This English translation is provided for information purposes only. If any discrepancy is identified between thistranslation and the Japanese original, the Japanese original shall prevail.
February 19, 2015

Financial Report for the Fiscal Year Ended December 31, 2014
(January 1, 2014 – December 31, 2014)
Japan Hotel REIT Investment Corporation
Listing:
Securities code:
URL:
Representative:

Tokyo Stock Exchange8985
http://www.jhrth.co.jp/
Yukio Isa, Executive Director

Asset management company:
Representative:
Contact:

Japan Hotel REIT Advisors Co., Ltd.
Hisashi Furukawa, Representative Director and President
Noboru Itabashi
General Manager of Accounting
Finance and Accounting Division
Phone: +81-3-6422-0530

Scheduled date to file Securities Report: March 20, 2015
Scheduled date to start dividend payment: March 20, 2015
Preparation of supplementary material on financial report: Yes
Schedule for presentation of financial results: Yes (Analysts and institutional investors only)(Amounts are rounded down to the nearest JPY1M)

1. Summary of financial results for the fiscal year ended December 2014
(January 1, 2014 – December 31, 2014)(1) Operating results(Percentages show changes from the previous period)
Operating revenue

Fiscal year ended
December 31, 2014
December 31, 2013

JPY1M
12,76011,472

%
11.2
57.5

Net income per unit
Fiscal year ended
December 31, 2014
December 31, 2013
(Note 1)

Operating income
JPY1M
7,545
5,367

％
40.6
106.8

Net income

JPY1M
5,776
3,740

JPY1M
5,774
3,233

%
54.4
164.8

Ordinary income tototal assets

Return on equity (ROE)

JPY
2,159
1,307

Ordinary income

%
6.1
4.1

%
78.6
-83.0

Ordinary income tooperating revenue
%
3.2
2.4

%
45.3
32.6

Net income per unit is calculated based on the period-average number of investment units issued.

(Note 2) Net income for the fiscal year ended December 2013 includes loss on sale of JYP1,189M and impairment loss of JPY516M.

(2) Cash distribution
Dividend per unit
Total dividends(Dividend from excess (Dividend from excessof earnings exclusive) of earnings exclusive)
Fiscal year ended
December 31, 2014
December 31, 2013

JPY
2,155
1,939

Dividend fromexcess of earnings
per unit

Total dividends
from excess ofearnings

JPY
0
0

JPY1M

6,015
5,082

Payout ratio

JPY1M

0
0

%
104.2
157.2

Dividend to net assets
%
6.1
5.8

(Note 1) The source of dividends for the fiscal year ended December 2013 is calculated by adding provision for dividends (JPY1,848M) to unappropriatedretained earnings.
(Note 2) The source of dividends for the fiscal year ended December 2014 is calculated by adding provision for dividends (JPY240M) to unappropriated retained
earnings.
(Note 3) Payout ratio is calculated by the formula below.

Numbers are rounded off to one decimal place.

Total dividends (total dividends from excess of earnings exclusive) / Net income x 100－

1 －(3) Financial position
Total assets
JPY1M
188,091
170,727

Fiscal year ended
December 31, 2014
December 31, 2013

Net assets

Equity ratio

JPY1M
100,342
89,756

%
53.3
52.6

Net assets per unit
JPY
35,94834,241(*) Net assets per unit are calculated based on the number of investment units issued at the end of the fiscal year.

(4) Cash flows

Fiscal year ended
December 31, 2014
December 31, 20132.

Cash flows fromoperating activities
JPY1M
8,353
9,991

Cash flows frominvesting activities
JPY1M-17,828-33,349

Cash flows fromfinancing activities
JPY1M
11,347
26,988Cash and cash equivalents
at end of fiscal year

JPY1M
14,424
12,553Operating forecast of fiscal year ending December 2015 (January 1, 2015 through December 31, 2015)(Percentages show changes from the previous period)

As ofMidterm
Full year

Operating revenue

Operating income

Ordinary income

JPY1M
6,649
15,148

JPY1M
3,559
8,695

JPY1M
2,719
6,907

%
20.8
18.7

%
18.2
15.2

%
21.7
19.6

(Reference) Estimated net income per unit for fiscal year ending December 2015 (Full year)

Net income
JPY1M
2,719
6,907

%
21.7
19.6

Dividend per unit
(Excess of earnings
exclusive)

Dividend per unit
resulting from excessof earnings

JPY
2,306

JPY
0

JPY2,314 (Calculated based on the estimate of period-average

number of investment units of 2,984,886 units.)(*) Reserve for dividends, JPY13M, is planned to be the source of dividend payment.

