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 20, 2019

Financial Report for the Fiscal Year Ended December 31, 2018
(January 1, 2018 – December 31, 2018)
Japan Hotel REIT Investment Corporation
Listing:
Securities code:
URL:
Representative:

Tokyo Stock Exchange8985
http://www.jhrth.co.jp/en/
Kaname Masuda, Executive Director

Asset Management Company:
Representative:
Contact:

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

Scheduled date to file Securities Report: March 20, 2019
Scheduled date to start dividend payment: March 20, 2019
Preparation of supplementary material on financial report:
Schedule for presentation of financial results:

Yes
Yes (Analysts and institutional investors only)(Amounts are rounded down to the nearest million yen)

1. Status summary of operation and assets for the fiscal year ended December 31, 2018
(January 1, 2018 – December 31, 2018)(1) Operating results(Percentages show changes from the previous year)

Operating revenue
Fiscal year ended
December 31, 2018
December 31, 2017

JPY1M
28,25325,475

%
10.9
15.2

Net income per unit
Fiscal year ended
December 31, 2018
December 31, 2017
(Note)

Operating income
JPY1M
17,99315,757

Ordinary income
%
14.2
13.5

JPY1M
16,211
14,006

Ordinary income tototal assets

Return on equity (ROE)

JPY
4,041
3,606

Net income
%
15.7
14.6

%
8.0
7.3

JPY1M
16,21014,005

%
15.7
15.5

Ordinary income tooperating revenue
%
4.6
4.2

%
57.4
55.0

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

(2) Cash distributions

Fiscal year ended
December 31, 2018
December 31, 2017

Dividend per unit
(Excess of earnings
exclusive)

Total dividends(Excess of earnings
exclusive)

Dividend per unit
resulting fromexcess of earnings

Total dividends
fromexcess of earnings

JPY

JPY1M

JPY

JPY1M

%

%

3,890
3,683

15,602
14,771

0
0

0
0

96.2
105.5

7.7
7.5

Dividend to
net assets

Payout ratio(Note 1) The source of dividends for the fiscal year ended December 31, 2018 is calculated by deducting ¥1,174 million of the reserve for special advanced
depreciation from the amount obtained by adding appropriation for dividends (¥563 million) to unappropriated retained earnings. For details of theappropriation for dividends, please refer to “<Reference Information 4> Dividend per unit and appropriation for dividends” on page 22.
(Note 2) The source of dividends for the fiscal year ended December 31, 2017 is calculated by adding appropriation for dividends (¥769 million) tounappropriated retained earnings. For details of the appropriation for dividends, please refer to “<Reference Information 4> Dividend per unit andappropriation for dividends” on page 22.
(Note 3) Payout ratio is calculated using the following formula, rounded off to one decimal place.
Total dividends (total dividends from excess of earnings exclusive) ÷ Net income × 100-1-(3) Financial position
Total assets
JPY1M
350,556
352,183

Fiscal year ended
December 31, 2018
December 31, 2017
(Note)Net assets

Equity ratio

JPY1M
203,372
201,963

%
58.0
57.3

Net assets per unit
JPY
50,70550,354

Net assets per unit are calculated based on the total number of investment units issued and outstanding at the end of the fiscal year.

(4) Cash flows

Fiscal year ended
December 31, 2018
December 31, 2017

Cash flows fromoperating activities
JPY1M
30,93817,763

Cash flows frominvesting activities
JPY1M(3,110)(36,083)

Cash flows from
Cash and cash equivalents
financing activities
at end of year
JPY1M
JPY1M
(18,563)
37,184
19,86627,920

2. Operating forecast for the fiscal year ending December 31, 2019
(January 1, 2019 – December 31, 2019)(Percentages show changes from the previous year)
Operating revenue
JPY1M

Midterm
Full year

12,76528,876%3.6
2.2

Operating income
JPY1M

7,186
17,371

%
(1.8)
(3.5)

Ordinary income
JPY1M

6,155
15,274

%
(3.6)
(5.8)

Dividend per unit
(Excess of earnings
exclusive)

Net income
JPY1M

6,154
15,273

%
(3.6)
(5.8)

Dividend per unit
resulting fromexcess of earnings

JPY
3,686

JPY
0

(Reference) Estimated net income per unit for the fiscal year ending December 31, 2019 (full year) ¥3,445(Calculated based on the estimate of period-average number of investment units of 4,432,717.)(Note)

Reserve for temporary difference adjustment in the amount of ¥1,177 million is planned to be the source of dividend payment.

* Other(1) Changes in accounting policies, changes in accounting estimates, and restatement of financial statements for prior period 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 financial statements for prior period after error corrections: No change(2) Total number of investment units issued and outstanding(a) Total number of investment units issued and outstanding at the end of the fiscal year(including investment units owned by Japan Hotel REIT Investment Corporation (hereinafter referred to as “JHR”))
As of December 31, 2018
4,010,847 units
As of December 31, 2017(b) Number of JHR’s own investment units held at the end of the fiscal year
As of December 31, 2018
As of December 31, 2017

4,010,847 units
0 units
0 units(Note) For the number of investment units serving as the basis of computation of net income per unit, please refer to “Notes on per unit information” on page 42.

* 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 forecasts 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
this forecast. For the assumptions of the operating forecast and notes for the use of operating forecast, please refer to “2.
Investment policies and operating results; (2) Operating results; (B) Outlook for the next fiscal period” on page 6 and“Assumptions of the operating forecast for the midterm and full year of the fiscal year ending December 31, 2019 (20th period)”on page 13.

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○Table of Contents
1. Related parties of the investment corporation ............................................................................................................................. - 4 2. Investment policies and operating results.................................................................................................................................... - 4 (1) Investment policies .................................................................................................................................................................. - 4 (2) Operating results ...................................................................................................................................................................... - 4 3. Financial statements .................................................................................................................................................................. - 23 (1) Balance sheets ........................................................................................................................................................................ - 23 (2) Statements of income ............................................................................................................................................................. - 25 (3) Statements of changes in net assets ........................................................................................................................................ - 26 (4) Statements of cash dividends ................................................................................................................................................. - 28 (5) Statements of cash flows ........................................................................................................................................................ - 29 (6) Notes on going concern assumption....................................................................................................................................... - 30 (7) Notes on matters concerning significant accounting policies................................................................................................. - 30 (8) Notes to financial statements ................................................................................................................................................. - 31 (9) Changes in total number of investment units issued and outstanding ..................................................................................... - 46 4. Changes in directors .................................................................................................................................................................. - 47 (1) Change in directors of JHR .................................................................................................................................................... - 47 (2) Change in directors of the Asset Management Company....................................................................................................... - 47 5. Reference information ............................................................................................................................................................... - 48 (1) Investment status.................................................................................................................................................................... - 48 (2) Assets under management ...................................................................................................................................................... - 50 --3-

1. Related parties of the investment corporation
Disclosure is omitted because there is no significant change from “Structure of the investment corporation” in the most recent
Securities Report (submitted on March 20, 2018) and Securities Registration Statement (submitted on January 8, 2019).

2. Investment policies and operating results(1) Investment policies
Disclosure is omitted because there is no significant change from “Investment policies,” “Investment targets” and “Distribution
policy” in the most recent Securities Report (submitted on March 20, 2018), Midterm Securities Report (submitted on
September 20, 2018) and the Securities Registration Statement (submitted on January 8, 2019).

(2) Operating results(A) Overview of the fiscal year under review(a) 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 TrustsAct”) 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 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 partiallyused 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 withthe former Japan Hotel and Resort, Inc. (hereinafter referred to as the “former JHR”) with an effective date of April 1, 2012
(hereinafter referred to as the “Merger”) and changed its name to Japan Hotel REIT Investment Corporation. Since theMerger, JHR has carried out eight 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 long term.
By implementing the aforementioned growth strategy, JHR has expanded its asset size while improving the quality of its
portfolio through new property acquisitions of 24 properties amounting to ¥210,022 million (on an acquisition price basis)in total in approximately a little less than seven years since the Merger. Moreover, in the fiscal year under review, JHR sold3 properties (R&B Hotel Higashi-nihonbashi, the b akasaka-mitsuke and the b ochanomizu) (hereinafter referred to as the“Sale”) as part of its growth strategy to improve the quality of its portfolio through asset replacement. As a result, JHR had
a portfolio of 41 properties with a combined acquisition price of ¥309,370 million and the total number of investment units
issued and outstanding stood at 4,010,847 units at the end of the fiscal year under review (December 31, 2018).
(b) Investment performance for the fiscal year under review
Although 2018 was a year when natural disasters hit Japan more often and harder than a typical year, such as Typhoon Jebi
that made Kansai International Airport dysfunctional and the Hokkaido Eastern Iburi Earthquake, the accommodation
market remained solid as the cumulative number of overnight guests at domestic accommodation facilities totaled 510
million guest nights (preliminary release), a slight increase over 2017 when the figure reached record high. Moreover, thenumber of foreign visitors to Japan (hereinafter referred to as “inbound visitors”) in 2018 amounted to 31.19 million (bypreliminary release, up 8.7% from the previous year), as the government showed strong commitment to making Japan atourism nation. As such, the number of inbound visitors has continued to increase strongly
The hotel investment market continued to be in a brisk state with continual attention paid to Japan’s tourism industry andhotel industry. With the investment market for certain hotels felt overheated, JHR carried out the Sale by comprehensively
taking into account the relevant properties’ positions in the portfolio, their competitiveness over the medium to long termand prospects for upside gains and stability, among other factors.

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The performance of the hotels owned by JHR showed some signs of impact of the above-mentioned natural disasters to acertain degree. However, GOP (gross operating profit) of the Major 21 hotels with variable rent contracts (Note) increased
over the previous year. In particular, the rooms department worked to generate greater earnings by implementing active
asset management, which is proactive pursuit for improvement of profitability and asset value of owned hotels. For further
details of sales, GOP and other management indicators for the Major 21 hotels with variable rent contracts, please refer to“<Reference Information 3> Hotel operation indexes, sales and GOP” on page 21.
In addition to measures to increase fixed and variable rent, etc. through the active asset management strategy, JHR has
endeavored to increase dividend by reducing the costs of each item such as real estate operating costs, general andadministrative expenses and borrowing costs through negotiations with relevant parties and other measures.
(Note)The hotel group combining the hotels which JHR leases to Hotel Management Japan Co., Ltd. (hereinafter referred to as “HMJ”) (Kobe
Meriken Park Oriental Hotel, Oriental Hotel tokyo bay, Namba Oriental Hotel, Hotel Nikko Alivila and Oriental Hotel Hiroshima,(hereinafter referred to as the “Five 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), Hotel Centraza Hakata, Holiday Inn
Osaka Namba, Hilton Tokyo Narita Airport, International Garden Hotel Narita, and Hotel Nikko Nara) is called the Existing HMJ
Group. The Major 21 hotels with variable rent contracts refers to the Existing HMJ Group excluding Hotel Centraza Hakata plus ibis
Tokyo Shinjuku, ibis Styles Kyoto Station, ibis Styles Sapporo, Mercure Sapporo, Mercure Okinawa Naha, Mercure Yokosuka, the bsuidobashi, the b ikebukuro, the b hachioji and the b hakata. The same shall apply hereinafter.

(c) Funding conditions
In February 2018, JHR issued investment corporation bonds of ¥10,000 million for individual investors mainly to allocate
the fund to early repayment of existing loans. In addition, JHR borrowed ¥1,700 million in March 2018 to refinanceexisting loans, and ¥8,350 million in April 2018 for the refinance and partial early repayment of existing loans. Meanwhile,in August 2018, JHR made early repayment of ¥5,000 million in short-term loans it borrowed in April 2018 by using partof the proceeds from the sale of R&B Hotel Higashi-nihonbashi, the b akasaka-mitsuke and the b ochanomizu. Upon therefinance of ¥4,400 million conducted in September 2018, JHR newly added The Shizuoka Bank, Ltd. to its lending banks
to further diversify lenders. Moreover, in November 2018, JHR took out loans of ¥700 million, the first part of the loans in
multiple installments totaling ¥3,100 million mainly for the purpose of renovating Hotel Centraza Hakata (Note 1).
Consequently, as of the end of the fiscal year under review, balance of interest-bearing debt totaled ¥136,671 million,
including, long-term loans payable of ¥103,071 million and investment corporation bonds of ¥33,600 million, and the ratio
of interest-bearing debt to total assets at end of year (Note 2) stood at 39.0%.
JHR reduced borrowing costs and extended maturity dates through the aforementioned series of fund procurement. Alongwith such, JHR concluded loans with fixed interest rates as well as interest rate swap contracts to hedge against risks ofinterest rates rising in the future. These actions brought the fixed rate ratio on total interest-bearing debt at end of year to
around 97%.
As of December 31, 2018, JHR’s issuer ratings were as follows.
Rating agency

RatingJapan Credit Rating Agency, Ltd.

A+

(Stable)Rating and Investment Information, Inc.

A

(Stable)(Note 1)

Major renovation works causing the suspension of hotel operation (hereinafter called the “Renovation”) have been implemented atHotel Centraza Hakata from October 1, 2018 to March 31, 2019 (scheduled).

(Note 2)

Ratio of interest-bearing debt to total assets at end of year = Balance of interest-bearing debt at end of year ÷ Total assets at end of year
× 100

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(d) Financial results
As a result of the abovementioned asset management, operating revenue, operating income and ordinary income were¥28,253 million, ¥17,993 million and ¥16,211 million, respectively, for the fiscal year under review (12-month period fromJanuary 1, 2018 to December 31, 2018). Net income was ¥16,210 million. Furthermore, of the gain on sale of real estate
properties, JHR decided to internally reserve ¥1,174 million as reserve for reduction entry.
With regard to dividends, it was decided that ¥15,602 million will be distributed, which was calculated by deducting theabove-mentioned reserve for reduction entry of ¥1,174 million and adding a reversal of reserve for temporary difference
adjustment (appropriation for dividends) of ¥563 million to unappropriated retained earnings of ¥16,213 million.
Consequently, the dividend per unit came to ¥3,890.
For details of the appropriation for dividends for the fiscal year under review, please refer to “<Reference Information 4>
Dividend per unit and appropriation for dividends” on page 22.
(B) Outlook for the next fiscal period(a) Investment policies and issues to be addressed
As for the environment surrounding the tourism industry, JHR considers it to be favorable with continued anticipation for
expansion of national tourism policies, such as the budget of the Japan Tourism Agency for the fiscal year 2019 increasing
by 2.7 times year-on-year to ¥66.5 billion (except reconstruction budget). Moreover, with the number of inbound tourists
continuing to increase strongly and domestic leisure demand remaining solid, such major events as Rugby World Cup 2019and Tokyo 2020 Olympic and Paralympic Games that will strongly demonstrate the attractiveness of “Japan” to the world
are expected to provide a further boost to the tourism industry. On the other hand, however, close attention should be paid
to the changes in supply-demand balance going forward, including an increase in supply from new development of hotels
following trends of increase in inbound visitors, and the impact on private house lodging business by the private houselodging business law (new minpaku law) that was enforced in June 2018. Although the hotel market remains generally
solid, the supply-demand balance appears to be loosening in certain areas and for certain asset classes, while high-grade
hotels in limited supply over demand are anticipated to continue growing strongly. As such, JHR believes that the locationand competitiveness of individual hotels and the capabilities of the operators are essential for differentiating the hotels fromothers. JHR considers that in addition to aforementioned differentiation, whether profitability including cost management
can be enhanced will make a further difference in hotel performance. Under such circumstances, JHR intends to work with
the Asset Management Company to implement strategies to differentiate 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, 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 s 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 the accommodation market
condition.
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.

-6-i) 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 Innor leading brands in Japan including Oriental Hotel and Hotel Nikko that are operated in various areas throughout thecountry 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 the hotel performances by requesting them to implement
marketing initiatives to attract a wider range of demand with considerations given to solid domestic leisure demand andincreased leisure demand from inbound visitors, measures to maintain and increase room rates, and realization of thesynergy effects like cost reductions from owning multiple properties, among other issues. Moreover, JHR conducts
strategic capital investment such as renovating guest rooms, etc. for improving property competitiveness primarily forhotels with high growth expectations, in an attempt to further enhance hotel earnings led by the growth in RevPAR.
ii) Properties under fixed rent contracts
JHR will increase its efforts to appropriately monitor operating conditions of these hotels and, by paying careful attention
to each tenant’s ability to bear the rent costs, conduct negotiations with the 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 facility maintenance and improvement to ensureeach hotel becomes prominent in the market and to maintain and increase the value of its assets.
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 long term 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 inorder to achieve upside gains.
Upon acquiring properties, JHR will focus on the infrastructure aspects of the relevant Hotel Assets such as buildings andfacilities, the services aspects such as the credibility of the hotel lessee and operator (including the ability of the hotel
lessee to bear rent costs) as well as operation and management capabilities, and the properties’ location superiority thatserves 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 tosuch factors as operation and management know-how required for operating the hotels and limitations in terms of invested
capital and location. As for “limited-service hotels,” JHR emphasizes the credibility and operation capabilities of the hotel
lessee and operator as well as the building age, location, guestroom composition and profitability of the properties (Note).
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 of competitiveness relies only on prices.
In the hotel investment market, harsh competition over acquisitions is ongoing due in part to an increase in J-REITs thatinvests in hotels and formation of non-listed private J-REITs. JHR will aim for expansion of asset size that accompanies animprovement in the quality of its portfolio by acquiring highly competitive properties while leveraging its strength andadvantages 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 of financial
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% as in the past. In addition, when seeking
new funding for property acquisitions or refinancing existing debt, JHR will work to disperse maturity dates of its debt aswell as further reinforce and expand its base of lenders and further diversify funding methods, including issuance ofinvestment corporation bonds, while considering the balance with the borrowing costs.

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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 through extending 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 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. For the fiscal year under review and thereafter, JHR stipulated
a policy to reverse ¥262 million (hereinafter called the “50-year amortization amount of negative goodwill”), which is anamount equivalent to 2% (1/50) of the balance of the reserve for temporary difference adjustment for the fiscal year ended
December 2017, to pay out as dividends, with the balance of the 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, dilution ofdividend per unit due to the issuance of new investment units through public offerings, etc., loss on retirement of
noncurrent assets, and suspension of sales and such due to large-scale renovations with significant impact on revenues, JHR
stipulated a policy to reverse additional portion of the negative goodwill on top of the 50-year amortization amount ofnegative goodwill (¥262 million).
As for the fiscal year ending December 31, 2019 (20th period), JHR expects ¥1,177 million, which is the total of the 50year amortization amount (¥262 million), correspondence to dilution, etc. (¥310 million), loss on retirement of noncurrent
assets (¥247 million) and the correspondence to the large-scale renovation at Hotel Centraza Hakata (¥357 million) as
additional amounts to dividends by reversing the negative goodwill.
(Note)The policy may change due to a resolution of the board of directors, and it does not guarantee the method of reversing the reserve fortemporary 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, Social andGovernance) 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 is indispensable to establish favorable
relationships with its stakeholders including unitholders, hotel users (guests), lessees, operators, business partners including
property managers, etc., local communities, officers and employees of the Asset Management Company and others and tofulfill 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) evaluationfor Hotel Nikko Alivila and Mercure Okinawa Naha in February 2018 as first such cases for J-REIT’s hotel properties(Note 1). Moreover, 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, acquiring “Green Star,” the highest ranking, in the
GRESB Real Estate Assessment (Note 2) and “4 Stars” in the GRESB Rating.
Recognizing its social responsibility towards local communities as a J- REIT specializing in hotels, JHR will proactively
carry out social contribution activities capitalizing on the characteristics of the hotel sector and each hotel.
(Note 1)
(Note 2)

Investigated by the Asset Management Company based on disclosed information.
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 for sustainability of real estatecompanies, 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.

