Asset Management Report
For the Year Ended December 31, 2015

Japan Hotel REIT Investment Corporation

Dear Investors,
Thank you for your support and patronage to Japan Hotel REIT Investment Corporation (JHR) and
its asset management company, Japan Hotel REIT Advisors Co., Ltd.
Having settled the accounts for the 16th fiscal period (from January 1, 2015 to December 31, 2015)of JHR, we are pleased to present you with the asset management status and settlement of accounts
for the period.
Pursuant to the mission recognized by JHR of providing investors with attractive opportunities toinvest in hotel assets, asset management is conducted by placing “simultaneous pursuit of stability
and upside potential” at the core of our strategy.
In the fiscal period under review, with capital increases through public offering of new investment
units carried out in January and June and other fund procurement, JHR acquired seven hotels locatedmainly in central Tokyo and the bay area. Furthermore, JHR acquired hotels bearing world-classinternational brand names “Okinawa Marriott Resort & Spa” and “ACTIVE-INTER CITYHIROSHIMA (Sheraton Hiroshima Hotel) by public offering mentioned above and other fundprocurement.” In total, assets with a combined acquisition price of ¥57.0 billion were acquired in the
period. These are hotel assets that exactly match JHR’s investment strategy of pursuing upside inrevenue while improving portfolio stability.
An asset management strategy of aiming for maximization of revenue and asset value of individual
hotels is planned and executed for JHR’s portfolio properties. Reflecting the momentum gathering
for leisure demand from within and outside Japan, the operating performance of the rooms
department improved in the fiscal period under review at many of the hotels in JHR’s portfolio. As aresult, the variable rent, etc. received by JHR increased, leading to operating revenue exceeding theprevious forecast.
Moreover, in addition to posting a gain on sale of real estate properties, lowering of funding costs
and other cost reduction efforts were made. As a result, for the fiscal period under review, JHR
posted operating revenue of ¥17,343 million, ordinary income of ¥9,295 million and net income of¥9,294 million and declared dividend per unit of ¥2,975 (up 38.1% from the previous fiscal period).
Entering the 17th fiscal period (from January 1, 2016 to December 31, 2016), too, new investment
units were issued at the beginning of the year, followed by the acquisition of “CANDEO HOTELS
UENO-KOEN” located in the Tokyo metropolitan area for ¥6,705 million. As a result, JHR’s
portfolio grew to a portfolio size of ¥232,428 million in terms of combined acquisition price.
With sharp increase in the number of inbound tourists visiting Japan and steady increase in domestic
leisure demand, there are great hopes for the future growth of Japan’s tourism industry and also
growing interest in hotel assets as investment targets.
We at JHR and Japan Hotel REIT Advisors are resolved to make our best endeavors for JHR’s
further growth in order to provide investors with attractive opportunities to invest in hotel assets by
taking advantage of the high expertise and know-how we have fostered and accumulated to date.
We ask for your continued support and understanding of our operations.

1Kaname Masuda
Executive Director
Japan Hotel REIT Investment Corporation

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

2JAPAN HOTEL REIT INVESTMENT CORPORATION
Contents:

I.

Asset Management Report

4This section (P1-P47) is the translation of the Asset Management Report for the 16th Period releasedon March 23, 2016 except for the update on 6. Significant subsequent events. 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.

II. Financial Statements
For the Years ended December 31, 2015 and December 31, 2014
Balance Sheets48

Statements of Income

50

Statements of Changes in Net Assets

51

Statements of Cash Flows

52

Notes to Financial Statements

54

Independent Auditor’s Report723

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

12th period
March 2012

13th period
December 2012

14th period
December 2013

15th period
December 2014

16th period
December 2015

Millions of yen

1,431

7,283

11,472

12,76017,343

Millions of yen[1,431][7,283][11,472][12,760][17,033]

Millions of yen

681

4,688

6,105

5,214

6,354

Millions of yen[503][2,668][3,870][4,163][5,002]Millions of yen

750

2,595

5,367

7,545

10,988Millions of yen

474

1,412

3,740

5,776

9,295

Millions of yen

473

19,031

3,233

5,774

9,294

Total assets[Period-on-period change]

Millions of yen

46,773[0.0]

139,623[198.5]

170,727[22.3]

188,091[10.2]

240,356[27.8]Net assets[Period-on-period change]

Millions of yen[%]

23,635[(0.1)]

69,010[192.0]89,756[30.1]

100,342[11.8]

129,914[29.5]

Unitholders’ capital

Operating revenue(Note 2)

[Real estate operating revenue](Note 3)Operating expenses[Real estate operating costs](Note 3)Operating income
Ordinary income
Net income(Note 4)[%]

Millions of yen

23,161

28,26048,84559,02485,470

Number of investment units issued andoutstanding

Units

58,0312,111,281

2,621,281

2,791,281

3,144,227

Net assets per unit

(Note 5)Yen

33,941

32,68634,24135,94841,318Net income per unit

(Note 5)

Yen

680

9,711

1,307

2,159

3,036

Total dividends

Millions of yen

473

3,012

5,082

6,015

9,354

Dividend per unit

Yen

8,166

1,427

1,939

2,155

2,975

[Earnings dividend per unit]

Yen

8,166

1,427

1,939

2,155

2,975

[Dividend per unit resulted fromexcess of earnings]

Yen

–

–

–

–

–

%

1.0

1.5

2.4

3.2

4.3

[%]

[2.0]

[2.0]

[2.4]

[3.2]

[4.3]

%

2.0

41.1

4.1

6.1

8.1

[%]

[4.0]

[54.5]

[4.1]

[6.1]

[8.1]

%

50.5

49.4

52.6

53.3

54.1

Ratio of ordinary income to total assets(Note 6)

[Annualized]
Return on unitholders’ equity(Note 7)

[Annualized]
Ratio of net assets to total assets(Note 8)[Period-on-period change][%][(0.1)][(1.1)]

[3.2]

[0.8]

[0.7]

(Note 9)

%

100.0

15.8

157.2

104.2

100.6

(Note 10)

Millions of yen

1,191

6,216

9,907

11,002

14,829

Yen

1,059

2,087

2,759

2,930

3,478

Times

8.8

8.6

18.2

26.3

23.9

Times

3.3

3.8

4.5

8.3

15.6

Millions of yen

21,51665,22074,78481,089102,772

%

46.0

46.7

43.8

43.1

42.8

Properties

19

28

28

30

36

Payout ratio[Additional information]
NOI
FFO per unit

(Note 5) (Note 11) (Note 12)

FFO multiple(Note 5) (Note 12) (Note 13)

Debt service coverage ratio(Note 12) (Note 14)

Interest-bearing debt
Ratio of interest-bearing debt to total
assets(Note 15)
Number of investment properties

2

101,028.49

288,875.32

349,162.63

386,826.71

493,758.78

24

37

38

57

113

％

100.0

100.0

100.0

99.9

99.9

Depreciation

Millions of yen

263

1,592

2,297

2,400

2,772

Capital expenditures

Millions of yen

102

699

854

1,306

1,811

Days

183

275

365

365

365

Total leasable aream

Number of tenants at end of period(Note 16)

Occupancy rate at end of period(Note 17)

Number of operating days

Tenants

4

(Note 1)(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)(Note 8)(Note 9)(Note 10)

Following the resolution to partly amend the Articles of Incorporation of Japan Hotel REIT Investment Corporation(hereinafter referred to as “JHR”) at the 5th General Meeting of Unitholders held on February 24, 2012, JHR changed
its fiscal period from six-month periods that end on March 31 and September 30 each year to 12-month periods thatend on December 31 (aligned with the calendar year). As a result of the change, and to facilitate the transition, JHR’s
13th business period was the nine months from April 1, 2012 through December 31, 2012.
Operating revenue does not include consumption taxes.
Revenue from the real estate leasing business was presented as “Real estate rental income” in past periods. However,
because of the introduction of management contracts in the 13th fiscal period, this presentation of the real estate leasing
business is no longer appropriate. Therefore, the presentation of revenue from this business was changed to “Realestate operating revenue” for all fiscal periods including the 12th and earlier fiscal periods. The presentation of
expenses for the real estate leasing business was changed from “Real estate rental expenses” to “Real estate operating
costs.”Net income for the 13th fiscal period includes a gain on negative goodwill (¥18,578 million) from a merger, loss onsale of real estate properties (¥1,393 million) and impairment loss (¥958 million). Net income for the 14th fiscal period
includes loss on sale of real estate properties (¥1,189 million) and impairment loss (¥516 million). Net income for the
16th fiscal period includes gain on sale of real estate properties (¥305 million).
JHR carried out a 12-for-1 split of units with an effective date of April 1, 2012. Net assets per unit, net income per unit,
FFO per unit and FFO multiple are calculated as if the unit split had been completed at the start of the 12th fiscal
period.
Ratio of ordinary income to total assets = Ordinary income / ((Total assets at beginning of period + Total assets at endof period) / 2) × 100
Return on unitholders’ equity = Net income / ((Net assets at beginning of period + Net assets at end of period) / 2) ×100
Ratio of net assets to total assets = Net assets at end of period / Total assets at end of period × 100
The payout ratio is calculated using the formula “Dividend per unit / Net income per unit x 100” for the 12th fiscal
period, and the formula “Total dividends (excess of earnings exclusive) / Net income x 100” from the 13th through16th fiscal periods.
NOI = Real estate operating revenue − Real estate operating costs + Depreciation + Loss on retirement of noncurrent
assets(Note 11) FFO per unit = (Net income + Depreciation + Loss on retirement of noncurrent assets ± Loss or gain on sale of realestate properties ± Extraordinary loss or income) / Number of investment units issued and outstanding(Note 12) For the 13th fiscal period, FFO per unit, FFO multiple and debt service coverage ratio are calculated excluding gain on
negative goodwill of ¥18,578 million, loss on sale of real estate properties of ¥1,393 million and impairment loss of¥958 million. For the 14th fiscal period, FFO per unit, FFO multiple and debt service coverage ratio are calculated
excluding loss on sale of real estate properties of ¥1,189 million and impairment loss of ¥516 million. For the 16th
fiscal period, FFO per unit, FFO multiple and debt service coverage ratio are calculated excluding gain on sale of realestate properties of ¥305 million.
(Note 13) FFO multiple = Investment unit price at end of period / Annualized FFO per unit
(Note 14) Debt service coverage ratio = (Net Income before income taxes + Depreciation + Loss on retirement of noncurrent
assets ± Loss or gain on sale of real estate properties ± Extraordinary losses or income + Amortization of investment
corporation bond issuance costs + Amortization of investment unit issuance expenses + Loss on derivative instruments+ Interest expense +Interest expense on investment corporation bonds) / (Interest expense + Interest expense on
investment corporation bonds + Total of contracted principal repayments (excluding lump-sum principal repayments))(Note 15) Ratio of interest-bearing debt to total assets = Interest-bearing debt at end of period / Total assets at end of period × 100(Note 16)

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

(Note 17)

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

2. Asset management operation for the fiscal period under review(1) Brief history and principal activities
Japan Hotel REIT Investment Corporation (hereinafter referred to as “JHR”) was established under the Act on
Investment Trusts and Investment Corporations (Act No. 198 of 1951, as amended; hereinafter referred to as
the “Investment Trusts Act”) on November 10, 2005 and was listed on the Real Estate Investment Trust(“REIT”) section of the Tokyo Stock Exchange (Securities code: 8985) on June 14, 2006.
5

JHR entrusts the asset management to Japan Hotel REIT Advisors Co., Ltd. (hereinafter referred to as the“Asset Management Company”). Focusing on hotels, which are important components of the social
infrastructure and profitability, JHR primarily invests in real estate related assets that are in themselves realestate which are wholly or partially used as hotels or real estate equivalents of such real estate or that arebacked by such real estate or real estate equivalents.
JHR, the former Nippon Hotel Fund Investment Corporation, merged with the 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. Over approximately alittle less than four years since the merger through the end of the 16th fiscal period, JHR has carried out five
public offerings for capital increase and continuously acquired hotels that are “competitive enough to attract
domestic and inbound leisure demand” and located in its “strategic investment target areas.”
As such, JHR has expanded the asset size by steadily implementing the growth strategy, having its portfolio
grow to 36 properties with a combined acquisition price of ¥225,723 million as of the end of the fiscal period
under review.
The number of JHR’s investment units issued and outstanding was 3,144,227 as of December 31, 2015.
(2) Investment performance
During the fiscal period under review, the Japanese economy continued to show a modest recovery trend,
despite weakness seen in some areas, partly due to the effect of the various measures implemented by the Abeadministration to securely end deflation and achieve both economic revitalization and fiscal soundness. Under
such circumstances, the tourism market was in an environment in which, on top of the leisure demand among
the Japanese people remaining solid, the number of overseas (inbound) tourists visiting Japan, primarily from
Asian countries, continued to increase thanks to the government’s various measures aimed at making Japan amajor tourism nation as well as the depreciation of the yen and other factors. The number of such inboundtourists, which had surpassed 10 million for the first time in 2013, reached 13.4 million, up around 30% overthe figure, in 2014 and increased by 47.1% year-on-year to 19.7 million in 2015, coming close to 20 million
annually that the Japanese government targeted at initially.
Given such a strong wind behind Japan’s tourism industry and hotel industry, many of the hotels owned by
JHR achieved a rise in operating performance, mainly in the rooms department, allowing us to feel again how
strong the leisure demand was both in and outside Japan. Also in the investment market for hotels,transactions of hotel properties remained brisk with an increase in the number of investors who anticipatedfuture growth of such properties, keeping the market size expanding. In such an environment, JHR issued newinvestment units through two public offerings in January and June 2015 together with other fund procurement
and acquired eight properties in total with a combined acquisition price of ¥39,705 million. Moreover, in
December 2015, JHR acquired ACTIVE-INTER CITY HIROSHIMA (Sheraton Hiroshima Hotel), located a
one-minute walk from Shinkansen Exit of JR Hiroshima Station, for an acquisition price of ¥17,320 million
through new borrowing (¥9,000 million) and cash on hand. On the other hand, as part of its growth strategy
and with an intention to further enhance the quality of its portfolio through reshuffling of assets, JHR soldthree properties in October 2015 at prices surpassing the book values and appraisal values for a combined saleprice of ¥4,890 million, achieving a further enhancement of the quality of the portfolio.
Furthermore, in January 2016, JHR implemented capital increase through public offering, the sixth one since
the merger, to complement a decrease in cash on hand, which is a decrease equivalent to the cash on handused to fund the acquisition of ACTIVE-INTER CITY HIROSHIMA (Sheraton Hiroshima Hotel). JHR also
used the proceeds from the public offering to newly acquire CANDEO HOTELS UENO-KOEN, located in
the Ueno area in central Tokyo which benefits from an increase in inbound tourism demand, for an acquisition
price of ¥6,705 million. The acquisition has increased the portfolio size to ¥232,428 million on an acquisition
price basis.
Moreover, steadily implementing its growth strategy, JHR concluded a purchase and sale agreement as ofFebruary 18, 2016 regarding the acquisition of Hotel Centraza Hakata for a planned acquisition price of¥7,197 million.
For its owned hotels, JHR endeavored to expand its earnings by continuously discussing with the hotel
operators for increasing revenue, after assessing the business environment and operation conditions at each
hotel on a monthly basis. For hotels with variable rent contracts including upside sharing schemes and6management contracts, hotel earnings increased against the backdrop of strong domestic and overseas leisuredemand, which achieved an increase in JHR’s rent revenue. Among fixed rent properties held, JHR rebranded
Dormy Inn Suidobashi, for which the lease contract expired at the end of June 2015, to “the b suidobashi” andchanged its rent scheme, which had been fixed rent alone, to the one comprising fixed rent as minimum
guaranteed rent plus variable rent.
With respect to capital investments in portfolio properties, JHR invested in the renewal of its facilities in orderto maintain the value of its assets and carried out strategic refurbishment to increase profits at hotels withvariable rent contracts, etc.
In terms of operations of the five hotels (hereinafter referred to as the “five HMJ hotels”) which JHR leases(Note 1) to Hotel Management Japan Co., Ltd. (hereinafter referred to as “HMJ”) under variable rent
contracts, they have produced a year-on-year increase both in sales and GOP (gross operating profit), led by
the rooms department, during the fiscal period under review. The rooms department achieved an increase in
not only the guest room occupancy rate but also the ADR (average daily rate), allowing us to feel how strong
the leisure demand was. For further details regarding sales, GOP and other management indicators for the five
HMJ hotels, please refer to “<Reference 1> Major indicators of the hotel business for the fiscal year ended
December 31, 2015” and “<Reference 2><1> Sales and GOP of HMJ group hotels” in 7. Reference
information. Furthermore, as announced in the “Notice Concerning Revision of Fixed-Term Lease Agreement”
dated December 18, 2015, JHR negotiated with HMJ to modify the terms and conditions of the fixed-termlease agreement with HMJ, as JHR believed that HMJ’s profitability would increase in accordance with ashift to independent hotel operations by HMJ. As a result, JHR and HMJ agreed that the variable rent ratio bechanged from 81.5% to 85.0% effective January 1, 2016 while JHR shall return part of the security deposits to
HMJ. This has made it possible for JHR to obtain the enhanced performance of the hotels as its earnings.
Moreover, inbound guests and domestic leisure demand were successfully attracted by the 6 hotels (Note 2)
for which AAPC Japan K.K. (hereinafter referred to as “Accor”), a Japanese subsidiary of Accor Hotels
headquartered in Paris, France, serves as the operator (hereinafter referred to as the “six Accor hotels”). These
hotels posted a year-on-year increase both in sales and GOP, mainly led by an increase in the ADR. For
further details regarding sales, GOP and other management indicators for the six Accor hotels, please refer to“<Reference 1> Major indicators of the hotel business for the fiscal year ended December 31, 2015” and“<Reference 2><2> Sales and GOP of the six Accor hotels” in 7. Reference information.
Furthermore, efforts were made to attract inbound tourists at the six “the b” hotels (Note 3), which are leased
to the subsidiaries of the Ishin Hotels Group with a variable rent scheme, and consequently a year-on-yearincrease was achieved both in sales and GOP. For further details regarding sales, GOP and other management
indicators for the six “the b” hotels, please refer to “<Reference 1> Major indicators of the hotel business forthe fiscal year ended December 31, 2015” and “<Reference 2><3> Sales and GOP of the six “the b” hotels”
in 7. Reference information.
As for further details regarding sales, GOP and other management indicators for Okinawa Marriott Resort &Spa and ACTIVE-INTER CITY HIROSHIMA (Sheraton Hiroshima Hotel) that JHR acquired in the fiscal
period under review, please refer to “<Reference 1> Major indicators of the hotel business for the fiscal year
ended December 31, 2015” and “<Reference 2><1> Sales and GOP of HMJ group hotels” in 7. Reference
information.
In addition, JHR not only increased the size of its asset portfolio by acquiring new properties, but also madesteady progress in reducing real estate management costs, general and administrative expenses, andborrowing costs.
(Note 1) The five HMJ hotels represent the five hotels, namely, Kobe Meriken Park Oriental Hotel, Oriental Hotel tokyo bay,
Namba Oriental Hotel, Hotel Nikko Alivila and Oriental Hotel Hiroshima. The HMJ group hotels represent the sevenhotels comprising the five HMJ hotels plus Okinawa Marriott Resort & Spa and Sheraton Hiroshima Hotel, which is
the major facility of ACTIVE-INTER CITY HIROSHIMA.
(Note 2) Represents the six hotels, namely, ibis Tokyo Shinjuku, ibis Styles Kyoto Station, ibis Styles Sapporo, Mercure
Sapporo, Mercure Okinawa Naha and Mercure Yokosuka.
(Note 3) Represents the six hotels, namely, the five hotels comprising the b akasaka-mitsuke, the b ikebukuro, the bochanomizu, the b hachioji and the b hakata (hereinafter referred to as the “five “the b” hotels”) plus the b suidobashi,
which was rebranded from the former Dormy Inn Suidobashi on July 1, 2015.