*Others(1) Changes in accounting policies, changes in accounting estimates, and restatement of prior period financial statements after error
corrections(a) Changes in accounting policies due to revisions to accounting standards and other regulations: No change(b) Changes in accounting policies due to other reasons than above (a): No change(c) Changes in accounting estimates: No change(d) Restatement of prior period financial statements after error corrections: No change(2) Number of units issueda.

Total number of units issued at the end of fiscal year (including JHR’s own investment units)
As of December 2014
2,791,281 units
As of December 2013b.

2,621,281 units

Number of JHR’s own investment units at the end of fiscal year
As of December 2014

0 unitAs of December 2013

0 unit* Status of audit procedures
At the time of disclosure of this financial report, audit procedures for the financial statements pursuant to the Financial Instruments
and Exchange Act of Japan are incomplete.

* Appropriate use of forecasts of results and other special items
Forward-looking statements presented in this financial report including operating forecast are based on information currently
available to us and on certain assumptions we deem to be reasonable. As such, actual operating and other results may differ
materially from these forecasts due to a number of factors. Furthermore, we do not intend to guarantee any dividend amount by
these forecasts.

－

2 －Assumptions of the operating forecast for the midterm and full year of the fiscal year ending December 2015
Item

Assumption
・Midterm: fiscal year ending December 2015 (16th Period):

Calculation
periodJanuary 1, 2015 through June 30, 2015 (181 days)
・Full year: fiscal year ending December 2015 (16th Period):
January 1, 2015 through December 31, 2015 (365 days)・Thirty-six properties are assumed to be held. The properties include 30 properties owned by JHR as ofDecember 31, 2014 (hereinafter called “existing properties”), plus 5 properties of “the b akasaka-mitsuke,” “theb ikebukuro,” “the b ochanomizu,” “the b hachioji,” and “the b hakata” (hereinafter called “the five ‘the b’hotels”) acquired on January 30, 2015, and the following 1 property which is scheduled to be acquired(hereinafter called “to-be-acquired asset”).

Investment
assets<To-be-acquired asset>
Scheduled acquisition date

Asset nameMarch 31, 2015

Hotel Francs

・In addition, it is assumed that no asset is to be transferred (acquisition or disposition other than the above
through to the end of the fiscal year ending December 2015 (16th period). The actual number may fluctuate
depending on transfer of asset(s).
・Operating revenue is calculated based on the effective lease contract, etc. as of today and considering hotel
competitiveness and market environment, etc.
・Rent of the main hotels is calculated based on the following assumptions.
<Fixed and variable rent of HMJ’s five hotels(*1)>
Annual rent (JPY5,678M) = Fixed rent (JPY3,221M/year) + Variable rent (See below for calculation)
Variable rent = [(a) Total GOP of HMJ’s five hotels(*2) – (b) GOP base amount (*3)] x 81.5%
HMJ’s five hotels for the fiscal year ending December 2015 (16th period)
GOP base amount(b)

Variable rent((a)-(b)) x 81.5%

Midterm

2,257

1,675

474

Full year

6,366

3,351

2,457

(*1)

HMJ’s five hotels are five hotels, namely, Kobe Meriken Park Oriental Hotel, Oriental Hotel tokyo bay,
Namba Oriental Hotel, Hotel Nikko Alivila, and Oriental Hotel Hiroshima.

Operatingrevenue(Unit: JPY1M)

Total GOP of HMJ’s five hotels
(a)

(*2)

GOP is Gross Operating Profit, which is a representative management indicator for hotels’ management
performance.