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(b) Significant subsequent events
1. Acquisition of assets
JHR acquired Hotel Oriental Express Osaka Shinsaibashi as of February 1, 2019.
Property name

Hotel Oriental Express Osaka Shinsaibashi

Asset category

Real estate beneficial interest in trust and movable assets attached to the hotel

Asset type

Hotel

Address

3-2-13, Minamisemba, Chuo-ku, Osaka-shi, Osaka

Acquisition dateFebruary 1, 2019

SellerUndisclosed (Note 1)

Acquisition price (Note 2)¥2,738 million(Note 1) The information is not disclosed as consent on disclosure has not been obtained from the seller.
(Note 2) The acquisition price does not include expenses for acquisition, settlement of property tax and city planning tax, and consumption taxes.

2. Conclusion of contract on acquisition of asset
On January 8, 2019, JHR concluded a purchase and sale agreement (Note 1) regarding acquisition of the following asset.
Property name

Hilton Tokyo Odaiba

Asset category

Real estate beneficial interest in trust and movable assets attached to the hotel

Asset type

Hotel

Address

1-9-1, Daiba, Minato-ku, Tokyo

Anticipated acquisition date

April 8, 2019

SellerHulic Co., Ltd.

Acquisition price (Note 2)¥62,400 million(Note 1) The purchase and sale agreement is subject to forward commitment, etc., stipulated in the Comprehensive Guidelines for Supervision of
Financial Instruments Business Operators, etc. by Financial Services Agency. Forward commitment, etc. here is defined as“a postdated realestate transaction contract where there is an agreement to either make a financial settlement or complete transfer of asset after a period of one
month or more following the conclusion of the contract, or any other similar contracts. The purchase and sale agreement stipulates that either
party may cancel the purchase and sale agreement if the other party violates the obligations stipulated in the purchase and sale agreement andthat the violating party shall pay a certain amount of trading value to the other party. However, the purchase and sale agreement contains a
special condition which stipulates that completion of debt financing stated in “3. Resolution on borrowing funds” below or other fundraising by
JHR is a condition precedent to the payment of the transaction amount. Accordingly, in the event that debt financing or fundraising by JHR for
the payment of the transaction amount is not completed, the purchase and sale agreement will be terminated without payment of cancellation
penalty.
(Note 2) The acquisition price does not include expenses for acquisition, settlement of property tax and city planning tax, and consumption tax and local
consumption tax.

3. Resolution on borrowing of funds
JHR resolved on January 8, 2019 to conduct new borrowings totaling ¥30,000 million as follows, in order to partly fund theacquisition of the real estate beneficial interest in trust of Hilton Tokyo Odaiba and movable assets attached thereon as
described above in 2. Conclusion of contract on acquisition of asset.
(1) Term Loan 53
Lenders

The Bank of Fukuoka, Ltd. / The Chiba Bank, Ltd. / The Nishi-Nippon City Bank,
Ltd. / Sompo Japan Nipponkoa Insurance Inc.

Amount of the loan

¥2,500 million

Interest rate

To be determined (fixed rate)

Date of borrowing

April 8, 2019
Individual loan contracts to be concluded on March 11, 2019 with the lenders

Method of borrowing

indicated above based on the Basic Agreement concluded on November 13, 2013
(including subsequent amendments).

Method of principal repayment

Lump-sum payment on the maturity date

Maturity date

March 29, 2024

Collateral

Unsecured / Unguaranteed-9-(2) Term Loan 54
Lenders

Sumitomo Mitsui Banking Corporation / Shinsei Bank, Limited / Mizuho Bank,
Ltd. / Sumitomo Mitsui Trust Bank, Ltd. / Development Bank of Japan Inc.

Amount of the loan

¥7,500 million

Interest rate

Base interest rate (JBA Japanese Yen TIBOR for one month) + 0.55%

Date of borrowing

April 8, 2019
Individual loan contracts to be concluded on March 11, 2019 with the lenders

Method of borrowing

indicated above based on the Basic Agreement concluded on November 13, 2013
(including subsequent amendments).

Method of principal repayment

Lump-sum payment on the maturity date

Maturity date

March 31, 2027

Collateral

Unsecured / Unguaranteed(3) Term Loan 55

Lenders

Sumitomo Mitsui Banking Corporation / Shinsei Bank, Ltd. / Mizuho Bank, Ltd. /Sumitomo Mitsui Trust Bank Limited / Resona Bank, Ltd. / The Nomura Trust andBanking Co., Ltd. / Development Bank of Japan Inc. / The Bank of Fukuoka, Ltd. /Aozora Bank, Ltd. / The Nishi-Nippon City Bank, Ltd.

Amount of the loan

¥18,000 million

Interest rate

Base interest rate (JBA Japanese Yen TIBOR for one month) + 0.60%

Date of borrowing

April 8, 2019

Method of borrowing

Individual loan contracts to be concluded on March 11, 2019 with the lenders
indicated above based on the Basic Agreement concluded on November 13, 2013
(including subsequent amendments).

Method of principal repayment

Lump-sum payment on the maturity date

Maturity date

March 31, 2028

Collateral

Unsecured / Unguaranteed(4) Term Loan 56
LenderSumitomo Mitsui Banking Corporation

Amount of the loan

¥2,000 million

Interest rate

Base interest rate (JBA Japanese Yen TIBOR for one month) + 0.275%

Date of borrowing

April 8, 2019

Method of borrowing

Individual loan contracts to be concluded on March 11, 2019 with the lenders
indicated above based on the Basic Agreement concluded on November 13, 2013

Method of principal repayment

Lump-sum payment on the maturity date

Maturity date

March 31, 2020

Collateral

Unsecured / Unguaranteed(including subsequent amendments).

- 10 -

4. Issuance of new investment units
JHR resolved to issue new investment units at the Board of Directors meetings held on January 8, 2019 and January 16, 2019.
Payment for the new investment units was completed on January 23, 2019 and February 20, 2019, and the investment units
were issued under the following terms and conditions. As a result, JHR’s unitholders’ capital increased to ¥186,894,169,809,
with the number of investment units issued and outstanding totaling 4,462,347 units.
(1) Issuance of new investment units (domestic public offering and overseas offering)Number of investment units issued:

447,800 units

Of which, domestic public offering:

206,247 units

Of which, overseas offering:

241,553 units

Issue price:¥76,342 per unit

Total issue price:¥34,185,947,600

Paid-in amount (issue value):¥73,927 per unit

Total paid-in amount (total issue value):¥33,104,510,600

Payment date:

January 23, 2019(2) Issuance of new investment units (third-party allotment)
Number of investment units issued:

3,700 units

Paid-in amount (issue value):¥73,927 per unit

Total paid-in amount (total issue value):¥273,529,900

Payment date:February 20, 2019

Allottee:

SMBC Nikko Securities Inc.

(3) Use of funds
JHR will allocate the proceeds from the issuance of new investment units through the domestic public offering and overseas
offering of ¥33,104,510,600 to part of the funds for acquisition of Hotel Oriental Express Osaka Shinsaibashi and Hilton
Tokyo Odaiba as described above in “1. Acquisition of assets” and “2. Conclusion of contract on acquisition of asset.” In
addition, the proceeds from the issuance of new investment units through third-party allotment of ¥273,529,900 will beallocated to part of the funds for acquisition of Hilton Tokyo Odaiba. The residual funds of the proceeds, if any, will be
retained as cash on hand to be allocated to part of the funds for future acquisition of specified assets, part of the funds for
repayment of loans, or repair expenses and capital expenditures to maintain or improve competitiveness of existing
properties.

- 11 -

(c) Operating forecast
The following is JHR’s operating forecast for the midterm of the fiscal year ending December 31, 2019 (20th period) andthe full year of the fiscal year ending December 31, 2019 (20th period). For the assumptions of the operating forecast,please refer to “Assumptions of the operating forecast for the midterm and full year of the fiscal year ending December 31,
2019 (20th period)” on page 13.
Midterm of the fiscal year ending December 31, 2019 (20th period)
Operating revenue¥12,765 million
Operating income
Ordinary income¥7,186 million¥6,155 million

Midterm net income¥6,154 million

Full year of the fiscal year ending December 31, 2019 (20th period)
Operating revenue¥28,876 million
Operating income
Ordinary income¥17,371 million¥15,274 million

Net income
Dividend per unit

¥15,273 million¥3,686

Dividend per unit resulting from excess of earnings¥0(Note) The forecast figures above are the current forecasts calculated based on certain assumptions. As such, actual operating revenue,
operating income, ordinary income, net income (midterm / full year), dividend per unit and dividend per unit resulting from excessof earnings may vary due to changes in the circumstances. Furthermore, the forecasts are not intended to guarantee any dividend
amount.

- 12 -

Assumptions of the operating forecast for the midterm and full year of the fiscal year ending December 31, 2019 (20th period)
Item
Calculation
periodAssumptions
・Midterm (20th Period) : January 1, 2019 through June 30, 2019 (181 days)
・Full year (20th Period) : January 1, 2019 through December 31, 2019 (365 days)
・The 41 properties owned by JHR as of December 31, 2018, plus the following Assets for (Anticipated)
Acquisition, to total 43 properties are assumed.
<Assets for (Anticipated) Acquisition>(Anticipated) acquisition date

Assets underFebruary 1, 2019

management

April 8, 2019

Name of asset
Hotel Oriental Express Osaka Shinsaibashi
Hilton Tokyo Odaiba

・It is assumed that there will be no change (acquisition of new property or disposition of the existing properties,etc.) in assets under management other than the above through the end of the fiscal year ending December 2019
(20th period). However, the actual results may fluctuate depending on the changes in assets under managementthat may take place.
・Operating revenue is calculated based on leases and other contracts effective as of today and in consideration ofcompetitiveness of hotels, market environment and other factors. If there are lease contracts with regards tofacilities other than hotels, such as retail facilities and offices, etc., operating revenue calculated based on thesaid lease contracts is included.
・Rents, etc. of the main hotels are calculated based on the following assumptions.
(1) The Existing HMJ GroupThe assumptions of the fixed rent and variable rent are as follows.
Total rent = Fixed rent + Variable rent
Variable rent = [Total GOP of the hotels – GOP base amount] × Variable rent ratio (%)(Unit: millions of yen)
Total GOP of
the hotel(s)GOP baseamountMidterm

1,610

3,240

1,675

Full year

3,221

8,133

3,351

Okinawa Marriott

Midterm

274

403

350

Resort & Spa

Full year

550

1,400

700

ACTIVE-INTER
CITY HIROSHIMA

Midterm

398

488

234

(Sheraton Grand
Hiroshima Hotel) (*1)

Full year

797

1,046

468

Hotel Centraza
HakataMidterm

199

67

212

Full year

400

677

425

Holiday Inn
Osaka Namba

Midterm

288

593

325

Full year

576

1,242

650

Hilton Tokyo Narita

Midterm

222

462

275

Airport

Full year

444

993

550

International Garden

Midterm

168

323

180

Hotel Narita

Full year

336

650

360

Midterm

210

353

235

The Five HMJ Hotels

Operatingrevenue

Fixed
rent

Hotel Nikko Nara
Total

Full year

420

735

Midterm

3,372

5,932

470
-

Full year

6,744

14,878-

Variablerent ratio

85.0%
90.0%

82.5%

90.0%
92.5%
86.5%
98.0%
91.5%
-

Variable
rent

Total
rent

1,330

2,940

4,065

7,286

47

322

630

1,180

215

614

488

1,285

- (*2)

199

226

626

248

536

547

1,123

162

384

383

827

140

308

285

621

108

318

242

662

2,253

5,625

6,869

13,613(*1) As to “Total GOP of the hotel(s)” and “GOP base amount,” the rent for Sheraton Grand Hiroshima Hotel,
the major facility of ACTIVE-INTER CITY HIROSHIMA, is stated. “Fixed rent” includes rent from theoffice building and the retail zone (¥224 million for the midterm and ¥449 million for the full year); and- 13 -

Item

Assumptions“Variable rent” includes variable rent pursuant to a revenue linked rent agreement with some retail tenants(¥5 million for the midterm and ¥10 million for the full year).
(*2) Due to the impact of the suspension of hotel operation due to the Renovation scheduled in the first half ofthe fiscal year ending December 2019 (20th period), GOP of the hotel for the first half is not expected to
exceed GOP base amount. Therefore, it is assumed that variable rent for the midterm will not be recognized.
(2) The Two New HMJ Hotels (Assets for (Anticipated) Acquisition)
1. Hotel Oriental Express Osaka Shinsaibashi
The assumptions of the fixed rent and variable rent are as follows.
Total rent = Fixed rent + Variable rent
Variable rent = [Total GOP of the hotels – GOP base amount] × Variable rent ratio (%)(Unit: millions of yen)

Hotel Oriental Express
Osaka Shinsaibashi (*)

Midterm
Full year

Fixed
rent

Total GOP of
the hotel(s)GOP baseamountVariable rent
ratio

Variable
rent

Total
rent

47
102

101

64

91.0%

34

47
137

(*) Variable rent which is linked to GOP of the hotel will be recognized starting from July 1, 2019. As for the
total GOP of the hotel for the full year, the GOP of the hotel from July 1, 2019 through December 31, 2019is stated. The fixed rent is the assumed figures for 334 days from February 1, 2019 to December 31, 2019.
Base GOP amount will be ¥128 million and annual fixed rent will be ¥110 million starting from the fiscal
year ending December 2020.
2. Hilton Tokyo Odaiba
The assumptions of the fixed rent and variable rent are as follows. Variable rent for the fiscal year ending
December 2019 (20th period) is not expected.
Total rent = Fixed rent + Variable rent
Variable rent = [Total AGOP of the hotels (*1) – AGOP base amount] × Variable rent ratio (%)(Unit: millions of yen)

Hilton Tokyo Odaiba

Midterm
Full year

Fixed
Rent (*2)

Total AGOP of
the hotel(s)(*2)

AGOP
base
amount

714
2,264

725
2,370

817
2,450

Variablerent ratio

Variable
rent

Total
rent

30.0%

-

714
2,264

(*1) AGOP (adjusted GOP) is the amount calculated by subtracting certain fees and other items from GOP. The
same shall apply hereinafter.
(*2) AGOP of the hotel for full year is the AGOP of the hotel from April through December 2019. The fixed rentis the assumed figures for 268 days from April 8, 2019 through December 31, 2019. AGOP base amountfrom January 1, 2020 to December 31, 2021 is ¥2,970 million, and the annual fixed rent is ¥3,100 million.
AGOP base amount from January 1, 2022 to December 31, 2029 is ¥1,660 million, variable rent ratio is98%, and the annual fixed rent is ¥1,600 million.
(3) Other hotels with variable rent
1. The following are income from management contracts (*2) and variable rent for the Accor Group (*1).
(Unit: millions of yen)
Midterm
Full year
ibis Tokyo Shinjuku
227
496
ibis Styles Kyoto Station
244
525
ibis Styles Sapporo
263
643
Mercure Sapporo
283
693
Mercure Okinawa Naha
230
478
Mercure Yokosuka
168
278
Total
1,418
3,115
(*1) The Accor Group refers to a hotel group for which AAPC Japan K.K. (hereinafter referred to as “Accor”), a
Japanese subsidiary of Accor Hotels, serves as the operator.
(*2) For income from management contracts, it is assumed that each hotel’s GOP amount is recognized as- 14 -

Item

Assumptions
income from management contracts and the management contract fees to be paid by JHR are recognized as
an operating expense.
2. The following are variable rent for the Ishin Group (*).

the b suidobashi
the b ikebukuro
the b hachioji
the b hakata
Total

Midterm
10
63
33
76
184

(Unit: millions of yen)
Full year
25
137
69
164
397

(*) The Ishin Group refers to a hotel group which has subsidiaries of the Ishin Hotels Group as lessees.
3. The following are variable rent for other hotels subject to variable rent

Comfort Hotel Tokyo Higashi Nihombashi
Smile Hotel Nihombashi Mitsukoshimae
Hotel Vista Kamata Tokyo
Chisun Inn Kamata
Hotel Keihan Universal City
Hotel Sunroute Shinbashi
Hilton Tokyo Bay
Hilton Nagoya
Total

Midterm
17
19－
38
Undisclosed (*)
115
Undisclosed (*)
Undisclosed (*)
859(Unit: millions of yen)
Full year
17
19
22
82
Undisclosed (*)
115
Undisclosed (*)
Undisclosed (*)1,469(*) Undisclosed since tenants that concluded lease agreements did not agree to disclose rent revenue, etc.
・The following is the breakdown of variable rent and income from management contracts (*).

The Existing HMJ GroupThe Two New HMJ Hotels
Accor Group
Ishin Group
Other hotels with variable rent (8 hotels)
Total (32 hotels)

Midterm
2,253
－
1,418
184
859
4,715

(Unit: millions of yen)
Full year
6,869
34
3,115
397
1,469
11,886(*) For details of variable rent and income from management contracts except for the Assets for (Anticipated)
Acquisition, please refer to “5. Reference information (2) Assets under management (C) Other major assets

OperatingExpenses

under management C. Overview of the hotel business a. Rent structures of hotels with variable rent,
management contract or revenue sharing” on page 58.
・With respect to real estate leasing expenses, which constitute a major part of the operating expenses, expenses
other than depreciation are calculated based on historical data, and variable factors are reflected in thecalculation.
・It is assumed that ¥1,648 million will be recognized as expenses for fixed asset tax, city planning tax and othertaxes and public dues.
・In general, fixed asset tax and city planning tax and other taxes and public dues on acquired assets are settledwith the previous owners at the time of acquisition, calculated on a pro rata basis of the holding period. For JHR,
such settlement amount is included in the acquisition price, and it will not be recognized as expenses for the
calculation period. For expected amount of fixed asset tax and city planning tax and other taxes and public for
the Assets for (Anticipated) Acquisition, please refer to <Reference Information 2> Assumptions of theannualized effect (full year effect) for the fiscal year ended December 31, 2018 (19th period) and for the forecast
for the fiscal year ending December 2019 (20th period) on page 20.
・Capital expenditure is assumed to be ¥6,778 million (¥2,369 million for capital expenditure I, ¥853 million for
capital expenditure II, ¥454 million for capital expenditure III, and ¥3,100 million for expenditure related to theRenovation at Hotel Centraza Hakata) for the fiscal year ending December 2019 (20th period).
(*) JHR classifies capital expenditures into the following three categories. (I) Capital investment related torenewal of buildings, facilities, and equipment which is required to maintain proper values of properties,(II) capital investment for fixtures and furniture that are not directly related to building structure or facilities- 15 -

Item

Assumptions
but necessary for operating hotels, and (III) strategic capital investment such as renovating guest rooms, etc.
for maintaining / improving the competitiveness of the hotels.
・Depreciation is calculated using the straight-line method including the planned capital expenditures above, and isassumed to be ¥4,663 million.
・Repair expenses for buildings are recognized as expenses in the estimated amount necessary for each operating
period. Please note that the repair expenses of each operating period may differ materially from the forecast
amount for various reasons, such as; (1) Emergency repair expenses may be necessary due to damage tobuildings from unexpected causes; (2) The amount of repair expenses generally tends to increase in difference

Nonoperating
expenses

over time; and (3) Repair expenses are not required on a regular basis.
・¥2,096 million is expected for all non-operating expenses, including cost related to debt such as interest expense,
arrangement fee, amortization for the following (1) handling fees and (2) derivative instruments and other nonoperating expenses.
・Expenses for issuance of new investment units and secondary offering are 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 the end of December
2018 was ¥136,671 million. It is assumed that the balance of interest-bearing debt after acquiring the Assets forbearing debt

(Anticipated) Acquisition as of the end of April 2019 will be ¥168,471 million, and will be ¥169,071 million asof the end of December 2019.
・Loans for acquisition of the Assets for (Anticipated) Acquisition in the amount of ¥30,000 million are assumed.
・It is assumed that JHR will take out new loans in the amount of ¥1,800 million and ¥600 million, respectively,

Issuance ofinvestment

・The number of investment units issued as of today (4,462,347 units) is assumed.
・It is assumed that there will be no additional issuance of investment units through to the end of the fiscal year

Interest-

for the Renovation cost of Hotel Centraza Hakata on April 30, 2019 and July 31, 2019.

units

ending December 2019 (20th period).
・Dividend per unit for the fiscal year ending December 2019 (20th period) is calculated based on the following
assumptions.
¥15,273 million

Net income
Reversal of reserve for temporary difference adjustment (negative goodwill)

50-year amortization amount of negative goodwill (*1)
Loss on retirement of noncurrent assets (*2)¥262 million¥247 million

Correspondence to major renovation works (*3)
Adjustment for dilution (*4)¥357 million¥310 million

Distributable amount
Total number of investment units issued¥16,450 million
4,462,347 units

Dividend per unit

Dividend per
unit

(*1)

¥3,686¥262 million (hereinafter called “50-year amortization amount of negative goodwill”) is scheduled to be
paid out as dividends, with the remaining balance of the reserve for temporary difference adjustment set
as the maximum amount, for every fiscal year.

