) Long-term loans payable
The carrying value is deemed to approximate the fair value since the interest rate on long-term loans payable arefloating interest rates which are adjusted periodically to reflect market interest rates.
(viii) Derivative transactions
The information on the fair value of derivative transactions is presented in Note 18.
(2) Information on financial instruments whose fair values are difficult to estimate as of December 31, 2019 and 2018
was as follows:
Thousands of yen
As of December
As of December
31, 2019
31, 2018
Carrying amount
Tenant leasehold and security deposits¥
1,040,520¥
1,041,016
Tenant leasehold and security deposits in trust
4,681,825
4,593,946¥
5,722,345¥
5,634,962
Total
Tenant leasehold and security deposits / Tenant leasehold and security deposits in trust
Tenant leasehold and security deposits (in trust) are not subject to fair value disclosure because they have no market
price and their actual deposit periods from a tenant’s move-in to move-out are not estimable, thus making areasonable estimate of future cash flows difficult.
(3) Redemption schedule for monetary claims as of December 31, 2019 and 2018:

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

As of December 31, 2018
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Total

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

Due after
one to two
years
¥
¥
-

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

Due after
four to five
years
¥
¥
-

Due after
five years¥¥-

Due within
one year¥25,706,559
11,478,156
2,474,121¥39,658,838

Due after
one to two
years
¥
¥
-

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

Due after
four to five
years
¥
¥
-

Due after
five years¥¥-(4) Schedule for repayment of loans payable and redemption of investment corporation bonds as of December 31, 2019and 2018.

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

Due within
one year

Due after
one to two
years

¥

¥

-

12,782,000¥12,782,000-

1,500,000
10,800,000¥12,300,000

55

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

Due after
four to fiveyears

Due after
five years

¥

¥

¥

-

6,000,000
10,900,000¥16,900,000¥-

15,772,000¥15,772,000-

3,000,000
18,650,000¥21,650,000-

31,100,000
58,250,000¥89,350,000As of December 31, 2018
Current portion of investment
corporation bonds
Current portion of long-termloans payable
Investment corporation bonds
Long-term loans payable
Total