GOP is the remaining amount calculated by deducting the following operating expenses(to the extent that these are incurred directly from the management of each property) from hotels’ total
sales.
Operating expenses include (1) sales cost, (2) hotel personnel cost and welfare expenses, (3) fixture cost,(4) expenses related to the sales office (including outsourcing cost, fees and commissions, etc.), (5)general and administrative expenses, (6) sales promotion and advertising expenses, (7) repair andmaintenance expenses (including expenses for facility maintenance and management), (8) utilities cost,(9) insurance expenses related to operation and management, (10) taxes and public dues (such as stamptax) related to operation and management of hotels, (11) allowance for doubtful accounts and bad debt
expenses related to accounts receivable from hotel customers, and (12) other direct expenses related tothe operation and management of hotels.
(*3)

GOP base amount is not assumed to change during the contracted lease period.

－

3 －<Income from management contract of Accor’s five hotels(*1)(Unit: JPY1M)

ibis Tokyo
Shinjuku

ibis Styles Kyoto
Stationibis Styles
SapporoMercure Hotel
SapporoMercure Hotel
Okinawa Naha

Total

Midterm

232

177

192

115

134

851

Full year

471

398

471

362

288

1,991

(*1) Accor’s five hotels are five hotels, namely, ibis Tokyo Shinjuku, ibis Styles Kyoto Station, ibis Styles
Sapporo, Mercure Hotel Sapporo, and Mercure Hotel Okinawa Naha.
(*2) It is assumed that the respective hotel’s GOP amount is posted as income from management contract and the
management contract fees to be paid by JHR is posted as an operating expenses item.

In cases wherecertain tenant revenue is included in the respective hotel’s GOP, income from management contract isposted by subtracting the amount equivalent to tenant sales from GOP. The concerned amount equivalent
to tenant sales is posted as fixed rent, etc.
<Fixed and variable rent of the five “the b” hotels (*1)>(Unit: JPY1M)

the b akasaka-

the b

the b

mitsukeikebukuroochanomizu

Fixed (*2)

125

199

Variable

142

Total

268

the b hachioji

the b hakata

Total

63

112

78

580

110

46

59

47

406

310

110

172

126

987

(*1) Five “the b” hotels are five hotels, namely, the b akasaka-mitsuke, the b ikebukuro, the b ochanomizu, the bhachioji, and the b hakata.
(*2) Fixed rent includes certain tenant rent.
・The following is the breakdown of variable rent and income from management contract(*1).
<Breakdown of variable rent, etc. for the fiscal year ending December 2015 (16th period)>(Unit: JPY1M)
HMJ’s five hotels Accor’s five hotels

Five “the b”
hotelsOther variable
rent (*2)

TotalMidterm

474

851

174

169

1,669

Full year

2,457

1,991

406

207

5,062

(*1) Rent from upside sharing is expected from Smile Hotel Nihombashi Mitsukoshimae, Hotel Vista Kamata
Tokyo, Hotel Keihan Universal City, Hotel Sunroute Shimbashi, and Hilton Tokyo Bay Hotel. The rent
from upside sharing is assumed to be posted as variable rent.
(*2) Variable rent of Chisan Inn Kamata is calculated by multiplying 85% to the hotel’s monthly GOP. JPY29M
is included in the midterm and JPY63M is included in the full year.
・It is assumed that operating revenue has no arrears or non-payment of rent, etc.
・Among real estate leasing expenses, which is the major operating expenses, expenses other than depreciation arecalculated based on past actual data and variable factors are reflected in the calculation.
Operating expenses of the five “the b” hotels and to-be-acquired asset are based on past actual data as provided
by present owners, etc., and variable factors are reflected in the calculation.
・It is assumed that taxes and public dues such as fixed asset tax and city planning tax, JPY985M, will be posted
Operatingexpenses

as expenses.
・In general, fixed asset tax and city planning tax, etc. of a property to be acquired are settled with the previous
owner at the time of acquisition, calculated on a pro rata basis of the holding period. For JHR, the settlement
amount is included in the acquisition price, and it will not be posted as expenses for the calculation period.
Therefore, taxes and public dues of fixed asset tax and city planning tax, etc. for the five “the b” hotels and the
to-be-acquired asset will not be posted as expenses for the fiscal year ending December 2015 (16 th period).
JPY147M is expected as annual fixed asset tax and city planning tax, etc. for the five “the b” hotels and to-be－

4 －acquired asset.

