PNX依頼事項

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

February 25, 2016
(TSE: 8985)
http://www.jhrth.co.jp/en/

Table of Contents
I. Settlement of Accounts for FY12/2015 - Highlights
1.

FY12/2015 Highlights

Appendix １ JHR’s Characteristics

3

II. Summary of Settlement of Accounts

１．Simultaneous Pursuit of Stability and Upside Potential

28

２．Key Points to Promote Growth Cycle

29

１． Operational Performance

5

３．External Growth Strategy

30

２． Revenue Forecast

6

４．Internal Growth Strategy

31

３． Balance Sheet

7

５．Financial Strategy

32

６．Benefits Program for Unitholders

33

III. External Growth
１． Properties Acquired in 20159

２． Properties Acquired/to be Acquired in 201611

３． Continuous Property Acquisitions

12

４． Status of Portfolio after Property Acquisitions

13

Appendix ２ Information on Properties

IV. Internal Growth
１． Rent Schemes

３． HMJ’s Five Hotels - Highlights

17

４． Case Studies of Internal Growth Strategy

18

５． Capital Expenditure and Depreciation

19
21

39

４．Major CAPEX III by Hotel40

１．Performance Highlights of HMJ’s Five Hotels

42

２．Performance Highlights of Accor’s Five Hotels

43

３．Performance Highlights of Five “the b” Hotels

44

１．Major Unitholders and Unitholders of Investment Units

46

２．Changes in Investment Unit Price and Market Capitalization

47

１．Summary of the Asset Management Company

24

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”).

３．Portfolio Map

Appendix ５ Summary of the Asset Management Company

VI. Market Environment
１． Market Environment

37

Appendix ４ Investors Composition and Investment Unit Price

V. Financial Status
１． Financial Status

２．Summary of Lease Contracts

Variable Rent

２． Performance of Major Hotels Adopting
16

35

Appendix ３ Comments on Performance of Major Hotels with

15

Variable Rent Scheme, etc.

１．Property List

49

２．Features and Governance of the Asset Management Company 50

1

I. Settlement of Accounts for FY12/2015 - Highlights

１．FY12/2015 Highlights
1. External Growth

2. Internal Growth (*1, 2, 3, 4)

Ongoing Property Acquisitions
End of 12/2014

Steady Growth of Dividend(*5, 6)

Improved Performance of Hotels Adopting Variable Rent, etc.

30 properties / JPY173.4 billion◆ High growth of RevPAR throughout the year

◆Public offering in January
HMJ’s five hotels

Acquired

Accor’s six hotels

6 properties / JPY23.1 billion

Five “the b” hotels

Total

2014

2015

15,245
8,137
7,132
11,103

16,8439,130
8,124
12,352

(JPY)
3,500

(Unit: JPY)

Variance

10.5%
12.2%
13.9%
11.2%

Increase in Revenue Sharing by JPY349M

Impact of
Selling 3
Properties

11.5% increase(net basis:
15.3% increase)

3,318

2,975

3,000
38.1% increase(net basis:
33.5% increase)98(net basis)

2,500

2,155

2,877

1,939

2,000

◆Increase in revenue sharing by revised lease agreements

2015 ◆Public offering in June

1,500

2 properties / JPY16.6 billion
Sold 3 properties / JPY4.7 billion (October)
Acquired ACTIVE-INTER CITY HIROSHIMA(Sheraton Hiroshima Hotel) JPY17.3 billion(December)

36

*via
public offering inJanuary 2016
End of
12/2015
properties/ JPY

225.7billion◆Public offering in January

Acquired CANDEO HOTELS UENO-KOEN

2016

JPY6.7 billion (February)

Scheduled to acquire Hotel Centraza Hakata

JPY7.2 billion (April)

38 properties / JPY239.6billion (Planned)

End of April 2016 (Planned)

14th Period(FY12/2013)

3. Improvement in Financial Conditions
Improvement in Financial Indicators(2014  2015)
Management of LTV

43.1％⇒42.8％

Longer average life of debt

2.4 yrs⇒3.7 yrs

17th Period(FY12/2016)

Market Capitalization (Right Axis)(JPY)

Total amount: JPY6 billion, Period: 7 yrs, Rate: 0.82%

100,000

Investment Unit Price (Left Axis)(JPY M)
350,000

90,000300,000

JCR：A (positive), R&I：A- (positive)

80,000

Direction of the rating: Both JCR and R&I revised to positive

70,000(*1) HMJ’s five hotels are Kobe Meriken Park Oriental Hotel, Oriental Hoteltokyo 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 bochanomizu, the b hachioji, and the b hakata (hereinafter called the “five ‘the b’hotels”).
(*4) Regarding the numbers for Hotel Nikko Alivila and the b akasaka-mitsukein 2014, the effect of variance in the number of rooms available for sale due topartial renovations, etc. is included. (The same applies hereinafter.)(*5) Fiscal year ending December 2012 (13th period) is irregular settlement ofaccounts of nine months. Therefore, the dividend of FY12/2012 is anannualized number based on certain conditions.
(*6) Net basis means dividend without reflecting gain on sales of properties.