(3) Funding

7

JHR acquired the five “the b” hotels by using the ¥15,651 million in total obtained by issuing new investment
units through public offering in January 2015 and third-party allotment in February 2015, as well as the¥1,000 million in short-term loans and ¥12,900 million in long-term loans borrowed in January 2015. JHR
also used these funds to make early repayment of ¥4,779 million in existing long-term loans. In March 2015,
JHR procured ¥1,500 million in long-term loans to partly fund the acquisition of Hotel Francs. Moreover,
JHR acquired Mercure Yokosuka by using cash on hand in April 2015. The reduced cash balance wascompensated by public offering in June 2015 and third-party allotment in July 2015
JHR also acquired Okinawa Marriott Resort & Spa by using the ¥10,793 million in total obtained by issuing
new investment units through public offering in June 2015 and third-party allotment in July 2015, as well as
the ¥5,000 million in short-term loans and ¥1,500 million in long-term loans borrowed in July 2015. In
September 2015, JHR borrowed ¥6,608 million in long-term loans to fund refinancing and early repayment of
the borrowings that matured on the same month and November 2015.
In October 2015, JHR issued investment corporation bonds for retail investors, the first such issuance for JHR,
totaling ¥6,000 million to make early repayment of ¥6,000 million in existing loans. JHR also made early
repayment of ¥4,000 million in long-term loans by using funds obtained from sale of the three properties
comprising Daiwa Roynet Hotel Akita, Hotel Sunroute Niigata and Comfort Hotel Shin-Yamaguchi.
Moreover, in December 2015, JHR procured ¥9,000 million in short-term loans to partly fund the acquisitionof ACTIVE-INTER CITY HIROSHIMA (Sheraton Hiroshima Hotel).
As a result of the above, as of the end of the fiscal period under review, interest-bearing debt totaled ¥102,772
million, including short-term loans payable of ¥9,000 million, current portion of long-term loans payable of¥11,393 million, long-term loans payable of ¥70,379 million, current portion of investment corporation bondsof ¥2,500 million and investment corporation bonds of ¥9,500 million, and the ratio of interest-bearing debt tototal assets at end of period stood at 42.8%.
Through a series of these funding measures, JHR was able to lower its funding costs and diversify its
repayment period.
Furthermore, JHR concluded interest rate swap contracts to fix the interest on ¥16,716 million in total onloans on January 30, March 27, July 10 and September 17, 2015 in order to suppress the increase in interest
payment resulting from future interest rate rises. These actions brought the fixed rate ratio (including theinterest rate cap purchase portion) on JHR’s total interest-bearing debt to approximately 85%.
As of December 31, 2015, JHR’s issuer ratings were as follows.
As of October 29, 2015, Rating and Investment Information, Inc. (hereinafter referred to as “R&I”) changed
the outlook of JHR’s issuer rating from “stable” to “positive.” Moreover, as of November 26, 2015, Japan
Credit Rating Agency, Ltd. (hereinafter referred to as “JCR”) also changed its outlook of JHR’s long-term
issuer rating from “stable” to “positive.”
Rating agency

RatingOutlook

R&I

A−

Positive

JCR

A

Positive(4) Financial results
As a result of the abovementioned asset management, operating revenue, operating income and ordinary
income were ¥17,343 million, ¥10,988 million and ¥9,295 million, respectively, for the fiscal period underreview (12-month period from January 1 to December 31, 2015). Net income was ¥9,294 million.
With regard to dividends, it was decided that ¥9,356 million, which was calculated by adding a reversal ofreserve for dividends (appropriation for dividends) of ¥60 million to unappropriated retained earnings of¥9,296 million, would all be distributed except for fractions of less than one yen of dividend per unit.
Consequently, the dividend per unit came to ¥2,975.
Appropriation for dividends for the fiscal period under review is for the purpose of offsetting the financial
costs associated with early repayment and losses on retirement of existing facilities incurred for the
replacement of equipment.

8For appropriation for dividends, please refer to “<Reference 3> Dividend per unit and appropriation for
dividends” in 7. Reference information.
3. Changes in unitholders’ capital, etc.
The table below indicates increases (decreases) in the number of investment units issued and outstanding andunitholders’ capital of JHR in the past five years.

Date

Capital transaction

Number of units issued(Units)Unitholders’ capital(Millions of yen)

Increase(decrease)

Balance

Increase(decrease)

Balance

Note

April 6, 2011

Capital increase through third-party
allotment of investment units

15,831

58,031

3,599

23,161(Note 1)

April 1, 2012

Investment unit split

638,341

696,372–

23,161(Note 2)

April 1, 2012

Merger1,162,909

1,859,281–

23,161(Note 3)September 12, Capital increase through public
2012
offering of investment units

240,000

2,099,281

4,855

28,017(Note 4)

October 11,
2012

Capital increase through third-party
allotment of investment units

12,0002,111,281

242

28,260(Note 5)

April 17,2013

Capital increase through public
offering of investment units

510,000

2,621,281

20,585

48,845(Note 6)

September 9,
2014

Capital increase through public
offering of investment units

170,000

2,791,281

10,17959,024(Note 7)January 27,
2015

Capital increase through public
offering of investment units

200,000

2,991,281

14,97473,999(Note 8)February 18,
2015

Capital increase through third-party
allotment of investment units

9,041

3,000,322

676

74,676(Note 9)June 22,2015

Capital increase through public
offering of investment units

140,000

3,140,322

10,50085,177(Note 10)

July 232015

Capital increase through third-party
allotment of investment units

3,905

3,144,227

292

85,470(Note 11)

(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)(Note 8)(Note 9)(Note 10)(Note 11)

New investment units were issued through third-party allotment with an issue price per unit of ¥227,400 in order toraise funds for the acquisition of new properties.
JHR conducted a 12-for-1 split of investment units.
JHR (the former NHF) merged with the former JHR. The merger was an absorption-type merger pursuant to Article
147 of the Investment Trusts Act where JHR is the surviving corporation and the former JHR is the absorbed
corporation. Following this merger, 11 investment units of JHR after the split of investment units were delivered byallotment for each investment unit of the former JHR.
New investment units were issued through public offering with an issue price per unit of ¥20,990 (subscription priceof ¥20,232) in order to raise funds for the acquisition of new properties, etc.
New investment units were issued through third-party allotment with an issue price per unit of ¥20,232 in order torepay loans payable, etc.
New investment units were issued through public offering with an issue price per unit of ¥41,778 (subscription priceof ¥40,363) in order to raise funds for the acquisition of new properties, etc.
New investment units were issued through public offering with an issue price per unit of ¥61,912 (subscription priceof ¥59,880) in order to raise funds for the acquisition of new properties, etc.
New investment units were issued through public offering with an issue price per unit of ¥77,415 (subscription priceof ¥74,874) in order to raise funds for the acquisition of new properties, etc.
New investment units were issued through third-party allotment with an issue price per unit of ¥74,874 in order toraise funds for allocation to part of future acquisitions of specified assets, part of other repayment of loans, or capital
expenditures to maintain or improve competitiveness of existing properties.
New investment units were issued through public offering with an issue price per unit of ¥77,512 (subscription priceof ¥75,007) in order to raise funds for the acquisition of new properties, etc.
New investment units were issued through third-party allotment with an issue price per unit of ¥75,007 in order toraise funds for allocation to part of future acquisitions of specified assets, part of other repayment of loans, or capital
expenditures to maintain or improve competitiveness of existing properties.

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

12th period

13th period

14th period

15th period

16th period

Account closing month

March 2012

December 2012

December 2013

December 2014

December 2015

Highest price

19,550 (Note)

25,11051,50082,40093,800

Lowest price

15,008 (Note)

17,83023,67045,35070,600Price at end of period

18,700 (Note)

23,88050,40077,00089,500(Note)

In line with the merger, JHR conducted a 12-for-1 split of investment units with an effective date of April 1, 2012.
Consequently, figures for the 12th period have been calculated as if the unit split had been conducted at the start of the
fiscal period.

4. Dividends, etc.
Earnings dividend for the period under the review was decided in accordance with the monetary distribution
policy stipulated in Article 34, paragraph 1 of JHR’s Articles of Incorporation to exceed 90% of JHR’s
distributable profit that is defined by Article 67-15 of the Act on Special Measures Concerning Taxation. And¥9,356 million, which was calculated by adding a reversal of reserve for dividends (appropriation for dividends)of ¥60 million to unappropriated retained earnings of ¥9,296 million as of end of the period under the review,
would all be distributed except for fractions of less than one yen of dividend per unit. Consequently, the dividend
per unit came to ¥2,975.
(Yen)
12th period

13th period

14th period

15th period

16th period(From October 1, 2011
to March 31, 2012)(From April 1, 2012
to December 31, 2012)(From January 1, 2013
to December 31, 2013)(From January 1, 2014
to December 31, 2014)(From January 1, 2015
to December 31, 2015)

Unappropriated retained
earnings

473,912,203

19,031,977,302

3,235,030,032

5,776,116,820

9,296,121,922

Reversal of reserve fordividends––

1,848,870,143

240,538,162

60,847,707

31,057

1,695,047

1,236,316

1,444,427

2,894,304

Total cash dividends

473,881,146

3,012,797,987

5,082,663,859

6,015,210,555

9,354,075,325[Dividend per unit][8,166][1,427][1,939][2,155][2,975]473,881,146

3,012,797,987

5,082,663,859

6,015,210,555

9,354,075,325[8,166][1,427][1,939][2,155][2,975]

–

–

–

–

–

[–]

[–]

[–]

[–]

[–]

Classification

Retained earnings

Of the above, total earnings
dividends[Earnings dividend per unit]
Of the above, total return ofcapital contributions[Return of capital
contributions per unit]105. Investment policies and issues to be addressed
General investment outlook
In 2016, the Japanese economy is anticipated to show a recovery bolstered by strong private sector demand, withthe employment and income environments continuing to improve and the virtuous cycle of the economy making
further progress as well as the terms of trade improving moderately, partly due to the positive effect of the“Urgent Policies to Realize a Society in Which All Citizens are Dynamically Engaged” implemented by thegovernment on November 26, 2015 and other measures. Attention must be paid, however, to the downside swingof the emerging economies including China, market price trends of crude oil and other commodities andgeopolitical risks, among other factors, amid the U.S. monetary policy being increasingly normalized. Moreover,in the environment surrounding the tourism industry, it is expected that JHR will benefit from a further increasein the number of domestic tourists and inbound tourists thanks to an increase in individual income through theeconomic growth in the Asian areas, visa waiver and relaxing visa issuance requirements, enhanced
infrastructures including expansion in the arrival and departure slot of international flights, among other factors,
on top of the leisure demand among the Japanese people remaining solid.
Under such circumstances, JHR intends to invest based on the approach described below in order to makeinvesting in JHR more appealing based on its balanced mix of stability centered on fixed rent revenue andupside potential derived from variable rent and other revenue sources.
Internal growth
JHR will work to boost sales and GOP of hotels operated under variable rent contracts, which are the sevenhotels of the HMJ group hotels that comprise the five HMJ hotels plus Okinawa Marriott Resort & Spa (newly
acquired in July 2015) and ACTIVE-INTER CITY HIROSHIMA (Sheraton Hiroshima Hotel) (newly acquiredin December 2015), and the six “the b” hotels that comprise the five “the b” hotels plus the b suidobashi, which
was rebranded from Dormy Inn Suidobashi on July 1, 2015, as well as of the six Accor hotels that are mainly
operated under a management contract scheme, with an aim to maximize variable rent and earnings undermanagement contracts. To achieve this goal, JHR will request each hotel, its operations support company and its
operator to implement marketing initiatives to attract wider range of demand and measures to maintain andincrease room rates. JHR will also work with related parties to move the business focus from competition basedon price to competition based on value, aiming to create facilities and services that become prominent in themarket.
For hotels with only fixed rent contracts, JHR will increase its efforts to monitor operating conditions 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 inhotel earnings would lead to an increase in JHR’s earnings, such as revising rents upward and introducing upside
sharing schemes.
In addition, JHR will carry out an ongoing program of facility maintenance and improvement to ensure each
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 focus on investing in hotels with prospects for attracting
domestic and overseas leisure demand over the medium to long term, that is, highly competitive hotels located inappealing or fashionable areas, as it has done to date. Limited-service hotels, full-service hotels and resort hotels
are all investment targets, but JHR will only acquire properties with competitive advantages in terms ofbuildings and facilities (infrastructure) and the capabilities of the hotel tenant and operator (services).
However, competition over acquisition has become fierce in the investment market for hotels in accordance withan increase in the number of investors, with transaction yields showing a downward trend. Under suchcircumstances, JHR will work to acquire properties and make them prominent in the market, by taking
advantage of its strength as a REIT specializing in hotel properties of being able to extensively collecttransaction information of real estate related assets, etc. that are used as hotels and make selective approaches.
Specifically, JHR will utilize its pipelines as a major player in the investment market for hotels, ability to collectinformation on operations of hotels in general, proposal and implementation of a variety of rent schemes
including the management contract scheme, and excellent networks with major hotel operators. By doing so,
JHR will acquire properties while maintaining its superiority in the investment market for hotels.

11

Following such policy, in the fiscal period ended December 2015, JHR acquired seven properties (the five “the b”
hotels, Hotel Francs and Mercure Yokosuka) located mainly in Tokyo and the bay area that are deemed to enjoy
the largest benefits from an increase in inbound tourists. JHR also acquired a large resort hotel with the name of
Marriot, a world’s top international brand, in the Okinawa area, which is expected to show the highest growthamong JHR’s strategic investment target areas. Moreover, JHR acquired a multi-use facility centering on arelatively new, full-service hotel carrying the name of Sheraton, another well-known international brand,featuring a good location with a one-minute walk from JR Hiroshima Station. Of these properties, a lease
scheme that combines fixed rents and variable rents has been employed by the seven properties excluding Hotel
Francs that is with fixed rent contract only and Mercure Yokosuka that is with variable rent contract only, inorder to pursue upside potential while working to secure stability. Going forward, JHR will continuously acquire
properties by taking advantage of these strengths that are peculiar to a REIT specialized in hotels, including theability to incorporate a variety of rent schemes, hotel renovations and rebranding arrangements.
Finance strategy
JHR seeks to maintain and enhance the relationships of trust with financial institutions with which it does
business, while working to ensure financial stability and strength by increasingly diversifying the means offinancing. It aims to conduct financial operations by keeping the ratio of interest-bearing debt to total assets at
no larger than 50% for the time being. In addition, when seeking new borrowings for property acquisitions orrefinancing existing debt, JHR will work to reinforce its existing relationships with multiple banks while seeking
to spread out the maturity dates of its debt and considering the balance with borrowing costs.
Moreover, JHR will investigate extending the maturity dates and managing interest rate risks while discerning
the conditions of the market for interest rate.

126. Significant subsequent events(1) Acquisition of assets
On February 1, 2016, JHR acquired the following property.
Property nameCANDEO HOTELS UENO-KOEN

Asset category

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

Asset type

Hotel

Address

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

Acquisition dateFebruary 1, 2016

SellerGK Ueno Parkside

Acquisition price (Note)¥6,705 million(Note) The acquisition price does not include expenses for acquisition, settlement of property taxes and city planning taxes, andconsumption taxes.

On April 1, 2016, JHR acquired the following property.
Property name

Hotel Centraza Hakata

Asset category

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

Asset type

Hotel

Address

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

April 1, 2016

Seller

The seller is not disclosed as consent on disclosure has notbeen obtained from the seller. There are no capital, humanor business relationships to be noted between JHR or the
Asset Management Company and the seller. In addition,
the seller does not have any special interest relationshipwith either JHR or the Asset Management Company.

Acquisition price (Note)¥7,197 million(Note)

The acquisition price does not include expenses for acquisition, settlement of property taxes and city planning taxes, andconsumption taxes.

(2) Resolution on borrowing of funds
JHR resolved on new borrowings as follows in order to partly fund the acquisition of the real estate beneficial
interest in trust of CANDEO HOTELS UENO-KOEN and movable assets attached thereon as described above
in item (1) Acquisition of assets.

13

Term Loan 18
LenderSumitomo Mitsui Banking Corporation / Shinsei Bank,
Limited / Mizuho Bank, Ltd. / The Hiroshima Bank, Ltd.

Amount of the loan

¥2,000 million

Interest rate

Base interest rate (JBA Japanese Yen TIBOR for one
month) + 0.30%

Date of borrowing

February 29, 2016

Method of principal
repayment

Lump-sum payment on the maturity date

Maturity date

March 31, 2019

Collateral

Unsecured/Unguaranteed

JHR resolved on new borrowings as follows in order to partly fund the acquisition of the real estate beneficial
interest in trust of Hotel Centraza Hakata and movable assets attached thereon as described above in item (1)Acquisition of assets.
Term Loan 19

LenderSumitomo Mitsui Banking Corporation / Mizuho Bank,
Ltd. / Shinsei Bank, Limited / Sumitomo Mitsui Trust
Bank, Limited / Mitsubishi UFJ Trust and Banking
Corporation / The Bank of Fukuoka, Ltd.

Amount of the loan

¥7,000 million

Interest rate

Base interest rate (JBA Japanese Yen TIBOR for one
month) + 0.30%

Date of borrowing

April 1, 2016

Method of principal
repayment

Lump-sum payment on the maturity date

Maturity date

March 31, 2017

Collateral

Unsecured/Unguaranteed(3) Issuance of new investment units
JHR resolved to issue new investment units at the Board of Directors meetings held on January 4, 2016 andJanuary 13, 2016. Payment for the new investment units was completed on January 20, 2016 and February 17,
2016, and the investment units were issued under the following terms and conditions. As a result, JHR’s
unitholders’ capital increased to ¥100,088,808,209, with the number of investment units issued andoutstanding totaling 3,321,907 units.
(A) Issuance of new investment units (public offering)Number of investment units issued:
Issue price:
Total issue price:
Paid-in amount (issue value):
Total paid-in amount (total issue value):
Payment date:14

170,000 units¥85,020 per unit
¥14,453,400,000¥82,273 per unit
¥13,986,410,000
January 20, 2016

(B) Issuance of new investment units (third-party allotment)
Number of investment units issued:
7,680 units
Paid-in amount (issue value):¥82,273 per unit
Total paid-in amount (total issue value):¥631,856,640
Payment date:February 17, 2016
Allottee:
SMBC Nikko Securities Inc.
(C) Use of funds
JHR allocated the proceeds obtained from the public offering and the third-party allotment to cash on
hand in order to complement part of a decrease in cash on hand, which is a decrease that occurred
when JHR had used cash on hand to partly fund the acquisition of ACTIVE-INTER CITYHIROSHIMA (Sheraton Hiroshima Hotel) (including expenses for acquisition) that it acquired on
December 18, 2015. JHR also used the said proceeds to partly fund the acquisition of CANDEO
HOTELS UENO-KOEN as described above in item (1) Acquisition of assets.
(4) Issuance of investment corporation bonds
JHR issued the investment corporation bonds under the following terms and conditions.
Category

Sixth unsecured investment corporation bonds

Total amount of bonds¥3,000 million

Issue price¥100 for ¥100 of each bondInterest rate

0.935% per year

Issue date

March 22, 2016

Redemption date

March 19, 2026

Collateral

Unsecured

Use of proceeds

To partly fund the repayment of existing loans

7. Reference information<Reference 1>
Major indicators of the hotel business for the fiscal year ended December 31, 2015
The following tables indicate the figures related to the hotel business of the HMJ group hotels, the six
Accor hotels and the six “the b” hotels for the operating period from January 1, 2015 throughDecember 31, 2015, based on the data provided by the hotel lessees. Furthermore, while the indicatorsof the hotels are among the indicators that show the operating status of the rooms departments, they do
not necessarily represent the operating revenue and the ability to bear rent, etc. of the respective hotels,
as the daily rates and profit margins, etc. of the respective rooms available for sale are not uniform,
among other reasons. As such, the indicators are no more than the reference figures.
(a) HMJ group hotels(Millions of yen)
Kobe Meriken
Oriental Hotel
Park Oriental
tokyo bay
Hotel
Ratio
to total
sales

Namba
Oriental
Hotel

Ratio
to totalsales

Hotel Nikko Oriental Hotel
AlivilaHiroshima

Ratio
to total
sales

Ratio
to total
sales

Five HMJ
hotelsTotal/Average

Okinawa
MarriottResort & Spa(Note 4)

Sheraton
Hiroshima
Hotel(Note 5)Ratio
to total
sales

Ratio
to total
sales

Ratio
to total
sales

Ratio
to totalsales

Occupancy rate

80.0%

－

98.1%

－

89.7%

－

83.6%

－

80.0%

－

87.7%

－

87.9%

－

85.4%

－

ADR (Note 1)

17,361－

20,027－

16,949－26,651

－

8,908

－

19,212－

19,025－

16,429－

RevPAR(Note 2)

13,896－

19,655－

15,204－

22,283

－

7,122

－

16,843－

16,717－

14,024－15

Kobe Meriken
Oriental Hotel
Park Oriental
tokyo bay
Hotel

Namba
Oriental
Hotel

Hotel Nikko Oriental Hotel
AlivilaHiroshima

Five HMJ
hotelsTotal/Average

Okinawa
MarriottResort & Spa(Note 4)

Sheraton
Hiroshima
Hotel(Note 5)Ratio
to total
sales

Ratio
to total
sales

Ratio
to total
sales

Ratio
to total
sales

Ratio
to total
sales

Ratio
to total
sales

Ratio
to total
sales

Ratio
to totalsales

5,252 100.0%

7,322 100.0%

2,530 100.0%

5,948 100.0%

2,134 100.0%

23,186 100.0%

4,016 100.0%

2,847 100.0%

Rooms
department

1,783

33.9%

3,978

54.3%

1,571

62.1%

3,551

59.7%

649

30.4%

11,532

49.7%

2,427

60.4%

1,340

47.1%

Food & beveragedepartment

3,126

59.5%

2,871

39.2%

165

6.5%

1,905

32.0%

1,410

66.1%

9,477

40.9%

1,159

28.9%

1,408

49.4%

Tenantdepartment

60

1.1%

250

3.4%

750

29.6%

2

0.0%

23

1.1%

1,083

4.7%

79

2.0%

13

0.5%

Other
departments(Note 3)

284

5.4%

224

3.1%

45

1.8%

489

8.2%

52

2.4%

1,093

4.7%

352

8.8%

87

3.0%

1,168

22.2%

2,044

27.9%

1,423

56.2%

1,977

33.2%

328

15.4%

6,941

29.9%

1,230

30.6%

716

25.1%

Total sales

GOP(Note 1)
(Note 2)

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

ADR: Represents average daily rate, which is calculated by dividing total rooms revenue for a certain period (excluding
service charges) by the total number of rooms sold during the period. The same shall apply hereinafter.
RevPAR: Represents revenue per available room, which is calculated by dividing total rooms revenue for a certain
period (excluding service charges) by the total number of rooms available for sale during the period. Revenue peravailable room equals the product of ADR and occupancy rate. The same shall apply hereinafter.
Figures for the Other departments include sales of the Product sales department.
For Okinawa Marriott Resort & Spa, which JHR acquired on July 10, 2015, annual figures include the result of before
and after acquisitions.
The indicated figures are for Sheraton Hiroshima Hotel, the main facility of ACTIVE-INTER CITY HIROSHIMA. For
ACTIVE-INTER CITY HIROSHIMA (Sheraton Hiroshima Hotel), which JHR acquired on December 18, 2015,
annual figures include the result of before and after acquisition.
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 tototal sales is rounded off to one decimal place. The same shall apply hereinafter.