(*2)

The amount recognized as a loss on retirement of noncurrent assets will be appropriated by reserve fortemporary difference adjustment (negative goodwill) and is expected to have no impact on dividend per unit.

(*3)

Taking into consideration the effect on dividend of the suspension of hotel operation due to theRenovation at Hotel Centraza Hakata, ¥357 million, which is equivalent to the difference between NOI
after depreciation of Hotel Centraza Hakata from January to March 2018 and assumed NOI after
depreciation from January to March 2019, will be appropriated by reserve for temporary difference
adjustment (negative goodwill). In case the period of the major renovation work is changed, the amountto be reversed from reserve for temporary difference adjustment may be reviewed.

(*4)

Decrease in dividend per unit because JHR will not own the Asset for (Anticipated) Acquisition for thefull fiscal year ending December 2019, as well as dilution of investment units due to the issuance of new
investment units are expected. We plan to avoid the impact of the said dilution on dividend per unit for
the fiscal year ending December 2019 by appropriating reserve for temporary difference adjustment(negative goodwill).
- 16 -

Item

Assumptions
・Dividend per unit may fluctuate due to various causes, such as fluctuation of rent revenue resulting from transfer
of assets under management, change of tenants, etc. at hotels, change in the business environment surrounding
tenants, etc. of hotels, unexpected repairs, and actual number of new units issued, etc.
・The remaining balance of the reserve for temporary difference adjustment (negative goodwill) after theappropriation of the reserve for temporary difference adjustment (negative goodwill) for dividends for the fiscal
year ending December 2019 (20th period) is expected to be ¥10,616 million.
・ The operating status for the fiscal year ending December 2019 of the Assets for (Anticipated) Acquisition isassumed as follows.
<Hotel Oriental Express Osaka Shinsaibashi>(unit: millions of yen)
Fiscal year ending December 2019
Full year (*3)
Operating days
334 days
365 days
Operating revenue
137
179
NOI (*1)
133
165
NOI yield (%) (*2)
6.0

Assets for(Anticipated)
Acquisition<Hilton Tokyo Odaiba>(unit: millions of yen)
Fiscal year ending December 2019
Full year (*3)
Operating days
268 days
365 days
Operating revenue
2,264
3,100
NOI (*1)
2,260
2,772
NOI yield (%) (*2)
4.4(*1) NOI = Real estate operating revenue – Real estate operating costs + Depreciation + Loss on retirement of
noncurrent assets + Asset retirement obligations expenses(*2) NOI yield = NOI ÷ (Anticipated) acquisition price(*3) For the assumptions of calculating the annualized (full year) figures, please refer to “<Reference
Information 2> Assumptions of the annualized effect (full year effect) for the fiscal year ended December
31, 2018 (19th period) and for the forecast for the fiscal year ending December 2019 (20th period)” on
page 20.

Dividend perunit resulting
from excess

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

of earnings
・It is assumed that revision in law, tax system, accounting standard, regulations of the listing, regulations of The
Other

Investment Trusts Association, Japan 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 and hotelbusiness environment, etc.
・The numerical values are rounded down to the nearest millions of yen in the assumptions above.

- 17 -

<Reference Information 1> Highlights of the operating forecast and forecast of dividend(1) The following is a comparison and major causes of variance between the actual results for the fiscal year ended December 31,
2018 (19th period) and the forecast for the fiscal year ending December 31, 2019 (20th period)(Unit: millions of yen)
2018

2019

ActualForecast

Number of Properties

Previous Period

(B)

(A)

Properties

Comparison with

(B)-(A)

Assets to

Three

be

Propertie

Acquired in s Sold in

%

2019

Existing

Causes of Variance

Properties
(*1)

2018

41

43

2

2

-

-

Acquisition Price

309,370

374,508

65,13821.1%

65,138--Operating Revenue

28,25328,876

622

2.2%

2,402

(2,214)434

Real Estate Operating Revenue

26,31828,876

2,557

9.7%

2,402

(279)

434

Fixed Rent, etc.

14,78816,989

2,200

14.9%

2,367

(199)

32

Composition

56.2%

58.8%

Variable Rent

11,52911,886

356

3.1%

34

(79)

402

Composition

43.8%

41.2%

The Existing HMJ Group: increase in variable rent by
JPY255 MM
The Accor Group: increase in income frommanagement contract, etc. by JPY169MM
Decrease in revenue sharing, etc. by JPY22M

Gain on Sale of Real

ProfitEstate Properties

and

1,934

-

(1,934)--(1,934)

-

10.8%

2,394

(251)

251
334

Loss

NOI

22,10424,4982,394

Statement

NOI Yield

7.1%

6.5%

(0.6%)

Depreciation

4,091

4,663

571

272

(34)

2

2

0

-

-

0

35

247

211

-

-

211

NOI after Depreciation (*2)

17,974

19,584

1,610

2,121

(216)

(294)

NOI Yield after Depreciation

5.8%

5.2%

(0.6%)

Operating Income

17,993

17,371(621)

Ordinary Income

16,211

15,274(936)(5.8%)Net Income

16,21015,273(936)(5.8%)

563

1,177

Amount to be reversed from reserve for temporary difference adjustments
613 108.9% 2018: 50-year amortization amount of negative goodwill: JPY262M

Reserve for Special Advanced
Depreciation(1,174)-

1,174

Asset Retirement Obligations
Loss on Retirement ofNoncurrent Assets

Reserve for Temporary
Difference Adjustments(negative goodwill)

Dividends

9.0%(3.5%)

Correspondence to loss on retirement of noncurrent assets: JPY35M

Total Dividends

15,602

16,448846

Number of Units Issued(unit)

4,010,847

4,462,347

451,500

Dividend per Unit (JPY)

3,890

3,686

(204)

- Correspondence to major renovation works: JPY265M
5.4%

2019: 50-year amortization amount of negative goodwill: JPY262M

11.3% Correspondence to loss on retirement of noncurrent assets: JPY247M

Correspondence to major renovation works: JPY357M(5.2%) Correspondence to dilution: JPY310M(*1)“The existing properties” above refers to 41 properties owned by JHR as of December 31, 2018.

(*2)

NOI after depreciation = Real estate operating revenue – Real estate operating costs. NOI yield after depreciation = NOI after
depreciation ÷ (Anticipated) acquisition price- 18 -

(2) The following is a comparison and major causes of variance between the actual results of the annualized effect for the fiscal
year ended December 31, 2018 (19th period) and for the forecast of the annualized effect for the fiscal year ending December
31, 2019 (20th period)(Unit: millions of yen)
2018

2019

(Reference)
Actual results forecast of theof theannualized

annualized

effecteffect(*1)

Comparison with Assets toPrevious Period

Acquiredin 2019

(*1)
(B)

(A)
Properties

Number of Propertiesbe(B)-(A)

Existing
Properties

％

41

43

2

2

-

Acquisition Price

309,370

374,508

65,13821.1%

65,138-Operating Revenue

26,03929,753

3,713

14.3%

3,279

434

26,03929,753

3,713

14.3%

3,279

434

Fixed Rent, etc.

14,58917,832

3,242

22.2%

3,210

32

Composition

56.0%

59.9%

Variable Rent

11,44911,921

471

4.1%

68

Real Estate
Operating Revenue

Causes of Variance(*2)

402 The Existing HMJ Group: increase in variable rent by
JPY255 MM
The Accor Group: increase in income from

Composition

44.0%

management contract, etc. by JPY169MM

40.1%

ProfitandDecrease in revenue sharing, etc. by JPY22M

Loss

NOI

21,811

25,042

3,231

Statement

NOI Yield

7.1%

6.7%

(0.4%)

Depreciation

4,057

4,750

2

2

Asset Retirement Obligations

Loss on Retirement ofNoncurrent Assets

NOI after Depreciation

293

693

359

334

0

-

0

35

247

211

17,71520,041

2,325

13.1%

NOI Yield after
Depreciation

5.7%

5.4%

(0.4%)

Operating Income

15,822

17,763

1,940

12.3%

Ordinary Income

14,05015,689

1,638

11.7%

Net Income

14,04915,688

1,638

11.7%

563

867

303

53.9%

Total Dividends

14,611

16,555

1,943

13.3%

Number of Units
Issued (unit)

4,010,847

4,462,347

451,500

3,643

3,710

67

Reserve for Temporary
Difference Adjustments(negative goodwill)

Dividends

2,938

14.8%

Dividend per Unit (JPY)

-

211

2,578

(252)

Amount to be reversed from reserve for temporary difference adjustments
2018: 50-year amortization amount of negative goodwill: JPY262M
Correspondence to loss on retirement of noncurrent assets: JPY35M
Correspondence to major renovation works: JPY265M

11.3% 2019: 50-year amortization amount of negative goodwill: JPY262M

Correspondence to loss on retirement of noncurrent assets: JPY247M
1.8% Correspondence to major renovation works: JPY357M(*1)

For assumptions of the forecast of the annualized effect for fiscal year ending December 2019, please refer to <Reference Information
2> Assumptions of the annualized effect (full year effect) for the fiscal year ended December 31, 2018 (19th period) and for theforecast for the fiscal year ending December 2019 (20th period) below.

(*2)“The existing properties” above refers to 41 properties owned by JHR as of December 31, 2018.

- 19 -

<Reference Information 2> Assumptions of the annualized effect (full year effect) for the fiscal year ended December 31, 2018 (19thperiod) and for the forecast for the fiscal year ending December 2019 (20th period)<1> The fiscal year ended December 31, 2018 (19th period)
It is assumed that the three sold properties are not held from the beginning of the year. Moreover, gain on sale of real estate properties
and reserve for special advanced depreciation are not assumed.
The fixed asset tax and city planning tax and other taxes for three properties (Hilton Tokyo Narita Airport, International Garden Hotel
Narita, and Hotel Nikko Nara) acquired in the fiscal year ended December 2017 (18th period) are assumed to be ¥160 million, whichis equivalent to twelve months.
<2> The fiscal year ended December 31, 2018 (20th period)
There is no change in assumptions for operating revenue and operating expenses of the existing properties excluding the Assets for(Anticipated) Acquisition, from the “Assumptions of the operating forecast for the midterm and full year of the fiscal year ending
December 31, 2019 (20th period)” on page 13.
The fixed rent and variable rent for Oriental Express Osaka Shinsaibashi for the full year are calculated as follows.
Total rent for the fiscal year ending December 2019 (20th Period) (full year) (¥179 million)= Fixed rent (¥110 million) + Variable rent
Variable rent = ((1) Total GOP of the hotels – (2) GOP base amount) × 91.0 (%)(Unit: millions of yen)
(1) Total GOP of thehotels(2) GOP base amount

Variable rent((1)-(2)) × 91.0%

203

128

68

Full year

The fixed rent and variable rent for Hilton Tokyo Odaiba for the full year are calculated as follows.
Total rent for the fiscal year ending December 2019 (20th Period) (full year) (¥3,100 million)= Fixed rent (¥3,100 million) + Variable rent
Variable rent = ((1) AGOP of the hotels – (2) AGOP base amount) × 30.0 (%)(Unit: millions of yen)
(1) AGOP of the hotel(2) AGOP base amount

Variable rent((1)-(2)) × 30.0%

2,951

2,970

– (*)

Full year(*) The variable rent is not expected.
The fixed asset tax and city planning tax and other taxes for the Assets for (Anticipated) Acquisition are assumed to be ¥326 million,
which is equivalent to twelve months.
For non-operating expenses, borrowing costs related to asset acquisitions, expenses incurred in the issuance of new investment units
and others are assumed on an annualized basis (for twelve months). On the other hand, major one-time financial costs incurred for
asset acquisition are not included.

- 20 -

<Reference Information 3> Hotel operation indexes, sales and GOP
The numeral figures are based on figures obtained from hotel lessees, etc. Please note that these figures have not been audited nor havethey gone through other procedures. No guarantee is made as to the accuracy or completeness of the figures and information.
ADR and RevPAR are rounded off to the nearest yen. Sales and GOP are rounded off to the nearest million yen. Occupancy rate andcomparison with the previous period are rounded off to one decimal place. ADR represents average daily rate, which is calculated by
dividing revenue for rooms in a given period by the total number of rooms sold during the period. RevPAR represents revenue peravailable room, which is calculated by dividing revenue for rooms for a given period (excluding service charges) by the total numberof rooms available for sale during the period. The same shall apply hereinafter.
<1> Major 21 Hotels with Variable Rent, etc.
Actual Result for FY12/2018
First halfComparison
with theprevious
periodSecondhalfComparison
with theprevious
periodForecast for FY12/2019
Comparison
Comparison
Comparison
Second with thewith thewith theFirst half previous
previous
previous
half
periodperiodperiodFull
year

Full year

Comparison
with theprevious
periodOccupancy Rate

87.3%

0.3pt 87.1%(1.4pt)87.2%(0.6pt)88.0%

0.7pt 89.9%

2.8pt

89.0%

1.8pt

ADR

13,744

2.2%

15,8680.7%

14,814

1.3%

14,0172.0%

16,1842.0%

15,121

2.1%

RevPAR

11,996

2.5%

13,828(0.9%)

12,9200.6%

12,3382.9%

14,556

5.3%

13,456

4.2%

Sales (JPY 1M)

22,9580.8%

26,257(1.2%)

49,215(0.3%)

23,684

3.2%

27,331

4.1%

51,015

3.7%

GOP (JPY 1M)

7,715

2.6%

10,1960.3%

17,911

1.3%

7,774

0.8%

10,5503.5%

18,324

2.3%(*) Numbers of fiscal year ending December 2017 for Hilton Tokyo Narita Airport, International Garden Hotel Narita and Hotel
Nikko Nara which acquired in fiscal year ending December 2017 are for full year calculated by adding numbers prior toacquisition by JHR. The same shall apply hereinafter.
<2> The Eleven HMJ Hotels
The figures are the total amount for 11 hotels from the Existing HMJ Group excluding Hotel Centraza Hakata in order to
exclude the impact of the Renovation that resulted in suspension of sales.
Actual Result for FY12/2018
First halfComparison
with theprevious
periodComparison
Second with theprevious
half
periodForecast for FY12/2019
Comparison
Comparison
Comparison
Second with thewith thewith theFirst
halfprevious
previous
previous
half
periodperiodperiodFull
year

Full year

Comparison
with theprevious
periodOccupancy Rate

87.3%

△0.1pt 87.7%(1.3pt)87.5%(0.7pt)88.1%

0.8pt 90.3%

2.6pt

89.2%

1.7pt

ADR

15,246

2.2%

18,0350.1%

16,6561.0%

15,486

1.6%

18,303

1.5%

16,923

1.6%

RevPAR

13,306

2.1%

15,816(1.4%)

14,5720.2%

13,6402.5%

16,525

4.5%

15,095

3.6%

Sales (JPY 1M)

18,7540.2%

21,831(1.4%)

40,585(0.7%)

19,331

3.1%

22,575

3.4%

41,906

3.3%

GOP (JPY 1M)

5,809

2.2%

8,141

1.2%

13,950

1.7%

5,865

1.0%

8,337

2.4%

14,202

1.8%

Full year

Comparison
with theprevious
period<3> Hotel Oriental Express Osaka Shinsaibashi
Actual Result for FY12/2018

Forecast for FY12/2019

First halfComparison
with theprevious
periodSecondhalfComparison
with theprevious
periodComparison
Comparison
Comparison
Second with thewith thewith theFirst
halfprevious
previous
previous
half
periodperiodperiodOccupancy Rate

-

-

-

-

-

-

90.0%

- 90.0%

-

90.0%

-

ADR

-

-

-

-

-

-

10,500- 10,500-

10,500-

RevPAR

-

-

-

-

-

-

9,449

-

9,449

-

9,449

-

Sales (JPY 1M)

-

-

-

-

-

-

224

-

226

-

450

-

GOP (JPY 1M)

-

-

-

-

-

-

102

-

102

-

204

-

Full
year

(*) Hotel Oriental Express Osaka Shinsaibashi started operation on April 2, 2018. Therefore, numbers are not available for prior
to 2018.

- 21 -

<4> Hilton Tokyo Odaiba
Actual Result for FY12/2018
First halfComparison
with theprevious
periodSecondhalfComparison
with theprevious
periodFull
year

Forecast for FY12/2019
Comparison
Comparison
Comparison
Second with thewith thewith theFirst
halfprevious
previous
previous
half
periodperiodperiodFull year

Comparison
with theprevious
periodOccupancy Rate

95.2%

0.9pt 92.9%(3.0pt)94.0%(1.1pt)95.2%

0.0pt 94.1%

1.2pt

94.7%

0.6pt

ADR

28,831

6.8%

31,3968.6%

30,108

7.6%

28,8310.0%

32,0011.9%

30,420

1.0%

RevPAR

27,451

7.7%

29,154

5.3%

28,3096.4%

27,4510.0%

30,115

3.3%

28,794

1.7%

Sales (JPY 1M)

4,591

9.5%

5,008

7.3%

9,599

8.3%

4,591

0.0%

5,081

1.5%

9,672

0.8%

GOP (JPY 1M)

1,374

21.7%

1,723

15.2%

3,097

18.0%

1,374

0.0%

1,720

(0.2%)

3,094(0.1%)(*) Numbers are calculated by adding numbers prior to acquisition by JHR. ADR and RevPAR include service fees.

<Reference Information 4> Dividend per unit and appropriation for dividends
Dividend per unit for the fiscal year ended December 31, 2017 and the fiscal year ended December 31, 2018 are calculated based on
the following assumptions.

Unappropriated retained earnings

Fiscal year ended
December 31, 2017

Fiscal year ended
December 31, 2018

(JPY1M)(JPY1M)

14,005

16,213

Reserve for special advanced depreciation (*1)－

(1,174)

Total of reserve for temporary difference adjustment (*2)
(negative goodwill) used

769

563

50-year amortization amount of negative goodwill (*2)

262

262

Loss on retirement of noncurrent assets (*3)

132

35

Correspondence to major renovation works (*4)－

265

Adjustment for dilution (*5)

374－

14,771

15,6024,010,847 units

4,010,847 units¥3,683¥3,890Total dividends
Total number of investment units issued
Dividend per unit(*1) It is assumed that ¥1,174 million of gain on sale by the Sales is planned to be retained as reserve for special advanced
depreciation within the limit to maintain conduit status stipulated by Article 67-15 of 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
accompanied with transfer of specified assets” (Article 65-8 in the Act on Special Measures Concerning Taxation).
(*2) Starting from the fiscal year ending 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
Accountings 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 reverse ¥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 remaining balanceof the reserve for temporary difference adjustment set as the maximum amount, for every year from the fiscal year ended
December 31, 2017 (18th period).
(*3) Amount recognized as a loss on retirement of noncurrent assets will be appropriated by reserve for temporary difference
adjustment (negative goodwill) and is expected to have no impact on dividend per unit.
(*4) Taking into consideration the effect on dividend by the suspension of hotel operation due to the Renovation at Hotel
Centraza Hakata, ¥265 million, which is equivalent to the difference between NOI after depreciation of Hotel Centraza
Hakata for the fiscal year ended December 2017 (18th period) and forecasted NOI after depreciation for the fiscal year
ended December 2018 (19th period), will be appropriated by reserve for temporary difference adjustment (negative
goodwill).
(*5) Adjustment for dilution of dividend per unit due to issuance of new investment units.