60,0003

16th Period(FY12/2015)

Rising Market Capitalization and
Investment Unit Price

Issuance of Investment Corporation Bonds to Retail
Investors (First Time for JHR)

Review of Credit Rating

15th Period(FY12/2014)

250,000
200,000

50,000150,000

40,00030,000100,000

20,00050,00010,000004/20126/20128/2012
10/2012
12/20122/20134/20136/20138/2013
10/2013
12/20132/20144/20146/20148/2014
10/2014
12/20142/20154/20156/20158/2015
10/2015
12/2015

AcquiredII. Summary of Settlement of Accounts

1. Operational Performance
（A）

(B)

(B)－(A)FY12/2014

FY12/2015

ActualActual(Unit: JPY M)
Variance

Total(C)+(D)+(E)

Property(C) (*1)(D) (*2)① Operating Revenue – Variable Rent, etc.

(E)

30

36

6

9

-3

Acquisition Price

173,429

225,723

52,29457,025- 4,731-

Operating Revenue

12,76017,343

4,583

2,195

244

2,143

-

4,273

2,195

- 60

2,139

Real Estate Operating Revenue

Composition

12,760Composition

17,033

Variable Rent

28.9％

3,693

39.5％

6,722

①→

3,029

1,045

-

1,984

Fixed Rent

71.1％

9,066

60.5％ 10,311

②→

1,244

1,150

- 60

155

0

309

309

-

305

4

11,002

14,829

3,827

2,086

- 54

1,795

6.3%

6.6%

0.2%

-

-

-

NOI
Depreciation

2,400

2,772

371

269

- 13

115

Loss on Retirement of Noncurrent
Assets

4

25

21

-

-

21

Loss on Sale

-

-

-

-

-

-

8,597

12,031

3,434

1,817

- 41

1,658

5.0%

5.3%

0.4%

-

-

-

Other Operating Expenses

1,051

1,352

300

Operating Income

7,545

10,988

3,443

4

18

13

Non-Operating Expenses

1,774

1,711

- 62

Ordinary Income

5,776

9,295

3,519

Net Income

5,774

9,294

3,519

240

60

- 179

6,015

9,354

3,338

2,791,281

3,144,227

352,946

2,155

2,975

820

NOI after Depreciation

Non-Operating Income

Use of Negative Goodwill
Dividend

Property
Disposition

No. of Properties

Gain on Sale of Real Estate
Properties

Profitand Loss

Major Causes of Variance

Existing
Properties

Property
Acquisition

Total Dividends
Number of Units Issued (Units)
Dividend per Unit (JPY)+38.1%

5•

Increase in variable rent of HMJ’s five hotels -- JPY521M•

Increase in income from management contracts -- JPY100M(*3)•

Increase in revenue sharing, etc. -- JPY369M(Including other variable rent)•

Full-year impact, etc. of 3 properties acquired in FY12/2014 -JPY993M•

Variable rent from 9 properties acquired during FY12/2015 -JPY1,045M② Operating Revenue – Fixed Rent•

Full-year impact, etc. of 3 properties (*4) acquired during
FY12/2014 -- JPY180M•

