Japan Hotel REIT Investment Corporation
Midterm Financial Results Briefing 16th Period (FY12/2015)

August 21, 2015

(TSE: 8985)
http://www.jhrth.co.jp/en/

Table of Contents
I. Midterm Settlement of Accounts for FY12/2015 – Highlights

Appendix １ JHR’s Characteristics

3

1. Highlights of Midterm FY12/2015

II. Summary of Midterm Settlement of Accounts
and Revenue Forecast for Full Year
1. Midterm Operational Performance for FY12/2015

5

2. Revenue Forecast for Full FY12/2015

6

3. Balance Sheet

7

1. Properties Acquired in 20159

2. Ongoing Property Acquisitions

11

3. Market Environment – Inbound Visitors

12

4. Market Environment - Domestic Market

13

III. External Growth15

2. HMJ’s Five Hotels – Highlights

16

3. Major Indicators of Rooms Department of Hotels with Variable Rent

17

4. Portfolio Diversification

19

5. Capital Expenditure and Depreciation

20

２. External Growth Strategy

26

３. Internal Growth Strategy

27

４. Financial Strategy

28

５. Benefits Program for Unitholders

29

１. Property List

31

２. Summary of Lease Contracts

33

３. Portfolio Map

35

Appendix ３ Investors Composition and Investment Unit Price
１. Major Unitholders and Investors Composition37

２. Changes in Investment Unit Price and Market Capitalization

38

Appendix ４ Summary of the Asset Management Company

V. Financial Strategy
1. Financial Strategy

25

Appendix ２ Information on Properties

IV. Internal Growth
1. Rent Schemes

１. Simultaneous Pursuit of Stability and Upside Potential

22

Former Nippon Hotel Fund Investment Corporation (“former NHF”) and former Japan Hotel and Resort, Inc.
(“former JHR”) merged on April 1, 2012. The surviving company is the former NHF. The new name after
the merger is Japan Hotel REIT Investment Corporation (“JHR”). The asset management company of JHR isJapan Hotel REIT Advisors Co., Ltd. (“Asset Management Company”).

1

1. Summary of the Asset Management Company

40

2. Features and Governance of the Asset Management Company

41

I. Midterm Settlement of Accounts for FY12/2015 – Highlights

1. Highlights of Midterm FY12/2015
1. External Growth

Steady growth of dividend

Ongoing property acquisitions（JPY）

End of FY12/2014

30 properties /JPY173.4B

Public offering in 1/2015

6 properties / JPY23.1B

2,300

acquired

2,100

2 properties / JPY16.6B

1,900

Public offering in 6/2015

38 properties / JPY213.1B

Property acquisitions unique to hotel REIT

Five “the b” hotels (*3)
Total

Improvement in financial indicators (after the purchase of
Okinawa Marriott Resort & Spa / forecast at the end of
12/2015）
Lower borrowing costs
Management of LTV

1.7％⇒1.6 %

43.1％⇒41.7％

FY12/2012 FY12/2013 FY12/2014 FY12/2015
（16th
（15th
（14th
（13th
(*5)
PeriodPeriod） Period）
Period）
Forecast）

directly negotiated transactions.

First half ofFirst half of2014(*4)
2015
12,84914,163
7,505
8,350
6,824
7,852
9,757
10,828

3. Improvement in Financial Conditions

1,621

1,500

◆ High growth of RevPAR in first half of 2015

Accor’s six hotels

2,155

1,939

Acquired with various purchase schemes from multiple sellers including

Improved performance of hotels with variable rent(*2)

11.1%up

1,700

2. Internal Growth

HMJ’s five hotels (*1)

23.0%up2,500

acquired

After property
acquisitions in 2015

2,650

2,700

（Unit: JPY)

Variance
10.2%
11.3%
15.1%
11.0%

◆ Forecast of variable rent, etc. for full

FY2015 compared with the same period
last year+JPY363M
HMJ’s five hotels
ibis Tokyo Shinjuku+JPY75M& ibis Kyoto
Upside sharing+JPY300M

4. Others
AIFMD registration
Newly registered in the U.K. and the Netherlands

Expansion of Benefits Program for Unitholders
Addition of Accor’s six hotels to existing HMJ’s five hotels(*1) HMJ’s five hotels are Kobe Meriken Park Oriental Hotel, Oriental Hotel tokyo bay, Namba Oriental Hotel, Hotel Nikko Alivila, and Oriental Hotel Hiroshima (hereinafter called “HMJ’s five hotels”).
(*2) Accor’s six hotels are ibis Tokyo Shinjuku, ibis Styles Kyoto Station, ibis Styles Sapporo, Mercure Sapporo, Mercure Okinawa Naha, and Mercure Yokosuka (hereinafter called “Accor’s six hotels”).
(*3) Five “the b” hotels are the b akasaka-mitsuke, the b ikebukuro, the b ochanomizu, the b hachioji, and the b hakata (hereinafter called ”the five “the b” hotels”).
(*4) Numbers for Hotel Nikko Alivila and the b akasaka-mitsuke in 2014 are under the effect of variance in the number of rooms available for sale due to partial renovations, etc. (the same applies hereinafter).
(*5) Fiscal year ending December 2012 (13th period) is irregular settlement of accounts of nine months. Therefore, the dividend of FY12/2012 is an annualized number based on certain conditions.

3

Rising market capitalization andinvestment unit price(JPY)(JPY M)

120,000

300,000

100,000

250,000

80,000200,000

60,000150,000

40,000100,000

20,00050,0000
2012/40
2013/4

2014/4

2015/4Market Capitalization (right axis)
Investment unit price (left axis)

II. Summary of Midterm Settlement of Accounts
and Revenue Forecast for Full Year

1. Midterm Operational Performance for FY12/2015

Property（A）（B）

FY12/2014

FY12/2015

FY12/2015

Midterm

Midterm

Midterm

ActualForecast
Previous Time

Actual(Unit: JPY M)（B）ー（A）

Operating revenue – variable rent, etc.

No. of properties

27

37

37

ー

Acquisition price

157,632

198,184

198,184

ー

5,504

6,824

7,242

417

Operating revenue
Variable rent

1,011

1,845

2,269

424

Fixed Rent

4,492

4,979

4,973

-6

NOI

4,691

5,749

6,209

460

Depreciation

1,168

1,364

1,327

-37

2

6

1

-4

3,520

4,377

4,880

502

508

668

622

-45

3,011

3,709

4,257

547

Non-operating income

1

0

9

9

Non-operating expenses

778

839

794

-44

Ordinary income

2,235

2,870

3,472

602

Net income (midterm)

2,234

2,870

3,472

601

Loss on retirement of noncurrent assets
ProfitNOI after depreciationand loss
Other operating expenses
Operating income

Major causes of variances

Variance from
Previous Time(*1) For detail, please see Midterm Financial Report released on August 20, 2015.
(*2) NOI, etc. are calculated using the following formula.
NOI (Net Operating Income)=Real estate operating revenue - Real estate operating costs + Depreciation＋Loss on retirement of noncurrent assets
NOI yield＝NOI/total acquisition price of the properties owned as of the end of the fiscal period/year
NOI after depreciation＝Real estate operating revenue – Real estate operating costs
NOI yield after depreciation＝NOI after depreciation/total acquisition price of the properties owned as of the end of the fiscal period/year

5•

HMJ’s five hotels--increase in variable rent by JPY256M•

Accor’s six hotels--increase in income from management
contracts, etc. by JPY96M•

Five “the b” hotels--increase in variable rent by JPY18M•

Other increases such as upside sharing by JPY52M

Operating Expenses•

Decrease in operating expenses by JPY130M

2. Revenue Forecast for Full FY12/2015（A）
FY12/2014（B）

FY12/2015

FY12/2015

Forecast
Previous Time

Forecast
This Time

Forecast
This Time（Annualized）

ActualProperty

Variance
from
PreviousTime

Major causes for variance
Operating revenue – variable rent, etc.