- 22 -

3. Financial statements(1) Balance sheets(thousands of yen)
As ofDecember 31, 2017
AssetsCurrent assets
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Prepaid expenses
Income taxes receivable
Derivative assets
Other current assets
Total current assets
Noncurrent assets
Property and equipment, at cost
Machinery and equipment
Accumulated depreciation
Machinery and equipment, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Buildings in trust
Accumulated depreciation
Buildings in trust, net
Structures in trust
Accumulated depreciation
Structures in trust, net
Machinery and equipment in trust
Accumulated depreciation
Machinery and equipment in trust, net
Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Construction in progress in trust
Net property and equipment
Intangible assets
SoftwareLeasehold rights in trust
Fixed-term leasehold rights in trust
Other intangible assets
Total intangible assets
Investments and other assets
Security deposits
Leasehold and security deposits in trust
Long-term prepaid expenses
Derivative assets
Reserve for repairs and maintenanceTotal investments and other assets
Total noncurrent assets
Deferred assets
Investment unit issuance costs
Investment corporation bond issuance costs
Total deferred assets
Total assets*1- 23 -

As ofDecember 31, 2018

16,179,716
11,740,634
2,411,837
573,439
32－
14,20530,919,866

25,706,559
11,478,156
2,474,121
527,491
34
2,229
77,98740,266,582

278,899(119,213)
159,686
2,438,070(1,132,473)
1,305,597
122,414,147(15,153,003)
107,261,144
2,493,765(304,817)
2,188,948
580,867(99,228)
481,638
137,266(87,308)
49,957
171,618,110
1,512
283,066,595

398,134(150,113)
248,021
3,121,628(1,505,450)
1,616,178
122,605,307(18,178,952)
104,426,355
2,535,539(367,369)
2,168,169
598,790(125,229)
473,561
136,526(95,925)
40,601
163,151,369
765,363
272,889,620*1

200,001
28,648,457
5,313,494
9,116
34,171,069

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

12,520158,323
3,008,327
123,334
319,058
3,621,564
320,859,228

12,520150,223
2,687,996
45,125292,508
3,188,374
309,993,574

272,107132,059
404,166
352,183,262

124,220
172,390296,610
350,556,767

(thousands of yen)
As ofDecember 31, 2017
Liabilities
Current liabilities
Operating accounts payable
Short-term loans payable
Current portion of investment corporation bonds
Current portion of long-term loans payable
Accrued expenses
Income taxes payable
Consumption taxes payable
Advances received
Dividends payable
Deposits received
Derivative liabilities
Deferred tax liabilities
Other current liabilities
Total current liabilities
Long-term liabilities
Investment corporation bonds
Long-term loans payable
Tenant leasehold and security deposits
Tenant leasehold and security deposits in trust
Derivative liabilities
Deferred tax liabilities
Asset retirement obligations
Total long-term liabilities
Total liabilities
Net assets
Unitholders’ equity
Unitholders’ capital
SurplusCapital surplus
Voluntary reserve
Reserve for temporary difference adjustment
Total voluntary reserve
Unappropriated retained earnings (undisposed loss)
Total surplus
Total unitholders’ equity
Valuation and translation adjustments
Deferred gains (losses) on hedges
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets*2909,9713,000,000－
15,022,750
650,568
1,210
560,170
900,259
16,40022,09823,471－
54,903
21,161,802

1,941,008－
2,000,000
11,117,000
530,377
1,210
496,921882,052
18,275
7,315
17,608583
9,013
17,021,368

23,600,000
98,777,000
1,041,016
4,653,410
504,179
38,954
443,577
129,058,138
150,219,940

31,600,000
91,954,000
1,041,016
4,593,946
514,339
14,255445,622130,163,180
147,184,548

153,516,129

153,516,129

21,746,398

21,746,398

13,127,153
13,127,153
14,005,489
48,879,041
202,395,170(431,849)(431,849)*3 201,963,321
352,183,262- 24 -

As ofDecember 31, 2018*2

12,357,644
12,357,644
16,213,482
50,317,525
203,833,655(461,435)(461,435)*3 203,372,219
350,556,767

(2) Statements of income(thousands of yen)
For the year ended
December 31, 2017
Operating revenue
Real estate operating revenue
Other real estate operating revenue
Gain on sales of real estate properties
Total operating revenue
Operating expenses
Real estate operating costs
Asset management fee
Asset custody and Administrative service fee
Directors’ compensation
Other operating expenses
Total operating expenses
Operating income
Non-operating income
Interest income
Gain on forfeiture of unclaimed dividends
Gain on insurance claims
Refunded fixed asset tax
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
Income before income taxes
Income taxes – current
Total income taxes
Net income
Retained earnings brought forward
Unappropriated retained earnings (undisposed loss)*1*1

24,318,307
1,157,246
25,475,553*1, *3- 25 -

7,911,653
1,501,391
111,425
14,150179,110
9,717,731
15,757,821

For the year ended
December 31, 201825,140,735
1,178,141*2 1,934,974
28,253,850*1*1*1, *3

8,344,364
1,577,515
110,273
13,400214,828
10,260,381
17,993,469

212
3,624
648
－
391
22,381
27,258

225
3,583
4,627
10,354
118
12,84331,752904,000
169,584
522,774
20,748141,962
13,306
6,414
1,778,791
14,006,288
14,006,288
1,210
1,210
14,005,078
411
14,005,489

818,631
246,329525,031
27,751
147,887
39,417
8,529
1,813,577
16,211,644
16,211,644
1,210
1,210
16,210,434
3,048
16,213,482

(3) Statements of changes in net assets
For the year ended December 31, 2017
(thousands of yen)
Unitholders’ equity
Surplus
Unitholders’capitalBalance, January 1, 2017
Changes of items during theyear:
Issuance of new investment
units

134,829,448

Voluntary reserve
CapitalsurplusReserve fortemporary Total voluntary
reservedifference
adjustment

Dividend
reserve

21,746,398－

13,867,228

13,867,228

Unappropriatedretainedearnings(undisposed
loss)
12,126,057

Total
unitholders’equityTotal
surplus47,739,684

18,686,681

182,569,132

18,686,681

Reversal of dividend
reserve(13,867,228)

13,867,228－－

13,127,153(13,127,153)－－

Dividends paid

(12,865,721) (12,865,721)(12,865,721)

Net income

14,005,078

14,005,078

14,005,078(13,867,228)

Reserve for temporary
difference adjustment

Net changes of items
other than unitholders’equityTotal changes of items
during the year
Balance, December 31, 201713,127,153

18,686,681－(13,867,228)

13,127,153(740,075)

1,879,431

1,139,356

19,826,037*1

21,746,398－

13,127,153

13,127,153

14,005,489

48,879,041

202,395,170

153,516,129(thousands of yen)
Valuation and translation
adjustments
Total
Total
Deferred
net assets
valuation andgains (losses)
translation
on hedges
adjustments
Balance, January 1, 2017

(580,019)(580,019)

Changes of items during theyear:
Issuance of new investment
units
Reversal of dividend
reserve
Reserve for temporary
difference adjustment

181,989,112

18,686,681－－

Dividends paid

(12,865,721)

Net income

14,005,078

Net changes of items
other than unitholders’equityTotal changes of items
during the year
Balance, December 31, 2017

148,170

148,170

148,170

148,170

148,170

19,974,208(431,849)(431,849)

201,963,321- 26 -

For the year ended December 31, 2018
Unitholders’ equity
Surplus
Unitholders’capitalBalance, January 1, 2018

153,516,129

Voluntary reserve
Total
voluntary
reserve

Total
surplus13,127,153

13,127,153

14,005,489

48,879,041 202,395,170(769,508)(769,508)

769,508

Reserve fortemporarydifference
adjustment

21,746,398

Changes of items during theyear:
Reversal of reserve fortemporary difference
adjustment

Total
unitholders’ equity

Unappropria
ted retained
earnings(undisposed
loss)

Capitalsurplus－－Dividends paid

(14,771,949)(14,771,949) (14,771,949)

Net income

16,210,434

16,210,434

16,210,434

1,438,484

Net changes of items
other than unitholders’equityTotal changes of items
during the year
Balance, December 31, 2018－－

(769,508)(769,508)

2,207,993

1,438,484*1 153,516,129

21,746,398

12,357,644

12,357,644

16,213,482

50,317,525 203,833,655(thousands of yen)
Valuation and translation
adjustments
Total
Total
Deferred
net assets
valuation andgains (losses)
translation
on hedges
adjustments
Balance, January 1, 2018

(431,849)(431,849)

Changes of items during theyear:
Reversal of reserve fortemporary difference
adjustment

201,963,321－

Dividends paid

(14,771,949)

Net income

16,210,434

Net changes of items
other than unitholders’equityTotal changes of items
during the year
Balance, December 31, 2018(29,586)(29,586)(29,586)(29,586)(29,586)

1,408,897(461,435)(461,435)

203,372,219- 27 -

(4) Statements of cash dividends
Classification

I. Unappropriated retained earnings

For the year ended
December 31, 2017

For the year ended
December 31, 2018

¥14,005,489,588¥16,213,482,816*1 ¥769,508,609*1 ¥563,572,972¥14,771,949,501¥15,602,194,830[¥3,683][¥3,890]－¥1,174,860,958¥3,048,696－

II. Reversal of voluntary reserve
Reversal of reserve fortemporary difference adjustment
III. Dividends[Dividend per unit]
IV. Voluntary reserve
Reserve for special advanced
depreciation
V. Retained earnings carried forward
Method of calculating the amount of

In accordance with the monetary

In accordance with the monetarydividends

distribution policy stipulated in Article 34,
paragraph 1 of JHR’s Articles of

distribution policy stipulated in Article 34,
paragraph 1 of JHR’s Articles ofIncorporation, amount of dividend must
exceed 90% of JHR’s distributable profit

Incorporation, amount of dividend must
exceed 90% of JHR’s distributable profit

that is defined by Article 67-15 of the Act
on Special Measures Concerning Taxation.

that is defined by Article 67-15 of the Act
on Special Measures Concerning Taxation.

It was decided that ¥14,774,998,197, which
was calculated by adding a reversal of

It was decided that ¥15,602,194,830, which
was calculated by adding a reversal ofreserve for temporary difference adjustmentof ¥769,508,609 to unappropriated retained

reserve for temporary difference adjustmentof ¥563,572,972 to the amount obtained byearnings of ¥14,005,489,588, would all be
distributed except for fractions of less thandeducting reserve for special advanced
depreciation (defined by Article 65-8 of the

one yen of dividend per unit. Consequently,
the dividend per unit came to ¥3,683. The

Act on Special Measures Concerning
Taxation) of ¥1,174,860,958 frommonetary distribution in excess of earnings
stipulated in Article 34, paragraph 1 (4) of

unappropriated retained earnings of¥16,213,482,816, would be distributed. The

JHR’s Articles of Incorporation will not bemade.

monetary distribution in excess of earnings
stipulated in Article 34, paragraph 1 (4) of
JHR’s Articles of Incorporation will not be
made.

- 28 -

(5) Statements of cash flows(thousands of yen)
For the year ended
December 31, 2017
Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Loss on retirement of noncurrent assets
Loss (Profit) on derivative instruments
Amortization of investment corporation bond issuance costs
Amortization of investment unit issuance costs
Decrease in property and equipment due to sale
Decrease in property and equipment in trust due to sale
Decrease in 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 – net
SubtotalInterest received
Interest paid
Interest received on tax refunds
Income taxes – refunded (paid)
Net cash provided by operating activities
Cash flows from investing activities
Purchase of property and equipment
Purchase of property and equipment in trust
Purchase of intangible assets
Payments of reserve for repairs and maintenance
Proceeds from collection of guarantee deposits in trust
Reimbursements of tenant leasehold and security deposits
Proceeds from tenant leasehold and security deposits in trust
Reimbursements of tenant leasehold and security deposits in trust
Net cash used in investing activities
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
Proceeds from issuance of investment units
Payments for investment corporation bond issuance costs
Dividends paid
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

- 29 -For the year ended
December 31, 2018

14,006,288
3,725,775
132,908(9,074)
20,748141,962－－－(212)
1,073,584(391)(340,685)
13,261
82,178(6,949)43,44963,796969(95,850)(11,075)
18,840,684
166(1,076,810)
391
(947)
17,763,484

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(557,756)(35,256,102)(46,379)(258,870)－(16)
70,297(35,130)(36,083,958)(536,481)(2,399,742)(87,074)(40,330)
8,100－
59,743(115,020)(3,110,806)

4,000,000(2,800,000)
21,700,000(9,679,250)
1,000,000
18,516,225(9,218)(12,860,798)
19,866,959
1,546,484
26,373,866*1 27,920,350

5,000,000(8,000,000)
10,150,000(20,878,750)
10,000,000－(68,082)(14,766,490)(18,563,322)
9,264,365
27,920,350*1 37,184,716

(6) Notes on going concern assumption
Not applicable.

(7) Notes on matters concerning significant accounting policies
1.

Method ofdepreciation andamortization of
noncurrent assets(1) Property and equipment (including trust accounts)
Depreciation of property and equipment is calculated using the straight-line method. The useful
lives of major property and equipment components are as follows:
Machinery and equipment
Tools, furniture and fixtures

2 to 17 years
2 to 20 years

Buildings in trust
Structures in trust

2 to 62 years
2 to 62 years

Machinery and equipment in trust
Tools, furniture and fixtures in trust

4 to 32 years
2 to 27 years(2) Intangible assets
Intangible assets are amortized using the straight-line method. The amortization period of major
intangible assets is as follows.
Software (for internal use)

5 years as internally usable years

Fixed-term leasehold rights in trust are amortized using the straight-line method based on remaining
period (41 years and 49 years) of the contract.
(3) Long-term prepaid expenses
Long-term prepaid expenses are amortized using the straight-line method.
2.

Accounting fordeferred assets(1) Investment unit issuance costs
Investment unit issuance costs are amortized using the straight-line method over three years.
(2) Investment corporation bond issuance costs
Investment corporation bond issuance costs are amortized using the interest method over therespective term of the bond.

3.

Standards forrecognition ofTreatment of property taxes and other taxes
For taxes imposed on properties under management such as property taxes, city planning taxes, andrevenues andexpensesdepreciable asset taxes, the imposed amounts are allocated to the respective period and expensed as“Real estate operating costs.”
Cash paid for property taxes and city planning taxes to the transferor of real properties at acquisition is
not recorded as “Real estate operating costs” but capitalized as part of the acquisition cost of the relevant
property.
The amount of such taxes capitalized in the acquisition cost of real properties was ¥75,557 thousand forthe year ended December 31, 2017 and none for the year ended December 31, 2018.

4.

Method of(1) Method of hedge accounting

hedge accounting

Deferred hedge accounting is applied(2) Hedging instruments and hedged items
Hedging instruments
Interest rate swaps
Interest rate caps
Hedged items
Interest rates on loans payable(3) Hedging policy
JHR enters into certain derivative transactions in accordance with its financial policy in order tomanage risks, which is provided in the Articles of Incorporation.
(4) Method for assessing hedge effectiveness
JHR evaluates hedge effectiveness by comparing the cumulative changes in cash flow of hedging
instruments and the hedged items and assessing the ratio between the changes.

- 30 -

5.

6.

Scope of funds

Cash and cash equivalents in the statements of cash flows consist of cash on hand, cash in trust accounts,(cash and cash
equivalents) inbank deposit and trust deposit, which can be withdrawn at any time, and short-term investments with amaturity of three months or less when purchased, which can easily be converted to cash and subject tothe statements ofcash flows

minimal risk of change in value.

Other(1) Accounting treatment of beneficial interests in trust with real estate, etc. as their assets

significant mattersserving as the basis

For trust beneficial interests in real estate, etc., all assets and liabilities held in trust accounts as well
as all income generated and expenses incurred from assets in trust are presented in thefor preparing
financial statements

accompanying balance sheet and income statement accounts accordingly.
The following material items of the trust accounts recorded in the relevant accounts are presented
separately on the balance sheets.
(a) Cash and deposits in trust(b) Buildings in trust; Structures in trust; Machinery and equipment in trust; Tools, furniture andfixtures in trust; Land in trust; Construction in progress in trust(c) Leasehold rights in trust; Fixed-term leasehold rights in trust; Leasehold and security deposits
in trust(d) Tenant leasehold and security deposits in trust(2) Accounting treatment of consumption taxes
Consumption taxes are excluded from the transaction amounts.

(8) Notes to financial statements
Disclosure of notes on “securities,” “share of (profit) loss of entities accounted for using equity method,” “related-party
transactions” and “retirement benefits” is omitted because there is thought to be not important and thus not necessary fordisclosure in the financial report.

[Notes on accounting standards and other regulations yet to be 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 UnitedStates have jointly developed comprehensive accounting standards for revenue recognition and issued “Revenue fromContracts with Customers” (IFRS 15 by IASB and Topic 606 by FASB) in May 2014. Given the situation where IFRS 15
will be applied from fiscal years beginning on or after January 1, 2018 and that Topic 606 will be 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 specify theaccounting standards, 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 compatibility with IFRS 15. The
basic policy also stipulates that if there is an item to which consideration should be given, such as practices that have been
conducted thus far in Japan, alternative treatments will be added to the extent to which comparability is not impaired.
(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 level of the impact on the financial statements of applying the “Accounting Standard for Revenue Recognition” andthe like is currently under review.

- 31 -

[Notes to balance sheets]*1. Accumulated advanced depreciation of property and equipment deducted from acquisition costs due to government
subsidies received, etc.
(thousands of yen)
As ofDecember 31, 2017
Buildings in trust

As ofDecember 31, 2018¥24,921¥24,921*2. Matters concerning provision and reversal of reserve for temporary difference adjustment
As of December 31, 2017
Amount ofinitialaccrualBalance at
beginning of
periodAmount ofprovision
during period

Amount ofreversalduringperiodBalance at
end ofperiodGrounds for provision and reversal
Application of the transitional

Dividend
reserve

13,127,153-

13,127,153-

13,127,153(Note)

measures of Paragraph 3 of the
Supplementary Provisions of the“Ordinance on Accountings ofInvestment Corporations” (Cabinet
Office Ordinance No.27 of 2015)(Note) The remaining balance of the amount subdivided into gain on negative goodwill which was recorded as a dividend reserveprior to the previous period is reserved for temporary difference adjustment during the fiscal year, and is scheduled forreversal every fiscal year, starting from the fiscal year following the fiscal year in which the reserve was made, in an
amount that shall be no less than that in equal amounts every fiscal year over a period of no more than 50 years.
As of December 31, 2018
(thousands of yen)Amount ofinitialaccrualBalance at
beginning of
periodAmount ofprovision
during period

Amount ofreversalduringperiod13,127,153

13,127,153-

769,508

Balance at
end ofperiodGrounds for provision and reversal

12,357,644

Allocation for dividend

Dividend
reserve(Note)(Note) Dividend reserve indicates the remaining balance of the amount subdivided into gain on negative goodwill which wasrecorded as a dividend reserve before the fiscal year ended December, 2016, and is scheduled for reversal every fiscal year,
starting from the fiscal year following the fiscal year in which the reserve was made, in an amount that shall be no lessthan that in equal amounts every fiscal year over a period of no more than 50 years.
*3. Minimum net assets as required by Article 67, paragraph 4 of the Investment Trusts Act
As ofDecember 31, 2017
¥50,000 thousand- 32 -

As ofDecember 31, 2018
¥50,000 thousand

[Notes to statements of income]*1. Components of real estate operating revenue and real estate operating costs(thousands of yen)
For the year ended
December 31, 2017
A.

Real estate operating revenue
Real estate operating revenue
Fixed rent

13,064,351

13,610,785

Variable rent
Income from management contracts

8,572,121
2,681,834

8,851,482
2,678,467

24,318,307

25,140,735

Other real estate operating revenue
Parking lots

179,054

173,453

Other incidental revenue
Utilities

62,597
781,934

62,693804,915

Other

133,660

Total

Total
Total real estate operating revenueB.

137,078

1,157,246

1,178,141

25,475,553

26,318,876

Real estate operating costs
Real estate operating costs
Land lease and other rent expenses

C.