Decrease, etc. from selling 1 property during FY12/2014 (*5) --JPY21M•

Fixed rent from 9 properties acquired during FY12/2015 -JPY1,150M(*1) This indicates an impact from acquiring nine properties on the statement ofincome. Nine properties are five "the b" hotels acquired on January 30, 2015,
Hotel Francs on March 31, 2015, Mercure Yokosuka on April 2, 2015, Okinawa
Marriott Resort & Spa on July 10, 2015, and ACTIVE-INTER CITY HIROSHIMA
on December 18, 2015.
(*2) This indicates an impact from selling 3 properties (Comfort Hotel ShinYamaguchi, Daiwa Roynet Hotel Akita, and Hotel Sunroute Niigata) on October30, 2015 on the statement of income.
(*3) An increase in income from management contracts from ibis Tokyo Shinjuku
and ibis Styles Kyoto Station.
(*4) The properties refer to ibis Styles Sapporo acquired on July 9, 2014 andMercure Sapporo and Mercure Okinawa Naha acquired on September 30,2014.
(*5) The property refers to Dormy Inn Namba which was sold on January 24, 2014.
(*6) Each is calculated using the following formula
NOI (Net Operating Income) = Real estate operating revenue − Real estate
operating costs + Depreciation + Loss on retirement of noncurrent assets
NOI yield = NOI ÷ Acquisition price
NOI after depreciation = Real estate operating revenue − Real estate
operating costs
NOI yield after depreciation = NOI after depreciation ÷ Acquisition price2. Revenue Forecast
（A）

(B)

【Reference】(B)－(A)FY12/2015

FY12/2016

FY12/2016

Variance

ActualProperty(Annualized
Numbers) (*1)(C)+(D)+(E)

Existing
Properties(C) (*2)(E) (*3)(D) (*4)①Operating Revenue – Variable Rent, etc.

38

2

2

-

-

239,626

13,902

13,902--

Operating Revenue

17,343

20,83621,019

3,492

2,105

- 599

1,986

Real Estate Operating Revenue Composition 17,033 Composition 20,836 Composition 21,019

3,802

2,105

-293

1,990

①→ 1,440②→ 550Loss on SaleNOI after Depreciation (*6)

39.5％
60.5％

6,722
10,311

41.4％
58.6％

8,632
12,204

41.3％
58.7％

8,688

1,909

469

-

12,330

1,893

1,636

- 293

309

-

-

-309

-

- 305

-4

14,82917,625

17,618

2,795

1,517

(*7) - 257

1,535

6.6%

7.4%

7.4%

0.8%

-

-

-

2,772

3,207

3,269

435

395

- 73

112

25

13

13

- 12

-

-

-12

-

-

-

-

-

-

-

12,031

14,404

14,336

2,373

1,122

(*7) - 184

1,435

5.3%

6.0%

6.0%

0.7%

-

-

-

Other Operating Expenses

1,352

1,759

1,777

406

Operating Income

10,98812,645

12,558

1,656

Non-Operating Income

18

-

-

- 18

Non-Operating Expenses

1,711

1,740

1,664

28

Ordinary Income

9,295

10,904

10,893

1,608

Net Income

9,294

10,904

10,893

1,610

Use of Negative Goodwill
Total Dividends
Number of Units Issued (Units)
Dividend per Unit (JPY)

60

119

155

58

9,354

11,022

11,048

1,668

3,144,227

3,321,907

3,321,907

177,680

2,975

3,318

3,326

343

+11.5%For details, please refer to the “Financial Report for the Fiscal Year Ended December 31, 2015 (January 1, 2015 – December 31, 2015)” dated February 24, 2016.
This indicates an impact from acquisition of 3 properties on the statement of income. Three properties are ACTIVE-INTER CITY HIROSHIMA acquired on December
18, 2015, CANDEO HOTELS UENO-KOEN acquired on February 1, 2016, and Hotel Centraza Hakata which is scheduled to be acquired on April 1, 2016.
This indicates an impact from sale of 3 properties (Comfort Hotel Shin-Yamaguchi, Daiwa Roynet Hotel Akita, and Hotel Sunroute Niigata) on October 30, 2015 on
the statement of income.
35 properties (36 properties as of December 31, 2015 minus ACTIVE-INTER CITY HIROSHIMA)
This indicates an impact from acquiring the b akasaka-mitsuke, the b ikebukuro, the b ochanomizu, the b hachioji, and the b hakata (hereinafter called “five ‘the b’hotels”) on January 30, 2015, Hotel Francs on March 31, 2015, Mercure Yokosuka on April 2, 2015, and Okinawa Marriott Resort & Spa on July 10, 2015.
Each is calculated using the following formula: NOI (Net Operating Income) = Real estate operating revenue − Real estate operating costs + Depreciation + Loss onretirement of noncurrent assets, NOI yield = NOI ÷ Acquisition price, NOI after depreciation = Real estate operating revenue − Real estate operating costs, NOI
yield after depreciation = NOI after depreciation ÷ Acquisition price
FYI, NOI and NOI after depreciation do not include gain on sale of real estate properties, etc. Variance of NOI and NOI after depreciation including the impact will be-JPY563M and -JPY489M, respectively.