No. of properties

30

38

38

38

-

•

HMJ’s five hotels--increase in variable rent by JPY311M

Acquisition price

173,429

213,134

213,134

213,134-•

Operating revenue

12,76016,05016,655

17,220604

Accor’s six hotels--increase in income from management
contracts, etc. by JPY168M•

Six “the b” hotels--increase in variable rent by JPY36M•

Other increases such as upside sharing by JPY82M

VariablerentComposition

28.9％3,693 35.5％

6,303 37.5％ 6,455

599

Fixed
Rent

Composition

71.1％9,066 64.5％ 10,347 62.2％ 10,352 62.5％ 10,764

5

5,703 37.8％

11,002

13,736

14,343

14,646

607

6.3%

6.4%

6.7%

6.9%

0.3%

2,400

2,862

2,862

2,990

0

4

13

13

13

0

8,597

10,86011,467

11,642

607

5.0%

5.1%

5.4%

5.5%

0.3%

Other operating expenses

1,051

1,485

1,438

1,480

-47

Operating income

7,545

9,375

10,029

10,162

654

4

0

9

9

9

Non-operating expenses

1,774

1,836

1,720

1,713

-116

Ordinary income

5,776

7,539

8,319

8,458

780

Net income

5,774

7,539

8,318

8,457

779

240

13

13

13

0

6,015

7,552

8,332

8,467

779

2,791,281

3,144,227

3,144,227

3,144,227

0

2,155

2,402

2,650

2,693

248

NOI
Depreciation
Loss on retirement of noncurrent
Profitassetsand loss
NOI after depreciation

Non-operating income

Use of negative goodwill
Dividend(Unit: JPY M)【Reference】 （B）－（A）Total dividends
Number of units issued (Units)
Dividend per unit (JPY)+10.3%+23.0%(*1) For detail, please see Midterm Financial Report released on August 20, 2015.
(*2) NOI, etc. are calculated using the following formula.
NOI (Net Operating Income)=Real estate operating revenue - Real estate operating costs + Depreciation＋Loss on retirement of noncurrent assets
NOI yield＝NOI/total acquisition price of the properties owned as of the end of the fiscal period/year
NOI after depreciation＝Real estate operating revenue – Real estate operating costs
NOI yield after depreciation＝NOI after depreciation/total acquisition price of the properties owned as of the end of the fiscal period/year

6

Major assumptions for FY12/2015（*1）
 Operating assets: Thirty-eight properties. No property transfer(acquisition or disposition) is expected.
 Operating revenue: Based on lease contracts, etc., hotels’
competitiveness and market environment have been considered forthe calculation.
 Operating expenses: JPY946M for fixed asset tax and city planningtax, etc. is assumed. The taxes of the eight properties acquired during
the midterm will not be posted as operating expenses since they will
be posted as acquisition expenses. (The fixed asset tax and city
planning tax for the eight properties is posted with the assumption of
JPY255M in annualized number.) Straight-line method is applied to
calculate depreciation.
 Non-operating expenses: JPY1,720M is assumed as interest
payments, amortization of loan-related fees, loan-related costs andamortized expenses for issuing new investment units in January andJune 2015.
 Borrowing: It is assumed that the balance of loans and investment
corporation bonds at the beginning of FY12/2015 totals JPY81,089M.
The amount is assumed to be JPY97,772M at the end of FY12/2015.
 No. of investment units issued: Assume 3,144,277 units issued in
total.
 Dividend per unit: Negative goodwill is used for loss on retirementof noncurrent assets (JPY13M). Balance carried forward from theprevious period is JPY1M.

3. Balance Sheet(Unit: JPY M)
FY12/2014
FY12/2015
End of Fiscal Year End of Midterm
12/31/2014（注3）

FY12/2014
FY12/2015
End of Fiscal Year End of Midterm

Variance

6/30/201512/31/2014

ASSETS（注3）

Variance

6/30/2015

LIABILITIES AND NET ASSETS

Current assets
Cash and deposits(*1)

Operating accounts receivable

15,83626,322

10,486

13,474

23,581

10,107

14,42425,145

10,721

Operating accounts payable

285

568

283

1,029

758

-271

Short-term loans payable

-

1,000

1,000

11,825

20,588

8,763

Current liabilities

Current portion of long-term loans
payable

382

419

37

172,160

196,219

24,059Accounts payable

691

558

-133

150,736

175,166

24,430

Advances received

651

717

66

Buildings in trust

61,00765,402

4,395

Others

20

149

129

Land in trust

89,055

109,077

20,022

74,27475,015

741

672

685

13

Long-term loans payable

63,26463,896632

Intangible assets

19,842

19,840-2

Investment corporation bond

6,000

6,000

-

Other assets

1,582

1,212

-370

Tenant leasehold and security
deposits

4,650

4,864

214

Investment securities

602

-

-602

Others

358

254

-104

Leasehold and security deposits

170

170

-

87,74898,596

10,848Others

808

1,041

233

Deferred assets

94

125

31

Unitholders’ capital

59,02485,177

26,153

Capital surplus

21,746

21,746-

Dividend reserve

14,16813,928

-240

5,776

3,473

-2,303-373
100,342-254
124,071

119
23,729188,091

222,668

34,577

OthersProperty and equipment, at cost
Net property and equipment(*2)

Others(*3)

Long-term liabilities

TOTAL LIABILITIESNET ASSETS

Unappropriated retained earnings(midterm/year)
OthersTOTAL NET ASSETSTOTAL ASSETS

188,091

222,668

34,577TOTAL LIABILITIES AND NET ASSETS(*1) Cash and deposits in trust is included.
(*2) The sum of building in trust, structures in trust, machinery and equipment in trust, tools, furniture and fixtures in trust, and construction in progress in trust.
(*3) The sum of machinery and equipment, tools, furniture and fixtures.

7III. External Growth1. Properties Acquired in 2015(1)Portfolio of “the b” Hotels (Five “the b” Hotels)
the b akasaka-mitsuke

Address

the b ikebukuroTokyo

Address

the b ochanomizu

Tokyo

AddressTokyo

Acquisition Price JPY6,250M

Acquisition Price JPY6,520M

Acquisition Price JPY2,320M

Appraisal Value JPY6,420M

Appraisal Value

JPY6,770M

Appraisal Value

JPY2,470M

Total No. of
Guest Rooms

122 rooms

Total No. of
Guest Rooms

175 Rooms

Total No. of
Guest Rooms

72 Rooms

Completion

11/2002

Completion

6/1982Completion

8/1999NOI Yield

4.3%

NOI Yield

4.7%

NOI Yield

4.6%

Rent Scheme

Fixed+Variable

Rent Scheme

Fixed+Variable

Rent Scheme

Fixed+Variable

the b hachioji

Address

the b hakata

Tokyo

Address

FukuokaAcquisition Price JPY2,610M

Acquisition Price JPY2,300M

Appraisal Value

JPY2,720M

Appraisal Value JPY2,370M

Total No. of
Guest Rooms

196 Rooms

Total No. of
Guest Rooms

175 Rooms

Completion

8/1986

Completion

9/1997

NOI Yield

6.3%

NOI Yield

5.7%

Rent Scheme

Fixed+Variable

Rent Scheme

Fixed+Variable(*) NOI Yield is based on annualized NOI of FY12/2015 forecast91. Properties Acquired in 2015(2)Hotel Francs

Mercure Yokosuka

Chiba

Address

Kanagawa

Acquisition Price

JPY3,105M

Acquisition Price

JPY1,650M

Appraisal Value

JPY3,500M

Appraisal Value

JPY1,680M

Total No. of Guest
Rooms

222 Rooms

Total No. of Guest
Rooms

160 Rooms

Completion

8/1991

Completion

11/1993

NOI Yield

7.5%

NOI Yield

7.3%

Rent Scheme

Fixed

Rent Scheme

Variable

Address

Okinawa

Acquisition Price

JPY14,950M

Appraisal Value

JPY15,400M

Total No. of Guest
Rooms

361 Rooms

Completion

2/2005Address

Okinawa Marriott Resort & Spa(*) NOI Yield is based on annualized NOI of FY12/2015 forecast

10

NOI Yield

6.1%

Rent Scheme

Fixed+Variable2. Ongoing Property Acquisitions
Change in asset size（*）
 Realize external growth by steady property acquisitions
Increase in asset size

(JPY M)

213,134

220,000
200,000

173,429

180,000

158,902

160,000
140,000

130,883

122,285

39,705

14,52728,0198,598

120,000
100,000
April 2012
（Effective date of merger)

FY12/2012 (13th Period)
2

Acquisition

Disposition28

FY12/2014 (15th Period)2

3・Hilton Tokyo Bay・ibis Styles Kyoto Station

・ibis Styles Sapporo
・Mercure Sapporo
・Mercure Okinawa Naha

2

2

1

28

28

30

・Hotel Keihan Universal City・Hotel Sunroute Shimbashi

Total properties

FY12/2013 (14th Period)(*) Asset size refers to the total amount of acquisition price.

11

After acquisitions in 20158・the b akasaka-mitsuke
・the b ikebukuro
・the b ochanomizu
・the b hachioji
・the b hakata
・Hotel Francs
・Mercure Yokosuka
・Okinawa Marriott Resort & Spa

38

3. Market Environment –Inbound Visitors
Change in the number of inbound visitors by purpose

Comparison of foreign lodgers by prefecture (2014 vs 2013)

First half of 2015: up 46% from the same period last year.
The growth in the total number of inbound visitors is accelerating. The key
driver of growth is inbound leisure tourists.

Notable growth in areas where JHR-owned hotels locate

At the pace of 1st half

（in thousands)
20,00019,000～20,000（Stayed night(people): in 1,000 )
14,000

total number

Stayed night (people) in 1,000 (2013)

Stayed night (people) in 1,000 (2014)13,195business visitors
18,000otherstourists

12,00016,00010,00013,41314,00012,00010,881
10,36410,000

8,000

6,000

4,000

2,000

8,611
8,358
8,347
8,351
7,283
7,963
6,790
6,653
6,362
6,005
6,049
6,219
5,102
4,981
4,614
6,042
5,069
5,954
4,105
4,628
4,313
3,718
3,840
3,312
4,760
3,242
3,994
4,369
3,095
3,381
2,693
4,057
2,358
2,114
1,915
3,055
2,717
2,560
2,392
1,731
1,925

8,000

3,890

4,000

3,291
2,667

2,388

2,000

0

0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

6,200

Actual of
1st half 6,000
9,140

1,489

Tokyo

Osaka Hokkaido Kyoto

Chiba

Okinawa

1,432

1,357

953

Aichi Kanagawa Fukuoka Average byPrefecture
Rate of
44％
27％
25％
30％
61％
30％
34％
51％
34％
increase 34％(*) In the order of the number of foreign lodgers (from left to right).
Prefectures in red means JHR has purchased hotels in those areas after the merger.