For the year ended
December 31, 2018

922,891

907,621

Property taxes
Outsourcing expenses (Note)

1,476,156
703,933

1,630,178
714,663

Nonlife insurance
Depreciation and amortization

47,0303,725,775

47,7984,091,929

Loss on retirement of noncurrent assets
Repairs

132,908
49,74735,972
46,405

Utilities
Trust fees

790,728
43,655

813,91142,537

Other

18,825

13,345

Total real estate operating costs

7,911,653

8,344,364

Net real estate operating income (A − B)

17,563,899

17,974,512(Note) Outsourcing expenses include management contract fees of ¥343,712 thousand for the year ended December 31, 2017 and ¥337,442 thousand for the year
ended December 31, 2018.

*2．Breakdown of gain on sales of real estate properties
For the year ended December 31, 2017
Not applicable.
For the year ended December 31, 2018
(thousands of yen)
R&B Hotel Higashi-nihonbashi
Proceeds from sale of real estate
Cost of sale of real estate

3,050,000
1,483,749

Other related sales expenses

22,955Gain on sales of real estate properties

1,543,295

the b akasaka-mitsuke
Proceeds from sale of real estate

6,600,000

Cost of sale of real estate
Other related sales expenses

6,294,221
41,508Gain on sales of real estate properties

264,270- 33 -

the b ochanomizu
Proceeds from sale of real estate

2,500,000

Cost of sale of real estate
Other related sales expenses

2,353,951
18,639Gain on sales of real estate properties

127,408*3. Depreciation was expensed as follows:
For the year ended
December 31, 2017
Property and equipment
Intangible assets(thousands of yen)
For the year ended
December 31, 2018

¥3,538,117¥3,894,324¥187,658¥197,605[Notes to statements of changes in net assets]
For the year ended
December 31, 2017

For the year ended
December 31, 2018

*1 Total number of investment units
authorized, and issued and outstanding
Total number of investment units authorized

20,000,000 units

20,000,000 units

Total number of investment units issued and outstanding

4,010,847 units

4,010,847 units[Notes to statements of cash dividends]*1. Reserve for temporary difference adjustment
For the year ended December 31, 2017
By application of the transitional measures of Paragraph 3 of the Supplementary Provisions of the “Ordinance on
Accountings of Investment Corporations” (Cabinet Office Ordinance No. 27 of 2015), ¥13,127,153,216 in dividend reservethat is the remaining balance of the amount subdivided into gain on negative goodwill recorded in prior fiscal years is set
aside as reserve for temporary difference adjustment on the statements of cash dividends for the year ended December 31,
2016. Starting from the fiscal year following the fiscal year in which the reserve was made, reversal of the concerned
reserve amount in an amount that shall be no less than the 50-year even amortization amount (¥262,543,065) of theremaining balance of the amount when the reserve was made, is required. In this fiscal year under review, reversal of¥769,508,609 has been decided, which is the amount calculated by adding ¥374,000,000 for adjustment to dilution ofdividend per unit due to capital increase through public offering and ¥132,908,609 equivalent to loss on retirement of fixed
assets to ¥262,600,000 of the reversal.
For the year ended December 31, 2018
By application of the transitional measures of Paragraph 3 of the Supplementary Provisions of the “Ordinance on
Accountings of Investment Corporations” (Cabinet Office Ordinance No. 27 of 2015), ¥13,127,153,216 in dividend reservethat is the remaining balance of the amount subdivided into gain on negative goodwill recorded in prior fiscal years is set
aside as reserve for temporary difference adjustment on the statements of cash dividends for the year ended December 31,
2016. Starting from the fiscal year following the fiscal year in which the reserve was made, reversal of the concerned
reserve amount in an amount that shall be no less than the 50-year even amortization amount (¥262,543,065) of theremaining balance of the amount when the reserve was made, is required. In this fiscal year under review, reversal of¥563,572,972 has been decided, which is the amount calculated by adding ¥35,972,972 equivalent to loss on retirement of
fixed assets and ¥265,000,000 for the large-scale renovation at Hotel Centraza Hakata to ¥262,600,000 of the reversal.

[Notes to statements of cash flows]*1. Relation of balance of cash and cash equivalents at end of year and the amount in balance sheet accounts
For the year ended
December 31, 2017
Cash and deposits¥16,179,716(thousands of yen)
For the year ended
December 31, 2018¥25,706,559

Cash and deposits in trust¥11,740,634¥11,478,156

Cash and cash equivalents¥27,920,350¥37,184,716- 34 -

[Notes on lease transactions]Operating leases (as lessor)
Minimum rental revenue under non-cancellable operating leases
As ofDecember 31, 2017

(thousands of yen)
As ofDecember 31, 2018

Due within one year

¥1,520,073¥1,666,631

Due after one year

¥4,685,123¥3,562,086

Total¥6,205,197¥5,228,717[Notes on financial instruments]
1. Matters concerning status of financial instruments(1) Policy for financial instruments
JHR is an investment corporation set forth in Article 2, paragraph 12 of the Investment Trusts Act, managing investments
mainly in specified assets as prescribed in the Investment Trusts Act. As a policy, JHR procures funds through issuance ofinvestment units, etc. and loans from financial institutions in order to make investments in specified 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 is operating receivables and is exposed to credit risks of clients. As for the risks, JHR is
managing payment dates and balances by each client with an aim to grasp concerns in collecting due to deterioration in
their financial status and other factors in early stage and reduce the risks.
The floating rate loans payable are exposed to risks of interest rate fluctuations. In order to mitigate interest rate risk, JHR
may enter into derivative transactions, if necessary, to fix the interest expense.
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 section in charge of finance at theAsset Management Company by using financial institutions with high credit ratings through approval and resolution byauthorized personnel and a meeting committee structure set forth in its decision-making standards and resolution of JHR’sboard of directors.
Loans payable are exposed to liquidity risks. The section in charge of finance at the Asset Management Company preparesand updates projections and actual cash flows on a monthly basis to manage liquidity risks and monitor compliance withrestrictive covenants set forth in the loan agreements. JHR manages liquidity risks by managing the ratio of short-termand long-term loans payable considering the current financial environment through approval and resolution by authorized
personnel and meeting committee structure in the Asset Management Company and resolution of JHR’s board of directors.
(3) Supplementary explanation on matters concerning fair value, etc. of financial instruments
Regarding the contract amount, etc. of derivative transactions in “2. Matters concerning fair value of financial
instruments,” the amount itself does not indicate certain scale of market risk exposure related to derivative transactions.

- 35 -

2. Matters concerning fair value of financial instruments
Carrying amounts of financial instruments on the balance sheets, their fair values, and the differences as of December 31,
2017 were as follows. Financial instruments whose fair values are considered extremely difficult to measure are not includedin the table. See Note 2 below.
Carrying amount
Fair value
Difference(JPY 1,000)(JPY 1,000)(JPY 1,000)(1) Cash and deposits

16,179,716

16,179,716―(2) Cash and deposits in trust

11,740,634

11,740,634―(3) Operating accounts receivable

2,411,837

2,411,837―

Total assets

30,332,188

30,332,188―(4) Short-term loans payable

3,000,000

3,000,000

―

―

―

―

(6) Current portion of long-term loans payable

15,022,750

15,022,750―(7) Investment corporation bonds

23,600,000

23,621,270

21,270(8) Long-term loans payable

98,777,000

98,777,000―

Total liabilities

140,399,750

140,421,020

21,270(404,316)(404,316)―(5) Current portion of investment corporation bonds
payable(9) Derivative transactions (*)

Carrying amounts of financial instruments on the balance sheets, their fair values, and the differences as of December 31,
2018 were as follows. Financial instruments whose fair values are considered extremely difficult to measure are not includedin the table. See Note 2 below.
Carrying amount(JPY 1,000)

Fair value(JPY 1,000)

Difference(JPY 1,000)(1) Cash and deposits

25,706,559

25,706,559―(2) Cash and deposits in trust

11,478,156

11,478,156―(3) Operating accounts receivable

2,474,121

2,474,121―

Total assets

39,658,838

39,658,838

―

―

―

―

(5) Current portion of investment corporation bonds
payable2,000,000

2,002,200

2,200(6) Current portion of long-term loans payable

11,117,000

11,117,000―(7) Investment corporation bonds

31,600,000

31,785,870

185,870(8) Long-term loans payable

91,954,000

91,954,000―

Total liabilities

136,671,000

136,859,070

188,070(4) Short-term loans payable(9) Derivative transactions (*)(484,593)(484,593)―(*) Receivables and payables arising from derivative transactions are presented on a net basis and amounts in parenthesis denote net
payables.
(Note 1) Methods to measure fair value of financial instruments, and derivative transactions(1) Cash and deposits; (2) Cash and deposits in trust; (3) Operating accounts receivable; (4) Short-term loans payable
The carrying value is deemed to approximate the fair value since the instruments are scheduled to be settled in a short periodof time. Therefore, carrying value is stated.
(5) Current portion of investment corporation bonds payable; (7) Investment corporation bonds
The fair value of these instruments is measured based on the market price.
(6) Current portion of long-term loans payable; (8) Long-term loans payable
The carrying value is deemed to approximate the fair value since the interest rate on long-term loans payable are floatinginterest rates which are revised periodically to reflect market interest rates.
(9) Derivative transactions
The information on the fair value of derivative transactions is presented in “Notes on derivative transactions” below.

- 36 -

(Note 2) Carrying amount of financial instruments whose fair values are considered extremely difficult to measure(thousands of yen)
As ofDecember 31, 2017Classification

As ofDecember 31, 2018

Tenant leasehold and security deposits

1,041,016

1,041,016

Tenant leasehold and security deposits in trust

4,653,410

4,593,946

Total

5,694,426

5,634,962

Tenant leasehold and security deposits / Tenant leasehold and security deposits in trust
Tenant leasehold and security deposits (in trust) for rental properties 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 is difficult.
3. Redemption schedule for monetary claims subsequent to the account closing date
As of December 31, 2017
Due after
Due after
Due after
Due within
one to two
two to three
three to four
one year
years
years
years
(JPY 1,000)(JPY 1,000)(JPY 1,000)(JPY 1,000)

Due after
four to five
years
(JPY 1,000)

Due after
five years(JPY 1,000)

Cash and deposits

16,179,716

―

―

―

―

―

Cash and deposits in trust

11,740,634

―

―

―

―

―

Operating accounts receivable

2,411,837

―

―

―

―

―

Total

30,332,188

―

―

―

―

―

Due within
one year(JPY 1,000)

Due after
one to two
years(JPY 1,000)

Due after
two to threeyears(JPY 1,000)

Due after
three to four
years
(JPY 1,000)

Due after
four to five
years
(JPY 1,000)

Due after
five years(JPY 1,000)

Cash and deposits

25,706,559

―

―

―

―

―

Cash and deposits in trust

11,478,156

―

―

―

―

―

Operating accounts receivable

2,474,121

―

―

―

―

―

Total

39,658,838

―

―

―

―

―

As of December 31, 2018

4. Schedule for repayment of loans payable and redemption of investment corporation bonds subsequent to the account closing
date
As of December 31, 2017
Due within
one year(JPY 1,000)

Due after
one to two
years(JPY 1,000)

Due after
two to threeyears(JPY 1,000)

Due after
three to four
years
(JPY 1,000)

Due after
four to five
years
(JPY 1,000)

Due after
five years(JPY 1,000)

3,000,000

―

―

―

―

―

―

―

―

―

―

―

15,022,750

―

―

―

―

―

Investment corporation bonds―

2,000,000―

1,500,000

6,000,000

14,100,000

Long-term loans payable―

11,217,000

13,544,000

10,800,000

11,200,000

52,016,000

18,022,750

13,217,000

13,544,000

12,300,000

17,200,000

66,116,000

Short-term loans payable
Current portion of investment
corporation bonds payable
Current portion of
long-term loans payable

Total- 37 -

As of December 31, 2018
Due within
one year(JPY 1,000)

Due after
one to two
years(JPY 1,000)

Due after
two to threeyears(JPY 1,000)

Due after
three to four
years
(JPY 1,000)

Due after
four to five
years
(JPY 1,000)

Due after
five years(JPY 1,000)

―

―

―

―

―

―

2,000,000

―

―

―

―

―

11,117,000

―

―

―

―

―

Investment corporation bonds――

1,500,000

6,000,000―

24,100,000

Long-term loans payable―

12,782,000

10,800,000

10,900,000

15,772,000

41,700,000

13,117,000

12,782,000

12,300,000

16,900,000

15,772,000

65,800,000

Short-term loans payable
Current portion of investment
corporation bonds payable
Current portion of
long-term loans payable

Total[Notes on derivative transactions]
1. Derivative transactions to which hedge accounting is not applied
As of December 31, 2017
For derivative transactions which hedge accounting is not applied, the contract amount or the amount equivalent to theprincipal provided in the contract, etc. as of the account closing date was as follows:(thousands of yen)Classification

Type, etc. of
derivative transaction

Transactions
other thanmarkettransactions

Interest rate swaps(fixed rate payment,
floating rate receipt)

Contract amount, etc.
Of which, due
after one year
6,794,000

1,794,000

Fair value

Method to measure the fair value

The fair value is measured at the(15,651) quoted price, etc. obtained from thecounterparty financial institutions.

As of December 31, 2018
For derivative transactions which hedge accounting is not applied, the contract amount or the amount equivalent to theprincipal provided in the contract, etc. as of the account closing date was as follows:(thousands of yen)Classification

Type, etc. of
derivative transaction

Transactions
other thanmarkettransactions

Interest rate swaps(fixed rate payment,
floating rate receipt)

Contract amount, etc.
Of which, due
after one year
6,088,000

3,494,000

Fair value

Method to measure the fair value

The fair value is measured at the(37,996) quoted price, etc. obtained from thecounterparty financial institutions.

2. Derivative transactions to which hedge accounting is applied
As of December 31, 2017
For derivative transactions which hedge accounting is applied, the contract amount or the amount equivalent to the principal
provided in the contract, etc. as of the account closing date for each method of hedge accounting was as follows:(thousands of yen)
Method ofhedge
accounting

DeferralmethodContract amount, etc.

Type, etc. of
derivative transactionMainhedged item

Interest rate swaps(fixed rate payment,
floating rate receipt)

Long-termloans payable

100,058,750

91,048,000Interest rate caps

Long-termloans payable

4,286,250－

Of which, due
after one year

- 38 -

Fair value

Method to measure
the fair value

The fair value is(388,665) measured at thequoted price, etc.
obtained from the－ counterparty
financial institutions.

As of December 31, 2018
For derivative transactions which hedge accounting is applied, the contract amount or the amount equivalent to the principal
provided in the contract, etc. as of the account closing date for each method of hedge accounting was as follows:(thousands of yen)
Method ofhedge
accounting

DeferralmethodType, etc. of
derivative transaction

Interest rate swaps(fixed rate payment,
floating rate receipt)Mainhedged item

Long-termloans payable

Contract amount, etc.
Of which, due
after one year

90,654,000

81,554,000

Fair value

Method to measure
the fair value

The fair value ismeasured at thequoted price, etc.
(446,597)
obtained from thecounterparty
financial institutions.

[Notes on tax-effect accounting]1.

Significant components of deferred tax assets and liabilities by cause(thousands of yen)
As ofDecember 31, 2017

As ofDecember 31, 2018

Deferred tax assets:
1,756,833

1,728,216

Amortization of fixed-term leasehold of land

Valuation difference on assets accepted through merger

76,475

119,491

Asset retirement obligations

7,603

11,259Deferred gains (losses) on hedges

165,776

156,203

Total gross deferred tax assets

2,006,688

2,015,170(2,006,688)(2,015,170)――

38,954

14,83838,954

14,838Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Deferred gains (losses) on hedges
Total gross deferred tax liabilities
2.

Details of major causes of material differences between the statutory tax rate and the tax rate under effective tax accounting
As ofDecember 31, 2017

Statutory tax rate

As ofDecember 31, 201831.74%

31.74%(31.92%)(29.63%)

Reserve for special advanced depreciation―%(2.30%)

Change in valuation allowance

0.18%

0.10%

Other – net

0.01%

0.09%

Actual effective tax rate

0.01%

0.01%

[Adjustments]
Deduction for dividends paid

- 39 -

[Notes on asset retirement obligations]
Asset retirement obligations recognized on the balance sheet
1. Outline of the subject asset retirement obligations
JHR recognizes asset retirement obligations as it is obliged to restore the land of Hotel Centraza Hakata, acquired on April 1,
2016, and HOTEL ASCENT FUKUOKA, acquired on August 19, 2016, to the original state in accordance with the fixedterm leasehold agreement.
2. Calculation method of the subject asset retirement obligations
Calculated the amount of asset retirement obligations estimating that the expected useful life is 34 years and 48 years,
respectively, due to their remaining use period and using the discount rate of 0.484% and 0.394%, respectively.
3. Increase and decrease of the subject asset retirement obligations(thousands of yen)
For the year ended
December 31, 2017
Balance at beginning of period
Increase due to acquisition of property and equipment
Adjustment due to passage of time
Balance at end of period

For the year ended
December 31, 2018
441,542443,577

―

―

2,035

2,045

443,577445,622[Notes on segment and related information]
1. Segment information
The segment information has been omitted because JHR has only one segment, which is the investment and management ofhotel real estate.
2. Related information
For the year ended December 31, 2017(1) Information about products and services
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 on the statements of income.
(2) Information about geographical areas(i) Operating revenue
Information about geographical areas has been omitted because operating revenue from external customers in Japanaccounted for more than 90% of total operating revenue on the statements of income.
(ii) Property and equipment
Information about property and equipment has been omitted because the amount of property and equipment located inJapan accounted for more than 90% of net property and equipment on the balance sheets.
(3) Information about major customers(thousands of yen)
Name of customer

Operating revenue

Name of related segment

Hotel Management Japan Co., Ltd.

6,973,259

Investment and management of hotel real estate

AAPC Japan K.K.

3,098,069

Investment and management of hotel real estate- 40 -

For the year ended December 31, 2018(1) Information about products and services
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 on the statements of income.
(2) Information about geographical areas(i) Operating revenue
Information about geographical areas has been omitted because operating revenue from external customers in Japanaccounted for more than 90% of total operating revenue on the statements of income.
(ii) Property and equipment
Information about property and equipment has been omitted because the amount of property and equipment located inJapan accounted for more than 90% of net property and equipment on the balance sheets.
(3) Information about major customers(thousands of yen)
Name of customer

Operating revenue

Name of related segment

Hotel Management Japan Co., Ltd.

7,200,325

Investment and management of hotel real estate

AAPC Japan K.K.

3,121,263

Investment and management of hotel real estate[Notes on rental properties, etc.]
JHR owns rental properties for hotels. The carrying amounts, changes in such balances, and fair values of such properties wereas follows:(thousands of yen)
For the year ended
December 31, 2017

Use

For the year ended
December 31, 2018

Carrying amount

Hotel

Balance at beginning of period

284,965,547

317,229,208

Net increase (decrease) during period

32,263,660(10,439,828)

Balance at end of period

317,229,208

306,789,379

439,390,000

437,510,000

Fair value at end of period(Note 1)

(Note 2)

Increase during the year ended December 31, 2017 principally represents the acquisition of Hilton Tokyo Narita Airport for ¥13,376 million,
International Garden Hotel Narita for ¥9,237 million and Hotel Nikko Nara for ¥10,589 million. Decrease during the year ended December 31, 2018
principally represents the sale of R&B Hotel Higashi Nihonbashi for ¥1,483 million, the b akasaka-mitsuke for ¥6,294 million and the b ochanomizu
for ¥2,353 million.
Fair value at end of period is the appraisal value determined by licensed real estate appraisers.

- 41 -

Real estate operating revenue and costs related to the rental properties were as follows:(thousands of yen)
For the year ended
December 31, 2017

Use

For the year ended
December 31, 2018

Amount on the statements of income
Real estate operating revenue

25,475,553

26,318,876

Real estate operating costs

7,911,653

8,344,364

Net real estate operating income

17,563,899

17,974,512

Hotel(Note)“Real estate operating revenue” and “Real estate operating costs” are income from real estate operation (including other income from real estate
operation) and corresponding expenses (such as depreciation, property tax, etc., trust fees, repair expenses and others), and are included in [“Operating
revenue” and “Real estate operating costs,”]【Check this definition with AC】 respectively.