6

Increase in variable rent of HMJ’s five hotels – JPY650M•

38

Loss on Retirement of Noncurrent
ProfitAssetsand Loss

(*7)

(*1)

Property
Disposition

239,626

Depreciation

(*6)

Total

36

NOI (*6)

(*4)
(*5)

Forecast

225,723

Gain on Sale of Real Estate
Properties(*3)

Forecast

Acquisition Price

Fixed Rent

(*1)
(*2)

Major Causes of Variance

Variance
Property
Acquisition

No. of Properties

Variable Rent

Dividend(Unit: JPY M)(Revised variable rent ratio from 81.5% to 85% starting January
1, 2016.)•

Increase in income from management contracts, etc. fromAccor’s five hotels– JPY356M•

Increase in revenue sharing, etc. – JPY120M(Include other variable rent.)
Full-year impact, etc. of 8 properties acquired in FY12/2015 -JPY313M•②Operating Revenue – Fixed Rent•

Full-year impact, etc. of 8 properties (*5) acquired during
FY12/2015 -- JPY433M•

Cancellation fees by replacement of tenants – JPY114M
Major Assumptions for FY12/2016 (*1)
Operating assets: In addition to 37 properties currently owned plus 1
property to be acquired in April 2016, total 38 properties will beowned/operated until end of the year. No property transfer (acquisition,
disposition, etc.) is assumed.

Operating revenue: Based on the lease contracts, etc., hotels’
competitiveness and market environment have been considered.



Operating expenses: JPY1,201M for fixed asset tax and city planning tax, etc.
is assumed. The taxes of the two new acquired properties (including planned
acquisition) this fiscal year will not be posted as operating expenses since they
will be posted as acquisition expenses. (The fixed asset tax and city planningtax for the two properties is posted with the assumption of JPY45M inannualized number.)
Straight-line method is applied to calculate depreciation.



Non-operating expenses: JPY1,740M is assumed as interest payments,
amortization of loan-related fees, loan-related costs and amortized expenses
for issuing new investment units.



Borrowing: It is assumed that the balance of loans and investment
corporation bonds at the beginning of the FY12/2016 totals JPY102,772M. The
amount is assumed to be JPY111,593M at the end of FY12/2016.



No. of investment units issued: Assume 3,321,907 units

Dividend per unit: Negative goodwill will be used for amortization for fixedterm leasehold rights of land and asset retirement obligations (JPY119M).

3. Balance Sheet(Unit:JPY M)（注
End of FY12/2014(As of)

End of FY12/2015

12.31.2014

End of FY12/2014
Variance

12.31.2015(As of)ASSETS

3）

End of FY12/2015

12.31.2014

Variance

12.31.2015

LIABILITIES AND NET ASSETS

Current Assets

15,836

15,633- 203

Cash and Deposits (*1)

14,424

13,698- 726

Operating Accounts Payable

285

875

590

Operating Accounts Receivables

1,029

1,269

240

Short-Term Loans Payable

0

9,000

9,000

382

665

283

0

2,500

2,500

OthersCurrent Liabilities

Current Portion of Investment
Corporation Bond
Current Portion of Long-Term Loans
Payable13,47425,073

11,599Property and Equipment, at Cost

172,160

224,588

52,428

11,825

11,393- 432

Net Property and Equipment

150,736

203,488

52,752

Accounts Payable

691

502

- 189

Building in Trust (*2)

61,007

81,66020,653

Advances Received

651

692

41

Land in Trust

89,055

120,918

31,863

Others(*3)

672

908

236

Intangible Assets

19,842

19,88442

Other Assets

1,582

1,214

- 368

Investment Securities

602

0

- 602

Leasehold and Security Deposits

170

170

0

Others

808

1,043

235

Deferred Assets

94

135

41

OthersLong-Term Liabilities

188,091

240,356109

89

85,368

11,094

Investment Corporation Bonds

6,000

9,500

3,500

Long-Term Loans Payable

63,26470,379

7,115

Tenant Leasehold and Security Deposits

4,650

4,955

305

Others

358

533

175

TOTAL LIABILITIES

87,748110,442

22,694

Unitholders' Capital

59,02485,47026,446

Capital Surplus

21,746

21,7460

Dividend Reserve

14,16813,928- 240

Unappropriated Retained Earnings(midterm/year)

5,776

9,296

3,520

Others

- 373

- 526

- 153

100,342

129,914

29,572

188,091

240,356

52,265NET ASSETSTOTAL NET ASSETSTOTAL ASSETS

20
74,274TOTAL LIABILITIES AND NET ASSETS

52,265(*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, and construction in progress.