Source: “Trend of the number of inbound visitors” by Japan National Tourism Organization (JNTO)

Source: “Overnight trips survey” by Japan Tourism Agency

12

4. Market Environment –Domestic Market
Comparison of key property indexes in major cities in the world (from January to June in 2015, compared with the same period in 2014)

Growth rate of ADR（％）
35

Osaka

30

31.5％
25

20

Kobe
Fukuoka

Kyoto

15

Tokyo

13.1％

19.9％

15.1％

12.2％

10

Okinawa

Sapporo

11.2％

19.1％

5

Growth rate ofoccupancy rate (%)

Hiroshima
8.2％

0
-1

0

1

2

3

4

5

-5
(*) The size of circles show growth rate of RevPAR.
Source: Prepared by Asset Management Company using data of STR Global

13

6

7

8

9

10

IV. Internal Growth1. Rent Schemes
Stability

Upside(As of the end of December 2015 (Forecast))

Type of rent

Fixed rent

Fixed rent + Upside sharing

Fixed rent + Variable rent

Variable rentManagement contract

Type of contract

Lease contract

Lease contract

Lease contract

Lease contract

Management contract

○

○

○

-

-

-

-

A certain percentage of sales
exceeded the threshold

A certain percentage of hotel GOP

A certain percentage of hotel
GOP

GOP of hotel

-

2,672
（16.1%）

3,344（20.1%）

7,779（46.7%）

203（1.2%）

2,650（15.9%）

16,651（100.0%）2,672（16.1%）

2,987（17.9%）

4,157（25.0%）

40（0.2%）

488（2.9%）

10,347（62.2%）ーー356（2.1%）

3,621（21.8%）

162（1.0%）

2,162（13.0%）

6,303（37.8%）

Involvement in hotel
operation

Low

Low

High

High

High

CAPEX paid by JHR

1) Renewal of building andfacilities

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

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

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

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

No. of properties

14
35,68116.7%

540,47019.0%

12104,870
49.2%

2
2,473
1.2%

5
29,64013.9%

Rent
schemes

Fixed
Variable

Operating revenue(JPY M) (%)
Fixed
rent
(Break- （％）down) Variable
rent
（％）

Acquisition price (JPY M)（％）

Hakone Setsugetsuka
Smile Hotel Nihombashi
The Beach Tower Okinawa Mitsukoshimae
Dormy Inn Kumamoto
Hotel Vista Kamata Tokyo
Hotel Francs
Hotel Keihan Universal City
(10 other hotels)
Hotel Sunroute Shimbashi
Hilton Tokyo Bay
Hotels

Kobe Meriken Park Oriental Hotel
Oriental Hotel tokyo bay
Namba Oriental Hotel
Hotel Nikko Alivila
Oriental Hotel Hiroshima
the b akasaka-mitsuke
the b ikebukuro
the b ochanomizu
the b hachioji
the b hakata
the b suidobashi (*1)
Okinawa Marriott Resort & Spa(*1) Dormy Inn Suidobashi was rebranded to the b suidobashi in July 2015. The rent scheme is changed from fixed rent to fixed rent + variable rent.
(*2) Underlined hotels are hotels that JHR purchased after the merger.
(*3) Hotels in red characters are those JHR adopted upside sharing or variable rent, etc. after the acquisitions.

15

Chisan Inn Kamata
Mercure Yokosuka

ibis Tokyo Shinjuku

ibis Styles Kyoto Station

ibis Styles Sapporo
Mercure Sapporo
Mercure Okinawa Naha

Total

38
213,134
100.0%

2. HMJ’s Five Hotels -- Highlights
Change in total sales and GOP
First half

Second half

23,304
21,138GOP
21,396(Sales)

20,00015,00010,000
5,000

6,296

11,42911,508

12,793

20,224

11,633

11,70322,29621,994

21,312
+9.0％

6,155

+2.4％

6,302

+7.1％

23,175（JPY M)
7,000

6,749

6,500

12,79912,272
12,197

6,000

(GOP)

（JPY M)
25,000

5,500

5,136

5,696

5,158

5,645

10,511

9,709

9,888

8,521

9,679

9,797

10,024

10,376

CY2008

CY2009CY2010CY2011CY2012

CY2013

CY2014

CY2015
forecast

86.1%

86.9%

87.8%

17,551

18,608

0

5,000
4,500

Change in KPIADR(ADR・RevPAR)

18,46318,00077.8%
16,00014,000Occupancy
rate

82.7%
17,197

15,98017,297
16,20012,696

12,845

＋8.4％

＋2.4％

13,40016,51815,245

14,886

15,846

73.8%

80%

+6.0％
+1.5％

+6.8％

14,367

RevPAR

85%

80.4%
76.7%

75%
70%
65%

＋11.1％

12,16090%

12,00060%

CY2008

CY2009CY2010CY2011CY201216

CY2013

CY2014

CY2015
forecast(Occupancy rate)（JPY）
20,0003. Major Indicators of Rooms Department of Hotels with Variable Rent (1)Occupancy rate (right axis)

ADR (left axis)

RevPAR (left axis)

HMJ’s Five Hotels
24,00015,24018,00012,0006,000
012,849+6.4%+10.2%

16,222

14,163

19,697
17,602

+6.0%

+7.0%

20,87918,835

17,551+6.0%

18,60815,245+8.4%

16,518

100%
80%

84.3%

87.3%

89.4%

90.2%

86.9%

88.8%

First half of 2014
ActualFirst half of 2015
ActualSecond half of 2014
ActualSecond half of 2015
Forecast

Full FY2014
ActualFull FY2015
Forecast

60%
40%
20%
0%

Accor’s Six Hotels
12,000

9,287

+7.2%

7,505

+11.3%

9,953

10,198+4.8%

10,687

9,760

+5.9%

10,331

80%

9,000
6,000
3,000
0

100%

9,332

8,350

8,758

80.8%

83.9%

85.9%

87.3%

First half of 2014
ActualFirst half of 2015
ActualSecond half of 2014
ActualSecond half of 2015
Forecast

+6.6%

8,845

60%

83.4%

85.6%

20%

Full FY2014
ActualFull FY2015
Forecast

8,137

+8.7%

40%
0%

Five “the b” Hotels
10,000

7,925

+9.3%

7,500
5,000
2,500
0

6,824

+15.1%

8,659
7,852

8,268
7,426

+9.5%

9,056

+12.6%

8,364

8,104

+9.3%

8,861

+13.7%

8,110

80%
7,132

60%
40%

86.1%

90.7%

89.8%

92.4%

88.0%

91.5%

First half of 2014
ActualFirst half of 2015
ActualSecond half of 2014
ActualSecond half of 2015
Forecast

Full FY2014
ActualFull FY2015
Forecast

17

100%

20%
0%

3. Major Indicators of Rooms Department of Hotels with Variable Rent (2)Occupancy rate (right axis)

ADR (left axis)

RevPAR (left axis)

Total
16,00011,703+6.7%

12,48812,0008,000+11.0%

9,757

10,82814,084+5.8%

14,907

12,419+7.5%

13,352

12,940+6.1%

13,72880%
11,103+9.0%

12,101

83.4%

86.7%

88.2%

89.6%

85.8%

88.2%

First half of 2014
ActualFirst half of 2015
ActualSecond half of 2014
ActualSecond half of 2015
Forecast

Full FY2014
ActualFull FY2015
Forecast

Forecast of GOP
GOP(JPY M)

12,0009,230

10,000+10.2%

10,176

Total

8,000
6,000

2,000
0

6,302

+7.1%

2,075

+14.6%

6,749

HMJ's Five
Hotels4,000
Accor's Six
HotelsFive "the b"
Hotels

60%
40%

4,000
0

100%

1,049

854
Full FY2014
Actual2,379+22.9%

Full FY2015
Forecast

18

20%
0%

4. Portfolio Diversification
 Diversification of tenants (*)
FY12/2013

FY12/2014

Others21%

Others
19%

Accor
9%

HMJ
43%

Kyoritsu
Maintenance

HMJ
40%

Kyoritsu
Maintenance

Accor
17%

Daiichi Building(Hilton Tokyo Bay)
15％

Daiichi Building(Hilton Tokyo Bay)
16％

Others17%

7％

9％

Kyoritsu
Maintenance 11％

FY12/2015(Forecast)

HMJ
32%

the b
10%
Accor
15%

Daiichi Building(Hilton Tokyo Bay)12％

Lagoon resort Nago
(Okinawa Marriott )7％

 Diversification of areas (*)
FY12/2013

FY12/2014
Others9%

Others9%
Okinawa
17%
Kansai
26%

Tokyo
16%
Kanto
(excluding
Tokyo)
32%

Hokkaido
7%

Others8%
Tokyo
15%
Okinawa17%

Kanto(excluding
Tokyo)
29%
Kansai23%(*) Based on acquisition price19

FY12/2015(Forecast)