Due within
one year

Due after
one to twoyears¥ 2,000,000¥

11,117,000¥13,117,000

12,782,000¥12,782,000-

56

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

Due after
four to fiveyears

Due after
five years

¥

¥

¥

-

1,500,000
10,800,000¥12,300,000¥-

6,000,000
10,900,000¥16,900,000-

15,772,000¥15,772,000-

24,100,000
41,700,000¥65,800,000

7. Long-Term Loans Payable
long-term loans payable as of December 31, 2019 and 2018 consisted of the following:

Maturity dateLong-term loans payable:
1.15% Unsecured loan, payable in a lump-sum at maturity (*1)
Unsecured loan, payable in a lump-sum at maturity (*2)
0.92% Unsecured loan, payable in a lump-sum at maturity (*1,3)
1.04% Unsecured loan, payable in a lump-sum at maturity (*1)
0.57% Unsecured loan, payable in a lump-sum at maturity
0.38% Unsecured loan, payable in a lump-sum at maturity (*1)
0.90% Unsecured loan, payable in a lump-sum at maturity (*1,3)
0.93% Unsecured loan, payable in a lump-sum at maturity (*1)
0.95% Unsecured loan, payable in a lump-sum at maturity (*1)
0.52% Unsecured loan, payable in a lump-sum at maturity
1.07% Unsecured loan, payable in a lump-sum at maturity (*1)
1.07% Unsecured loan, payable in a lump-sum at maturity (*1,3)
0.21% Unsecured loan, payable in a lump-sum at maturity (*1)
0.19% Unsecured loan, payable in a lump-sum at maturity (*1,3)
0.19% Unsecured loan, payable in a lump-sum at maturity (*1)
0.77% Unsecured loan, payable in a lump-sum at maturity (*1,3)
0.77% Unsecured loan, payable in a lump-sum at maturity (*1)
0.68% Unsecured loan, payable in a lump-sum at maturity (*1,3)
0.66% Unsecured loan, payable in a lump-sum at maturity (*1)
0.57% Unsecured loan, payable in a lump-sum at maturity
0.74% Unsecured loan, payable in a lump-sum at maturity (*1)
0.56% Unsecured loan, payable in a lump-sum at maturity (*1)
0.56% Unsecured loan, payable in a lump-sum at maturity (*1)
0.59% Unsecured loan, payable in a lump-sum at maturity
0.71% Unsecured loan, payable in a lump-sum at maturity
0.47% Unsecured loan, payable in a lump-sum at maturity
0.85% Unsecured loan, payable in a lump-sum at maturity (*1)
0.73% Unsecured loan, payable in a lump-sum at maturity (*1)
0.68% Unsecured loan, payable in a lump-sum at maturity (*1)
0.75% Unsecured loan, payable in a lump-sum at maturity
0.73% Unsecured loan, payable in a lump-sum at maturity (*1)
0.73% Unsecured loan, payable in a lump-sum at maturity (*1)
0.73% Unsecured loan, payable in a lump-sum at maturity (*1)
0.68% Unsecured loan, payable in a lump-sum at maturity (*1)
0.65% Unsecured loan, payable in a lump-sum at maturity (*1)
0.57% Unsecured loan, payable in a lump-sum at maturity (*1)
0.65% Unsecured loan, payable in a lump-sum at maturity (*1)
0.42% Unsecured loan, payable in a lump-sum at maturity
0.42% Unsecured loan, payable in a lump-sum at maturity
0.52% Unsecured loan, payable in a lump-sum at maturity
0.55% Unsecured loan, payable in a lump-sum at maturity
0.95% Unsecured loan, payable in a lump-sum at maturity (*1)
0.34% Unsecured loan, payable in a lump-sum at maturity (*4)
0.34% Unsecured loan, payable in a lump-sum at maturity (*4)
0.38% Unsecured loan, payable in a lump-sum at maturity
0.72% Unsecured loan, payable in a lump-sum at maturity (*1)
0.82% Unsecured loan, payable in a lump-sum at maturity (*1)
0.23% Unsecured loan, payable in a lump-sum at maturity
0.68% Unsecured loan, payable in a lump-sum at maturity (*1)
Sub-total
Total of long-term loans payable

March 31, 2021
September 30, 2019
September 30, 2020
September 30, 2021
December 30, 2020
January 31, 2020
January 31, 2022
March 31, 2022
June 30, 2022
June 30, 2020
September 29, 2023
September 29, 2023
March 29, 2019
March 29, 2019
March 29, 2019
March 29, 2024
March 29, 2024
March 31, 2023
March 29, 2024
March 29, 2024
September 30, 2025
September 30, 2024
September 30, 2024
September 30, 2024
September 30, 2024
June 30, 2023
September 30, 2026
September 30, 2025
September 30, 2025
September 30, 2025
September 30, 2025
September 30, 2025
September 30, 2025
September 30, 2025
March 31, 2025
March 29, 2024
March 31, 2025
March 31, 2023
March 31, 2023
March 31, 2023
September 29, 2023
September 30, 2027
December 30, 2019
December 30, 2019
March 29, 2024
March 31, 2027
March 31, 2028
September 30, 2024
September 30, 2027

Millions of yen
As of December
As of December
31, 2019
31, 2018
Amount
¥

¥

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

¥

¥

6,800
6,317
6,055
4,000
935
4,700
7,900
1,500
1,500
1,092
2,880
892
2,000
960
1,140
2,100
2,650
4,200
800
500
9,500
1,300
2,000
700
500
2,250
4,250
1,000
700
500
500
500
1,000
300
2,550
4,000
2,450
1,700
2,850
500
500
3,900
350
350
103,071
103,071

Stated interest rate, which is a rate per annum, represents the weighted average rate during the year ended December 31, 2019, or the most recent year, basedon the number of days and outstanding balance of the loans payable. The interest rate is rounded off to the nearest second decimal place.