[Notes on per unit information]
For the year ended
December 31, 2017

For the year ended
December 31, 2018

Net assets per unit

¥50,354¥50,705

Net income per unit

¥3,606¥4,041(Note 1)
(Note 2)

Net income per unit is computed by dividing net income by the average number of investment units during the period.
Net income per unit after the adjustment of potentially dilutive units is not presented since there are no potentially dilutive units.
The basis of computation of net income per unit is as follows:

For the year ended
December 31, 2017
Net income (JPY 1,000)

For the year ended
December 31, 2018

14,005,078

16,210,434――

Net income for attributable to common investment units (JPY 1,000)

14,005,078

16,210,434

Average number of investment units during period (units)

3,883,679

4,010,847

Amount not attributable to common unitholders (JPY 1,000)[Notes on significant subsequent events]
1. Acquisition of assets
JHR acquired Hotel Oriental Express Osaka Shinsaibashi on February 1, 2019.
Property name

Hotel Oriental Express Osaka Shinsaibashi

Asset category

Real estate beneficial interest in trust and movable assets attached to the hotel

Asset type

Hotel

Address (residential indication)

3-2-13, Minamisemba, Chuo-ku, Osaka-shi, Osaka

Acquisition dateFebruary 1, 2019

SellerUndisclosed (Note 1)

Acquisition price (Note 2)¥2,738 million(Note 1) The information is not disclosed as consent on disclosure has not been obtained from the seller.
(Note 2) The acquisition price does not include expenses for acquisition, settlement of property taxes and city planning taxes, and consumption tax.

- 42 -

2. Conclusion of contract on acquisition of asset
On January 8, 2019, JHR concluded a purchase and sale agreement (Note 1) regarding acquisition of the following asset.
Name of asset to be acquired

Hilton Tokyo Odaiba

Asset category

Real estate beneficial interest in trust and movable assets attached to the hotel

Asset type

Hotel

Address (residential indication)

1-9-1, Daiba, Minato-ku, Tokyo

Anticipated acquisition date

April 8, 2019

Anticipated seller

Hulic Co., Ltd.

Anticipated acquisition price (Note 2)¥62,400 million(Note 1) The purchase and sale agreement is subject to forward commitment, etc., stipulated in the Comprehensive Guidelines for Supervision of
Financial Instruments Business Operators, etc. by Financial Services Agency. Forward commitment, etc. here is defined as“a postdated realestate transaction contract where there is an agreement to either make a financial settlement or complete transfer of asset after a period of one
month or more following the conclusion of the contract, or any other similar contracts.” The purchase and sale agreement stipulates that either
party may cancel the purchase and sale agreement if the other party violates the obligations stipulated in the purchase and sale agreement andthat the violating party shall pay a certain amount of trading value to the other party. However, the purchase and sale agreement contains a
special condition which stipulates that completion of debt financing stated in “3. Resolution on borrowing funds” below or other fundraising by
JHR is a condition precedent to the payment of the transaction amount. Accordingly, in the event that debt financing or fundraising by JHR for
the payment of the transaction amount is not completed, the purchase and sale agreement will be terminated without payment of cancellation
penalty.
(Note 2) The acquisition price does not include expenses for acquisition, settlement of property tax and city planning tax, consumption tax and local
consumption tax.

3. Resolution on borrowing of funds
At the Board of Directors meeting held on January 8, 2019, JHR resolved on the following new borrowings in order topartly fund the acquisition of the real estate beneficial interest in trust and movable assets attached to the hotel as describedabove in “2. Conclusion of contract on acquisition of asset.”(1) Term Loan 53
Scheduled lender

The Bank of Fukuoka, Ltd. / The Chiba Bank, Ltd. / The Nishi-Nippon City Bank,
Ltd. / Sompo Japan Nipponkoa Insurance Inc.

Planned amount of the new loan

¥2,500 million

Interest rate

To be determined (fixed rate)

Scheduled date of borrowing

April 8, 2019
Individual loan contracts to be concluded on March 11, 2019 with the lenders

Method of Borrowing

indicated above based on the Basic Agreement concluded on November 13, 2013
(including subsequent amendments).

Method of principal repayment

Lump-sum payment on the maturity date

Maturity date

March 29, 2024

Collateral

Unsecured / Unguaranteed(2) Term Loan 54
Scheduled lender

Sumitomo Mitsui Banking Corporation / Shinsei Bank, Limited / Mizuho Bank,
Ltd. / Sumitomo Mitsui Trust Bank, Ltd. / Development Bank of Japan Inc.

Planned amount of the new loan

¥7,500 million

Interest rate

Base interest rate (JBA Japanese Yen TIBOR for one month) + 0.55%

Scheduled date of borrowing

April 8, 2019
Individual loan contracts to be concluded on March 11, 2019 with the lenders

Method of Borrowing

indicated above based on the Basic Agreement concluded on November 13, 2013
(including subsequent amendments).

Method of principal repayment

Lump-sum payment on the maturity date

Maturity date

March 31, 2027

Collateral

Unsecured / Unguaranteed- 43 -

(3) Term Loan 55

Scheduled lender

Sumitomo Mitsui Banking Corporation / Shinsei Bank, Ltd. / Mizuho Bank, Ltd. /Sumitomo Mitsui Trust Bank Limited / Resona Bank, Ltd. / The Nomura Trust andBanking Co., Ltd. / Development Bank of Japan Inc. / The Bank of Fukuoka, Ltd. /Aozora Bank, Ltd. / The Nishi-Nippon City Bank, Ltd.

Planned amount of the new loan

¥18,000 million

Interest rate

Base interest rate (JBA Japanese Yen TIBOR for one month) + 0.60%

Scheduled date of borrowing

April 8, 2019

Method of Borrowing

Individual loan contracts to be concluded on March 11, 2019 with the lenders
indicated above based on the Basic Agreement concluded on November 13, 2013
(including subsequent amendments).

Method of principal repayment

Lump-sum payment on the maturity date

Maturity date

March 31, 2028

Collateral

Unsecured / Unguaranteed(4) Term Loan 56
Scheduled lender

Sumitomo Mitsui Banking Corporation

Planned amount of the new loan

¥2,000 million

Interest rate

Base interest rate (JBA Japanese Yen TIBOR for one month) + 0.275%

Scheduled date of borrowing

April 8, 2019

Method of Borrowing

Individual loan contracts to be concluded on March 11, 2019 with the lenders
indicated above based on the Basic Agreement concluded on November 13, 2013
(including subsequent amendments).

Method of principal repayment

Lump-sum payment on the maturity date

Maturity date

March 31, 2020

Collateral

Unsecured / Unguaranteed

4. Issuance of new investment units
JHR resolved to issue new investment units at the Board of Directors meetings held on January 8, 2019 and January 16,
2019. Payment for the new investment units was completed on January 23, 2019 and February 20, 2019, and the investment
units were issued under the following terms and conditions. As a result, JHR’s unitholders’ capital increased to¥186,894,169,809, with the total number of investment units issued and outstanding being 4,462,347 units.
(1) Issuance of new investment units (domestic public offering and overseas offering)Number of investment units issued:

447,800 units

Of which, domestic public offering:

206,247 units

Of which, overseas offering:

241,553 units

Issue price:¥76,342 per unit

Total issue price:¥34,185,947,600

Paid-in amount (issue value):¥73,927 per unit

Total paid-in amount (total issue value):¥33,104,510,600

Payment date:

January 23, 2019(2) Issuance of new investment units (third-party allotment)
Number of investment units issued:

3,700 units

Paid-in amount (issue value):¥73,927 per unit

Total paid-in amount (total issue value):¥273,529,900

Payment date:February 20, 2019

Allottee:

SMBC Nikko Securities Inc.
- 44 -

(3) Use of funds
JHR will allocate the proceeds from the issuance of new investment units through the domestic public offering and overseas
offering of ¥33,104,510,600 to part of the funds for acquisition of Hotel Oriental Express Osaka Shinsaibashi and Hilton
Tokyo Odaiba as described above in “1. Acquisition of assets” and “2. Conclusion of contract on acquisition of asset.” In
addition, the proceeds from the issuance of new investment units through third-party allotment of ¥273,529,900 will beallocated to part of the funds for acquisition of Hilton Tokyo Odaiba. The residual funds of the proceeds, if any, will be
retained as cash on hand to be allocated to part of the funds for future acquisition of specified assets, part of the funds for
repayment of loans, or repair expenses and capital expenditures to maintain or improve competitiveness of existing
properties.

- 45 -

(9) Changes in total number of investment units issued and outstanding
The following is the status of increase (decrease) in the total number of investment units issued and outstanding and unitholders’capital for past five years through to the end of the fiscal year under review.
Total number ofinvestment units
issued and outstanding
Date
Capital transaction(Units)Increase
Balance(Decrease)
Capital increase throughSeptember 9, 2014
170,000 2,791,281
public offering of investment units
Capital increase throughJanuary 27, 2015
200,000 2,991,281
public offering of investment units
Capital increase throughFebruary 18, 2015
9,041 3,000,322
third-party allotment of investment units
Capital increase throughJune 22, 2015
140,000 3,140,322
public offering of investment units
Capital increase throughJuly 23, 2015
3,905 3,144,227
third-party allotment of investment units
Capital increase throughJanuary 20, 2016
170,000 3,314,227
public offering of investment units
Capital increase throughFebruary 17, 2016
7,680 3,321,907
third-party allotment of investment units
Capital increase throughJuly 27, 2016
428,260 3,750,167
public offering of investment units
Capital increase throughAugust 23, 2016
11,7403,761,907
third-party allotment of investment units
Capital increase throughJuly 5, 2017
236,000 3,997,907
public offering of investment units
Capital increase throughAugust 2, 201712,940 4,010,847
third-party allotment of investment units(Note 1)

Unitholders’ capital(JPY1M)

Note

Increase(Decrease)

Balance

10,17959,024(Note 1)

14,97473,999(Note 2)676

74,676(Note 3)

10,50085,177(Note 4)292

85,470(Note 5)

13,98699,456(Note 6)631

100,088(Note 7)33,813

133,902(Note 8)926

134,829(Note 9)17,715

152,544(Note 10)971

153,516(Note 11)

New investment units were issued through public offering with an issue price per unit of ¥61,912 (issue value of ¥59,880) in order to procure funds
for the acquisition of new properties, etc.
(Note 2) 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 procure funds
for the acquisition of new properties, etc.
(Note 3) New investment units were issued through third-party allotment with an issue value per unit of ¥74,874 in order to procure funds for allocation to partof future acquisitions of specified assets, part of repayment of other loans, or capital expenditures to maintain or improve competitiveness of existing
properties.
(Note 4) 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 procure funds
for the acquisition of new properties, etc.
(Note 5) New investment units were issued through third-party allotment with an issue value per unit of ¥75,007 in order to procure funds for allocation to partof future acquisitions of specified assets, part of repayment of other loans, or capital expenditures to maintain or improve competitiveness of existing
properties.
(Note 6) 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 procure funds
for the allocation to acquisition of new properties, etc.
(Note 7) New investment units were issued through third-party allotment with an issue value per unit of ¥82,273 in order to procure funds for allocation toacquisition of new properties, etc.
(Note 8) 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 procure funds
for the allocation to acquisition of new properties, etc.
(Note 9) New investment units were issued through third-party allotment with an issue price per unit of ¥78,956 in order to procure funds for allocation to partof future acquisitions of specified assets, part of repayment of other loans, or repair expenses and capital expenditures to maintain or improve
competitiveness of existing properties.
(Note 10) 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 procure funds
for the allocation to acquisition of new properties, etc.
(Note 11) New investment units were issued through third-party allotment with an issue price per unit of ¥75,065 in order to procure funds for allocation to partof future acquisitions of specified assets, part of repayment of other loans, or repair expenses and capital expenditures to maintain or improve
competitiveness of existing properties.

- 46 -

4. Changes in directors(1) Change in directors of JHR
Not applicable.

(2) Change in directors of the Asset Management Company
Not applicable.

- 47 -

5. Reference information
For detailed information of each property and the operating results of hotels, please see the reference information below aswell as Financial Results Briefing dated today and the website of JHR (http://www.jhrth.co.jp/en/ir/library.html).

(1) Investment status
The following outlines the investment status of JHR as of the end of the fiscal year under review.
Assetcategory

Hotel type
(Note 1)

Prefectural
location

Tokyo

Limited-service
hotel
Osaka
Hokkaido

FukuokaRealestate
in
trust

Kyoto
Okinawa
Kumamoto
Nara

Chiba

Full-service hotelNameibis Tokyo Shinjuku
CANDEO HOTELS UENO-KOEN
the b ikebukuro
the b akasaka-mitsuke (Note 4)
Hotel Sunroute Shinbashi (Note 5)
Comfort Hotel Tokyo Higashi Nihombashi
the b hachioji
the b ochanomizu (Note 4)
Smile Hotel Nihombashi Mitsukoshimae
R&B Hotel Ueno Hirokoji
R&B Hotel Higashi Nihonbashi (Note 4)
Hotel Vista Kamata Tokyo
the b suidobashi
Dormy Inn EXPRESS Asakusa
Chisun Inn Kamata
Holiday Inn Osaka Namba
Namba Oriental Hotelibis Styles Sapporo
Mercure Sapporo
HOTEL ASCENT FUKUOKA
the b hakata
Hakata Nakasu Washington Hotel Plaza
Toyoko Inn Hakata-guchi Ekimae
ibis Styles Kyoto Station
Mercure Okinawa Naha
Dormy Inn Kumamoto
Nara Washington Hotel Plaza
Subtotal
Oriental Hotel tokyo bay
Hilton Tokyo Narita Airport
International Garden Hotel Narita
Hotel Francs
ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel) (Note 6)
Oriental Hotel Hiroshima
Hilton Nagoya
Hotel Nikko Nara
Kobe Meriken Park Oriental Hotel
Hotel Centraza Hakata (Note 7)
Mercure Yokosuka
Subtotal

As ofDecember 31, 2018
Total amount
Ratio toheld
total assets(JPY1M)(%)(Note 2)
(Note 3)
7,940
2.3
6,681
1.9
6,584
1.9
4,821
1.4
3,557
1.0
2,686
0.8
2,030
0.6
1,766
0.5
1,465
0.4
1,198
0.3
952
0.3
779
0.2
27,033
7.7
14,552
4.2
6,620
1.9
5,853
1.7
5,178
1.5
2,340
0.7
2,033
0.6
1,437
0.4
6,665
1.9
2,860
0.8
2,165
0.6
1,802
0.5
119,01033.9
17,790
5.1
13,253
3.8
9,195
2.6
3,187
0.9

17,6205.0

17,487

5.0

4,091
15,588
10,525
9,893
7,341
1,636
110,397

1.2
4.4
3.0
2.8
2.1
0.5
31.3

4,106
15,605
10,442
9,772
7,178
1,642
109,661

1.2
4.5
3.0
2.8
2.0
0.5
31.3

Hotel Nikko Alivila

18,128

5.1

17,989

5.1

Okinawa Marriott Resort & Spa
The Beach Tower Okinawa
Chiba
Hilton Tokyo Bay
Osaka
Hotel Keihan Universal City
Kanagawa
Hakone Setsugetsuka
Subtotal
Real estate in trust – Total

14,722
6,749
26,192
5,984
3,798
75,576
315,561

4.2
1.9
7.4
1.7
1.1
21.5
89.6

14,875
6,677
26,0985,930
3,722
75,295
303,967

4.2
1.9
7.4
1.7
1.1
21.5
86.7

Hiroshima
Aichi
Nara
Hyogo
Fukuoka
Kanagawa

Okinawa

Resort hotel

As ofDecember 31, 2017
Total amount
Ratio toheld
total assets(JPY1M)(%)(Note 2)
(Note 3)
7,984
2.3
6,719
1.9
6,573
1.9
6,290
1.8
4,840
1.4
3,593
1.0
2,680
0.8
2,350
0.7
2,041
0.6
1,751
0.5
1,495
0.4
1,464
0.4
1,204
0.3
961
0.3
789
0.2
27,083
7.7
14,595
4.1
6,659
1.9
5,895
1.7
5,187
1.5
2,335
0.7
2,040
0.6
1,456
0.4
6,682
1.9
2,889
0.8
2,185
0.6
1,835
0.5
129,58836.8
18,002
5.1
13,318
3.8
9,222
2.6
3,155
0.9

Deposits and other assets (Note 8)

36,621

10.4

46,589

13.3

Total assets

352,183

100.0

350,556

100.0

Amount(JPY1M)
Total liabilities
Total net assets

150,219
201,963- 48 -

Ratio tototal assets
(%)
42.7
57.3

Amount(JPY1M)
147,184
203,372

Ratio tototal assets
(%)
42.0
58.0

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

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 held” shows the amount calculated by deducting accumulated depreciation from acquisition price (including
expenses incidental to acquisition).
“Ratio to total assets” shows the ratio of total amount of each asset held to total assets, rounded off to one decimal place.
R&B Hotel Higashi-nihonbashi, the b akasaka-mitsuke and the b ochanomizu were sold on August 10, 2018.
Hotel Sunroute Shinbashi is scheduled to be renamed as Sotetsu Fresa Inn Shimbashi-Karasumoriguchi on April 23, 2019.
ACTIVE-INTER CITY HIROSHIMA is classified in accordance with the business category of Sheraton Grand Hiroshima Hotel, its main facility.
Hotel Centraza Hakata is scheduled to be renamed as Oriental Hotel Fukuoka Hakata Station on April 9, 2019.
Includes machinery and equipment, tools, furniture and fixtures, construction in progress, construction in progress in trust, and intangible assets(excluding leasehold rights in trust and fixed-term leasehold of land in trust).

- 49 -

(2) Assets under management(A) Major issues of investment securities
Not applicable(B) Real estate properties under management
Not applicable(C) Other major assets under management
A. Summary of real estate properties (in trust) under management
The following summarizes the real estate properties (in trust) under management by JHR as of the end of the fiscal year underreview.
a. Details of assets under management (acquisition price, etc.)
Property
No.