Hokkaido
6%
Okinawa
21%
Kansai
19%

Tokyo
20%

Kanto
(excluding
Tokyo)
26%

5. Capital Expenditure and Depreciation(*1)(JPY M)
3,000

CAPEX ICAPEX IICAPEX III

Depreciation
2,862

2,500

2,212

2,322

2,242

2,214

2,297

2,400

2,072
1,869

2,000

1,780

1,841

30
1,500

1,306
998

1,000

1,096

1,236

1,078
785

668

591

600
793

500

0
(*2)(*3)

258

118

283

49
156

378

322

FY2006
Actual

FY2007
Actual

FY2008Actual518
90
177
FY2009Actual

515
21
213

233
36
322

281

FY2010
Actual

FY2011
Actual

502

343
854

198

58
167

622

629

CY2012
ActualCY2013
Actual

203
1,248
760

CY2014
ActualCY2015Plan(*1) CAPEX I is capital investment related to renewal construction of buildings, facilities, and equipment which is required to maintain proper values of properties. CAPEX II is capital investment for fixtures and furnishings that are not directly related to building structures or
facilities but necessary for operating hotels. CAPEX III is strategic capital investment for renewing guest rooms, banquet rooms and restaurant for maintaining/improving the competitiveness of the hotels.
(*2) The actual for FY2006 is the actual of the former JHR for the period from IPO to August 2006 (6.5 months). The actual for FY2007 is the sum of the actual of the former JHR from September 2006 through August 2007 and that of the former NHF from IPO to September 2007(15.5 months). The actual for FY2008 is the sum of the actual of former JHR from September 2007 through August 2008 and that of former NHF from October 2007 through September 2008 (the same method applies for FY2009 to FY2011). The sum of CY2012 is the actualfrom January 2012 through December 2012 (Depreciation is the annualized number for the 13th period.), and the actual for CY2013 and CY2014 is actual number for the period from January through December each year. The plan for CY2015 is the plan for the period fromJanuary through December 2015 based on the revenue forecast in the Midterm Financial Report for the Fiscal Year Ending December 2015 dated August 20, 2015.
(*3) The former NHF and former JHR spent JPY31M (October 2011 through December 2011) and JPY90M (September 2011 through December 2011), respectively, in addition to the amount indicated above.

20

V. Financial Strategy

1. Financial Strategy (1)Change in costs for interest-bearing debt (*1) and average life of debt (*2)(Year)

2.3%

3.5 years
2.0%

3.3 years
1.7%

1.5%

Investment Corporation Bonds

3.0

1.6%

2.4 years

22.5%

Long-term (scheduled
repayment within one year)
Long-term

85.4%(*1) Long-term loan: Original loan withmaturity over one year.
Short-term loan: Original loan with maturity
within one year.

End of FY12/2014 End of midterm of(15th Period)
FY12/2015(Midterm of 16th Period)

76.4%

LTV（Total asset base)

43.1％

41.7％

Interest rate fixation ratio

89.0％

90.2％

(*1) Weighted-average number of costs for interest-bearing debt (including up-front fee, etc.) as of the end of each fiscal period/year.
(*2) Average life of debt as of the end of each fiscal period/year.

(*2) Percentage in 2015 is forecast amountfor December

Change in LTV (total asset base)(*3) including purchase of cap contracts

47.5%

14.6%

Short-term

2.0
End of FY12/2013(14th Period)

93.4%

1.1%

Term of interestbearing debt

2.5

1.0%

92.6%

Loans

3.5

2.6 years

End of FY12/2012(13th Period)

6.6%

Breakdown of theinterest-bearing debt

4.0

Costs for interest-bearing debt

2.0%

As of the end of June 2015

7.4%

Average life of debt

2.5%

As of the end of Dec. 2014

Repayment schedule of interest-bearing debt (as of end of June 2015)
46.7%（JPY M)
20,000

45.0%
43.8%

10,000

41.7%

5,000
40.0%

（2015年6月末時点）

Investment Corporation Bond

17,3472,500

15,000

43.1%

42.5%

Borrowing

13,322
10,618

12,582
8,794

6,820

12,300
1,500

9,700

2,000

6,820

14,847

10,61813,322

6,794

12,582

10,800

9,700

2015

2016

2017

2018

2019

2020

2021

2022

0
End of FY12/2012(13th Period)

End of FY12/2013(14th Period)(*) Change in LTV as of the end of each fiscal period/year.

End of FY12/2014(15th Period)

End ofof FY12/2015
midterm ofEnd(Forecastof 16th Period)
FY12/2015(Midterm of 16th Period)221. Financial Strategy (2)Lender list for interest-bearing debts

Status of credit ratings(JPY M)

Lenders

Balance as of the end Balance as of the endof last yearof midterm(As of the end of(As of the end of June
December 2014)2015)
Balance

Percentage

Balance

Percentage

15th Period (end of FY12/2014)

Variance
Balance

Sumitomo Mitsui Banking Corporation

20,20524.9%

23,205

25.4%

3,000

Shinsei Bank, Ltd.

10,318

12.7%

11,857

13.0%

1,539

Mizuho Bank, Ltd.

9,526

11.7%

11,707

12.8%

2,181

Resona Bank, Limited

7,002

8.6%

8,492

9.3%

1,490

The Tokyo Star Bank, Limited

8,199

10.1%

8,485

9.3%

286

Sumitomo Mitsui Trust Bank, Limited

6,998

8.6%

8,481

9.3%

1,483

The Nomura Trust and Banking Co., Ltd.

4,100

5.1%

4,085

4.5%

- 15

Development Bank of Japan Inc.

1,879

2.3%

1,875

2.1%

-4

The Chiba Bank, Ltd.

1,531

1.9%

1,822

2.0%

291

The Hiroshima Bank, Ltd.

1,492

1.8%

1,492

1.6%

-

The Bank of Fukuoka, Ltd.

1,488

1.8%

1,486

1.6%

-2

Mitsubishi UFJ Trust and Banking
Corporation

1,000

1.2%

1,000

1.1%

-

Sompo Japan Nipponkoa Insurance Inc.

996

1.2%

992

1.1%

-4

Aozora Bank, Ltd.

350

0.4%

500

0.5%

150

75,08992.6%

85,485

93.4%

10,395

2nd Investment Corporation Bond
without collateral

2,500

3.1%

2,500

2.7%

-

3rd Investment Corporation Bond
without collateral

2,000

2.5%

2,000

2.2%

-

4th Investment Corporation Bond
without collateral

1,500

1.8%

1,500

1.6%

-

Investment Corporation Bond (Sub-Total)

6,000

7.4%

6,000

6.6%

-

81,089100.0%

91,485100.0%

10,395

Borrowing (Sub-Total)

Total Interest-Bearing Debt

23

Japan Credit Rating Agency, Ltd. (JCR)

A (prospectus: stable）

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

A- (prospectus: stable)

Use of negative goodwill
Major policies for using negative goodwill
 Cope with losses caused by property dispositions when replacing properties.
 Cope with dilution at issuance of investment units during the period.
 Cope with loss on retirement of noncurrent assets resulting from renovation, etc.

Balance of negative
goodwill

2014(January throughDecember 2014)

Amount of negative
goodwill used

Balance of negative
goodwill

JPY14.1B
Adjustment for dilution: JPY164M
Loss on retirement of
noncurrent assets: JPY 4M
Financial costs associatedwith early repayment: JPY 71M

JPY13.9B

Appendix 1
JHR’s Characteristics

1. Simultaneous Pursuit of Stability and Upside Potential
JHR pursues both stability and upside potential by implementing steady growth strategies
Change in the external environment
Growth of nonresident 
population

Economic trends

Tourism nation policy
Inbound travelers
Domestic travelers

Planning and execution of the asset
management strategies
Ensure stable revenue
Fixed rent
Variable

Capital expenditure (CAPEX) to maintaincompetitiveness and proper asset value

Maintenance/improvement of rent-paying
capacity by tenants, etc.

Management
contract

Variable rent

Upsidesharing

rent

Fixed



Pursue upside potential＜Percentage of rental income＞

38%

rent

62%

(Forecast for FY12/2015)

25




Change in rent scheme/rebranding
Strategic capital expenditure

Increase in rental income, etc. throughimproved hotel performances

2. External Growth Strategy
Basic Policies
Perception of the external
environment Acquire hotel real estate that is capable of attracting “domestic and inbound leisure customers.”

Trend of the hotel investment

 Improve profitability, stability, and quality of the overall portfolio.

market Along with a rise in hotel revenue
due to economic recovery andincrease in domestic and inbounddemand, hotel assets have gained
investors’ further attention. In
addition, since the yields of otherasset classes are decreasing andcompetitions to acquire hotel assets
have become intense, yields ontransactions are on a downward
trend.

Key MeasuresEmphasize the superiority of buildings and facilities (infrastructure), operations (services), and locations of hotel
real estate.
•

The prime investment targets are “full-service hotels” and “resort hotels” that have high barriers to entry due to operationand management know-how, capital outlay and location.