(b) Six Accor hotels(Millions of yen)ibis Tokyo
Shinjuku

ibis Styles
Kyoto Station

Ratio to
total
sales

ibis Styles
SapporoRatio to
total
sales

MercureSapporoRatio to
total
sales

MercureOkinawa Naha

Ratio to
total
sales

MercureYokosuka(Note 1)

Ratio to
total
sales

Total/Average(Note 2)

Ratio to
total
sales

Ratio
to totalsales

Occupancy rate

88.5％

－

90.7%

－

87.8%

－

82.1%

－

80.7%

－

89.5%

－

86.1%

－

ADR

11,809－10,491

－

9,335

－

11,009－10,038－

11,561－

10,605－

RevPAR

10,456

－

9,520

－

8,197

－

9,044

－

8,097

－

10,352

－

9,130

－

Total sales

873 100.0%

814 100.0%

Rooms department

782

89.6%

747

91.8%

832

81.6%

941

80.3%

765

82.9%

605

56.9%

4,672

79.7%

Food & beveragedepartment

71

8.1%

61

7.5%

163

16.0%

221

18.9%

131

14.2%

437

41.1%

1,084

18.5%

Other departments

20

2.3%

6

0.7%

24

2.4%

10

0.8%

26

2.8%

21

2.0%

108

1.8%

GOP

470

53.8%

437

53.7%

513

50.3%

464

39.6%

392

42.5%

235

22.1%

2,512

42.8%

(Note 1)
(Note 2)

1,019 100.0%

1,172 100.0%

923 100.0%

1,062 100.0%

5,863 100.0%

For Mercure Yokosuka, which JHR acquired on April 2, 2015, annual figures include the result of before and after
acquisition.
For Total/Average, figures calculated by JHR are indicated as no figures have been provided by the hotel operators or
hotel lessees.

16

(c) Six “the b” hotels(Millions of yen)
the b suidobashi(Note 1)the bakasaka-mitsuke(Note 2)

Ratio to
total
sales

the b
ikebukuro(Note 2)

Ratio to
total
sales

the b
ochanomizu(Note 2)the b hachioji(Note 2)

Ratio to
total
sales

Ratio to
total
sales

Ratio to
total
sales

the b hakata(Note 2)

Total/Average(Note 3)

Ratio to
total
sales

Ratio
to totalsales

Occupancy rate

－

－

89.6%

－

91.7%

－

90.8%

－

90.7%

－

95.4%

－

91.9%

－

ADR

－

－

11,494－

10,494－

10,936

－

7,074

－

6,580

－

8,842

－

RevPAR－－

10,301

－

9,626

－

9,932

－

6,414

－

6,277

－

8,124

－

Total sales－－

464 100.0%

625 100.0%

262 100.0%

558 100.0%

406 100.0%

2,315 100.0%

Rooms department

－

－

459

98.9%

615

98.4%

261

99.4%

459

82.3%

401

98.8%

2,194

94.8%

Food & beveragedepartment

－

－

－

－

－

－

－

－

95

17.0%

－

－

95

4.1%

Other departments

－

－

5

1.1%

10

1.6%

1

0.6%

4

0.8%

5

1.2%

26

1.1%

－

－

266

57.4%

320

51.2%

122

46.5%

193

34.5%

178

43.9%

1,079

46.6%

GOP

(Note 1)
(Note 2)
(Note 3)For the b suidobashi, there is no figure available for disclosure for the fiscal period ended December 31, 2015 as nodata exist for the period before July 1, 2015.
For the five “the b” hotels, which JHR acquired on January 30, 2015, annual figures include the result of before andafter acquisitions.
For Total/Average, figures calculated by JHR are indicated as no figures have been provided by the hotel lessees.
Furthermore, the figures represent the total and average of the five “the b” hotels, or the six “the b” hotels minus the bsuidobashi.

<Reference 2>
The following tables indicate the sales and GOP of the HMJ group hotels, the six Accor hotels and the five “theb” hotels, among JHR’s hotels with variable rent contracts. Furthermore, while the indicated figures are based on
the data provided by the hotel lessees, etc., please note that the figures have not undergone audit and otherprocedures and JHR is not in a position to guarantee the accuracy and completeness of the individual figures anddescriptions. Moreover, the sales and GOP are rounded off to the nearest million yen, and the year-on-yearchange is rounded off to the one decimal place.

<1> Sales and GOP of HMJ group hotels(1) Sales by hotel(Millions of yen)
Sales of the HMJ group hotels
First half
Kobe Meriken Park
Oriental Hotel

Second half
Full year
First half

Oriental Hotel tokyo bay Second half
Full year
First half
Namba Oriental Hotel

Second half
Full year

Fiscal year ended Dec. 31, 2014

Fiscal year ended Dec. 31, 2015

Results

Results

Year-on-year change

2,424
2,798
5,222
3,366
3,844
7,210
998
1,151
2,149

0.4%
0.1%
0.2%
4.9%
(3.3)%
0.4%
6.8%
10.9%
9.0%
17

Year-on-year change

2,424
2,828
5,252
3,395
3,927
7,322
1,189
1,341
2,530

(0.0)%
1.1%
0.6%
0.9%
2.2%
1.6%
19.1%
16.6%
17.8%

(Millions of yen)
Sales of the HMJ group hotels

Fiscal year ended Dec. 31, 2014

Fiscal year ended Dec. 31, 2015

Results

Results

2,190
3,301
5,491
1,046
1,178
2,223
10,024
12,272
22,296
1,600
2,211
3,811
1,359
1,511
2,870

First halfHotel Nikko Alivila

Second half
Full year
First half

Oriental Hotel Hiroshima Second half
Full year
First half
Total of the five HMJ
hotelsSecond half
Full year

First half
Okinawa Marriott Resort
Second half
& Spa
Full year
First half
Sheraton Hiroshima
Hotel

Second half
Full year(Note)

Year-on-year change(0.1)%
3.7%
2.2%(0.0)%(2.5)%(1.4)%
2.3%
0.6%
1.4%
5.8%
7.1%
6.6%
3.5%
1.0%
2.2%

Year-on-year change

2,377
3,571
5,948
991
1,142
2,134
10,376
12,81023,186
1,614
2,402
4,016
1,346
1,502
2,847

8.6%
8.2%
8.3%
(5.2)%(3.0)%(4.0)%
3.5%
4.4%
4.0%
0.9%
8.7%
5.4%
(1.0)%(0.6)%(0.8)%For Okinawa Marriott Resort & Spa and ACTIVE-INTER CITY HIROSHIMA (Sheraton Hiroshima Hotel), which
JHR acquired on July 10, 2015 and December 18, 2015, respectively, figures include the result of before and after
acquisition.

(2) Hotel GOP(Millions of yen)
GOP of the HMJ group hotels

Total for five HMJ
hotels(Note)

Fiscal year ended Dec. 31, 2015

Results

Results

Year-on-year change

Year-on-year change

GOP

6,302

2.4%

6,941

10.1%

Ratio of GOP to
sales

28.3%

0.3%

29.9%

1.7%

1,105

12.5%

1,230

11.3%

29.0%

1.5%

30.6%

1.6%

651

11.3%

716

10.0%

22.7%

1.9%

25.1%

2.5%

GOP
Okinawa Marriott Resort& Spa
Ratio of GOP to
sales
Sheraton Hiroshima
Hotel

Fiscal year ended Dec. 31, 2014

GOP
Ratio of GOP tosales

JHR acquired Okinawa Marriott Resort & Spa and ACTIVE-INTER CITY HIROSHIMA (Sheraton Hiroshima Hotel) on
July 10, 2015 and December 18, 2015, respectively. Annual figures of the HMJ group hotels include the result of before andafter the acquisition of these two hotels.

The calculation of rent for five HMJ hotels for the fiscal year ended December 31, 2015 is as follows:
Annual rent (¥6,147 million) = Fixed rent (¥3,221 million) + Variable rent (¥2,926 million)
Variable rent = [Total GOP of the five HMJ hotels (¥6,941 million) − GOP base amount (¥3,351
million)] × 81.5% (Note)(Note)

With regard to the fixed-term lease agreement for the five HMJ hotels, JHR concluded an agreement to change the variable
rent ratio from 81.5% to 85.0%, effective on January 1, 2016.

18

<2> Sales and GOP of the six Accor hotels(1) Sales by hotel(Millions of yen)
Sales of the six Accor hotels

Fiscal year ended Dec. 31, 2014

Fiscal year ended Dec. 31, 2015

Results

Results

427
445
872
305
384
690
397
522
920
425
573
998
363
414
778
545
491
1,036
2,463
2,829
5,292

First half
ibis Tokyo Shinjuku

Second half
Full year
First half

ibis Styles Kyoto Station Second half
Full year
First half
ibis Styles Sapporo

Second half
Full year
First half

Mercure Sapporo

Second half
Full year
First half

Mercure Okinawa Naha

Second half
Full year
First half

Mercure Yokosuka

Second half
Full year
First half

Total

Second half
Full year(Note)(2)

Year-on-year change

12.0%
7.5%
9.6%
(1.2)%
13.3%
6.3%
2.3%
4.8%
3.7%
5.5%
3.9%
4.6%
28.0%
14.5%
20.5%
3.7%
9.5%
6.4%
7.5%
8.3%
7.9%

Year-on-year change

453
421
873
357
457
814
429
591
1,019
499
672
1,172
407
516
923
550
512
1,062
2,696
3,168
5,863

6.1%
(5.5)%
0.2%
17.1%
18.8%
18.0%
7.9%
13.1%
10.9%
17.5%
17.4%
17.4%
12.1%
24.5%
18.7%
1.0%
4.3%
2.6%
9.5%
12.0%
10.8%

For Mercure Yokosuka, which JHR acquired on April 2, 2015, figures include the result of before and after acquisition.

Hotel GOP
(Millions of yen)
Fiscal year ended Dec. 31, 2014

GOP of the six Accor hotels

Results

Fiscal year ended Dec. 31, 2015

Year-on-year change

Results

Year-on-year change

Total for six Accor hotels

2,075

15.6%

2,512

21.0%

Ratio of GOP to sales

39.2%

2.6%

42.8%

3.6%

(Note)

JHR acquired Mercure Yokosuka on April 2, 2015. Annual figures of the six Accor hotels include the result of before andafter the acquisition of Mercure Yokosuka.

<3> Sales and GOP of the six “the b” hotels(1) Sales by hotel(Millions of yen)

Sales of the six “the b” hotels

First half
the b akasaka-mitsuke

Second half
Full year

Fiscal year ended Dec. 31, 2014

Fiscal year ended Dec. 31, 2015

Results

Results

Year-on-year change

131
213
344

19

(13.7)%
94.9%
31.8%

Year-on-year change

221
242
464

69.4%
13.8%
35.0%

Sales of the six “the b” hotels

Fiscal year ended Dec. 31, 2014

Fiscal year ended Dec. 31, 2015

Results

Results

279
283
562
121
124
246
242
256
497
172
191
363
944
1,067
2,011

First half
the b ikebukuro

Second half
Full year
First half

the b ochanomizu

Second half
Full year
First half

the b hachioji

Second half
Full year
First half

the b hakata

Second half
Full year
First half

Total

Second half
Full year(Note 1)

(Note 2)
(Note 3)Year-on-year change

8.1%
4.6%
6.4%
7.9%
1.6%
4.6%
9.8%
0.9%
5.0%
7.0%
8.7%
7.9%
4.7%
14.6%
9.7%

301
324
625
132
130
262
267
291
558
191
215
406
1,111
1,203
2,315

Year-on-year change

7.7%
14.5%
11.1%
9.0%
4.8%
6.9%
10.4%
13.8%
12.2%
10.9%
12.8%
11.9%
17.7%
12.8%
15.1%

The number of guest rooms of the b akasaka-mitsuke increased from 91 to 122 with the extension and refurbishment
work conducted by the previous owner having completed in April 2014. Accordingly, the number of guest rooms
available for sale in the first half of 2015 and the first half of 2014 are not identical.
For the five “the b” hotels, which JHR acquired on January 30, 2015, figures include the result of before and after
acquisition.
For the b suidobashi, there is no figure to disclose for the fiscal year ended December 31, 2015 as no data exists for theperiod before July 1, 2015.

(2) Hotel GOP(Millions of yen)
Fiscal year ended Dec. 31, 2014

Fiscal year ended Dec. 31, 2015

Results

Year-on-year change

Results

Year-on-year change

Total for the five “the b” hotels

854

15.5%

1,079

26.4%

Ratio of GOP to sales

42.4%

2.1%

46.6%

4.2%

GOP of the five “the b” hotels(Note 1)
(Note 2)

JHR acquired the five “the b” hotels on January 30, 2015. Annual figures of the five “the b” hotels include the result of
before and after the acquisition.
For the b suidobashi, there is no figure to disclose for the fiscal year ended December 31, 2015 as no data exists for theperiod before July 1, 2015.

20

<Reference 3>

Dividend per unit and appropriation for dividends

Dividend per unit for the fiscal periods ended December 31, 2014 and December 31, 2015 was calculated basedon the assumptions described below.
(Millions of yen)
Fiscal year ended
December 31, 2014
Unappropriated retained earnings
Total appropriation for dividends (use of negative goodwill)

Fiscal year ended
December 31, 2015

5,776

9,296

240

60

Loss on retirement of noncurrent assets

425

Financial costs in accordance with early
repayment

71

35

Adjustment for dilution (Note)
Total dividends

164

-

6,015

9,354

Number of investment units issued and outstanding(Units)2,791,281

3,144,227

Dividend per unit

(Yen)

2,155

2,975

(Note)

This is to respond to the dilution of dividend per unit which occurred as a result of the issuance of new investment units
during the fiscal periods ended December 31, 2014.

<Reference 4>Balance of reserve for dividends (negative goodwill)

The following shows the balance of reserve for dividends (negative goodwill) after the appropriation for
dividends as of December 31, 2015.
(Millions of yen)
14,168(240)

Balance of reserve for dividends as of December 31, 2014
Appropriation for dividends for the fiscal year ended December 31, 2014
Balance of reserve for dividends after appropriation for dividends as of December 31, 2014
Appropriation for dividends for the fiscal year ended December 31, 2015

13,928(60)

Balance of reserve for dividends after appropriation for dividends as of December 31, 2015

13,867

Overview of JHR
1. Unitholders’ capital
Account closing date
Total number of authorized units(Units)Total number of units issued(Units)Unitholders’ capital(Millions of yen)
Number of unitholders(Note)(Persons)

12th period

13th period

14th period

15th period

16th period

As ofMarch 31, 2012

As of
December 31, 2012

As of
December 31, 2013

As ofDecember 31, 2014

As ofDecember 31, 2015

2,000,000

20,000,000

20,000,000

20,000,000

20,000,000

58,0312,111,281

2,621,281

2,791,281

3,144,227

23,161

28,26048,84559,02485,470

5,728

13,63017,073

22,86625,182The total number of authorized units changed from 2 million units to 20 million units on the effective date of the merger
based on the resolution of the 5th General Meeting of Unitholders of JHR held on February 24, 2012.

21

2. Matters regarding investment units
Major unitholders of JHR as of December 31, 2015 were as follows:
Number of units held
(Units)Name

Percentage (Note)(%)

Japan Trustee Services Bank, Ltd. (Trust Account)

540,06217.17%The Master Trust Bank of Japan, Ltd. (Trust Account)

417,042

13.26%

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

330,953

10.52%

Nomura Bank (Luxembourg) S.A.

128,733

4.09%

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

120,438

3.83%

Shikoku Railway Company

58,311

1.85%

NORTHERN TRUST CO. (AVFC) RE IEDU UCITS CLIENTS NONLENDING 15 PCT TREATY ACCOUNT

57,436

1.82%

STATE STREET BANK AND TRUST COMPANY 505001

50,662

1.61%

NOMURA PB NOMINEES TK1 LIMITED

38,269

1.21%

NOMURA PB NOMINEES LIMITED OMNIBUS-MARGIN(CASHPB)

37,6991.19%

1,779,605

56.59%

Total(Note)The percentage indicates the ratio of the number of units held to the number of units issued and outstanding, rounded down
to the two decimal places.

3. Matters regarding officers, etc.
(1) Officers, etc. as of December 31, 2015 were as follows:
Name

Major concurrent post outside
JHR

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

Executive Director

Kaname Masuda (Note 1) (Note 2)

Representative Partner, Masuda &Partners Law Office

900

Supervisory Director

Hiroshi Matsuzawa (Note 2)

–

2,500

Supervisory Director

Tetsuya Mishiku (Note 2)

Representative Attorney, Mishiku& Nagamachi Law Office

2,500Supervisory Director

Hiroto Kashii (Note1) (Note 2)–

500

Independent auditor

KPMG AZSA LLC (Note 3)–

28,100

Position(Note 1)

(Note 2)

(Note 3)(Note 4)

Based on the resolutions made at the 7th General Meeting of Unitholders held on November 26, 2015, Yukio Isa
resigned from office of Executive Director as of the date, and Kaname Masuda newly took office of Executive Directorof JHR. In addition, Hiroto Kashii newly took office as Supervisory Director of JHR. Furthermore, the totalcompensation paid to Yukio Isa, who had resigned, for his assignment as Executive Director during the fiscal year
under review was ¥4,400 thousand.
None of the Executive Director and the Supervisory Directors own investment units of JHR in their own name oranother person’s name. Moreover, although the Supervisory Directors may be officers in corporations other than thoselisted above, there are no conflicts of interest between those corporations including those listed above and JHR.
Remuneration for the independent auditor includes fees for services other than those stipulated in Article 2, paragraph 1of the Certified Public Accountants Act amounting to ¥7,600 thousand, such as preparation of comfort letters andresearch reports based on agreed-upon procedures performed for the capital increase through the public offerings on
January 27, 2015 and June 22, 2015, respectively, and the issuance of investment corporation bonds on October 23,
2015.
In case the number of Executive Director does not meet the requirement stipulated by laws and regulations, Hisashi
Furukawa, Representative Director of the Asset Management Company, was elected as Substitute Executive Director,
based on the resolution made by the 7th General Meeting of Unitholders of JHR held on November 26, 2015.

(2) Policy for decisions on dismissal or non-reappointment of independent auditor
We have a policy to determine, at a General Meeting of Unitholders, whether to dismiss the independent
auditor pursuant to provisions of the Investment Trusts Act, and to determine whether or not to reappoint the22independent auditor taking into comprehensive consideration the audit quality, audit fees and other various
matters.

4. Asset management company, custodian and general administrators
The asset management company, etc. as of December 31, 2015 were as follows:
Consignment classification

Name

Asset management company

Japan Hotel REIT Advisors Co., Ltd.

Custodian

Sumitomo Mitsui Trust Bank, Limited

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

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

General administrator (tax return preparation, etc.)

PwC Tax Japan

23

Status of Investment Assets
1. Composition of assets
15th period(As of December 31, 2014)
Type of assets

Business
category(Note 1)

Prefectural
location

Total amount ofassets held
(Millions ofyen)

Name of property, etc.