Name

Grade
(Note 1)

Acquisition
price(JPY1M)(Note 2)Carrying
amountat end ofperiod(JPY1M)(Note 3)

Appraisalvalue
at end ofperiod(JPY1M)(Note 4)

Investment
ratio
Appraisal(Acquisition
agencyprice)(Note 5)(%)(Note 6)

Collateral(Note 7)

1

Kobe Meriken Park Oriental Hotel

Upper-middle

10,9009,988

15,800N

3.5

Unsecured

2

Oriental Hotel tokyo bay

Mid-price

19,90018,013

34,100N

6.4

Unsecured

3

Namba Oriental Hotel

Mid-price

15,00014,69032,900N

4.8

Unsecured

4

Hotel Nikko Alivila

Luxury18,90018,24231,500N

6.1

Unsecured

5

Oriental Hotel Hiroshima

Upper-middle

4,100

4,175

4,350

N

1.3

Unsecured6

ibis Tokyo Shinjuku

Mid-price

7,243

8,061

9,650

N

2.3

Unsecured

8

The Beach Tower Okinawa

Mid-price

7,610

6,682

9,810

N

2.5

Unsecured

9

Hakone Setsugetsuka

Mid-price

4,070

3,730

5,200

N

1.3

Unsecured

10

Dormy Inn Kumamoto

Mid-price

2,334

2,165

3,000

J

0.8

Unsecured

12

the b suidobashi

Mid-price

1,120

1,222

1,940

N

0.4

Unsecured

13

Dormy Inn EXPRESS Asakusa

Economy

999

952

1,330

J

0.3

Unsecured

14

Hakata Nakasu Washington Hotel Plaza

Mid-price

2,130

2,034

4,440

N

0.7

Unsecured

15

Nara Washington Hotel Plaza

Mid-price

2,050

1,805

2,430

N

0.7

Unsecured16

R&B Hotel Ueno Hirokoji

Economy

1,720

1,766

1,950

J

0.6

Unsecured

18

Comfort Hotel Tokyo Higashi Nihombashi

Economy

3,746

3,557

5,680

J

1.2

Unsecured

22

Smile Hotel Nihombashi Mitsukoshimae

Economy

2,108

2,030

3,120

J

0.7

Unsecured24

Toyoko Inn Hakata-guchi Ekimae

Economy

1,652

1,437

2,780

T

0.5

Unsecured

25

Hotel Vista Kamata Tokyo

Economy

1,512

1,466

2,040

T

0.5

Unsecured

26

Chisun Inn Kamata

Economy

823

781

1,440

T

0.3

Unsecured

29

Hotel Keihan Universal City

Mid-price

6,000

5,931

13,900R

1.9

Unsecured

30

Hotel Sunroute Shinbashi

Mid-price

4,800

4,822

8,810

D

1.6

Unsecured

31

Hilton Tokyo Bay

Luxury26,05026,10239,600D

8.4

Unsecured32

ibis Styles Kyoto Station

Mid-price

6,600

6,687

11,500D

2.1

Unsecured33

ibis Styles Sapporo

Mid-price

6,797

6,658

10,800N

2.2

Unsecured34

Mercure Sapporo

Mid-price

6,000

5,923

10,700N

1.9

Unsecured35

Mercure Okinawa Naha

Mid-price

3,000

2,891

7,760

N

1.0

Unsecured37

the b ikebukuro

Mid-price

6,520

6,609

7,330

N

2.1

Unsecured39

the b hachioji

Mid-price

2,610

2,698

2,780

N

0.8

Unsecured40

the b hakata

Mid-price

2,300

2,355

4,530

N

0.7

Unsecured

41

Hotel Francs

Mid-price

3,105

3,187

4,090

D

1.0

Unsecured42

Mercure Yokosuka

43

Okinawa Marriott Resort & Spa

Mid-price

1,650

1,681

2,940

D

0.5

Unsecured

Upper-middle

14,95015,04418,600N

4.8

Unsecured

44

ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel)

Luxury17,32017,561

21,100D

5.6

Unsecured

45

CANDEO HOTELS UENO-KOEN

Mid-price

6,705

6,689

7,630

D

2.2

Unsecured

46

Hotel Centraza Hakata

Mid-price

7,197

8,001

8,500

D

2.3

Unsecured

47

Holiday Inn Osaka Namba

Mid-price

27,00027,13027,200N

8.7

Unsecured

48

HOTEL ASCENT FUKUOKA

Economy

4,925

5,178

6,540

D

1.6

Unsecured

49

Hilton Nagoya

Luxury15,25015,605

15,700D

4.9

Unsecured- 50 -

Property
No.

Acquisition
price(JPY1M)(Note 2)Carrying
amountat end ofperiod(JPY1M)(Note 3)

Appraisalvalue
at end ofperiod(JPY1M)(Note 4)Upper-middle

13,175

13,461

13,400N

4.3

UnsecuredMid-price

9,125

9,259

9,440

N

2.9

UnsecuredD

3.4

Unsecured

Grade(Note 1)Name

50Hilton Tokyo Narita Airport

51

International Garden Hotel Narita

52

Hotel Nikko Nara

Upper-middle
Total(Note 1)
(Note 2)

(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)(Note 8)

10,373

10,500

11,200309,370

306,789

437,510Investment
ratio
Appraisal(Acquisition
agencyprice)(Note 5)(%)(Note 6)

Collateral(Note 7)100.0

JHR categorizes hotels into the four grade classes “Luxury,” “Upper-middle,” “Mid-price” and “Economy” mainly from the perspective of average
daily rate, etc.
“Acquisition price” is the acquisition price stated on the purchase and sale agreement for beneficial interest in trust etc. (consumption tax, local
consumption tax and the acquisition expense such as broker’s fee are not included). The acceptance prices are indicated for the properties that havebeen accepted through the merger from the former JHR.
“Carrying amount at end of period” is the book value at the end of the fiscal year under review, and includes not only the amounts for real estate intrust, but also machinery and equipment, tools, furniture and fixtures, construction in progress in trust, and intangible assets.
“Appraisal value at end of period” is the appraisal value at the end of the fiscal year under review as the date of appraisal, in accordance with theasset valuation methods and standards provided in JHR’s Articles of Incorporation and the regulations set forth by The Investment Trusts Association,
Japan.
Under “Appraisal agency,” the letters indicate the appraisers for the properties as follows:N:
Nihon Fudosan Kenkyusho (Japan Real Estate Institute)J:
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.
“Investment ratio” is the ratio of acquisition price of the respective asset held at the end of the fiscal year under review to the total amount ofacquisition price of all assets held at the end of the fiscal year under review, rounded off to one decimal place.
“Collateral” is whether or not a pledge has been established for the beneficial interest in trust.
The omitted property numbers are the property numbers of assets that have been transferred.

b. Details of assets under management (change in portfolio tenants)
The following is the change in total number of tenants, total leasable area, total leased area, and occupancy rate of real estate
properties (in trust) under management for the past five years.

Total number oftenants(Note 1)
Total leasable area
(Note 2)
Total leased area
(Note 3)
Occupancy rate
(Note 4)(Note 1)

(Note 2)

(Note 3)(Note 4)End of 15th period
December 2014

End of 16th period
December 2015

End of 17th period
December 2016

End of 18th period
December 2017

End of 19th period
December 2018

57

113

128

131

126

386,826.71 m2

493,758.78 m2

587,481.02 m2

687,124.54 m2

678,714.48 m2

386,447.08 m2

493,138.06 m2

587,050.94 m2

686,694.46 m2

677,863.00 m2

99.9%

99.9%

99.9%

99.9%

99.9%

Total number of tenants indicates the total number of tenants based on the lease contracts for respective real estate in trust (excluding tenants ofparking lots, etc.) as of the end of each fiscal period. However, for properties for which master lease contracts under the pass-through scheme areconcluded in which trustee receives the same amount of rents, etc. from end tenants as is in principle, the total number of end tenants (excluding
tenants of parking lots, etc.) is indicated.
In principle, total 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 intsubo units, the figure in the table has been converted to the area in metric units (3.30578 square meters per one tsubo). In this report, the same shallapply hereinafter.
In principle, leased area represents the leased area described in the lease contract of the building. For properties in which the leased area is notdescribed in the lease contract, leased area shows the area described in the registration of the building. 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 which master lease contracts under the pass-through scheme are concluded in which trustee receives the same amount ofrents, etc. from end tenants as is in principle, the total area for which lease contracts have been concluded with end tenants and which are actuallyleased is indicated. The same shall apply hereinafter.
Occupancy rate indicates the percentage of leased area to leasable area of respective real estate properties in trust as of the end of each fiscal period.
The same shall apply hereinafter.

- 51 -

c. Details of property assets (information on major real estate)
There is no major real estate of which total annual rent accounts for 10% or more of the total annual rent of the entire portfolio.
“Total annual rent” is the amount of (i) the amount arrived at when monthly fixed rent (rent of the building itself only, excludingcommon area maintenance charges and signage and parking usage fees; not factoring in any change in rent during the fiscal year) inlease contracts at the end of the fiscal year under review is multiplied by 12, plus (ii) assumed amounts of revenue sharing, variable
rent or income from management contracts for full year.
d. Details of assets under management (NOI, etc.)

1

Kobe Meriken Park Oriental Hotel

Variable/Fixed

Real estate
operating revenue(JPY 1,000)
1,210,096

2

Oriental Hotel tokyo bay

Variable/Fixed

1,888,871

1,770,283

1,357,144

3

Namba Oriental Hotel

Variable/Fixed

1,629,254

1,525,885

1,345,405

4

Hotel Nikko Alivila

Variable/Fixed

2,048,343

1,899,999

1,578,371

5

Oriental Hotel Hiroshima

Variable/Fixed

424,730

380,299295,573

6

ibis Tokyo Shinjuku

Management contract

660,122469,556

358,409

8

The Beach Tower Okinawa

Fixed

511,017467,640

337,615

9

Hakone Setsugetsuka

Fixed294,946

270,607179,019

10

Dormy Inn Kumamoto

Fixed

194,460

170,564

128,99012the b suidobashi

Variable/Fixed

109,471

97,76870,426

13

Dormy Inn EXPRESS Asakusa

Fixed

63,99555,26941,897

14

Hakata Nakasu Washington Hotel Plaza (Note 4)

Fixed

240,000

224,000

198,000

15

Nara Washington Hotel Plaza (Note 4)

Fixed

150,000

134,000

95,000

16

R&B Hotel Ueno Hirokoji

Fixed97,294

83,10669,43917

R&B Hotel Higashi Nihonbashi (Note 5)

74,244

63,82851,13418

Comfort Hotel Tokyo Higashi Nihombashi

270,927

240,839

204,667

22

Smile Hotel Nihombashi Mitsukoshimae

153,465

138,046

117,89824

Toyoko Inn Hakata-guchi Ekimae

141,039

127,964

109,28525

Hotel Vista Kamata Tokyo

115,241

100,12176,25526

Chisun Inn Kamata

82,68075,45063,94829

Hotel Keihan Universal City

822,800

746,999

656,78230

Hotel Sunroute Shinbashi

426,062

360,989

339,516

1,992,542

1,694,049

1,521,024

548,688473,261436,285

PropertyNo.

Name

Rent type(Note 1)

NOI
(Note 2)(JPY 1,000)
957,797

NOI after depreciation(Note 3)
(JPY 1,000)
640,674

31

Hilton Tokyo Bay

32

ibis Styles Kyoto Station

Fixed
Variable/Fixed(Note 7)
Variable/Fixed(Note 7)
Fixed
Variable/Fixed(Note 7)
Variable
Variable/Fixed(Note 7)
Variable/Fixed(Note 7)
Variable/Fixed(Note 7)
Management contract

33

ibis Styles Sapporo

Management contract

662,395

530,233

451,41534

Mercure Sapporo

Management contract

820,128

532,637

446,866

35

Mercure Okinawa NahaManagement contract

456,113

373,482

317,98136

the b akasaka-mitsuke (Note 5)

Variable/Fixed

146,475

134,858

119,97037

the b ikebukuro

Variable/Fixed

361,036

332,064

295,94538

the b ochanomizu (Note 5)

Variable/Fixed

58,48952,93945,88739

the b hachioji

Variable/Fixed

203,227

176,553

146,75440

the b hakata

Variable/Fixed

250,689

237,949

216,680

41

Hotel Francs

Fixed

300,000

237,807194,249

42

Mercure Yokosuka

Variable

310,497

198,952

162,129

43

Variable/Fixed

1,169,917

1,084,541

833,818

Variable/Fixed

1,526,824

1,090,707

893,130

45

Okinawa Marriott Resort & Spa
ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel)
CANDEO HOTELS UENO-KOEN

Fixed

349,971

323,308

283,600

46

Hotel Centraza Hakata (Note 6)

Variable/Fixed

589,421343,659

119,879

47

Holiday Inn Osaka Namba

Variable/Fixed

1,114,357

1,068,046

920,12148

HOTEL ASCENT FUKUOKA

Fixed

432,801

284,239

248,61149

Hilton Nagoya

Variable

1,390,977

687,096

539,48750

Hilton Tokyo Narita Airport

Variable/Fixed

785,260

720,053

553,599

51

International Garden Hotel Narita

Variable/Fixed

608,931574,674

447,31952

Hotel Nikko Nara

Variable/Fixed

629,260
26,318,876

591,786
22,104,460

462,741
17,974,512

44

Total

- 52 -

(Note 1)(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)(Note 8)Under “Rent type,” “Fixed” is a property under a fixed rent structure, “Variable” is a property under a variable rent structure, “Management contract”
is a property under a management contract structure, and “Variable/Fixed” is a property under a combination of fixed and variable rent structures.
NOI = Real estate operating revenue − Real estate operating costs + Depreciation + Loss on retirement of noncurrent assets + Asset retirement
obligations expenses
NOI after depreciation (net real estate operating income) = Real estate operating revenue − Real estate operating costs
For Hakata Nakasu Washington Hotel Plaza and Nara Washington Hotel Plaza, consent on disclosure of rent in units of thousand yen has not beenobtained from the lessees and is thus rounded down to the nearest million yen.
R&B Hotel Higashi-nihonbashi, the b akasaka-mitsuke and the b ochanomizu were sold on August 10, 2018.
Hotel Centraza Hakata is under major renovation work and suspending its hotel operation during October 1, 2018 through the end of March 2019(plan).
For Comfort Hotel Tokyo Higashi Nihombashi, Smile Hotel Nihombashi Mitsukoshimae, Hotel Vista Kamata Tokyo, Hotel Keihan Universal City,
Hotel Sunroute Shinbashi and Hilton Tokyo Bay, the rent structure is one that has set not only fixed rent, but also partly has rent based on revenue
sharing structure. For Comfort Hotel Tokyo Higashi-nihombashi, the rent structure was changed from “Fixed” to “Variable/Fixed”, as the rent
structure was changed after a memorandum of amendment concerning the fixed-term lease agreement for Comfort Hotel Tokyo Higashi-nihonbashi
was concluded on April 27, 2018.
The property numbers of assets that were sold before the end of the previous fiscal year are intentionally omitted.

- 53 -

B. Income statements for individual real estate properties (in trust) under management
The following are the individual income statements for real estate properties (in trust) under management for the fiscal year underreview (from January 1, 2018 to December 31, 2018). Figures are rounded down to the nearest thousand yen in principle, but areotherwise noted if circumstances do not allow for the figures to be stated in units of thousand yen.
Property No.

-

Property name

Portfolio total(Note 1)

1
Kobe
Meriken Park
Oriental Hotel

2

3

4

5

Oriental Hoteltokyo bay

Namba
Oriental Hotel

Hotel Nikko
AlivilaOriental Hotel
Hiroshima

Number of operating days

-

365

365

365

365

365

(A) Real estate operating revenue subtotal

26,318,876

1,210,096

1,888,871

1,629,254

2,048,343

424,730

Fixed rent

13,610,785

645,900

631,600

797,900

804,100

341,504

Variable rent

11,529,949

563,226

1,257,271

831,354

1,244,243

83,226

Other revenue

1,178,141

969

-

-

-

-

(B) Real estate operating costs subtotal

8,344,364

569,422531,726

283,849

469,971

129,156

Land lease and other rent expenses

907,621

193,868--

84,149-Property taxes

1,630,178

52,916113,385

99,94057,74741,394

Outsourcing expenses

714,663

960

960

960

1,920

960

Nonlife insurance

47,798

3,232

3,232

1,457

2,493

1,066

Depreciation and amortization

4,091,929

315,789

397,917

170,878

314,146

82,482

Loss on retirement of noncurrent assets

35,972

1,333

15,220

9,601

7,481

2,243

Other costs

916,199

1,321

1,010

1,010

2,034

1,010

(C) Net real estate operating income = (A) − (B)17,974,512

640,674

1,357,144

1,345,405

1,578,371

295,573(Reference) Occupancy rate

99.9%

100.0%

100.0%

100.0%

100.0%

100.0%(Reference) Number of tenants

130

1

1

1

1

1

Property No.

6

8

9

ibis
The Beach Tower
Tokyo Shinjuku
Okinawa(Note 1)

Property name10

HakoneSetsugetsuka

Dormy Inn
Kumamoto

12

13

the b
suidobashi

Dormy Inn
EXPRESSAsakusa

Number of operating days

365

365

365

365

365

365

(A) Real estate operating revenue subtotal

660,122511,017294,946

194,460

109,471

63,995

Fixed rent

103,778

511,008

294,340

194,460

84,99963,395

Variable rent

495,681---

24,471-Other revenue

60,662

9

606

-

-

600

(B) Real estate operating costs subtotal

301,712

173,401

115,926

65,46939,04522,097

Land lease and other rent expenses

-

-

-

-

-

-

Property taxes

35,431

39,13422,42819,208

8,174

6,052

Outsourcing expenses

91,607

-

-

-

1,200

1,200

Nonlife insurance

573

1,116

650

431

187

109

Depreciation and amortization

111,146

130,024

91,587

41,57427,25013,372

Loss on retirement of noncurrent assets

-

-

-

-

92

-

Other costs

62,952

3,125

1,260

4,254

2,139

1,363

(C) Net real estate operating income = (A) − (B)358,409337,615

179,019

128,990

70,42641,897(Reference) Occupancy rate

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%(Reference) Number of tenants

4

1

1

1

1

1

- 54 -

Property No.

14

15

16

Hakata Nakasu
Nara
Washington Hotel Washington Hotel
Plaza
Plaza
(Note 2)
(Note 2)
Number of operating days
365
365

Property name

17

365

R&B Hotel
HigashiNihonbashi(Note 3)
221

R&B Hotel
Ueno
Hirokoji

18

22

Comfort HotelTokyo Higashi
Nihombashi

Smile Hotel
Nihombashi
Mitsukoshimae

365

365

(A) Real estate operating revenue subtotal

240,000

150,000

97,29474,244

270,927

153,465

Fixed rent

240,000

146,000

96,50474,244

259,721

134,400

Variable rent

-

-

-

-

-

19,065

Other revenue

0

3,000

789

-

11,205-(B) Real estate operating costs subtotal

42,00054,00027,854

23,11066,25935,567

Land lease and other rent expenses

-

-

-

3,280

-

-

Property taxes

11,00011,00012,145

5,235

26,681

12,520Outsourcing expenses

1,000

3,000

840

729

1,614

1,200

Nonlife insurance

0

0

170

114

421

189

Depreciation and amortization

25,00038,00013,666

12,69436,172

20,148Loss on retirement of noncurrent assets

-

-

-

-

-

-

Other costs

2,000

1,000

1,033

1,055

1,370

1,508

(C) Net real estate operating income = (A) − (B)198,000

95,00069,43951,134

204,667

117,898(Reference) Occupancy rate

100.0%

100.0%

100.0%-

100.0%

100.0%(Reference) Number of tenants

1

2

1

-

2

1

Property No.

24

25

26

29

30

31

Property nameToyoko Inn
Hakata-guchi
EkimaeHotel Vista
Kamata Tokyo

Chisun Inn
KamataHotel Keihan
Universal City

Hotel Sunroute
Shinbashi

HiltonTokyo Bay

Number of operating days

365

365

365

365

365

365

(A) Real estate operating revenue subtotal

141,039

115,241

82,680822,800

426,062

1,992,542

Fixed rent

141,039

93,534-

Variable rent

Other revenue--

21,63770

82,680-

Undisclosed(Note 5)
Undisclosed(Note 5)
Undisclosed

293,425

97,762

34,874(Note 5)

Undisclosed(Note 5)
Undisclosed(Note 5)
Undisclosed(Note 5)(B) Real estate operating costs subtotal

31,75338,986

18,732

166,01786,545471,518

Land lease and other rent expenses

-

-

-

21,110-132,257

Property taxes

10,508

11,907

4,681

45,142

25,531

137,595

Outsourcing expenses

1,080

1,200

1,080

5,081

7,849

23,183Nonlife insurance

242

217

94

1,295

334

3,176

Depreciation and amortization

18,67923,866

11,502

90,216

21,472

173,024

Loss on retirement of noncurrent assets

-

-

-

-

-

-

Other costs

1,242

1,795

1,373

3,171

31,3572,280(C) Net real estate operating income = (A) − (B)109,285

76,25563,948656,782339,516

1,521,024(Reference) Occupancy rate

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%(Reference) Number of tenants

1

1

1

1

4

1

- 55 -

Property No.

32

33

34

35

36

37

Property name

ibis Styles
Kyoto Station(Note 1)

ibis Styles
Sapporo(Note 1)

MercureSapporo(Note 1)

MercureOkinawa Naha
(Note 1)the bakasaka-mitsuke(Note 3)the bikebukuro

Number of operating days

365

365

365

365

221

365

(A) Real estate operating revenue subtotal

548,688662,395

820,128

456,113

146,475

361,036

Fixed rent

42,334

21,54566,051-

82,856

220,505

Variable rent

502,753596,733

636,539447,761

63,618138,395

Other revenue

3,600

44,116

117,536

8,352

-

2,136

(B) Real estate operating costs subtotal

112,402210,980

373,261

138,132

26,50465,091

Land lease and other rent expenses

-

-

40

309

-

-

Property taxes

18,83236,60748,42422,933

9,356

20,395

Outsourcing expenses

53,85954,250142,146

55,854729

4,241

Nonlife insurance

412

820

831

788

131

400

Depreciation and amortization

36,97578,81785,77055,501

14,88836,119Loss on retirement of noncurrent assets

-

-

-

-

-

-

Other costs

2,322

40,484

96,048

2,744

1,399

3,934

(C) Net real estate operating income = (A) − (B)436,285

451,415446,866

317,981

119,970

295,945(Reference) Occupancy rate

100.0%

98.3%

98.1%

100.0%-

100.0%(Reference) Number of tenants

2

4

14

1

-

4

Property No.