Also, three properties (ibis Styles Sapporo, Mercure Hotel Sapporo, and Mercure Hotel

Okinawa Naha) acquired in fiscal year ended December 2014 (15th period) are assumed to be JPY84M(equivalent to 9-month rent).
・Depreciation is calculated by the straight-line method. The calculaton of depreciation includes the purchaseprice and incidental costs of the five “the b” hotels and to-be-acquired asset. The calculation also includes
additional capital expenditures (JPY1,696M) for the fiscal year ending December 2015 (16th period).
JPY2,722M is assumed for depreciation.
・Repair expenses for buildings are posted as expenses in the estimated amount necessary for each operating
period. Please bear in mind that the repair expenses of each operating period may differ materially from theforecast amount for various reasons, such as 1. Emergency repair expenses may be necessary due to damage,etc. to buildings from unexpected causes, 2. The amount of repair expenses generally tends to fluctuate overtime, and 3. Repair expenses are not required on a regular basis.
・JPY1,788M is expected for interest expense, amortization for the following (1) handling borrowing costs, (2)Nonoperating
expensesarrangement fee, and (3) derivative instrument (interest rate caps), etc.
・Expenses for the issuance of new investment units in January 2015 and new investment units by way of thirdparty allotment in February 2015 are estimated to be JPY29M.
・Expenses for additional issuance of investment units and secondary offering are assumed to be amortized over a
period of three years by the straight-line method.
・The balance of interest-bearing debt (sum of loans and investment corporation bonds) as of January 1, 2015 is
JPY81,089M.

Interestbearing debt

The balance as of March 31, 2015 after the acquisition of the to-be-acquired asset is assumed to

be JPY91,598M, and the balance as of December 31, 2015 is assumed to be JPY91,260M.
・Loans for acquiring the five “the b” hotels and to-be-acquired asset are assumed to be JPY10,621M.
・Loans with maturity due in 2015 totals JPY11,381M. It is assumed that the whole amount is to be refinanced.
・Other than above, JPY450M is scheduled for contractual repayment of interest-bearing debt. JHR’s own fundis assumed to be used for the repayment.

Issuance of・The number of investment units issued as of today (3,000,322 units) is assumed.

investment
units

・It is assumed that there will be no additional issuance of investment units through to the end of the fiscal year
ending December 2015 (16th period).
・It is assumed that the whole amount of net income excluding the amount posted as loss on retirement of
noncurrent assets is distributed.
・Dividend per unit for the fiscal year ending December 2015 (16th period) is calculated based on the following
assumptions.
Net income

JPY6,907M

Use of negative goodwill (Loss on retirement of
noncurrent assets)(*)

JPY13M

Total dividends possible for payment

JPY6,920M

Total number of investment units

3,000,322 units

Dividend per unit
Dividend
per unit

JPY2,306(*) Amount posted as loss on retirement of noncurrent assets will be appropriated by dividend reserve fromnegative goodwill and expects to have little impact on dividend.
・Dividend per unit may fluctuate by various causes, such as fluctuation of rental income resulting from transfer ofasset, change in hotel lessee, change of hotel lessee’s business environment, etc. and unexpected repairs, etc.
・The balance of the dividend reserve (negative goodwill) for the fiscal year ending December 2015 (16th period) is
calculated based on the following assumptions.

－

5 －Balance of reserve for dividends (negative goodwill) at end of

JPY14,168M

fiscal year ended December 2014
Use of negative goodwill (Loss on retirement of noncurrent
assets)Use of negative goodwill (Financial costs associated with early
repayment)-JPY4M-JPY71M-JPY164M

Use of negative goodwill (Adjustment for dilution)
Balance of reserve for dividends (negative goodwill) at end of
fiscal year ending December 2015

JPY13,928M

・The operating status of the five “the b” hotels acquired on January 30, 2015 and the to-be-acquired asset isestimated as follows.
<the b akasaka-mitsuke>(Unit: JPY 1M)
Fiscal year ending
December 2015

Operating revenue

268

288

NOI (*1)