•

 This trend is predicted to continue
for some time and transaction prices
are expected to rise further.

In the case of “limited-service hotels,” the creditworthiness of the hotel lessee, the age of the building, location, guest
room composition and profitability are important.

•Strategic investment areas•Hotels specialized in selling single rooms only are carefully chosen.

Hokkaido area, Tokyo and bay area, Osaka/Kyoto area, Fukuoka area, and Okinawa area.

Investigation and planning of the internal growth strategy upon property acquisition.
•

Investigate the appropriate rent level and rent scheme upon renewal, etc., cost reduction possibilities, and possibilities toimprove buildings and facilities.

•

If the hotel pays a variable rent, etc., promote internal growth through collaboration with the operators.

26

3. Internal Growth Strategy
Basic Policies
Perception of the external
environment
General market conditions
 Due to various measures
implemented by the administrationof Prime Minister Shinzo Abe to pull
the nation out of deflation andrealize the sustainable economic
growth, corporate earnings are
improving overall. Private
consumption is also showing some
sign of a recovery. Japan’s economy
continues to recover mildly.

 Increase variable rent through improvement of hotel revenues
 Set, maintain, and increase proper fixed rent levels based on rent-paying capacity

Key MeasuresHotel market environment
 Demand for hotels is expected tocontinue favorably due to anincrease in demand for domestic
leisure and business byimprovement of consumption
confidence and corporate
sentiments as well as inbounddemand. Unit price is expected toincrease continuously especially inthe accommodation market.



Monitoring, planning and execution of the asset management strategy based on an in-depth understandingof the hotel business.
•

Analyze the creditworthiness of hotel lessees, understand and improve hotel income and expenditures.

•

Understand the ever-changing needs of customers and diligently cope with changes.

•

Provide global level services to hotel users.

•

Differentiation strategy that enables “value competition,” not “price competition.”•

Propose a structuring for hotel organization which can spur innovations.

Plan and execute strategic CAPEX.
•Strategic investment that will improve profitability and strengthen competitiveness.

•

Make investments to maintain asset value and daily revenue.

Maximization of asset value through financial management including cost reduction and proper building
maintenance.

27

4. Financial Strategy
Basic Policies
Perception of the external
environment
Continuing favorable environment

 Ensure healthy and stable finance Strengthen bank formation and relationships with financial institutions

for financing in both direct andindirect financial markets

 Expanded investor base due tocontinuous access to both equity

Key Measuresand bond markets.
 Financial institutions are still eager
to provide loans.
 Due to the Bank of Japan’s monetaryeasing, short-term interest rates are
expected to be stable at a low levelfrom medium-perspective point ofview.
 On the other hand, long-term
interest rates, which are at a

 Maintain LTV level at a maximum of 50% (total asset base) for the time being
 Diverse fund procurement methods including issuance of the investment corporation bonds, etc.
 Diverse maturity
 Interest-rate risk management preparing for interest rate hike in the future

historical low, need to be paid close
attention to unforeseeable
circumstances.

28

5. Benefits Program for Unitholders
JHR offers a benefits program to unitholders to improve their satisfaction and expand the investor base.
JHR expanded the benefits program from FY2015 by adding Accor’s six hotels as subject hotels for the program.


Coupon redemption (July 2014 through June 2015)

Eligible recipients of complimentary coupons

Complimentary coupons will be sent to those who hold ten or more JHR units at the end of Juneevery year (end of the midterm settlement).

Rooms
Restaurants
No. of people
No. of people
No. ofNo. of
who used
who usedcoupons used
coupons used
coupons
coupons

Hotels

Details of the benefits program
HMJ’s five hotels—50% off the rack rates for hotel accommodation and 20% discountaaaaaaAaaaaaaaaafor restaurants
Accor’s six hotels—10% discount from the best-offered accommodation rates

Kobe Meriken Park Oriental Hotel

316

355

719

1,972

Oriental Hotel tokyo bay

1,305

1,624

1,613

4,640

Five complimentary coupons for accommodations and five complimentary coupons forrestaurants

Namba Oriental Hotel

243

302

142

354

Hotel Nikko Alivila

269

530

533

1,429

(*) Complimentary coupons for restaurants are only available at HMJ’s five hotels.

Oriental Hotel Hiroshima

273

314

275

741

2,406

3,125

3,282

9,136

Total

Hotels that offer the benefits program(*) No. of eligible recipients: 18,145 (unitholders of 10 units or over as of June 2013)12,211 (unitholders of 10 units or over as of June 2014)

HMJ’s five hotels and Accor’s six hotels

 Accor’s six hotels

 HMJ’s five hotels

Kobe Meriken Park Oriental Hotel

Namba Oriental Hotel

Oriental Hotel Hiroshima

Oriental Hotel tokyo bay

ibis Tokyo Shinjuku

Hotel Nikko Alivila

Mercure Sapporo

29

ibis Styles Kyoto Station

Mercure Okinawa Naha

ibis Styles Sapporo

Mercure Yokosuka

Appendix 2
Information on Properties

1. Property List (1/2)
Appraisal ValueNo.

Property name

Hotel type

Grade

(*1)

(*2)

No. of Location
guest
rooms

Age

(*3)

Acquisition
Book value
price(JPY M)(*4)(JPY M)(*5)

15th Period（as of
12.31.2014)
Appraisal
value(JPY M)(*6)

CAP rate

Midterm 16th Period Investment Revenue fromreal estate(as of 6.30.2015）
ratio
operation
Appraisal
value

NOI

P/L from real NOI yield
estate operation (Forecast)

CAP rate(*7)(JPY1000)(*8)(JPY1000)(*8)(JPY1000)
(*8)

(*9)

1

Kobe Meriken Park Oriental Hotel

Full-service

Upper-middle

319

Hyogo

20.0

10,90010,164

12,5005.8%

12,8005.7%

5.5%407,923265,739

90,904

7.8%

2

Oriental Hotel tokyo bay

Full-service

Mid-price

503

Chiba

20.2

19,90018,76027,7004.8%

29,100

4.8%

10.0%

729,750

669,671426,980

7.8%

3

Namba Oriental Hotel

Limited-service

Mid-price

257

Osaka

19.3

15,00014,76919,2004.7%

22,0004.6%

7.6%

601,501

551,263

467,042

7.4%

4

Oriental Hotel Hiroshima

Full-service

Upper-middle

227

Hiroshima

21.8

4,100

4,035

4,150

7.8%

4,150

7.7%

2.1%

185,393

161,629

126,7219.2%

5

Hotel Nikko Alivila

ResortLuxury396

Okinawa

21.3

18,90018,65821,3005.7%

22,1005.5%

9.5%

417,677

341,139

168,950

7.3%

6

The Beach Tower Okinawa

ResortMid-price

280

Okinawa

11.3

7,610

6,914

8,400

5.3%

8,720

5.1%

3.8%

255,506

234,038

174,625

6.1%

7

Hakone Setsugetsuka

ResortMid-price

158

Kanagawa

8.8

4,070

3,822

4,480

5.9%

4,490

5.9%

2.1%

147,472

135,977

95,161

6.7%

8

Dormy Inn Kumamoto

Limited-service

Mid-price

294

Kumamoto

7.4

2,334

2,249

2,790

6.3%

2,830

6.2%

1.2%

97,23086,514

66,725

7.2%

9

Dormy Inn Suidobashi (*10)

Limited-service

Economy

99

Tokyo

28.9

1,120

1,234

1,620

5.0%

1,670

4.7%

0.6%

42,00033,957

27,629

6.7%

10

Dormy Inn EXPRESS Asakusa

Limited-service

Economy

77

Tokyo

18.3

999

968

1,080

4.8%

1,140

4.7%

0.5%

31,997

27,62021,490

5.5%

11Hakata Nakasu Washington Hotel Plaza

Limited-service

Mid-price

247 Fukuoka 20.3

2,130

2,089

2,780

5.6%

3,110

5.4%

1.1%

120,000

111,000

98,000

10.5%

12Nara Washington Hotel Plaza

Limited-service

Mid-price

204

Nara

15.3

2,050

1,936

2,160

5.9%

2,200

5.8%

1.0%

75,00067,00046,000

6.5%

13

R&B Hotel Ueno-Hirokoji

Limited-service

Economy

187

Tokyo

13.2

1,720

1,753

1,670

4.8%

1,700

4.7%

0.9%

48,647

41,47935,128

4.9%

14

R&B Hotel Higashi-Nihombashi

Limited-service

Economy

202

Tokyo

17.3

1,534

1,507

1,850

5.2%

1,890

5.1%

0.8%

61,10352,61443,960

6.8%

15

Comfort Hotel Tokyo Higashi Nihombashi

Limited-service

Economy

259

Tokyo

7.4

3,746

3,673

4,740

5.2%

4,830

5.1%

1.9%

135,057

119,735

101,952

6.4%

16

Comfort Hotel Shin-Yamaguchi

Limited-service

Economy139

Yamaguchi

7.9

866

792

822

6.3%

834

6.2%

0.4%

30,26425,61918,4485.4%

17

Daiwa Roynet Hotel Akita

Limited-service

Economy

221

Akita

9.1

1,760

1,654

1,820

6.5%

1,880

6.3%

0.9%

69,00060,00043,000

6.2%

18

Smile Hotel Nihombashi Mitsukoshimae

Limited-service

Economy

164

Tokyo

18.3

2,108

2,048

2,550

4.8%

2,680

4.7%

1.1%

83,31075,56866,5786.4%

19

Hotel Sunroute Niigata

Limited-service

Mid-price

231

Niigata

22.9

2,105

1,977

1,900

6.4%

1,930

6.3%

1.1%

78,00070,54351,144

5.8%

20

Toyoko Inn Hakataguchi Ekimae

Limited-service

Economy257 Fukuoka 13.8

1,652

1,509

2,280

5.6%

2,360

5.4%

0.8%

70,51963,96253,266

7.7%

31

1. Property List (2/2)
Appraisal ValueNo.

Property name

Hotel type

Grade

No. ofLocation
guest
rooms

Age

Acquisition
Book value
price

(*3)