16th period(As of December 31, 2015)

Ratio to total
assets (%)(Note 3)(Note 2)

ibis Tokyo Shinjuku
the b ikebukuro
the b akasaka-mitsuke

7,386

3.9

7,487

3.1

-

-

6,591

2.7

-

-

6,295

2.6

Hotel Sunroute Shinbashi

4,893

2.6

4,873

2.0

Comfort Hotel Tokyo Higashi
Nihombashi

3,689

2.0

3,655

1.5

the b hachioji

-

-

2,670

1.1

the b ochanomizu

-

2,350

1.0

2,056

1.1

2,056

0.9

R&B Hotel Ueno Hirokoji

1,760

0.9

1,761

0.7

R&B Hotel Higashi Nihonbashi

1,516

0.8

1,528

0.6

Hotel Vista Kamata Tokyo

1,467

0.8

1,473

0.6

the b suidobashi (Note 4)

1,065

0.6

1,204

0.5

Dormy Inn EXPRESS Asakusa

974

0.5

963

0.4

Chisun Inn Kamata

810

0.4

802

0.3

Namba Oriental Hotel

14,746

7.8

14,689

6.1

ibis Styles Sapporo

6,849

3.6

6,788

2.8

Mercure Sapporo

6,079

3.2

6,010

2.5

ibis Styles Kyoto Station

6,743

3.6

6,725

2.8

-

-

2,323

1.0

Hakata Nakasu Washington Hotel
Plaza

2,072

1.1

2,075

0.9

Toyoko Inn Hakata-guchi Ekimae

1,520

0.8

1,498

0.6

Mercure Okinawa Naha

2,994

1.6

2,953

1.2

Kumamoto Dormy Inn Kumamoto

2,268

1.2

2,232

0.9

Nara

Nara Washington Hotel Plaza

1,949

1.0

1,910

0.8

Niigata

Hotel Sunroute Niigata

1,967

1.0

-

-

Akita

Daiwa Roynet Hotel Akita

1,672

0.9

-

-

799

0.4

-

-

Subtotal

75,28440.0

90,92437.8

Oriental Hotel tokyo bay

Osaka
Hokkaido
Kyoto

the b hakata
Fukuoka

Okinawa

Yamaguchi Comfort Hotel Shin-Yamaguchi

18,80010.0

18,512

7.7

Hotel Francs

-

-

3,165

1.3

ACTIVE-INTER CITYHIROSHIMA (Sheraton Hiroshima
Hotel) (Note 5)--

17,934

7.5

Oriental Hotel Hiroshima

4,026

2.1

4,043

1.7

Hyogo

Kobe Meriken Park Oriental Hotel

10,171

5.4

9,963

4.1

Kanagawa

Mercure Yokosuka

-

-

1,659

0.7

Subtotal

32,99917.5

55,27723.0

Hilton Tokyo Bay

26,18913.926,10910.9

Hotel Nikko Alivila

18,4759.8

18,325

7.6--

15,025

6.3

Chiba

Hiroshima

Chiba

Resort hotel(Note 3)(Note 2)-

Limitedservice hotel

Full-service
hotel

Ratio to total
assets (%)

Smile Hotel Nihombashi
Mitsukoshimae

Tokyo

Real estate intrust

Total amount ofassets held
(Millions ofyen)

Okinawa

Okinawa Marriott Resort & Spa
The Beach Tower Okinawa

6,953

3.7

6,882

2.9

Osaka

Hotel Keihan Universal City

6,085

3.2

6,019

2.5

Kanagawa

Hakone Setsugetsuka

3,848

2.0

3,788

1.6

Subtotal

61,55332.7

76,15031.7

Real estate in trust – Total

169,83790.3

222,352

92.5

24

15th period(As of December 31, 2014)
Type of assets

Business
category(Note 1)

Prefectural
location

Total amount ofassets held
(Millions ofyen)

Name of property, etc.

Ratio to total
assets (%)(Note 3)(Note 2)

(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)16th period(As of December 31, 2015)
Total amount ofassets held
(Millions ofyen)

Ratio to total
assets (%)(Note 3)(Note 2)Equity interest in silent partnership (Note 6)

602

0.3

-

-

Deposits and other assets (Note 7)

17,651

9.4

18,003

7.5

Total assets

188,091

100.0

240,356

100.0

Hotels are categorized as limited-service hotels, full-service hotels or resort hotels according to the manner of operation.
For real estate in trust, “Total amount of assets held” shows the amount calculated by deducting accumulated depreciationfrom acquisition price (including expenses incidental to acquisition).
“Ratio to total assets” shows the ratio of each asset held to total assets, rounded off to one decimal place.
Dormy Inn Suidobashi terminated operations as a hotel on March 31, 2015. Furthermore, with the completion of therefurbishment work conducted in accordance with the rebranding of the hotel, it started operations as a hotel under thename of the b suidobashi. In this report, the same shall apply hereinafter.
ACTIVE-INTER CITY HIROSHIMA is classified in accordance with the business category of Sheraton Hiroshima Hotel,
its main facility.
Represents the equity interest in silent partnership with G.K. Tourism Japan No. 1 as business operator.
Includes machinery and installation, furniture, fixtures and equipment, construction in progress, construction in progressin trust, and intangible assets (excluding leasehold rights).

25

2. Major portfolio assets
An overview of the portfolio assets of JHR (36 properties in total) as of December 31, 2015 was as follows.
PropertyNo.

Name of property, etc.

Book value(Millions ofyen)Leasable area(m2)

Leased area(m2)

(Note 2)

(Note 3)(Note 1)

1

Kobe Meriken Park Oriental Hotel(Note 5)

10,12032,663.90

Tenantoccupancy
ratio
(%)

Ratio of rental
revenue to total
rental revenue
(%)

Major
use

(Note 4)32,663.90

100.0

6.5

Hotel

2

Oriental Hotel tokyo bay

18,69844,833.11

44,833.11

100.0

10.2

Hotel

3

Namba Oriental Hotel

14,775

19,364.33

19,364.33

100.0

7.5

Hotel

4

Hotel Nikko Alivila (Note 6)

18,55638,024.98

38,024.98

100.0

9.4

Hotel

5

Oriental Hotel Hiroshima

4,078

13,752.22

13,752.22

100.0

2.5

Hotel

6

ibis Tokyo Shinjuku

7,559

6,801.84

6,801.84

100.0

3.8

Hotel

8

The Beach Tower Okinawa (Note 7)

6,882

20,140.01

20,140.01

100.0

3.0

Hotel

9

Hakone Setsugetsuka (Note 8)

3,797

10,655.03

10,655.03

100.0

1.7

Hotel

10

Dormy Inn Kumamoto (Note 8)

2,232

7,701.19

7,701.19

100.0

1.1

Hotel

12

the b suidobashi

1,230

3,097.25

3,097.25

100.0

0.6

Hotel

13

Dormy Inn EXPRESS Asakusa

963

2,014.90

2,014.90

100.0

0.4

Hotel

14

Hakata Nakasu Washington Hotel Plaza

2,076

5,602.04

5,602.04

100.0

1.4

Hotel

15

Nara Washington Hotel Plaza

1,916

5,271.54

5,271.54

100.0

0.9

Hotel

16

R&B Hotel Ueno Hirokoji

1,761

3,060.31

3,060.31

100.0

0.6

Hotel

17

R&B Hotel Higashi Nihonbashi

1,528

3,800.77

3,800.77

100.0

0.7

Hotel

18

Comfort Hotel Tokyo Higashi Nihombashi

3,655

5,765.27

5,765.27

100.0

1.6

Hotel

22

Smile Hotel Nihombashi Mitsukoshimae

3,167.82

3,167.82

100.0

0.9

Hotel

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

100.0

0.8

Hotel

(Note 8)

2,056

24

Toyoko Inn Hakata-guchi Ekimae

1,498

25

Hotel Vista Kamata Tokyo

1,473

3,831.80

3,831.80

100.0

0.7

Hotel

26

Chisun Inn Kamata806

1,499.87

1,499.87

100.0

0.4

Hotel

29

Hotel Keihan Universal City (Note 9)

6,020

16,212.40

16,212.40

100.0

4.7

Hotel

30

Hotel Sunroute Shinbashi

4,873

5,246.66

5,246.66

100.0

2.2

Hotel

31

Hilton Tokyo Bay (Note 10)

26,10964,931.94

64,931.94

100.0

11.5

Hotel

32

ibis Styles Kyoto Station (Note 8)

6,752

5,003.99

5,003.99

100.0

2.8

Hotel

33

ibis Styles Sapporo (Note 8)

6,802

14,992.49

14,896.40

99.4

3.4

Hotel

34

Mercure Sapporo

6,023

15,189.42

14,802.96

97.5

3.8

Hotel

35

Mercure Okinawa Naha (Note 8)

2,971

10,884.25

10,884.25

100.0

2.3

Hotel

36

the b akasaka-mitsuke (Note 11)

6,313

2,867.04

2,867.04

100.0

1.5

Hotel

37

the b ikebukuro (Note 8) (Note 11)6,599

5,650.01

5,650.01

100.0

1.9

Hotel

38

the b ochanomizu (Note 11)

2,357

1,742.23

1,742.23

100.0

0.6

Hotel

39

the b hachioji (Note 11)

2,687

7,847.65

7,847.65

100.0

1.2

Hotel

40

the b hakata (Note 11)

2,349

3,986.09

3,847.92

96.5

0.9

Hotel

41

Hotel Francs

3,165

19,213.39

19,213.39

100.0

1.3

Hotel

42

Mercure Yokosuka (Note 12)

1,668

16,881.82

16,881.82

100.0

0.9

Hotel

43

Okinawa Marriott Resort & Spa (Note 8)

15,06236,430.15

36,430.15

100.0

4.2

Hotel

44

ACTIVE-INTER CITY HIROSHIMA(Note 8) (Note 13)

17,94331,181.05

31,181.05

100.0

0.2

Hotel

223,372

493,758.78

493,138.06

99.9

98.3

Total

(Note 1)
(Note 2)

(Note 3)

Book value includes real estate in trust, machinery and installation, furniture, fixtures and equipment, construction inprogress, construction in progress in trust, and intangible assets.
In principle, leasable area represents leasable area of the building, which does not include leasable area of land(including parking lots on ground), based on a lease contract or plan for each real estate in trust. For properties inwhich the leased area is not described in the lease contract, leasable area represents the area described in theregistration of the building. Furthermore, when the leasable area in the lease contract is indicated in tsubo units, thefigure in the table has been converted to the area in metric units (3.30578 square meters per one tsubo).
In principle, leased area represents the leased area described in the lease contract of the building. For properties in26

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

(Note 12)(Note 13)

(Note 14)which the leased area is not described 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 tablehas been converted to the area in metric units (3.30578 square meters per one tsubo). However, for properties for whichmaster lease companies have concluded lease contracts with lessees, etc. under the pass-through scheme in which JHR
receives the same amount of rents, etc. from rents, from end tenants as is in principle, the total area for which lease
contracts have been concluded with end tenants and which are actually leased is indicated. In this report, the same shallapply hereinafter.
Represents the ratio of rental revenue to total real estate operating revenue for the fiscal period under review. In
calculating, the figures are rounded off to one decimal place. Furthermore, because the ratios of rental revenue to total
rental revenue for Comfort Hotel Shin-Yamaguchi, Daiwa Roynet Hotel Akita and Hotel Sunroute Niigata, which weretransferred in the fiscal period under review, are not included, the sum total of the ratio of rental revenue to total rental
revenue stands at 98.3%.
Kobe Meriken Park Oriental Hotel is a building owned in the form of a condominium ownership by two owners (JHR
and Kobe City). The area in this table shows the portion owned exclusively by JHR (including an accessory building of
764.83 square meters). With regard to the portion of the building owned exclusively by Kobe City, the area rented by
JHR from Kobe City with permission for use under Kobe City’s ordinance for harbor facilities, etc. is 694.00 square
meters and excluded from the above area of 32,663.90 square meters.
Leasable area and leased area for Hotel Nikko Alivila include an accessory building of 120.10 square meters andexclude a building of 493.50 square meters rented by JHR from Kabushiki Kaisha Okinawa Umi No Sono.
Leasable area and leased area for The Beach Tower Okinawa include the floor area of a warehouse in a two-story
light-gauge steel annex building (91.20 square meters).
Leasable area and leased area for Hakone Setsugetsuka, Dormy Inn Kumamoto, Comfort Hotel Tokyo Higashi
Nihombashi, ibis Styles Kyoto Station, ibis Styles Sapporo, Mercure Okinawa Naha, the b ikebukuro, Okinawa
Marriott Resort & Spa and ACTIVE-INTER CITY HIROSHIMA include accessory buildings.
The building of Hotel Keihan Universal City is a building with condominium ownership for Universal CityWalk Osaka,
which comprises two hotel buildings, business facilities, commercial facilities and others, as a single building. For theleasable area and leased area of the property, the leased area under the lease contract of the hotel is indicated.
The building of Hilton Tokyo Bay is co-owned with other right holders, and JHR owns co-ownership interest for
64,931.94 square meters (JHR owns 9/10 of co-ownership interest).
The b akasaka-mitsuke, the b ikebukuro, the b ochanomizu, the b hachioji and the b hakata are properties with
pass-through master lease contracts in which JHR receives the same amount of rents, etc. from rents, from end tenants
as is in principle. In this report, the same shall apply hereinafter.
The building of Mercure Yokosuka is a building with condominium ownership for Bay Square Yokosuka Ichibankan,
which comprises a hotel, a theater, stores, apartments, office spaces and parking lots, as a single building. For theleasable area and leased area of the property, the leased area under the lease contract of the hotel is indicated.
The building of ACTIVE-INTER CITY HIROSHIMA is a building with condominium ownership for ACTIVE-INTER
CITY HIROSHIMA, which comprises Sheraton Hiroshima Hotel, office spaces, stores, parking lots and bicycle
parking lots etc., as a single building. For the leasable area and leased area of the property, the leased area under thelease contract of the hotel, office spaces and stores is indicated.
The omitted numbers are the property numbers of assets that have been transferred.

27

3. Details of property assets, etc.
(1) Details of property assets
The details of real estate properties, etc. held by JHR as of December 31, 2015 were as follows:
PropertyNo.

Name of property, etc.

Location (Displayed address)

Assessedvalue at end
Form of ownership of period(Millions ofyen)Book value(Millions ofyen)(Note 2)

Appraisal
agency(Note 3)(Note 1)

1

Kobe Meriken Park Oriental
Hotel

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

Beneficial interestin trust

13,30010,120J

2

Oriental Hotel tokyo bay

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

Beneficial interestin trust

32,60018,698J

3

Namba Oriental Hotel

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

Beneficial interestin trust

27,00014,775J

4Hotel Nikko Alivila

600 Aza Gima, Yomitan-son,
Nakagami-gun, Okinawa

Beneficial interestin trust

25,40018,556

J

5

Oriental Hotel Hiroshima

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

Beneficial interestin trust

4,180

4,078

J

6

ibis Tokyo Shinjuku

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

8,830

7,559

J

8-6 Aza Mihama, Chatan-cho,
Nakagami-gun, Okinawa

Beneficial interestin trust

9,070

6,882

J

8

The Beach Tower Okinawa(Note 4)

9

Hakone Setsugetsuka

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

Beneficial interestin trust

4,730

3,797

J

10

Dormy Inn Kumamoto

3-1 Karashimacho, Kumamoto-shi,
Kumamoto

Beneficial interestin trust

2,950

2,232

M

12

the b suidobashi

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

Beneficial interestin trust

1,750

1,230

J

13

Dormy Inn EXPRESS Asakusa 3-4 Hanakawado 1-chome, Taito-ku, Tokyo

Beneficial interestin trust

1,220

963

M

14

Hakata Nakasu Washington
Hotel Plaza

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

Beneficial interestin trust

3,680

2,076

J

15

Nara Washington Hotel Plaza

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

Beneficial interestin trust

2,330

1,916

J

16

R&B Hotel Ueno Hirokoji

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

Beneficial interestin trust

1,810

1,761

M

17

R&B Hotel Higashi
Nihonbashi

15-6 Higashi-Nihonbashi 2-chome,
Chuo-ku, Tokyo

Beneficial interestin trust

1,960

1,528

M

18

Comfort Hotel Tokyo Higashi
Nihombashi

10-11 Nihonbashi-bakurocho 1-chome,
Chuo-ku, Tokyo

Beneficial interestin trust

5,110

3,655

M

22

Smile Hotel Nihombashi
Mitsukoshimae

4-14 Nihonbashi-Honcho 1-chome,
Chuo-ku, Tokyo

Beneficial interestin trust

2,850

2,056

M

24

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

2,490

1,498

T

25

Hotel Vista Kamata Tokyo

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

Beneficial interestin trust

1,870

1,473

T

26

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

Beneficial interestin trust

1,270

806

T

29

Hotel Keihan Universal City

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

Beneficial interestin trust

13,600

6,020

R

30

Hotel Sunroute Shinbashi

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

Beneficial interestin trust

7,420

4,873

D

31

Hilton Tokyo Bay

1-33 Maihama, Urayasu-shi, Chiba

Beneficial interestin trust

34,40026,109D

32

ibis Styles Kyoto Station

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

Beneficial interestin trust

8,590

6,752

D

33

ibis Styles Sapporo

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

Beneficial interestin trust

7,940

6,802

J

34

Mercure Sapporo

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

Beneficial interestin trust

7,840

6,023

J

28

Property
No.

Name of property, etc.

Location (Displayed address)

Assessedvalue at endof period
Form of ownership(Millions ofyen)Book value(Millions ofyen)(Note 2)

Appraisal
agency(Note 3)(Note 1)35

Mercure Okinawa Naha

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

Beneficial interestin trust

5,730

2,971

J

36

the b akasaka-mitsuke

21-7 Akasaka 3-chome, Minato-ku, Tokyo

Beneficial interestin trust

6,730

6,313

J

37

the b ikebukuro39-4 Higashi-ikebukuro 1-chome,
Toshima-ku, Tokyo

Beneficial interestin trust

7,040

6,599

J

38

the b ochanomizu

7-5 Kanda-awajicho 1-chome, Chiyoda-ku, Beneficial interestTokyoin trust

2,540

2,357

J

39

the b hachioji

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

Beneficial interestin trust

2,920

2,687

J

40

the b hakata

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

Beneficial interestin trust

2,700

2,349

J

41

Hotel Francs

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

Beneficial interestin trust

3,900

3,165

D

42

Mercure Yokosuka

27 Honcho 3-chome, Yokosuka-shi,
Kanagawa

Beneficial interestin trust

1,760

1,668

D

43

Okinawa Marriott Resort &Spa

1490-1, Kise, Nago-shi, Okinawa

Beneficial interestin trust

16,70015,062J

44ACTIVE-INTER CITYHIROSHIMA

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

Beneficial interestin trust

17,90017,943

D

302,110

223,372

Total(Note 1)

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

Assessed value at end of period shows appraisal value as of the end of the fiscal period under review as the date ofvaluation, in accordance with JHR’s Articles of Incorporation, the Ordinance on Accounting of Investment
Corporations (Cabinet Office Ordinance No. 47 of 2006) and regulations set forth by The Investment Trusts
Association, Japan.
Book value includes amounts of real estate in trust, machinery and installation, furniture, fixtures and equipment,
construction in progress in trust, and intangible assets.
The letters indicate the appraisers for the properties as follows:
M: Morii Appraisal & Investment Consulting, Inc.
T:
The Tanizawa Sōgō Appraisal Co., Ltd.
J:Japan Real Estate Institute
R:
Rich Appraisal Institute co.,Ltd.
D:
DAIWA REAL ESTATE APPRAISAL CO.,LTD.
Due to the lack of a displayed address, “location” in the registration or registration record is shown.
The omitted numbers are the property numbers of assets that have been transferred.

29

(2) Transition of real estate leasing business, etc.
An overview of leasing business of real estate, etc. owned by JHR is as follows:
15th period(From January 1, 2014 to December 31, 2014)
PropertyNo.

Name of property, etc.