57

Notes:(*1) As JHR has conducted interest rate swap transactions in order to hedge against interest rate fluctuation risks, theinterest rate of loans subject to such interest rate swap transactions is presented as the rate obtained by taking into
account the effect of interest rate swaps (interest rate fixation), rounded off to second decimal places.
(*2) Of these loans payable, the interest rate on the portion totaling ¥1,317 million is, in effect, fixed at 0.80225% perannum for the period from September 30, 2014 through September 30, 2019 due to the execution of an interest
rate swap agreement on September 26, 2014. Moreover, the interest rate on the portion totaling ¥5,000 million is,in effect, fixed at 0.94875% for the period from March 30, 2018 through September 30, 2019 due to the executionof an interest rate swap agreement on September 26, 2014.
(*3) JHR made partial early repayment of these loans payable on April 26, 2018.
(*4) JHR additionally borrowed ¥900 million loan payable on April 26, 2019 and made early repayment of ¥450
million on June 17, 2019 and ¥800 million on July 31, 2019, respectively.
8. Investment Corporation Bonds
Investment corporation bonds as of December 31, 2019 and 2018 consisted of the following:
Millions of yen
As of
As of
December 31,
December 31,
2019
2018
Unsecured 3rd investment corporation bond at interest rate of 0.92%, dueon March 19, 2019
Unsecured 4th investment corporation bond at interest rate of 0.86%, dueon December 17, 2021
Unsecured 5th investment corporation bond at interest rate of 0.82%, dueon October 21, 2022
Unsecured 6th investment corporation bond at interest rate of 0.935%, dueon March 19, 2026
Unsecured 7th investment corporation bond at interest rate of 0.60%, dueon November 27, 2026
Unsecured 8th investment corporation bond at interest rate of 0.60%, dueon November 27, 2026
Unsecured 9th investment corporation bond at interest rate of 0.53%, dueon November 22, 2024
Unsecured 10th investment corporation bond at interest rate of 0.84%, due
on February 21, 2028
Unsecured 11th investment corporation bond at interest rate of 0.854%, dueon June 14, 2029
Unsecured 12th investment corporation bond (green bonds) at interest rateof 0.40%, due on July 31, 2024

¥

¥

Total

-

¥

2,000

1,500

1,500

6,000

6,000

3,000

3,000

9,000

9,000

1,100

1,100

1,000

1,000

10,00010,000

8,000

-

2,000

-

41,600¥33,6009. Asset Retirement Obligations
a. Outline of the asset retirement obligations
JHR recognized asset retirement obligations as it is obliged to restore the land of Oriental Hotel Fukuoka Hakata Station(former Hotel Centraza Hakata), acquired on April 1, 2016, and HOTEL ASCENT FUKUOKA, acquired on August19, 2016, to the original state in accordance with each of the fixed-term land leasehold agreements.
b. Calculation method of the asset retirement obligations
The amount of asset retirement obligations for Oriental Hotel Fukuoka Hakata Station (former Hotel Centraza Hakata)and HOTEL ASCENT FUKUOKA was calculated by using the discount rates of 0.484% and 0.394%, respectively, andestimating the expected periods of use based on the remaining useful lives of the related buildings (34 years and 48
years, respectively).

58

c. Changes in the total amount of the asset retirement obligations
Thousands of yen
For the year ended
For the year ended
December 31, 2019
December 31, 2018
Balance at beginning of year
Adjustment due to accretion expense
Balance at end of year¥

445,6222,054
447,677¥¥

443,577
2,045
445,622¥

10. Net Assets
JHR maintains at least ¥50,000 thousand as the minimum net assets as required by the Investment Trust Act.
Dividends and other movements in unappropriated retained earnings related to each period that were decided after thebalance sheet date are summarized as follows:Yen
For the year ended
For the year ended
December 31, 2019
December 31, 2018
Total
Unappropriated retained
earnings¥
II Reversal of voluntary reserve
Reversal of reserve fortemporary difference adjustment(*1)
Reversal of reserve for special
advanced depreciation(*3)
III Dividends
IV Voluntary reserve
Provision of reserve for special
advanced depreciation (*2)
Provision of reserve foradvanced depreciation(*3)
V Retained earnings carried¥forward (I+II-III-IV)