(JPY M)(*4)(JPY M)(*5)

15th Period（as of
12.31.2014)
Appraisal
value(JPY M)(*6)

Revenue from
Midterm 16th Period
Investment
real estate(as of 6.30.2015）
ratio
operation
Appraisal
CAP rate
CAP rate
value(JPY1000)
(*8)

NOI

(JPY1000)(*8)

P/L from real NOI yield
estate operation (Forecast)(JPY1000)
(*8)

(*1)

(*2)

ResortMid-price

330

Osaka

14.0

6,000

6,053

8,920

5.9%

12,0005.7%

3.0%513,117474,854433,065

11.8%

(*7)

(*9)

21

Hotel Keihan Universal City

22

Chisan Inn Kamata

Limited-service

Economy

70

Tokyo

12.2

823

811

886

5.3%

1,070

5.1%

0.4%

33,21629,276

23,510

6.4%

23

Hotel Vista Kamata Tokyo

Limited-service

Economy

106

Tokyo

23.4

1,512

1,484

1,520

5.1%

1,700

4.9%

0.8%

53,14245,64934,5606.2%

24Hotel Sunroute Shimbashi

Limited-service

Mid-price

220

Tokyo

7.3

4,800

4,882

6,360

4.7%

6,750

4.5%

2.4%

222,180

190,171

179,634

6.5%

25

Hilton Tokyo Bay

ResortLuxury

818

Chiba

27.0

26,05026,17130,7004.9%

32,100

4.7%

13.1%

940,459784,729705,326

6.1%

26

ibis Tokyo Shinjuku

Limited-service

Mid-price

206

Tokyo

34.8

7,243

7,424

7,740

4.8%

8,430

4.6%

3.7%

332,421230,172

200,919

6.0%

27

ibis Styles Kyoto Station

Limited-service

Mid-price

215

Kyoto

6.3

6,600

6,751

7,020

5.0%

7,460

4.8%

3.3%

203,786

179,846

164,067

6.1%

28

ibis Styles Sapporo

Limited-service

Mid-price

278 Hokkaido

4.9

6,797

6,823

7,080

5.7%

7,400

5.5%

3.4%

230,569

193,993

158,493

7.0%

29

Mercure Sapporo

Limited-service

Mid-price

285 Hokkaido

6.2

6,000

6,056

6,170

5.5%

6,720

5.3%

3.0%

261,934

176,925

138,6127.3%

30

Mercure Okinawa Naha

Limited-service

Mid-price

260

Okinawa

5.9

3,000

2,991

3,220

5.4%

4,000

5.3%

1.5%

160,322

132,628

107,850

8.7%

31

the b akasaka-mitsuke

Limited-service

Mid-price

122

Tokyo

12.6

6,250

6,308

6,420

4.4%

6,420

4.4%

3.2%

115,761

113,812

104,417

4.2%

32

the b ikebukuro

Limited-service

Mid-price

175

Tokyo

33.0

6,520

6,585

6,770

4.8%

6,790

4.8%

3.3%

146,443

143,872

130,525

4.7%

33

the b ochanomizu

Limited-service

Mid-price

72

Tokyo

15.9

2,320

2,346

2,470

4.5%

2,480

4.5%

1.2%

49,411

48,39744,2264.6%34

the b hachioji

Limited-service

Mid-price

196

Tokyo

28.9

2,610

2,649

2,720

5.8%

2,740

5.7%

1.3%

89,14887,127

77,2196.8%

35

the b hakata

Limited-service

Mid-price

175 Fukuoka 17.8

2,300

2,326

2,370

5.2%

2,430

5.1%

1.2%

64,09063,02455,7685.8%

36Hotel Francs

Full-service

Mid-price

222

Chiba

23.9

3,105

3,165

3,500

5.3%

3,740

5.1%

1.6%

79,55878,70963,3307.3%

37Mercure Yokosuka

Full-service

Mid-price

160

Kanagawa

22.7

1,650

1,651

1,680

4.9%

1,680

4.9%

0.8%

54,58135,541

28,642

4.7%

Total or Average

-

-

8,631

-

18.6

198,184

195,005

231,338

100.0%

7,238,381

6,205,574

4,875,932

6.7%-

246,324-(*1) “Full-service” is full-service hotel, “Resort” is resort hotel, and “Limited-service” is limited service hotel.
(*2) Based on ADR, etc., JHR has classified the hotels into four categories as “luxury,” “upper-middle,” “mid-price,” and “economy.”(*3) Average age: The sum of (acquisition price of each property x property age ) ÷Total acquisition price.
(*4) The acquisition price on the Purchase & Sale Agreement for the Beneficial Interest in Trust or Real Estate Purchase & Sale Agreement is indicated. (Consumption tax, brokerage fee and other purchase-related costs are exclusive.)(*5) Book value as of the end of June 2015.
(*6) No. 31-37 are appraisal value at the time of acquisition.
(*7) Percentage of the acquisition price of the acquired asset to the total acquisition price. Numbers beyond one decimal place is rounded off.
(*8) Actual for six months from January through June 2015. The lessee did not agree to disclose numbers in units of JPY1000 for Nos. 11, 12, and 17. Amounts are rounded down to the nearest JPY 1M.
(*9) NOI yields (forecast) shows forecast for FY12/2015. Also, the total NOI yield = the NOI forecast as of FY12/2015 (including Okinawa Marriott Resort & Spa) ÷ total acquisition price.
(*10) “Dormy Inn Suidobashi” was rebranded to “the b suidobashi” on July 1, 2015.

32

2. Summary of Lease Contracts (1/2）
No．

Property name1

Kobe Meriken Park Oriental Hotel

2

Oriental Hotel tokyo bay

3Namba Oriental Hotel

4

Oriental Hotel Hiroshima

5

Hotel Nikko Alivila

6

The Beach Tower Okinawa

Lease type

Rent type(*1)

Fixed lease Fixed + Variable

LesseeHotelManagement
Japan Co., Ltd.

Hotel
operator/Hotelconsulting andmanagementcompany

Abilitas
Hospitality Co.,Ltd.

Lease Remaining/MC contractterm(*2)
term

Fixed

7

Hakone Setsugetsuka

Fixed lease

Fixed

8

Dormy Inn Kumamoto

Fixed lease

Fixed

Kyoritsu Maintenance Co., Ltd.

Rent summary

PeriodRent modification schedule(July 2015 through 2016)

Condition (*4)

2015
(*4)

2016

Sep. 2011

Scheme ismodified.

－

－

8

5

(Fixed rent)
JPY3,221M/year ＋(Variable rent) (WhenIn principle, the same rent will be
the total GOP of HMJ’s
applied until expiration of thefive hotels exceeds
contract.
GOP base amount(JPY3,351M), the excess
x 81.5% is paid.)

20

11

JPY42M/month

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

－

－

－

－

－

－

－

－

－

－

－

－
－

JAL Hotels Co.,Ltd.
Fixed lease

Contractual rent(*3)

Rent modification summary(Acquisition to end of June/2015)20

11

JPY24M/month

The same rent will be applied until
expiration of the contract

12

8

JPY16M/month

Rent can be modified throughmutual agreement every three years.

－－

Rebranded(Jul.)

9

Dormy Inn Suidobashi (*5)

Fixed lease

Fixed

10

0

JPY7M/month

The same rent will be applied until
expiration of the contract

10

Dormy Inn EXPRESS Asakusa

Lease

Fixed

20

2

JPY5M/month

Rent can be modified throughmutual agreement every three years.

Apr. 2012

Same

Under
discussion－

11

Hakata Nakasu Washington Hotel Plaza

Lease

Fixed

20

0

JPY20M/month

The same rent is applied from April
21, 2012 through expiration of thecontract.

Apr. 2012

Reduced（-7.5%）

Under
discussion－

12

Nara Washington Hotel Plaza

Lease

Fixed

20

5

JPY11M/month

Rent can be modified throughmutual agreement.

－

－

－

－

13

R&B Hotel Ueno-Hirokoji

Lease

Fixed

20

7

JPY8M/month

Rent can be modified throughmutual agreement.