263

267

NOI yield (%)(*2)-

4.3

Operating income

209

212

<the b ikebukuro>(Unit: JPY1M)
Fiscal year ending
December 2015

Acquiredand to-beacquired
assetsAnnualized

Annualized

Operating revenue

310

334

NOI (*1)

305

305

NOI yield (%)(*2)-

4.7

Operating income

239

239

<the b ochanomizu>(Unit: JPY1M)
Fiscal year ending
December 2015

Annualized

Operating revenue

110

117

NOI (*1)

105

105

NOI yield (%)(*2)-

4.6

Operating income

80

79<the b hachioji>(Unit: JPY1M)
Fiscal year ending
December 2015

Annualized

Operating revenue

179

189

NOI (*1)

174

159

NOI yield (%)(*2)-

6.1

Operating income

131

115

－

6 －

<the b hakata>(Unit: JPY1M)
Fiscal year ending
December 2015

Annualized

Operating revenue

126

135

NOI (*1)

121

119

NOI yield (%)(*2)-

5.2

Operating income

87

85<Hotel Francs>(Unit: JPY1M)
Fiscal year ending
December 2015

Annualized

Operating revenue

225

300

NOI (*1)

221

228

NOI yield (%)(*2)-

7.4

Operating income

160

157

(*1) NOI = Real estate operating revenue – real estate operating costs + depreciation + loss on retirement of
noncurrent assets(*2) NOI yield = NOI / Acquisition price (scheduled)
Dividend
per unit
resultingfrom excess

・It is assumed that excess of earnings (dividend per unit resulting from excess of earnings) will not be distributed.

of earnings
・It is assumed that no revision in law, tax law, accounting standard, regulations of the listing, regulations of The
OthersInvestment Trusts Association, Japan, etc. that may impact the forecast above will not be made.
・It is assumed that unexpected major incident will not occur in the general economy, real estate market, hotelbusiness environment, etc.
・The numerical values are rounded down to the nearest JPY1M in the assumptions.

－

7 －<Reference Material 1> Highlights of operating forecast and forecast of dividend(1) The comparison and the major causes of variance between actual results of fiscal year ended December 2013 (14 th period) andactual results of fiscal year ended December 2014 (15th period) are as follows.

Properties(Unit: JPY M)
14th Period

15th Period

Actual (*1)

Actual(A)（B）

Major causes of variance

Variance (1)Acquisition of（B）-（A）

Variance
ratio

Existing properties and disposed properties

3 properties (*2)

No. of properties

28

30

2

7.1%

3

-

Acquisition price

158,902173,429

14,527

9.1%

15,797-

Operating revenue

11,472

12,760

1,287

11.2%

442

844

9,066

405

4.7%

80

325 (2) JPY317M decrease due to disposition of 3 properties(*4).

Composition

Fixed rent

75.5%(1) Full-year impact of JPY637M by acquiring two properties(*3) in

Composition

8,661 71.1%

FY2013.

(1) JPY119M increase in HMJ's variable rent

Dividend

Profit and loss

(2) JPY74M increase in income from management contract with ibis

Variable rent

24.5%

2,811 28.9%

3,693

881

31.3%

Tokyo Shinjuku

362

519 (3) JPY33M increase in upside sharing, etc.
(4) Full-year impact of JPY291M by purchasing ibis Styles Kyoto
Station in FY2013

9,907

NOI (*5)

11,002

1,094

11.0%

382

6.2%

6.3%

0.1%

1.6%

-

NOI after
depreciation (*5)

7,602

8,597

994

13.1%

305

4.8%

5.0%

0.2%

4.2%

-

Operating income

6,556

7,545

988

15.1%

Net income

4,939

5,774

835

16.9%

Use of negative goodwill

143

240

97

67.8%

Total dividends

5,082

6,015

932

18.3%

No. of units issued

2,621,281

2,791,281

170,000

6.5%

Dividend per unit (JPY)