Number oftenants
at end ofperiod(Note 1)

Real estate
Tenantoperatingoccupancy
revenuerate
during theat end ofperiodperiod(Millions of
(%)
yen)

Ratio tototal realestateoperatingrevenue(%)

16th period(From January 1, 2015 to December 31, 2015)
Number oftenants
at end ofperiod(Note 1)

Real estate
Tenantoperatingoccupancy
revenuerate
during theat end ofperiodperiod(Millions of
(%)
yen)

Ratio tototal realestateoperatingrevenue(%)

1

Kobe Meriken Park Oriental
Hotel

1

100.0

1,085

8.5

1

100.0

1,110

6.5

2

Oriental Hotel tokyo bay

1

100.0

1,633

12.8

1

100.0

1,732

10.2

3

Namba Oriental Hotel

1

100.0

1,065

8.3

1

100.0

1,279

7.5

4

Hotel Nikko Alivila

1

100.0

1,406

11.0

1

100.0

1,604

9.4

5

Oriental Hotel Hiroshima

1

100.0

438

3.4

1

100.0

421

2.5

6

ibis Tokyo Shinjuku

4

100.0

625

4.9

4

100.0

645

3.8

8

The Beach Tower Okinawa

1

100.0

511

4.0

1

100.0

511

3.0

9

Hakone Setsugetsuka

1

100.0

294

2.3

1

100.0

294

1.7

10

Dormy Inn Kumamoto

1

100.0

194

1.5

1

100.0

194

1.1

11

Dormy Inn Namba (Note 2)

―

―

5

0.0

―

―

―

―

12

the b suidobashi

1

100.0

84

0.7

1

100.0

95

0.6

13

Dormy Inn EXPRESS Asakusa

1

100.0

63

0.5

1

100.0

63

0.4

14

Hakata Nakasu Washington
Hotel Plaza

1

100.0

240

1.9

1

100.0

240

1.4

15

Nara Washington Hotel Plaza

2

100.0

151

1.2

2

100.0

151

0.9

16

R&B Hotel Ueno Hirokoji

1

100.0

100

0.8

1

100.0

99

0.6

17

R&B Hotel Higashi
Nihonbashi

1

100.0

122

1.0

1

100.0

122

0.7

18

Comfort Hotel Tokyo Higashi
Nihombashi

2

100.0

270

2.1

2

100.0

270

1.6

19

Comfort Hotel
Shin-Yamaguchi

1

100.0

60

0.5

―

―

50

0.3

1

100.0

138

1.1

―

―

114

0.7

21

(Note 3)

Daiwa Roynet Hotel Akita(Note 3)22

Smile Hotel Nihombashi
Mitsukoshimae

1

100.0

134

1.1

1

100.0

150

0.9

23

Hotel Sunroute Niigata (Note 3)

1

100.0

156

1.2

―

―

129

0.8

24

Toyoko Inn Hakata-guchi
Ekimae

1

100.0

141

1.1

1

100.0

141

0.8

25

Hotel Vista Kamata Tokyo

1

100.0

98

0.8

1

100.0

113

0.7

26

Chisun Inn Kamata

1

100.0

62

0.5

1

100.0

70

0.4

29

Hotel Keihan Universal City

1

100.0

560

4.4

1

100.0

796

4.7

30

Hotel Sunroute Shinbashi

4

100.0

367

2.9

4

100.0

379

2.2

31

Hilton Tokyo Bay

1

100.0

1,897

14.9

1

100.0

1,953

11.5

32

ibis Styles Kyoto Station

2

100.0

408

3.2

2

100.0

483

2.8

33

ibis Styles Sapporo

5

99.4

241

1.9

5

99.4

573

3.4

34

Mercure Sapporo

14

98.1

123

1.0

13

97.5

651

3.8

35

Mercure Okinawa Naha

2

100.0

77

0.6

1

100.0

392

2.3

36

the b akasaka-mitsuke (Note 4)

―

―

―

―

2

100.0

262

1.5

37

the b ikebukuro (Note 4)

―

―

―

―

4

100.0

330

1.9

38

the b ochanomizu (Note 4)

―

―

―

―

1

100.0

105

0.6

39

the b hachioji (Note 4)

―

―

―

―

13

100.0

200

1.2

40

the b hakata (Note 4)

―

―

―

―

1

96.5

154

0.9

41

Hotel Francs (Note 5)

―

―

―

―

1

100.0

229

1.3

42

Mercure Yokosuka (Note 6)

―

―

―

―

1

100.0

154

0.9

43

Okinawa Marriott Resort &

―

―

―

―

1

100.0

722

4.2

30

15th period(From January 1, 2014 to December 31, 2014)
PropertyNo.

Name of property, etc.

Number oftenants
at end ofperiod(Note 1)

Real estate
Tenantoperatingoccupancy
revenuerate
during theat end ofperiodperiod(Millions of
(%)
yen)

16th period(From January 1, 2015 to December 31, 2015)

Ratio tototal realestateoperatingrevenue(%)

Number oftenants
at end ofperiod(Note 1)

Real estate
Tenantoperatingoccupancy
revenuerate
during theat end ofperiodperiod(Millions of
(%)
yen)

Ratio tototal realestateoperatingrevenue(%)

Spa (Note 7)
44

ACTIVE-INTER CITYHIROSHIMA (Note 8)
Total

―

―

―

―

37

100.0

34

0.2

57

99.9

12,760

100.0

113

99.9

17,033100.0(Note 1)

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

(Note 2)

Dormy Inn Namba was transferred as of January 24, 2014.

(Note 3) Comfort Hotel Shin-Yamaguchi, Daiwa Roynet Hotel Akita and Hotel Sunroute Niigata were transferred as of October30, 2015.
(Note 4)The b akasaka-mitsuke, the b ikebukuro, the b ochanomizu, the b hachioji and the b hakata were acquired as of January
30, 2015.

(Note 5)

Hotel Francs was acquired as of March 31, 2015.

(Note 6)

Mercure Yokosuka was acquired as of April 2, 2015

(Note 7)

Okinawa Marriott Resort & Spa was acquired as of July 10, 2015.

(Note 8)ACTIVE-INTER CITY HIROSHIMA was acquired as of December 18, 2015.

(Note 9)The property numbers of assets that were transferred before the previous fiscal period are intentionally omitted.

4. Details of securities assets
There are no applicable securities held by JHR as of December 31, 2015.
5. Contractual amounts and fair values of specified transactions
The contractual amounts and fair values of specified transactions as of December 31, 2015 were as follows:
Classification

Amounts of contract, etc.
(Millions of yen) (Note 1)

Transaction

Over 1 year
Transactions other thanmarket transactions

Interest rate swap transactions
Payable fixed rate / Receivable floating rate
Interest rate cap transactions
Total(Note 1)
(Note 2)70,37564,822

Fair value(Millions of yen)
(Note 2)

(533)

9,413

5,134

1

79,78969,957(532)

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

6. Other assets
All of the beneficial interest in trust mainly invested in real estate and held by JHR is included in “3. Details ofproperty assets, etc.” presented above. There were no other major specified assets that are considered to be
JHR’s main investments in the portfolio of JHR as of December 31, 2015.
7. Asset holdings by country and region
There is nothing to be reported on countries and regions other than Japan.

31Capital Expenditures for Portfolio Properties
1. Planned capital expenditures (Note)
The following table shows major estimated capital expenditures for renovation work planned as of the end of the
fiscal period under review for investment real estate properties held by JHR. Expenditures are expected to total¥2,582 million, which consists of capital expenditures of ¥2,532 million and repair expenses of ¥49 million, forthe following fiscal period.
Name of property, etc.
(Location)

Purpose

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

Renewal of guest rooms on
the 7th floor

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

Scheduled period

Estimated construction costs(Millions of yen)
Total amountPayment forthe period

Total amount
paid

From January 2016
to March 2016

50

-

-

Renovation of guest room
balconies

From January 2016
to April 2016

62

-

-

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

Renewal of sky lounge“Kou’s” and renovation ofelevator halls and pathways
on the 14th floor

From June 2016 toJuly 2016

80

-

-

Oriental Hotel tokyo bay(Urayasu-shi, Chiba)

Renewal of guest rooms on
the 4th floor

From January 2016
to February 2016

102

-

-

Namba Oriental Hotel(Osaka-shi, Osaka)Renewal of guest rooms on
the 9th floor

From January 2016
to February 2016

91

-

-

Hotel Nikko Alivila
Renewal of guest rooms on(Yomitan-son, Nakagami-gun, the 9th floor
Okinawa)

From May 2016 toJune 2016

55

-

-

ibis Tokyo Shinjuku(Shinjuku-ku, Tokyo)

Replacement of piping

From May 2016 toJuly 2016

83

-

-

ibis Tokyo Shinjuku(Shinjuku-ku, Tokyo)

Replacement of interior
fittings and furniture andprefabricated bathrooms inguest rooms on the 3rd
through 10th floors

From May 2016 toJuly 2016

164

-

-

Hilton Tokyo Bay(Urayasu-shi, Chiba)

Replacement of emergency
power generator

From February
2016 to April 2016

60

-

-

Hilton Tokyo Bay(Urayasu-shi, Chiba)

Renewal of disasterprevention facilities

From January 2016
to July 2016

92

-

-

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

Renewal of hotel operation
systems

From November
2015 to March 2016

55

-

-

895

-

-

Total
(Note)For new construction and renewal work, estimated construction costs include those for buildings, annexed installation, etc.
as well as items classified as furniture and fixtures. The scheduled period of the above planned repair work and whether or
not the repair work will be performed may change.

2. Capital expenditures during the period (Note)
For investment real estate properties held by JHR, major construction work conducted during the fiscal period
under review that represents capital expenditures is as below. Capital expenditures for the fiscal period under32

review totaled ¥1,811 million, and repair expenses that were accounted for as expense in the fiscal period underreview totaled ¥65 million. In aggregate, ¥1,876 million of construction work was carried out.
Name of property, etc. (Location)

PurposeConstruction costs(Millions of yen)

Periodthe b suidobashi(Bunkyo-ku, Tokyo)

Replacement of air conditioning units

From April 2015 to June
2015

55

the b suidobashi(Bunkyo-ku, Tokyo)

Renewal in association with re-branding

From April 2015 to June
2015

60

ibis Tokyo Shinjuku(Shinjuku-ku, Tokyo)

Replacement of interior fittings andfurniture and prefabricated bathrooms inguest rooms on the 4th through 10th
floorsFrom September 2015 toNovember 2015

91

207

Total
(Note)For new construction and renewal work, construction costs include those for buildings, annexed installation, etc. as wellas items classified as furniture and fixtures.

3. Cash reserves for the long-term repairs and maintenance plan (reserve for repairs and maintenance)
JHR accumulates cash reserves from cash flows for each period as detailed below to utilize for medium- tolong-term future expenditures on large-scale repairs and maintenance projects based on long-term repairs andmaintenance plans prepared for each property.
(Millions of yen)
12th period

13th period

14th period

15th period

16th period(From October 1, 2011
to March 31, 2012)(From April 1, 2012
to December 31, 2012)(From January 1, 2013
to December 31, 2013)(From January 1, 2014
to December 31, 2014)(From January 1, 2015
to December 31, 2015)

Balance at beginning of period

369

409

307

454

493

Provision during the period

90(Note) 286

184

46

185

Reversal during the period

50

388

37

7

20

Amount carried forward

409

307

454

493

657

Fiscal period(Note)

Figures in the above table include amounts assumed from the former JHR as a result of the merger.

33

Expenses and Liabilities
1. Details of expenses related to asset management, etc.
(Thousands of yen)
15th period(From January 1, 2014 toDecember 31, 2014)(a) Asset management fees

(Note 1)

809,152

16th period(From January 1, 2015 to
December 31, 2015)(Note 2)

1,045,925(b) Asset custody fees

14,134

17,633(c) Administrative service fees

71,70389,541(d) Officers’ compensation

9,600

10,800(e) Other operating expenses
Total

147,060

188,480

1,051,650

1,352,381(Note 1) For asset management fees for the 15th fiscal period, besides the above amounts, there are ¥110,977 thousand of fees
included in the acquisition price of investment properties, etc. in acquiring the properties and ¥3,500 thousand included
in gain or loss on sale of real estate from property transfer.
(Note 2) For asset management fees for the 16th fiscal period, besides the above amounts, there are ¥427,690 thousand of fees
included in the acquisition price of investment properties, etc. in acquiring the properties and ¥24,450 thousand included
in gain or loss on sale of real estate from property transfer.

34

2. Loans Payable
The status of loans by contractual agreement and by financial institution as of December 31, 2015 was asfollows:
Category

LenderSumitomo Mitsui Banking
Corporation
Shinsei Bank, Limited

Borrowingdate

Balance at Balance at
Average
beginning of end ofinterest
periodperiodrate (%)(Millions of (Millions(Note 1)yen)of yen)
－

4,000

－

2,250

－

2,250

－

500

Subtotal－

9,000

Short-term loans payable – Total (Note 2)

－

9,000

2,560

－

2,219

－

－

－

4,779

－

2,945

2,576

Short-term Mizuho Bank, Ltd.
loans
payable The Hiroshima Bank, Ltd.

December 18,
2015

Sumitomo Mitsui Banking
Corporation
February 15,
2011

Mizuho Bank, Ltd.
The Norinchukin Bank
Subtotal
The Tokyo Star Bank, Limited

March 24,2011

Subtotal
Sumitomo Mitsui Banking
Corporation
Shinsei Bank, Limited

March 31,
2011

The Tokyo Star Bank, Limited
Subtotal
Sumitomo Mitsui Banking
Corporation

March 26,
2012

Subtotal
Sumitomo Mitsui Banking
Corporation
Long-term Mizuho Bank, Ltd.
loans
payable The Norinchukin Bank

March 26,
2012

2,945

2,576

708

－

191

－

1,251

－

2,150

－

2,200

1,081

2,200

1,081

－

－

207

7

－

－

207

7

960

－

960

－

960

－

2,880

－

1,200

1,200

960

390

The Tokyo Star Bank, Limited

960

960

Subtotal

3,120

2,550

500

－

992

－

Subtotal
Sumitomo Mitsui Trust Bank,
LimitedResona Bank, Limited

September
19, 2012

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

September
19, 2012

The Tokyo Star Bank, Limited
The Hiroshima Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
Subtotal

November15, 2012

100

－

1,592

－

35

Maturity
date

Repayment
methodUse

Remarks

0.42%

November30, 2016

Lump-sum
repayment(Note 10)

Unsecured,
unguaranteed

1.68%

Lump-sum
February 15,
repayment
2015(Note 5)(Note 9)Unsecured,
unguaranteed

2.01%(Note 3)

March 24,
2016

Lump-sum
repayment(Note 6)(Note 9)Unsecured,
unguaranteed

1.80%(Note 3)September
30, 2015

Repayment of¥7,000 thousand
every 3 months,
and lump-sum
repayment of theremaining
amount(Note 8)

Unsecured,
unguaranteed

1.97%

March 26,
2016

Lump-sum
repayment(Note 6)(Note 9)Unsecured,
unguaranteed

1.53%

March 26,
2016

Repayment of¥50,000
thousand every 3months, andlump-sum
repayment of theremaining
amount(Note 9)Unsecured,
unguaranteed

1.20%(Note 3)September
19, 2015

Lump-sum
repayment(Note 10)

Unsecured,
unguaranteed

1.47%(Note 3)September
19, 2017

Lump-sum
repayment(Note 6)(Note 10)

Unsecured,
unguaranteed

1.14%(Note 3)

November15, 2015

Lump-sum
repayment(Note 7)(Note 8)

Unsecured,
unguaranteedCategory

LenderBalance at Balance at
Average
beginning of end of
Borrowinginterest
periodperioddate
rate (%)(Millions of (Millions(Note 1)yen)of yen)The Norinchukin Bank
November15, 2012

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

November15, 2012

Sumitomo Mitsui Banking
Corporation
Subtotal

Sumitomo Mitsui Banking
Corporation

February 28,
2013

Subtotal

Sumitomo Mitsui Trust Bank,
LimitedMarch 29,2013

Subtotal

The Chiba Bank, Ltd.
Development Bank of Japan Inc.

April 26,
2013

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

－

2,100

1,538

453

453

2,553

1,991

2,000

2,000

500

500

4,000

4,000

6,500

6,500

1,761

April 26,
2013

488

1,942

1,744

972

883

879

788

488

418

4,283

3,835

2,167

2,145

985

975

1,280

1,267

Subtotal

4,432

4,387

1,828

1,809

962

952

2,791

2,762

500

500

1,000

1,000

1,000

1,000

500

500

3,000

3,000

Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui Trust Bank,
Limited

September
30, 2013

Subtotal
Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui Trust Bank,
LimitedMizuho Bank, Ltd.
Shinsei Bank, Limited
Subtotal

October 31,
2013(Note 8)

Unsecured,
unguaranteed

1.38%(Note 3)

November15, 2017

Lump-sum
repayment(Note 8)

Unsecured,
unguaranteed

0.93%

Repayment of¥1,625 thousand
every month,
February 29,
and lump-sum
2016
repayment of theremaining
amount(Note 8)

Unsecured,
unguaranteed

0.97%

March 31,2017

Repayment of¥2,250 thousand
every 3 months,
and lump-sum
repayment of theremaining
amount(Note 6)(Note 8)

Unsecured,
unguaranteed

April 26,
2016

Repayment of¥11,000
thousand every 3months, andUnsecured,(Note 10)lump-sumunguaranteed
repayment of theremaining
amount (Note 6)

April 26,
2018

Repayment of¥11,250thousand every 3months, andUnsecured,(Note 10)lump-sumunguaranteed
repayment of theremaining
amount0.98%(Note 3)September
30, 2018

Repayment of¥7,250 thousand
every 3 months,
and lump-sum
repayment of theremaining
amount(Note 8)

Unsecured,
unguaranteed

0.98%(Note 3)September
30, 2018

Lump-sum
repayment(Note 10)

Unsecured,
unguaranteed

0.87%

1.07%

The Tokyo Star Bank, Limited

36

Remarks

Lump-sum
repayment(Note 6)

488

866

Use

March 26,
2016

1,742

866

Repayment
method1.29%(Note 3)

1,742

1,761

Long-term The Nomura Trust and Banking
Co., Ltd.
loans
payable－MaturitydateCategory

LenderBalance at Balance at
Average
beginning of end of
Borrowinginterest
periodperioddate
rate (%)(Millions of (Millions(Note 1)yen)of yen)Sumitomo Mitsui Banking
Corporation

78

70

Resona Bank, Limited

773

753

Shinsei Bank, Limited

726

718

89

75

Sumitomo Mitsui Trust Bank,
LimitedMarch 31,2014

The Nomura Trust and Banking
Co., Ltd.

698

688

The Chiba Bank, Ltd.

559

551

Sompo Japan Nipponkoa
Insurance Inc.

625

617

3,549

3,473

648

648

2,516

2,516

2,516

2,516

Sumitomo Mitsui Trust Bank,
Limited

1,120

1,120

Subtotal

6,800

6,800

600

600

Mizuho Bank, Ltd.

1,200

1,200

Long-term Resona Bank, Limitedloans
Shinsei Bank, Limited
payableSumitomo Mitsui Trust Bank,
Limited

803

434

720

720

600

600

1,000

1,000

The Nomura Trust and Banking
Co., Ltd.

500

500

The Hiroshima Bank, Ltd.

500

435

Sompo Japan Nipponkoa
Insurance Inc.

371

328

Development Bank of Japan Inc.

500

500

6,794

6,317

800

800

Mizuho Bank, Ltd.

1,600

1,600

Resona Bank, Limited

1,100

1,100

970

970

800

800

Development Bank of Japan Inc.

500

500

The Tokyo Star Bank, Limited

762

762

Aozora Bank, Ltd.

350

285

6,882

6,817

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

March 31,2014

Sumitomo Mitsui Banking
Corporation

The Bank of Fukuoka, Ltd.

September
30, 2014

Subtotal
Sumitomo Mitsui Banking
Corporation

Shinsei Bank, Limited
Sumitomo Mitsui Trust Bank,
LimitedSubtotal

September
30, 2014

37

Maturity
date

Repayment
methodUse

Remarks

0.73%(Note 3)

March 31,
2018

Repayment of¥19,000
thousand every 3months, andlump-sum
repayment of theremaining
amount(Note 8)

Unsecured,
unguaranteed

1.15%(Note 3)

March 31,2021

Lump-sum
repayment(Note 8)

Unsecured,
unguaranteed

0.67%(Note 4)September
30, 2019

Lump-sum
repayment(Note 6)(Note 9)Unsecured,
unguaranteed

0.92%(Note 3)September
30, 2020

Lump-sum
repayment(Note 6)(Note 9)Unsecured,
unguaranteedCategory

LenderBalance at Balance at
Average
beginning of end of
Borrowinginterest
periodperioddate
rate (%)(Millions of (Millions(Note 1)yen)of yen)Sumitomo Mitsui Banking
Corporation
Mizuho Bank, Ltd.
Resona Bank, Limited

September
30, 2014

600

600

1,200

1,200

850

850

Shinsei Bank, Limited

750

750

Sumitomo Mitsui Trust Bank,
Limited600

600

Subtotal

4,000

4,000

Mitsubishi UFJ Trust and Banking December 30,
Corporation
2014

1,000

935

Subtotal

1,000

935

Sumitomo Mitsui Banking
Corporation

－

1,400

Mizuho Bank, Ltd.

－

1,500

－

500

－

500

Sumitomo Mitsui Trust Bank,
Limited－500

The Chiba Bank, Ltd.

－

300

－

4,700

－

1,700

－

3,000

－

1,050

－

1,000

Sumitomo Mitsui Trust Bank,
Limited－1,000

The Tokyo Star Bank, Limited－

300

Aozora Bank, Ltd.

－

150

－

8,200

－

1,500

－

1,500

Aozora Bank, Ltd.

－

1,000

Mitsubishi UFJ Trust and Banking July 10, 2015
Corporation－

500

Subtotal

－

1,500

－

100

－

992

Subtotal－

1,092

Sumitomo Mitsui Trust Bank,
Limited

－

960

－

960

－

960

－

2,880

Shinsei Bank, Limited
Resona Bank, Limited

January 30,
2015

Subtotal
Sumitomo Mitsui Banking
Corporation
Mizuho Bank, Ltd.
Long-termloans Shinsei Bank, Limited
payableResona Bank, Limited

January 30,
2015

Subtotal
Sumitomo Mitsui Banking
Corporation

March 31,2015

Subtotal

Sumitomo Mitsui Banking
Corporation
The Hiroshima Bank, Ltd.