Apr. 2011

Increased（＋3.0%）－－

Apr. 2013

Same

－

－

14

R&B Hotel Higashi-Nihombashi

15

Comfort Hotel Tokyo Higashi Nihombashi

Lease

Fixed

Fixed lease

Fixed

Fixed lease

Fixed
Fixed

16

Comfort Hotel Shin-Yamaguchi

17

Daiwa Roynet Hotel Akita

Lease

18

Smile Hotel Nihombashi Mitsukoshimae

Lease

19

Hotel Sunroute Niigata

20

Toyoko Inn Hakataguchi Ekimae

Washington Hotel K.K.

20

3

JPY10M/month

Rent can be modified throughmutual agreement.

20

13

JPY21M/month

Rent can be modified throughmutual agreement every five years.

Jan. 2013

Same

－

－

20

12

JPY5M/month

Rent can be modified throughmutual agreement every three years.

Sep. 2013Same－

To be renewed(Sep.)

20

11

JPY11M/month

Rent can be modified throughmutual agreement every five years.

－

－

－

To be renewed(Jul.)

20

2

JPY11M/month +Upside sharing

Rent can be modified throughmutual agreement.

Apr. 2014

Scheme ismodified.

－

－

－

－

－

－

Oct. 2007

Increased（＋9.4%）－－

Greens Co., Ltd.
DAIWAROYAL Co., Ltd.

Fixed + Upside
The Kamogawa Grand Hotel, Ltd.
sharing

Fixed lease

Fixed

Sunroute Co., Ltd.

13

2

JPY13M/month

The same rent will be applied until
expiration of the contract

Lease

Fixed

Toyoko Inn Co., Ltd.

30

16

JPY11M/month

No rule has been stipulated.

33

2. Summary of Lease Contracts (2/2）
No．

21

Property name

Hotel Keihan Universal City

Lease type

Lease

Rent type(*1)
Fixed + Upside
sharing

LesseeHoteloperator/Hotelconsulting andmanagementcompany

K.K. Hotel Keihan

Lease Remaining/MC contractterm(*2)
term
20

Contractual rent(*3)

6

Nondisclosure

SHR Hotels,
Co., Ltd.

52Hotel GOP x 85% (If
it is below zero, itwill be JPY0.-)

Fixed + Upside
Vista Hotel Management Co., Ltd.
sharing

4

4

JPY7M/month＋
Upside sharing

Fixed lease

Fixed + Upside
sharing

15

8

JPY18M/month＋
Upside sharing

Hilton Tokyo Bay

Fixed lease

Fixed + Upside
sharing

４

４

JPY157M/month＋
Upside sharing

26

ibis Tokyo Shinjuku

-

12

9

27

ibis Styles Kyoto Station

-

5

4

28

ibis Styles Sapporo

-

5

4

29

Mercure Sapporo

-

15

14

30

Mercure Okinawa Naha

-

10

9

31

Mercure Yokosuka

Fixed lease

A.A.P.C. Japan K.K.

4

4

32

the b akasaka-mitsuke

Fixed lease Fixed + Variable

Ishin Akasaka Operations, K.K.

7

7

33

the b ikebukuro

Fixed lease Fixed + Variable

Ishin Ikebukuro Operations K.K.

7

7

34

the b ochanomizu

Fixed lease Fixed + Variable Ishin Ochanomizu Operations K.K.

7

7

35

the b hachioji

Fixed lease Fixed + Variable

Ishin Hachioji Operations, Y.K.

7

7

36

the b hakata

Fixed lease Fixed + Variable

Ishin Hakata Operations K.K.

7

7

37

Hotel Francs

Fixed lease

K.K. Bridal Produce

19

9

22

Chisan Inn Kamata

23

Hotel Vista Kamata Tokyo

Lease

24

Hotel Sunroute Shimbashi

25

Fixed lease

VariableManagement
contract
Management
contract
Management
contract
Management
contract
Management
contract
Variable

Fixed

Solare Hotels &Resorts Co., Ltd.

Sunroute Co., Ltd.
THE DAIICHIBUILDING CO.,LTD.

－

HiltonInternational
Company

A.A.P.C. Japan
K.K.

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

Rent modification summary
Rent modification schedule(Acquisition to end of June/2015) （2015年6月末時点）(July 2015 through 2016)

Rent summary

Condition (*4)

2015
(*4)

2016

Jul. 2014

Scheme ismodified.

－－-

Jul. 2012

Scheme ismodified.

－－

The same rent will be applied
until expiration of thecontract.

Jul. 2012

Scheme ismodified.

Renewed(Jul.)－

No rule has been stipulated.

－

－

－

－

Rent can be modified
through mutual agreement.

－－

Renewed(Jul.)-

Jul. 2012

Scheme ismodified.

－

－

-

－

－

－

－

-

Jul. 2014

Scheme ismodified.

－

－

-

－

－

－

－

-

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

Nondisclosure

The same rent will be applied
Linked to hotel GOP until expiration of thecontract.
The same rent will be applied
JPY102M/year +until expiration of the
Linked to hotel GOP
contract.
The same rent will be applied
JPY163M/year +until expiration of the
Linked to hotel GOP
contract.
The same rent will be applied
JPY69M/year +until expiration of the
Linked to hotel GOP
contract.
The same rent will be applied
JPY98M/year +until expiration of the
Linked to hotel GOP
contract.
The same rent will be applied
JPY82M/year +until expiration of the
Linked to hotel GOP
contract.
The same rent will be applied
JPY25M/month
until expiration of thecontract.

Period(*1) Rent type is as follows: Fixed: Fixed monthly rent, Variable: Variable monthly rent, Management contract: Management contract, Fixed+Variable: Property paying both fixed and variable rent, Fixed+Upside sharing: When the sales of the hotel (lessee) exceed pre-determined amount, additional rent is paid. (*2)
Remaining contract term as of June 30, 2015. (*3) Amount including car park and CAM without tax. (*4) Details of "Modified Scheme" is as follows. No. 1 to No. 5: Variable rent was modified from sales-base to GOP-linked. No. 18, 21: Upside sharing scheme has been applied in addition to fixed rent. No. 22: Fixed
rent has been replaced with the variable rent due to the replacement of the lessee. No. 23: The fixed rent was reviewed and the upside sharing scheme has been applied. No. 26, 28: JHR has commenced direct management contract schemes. (*5) No. 9: Along with the change in the hotel lessee to Ishin Suidobashi
Operations K.K. in July 2015, the hotel was rebranded to “the b suidobashi” and changed from fixed rent to fixed rent (JPY85M/year) + variable rent (linked with hotel GOP).

34

3. Portfolio Map
2

1

3

2

4
3

5

4

6

5

7

8

7

6

9

Hotel Type

Limited-service hotel

8

Full-service hotel
Resort hotel

Kobe Meriken Park
Oriental

Oriental Hoteltokyo bay

Namba Oriental
Hotel

Oriental Hotel
Hiroshima

Hotel Nikko
AlivilaThe Beach Tower
Okinawa

Hakone Setsugetsuka

10

11

12

13

14

15

16

Dormy Inn
Suidobashi

Dormy Inn
Kumamoto

Resort hotel
36%

17
28

Dormy Inn
EXPRESS Asakusa

Hakata Nakasu
Washington Hotel
Plaza

Nara Washington
Hotel Plaza

R&B Hotel
Ueno-Hirokoji

18

19

20

21

29

Full-service
hotel
19%

R&B Hotel Higashi- Comfort Hotel Tokyo Comfort Hotel Shin- Daiwa Roynet Hotel
Nihombashi
Higashi-Nihombashi Yamaguchi
Akita

22

23

Limited-service
hotel
45%

24

Area

17

Others8%

Smile Hotel Nihom- Hotel Sunroute
bashi Mitsukoshimae Niigata

25

Toyoko Inn
Hakataguchi Ekimae

26

Hotel Keihan
Universal City

27

Chisan Inn Kamata

Hotel Vista
Kamata Tokyo

Hotel Sunroute
Shimbashi

28

34

3 21

16

29

ibis Tokyo
Shinjuku

30

ibis Styles Kyoto
Station31

ibis Styles Sapporo

38

32

12

8

6

25

Kansai
19%

Grade

33

1
32

13
10

9
26

33

MercureOkinawa Naha

34

the b akasakamitsuke

35

the b ikebukuro

36

NEW

NEW

37

38

24

22
23
the b ochanomizu

the b hachioji

the b hakata

Hotel Francs
Mercure Yokosuka

Okinawa Marriott Resort & Spa

35

Kanto (excluding
Tokyo)
26%

Tokyo 23 wards

4

Mercure Sapporo

Okinawa
21%30
37

11 20 35

Tokyo
20%

5

2 36
7

Hilton Tokyo Bay

Hokkaido
6%

19

27

18

Economy8%

14 15

Luxury21%

31Mid-priced
57%

Upper-middle
14%

Appendix 3
Investors Composition and Investment Unit Price1. Major Unitholders and Investors Composition
Top ten major unitholders
 As of the end of December 2014

 As of the end of June 2015

Name

Ranking（*）

No. of Units

Percentage

Name

Ranking

No. of Units

1

Japan Trustee Service Bank, Ltd. (Trust)

524,068

18.77

1

2

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

287,523

10.30

2

3

Trust and Custody Services Bank, Ltd. (Securities Investment
Trust)

252,508

9.04

3

4

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

118,089

4.23

4

Trust and Custody Services Bank, Ltd. (Securities Investment
Trust)The Nomura Trust and Banking Co., Ltd. (Investment Trust)

5

Nomura Bank (Luxembourg) S.A.