38

39

40

41

42

43

Property namethe bochanomizu(Note 3)the bhachioji

the bhakataHotel Francs

MercureYokosuka

Okinawa
MarriottResort & Spa

Number of operating days

221

365

365

365

365

365

(A) Real estate operating revenue subtotal

58,489203,227

250,689

300,000

310,497

1,169,917

Fixed rent

41,919122,765

89,522300,000-

550,000

Variable rent

16,37373,676

161,167-

266,983

619,917

Other revenue

196

6,785

-

-

43,513-(B) Real estate operating costs subtotal

12,60256,47334,009105,750

148,367

336,099

Land lease and other rent expenses

-

-

-

-

-

-

Property taxes

3,812

21,423

9,415

58,97435,521

79,818Outsourcing expenses

729

1,200

1,200

1,800

19,4922,400

Nonlife insurance

70

437

254

919

1,717

2,308

Depreciation and amortization

7,052

29,79821,26943,55736,822

250,722

Loss on retirement of noncurrent assets

-

-

-

-

-

-

Other costs

938

3,613

1,869

498

54,812849(C) Net real estate operating income = (A) − (B)45,887

146,754

216,680

194,249

162,129

833,818(Reference) Occupancy rate-

100.0%

100.0%

100.0%

100.0%

100.0%(Reference) Number of tenants

-

12

2

1

1

1

- 56 -

Property No.

44

45

46

47

48

49

Property name

ACTIVE-INTERCITY
HIROSHIMACANDEOHOTELS
UENO-KOEN

Hotel Centraza
Hakata(Note 4)

Holiday Inn
Osaka Namba

HOTEL
ASCENTFUKUOKA

Hilton Nagoya

Number of operating days

365

365

365

365

365

365

(A) Real estate operating revenue subtotal

1,526,824

349,971589,421

1,114,357

432,801

1,390,977

Fixed rent

777,615400,000

576,000

308,840

Variable rent

Other revenue

Undisclosed(Note 5)464,271284,937-

189,421

Undisclosed

538,357---

123,961(Note 5)

Undisclosed(Note 5)
Undisclosed(Note 5)
Undisclosed(Note 5)(B) Real estate operating costs subtotal

633,693

66,371

469,542

194,236

184,189

851,490

Land lease and other rent expenses--

222,206-

27,998222,401

Property taxes

116,776

23,071

18,57042,77531,432

101,915

Outsourcing expenses

92,595

1,200

3,000

1,560

13,356

108,898

Nonlife insurance

3,331

474

1,139

1,136

481

3,277

Depreciation and amortization

197,577

39,708222,181

147,924

35,181

147,608

Loss on retirement of noncurrent assets

-

-

-

-

-

-

Other costs

223,413

1,917

2,445

838

75,741

267,388(C) Net real estate operating income = (A) − (B)893,130

283,600

119,879

920,121248,611539,487(Reference) Occupancy rate

99.8%

100.0%

100.0%

100.0%

96.8%

100.0%(Reference) Number of tenants

39

1

1

1

5

4

Property No.
Property name

50

51

52

Hilton Tokyo
Narita Airport

International
Garden Hotel
NaritaHotel Nikko Nara

Number of operating days

365

365

365

(A) Real estate operating revenue subtotal

785,260

608,931629,260

Fixed rent

444,000

336,000

420,000

Variable rent

340,560

272,931

209,260

Other revenue

700

-

-

(B) Real estate operating costs subtotal

231,660

161,611

166,518

Land lease and other rent expenses

-

-

-

Property taxes

58,58529,60430,410Outsourcing expenses

2,520

2,280

2,760

Nonlife insurance

3,148

1,429

2,840

Depreciation and amortization

166,454

127,354

129,044

Loss on retirement of noncurrent assets

-

-

-

Other costs

953

943

1,462

(C) Net real estate operating income = (A) − (B)553,599447,319462,741(Reference) Occupancy rate

100.0%

100.0%

100.0%(Reference) Number of tenants

1

1

1

(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)

Variable rent includes income from management contracts. For details of the management contract, please refer to “C. Overview of the hotelbusiness; a. Rent structures of hotels with variable rent, management contract or revenue sharing” on page 58.
Consent on disclosure of rent in units of thousand yen has not been obtained from the lessee and is thus rounded down to the nearest million yen.
R&B Hotel Higashi-nihonbashi, the b akasaka-mitsuke and the b ochanomizu were sold on August 10, 2018.
Hotel Centraza Hakata is under major renovation work and suspending hotel operation during October 1, 2018 through the end of March 2019 (plan).
Rent income, etc. is not disclosed as consent on disclosure has not been obtained from the tenant with whom a lease contract has been concluded andthus considered to be a case where disclosure cannot be made due to unavoidable circumstances.
The property numbers of assets that were sold before the end of the previous fiscal year are intentionally omitted.

- 57 -

C. Overview of the hotel businessa. Rent structures of hotels with variable rent, management contract or revenue sharing
Property
No.

The
Existing
HMJ
Group

The
Accor
Group

The
Ishin
Group

Other
hotelswithvariablerentorrevenuesharing

Name

Rent type

Method of calculating variable rent and income from management contracts

Variable/Fixed

When total GOP of the five HMJ hotels exceeds GOP base amount(set at ¥3,351 million / year), the amount arrived at when the amountexceeding GOP base amount is multiplied by 85.0%.
GOP base amount is set individually for each hotel for such purposes as
payment of variable rent from each hotel. The breakdown of GOP baseamount is presented below (Note 1).
When hotel GOP exceeds GOP base amount (set at ¥700 million / year),
the amount arrived at when the amount exceeding GOP base amount ismultiplied by 90.0%

1

Kobe Meriken Park Oriental Hotel

2

Oriental Hotel tokyo bay

3Namba Oriental Hotel

4

Hotel Nikko Alivila

5

Oriental Hotel Hiroshima

43

Okinawa Marriott Resort & Spa

Variable/Fixed44

ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel)

Variable/Fixed(Note 2)46

Hotel Centraza Hakata

Variable/Fixed

47

Holiday Inn Osaka Namba

Variable/Fixed

50

Hilton Tokyo Narita Airport

Variable/Fixed

51

International Garden Hotel Narita

Variable/Fixed

52

Hotel Nikko Nara

Variable/Fixed

6

ibis Tokyo Shinjuku

32

ibis Styles Kyoto Station

33

ibis Styles Sapporo

34

Mercure Sapporo

35

Mercure Okinawa Naha

42

Mercure Yokosuka

12

the b suidobashi

36

the b akasaka-mitsuke (Note 4)37

the b ikebukuro38

the b ochanomizu (Note 4)

39

the b hachioji

40

the b hakata

18

Comfort Hotel Tokyo Higashi
Nihombashi

22

Smile Hotel Nihombashi Mitsukoshimae

25

Hotel Vista Kamata Tokyo

26

Chisun Inn Kamata

29

Hotel Keihan Universal City

30

Hotel Sunroute Shinbashi

31

Hilton Tokyo Bay

49

Hilton Nagoya

When hotel GOP exceeds GOP base amount (set at ¥468 million / year),
the amount arrived at when the amount exceeding GOP base amount ismultiplied by 82.5%
When hotel GOP exceeds GOP base amount (set at ¥425 million / year),
the amount arrived at when the amount exceeding GOP base amount ismultiplied by 90.0%
When hotel GOP exceeds GOP base amount (set at ¥650 million / year),
the amount arrived at when the amount exceeding GOP base amount ismultiplied by 92.5%
When hotel GOP exceeds GOP base amount (set at ¥550 million / year),
the amount arrived at when the amount exceeding GOP base amount ismultiplied by 86.5%
When hotel GOP exceeds GOP base amount (set at ¥360 million / year),
the amount arrived at when the amount exceeding GOP base amount ismultiplied by 98.0%
When hotel GOP exceeds GOP base amount (set at ¥470 million / year),
the amount arrived at when the amount exceeding GOP base amount ismultiplied by 91.5%
Amount equivalent to GOP
Amount equivalent to GOP

Management
contract(Note 3)

Amount equivalent to GOP
Amount equivalent to GOP
Amount equivalent to GOP

VariableAmount linked to GOP

Variable/Fixed

Amount linked to GOP (Note 5)

Fixed +
Revenue sharing
Fixed +
Revenue sharing

Amount that is a certain percentage of sales exceeding the threshold(Note 5) (Note 6)
Amount that is a certain percentage of sales exceeding the threshold(Note 5)
When hotel total sales from January 1 to December 31 of every year
exceeds ¥270 million, the amount arrived at when the amount exceeding¥270 million is multiplied by 32.5%
Amount that is the monthly GOP multiplied by 86.0%(¥0 if the amount is below ¥0).
Amount that is a certain percentage of sales exceeding the threshold(Note 5)
Amount that is a certain percentage of sales exceeding the threshold(Note 5)
Amount that is a certain percentage of sales exceeding the threshold(Note 5)

Fixed +
Revenue sharing
Variable
Fixed +
Revenue sharing
Fixed +
Revenue sharing
Fixed +
Revenue sharing
Variable

Variable rents linked to hotel sales, etc. (Note 5)- 58 -

(Note 1)

Breakdown of the GOP base amount set individually for the five HMJ hotels
Hotel name

Annual GOP base amount

Kobe Meriken Park Oriental Hotel¥599,900 thousand

Oriental Hotel tokyo bay¥693,200 thousand

Namba Oriental Hotel¥832,200 thousand

Hotel Nikko Alivila¥995,700 thousand¥230,000 thousand

Oriental Hotel Hiroshima¥3,351,000 thousand

Total(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)b.

The indicated structures are for Sheraton Grand Hiroshima Hotel, the main facility of ACTIVE-INTER CITY HIROSHIMA.
The management contract structure is a structure for hotel real estate owned by JHR in which JHR entrusts an operator to operate the hotel andtakes in the outcome of that business as real estate operating revenue. Specifically, JHR, the owner of the hotel real estate, concludes amanagement contract with an operator and entrusts the operator with the tasks necessary to run the hotel business. JHR receives the hotelrevenue achieved from the hotel business (operation) by the operator and, at the same time, pays a management fee to the operator. This hotelrevenue is recognized as “real estate operating revenue through management contract” and is equivalent to the rent that is the real estate
operating revenue under the leasing structure.
the b akasaka-mitsuke and the b ochanomizu were sold on August 10, 2018.
The detailed content of the contract is not disclosed as consent on disclosure has not been obtained from the lessee.
Concerning the fixed-term lease agreement for Comfort Hotel Tokyo Higashi Nihombashi, a memorandum of amendment was concluded on
April 27, 2018 to amend the structure to one that sets not only fixed rent, but to also include rent based on revenue sharing.

Major indicators of the hotel business
The following tables indicate the figures related to the hotel business of the Existing HMJ Group for the operating period
from January 1, 2018 through December 31, 2018 based on the data provided by the hotel lessees, etc. While these
indicators of the hotels are among the indicators that show the operating status of the rooms departments, please note thatthey do not necessarily represent the operating revenue and the ability to bear rent, etc. of the respective hotels, as the room
rates and profit margins, etc. of the respective rooms available for sale are not uniform, among other reasons. As such, theindicators are no more than the reference figures.
Kobe
Meriken Park
Oriental Hotel
Ratio tototal sales(%)

Oriental Hoteltokyo bay

Namba
Oriental Hotel

Ratio tototal sales(%)

Hotel Nikko Alivila

Ratio tototal sales(%)

Oriental Hotel
Hiroshima

Ratio tototal sales(%)

Ratio tototal sales(%)

The Five HMJ
HotelsTotal/Average
Ratio tototal sales(%)

Occupancy rate

84.8%

－

96.7%

－

92.8%

－

84.9%

－

87.2%

－

89.9%

－

ADR
(Note 1)

17,166－

20,464－

19,469－28,738

－

9,409

－

20,112－

RevPAR(Note 2)

14,564－

19,797－

18,073－24,392

－

8,208

－

18,080－Total sales

5,442

100.0

6,839

100.0

2,891

100.0

6,433

100.0

1,904

100.0

23,509100.0

Rooms department

1,872

34.4

4,019

58.8

1,878

65.0

3,894

60.5

748

39.3

12,411

52.8

Food & beveragedepartment

3,277

60.2

2,392

35.0

130

4.5

1,888

29.4

1,095

57.5

8,782

37.4

Tenant department

70

1.3

230

3.4

834

28.8

2

0.0

23

1.2

1,159

4.9

Other departments(Note 3)

223

4.1

198

2.9

50

1.7

648

10.1

38

2.0

1,157

4.9

1,263

23.2

2,172

31.8

1,810

62.6

2,460

38.2

328

17.2

8,033

34.2

GOP

- 59 -

Sheraton Grand
Hiroshima Hotel(Note 4)
Ratio toRatio tototal sales
total sales(%)(%)

Okinawa Marriott
Resort & Spa

Hotel Centraza Holiday Inn Osaka
Hilton Tokyo Narita
HakataNamba
Airport(Note 5)
Ratio toRatio toRatio tototal sales
total sales
total sales
(%)
(%)
(%)

International
Garden Hotel
NaritaRatio tototal sales(%)

Occupancy rate

83.0%

－

91.2%

－

70.7%

－

93.8%

－

86.0%

－

85.5%

－

ADR
(Note 1)

21,291－

18,381－

12,074－18,063－

10,710

－

7,526

－

RevPAR(Note 2)

17,669－16,757

－

8,534

－

16,947

－

9,216

－

6,438

－

Total sales

4,027

100.0

3,372

100.0

1,836

100.0

1,991

100.0

3,271

100.0

1,521

100.0

Rooms department

2,573

63.9

1,601

47.5

667

36.4

1,944

97.7

2,063

63.1

1,197

78.7

Food & beveragedepartment

1,009

25.1

1,673

49.6

951

51.8

－

－

1,112

34.0

311

20.5

Tenant department

62

1.5

－

－

206

11.2

36

1.8

50

1.5

6

0.4

Other departments(Note 3)

383

9.5

98

2.9

11

0.6

10

0.5

46

1.4

7

0.5

1,389

34.5

1,016

30.1

635

34.6

1,232

61.9

944

28.9

639

42.0

GOP

The Existing HMJ
Group
Total/Average(Note 6)
Ratio toRatio tototal sales
total sales(%)(%)

Hotel Nikko Nara

(Note 1)
(Note 2)

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

Occupancy rate

76.4%

－

86.7%

－

ADR
(Note 1)

12,480－

16,481－

RevPAR(Note 2)

9,535－

14,289－Total sales

2,893

100.0

42,421

100.0

Rooms department

1,264

43.7

23,72055.9

Food & beveragedepartment

1,579

54.6

15,416

36.3

Tenant department

31

1.1

1,551

3.7

Other departments(Note 3)

20

0.7

1,734

4.1

GOP

699

24.2

14,586

34.4

ADR: Represents average daily rate, which is calculated by dividing revenue for rooms for a given period (excluding service charges) by the
total number of rooms sold during the period. Holiday Inn Osaka Namba, does not request service charges.
RevPAR: Represents revenue per available room, which is calculated by dividing revenue for rooms for a certain period (excluding service
charges) by the total number of rooms available for sale during the period. Revenue per available room given the product of ADR andoccupancy rate. The same shall apply hereinafter.
Figures for the other departments include sales of the department for sale of goods.
The indicated figures are for Sheraton Grand Hiroshima Hotel, the main facility of ACTIVE-INTER CITY HIROSHIMA.
Hotel Centraza Hakata is under major renovation work and suspending hotel operation during October 1, 2018 through the end of March 2019(plan). The occupancy rate is calculated including the suspension period.
For Total/Average of the Existing HMJ Group, figures are calculated by JHR as reference since no figures have been provided by the hotel
lessees.
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.
The same shall apply hereinafter.

- 60 -

D. Status of capital expenditures
a. Planned capital expenditures (Note)
The following table shows major estimated capital expenditures items for renovation work planned as of the end of the fiscal
year under review for real estate properties (in trust) under management by JHR. Expenditures are expected to total ¥6,842
million, which consists of capital expenditures of ¥6,778 million and repair expenses of ¥64 million, for the next fiscal year.
Estimated construction
costs(JPY1M)
Name of property, etc.
PurposeScheduled period(Location)
Total
Total
amountamountpaid
R&B Hotel Ueno Hirokoji
From January 2019
Renewal of air conditioning units
54－(Taito-ku, Tokyo)
to March 2019
Hilton Tokyo Bay
Renewal of disaster prevention
From October 201953－
(Urayasu-shi, Chiba)
switchboard
to November 2019
Hilton Tokyo Bay
From December 2018Land preparation for parking lot
423－(Urayasu-shi, Chiba)
to May 2019
Okinawa Marriott Resort & Spa
Replacement of air-conditioning
From February 2019
66－
(Nago-shi, Okinawa)
facilities for guestrooms
to March 2019
Okinawa Marriott Resort & Spa
From May 2019
Renovation of restaurants
233－(Nago-shi, Okinawa)
to June 2019
Hotel Centraza Hakata
Major renovation works for entire
From October 2018
3,100
704
(Fukuoka-shi, Fukuoka)
property
to March 2019
Holiday Inn Osaka Namba
Renovation of guest rooms
From May 2019
72－
(Osaka-shi, Osaka)(guestrooms on the 10th and 11th floors)
to May 2019
Hotel Nikko Nara
Renewal of surface of interior for one
From May 2019
128－
(Nara-shi, Nara)floor
to June 2019
Hilton Nagoya
From March 2019
Renewal of water supply piping
55－(Nagoya-shi, Aichi)
to November 2019
Total

4,185

704

(Note) New construction and renewal work includes that for buildings, attached facilities, etc. as well as items classified as furniture and fixtures. The
scheduled period of the above planned renovation work and whether or not the renovation work will be performed may change.

b. Capital expenditures during the year (Note)
For real estate properties (in trust) under management by JHR, major construction work conducted during the fiscal year
under review that represents capital expenditures is as below. Capital expenditures for the fiscal year under review totaled¥3,056 million, and repair expenses that were accounted for as expense in the fiscal year under review totaled ¥46 million.
In aggregate, ¥3,102 million of construction work was carried out.
Name of property, etc.
Construction costs
Purpose
Period(Location)(JPY1M)
Kobe Meriken Park Oriental Hotel(Kobe-shi, Hyogo)

Renewal of telephone switchboard

From May 2018
to July 201841

Oriental Hotel tokyo bay(Urayasu-shi, Chiba)

Increase the number of guestrooms
associated with relocation of Mama Salonand renovation of front lobby

From October 2018
to December 2018

144

Namba Oriental Hotel(Osaka-shi, Osaka)
Okinawa Marriott Resort & Spa(Nago-shi, Okinawa)
Holiday Inn Osaka Namba(Osaka-shi, Osaka)
Holiday Inn Osaka Namba(Osaka-shi, Osaka)
Hilton Nagoya(Nagoya-shi, Aichi)

Renewal of guest rooms on the 6th floor
Replacement of air-conditioning facilities
for guestrooms
Renewal of guest rooms on the 6th and7th floors
Renewal of guest rooms on the 4th and12th floor
Renewal of drainage for sewage and graywater pipes
Total

From January 2018
to February 2018
From September 2018
to December 2018
From January 2018
to February 2018
From September 2018
to September 2018
From June 2017
to January 2018

(Note) New construction and renewal work will include those for buildings, attached facilities, etc. as well as items classified as furniture and fixtures.

- 61 -

78
260
58
57
55
696