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

September
30, 2015

September
24, 2015

38

Maturity
date

Repayment
methodUse

Remarks

1.04%(Note 3)September
30, 2021

Lump-sum
repayment(Note 9)Unsecured,
unguaranteed

0.63%

December30, 2020

Lump-sum
repayment(Note 6)(Note 8)

Unsecured,
unguaranteed

0.58%

January 31, Lump-sum
2020
repayment(Note 9)Unsecured,
unguaranteed

0.90% January 31, Lump-sum(Note 3)2022
repayment(Note 9)Unsecured,
unguaranteed

0.93%(Note 3)

March 31,2022

Lump-sum
repayment(Note 10)

Unsecured,
unguaranteed

0.95%(Note 3)June 30,2022

Lump-sum
repayment(Note 10)

Unsecured,
unguaranteed

0.58%

June 30,
2020

Lump-sum
repayment(Note 8)

Unsecured,
unguaranteed

1.07%(Note 3)September
29, 2023

Lump-sum
repayment(Note 8)

Unsecured,
unguaranteedCategory

Balance at Balance at
Average
beginning of end of
Borrowinginterest
periodperioddate
rate (%)(Millions of (Millions(Note 1)yen)of yen)LenderSumitomo Mitsui Banking
Corporation

－

703

－

1,744

－

189

－

2,636

Long-term loans payable – Total

75,08981,772

Total loans payable

75,08990,772The Tokyo Star Bank, Limited
Long-termloans Shinsei Bank, Limited
payableSubtotal

September
30, 2015

1.07%(Note 3)Maturity
date

September
29, 2023

Repayment
methodLump-sum
repayment

Use

Remarks(Note 8)

Unsecured,
unguaranteed(Note 1)

The average interest rate is a weighted average of interest rates during the period, rounded off to two decimal places.

(Note 2)

JHR borrowed ¥1,000 million on January 30, 2015 and ¥5,000 million on July 10, 2015, and made early repayment of
the full amount of these loans on October 30, 2015.

(Note 3)As JHR has conducted interest rate swap transactions in order to hedge against interest rate fluctuation risks, the interest
rate of loans subject to such interest rate swap transactions is the rate obtained by taking into account the effect ofinterest rate swaps, rounded off to two decimal places.

(Note 4)Of these loans payable, the interest rate on the portion totaling ¥1,794 million is, in effect, fixed at 0.80225% per annum
for the period from September 30, 2014 through September 30, 2019 due to the execution of an interest rate swap
agreement on September 26, 2014. Moreover, the interest rate on the portion totaling ¥5,000 million is projected to be,in effect, fixed at around 0.95% per annum for the period from March 30, 2018 through September 30, 2019 due to the
execution of an interest rate swap agreement on September 26, 2014.

(Note 5)JHR made early repayment of the full amount of these loans payable on January 30, 2015.

(Note 6)JHR made partial early repayment of these loans payable on October 30, 2015.

(Note 7)JHR made early repayment of the full amount of these loans payable on September 30, 2015.

(Note 8)The funds were appropriated for repayment of borrowings.

(Note 9)The funds were appropriated for acquisition of the beneficial interest of real estate in trust, repayment of borrowings andrelated expenses, etc.

(Note 10) The funds were appropriated for acquisition of the beneficial interest of real estate in trust and related expenses, etc.
(Note 11) To present loans payable for each loan contract, ¥11,393 million of the current portion of long-term loans payable in thebalance sheets is included in long-term loans payable in the above table.

3. Investment corporation bonds
Status of investment corporation bonds as of December 31, 2015 was as follows:

Name

Issuance date

Balance at
beginning of
period(Millions ofyen)

Balance at
end of period(Millions ofyen)Interest
rate(%)

Maturity
date

Repayment
methodUse

Remarks

Unsecured,
unguaranteed(Note 5)

Second unsecured investment
corporation bonds(Note 1)

November26, 2013

2,500

2,500

0.89

November25, 2016

Lump-sum
repayment(Note 2)

Third unsecured investment
corporation bonds

March 19,
2014

2,000

2,000

0.92

March 19,2019

Lump-sum
repayment(Note 3)

Fourth unsecured investment
corporation bonds

December19, 2014

1,500

1,500

0.86

December17, 2021

Lump-sum
repayment(Note 4)

Fifth unsecured investment
corporation bonds

October 23,
2015

–

6,000

0.82

October
21, 2022

Lump-sum
repayment(Note 3)6,000

12,000Total

Unsecured,
unguaranteed(Note 5)
Unsecured,
unguaranteed(Note 5)
Unsecured,
unguaranteed(Note 5)(Note 1)The second unsecured investment corporation bonds are recorded in the current portion of investment corporation
bonds on the balance sheet.

(Note 2)

The funds were appropriated for redemption of the first unsecured investment corporation bonds and future acquisitionof specified assets, etc.

39

(Note 3)

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

(Note 4)

The funds were appropriated for repayment of borrowings and future acquisition of specified assets, etc.

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

4. Short-term investment corporation bonds
Not applicable.

5.

Subscription rights to new investment units
Not applicable.

40

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

Name of property, etc.

Acquisition
date

Sale

Acquisition
price(Millions ofyen)Sale date

Sale price(Millions ofyen)(Note 1)

(Note 1)

Book value(Millions ofyen)

Gain (loss) on
sale(Millions ofyen)(Note 2)

Beneficial interest ofreal estate in trust

the b akasaka-mitsuke

January 30,
2015

6,250

―

―

―

―

Beneficial interest ofreal estate in trust

the b ikebukuro

January 30,
2015

6,520

―

―

―

―

Beneficial interest ofreal estate in trust

the b ochanomizu

January 30,
2015

2,320

―

―

―

―

Beneficial interest ofreal estate in trust

the b hachioji

January 30,
2015

2,610

―

―

―

―

Beneficial interest ofreal estate in trust

the b hakata

January 30,
2015

2,300

―

―

―

―

Beneficial interest ofreal estate in trust

Hotel Francs

March 31,
2015

3,105

―

―

―

―

Beneficial interest ofreal estate in trust

Mercure Yokosuka

April 2,
2015

1,650

―

―

―

―

Beneficial interest ofreal estate in trust

Okinawa Marriott Resort & Spa

July 10,2015

14,950――――December18, 2015

17,320――――Beneficial interest ofreal estate in trust

ACTIVE-INTER CITYHIROSHIMA

Beneficial interest ofreal estate in trust

Comfort Hotel Shin-Yamaguchi――

October 30,
2015

Beneficial interest ofreal estate in trust

Daiwa Roynet Hotel Akita――

October 30,
2015

Beneficial interest ofreal estate in trust

Hotel Sunroute Niigata――

October 30,
2015

Total

(Note 1)
(Note 2)
(Note 3)–57,025

―

787
4,890
(Note 3)

1,644

305
(Note 3)

1,967
4,890

4,400

305

Acquisition price and sale price indicate contracted amounts of the property in the purchase and sale agreement, etc.
excluding related expenses (brokerage fees, taxes, etc.) incurred on the acquisition or sale of such property.
“Gain (loss) on sale” shows the amount calculated by deducting the book value and other selling expenses from the saleprice.
The sale price of each property is not disclosed as no consent to disclosure has been obtained by the buyer. Accordingly,
the amount of gain on sale of each property is not disclosed either.

2. Purchase and sale of other assets, etc.
Assets other than real estate, etc., and asset-backed securities, etc., infrastructure assets, etc. andinfrastructure-related assets were mostly bank deposits and bank deposits in trust.

41

3. Survey of prices, etc. of specified assets(1) Real estate properties, etc.

Acquisition/
sale

Asset type

Name of property, etc.

Acquisition/
sale date

Acquisition/
sale priceAppraisal
value(Millions ofyen)(Millions ofyen)(Note 1)

(Note 2)

Date ofappraisal

Appraisal agency

Acquisition

Beneficial interest ofreal estate in trust

the b akasaka-mitsuke

January 30,
2015

6,250

6,420

November 1,
2014Japan Real Estate
Institute

Acquisition

Beneficial interest ofreal estate in trust

the b ikebukuro

January 30,
2015

6,520

6,770

November 1,
2014Japan Real Estate
Institute

Acquisition

Beneficial interest ofreal estate in trust

the b ochanomizu

January 30,
2015

2,320

2,470

November 1,
2014Japan Real Estate
Institute

Acquisition

Beneficial interest ofreal estate in trust

the b hachioji

January 30,
2015

2,610

2,720

November 1,
2014Japan Real Estate
Institute

Acquisition

Beneficial interest ofreal estate in trust

the b hakata

January 30,
2015

2,300

2,370

November 1,
2014Japan Real Estate
Institute

Acquisition

Beneficial interest ofreal estate in trust

Hotel Francs

March 31,
2015

3,500

December 1,
2014

DAIWA REALESTATEAPPRAISAL
CO.,LTD.

Acquisition

Beneficial interest ofreal estate in trust

Mercure Yokosuka

April 2,
2015

1,650

1,680

February 28,
2015

DAIWA REALESTATEAPPRAISAL
CO.,LTD.

Acquisition

Beneficial interest ofreal estate in trust

Okinawa Marriott Resort &Spa

July 10,2015

14,95015,400April 1, 2015

Japan Real Estate
Institute

Acquisition

Beneficial interest ofreal estate in trust

ACTIVE-INTER CITYHIROSHIMA

December18, 2015

17,900November 1,
2015

DAIWA REALESTATEAPPRAISAL
CO.,LTD.

Sale

Beneficial interest ofreal estate in trust

Comfort Hotel
Shin-Yamaguchi

October 30,
2015

834

June 30, 2015

Morii Appraisal &Investment
Consulting, Inc.

Sale

Beneficial interest ofreal estate in trust

Daiwa Roynet Hotel Akita

October 30,
2015

1,880

June 30, 2015

Japan Real Estate
InstituteSale

Beneficial interest ofreal estate in trust

Hotel Sunroute Niigata

October 30,
2015

1,930

June 30, 2015

Morii Appraisal &Investment
Consulting, Inc.

3,105

17,3204,890(Note 3)(Note 1)

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

(Note 2)

The above appraisals were valuated by applying the “Real Estate Appraisal Standards, Chapter 3: Valuation for price ofreal estate for securitization.”(Note 3)The sale price of each property is not disclosed as no consent to disclosure has been obtained by the buyer.

42

(2) Transaction of securities
Not applicable.
(3) Other
For transactions made by JHR that require research on price, etc. pursuant to the provisions of Article 201 of
the Investment Trusts Act, except for transactions described in “(1) Real estate properties, etc.” above, theresearch activities were performed by KPMG AZSA LLC.
JHR has received from KPMG AZSA LLC a research report on four interest rate swap transactions executedduring the period from January 1, 2015 to December 31, 2015.
4. Transactions with interested parties, etc. (Note 1)(1) Transactions(Millions of yen)Price, etc. (Note 2) (Note 3)

Category

Acquisition price, etc.

Sale price, etc.

Real estate operating revenue

57,025

4,890

17,033

Amount of purchase frominterested parties, etc.

Amount of sales to interested
parties, etc.

–

[–%]

–

[–%]

Amount of real estate
operating revenue frominterested parties, etc.
7,990
[46.9%]

Hotel Management Japan Co., Ltd.

–

[–%]

–

[–%]

6,147

[36.1%]

Kyoritsu Maintenance Co., Ltd.

–

[–%]

–

[–%]

1,105

[ 6.5%]

Lagoon resort Nago Co., Ltd.

–

[–%]

–

[–%]

722

[ 4.2%]

K.K. A.I.C Hiroshima Management

–

[–%]

–

[–%]

14

[ 0.1%]

–

[–%]

–

[–%]

7,990

[46.9%]

Total amount

Breakdown of transactions with interested parties, etc.

Total

(Note 1)

(Note 2)
(Note 3)

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

(2) Amount of fees paid, etc.
(Thousands of yen)Classification

Outsourcing expenses(Note)(Note)

Total amountsof fees paid, etc.
(A)
148,450

Breakdown of transactions withinterested parties, etc.
Counter party
Hotel Management Japan Co., Ltd.

Amount of payment
(B)
5,760

Ratio to total amount
B/A (%)

3.9

Includes basic fees under the property management agreement as well as outsourcing expenses related to routine
maintenance and management of buildings and facilities.

435. Transactions with the Asset Management Company in other businesses of the Asset Management
Company
The Asset Management Company only engages in asset management and does not engage in any businesses
related to the financial instruments business, building lots and buildings transactions, or real estate specified
joint enterprise business. There are no applicable transactions.

44II. Financial Information
1. Assets, liabilities, equity, and profit and loss
For the status of assets, liabilities, equity (contribution), and profit and loss, please refer to “2. Balance Sheets,”“3. Statements of Income,” “4. Statements of Changes in Net Assets,” “Statements of Cash Flows” and “5. Notes
to Financial Statements.”
2. Changes in calculation method of depreciation
Not applicable.

3．Changes in evaluation method of real estate, etc. and infrastructure assets, etc.
Not applicable.

Status, etc. of beneficiary certificates of investment trusts set up by JHR
The status of JHR’s investment units that the Asset Management Company acquired after December 31, 2015 is asfollows:(1)

Status of acquisition, etc.
Date

Number of units acquired(units)Number of units disposed(units)Number of units held
(units)January 20, 2016

2,500

―

2,500

Accumulated total

2,500

―

2,500

Status, etc. of corporation owning foreign real estate
Not applicable.
Status, etc. of real estate owned by corporation owning foreign real estate
Not applicable.

45

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

Item

Summary

January 9, 2015

Conclusion of an underwriting
agreement for new investment
units in association with theissuance of new investment
units

Due to the issuance of new investment units, general administration foroffering the investment units was entrusted to SMBC Nikko Securities
Inc., Daiwa Securities Co. Ltd. and Mizuho Securities Co., Ltd.

June 4, 2015

Conclusion of an underwriting
agreement for new investment
units in association with theissuance of new investment
units

July 22, 2015

Comprehensive resolution on
the issuance of investment
corporation bonds andentrustment of accompanying
administration (Note )A comprehensive resolution was made on the issuance of investment
corporation bonds with the issuance period between July 30, 2015 andJuly 29, 2017 with the total amount issued of up to ¥100.0 billion, andthe decision on matters regarding the issuance of investment corporation
bonds, including the entrustment of operations as investment corporationbond administrator and entrustment of the administration, was left to thediscretion of the Executive Director.

November 25, 2015

Conclusion of memorandum of
understanding regarding theunitholders’ registryadministration agreement andthe special account managementagreement

In accordance with the enforcement of the Act on the Use of Numbers to
Identify a Specific Individual in the Administrative Procedure, JHR
entrusted operations regarding collection, registration, disposal anddeletion, etc. of such numbers of individual unitholders to Sumitomo
Mitsui Trust Bank, Limited.

November 25, 2015

Partial amendment to the asset
management agreement

Due to the issuance of new investment units, general administration foroffering the investment units was entrusted to SMBC Nikko Securities
Inc., Daiwa Securities Co. Ltd. and Mizuho Securities Co., Ltd.

In accordance with the modifications to the Articles of Incorporation
resolved at the 7th General Meeting of Unitholders of JHR, JHR decided
to make partial modifications to the asset management agreement asfollows:
・Clarifying the allocation of subscription rights to new investment units
without contribution as one of the fund procurement operations
・Deleting words and phrases that have become unnecessary with thepassing of a certain period, and others(Note) JHR issued the fifth unsecured investment corporation bonds on October 23, 2015. General administration regarding the fifth
unsecured investment corporation bonds was entrusted to Mizuho Bank, Ltd.

The following shows the summary of major conclusions, changes, etc. of the principal agreements that wereapproved or reported at meetings of JHR’s Board of Directors held after December 31, 2015.
Approval date

January 4, 2016

Item
Conclusion of an underwriting
agreement for new investment
units in association with theissuance of new investment
units

Summary
Due to the issuance of new investment units, general administration foroffering the investment units was entrusted to SMBC Nikko Securities
Inc., Daiwa Securities Co. Ltd. and Mizuho Securities Co., Ltd.

46

The 7th General Meeting of Unitholders of JHR was held on November 26, 2015. The major items approved at theGeneral Meeting of Unitholders are summarized below.
AgendaPartial amendments to the Articles
of Incorporation

Appointment of one Executive
Director

Appointment of three Supervisory
Directors
Appointment of one SubstituteExecutive Director

Summary
Partial amendments were made to the Articles of Incorporation due to the following reasons.
・Established a new rule regarding the timing to hold a general meeting of unitholders, and aprovision of a record date to determine unitholders who may exercise their rights at thesaid general meeting of unitholders, etc.
・Established a new provision to enable JHR to obtain all or majority of issued shares orinvestments of corporation(s) holding overseas real estate.
・Added assets in which JHR can invest in association with the addition of assets applicableto the specified assets due to the revision of the relevant law.
・Amended a provision to enable JHR to invest in derivative products to hedge against therisks of currency exchange fluctuations and climate fluctuations such as typhoons, andothers.
In association with resignation of Yukio Isa from office of Executive Director, Kaname
Masuda was newly appointed as Executive Director. The term of office is two years startingon November 26, 2015.
While the two Supervisory Directors, Hiroshi Matsuzawa and Tetsuya Mishiku, werereappointed, Hiroto Kashii was newly appointed as Supervisory Director, increasing thenumber of Supervisory Directors to three. The term of office is two years starting on
November 26, 2015 for each Supervisory Director.
Hisashi Furukawa, Representative Director of the Asset Management Company, was newly
elected as Substitute Executive Director.

(2) Other
Unless otherwise noted, amounts and ratios in this report are rounded down and rounded off to the stated unit,
respectively.

47

JAPAN HOTEL REIT INVESTMENT CORPORATION
Balance Sheets
December 31, 2015 and 2014
Thousands of yen
As ofDecember 31,
2015

As of
December 31,
2014¥

5,450,696
8,247,600
1,269,572
410,241
245,509
3,057
6,473
15,633,151¥

184,717
1,428,232
2,676
88,642,547
2,006,145
456,282
125,266
120,918,641
606
213,765,117(10,276,615)
203,488,501

155,796
1,041,932
67,291,439
736,632
469,007
129,339
89,055,831
126
158,880,106(8,143,763)
150,736,342

Intangible assets:
SoftwareLeasehold rights in trust
Other intangible assets
Total intangible assets

100,333
19,774,039
10,476
19,884,849

57,421
19,774,039
10,968
19,842,429

Other assets:
Investment securities (Note 4)
Security deposits
Leasehold and security deposits in trust
Long-term prepaid expenses
Derivative assets (Notes 4 and 14)
Reserve for repairs and maintenance
Investment unit issuance costs
Investment corporation bond issuance costs
Total other assets

12,520158,323
993,340
1,272
49,21966,92868,381
1,349,986

602,725
12,520158,323
803,747
4,834
55,62838,923
1,676,703¥240,356,489¥188,091,734

ASSETS
Current assets:
Cash and deposits (Notes 3 and 4)
Cash and deposits in trust (Notes 3 and 4)
Operating accounts receivable
Prepaid expenses
Consumption taxes receivable
Income taxes receivable
Other current assets
Total current assets
Property and equipment, at cost (Notes 13 and 15):
Machinery and equipment
Tools, furniture and fixtures
Construction in progress
Buildings in trust (Note 10)
Structures in trust
Machinery and equipment in trust
Tools, furniture and fixtures in trust
Land in trust
Construction in progress in trust
Less: Accumulated depreciation
Net property and equipment

Total assets

7,539,897
6,884,877
1,029,379
381,639428
3715,836,259(Continued)

48

JAPAN HOTEL REIT INVESTMENT CORPORATION
Balance Sheets
December 31, 2015 and 2014
Thousands of yen

LIABILITIES AND NET ASSETS
Current liabilities:
Operating accounts payable
Short-term loans payable (Notes 4 and 5)
Current portion of investment corporation bonds (Notes 4 and 6)
Current portion of long-term loans payable (Notes 4, 5 and 14)
Accrued expenses
Income taxes payable
Consumption taxes payable
Advances received
Dividends payable
Deposits received
Other current liabilities
Total current liabilities

As ofDecember 31,
2015

As of
December 31,
2014

¥

¥

875,465
9,000,000
2,500,000
11,393,603
500,859
1,210
692,794
12,381
71,44225,45225,073,210

285,938
11,825,132
400,390
1,210
290,174
651,652
10,7709,384
13,474,653

Long-term liabilities:
Investment corporation bonds (Notes 4 and 6)
Long-term loans payable (Notes 4, 5 and 14)
Tenant leasehold and security deposits (Note 4)
Tenant leasehold and security deposits in trust (Note 4)
Derivative liabilities (Note 14)
Total long-term liabilities

9,500,000
70,379,000
2,041,032
2,914,912
533,856
85,368,801

6,000,000
63,264,603
2,041,916
2,608,901
358,752
74,274,172

Total liabilities

110,442,012

87,748,826

85,470,541

59,024,923

21,746,398

21,746,398

13,928,075
13,928,075
9,296,121
44,970,596
130,441,137

14,168,614
14,168,614
5,776,116
41,691,129
100,716,052(526,660)(526,660)(373,144)(373,144)

Total net assets

129,914,477

100,342,908

Total liabilities and net assets¥240,356,489¥188,091,734

Net assets (Note 7):
Unitholders’ equity:
Unitholders’ capital
Units authorized: 20,000,000 units
Units issued and outstanding; 3,144,227 units and 2,791,281 units asof December 31, 2015 and 2014, respectively
Surplus:Capital surplus
Voluntary reserve:
Dividend reserve
Total voluntary reserve
Unappropriated retained earnings
Total surplus
Total unitholders’ equity
Valuation and translation adjustments:
Deferred gains (losses) on hedges (Note 14)
Total valuation and translation adjustments