97,7553.50

5Nomura Bank (Luxembourg) S.A.

6

Shikoku Railway Company

58,3112.08

6

7

Goldman Sachs International

41,6381.49

38,2698

Nomura PB Nominees TK1 Limited
NOMURA PB NOMINEES LIMITED OMNIBUS-MARGIN
9(CASHPB)
10 The Bank of New York Mellon SA/NV 10
Total

（*）

Percentage

Japan Trustee Service Bank, Ltd. (Trust)

519,652

16.54

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

400,64412.75

306,5859.76

120,068

3.82

107,333

3.41

Shikoku Railway Company

58,311

1.85

7State Street Bank & Trust Company 505001

57,128

1.81

1.37

8

NOMURA PB NOMINEES LIMITED OMNIBUS-MARGIN(CASHPB)

51,8901.65

36,3141.30

9Nomura PB Nominees TK1 Limited

38,2691.21

29,695

1.06

10 BNYM SA/NV FOR BNYM CLIENT ACCOUNT MPCS JAPAN

33,7441.07

1,484,170

53.17

Total

1,693,624

53.93(*) The total units held by each investor to the total units issued by JHR as of the end of December 2014 and the end of June 2015 (Rounded off to two decimal places.)

Owners of the investment units As of the end of December 2014
OwnersNo. ofinvestors

Individuals and others

22,227

No. ofunits
399,789

Financial institutions(including securities firms)

95 1,370,607

Other domestic firms

313

Foreign firms andindividuals
Total
Individuals and others

231

145,417875,468

No. of investors
1.3%
0.4%

 As of the end of June 2015

No. of units

Owners

1.0%

31.3
%
97.2
%

5.2%

Individuals and others

14.3
%

49.1
%

22,866 2,791,281
Financial institutions (including securities firms)

Other domestic firms

No. ofinvestors
27,652

No. ofunits
422,670

Financial institutions(including securities firms)

109 1,531,479

Other domestic firms

416

130,825

Foreign firms andindividuals

281 1,055,348

Total

28,458 3,140,322

No. of investors

No. of units

1.4% 0.9%
0.3%
33.6
%
97.1
%
4.1%

13.4
%

48.7
%

Foreign firms and individuals(*) Percentage of the number of investors: Percentage of investors in each category to the total number of investors at the end of each period. Percentage of the number of investment units: Percentage of the number of investment units owned by investors in each category
to the total number of investment units issued at the end of each period. (Rounded off to one decimal place.)37

2. Changes in Investment Unit Price and Market Capitalization(Based on the closing price of June 30, 2015)(*)

Price of the real estate investment
securities may fall depending on theprice of the real estate undermanagement or fluctuations of its
profitability, etc., and investors may
suffer losses. Investors may also suffer
losses through the bankruptcy ordeteriorated financial condition of theissuer. With reference to the risk ofinvestment in JHR units, see Securities
Report of JHR dated March 20, 2015.

4/18/2013

Investment unit priceTotal market capitalization:
JPY255.9B(JPY)
120,000

Price of the investment unit:
JPY81,500.-

1/28/2015+200,000 units throughPO
2/20/2015＋9,041 units through OA

Market Capitalization
Investment unit priceComparison with REIT Index and

100,000

100 is the closing price of JHR unit,
REIT index and TOPIX at TSE dated
April 2, 2012. REIT Index of TSE is
index of weighted average of themarket capitalization of all REITs
listed on TSE.

(JPY M)
300,000
250,000+510,000 units through PO
9/10/2014

80,0009/13/2012+240,000 units through PO
10/15/2012＋12,000 units through OA

60,000+170,000 units through PO

200,000
150,000

40,000100,000

20,00050,00000TOPIX of Tokyo Stock Exchange (TSE)(*)

6/23/2015+140,000 units throughPO
7/27/2015＋3,905 units through OA

500

Investment unit price of JHR
TSE REIT Index

400

TOPIX

300

200

100

0

38

Market capitalization

Change in the investment unit
price and market capitalization(Based on the closing price)Appendix 4
Summary of the Asset Management Company

1. Summary of the Asset Management Company
Company

Japan Hotel REIT Advisors Co., Ltd.

Location

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

Establishment

August 10, 2004

Capital

JPY300M as of June 30, 2015

Shareholders

Rockrise Sdn Bhd, Kyoritsu Maintenance Co., Ltd., ORIX Corporation

Representative Director

Hisashi Furukawa

Registration and Licenses

Building Lots and Buildings Transaction Business Operator, Governor of Tokyo (3) No. 83613, Discretionary Transaction
Agent by Minister of Land, Infrastructure, Transport and Tourism No. 38, Financial Instruments Trading Company, No. 334,
Director of Kanto Local Finance Bureau
Member of Investment Trust Association, Japan

Organization Chart

Shareholders Meeting
AuditorBoard of Directors Meeting

Investment (and Operation)
Committee

Compliance Committee
Representative Director
Compliance Office

Investment Division

Asset Management

Acquisitions

Operations Division

Finance & Planning Division

Finance & Planning40

Accounting &ReportingGeneralAffairs

Investor
Relations2. Features and Governance of the Asset Management Company
Features of the asset management company【1】

Mission statement
We continue challenge and creation, and provide you with attractive hotel investment opportunities.

【2】

Advanced expertisePlanned and executed unprecedented measures for the asset management of JHR.



Extensive experience, planning and execution abilities in renovation or rebranding through collaboration with hotel lessees or hotel operators.

Good and long-term business relationships with many hotel lessees and hotel operators.

Ensure managerial independence from the main sponsor (*1) and commitment to the growth of JHR.



Conduct and publish unique proprietary research on the hotel and tourism industries.

Rule to prevent conflict of interest in dealing with sponsor-related persons
Strict decision-making rules including those detailed below have been set for dealing with “sponsor-related persons.”(*2) In order to prevent conflict,
we strive to comply with arms-length rules and ensure transparent deals.
Asset management company: Compliance committee

JHR: Committee

The compliance committee consists of committee members

including outside specialists, and attendance of the outside

have any relationship with the sponsors-related persons.

specialists is in principle required for approval of the transaction.


The committee consists of third-party members who do notIn principle, outside specialists are authorized to dismiss proposals.

All deals involving sponsor-related persons in principle needapproval of the committee.

（*1）No employee of the asset management company is a seconded employee of the main sponsor, RECAP group, except for a part-time director.
（*2）Definition of “sponsor-related person” is broader than the “interested party” stipulated by law. All investors of the asset management company and its subsidiary company, etc. are considered as sponsor-related persons.

41Disclaimer
This material is prepared and provided solely for the purpose of providing information and not to solicit any purchase of investment units, investment unit
subscription rights or investment corporation bonds of Japan Hotel REIT Investment Corporation (“JHR”) or any other particular products. If any discrepancy is
identified between this translation and the Japanese original, the Japanese original shall prevail.
This material is neither a disclosure document nor an investment report required under or prepared pursuant to the Financial Instruments and Exchange Act,
Investment Trust and Investment Corporation Act and related government ordinances, Cabinet Office regulations, Tokyo Stock Exchange listing rules, or otherrelated rules and regulations.
This material contains forward-looking statements about financial conditions, operational results, and businesses of JHR, as well as plans and intentions of JHR
and its asset management company, Japan Hotel REIT Advisors Co., Ltd (“JHRA”). Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors that may cause actual results or performance of JHR to materially differ from those expressed or implied forecasts. Those
forecasts are made based on JHR’s present and future business strategies and assumptions relating to the political and economic circumstances surrounding
JHR in the future.
Every effort has been made to ensure the accuracy of the information contained in this material. However, there can be no assurance that the information isaccurate, complete, appropriate or fair. The information may be revised or retracted without prior notice.
Regarding the offering and trading of investment units or investment corporation bonds, financial institutions may charge you pre-determined handling feesand other charges aside from the price of the investment units or investment corporation bonds, please ask financial institutions for the amount, upper limit, andcalculation methods of such fees and other charges.
JHR mainly invests in real estate-related assets, primarily hotels which are subject to change in values. Therefore, unitholders and investment corporation bondholders may suffer losses due to economic conditions of the real estate market or securities market, interest rates, the nature of investment units, dependency
on mechanisms and related persons of investment corporations, changes in legal systems related to real estate (such as tax regulations and building
regulations), damages caused to the real estate-related assets by natural disasters, fluctuation in prices or profitability of the real estate-related assets, natureof the trust beneficiary rights under management, delisting of the investment units, or worsening of the financial position or insolvency of JHR. For details,
please refer to the Articles of Incorporation, Securities Registration Statement, Annual Securities Report and Extraordinary Report of JHR.
The contents of this material may not be copied or reproduced without our prior permission.
Japan Hotel REIT Advisors Co., Ltd.
Financial Instruments Trading Company
No. 334, Director of Kanto Local Finance Bureau
Member of the Investment Trust Association, Japan

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