Per unit

Total

Per unitI

15,290,314,375¥

16,213,482,816

1,176,490,844¥

263

563,572,972¥

140

1,174,860,958
16,466,060,430

¥
¥

263
3,690

15,602,194,830

¥
¥

3,890

-

1,174,860,958

1,174,860,958-

744,789¥-

Notes:(*1) JHR applied the transitional measures of Paragraph 3 of the Supplementary Provisions of the “Ordinance on
Accounting of Investment Corporations” (Cabinet Office Ordinance No. 27 of 2015) from 2016. As a result,¥13,127,153,216 of the dividend reserve, representing the remaining balance of the gain on negative goodwill
recorded in a prior fiscal period, was transferred to the “Reserve for temporary difference adjustment” accountthrough the appropriation of profit for the year ended December 31, 2016. Starting from the year ended
December 31, 2017, JHR plans to reverse the reserve every fiscal year in an amount that shall be at least 2% of
the transferred amount (¥262,543,065) but not exceeding the remaining amount of the reserve at that point inconformity with applicable rules and regulations.
For the year ended December 31, 2018, reversal of reserve for temporary difference adjustment of ¥563,572,972
was decided, which was calculated as ¥262,600,000 of the basic reversal plus ¥35,972,972 equivalent to loss on
disposal of property and equipment and ¥265,000,000 for the large-scale renovation at Oriental Hotel Fukuoka
Hakata Station (former Hotel Centraza Hakata).
For the year ended December 31, 2019, reversal of reserve for temporary difference adjustment of¥1,176,490,844 was decided, which was calculated as ¥262,600,000 of the basic reversal plus ¥246,890,844
equivalent to loss on disposal of property and equipment and ¥357,000,000 for the large-scale renovation at
Oriental Hotel Fukuoka Hakata Station (former Hotel Centraza Hakata) and ¥310,000,000 for adjustment todilution of dividend per unit due to capital increase through public offering.
(*2) For the year ended December 31, 2018, based on Article 65-8 of the Special Taxation Measures Act of Japan,
JHR decided to provide for the “Reserve for special advanced depreciation” in the amount of ¥1,174,860,958 inrelation to the gain on sale of real estate properties recorded during the year.
(*3) For the year ended December 31, 2019, JHR decided to reverse the “Reserve for special advanced depreciation”

59

in the amount of ￥1,174,860,958 and to provide the same amount for the “Reserve for advanced depreciation”
based on Article 65-7 of the Special Taxation Measures Act of Japan, following the acquisition of applicable
assets during the year.
11. Provision and Reversal of Reserve for Temporary Difference Adjustment
Changes in the balance of reserve for temporary difference adjustment during the years ended December 31, 2019 and2018 consisted of the following (yen in thousand):
Provision
Reversal
Balance as of
Balance as
Rationale for provision orOriginal
during theduring theDecemberof January
Sourcereversalamountyear
year
31, 2019
1, 2019
Dividend
13,127,153 12,357,644
563,572
11,794,071 Allocation for dividend
reserve

SourceOriginal
amountBalance asof January
1, 2018

Provision
during theyear

Reversalduring theyear

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

769,508

Balance as ofDecember31, 2018

Rationale for provision orreversal

12,357,644 Allocation for dividend

12. Real Estate Operating Revenue and Costs
The components of “Real estate operating revenue” and “Real estate operating costs” for the years ended December
31, 2019 and 2018 were as follows:
Thousands of yen
For the year ended For the year ended
December 31,
December 31,
2019
2018
Operating revenue:
Real estate operating revenue:
Fixed rent¥
15,931,097¥
13,610,785
Variable rent
8,675,885
8,851,482
2,501,004
2,678,467
Income from management contract (*1)
Sub-total
27,107,988
25,140,735
Other real estate operating revenue:
Parking lots
161,660
173,453
Other incidental revenue
63,016
62,693
Utilities
803,012804,915
142,873
137,078
Other
1,170,561
1,178,141
Sub-total
28,278,550
26,318,876
Total operating revenue
Real estate operating costs:
Land lease and other rent expenses
898,207907,621
Property taxes
1,658,930
1,630,178
Outsourcing expenses (*2)
653,041
714,663
Nonlife insurance
51,03047,798Depreciation and amortization
4,557,414
4,091,929
Loss on disposal of property and equipment
246,890
35,972
Repairs
41,41046,405
Utilities
818,290
813,911
Trust fees
44,67942,537
13,34527,511
Other
8,344,364
8,997,408
Total real estate operating costs¥
19,281,141¥
17,974,512
Net real estate operating income
Notes:(*1) Pursuant to management contracts with a certain hotel operator, JHR receives revenue in the amount equivalent
to the properties’ gross operating profit, or GOP, while it pays management contract fees to the operator. In the60

event a property’s GOP for the relevant period is a negative number, then JHR is required to pay an amount equal
to such negative number to the operator. Even though some of the revenue JHR receives under management
contracts is variable, it recognizes such revenue as income from management contracts and not as variable rent.
(*2) Outsourcing expenses include management contract fees of ¥296,029 thousand for the year ended December 31,
2019 and ¥337,442 thousand for the year ended December 31, 2018.
13. Gain on Sale of Real Estate Properties
There was no gain or loss on sale of real estate properties for the year ended December 31, 2019.
The components of “Gain on sale of real estate properties” for the year ended December 31, 2018 were as follows:

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

Thousands of yen
For the year ended December 31, 2018
R&B Hotel Higashithe b
the b
nihonbashi
akasaka-mitsuke
ochanomizu¥
3,050,000¥
6,600,000 ¥
2,500,000
1,483,749
6,294,221
2,353,951
22,95541,50818,639
¥1,543,295¥
264,270¥
127,408

14. Advanced Depreciation of Property and Equipment
The accumulated advanced depreciation of property and equipment deducted from acquisition costs due to government
subsidies received as of December 31, 2019 and 2018 were as follows:
Thousands of yen
As of
As of
December 31, 2019
December 31, 2018¥
24,921¥
24,921

Buildings in trust
15. Income Taxes

Significant components of deferred tax assets and liabilities as of December 31, 2019 and 2018 were as follows:
Thousands of yen
As of December
As of December
31, 2019
31, 2018
Deferred tax assets
Valuation difference on assets acquired by merger
Amortization of fixed-term leasehold rights
Asset retirement obligations
Deferred losses on hedges
Subtotal deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Deferred gains on hedges
Total deferred tax liabilities

¥

61

¥

1,712,010¥
162,810
14,951
128,306
2,018,079(2,018,079)- ¥1,728,216
119,491
11,259156,2032,015,170(2,015,170)-¥

13,981
13,981

14,838
14,838¥

Reconciliation between the effective statutory tax rate and the actual effective tax rate reflected in the accompanying
statements of income for the years ended December 31, 2019 and 2018 was as follows:
For the year
ended December
31, 2019
31.51%(31.72)
0.20
0.03
0.01%

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

For the year
ended December
31, 2018
31.74%(29.63)(2.30)
0.10
0.09
0.01%

16. Amounts per Unit
Net income per unit for the years ended December 31, 2019 and 2018 was as follows:

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

Thousandsof yenNet
incomeNumber ofunits
Weightedaverage units¥ 15,290,314

4,434,849

¥

3,447

¥ 16,210,434

4,010,847

¥

4,041

Yen
Net income
per unit

For the year ended December 31, 2018
Basic net income per unit - Net income attributable tocommon unitholders

Notes:(1) The computation of net income per unit is based on the weighted-average number of units outstanding during theyear.
(2) Diluted net income per unit is not presented since there are no potentially dilutive units for the years ended
December 31, 2019 and 2018.
Net assets per unit as of December 31, 2019 and 2018 were as follows:
Yen
As of December
As of December
31, 2019
31, 2018¥
53,004 ¥50,705

Net assets per unit
17. Leases
As Lessor:

JHR leases its real estate properties to third parties under non-cancellable operating leases. Minimum rental revenue
under the non-cancellable operating leases as of December 31, 2019 and 2018 were as follows:
Thousands of yen
As of December
As of December
31, 2019
31, 2018¥
1,459,034¥
1,666,631
2,106,234
3,562,086¥
3,565,268¥
5,228,717

Due within one year
Due after one year
Total

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18. Derivatives and Hedging Activities
a. Derivative transactions to which hedge accounting is not applied
Derivative transactions to which hedge accounting was not applied as of December 31, 2019 and 2018 were as follows:

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

As of December 31, 2018
Interest rate swaps(fixed rate payment,
floating rate receipt)

Classification
Transactions
other thanmarkettransactions

Classification
Transactions
other thanmarkettransactions

Contract
amount(*1)

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

Contract
amount(*1)

Thousands of yen
Contract
amountdue after one
year¥ 6,088,000¥ 3,494,000

Fair value(*2)¥(25,992)