1,939

2,155

216

11.1%

712

689

(*1) Operating results excluding special causes resulting from loss on sale of Hotel Vista Hashimoto and Pearl Hotel Kayabacho and impairment loss by selling
Dormy Inn Namba.
(*2) Refers to ibis Styles Sapporo acquired on July 9, 2014, and Mercure Hotel Sapporo and Mercure Hotel Okinawa Naha acquired on September 30, 2014.
(*3) Refers to Hilton Tokyo Bay Hotel acquired on April 26, 2013 and ibis Styles Kyoto Station acquired on October 31, 2013. FYI, Hilton Tokyo Bay Hotel is posted
on profit and loss in the 14th Period (Actual) for the amount approximately eight months rent, etc. and ibis Styles Kyoto Station for the amountapproximately two months rent, etc.
(*4) Refers to Hotel Vista Hashimoto sold on June 28, 2013, Pearl Hotel Kayabacho sold on November 13, 2013, and Dormy Inn Namba sold on January 24, 2014.
(*5) Each is calculated using the following formula.
NOI (Net Operating Income) = Real estate operating revenue - Real estate operating costs + Depreciation + Loss on retirement of noncurrent assets
NOI yield = NOI / Acquisition price
NOI after depreciation = Real estate operating revenue - Real estate operating costs
NOI yield after depreciation = NOI after depreciation / Acquisition price(2) The comparison and the major causes of variance between actual results of fiscal year ended December 2014 (15th period) andoperating forecast and forecast of dividend of fiscal year ending December 2015 (16th period) are as follows.
(Unit: JPY M)

Properties

15th Period

Forecast this time

Forecast this time
Annualized

Variance

（A）

（B）

（C）

（B）-（A） Variance ratio

Acquisition of

Existing properties

6 properties (*1)

No. of properties

30

36

36

6

20.0%

6

-

Acquisition price

173,429

196,534

196,534

23,105

13.3%

23,105-

15,293

2,388

18.7%

1,220

1,167

10,209

1,018

11.2%

813

204 properties(*2) in FY2014.
(1) JPY52M increase in HMJ's variable rent.
(2) JPY62M increase in income from management
contract with ibis Tokyo Shinjuku and ibis Styles Kyoto
962 Station.
(3) JPY88M increase in upside sharing.
(4) Full-year impact of JPY759M from acquiring 3
properties (*2) in FY2014.

Fixed rent

Profit and loss

Major causes of variance

ActualOperating revenue

Dividend

16th Period

Variable rent

12,760Composition

71.1%(1) Full-year impact of JPY228M from acquiring 3

Composition

10,085 66.8%

3,693 33.4%

5,062 33.2%

5,084

1,369

37.1%

406

11,002

12,86812,863

1,865

17.0%

1,190

6.3%

6.5%

6.5%

0.2%

3.2%

5.2%

NOI after
depreciation (*3)

8,597

10,132

10,119

1,535

17.9%

1,045

5.0%

5.2%

5.1%

0.2%

4.0%

4.5%

Operating income

7,545

8,695

8,676

1,149

15.2%

908

240

Net income

5,774

6,907

6,940

1,132

19.6%

711

421

NOI (*3)

28.9%

15,148Composition

9,066 66.6%

Use of negative goodwill

240

13

13

-227

-94.6%

Total dividends

6,015

6,918

6,951

903

15.0%

No. of units issued

2,791,281

3,000,322

3,000,322

209,041

7.5%

Dividend per unit (JPY)

2,155

2,306

2,317

151

7.0%

675

489

(*1) Refers to the five b hotels acquired on January 30, 2015 and Hotel Francs scheduled to be acquired on March 31, 2015.
(*2) Refers to ibis Styles Sapporo acquired on July 9, 2014, and Mercure Hotel Sapporo and Mercure Hotel Okinawa Naha acquired on September 30, 2014. FYI, ibis Styles Sapporo isposted on profit and loss in the 15th Period (Actual) for the amount approximately 6 months' rent, etc. and Mercure Hotel Sapporo and Mercure Hotel Okinawa Naha for theamount approximately 3 months' rent, etc.
(*3) Each is calculated using the following formula.
NOI (Net Operating Income) = Real estate operating revenue - Real estate operating costs + Depreciation + Loss on retirement of noncurrent assets
NOI yield = NOI / Acquisition price
NOI after depreciation = Real estate operating revenue - Real estate operating costs
NOI yield after depreciation = NOI after depreciation / Acquisition price－8 －