See notes to financial statements.
49

JAPAN HOTEL REIT INVESTMENT CORPORATIONStatements of Income
For the years ended December 31, 2015 and December 31, 2014
Thousands of yen
For the year
For the year
ended
ended
December 31, December 31,
2015
2014
Operating revenue:
Real estate operating revenue (Note 8)
Other real estate operating revenue (Note 8)
Gain on sale of real estate properties (Note 9)
Gain on investment in silent partnership
Total operating revenue¥ 16,632,526
401,349
305,668
4,288
17,343,833¥ 12,510,628
249,564
13
12,760,205

Operating expenses:
Real estate operating costs (Note 8)
Asset management fee
Asset custody fee
Administrative service fee
Directors’ compensation
Other operating expenses
Total operating expenses

5,002,501
1,045,925
17,63389,541
10,800188,480
6,354,882

4,163,015
809,152
14,13471,7039,600
147,060
5,214,666

Operating income

10,988,950

7,545,539

2,977
1,186
4,644
292
9,411
18,512

2,111
1,268
958
447
4,785

918,051
62,850632,240
12,50051,84633,99690
1,711,575

1,029,964
37,110599,282
8,677
35,77463,35767
1,774,234

9,295,887

5,776,090

Income before income taxes

9,295,887

5,776,090

Income taxes (Note 11):
Current
Deferred
Total income taxes

1,210
1,210

1,210
1,210

Non-operating income:Interest income
Gain on forfeiture of unclaimed dividends
Gain on insurance claims
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¥

Net income

See notes to financial statements.
50

9,294,677¥

5,774,880

JAPAN HOTEL REIT INVESTMENT CORPORATIONStatements of Changes in Net Assets
For the years ended December 31, 2015 and December 31, 2014

Unitholders’capitalBalance, January 1, 2014
Changes of items during the year:
Issuance of new investment units
Reversal of dividend reserve
Dividends paid
Net income
Net changes of items other thanunitholders’ equity
Total changes of items during theyear
Balance, December 31, 2014
Changes of items during the year:
Issuance of new investment units
Reversal of dividend reserve
Dividends paid
Net income
Net changes of items other thanunitholders’ equity
Total changes of items during theyear¥

Balance, December 31, 2015¥¥

Thousands of yen
Unitholders’ equity
Surplus
Voluntary reserve
Dividend
Total voluntary Unappropriatedreserve
reserveretained earnings

Capital surplus

48,845,323¥

21,746,398¥

16,017,484 ¥

16,017,484¥¥

89,844,236(1,848,870)-

1,848,870(5,082,663)
5,774,880(5,082,663)
5,774,880

10,179,600(5,082,663)
5,774,880

-

-

-

-

-

-

-

10,179,600
59,024,923¥

21,746,398¥(1,848,870)(1,848,870)
14,168,614 ¥ 14,168,614¥

2,541,086
5,776,116¥

692,216
41,691,129¥

10,871,816
100,716,052

26,445,618--(240,538)-(240,538)-

240,538(6,015,210)
9,294,677(6,015,210)
9,294,677

26,445,618(6,015,210)
9,294,677

-

-

-

-

-

-

-

Total net assets

Balance, December 31, 2015

40,998,912(1,848,870)-

Thousands of yen
Valuation and translation adjustments
Deferred gains
Total valuation(losses) on
and translation
hedgesadjustments

¥

¥

-

(240,538)
13,928,075 ¥¥3,235,030

10,179,600-¥

Balance, January 1, 2014
Changes of items during the year:
Issuance of new investment units
Reversal of dividend reserve
Dividends paid
Net income
Net changes of items other thanunitholders’ equity
Total changes of items during theyear
Balance, December 31, 2014
Changes of items during the year:
Issuance of new investment units
Reversal of dividend reserve
Dividends paid
Net income
Net changes of items other thanunitholders’ equity
Total changes of items during theyear¥

Total unitholders’equityTotal surplus

26,445,618
85,470,541(88,022)¥¥

21,746,398(88,022)¥(240,538)
13,928,075 ¥

89,756,213--

10,179,600(5,082,663)
5,774,880(285,121)(285,121)(285,121)(285,121)(373,144)¥(285,121)(373,144)¥

10,586,694
100,342,908--

26,445,618(6,015,210)
9,294,677(153,516)(153,516)(153,516)(153,516)(526,660)¥(153,516)(526,660)¥

29,571,568
129,914,477

See notes to financial statements.

51

3,520,005
9,296,121¥

3,279,466
44,970,596¥

29,725,085
130,441,137

JAPAN HOTEL REIT INVESTMENT CORPORATIONStatements of Cash Flows
For the years ended December 31, 2015 and December 31, 2014
Thousands of yen
For the year
For the year
ended
ended
December 31,
December 31,
2015
2014
Cash flows from operating activities:
Income before income taxes
Depreciation and amortization
Loss on disposal of property and equipment
Loss on derivative instruments
Amortization of investment corporation bond issuance costs
Amortization of investment unit issuance costs
Decrease in property and equipment in trust due to sale
Gain on investment in silent partnership
Interest income
Interest expense
Interest on tax refunds(Increase) decrease in operating accounts receivable(Increase) decrease in consumption taxes receivable(Increase) decrease in prepaid expenses(Increase) decrease in long-term prepaid expenses
Increase (decrease) in operating accounts payable
Increase (decrease) in 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 investment securities
Proceeds from redemption of investment securities
Purchase of property and equipment in trust
Purchase of property and equipment
Purchase of intangible assets
Payments of reserve for repairs and maintenance
Proceeds from tenant leasehold and security deposits in trust
Reimbursements of tenant leasehold and security deposits in trust
Proceeds from tenant leasehold and security deposits
Net cash used in investing activities¥

9,295,887
2,772,440
25,79024,584
12,50051,8464,400,042(4,288)(2,977)980,901(292)(240,193)(245,509)(28,602)(189,593)
69,222
103,627(290,174)
41,14162,058
7,996
16,846,409
2,977(983,493)
292(3,838)15,862,346

607,013(59,092,222)(299,812)(81,347)(49,219)
641,553(324,585)
16¥ (58,598,604)¥

5,776,090
2,400,444
4,643
63,357
8,677
35,774
683,986(2,111)
1,067,075(447)(275,570)(51,910)(358,452)(11,682)(46,197)
60,922
176,457
16,960(65,510)(4,307)
9,478,198
2,111(1,126,516)
447(1,233)8,353,007(602,725)(16,924,492)(317,551)(14,290)102,021(72,900)
1,396¥ (17,828,541)(Continued)

52

JAPAN HOTEL REIT INVESTMENT CORPORATIONStatements of Cash Flows
For the years ended December 31, 2015 and December 31, 2014
Thousands of yen
For the year
For the year
ended
ended
December 31,
December 31,
2015
2014
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¥

15,000,000(6,000,000)
22,508,000(15,825,132)
6,000,000
26,382,471(41,959)(6,013,599)
42,009,780¥

6,800,000(9,469,150)
29,082,000(23,607,180)
3,500,000
10,150,551(30,101)(5,079,101)
11,347,018(726,477)

1,871,484

Cash and cash equivalents at beginning of year

14,424,774

12,553,289

Cash and cash equivalents at end of year (Note 3)¥ 13,698,296

See notes to financial statements.

53¥

14,424,774

JAPAN HOTEL REIT INVESTMENT CORPORATION
Notes to Financial Statements
For the years ended December 31, 2015 and December 31, 2014
1. Organization
Japan Hotel REIT Investment Corporation (“JHR”), formerly known as Nippon Hotel Fund Investment
Corporation (the “former NHF”), was established under the Act on Investment Trusts and Investment Corporations(the “Investment Trust Act”) on November 10, 2005 and was listed on the Real Estate Investment Trust (“REIT”)
Section on the Tokyo Stock Exchange (Securities code: 8985) on June 14, 2006.
Focusing on importance as social infrastructure and profitability of hotels, JHR primarily invests in real estate
assets that are wholly or partially used as hotels and real estate-related assets that are in themselves real estate
equivalents pertaining to such real estate assets or that are backed by such real estate or real estate equivalents.
In the fiscal period ended December 31, 2012, the former NHF, as the surviving entity, merged with Japan Hoteland Resort, Inc. (the “former JHR”), as the dissolved entity, with an effective date of April 1, 2012 (the “merger”).
In conjunction with the merger, the former NHF changed its name to Japan Hotel REIT Investment Corporation,
marking a new start as the only REIT specializing in hotel properties in Japan when merged.
Through the merger, nine properties held by the former JHR were succeeded by JHR. As a result, as of theeffective date of the merger, JHR’s property portfolio expanded to 28 properties. As of December 31, 2015, JHR
has ownership interests in 36 properties.

2. Summary of Significant Accounting Policies
a. Basis of presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in the
Financial Instruments and Exchange Law and their related accounting regulations, and in conformity withaccounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as tothe application and disclosure requirements of International Financial Reporting Standards.
The accompanying financial statements have been reformatted and translated into English (with certain
reclassifications and expanded descriptions) from the financial statements of JHR prepared in accordance withJapanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the
Financial Instruments and Exchange Law. Certain supplementary information included in the statutory Japanese
language financial statements, but not required for fair presentation, is not presented in the accompanying financial
statements. JHR has not prepared consolidated financial statements, as JHR has no consolidating subsidiaries orentities.
b. Cash and cash equivalents

Cash and cash equivalents in the statements of cash flows consist of cash on hand, cash in trust accounts,
bank deposit and trust deposit, which can be withdrawn at any time, and short-term investments with amaturity of three months or less when purchased, which can easily be converted to cash and subject tominimal risk of change in value.
c. Securities
Investment securities without market value held as available-for-sale are stated at cost being determined by themoving average method. Equity interest in silent partnership is stated at its net asset value corresponding to theequity interest in the silent partnership.
d. Property and equipment
Property and equipment are stated at cost. Depreciation of property and equipment is calculated using thestraight-line method over their estimated useful lives. The useful lives of major property and equipment
components are as follows:
Machinery and equipment
Tools, furniture and fixtures
Buildings in trust
Structures in trust

2 to 17 years
2 to 20 years
2 to 62 years
2 to 62 years
54Machinery and equipment in trust
Tools, furniture and equipment in trust

4 to 32 years
2 to 27 years

e. Intangible assets
Intangible assets are amortized using the straight-line method. The amortization period of major intangible assets
is as follows.
Software (internal use)

5 years as internally usable years

f. Long-term prepaid expenses
Long-term prepaid expenses are amortized using the straight-line method.
g. Investment unit issuance costs
Investment unit issuance costs are amortized using the straight-line method over three years.
The issuance of new investment units through public offerings on January 27, 2015 and June 22, 2015 was
consummated under underwriting agreements in which underwriting securities companies committed to purchaseall of the investment units being offered at an issue value and selling them at an offering price different from such
issue value to general investors (the “spread method”).
No underwriting fees were paid by JHR under the spread method since the underwriters were compensated by theunderwriting spread, which amounted to ¥858,900 thousand for the year ended December 31, 2015 and ¥345,440
thousand for the year ended December 31, 2014, representing the difference between the issue price and the issue
value of all new investment units issued.
h. Investment corporation bond issuance costs
Investment corporation bond issuance costs are amortized using the interest method over the respective term of thebond.
i. Income taxes
Deferred tax assets and liabilities are recognized in the financial statements with respect to the differences between
the financial reporting and tax bases of the assets and liabilities, and were measured using the enacted tax rates andlaws which will be in effect in the years when the temporary differences are expected to be recovered or settled.
j. Taxes on property and equipment
Taxes imposed on properties such as property taxes, city planning taxes, and depreciable asset taxes are allocatedto the respective reporting period and expensed as “Real estate operating costs.” Cash paid for property taxes andcity 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 theacquisition cost of real properties was ¥180,668 thousand for the year ended December 31, 2015 and ¥36,674
thousand for the year ended December 31, 2014.
k. Derivatives and hedging activities
JHR enters into certain derivative transactions in accordance with its financial policy in order to manage risks,
which is provided in the Articles of Incorporation, mainly arising from adverse fluctuations in interest rates onloans payable. Derivative financial instruments are carried at fair value with changes in the unrealized gain or loss
charged or credited to operations, except for those which meet the criteria for hedge accounting in which theunrealized gain or loss is deferred as a component of net assets.
JHR evaluates hedge effectiveness by comparing the cumulative changes in cash flow of hedging instruments andthe hedged items and assessing the ratio between the changes.
l. Accounting treatment of beneficiary interests in trust assets including real estate
For trust beneficiary interests in real estate, all assets and liabilities held in trust accounts as well as all income
generated and expenses incurred from assets in trust are presented separately in the accompanying balance sheet
and income statement accounts.
m. Consumption taxes
Consumption taxes are excluded from the transaction amounts. However, non-deductible consumption taxes onproperty and equipment are included in the acquisition cost of the respective assets.
55

n. Rounding of amounts presented in the financial statements
The amounts are rounded down to the nearest thousands or millions in the accompanying financial statements.

3. Cash and Cash Equivalents
Cash and cash equivalents as of December 31, 2015 and 2014 in the statements of cash flows consisted of thefollowing:Thousands of yen
As of December
As of December
31, 2015
31, 2014¥
5,450,696¥
7,539,897
8,247,600
6,884,877¥
13,698,296¥
14,424,774

Cash and deposits
Cash and deposits in trust
Cash and cash equivalents

4. Financial Instruments
a. Status of financial instruments(1) Policy for financial instruments
JHR is an investment corporation set forth in Article 2, paragraph 12 of the Investment Trust Act, managing
investments mainly in specified assets as prescribed in the Investment Trust Act. As a policy, JHR procures
funds through issuance of investment units, etc. and loans from financial institutions in order to makeinvestments 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 derivativetransactions 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
Investment securities, which represent an investment in a silent partnership, are exposed to credit risks of theissuer and risks of fluctuation of real estate property value, etc. JHR manages these risks by periodicallymeasuring the actual market values of such properties and the financial conditions of the issuer.
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.
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 thefinance section of the asset management company by using financial institutions with high credit ratings
through approval and resolution by authorized personnel and a meeting committee structure set forth in its
decision-making standards and resolution of JHR’s board of directors.
Loans payable are exposed to liquidity risks. The finance department of the asset management company
prepares and updates projections and actual cash flows on a monthly basis to manage liquidity risks andmonitor compliance with restrictive covenants set forth in the loan agreements. JHR manages liquidity risks bymanaging the ratio of short-term and 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.
b. Fair Value of Financial Instruments
Carrying amounts of financial instruments on the balance sheets, their fair values, and the differences as ofDecember 31, 2015 and 2014 were as follows. Financial instruments whose fair values are considered extremely
difficult to measure are not included in the table. See Note (2) below.

56Thousands of yen
As of December 31, 2015
Carrying amount
Fair value
Difference¥
5,450,696¥
5,450,696¥
8,247,600
8,247,600¥
13,698,296¥
13,698,296¥-(iii) Short-term loans payable(iv) Current portion of investment corporation
bonds(v) Current portion of long-term loans payable(vi) Investment corporation bonds(vii) Long-term loans payable
Total

¥

9,000,000¥-¥

2,500,000
11,393,603
9,500,000
70,379,000
102,772,603(viii) Derivative transactions (*)¥(i) Cash and deposits(ii) Cash and deposits in trust
Total

Thousands of yen
As of December 31, 2014
Carrying amount
Fair value
Difference¥
7,539,897¥
7,539,897¥
6,884,877
6,884,877¥
14,424,774¥
14,424,774¥(i) Cash and deposits(ii) Cash and deposits in trust
Total(v) Current portion of long-term loans payable(vi) Investment corporation bonds(vii) Long-term loans payable
Total(viii) Derivative transactions (*)¥¥

9,000,000¥

2,507,000
11,393,603
9,544,450
70,379,000
102,824,053

¥

7,000
44,45051,450(532,584) ¥(532,584)

¥

-

¥

¥

11,825,132
6,000,000
63,264,603
81,089,735¥(353,917)-¥¥

11,825,132
6,029,450
63,264,603
81,119,185¥

29,45029,450¥(353,917)¥-(*) Receivables and payables arising from derivative transactions are presented on a net basis and amounts in parenthesis denote net payables.

Notes:(1) Methods to measure fair value of financial instruments(i) Cash and deposits, (ii) Cash and deposits in trust, (iii) Short-term loans payable
The carrying value is deemed to approximate the fair value since the instruments are scheduled to be settled ina short period of time.
(iv) Current portion of investment corporation bonds, (vi) Investment corporation bonds
The fair value of these instruments is measured based on the market price.
(v) Current portion of long-term loans payable, (vii) Long-term loans payable
The carrying value is deemed to approximate the fair value since the interest rate on long-term loans payable
are floating interest rates which are revised periodically to reflect market interest rates.
(viii) Derivative transactions
The information on the fair value of derivative transactions is presented in Note 14.
(2) Information on financial instruments whose fair values are considered extremely difficult to measure as ofDecember 31, 2015 and 2014 was as follows:57

Thousands of yen
As of December
As of December
31, 2015
31, 2014
Carrying amount¥¥602,725
2,041,032
2,041,916
2,914,912
2,608,901¥
4,955,944¥
5,253,542

Investment securities
Tenant leasehold and security deposits
Tenant leasehold and security deposits in trust
Total

Investment securities
Investment securities (equity investment in silent partnership) are not subject to fair value disclosure because
they have no market price and their fair values are considered extremely difficult to measure.
Tenant leasehold and security deposits / Tenant leasehold and security deposits in trust
Tenant leasehold and security deposits (in trust) are not subject to fair value disclosure because they have nomarket price and their actual deposit periods from a tenant’s move-in to move-out are not estimable, thus
making a reasonable estimate of future cash flows difficult.
(3) Redemption schedule for monetary claims as of December 31, 2015 and 2014:

As of December 31, 2015
Cash and deposits
Cash and deposits in trust
Total

As of December 31, 2014
Cash and deposits
Cash and deposits in trust
Total

Due within
one year¥ 5,450,696
8,247,600¥13,698,296

Due after
one to two
years
¥
¥
-

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

Due after
four to five
years
¥
¥
-

Due after
five years¥¥-

Due within
one year¥ 7,539,897
6,884,877¥14,424,774

Due after
one to two
years
¥
¥
-

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

Due after
four to five
years
¥
¥
-

Due after
five years¥¥-(4) Schedule for repayment of loans payable and redemption of investment corporation bonds as of December 31,
2015 and 2014.