Fair value(*2)¥(37,996)b. Derivative transactions to which hedge accounting is applied
Derivative transactions to which hedge accounting was applied as of December 31, 2019 and 2018 were as follows:
Thousands of yen
Contract
Contract
amountAs of December 31,
Method of hedge
amountdue after one
Fair value
2019
accounting
Hedged item
(*1)
year
(*2)
Interest rate swaps
Long-term(fixed rate payment,
Deferral method¥ 112,654,000 ¥ 101,072,000 ¥ (363,394)
loans payable
floating rate receipt)

As of December 31,
2018
Interest rate swaps(fixed rate payment,
floating rate receipt)

Method of hedge
accounting
Deferral method

Hedged item
Long-termloans payable

Contract
amount(*1)

Thousands of yen
Contract
amountdue after one
year¥ 90,654,000¥ 81,554,000

Fair value(*2)¥(446,597)

Notes:(*1) The contract amounts of the interest rate swap is presented based on the notional principal amounts. Also, thecontract amounts of derivative transactions do not indicate market risk exposure related to derivative transactions.
(*2) The fair value is measured at the quoted price obtained from the counterparty financial institutions.

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19. Investment and Rental PropertiesJHR owns rental properties for hotels to earn lease income and income from management contracts. The carrying
amounts, changes in such balances, and fair values of such properties were as follows:

HotelsJanuary 1,
2019¥306,789,379

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

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

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

HotelsJanuary 1,
2018¥317,229,208

Thousands of yen
Carrying amount
December 31,
Net decrease (*1)
2018
¥ (10,439,828) ¥ 306,789,379

Fair value (*2)
December 31,
2018¥ 437,510,000

Notes:(*1) Decrease during 2018 principally represents the sale of R&B Hotel Higashi-nihonbashi for ¥1,483 million, the bakasaka-mitsuke for ¥6,294 million and the b ochanomizu for ¥2,353 million.
(*2) Fair value of properties as of December 31, 2018 is generally the appraisal value determined by outside licensed
real estate appraisers.
Real estate operating revenue and costs for the years ended December 31, 2019 and 2018 related to the rental properties
were as follows:
Thousands of yen
For the year ended December 31, 2019
Real estate
Real estate
operating revenue
operating costs
Net real estate(*)(*)
operating income
Hotels¥28,278,550¥
8,997,408 ¥
19,281,141

HotelsThousands of yen
For the year ended December 31, 2018
Real estate
Real estate
operating revenue
operating costs
Net real estate(*)(*)
operating income¥
26,318,876¥
8,344,364 ¥
17,974,512

Note:(*) “Real estate operating revenue” and “Real estate operating costs” are income from real estate operation (including
other real estate operating revenue) and corresponding expenses (such as depreciation, property taxes, trust fees,and repairs and maintenance expenses), and are included in “Operating revenue” and “Real estate operating costs,”
respectively.
20. Segment Informationa. Segment information
The segment information has been omitted because JHR has only one segment, which is the investment andmanagement business of hotel real estate.
b. Related information(1) Information about products and services for the years ended December 31, 2019 and 2018
Information about products and services has been omitted because operating revenue from external customers in asingle product/service category accounted for more than 90% of total operating revenue.

64

(2) Information about geographical areas for the years ended December 31, 2019 and 2018(i) Operating revenue
Information about geographical areas has been omitted because operating revenue in Japan accounted for more than
90% of total operating revenue.
(ii) Property and equipment
Information about property and equipment has been omitted because the amount of property and equipment locatedin Japan accounted for more than 90% of net property and equipment.
(3) Information about major customers<For the year ended December 31, 2019>
Name of customer

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

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

Thousands of yen
Operating revenue¥

15,221,983¥

2,996,251<For the year ended December 31, 2018>
Name of customer

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

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

Thousands of yen
Operating revenue¥

13,093,017¥

3,121,263

Note:(*) Operating revenue includes the operating revenue from customers belonging to the business group of the said
customer.
21. Subsequent Events
Impact of the novel coronavirus
The global spread of the novel coronavirus infection has caused a significant decrease in the travel demand by
Chinese and other foreign tourists visiting Japan. Moreover, domestic demand for travel, parties and banquets, etc.
has also decreased as voluntary restraint on going out is spreading among Japanese people due to the request by theJapanese government.
In the face of such circumstances, concerns have arisen about the negative impact on the revenues and valuation of
the hotels owned by JHR. However, the overall financial impact and duration cannot be estimated at this time.

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