As of December 31, 2015
Short-term loan payable
Current portion of investment
corporation bonds
Current portion of long-termloans payable
Investment corporation bonds
Long-term loans payable
Total

As of December 31, 2014
Current portion of long-termloans payable
Investment corporation bonds
Long-term loans payable
Total

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

Due within
one year¥ 9,000,000

Due after
one to two
years
¥
-

2,500,000--

11,393,603¥22,893,603

9,679,250¥9,679,250

13,322,750¥13,322,750

Due within
one year¥11,825,132¥11,825,132

Due after
four to five
years
¥
-

Due after
five years
¥
-

-

-

-

2,000,000
6,317,000¥8,317,000

13,544,000¥13,544,000

7,500,000
27,516,000¥35,016,000

Due after
one to two
years

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

Due after
four to fiveyears

Due after
five years

¥

¥

¥

¥

2,500,000
13,847,603¥16,347,603

58

10,618,250¥10,618,250¥

13,322,750¥13,322,750

2,000,000
6,794,000¥ 8,794,000

1,500,000
18,682,000¥20,182,000

5. Short-Term and Long-Term Loans Payable
Short-term and long-term loans payable as ofDecember 31, 2015 and 2014 consisted of thefollowing:
As of December
31, 2015
Maturity date
Short-term loan payable:
Unsecured loan, payable in a lump-sum at maturity
Sub-total
Long-term loans payable:
Unsecured loan, payable in a lump-sum at maturity (*4)
Unsecured loan, payable in a lump-sum at maturity (*2,5)
Unsecured loan, payable ¥7,000 thousand quarterly andthe remaining balance in a lump-sum at maturity (*2)
Unsecured loan, payable in a lump-sum at maturity (*5)
Unsecured loan, payable ¥50,000 thousand quarterly andthe remaining balance in a lump-sum at maturity
Unsecured loan, payable in a lump-sum at maturity (*2)
Unsecured loan, payable in a lump-sum at maturity (*2,5)
Unsecured loan, payable in a lump-sum at maturity (*2,6)
Unsecured loan, payable in a lump-sum at maturity (*2,5)
Unsecured loan, payable in a lump-sum at maturity (*2)
Unsecured loan, payable ¥1,625 thousand monthly andthe remaining balance in a lump-sum at maturity
Unsecured loan, payable ¥2,250 thousand quarterly andthe remaining balance in a lump-sum at maturity (*5)
Unsecured loan, payable ¥11,000 thousand quarterly andthe remaining balance in a lump-sum at maturity (*5)
Unsecured loan, payable ¥11,250 thousand quarterly andthe remaining balance in a lump-sum at maturity
Unsecured loan, payable ¥7,250 thousand quarterly andthe remaining balance in a lump-sum at maturity (*2)
Unsecured loan, payable in a lump-sum at maturity (*2)
Unsecured loan, payable ¥19,000 thousand quarterly andthe remaining balance in a lump-sum at maturity (*2)
Unsecured loan, payable in a lump-sum at maturity (*2)
Unsecured loan, payable in a lump-sum at maturity (*3,5)
Unsecured loan, payable in a lump-sum at maturity (*2,5)
Unsecured loan, payable in a lump-sum at maturity (*2)
Unsecured loan, payable in a lump-sum at maturity (*5)
Unsecured loan, payable in a lump-sum at maturity
Unsecured loan, payable in a lump-sum at maturity (*2)
Unsecured loan, payable in a lump-sum at maturity (*2)
Unsecured loan, payable in a lump-sum at maturity (*2)
Unsecured loan, payable in a lump-sum at maturity
Unsecured loan, payable in a lump-sum at maturity (*2)
Unsecured loan, payable in a lump-sum at maturity (*2)

AmountAs of December
31, 2014
Amount

9,000
9,000

0.42%

February 15, 2015
March 24, 2016

2,576

1.68%
2.01%

4,779
2,945

September 30, 2015
March 26, 2016

1,081

1.80%
1.97%

2,150
2,200

March 26, 2016
September 19, 2015
September 19, 2017
November 15, 2015
March 26, 2016
November 15, 2017

7
2,550
1,991
6,500

1.53%
1.20%
1.47%
1.14%
1.29%
1.38%

207
2,880
3,120
1,592
2,553
6,500

February 29, 2016

1,742

0.93%

1,761

March 31, 2017

488

0.97%

866

April 26, 2016

3,835

0.87%

4,283

April 26, 2018

4,387

1.07%

4,432

September 30, 2018
September 30, 2018

2,762
3,000

0.98%
0.98%

2,791
3,000

March 31, 2018
March 31, 2021
September 30, 2019
September 30, 2020
September 30, 2021
December 30, 2020
January 31, 2020
January 31, 2022
March 31, 2022
June 30, 2022
June 30, 2020
September 29, 2023
September 29, 2023

3,473
6,800
6,317
6,817
4,000
935
4,700
8,200
1,500
1,500
1,092
2,880
2,636
81,772
90,772

0.73%
1.15%
0.67%
0.92%
1.04%
0.63%
0.58%
0.90%
0.93%
0.95%
0.58%
1.07%
1.07%

3,549
6,800
6,794
6,882
4,000
1,000
75,08975,089November 30, 2016¥

Millions of yen
For the year
ended December
31, 2015
Average Interest
rate (*1)

Sub-total¥

Total of short-term and long-term loans payable

¥

¥

-

Notes:
(*1)
(*2)

(*3)

The average interest rate represents the weighted average rate during the period based on the number of days and outstanding balance of the loans
payable. The interest rate is rounded to the nearest second decimal place.
As JHR has conducted interest rate swap transactions in order to hedge against interest rate fluctuation risks, the interest rate of loans subject tosuch interest rate swap transactions is the rate obtained by taking into account the effect of interest rate swaps (interest rate fixation), rounded off to
two decimal places.
Of these loans payable, the interest rate on the portion totaling ¥1,794 million is, in effect, fixed at 0.80225% for the period from September 30,
2014 through September 30, 2019 due to the execution of an interest rate swap agreement on September 26, 2014. Moreover, the interest rate on
the portion totaling ¥5,000 million is projected to be, in effect, fixed at around 0.95% for the period from March 30, 2018 through September 30,

59

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

2019 due to the execution of an interest rate swap agreement on September 26, 2014.
JHR made early repayment of the full amount of these loans payable on January 30, 2015.
JHR made partial early repayment of these loans payable on October 30, 2015.
JHR made early repayment of the full amount of these loans payable on September 30, 2015.

The annual maturities of long-term loan payable as of December 31, 2015 were as follows:

Years ending
December 31
2016
2017
2018
2019
2020
2021 and thereafter
Total

¥

¥

Millionsof yen11,393
9,679
13,322
6,317
13,54427,516
81,77260

6. Investment Corporation Bonds
Investment corporation bonds as of December 31, 2015 and 2014 consisted of the following:
Millions of yen
As of
As of
December 31,
December 31,
2015
2014
Unsecured investment corporation bond at interest rate of 0.89%, due on
November 25, 2016
Unsecured investment corporation bond at interest rate of 0.92%, due on
March 19, 2019
Unsecured investment corporation bond at interest rate of 0.86%, due on
December 17, 2021
Unsecured investment corporation bond at interest rate of 0.82%, due on
October 21, 2022
Total

¥

¥

2,500

¥

2,000

2,000

1,500

1,500

6,000
12,000¥

The annual maturities of the investment corporation bonds as of December 31, 2015 were as follows:
Years ending
December 31
2016
2017
2018
2019
2020
2021 and thereafter
Total

¥

¥

Millionsof yen
2,500
2,000
7,500
12,000

7. Net Assets
JHR maintains at least ¥50,000 thousand as the minimum net assets as required by the Investment Trust Act.

61

2,500

6,000

8. Real Estate Operating Revenue and Costs
The components of “Real estate operating revenue” and “Real estate operating costs” for the years ended
December 31, 2015 and December 31, 2014 were as follows:
Thousands of yen
For the year
For the year
ended December
ended December
31, 2015
31, 2014
Operating revenue:
Real estate operating revenue:
Fixed rent
Variable rent
Income from management contract
Sub-total
Other real estate operating revenue:
Parking lots
Other incidental revenue
Utilities
Other
Sub-total
Total operating revenue
Real estate operating costs:
Land lease and other rent expenses
Property taxes
Outsourcing expenses (*1)
Nonlife insurance
Depreciation and amortization
Loss on disposal of property and equipment
Repairs
Utilities
Trust fees
Other
Total real estate operating costs
Net real estate operating income¥¥

9,909,942
4,460,082
2,262,502
16,632,526¥

8,817,424
2,739,966
953,237
12,510,628

87,10041,191
261,412
11,644
401,349
17,033,876

61,735
26,112
133,458
28,258249,564
12,760,192

463,289
940,806
387,958
32,334
2,772,440
25,79065,240259,741
42,674
12,224
5,002,501
12,031,375

463,124
835,162
197,668
26,4802,400,444
4,643
45,507
132,826
44,901
12,254
4,163,015
8,597,176¥

Note:(*1) Outsourcing expenses include management contract fees of ¥239,507 thousand for the year ended December
31, 2015 and ¥81,689 thousand for the year ended December 31, 2014.

62

9.

Gain on Sale of Real Estate Properties
The components of “Gain on sale of real estate properties” for the years ended December 31, 2015 and December
31, 2014 were as follows:
Thousands of yen

Comfort Hotel
Shin-Yamaguchi
Proceeds from sale ofproperties
Costs of sale of properties
Other selling expenses
Gain on sale of real estate
properties

For the year ended
December 31, 2015
Daiwa Roynet
Hotel Sunroute
Hotel Akita
Niigata

For the year ended
December 31, 2014
Total

Dormy Inn Namba¥*
787,727
33,684¥*
1,644,598
72,401¥*
1,967,716
78,203¥4,890,000
4,400,042
184,288¥

700,000
683,986
16,000

¥

-

¥

-

¥

-

¥

305,668¥

13*The sale prices for each property have not been disclosed as consent on disclosure has not been obtained from thepurchaser.
10. Advanced Depreciation of Property and Equipment
The accumulated advanced depreciation of property and equipment deducted from acquisition costs due togovernment subsidies received as of December 31, 2015 and December 31, 2014 were as follows:
Thousands of yen
For the year
For the year
ended December
ended December
31, 2015
31, 2014¥
24,291 ¥24,921

Buildings in trust

11. Income Taxes
Significant components of deferred tax assets and liabilities as of December 31, 2015 and 2014 were as follows:
Thousands of yen
As of December
As of December
31, 2015
31, 2014
Deferred tax assets – noncurrent:
Valuation difference on assets acquired by merger
Deferred losses on hedges
Total gross deferred tax assets – noncurrent
Valuation allowance
Total deferred tax assets – noncurrent¥

1,833,861
179,626
2,013,488(2,013,488)-¥

2,084,809
135,963
2,220,772(2,220,772)-

Reconciliation between the effective statutory tax rate and the actual effective tax rate reflected in theaccompanying statements of income for the years ended December 31, 2015 and December 31, 2014 was asfollows:

63

For the year
ended December
31, 2015
34.15％(32.59)(2.72)
1.17
0.01%

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

64

For the year
ended December
31, 2014
34.16%(30.56)(3.62)
0.04
0.02%

12. Amounts per Unit
Net income per unit for the years ended December 31, 2015 and December 31, 2014 was as follows:

For the year ended December 31, 2015

Thousandsof yenNet
incomeNumber ofunits
Weightedaverage units

Basic net income per unit - Net income attributable tocommon unitholders¥

9,264,677

3,060,647

¥

3,036

For the year ended December 31, 2014
Basic net income per unit - Net income attributable tocommon unitholders¥

5,774,880

2,674,377

¥

2,159

Yen
Net income
per unit

Notes:(1) The computation of net income per unit is based on the weighted-average number of units outstanding during
the period.
(2) Diluted net income per unit is not presented since there are no potentially dilutive units for the years ended
December 31, 2015 and December 31, 2014.
Net assets per unit as of December 31, 2015 and 2014 were as follows:
Yen
As of December
As of December
31, 2015
31, 2014¥
41,318 ¥35,948

Net assets per unit

13. Leases
As Lessor:
JHR leases its real estate properties to third parties under non-cancellable operating leases. Minimum rental
revenue under the non-cancellable operating leases as of December 31, 2015 and 2014 were as follows:
Thousands of yen
As of December
As of December
31, 2015
31, 2014¥
1,788,631¥
1,308,494
7,565,169
6,161,012¥
9,353,800¥
7,469,507

Due within one year
Due after one year
Total

65

14. Derivatives and Hedging Activities
a. Derivative transactions to which hedge accounting is not applied
Derivative transactions to which hedge accounting is not applied as of December 31, 2015 and 2014 were as
follows:

As of December 31, 2015
Interest rate swaps(fixed rate payment,
floating rate receipt)

Interest rate caps

As of December 31, 2014
Interest rate swaps(fixed rate payment,
floating rate receipt)

Classification
Transactions
other thanmarkettransactions
Transactions
other thanmarkettransactions

Classification
Transactions
other thanmarkettransactions

Contract
amountThousands of yen
Contract
amountdue after one
year¥ 6,794,000¥ 6,794,000¥(38,598)

¥

¥

¥

34

848,250

848,250

Contract
amountThousands of yen
Contract
amountdue after one
year¥ 5,000,000¥ 5,000,000

Fair value

Fair value¥(37,252)

b. Derivative transactions to which hedge accounting is applied
Derivative transactions to which hedge accounting is applied as of December 31, 2015 and 2014 were as follows:

As of December 31, 2015
Interest rate swaps(fixed rate payment,
floating rate receipt)
Interest rate caps

Method ofaccounting

Hedged item

DeferralmethodLong-termloans payable

DeferralmethodLong-termloans payable

66

Contract
amount(*1)

Thousands of yen
Contract
amountdue after one
Fair value
year
(*2)

¥63,581,950¥58,028,750

8,565,250

4,286,250¥(495,258)

1,238

As of December 31, 2014
Interest rate swaps(fixed rate payment,
floating rate receipt)
Interest rate caps

Method ofaccounting

Hedged item

DeferralmethodLong-termloans payable

DeferralmethodLong-termloans payable

Contract
amount(*1)

Thousands of yen
Contract
amountdue after One
Fair value
year
(*2)

¥55,604,250¥ 48,659,950

9,413,500

9,413,500¥(321,499)

4,834

Notes:(*1) The contract amounts of the interest rate swap and interest rate cap are presented based on the notional
principal amounts. Also, the contract amounts of derivative transactions do not indicate certain scale of market risk
exposure related to derivative transactions.
(*2) The fair value is measured at the quoted price obtained from the counterparty financial institutions.
15. Investment and Rental PropertiesJHR owns rental properties for hotels to earn lease income and income from management contracts. The carrying
amounts, changes in such balances, and fair values of such properties were as follows:

HotelsThousands of yen
Carrying amount (*1)
January 1,
December 31,
2015
Net increase (*2)
2015¥
169,847,788¥
52,514,962¥
222,362,750

Fair value (*3)
December 31,
2015¥
302,110,000

Notes:(*1) Carrying amount recognized in the balance sheet is net of accumulated depreciation, if any, from acquisition
price (including costs for acquisitions). Amounts for machinery and equipment, tools, furniture and fixtures,construction in progress, construction in progress in trust, and intangible assets other than leasehold rights in trustand facility usage rights are not included.
(*2) Increase during the year ended December 31, 2015 principally represents the acquisition of the five “the b”
hotels for ¥20,230 million, Hotel Francs for ¥3,181 million, Mercure Yokosuka for ¥1,649 million, Okinawa
Marriott Resort & Spa for ¥15,094 million and ACTIVE-INTER CITY HIROSHIMA for ¥17,949 million.
Decrease during the year ended December 31, 2015 principally represents the sale of Comfort Hotel
Shin-Yamaguchi for ¥787 million, Daiwa Roynet Hotel Akita for ¥1,644 million and Hotel Sunroute Niigata for¥1,967 million.
(*3) Fair value of properties as of December 31, 2015 is generally the appraisal value determined by licensed realestate appraisers.

HotelsThousands of yen
Carrying amount (*1)
January 1,
December 31,
2014
Net increase (*2)
2014¥
155,753,667¥
14,094,120¥
169,847,788

Fair value (*3)
December 31,
2014¥
205,408,000

Notes:(*1) Carrying amount recognized in the balance sheet is net of accumulated depreciation, if any, from acquisition
price (including costs for acquisitions). Amounts for machinery and equipment, tools, furniture and fixtures,construction in progress, construction in progress in trust, and intangible assets other than leasehold rights in trustand facility usage rights are not included.
(*2) Increase during the year ended December 31, 2014 principally represents the acquisition of ibis Styles
Sapporo (formerly Best Western Hotel Sapporo Nakajima Koen) for ¥6,868 million, Mercure Sapporo for ¥6,102
million and Mercure Okinawa Naha for ¥3,009 million. Decrease during the year ended December 31, 2014
principally represents the sale of Dormy Inn Namba for ¥683 million.
67

(*3) Fair value of properties as of December 31, 2014 is generally the appraisal value determined by licensed realestate appraisers.
Real estate operating revenue and costs for the years ended December 31, 2015 and December 31, 2014 related to
the rental properties were as follows:

HotelsThousands of yen
For the year ended December 31, 2015
Real estate
Real estate
operating revenue
operating costs
Net real estate
(*1)
(*1)
operating income¥
17,033,876¥
5,002,501¥
12,031,375

HotelsThousands of yen
For the year ended December 31, 2014
Real estate
Real estate
operating revenue
operating costs
Net real estate
(*1)
(*1)
operating income¥
12,760,192¥
4,163,015¥
8,597,176

Note:(*1) “Real estate operating revenue” and “Real estate operating costs” are income from real estate operation(including other real estate operating revenue) and corresponding expenses (such as depreciation, property taxes,
trust fees, and repairs and maintenance expenses), and are included in “Operating revenue” and “Real estate
operating costs,” respectively.

16. Segment Informationa. Segment information
The segment information has been omitted because JHR has only one segment, which is the investment andmanagement business of hotel real estate.
b. Related information(1) Information about products and services for the years ended December 31, 2015 and December 31, 2014
Information about products and services has been omitted because operating revenue from external customers
in a single product/service category accounted for more than 90% of total operating revenue.
(2) Information about geographical areas for the years ended December 31, 2015 and December 31, 2014(i) Operating revenue
Information about geographical areas has been omitted because operating revenue in Japan accounted for morethan 90% of total operating revenue.
(ii) Property and equipment
Information about property and equipment has been omitted because the amount of property and equipment
located in Japan accounted for more than 90% of net property and equipment.
(3) Information about major customers<For the year ended December 31, 2015>
Thousands of yen
Segment
Operating revenue
Hotel real estate
Hotel Management Japan Co., Ltd.
¥6,147,639
investment and management
Hotel real estate
AAPC Japan K.K.
¥
2,546,023
investment and management
Hotel real estate
The Dai-ichi Building Co., Ltd.
(Note)
investment and management(Note) The operating revenue is not disclosed as consent on disclosure has not been obtained from the hotel
lessee.
Name of customer

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<For the year ended December 31, 2014>

Name of customer

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

Hotel Management Japan Co., Ltd.
The Dai-ichi Building Co., Ltd.

Thousands of yen
Operating revenue¥

5,627,554¥

1,872,000

17. Subsequent Eventsa. Acquisition of assets
On February 1, 2016, JHR acquired the following property.

Property nameCANDEO HOTELS UENO-KOEN

Asset category

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

Asset type

Hotel

Address

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

Acquisition dateFebruary 1, 2016

SellerGK Ueno Parkside

Acquisition price (Note)¥6,705 million(Note)

The acquisition price does not include expenses for acquisition, settlement of property taxes and city planningtaxes, and consumption taxes.

On April 1, 2016, JHR acquired the following property.

Property name

Hotel Centraza Hakata

Asset category

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

Asset type

Hotel

Address

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

Acquisition date

April 1, 2016

Seller

The seller is not disclosed as consent on disclosure has not beenobtained from the seller. There are no capital, human or business
relationships to be noted between JHR or the Asset Management
Company and the seller. In addition, the seller does not have any special
interest relationship with either JHR or the Asset Management
Company.

Acquisition price (Note)¥7,197 million(Note)

The acquisition price does not include expenses for acquisition, settlement of property taxes and city planningtaxes, and consumption taxes.

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b. Borrowing of funds
JHR obtained new borrowings as follows in order to partly fund the acquisition of the real estate beneficial
interest in trust of CANDEO HOTELS UENO-KOEN and movable assets attached thereon as described above initem a. Acquisition of assets.
Term Loan 18
LenderSumitomo Mitsui Banking Corporation / Shinsei Bank, Limited /Mizuho Bank, Ltd. / The Hiroshima Bank, Ltd.

Amount of the loan

¥2,000 million

Interest rate

Base interest rate (JBA Japanese Yen TIBOR for one month) + 0.30%

Date of borrowing

February 29, 2016

Method of principal repayment

Lump-sum payment on the maturity date

Maturity date

March 31, 2019

Collateral

Unsecured/Unguaranteed

JHR obtained new borrowings as follows in order to partly fund the acquisition of the real estate beneficial
interest in trust of Hotel Centraza Hakata and movable assets attached thereon as described above in item a.
Acquisition of assets.
Term Loan 19
LenderSumitomo Mitsui Banking Corporation / Mizuho Bank, Ltd. / Shinsei
Bank, Limited / Sumitomo Mitsui Trust Bank, Limited / Mitsubishi UFJ
Trust and Banking Corporation / The Bank of Fukuoka, Ltd.

Amount of the loan

¥7,000 million

Interest rate

Base interest rate (JBA Japanese Yen TIBOR for one month) + 0.30%

Date of borrowing

April 1, 2016

Method of principal repayment

Lump-sum payment on the maturity date

Maturity date

March 31, 2017

Collateral

Unsecured/Unguaranteedc. Issuance of new investment units
JHR resolved to issue new investment units at the Board of Directors meetings held on January 4, 2016 andJanuary 13, 2016. Payment for the new investment units was completed on January 20, 2016 and February 17,
2016, and the investment units were issued under the following terms and conditions. As a result, JHR’s
unitholders’ capital increased to ¥100,088,808,209, with the number of investment units issued and outstanding
totaling 3,321,907 units.
(1) Issuance of new investment units (public offering)Number of investment units issued:
170,000 units
Issue price:
Total issue price:¥85,020 per unit
¥14,453,400,000

Paid-in amount (issue value):
Total paid-in amount (total issue value):¥82,273 per unit
¥13,986,410,000

Payment date:

January 20, 2016(2) Issuance of new investment units (third-party allotment)
Number of investment units issued:
7,680 units
Paid-in amount (issue value):
Total paid-in amount (total issue value):¥82,273 per unit
¥631,856,640

Payment date:
Allottee:February 17, 2016
SMBC Nikko Securities Inc.

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(3) Use of funds
JHR allocated the proceeds obtained from the public offering and the third-party allotment to cash on hand in order
to complement part of a decrease in cash on hand, which is a decrease that occurred when JHR had used cash on
hand to partly fund the acquisition of ACTIVE-INTER CITY HIROSHIMA (Sheraton Hiroshima Hotel) (including
expenses for acquisition) that it acquired on December 18, 2015. JHR also used the said proceeds to partly fund theacquisition of CANDEO HOTELS UENO-KOEN as described above in item a. Acquisition of assets.

d. Issuance of investment corporation bonds
JHR issued investment corporation bonds under the following terms and conditions.

Category

Sixth unsecured investment corporation bonds

Total amount of bonds¥3,000 million

Issue price¥100 for ¥100 of each bondInterest rate

0.935% per year

Issue date

March 22, 2016

Redemption date

March 19, 2026

Collateral

Unsecured

Use of proceeds

To partly fund the repayment of existing loans

71