7III. External Growth1. Properties Acquired in 2015
(Acquired in January 2015)

Year
Name of Acquired
Property(Acquired in March
2015)“the b” Portfolio
the bakasaka-mitsuke

the bikebukuro

the bochanomizu

the bhachioji

the bhakataHotel Francs

Address

Minato-ku, Tokyo

Toshima-ku, Tokyo

Chiyoda-ku, Tokyo

Hachioji-shi, Tokyo

Hakata-ku, Fukuoka-shi,
Fukuoka Prefecture

Mihama-ku, Chiba-shi,
Chiba Prefecture

Completion
Acreage
Total Floor Space

11/2002625.46㎡
2,867.04㎡

08/1999357.47㎡
1,742.23㎡

08/1986
1,227.29㎡
7,847.65㎡

09/1997
719.46㎡
3,986.09㎡

08/1991
4,828.00㎡
19,213.39㎡

Structures

Steel-framed bldg

Steel-reinforced
concrete

Steel-reinforced
concrete

Steel-reinforced
concrete

Steel-reinforced
concrete

Floors

8 floors

Acquisition PriceAppraisal Value
Type
Grade
Total No. of Guest
Rooms
Rent Scheme

JPY6,250M
JPY6,420M
Limited service
Mid-priced

06/1982718.71㎡
5,650.01㎡
Steel-reinforced
concrete /steel-framed bldg
10 fl above+ 2 fl below ground
JPY6,520M
JPY6,770M
Limited service
Mid-priced

122 rooms

External
Appearance of the
Building

NOI Yield (*)(Assumed at thetime of acquisition)

JPY2,320M
JPY2,470M
Limited service
Mid-priced

12 fl above+ 2 fl below ground
JPY2,610M
JPY2,720M
Limited service
Mid-priced

JPY2,300M
JPY2,370M
Limited service
Mid-priced

13 fl above+ 1 fl below ground
JPY3,105M
JPY3,500M
Full service
Mid-priced

175 rooms

72 rooms

196 rooms

175 rooms

222 rooms

Fixed rent + Variable rent

Fixed rent + Variable rent

Fixed rent + Variable rent

Fixed rent + Variable rent

Fixed rent + Variable rent

Fixed rent

4.3%

4.7%

4.6%

6.1%

5.2%

7.4%

9 floors

8 floors

Note: NOI (Net Operating Income)=Real estate operating revenue-Real estate operating costs＋Depreciation＋Loss on retirementof noncurrent assets, NOI yield＝NOI/acquisition price, NOI after depreciation＝Real estate operating revenue–Real estate
operating costs, NOI yield after depreciation＝NOI after depreciation/acquisition price(*) NOI yield which is described in the press release, “Notice Concerning Operating Forecast andForecast of Dividend,” when the property acquisitions were resolved.

91．Properties Acquired in 2015 (Cont.)
Year(Acquired in April 2015)(Acquired in July 2015)(Acquired in December 2015)

Name of Acquired
Property

Mercure Yokosuka

Okinawa Marriott Resort & Spa

ACTIVE-INTER CITY HIROSHIMA(Sheraton Hiroshima Hotel)

External
Appearance of the
Building

Acreage

Yokosuka-shi,
Kanagawa Prefecture
11/1993
1,887.86㎡

Total Floor Space

16,881.82㎡

36,430.15㎡

39,540.75㎡

Structures

Steel-reinforced concrete bldg

Steel-reinforced concrete bldg

Steel-framed bldg / reinforced concrete bldg /steel-reinforced concrete bldg

Floors21 floors + 3 fl below ground

14 floors

21 floors + 1 fl below ground

Address
Completion

02/200252,988.00㎡

Higashi-ku,
Hiroshima-shi, Hiroshima Prefecture
08/2010
6,379.02㎡

Nago-shi, Okinawa Prefecture

Acquisition Price

JPY1,650M

JPY14,950M

JPY17,320M

Appraisal Value

JPY1,680M

JPY15,400M

JPY17,900M

Type

Full service

ResortFull service

Grade
Total No. of Guest
Rooms
Rent Scheme
NOI Yield (*)

Mid-priced

Upper middle

Luxury160 rooms

361 rooms

238 rooms

Variable rent

Fixed rent + Variable rent

Fixed rent + Variable rent

7.0%

6.2%

5.2%

(Assumed at thetime of acquisition)(*) NOI yield which is described in the press release, “Notice Concerning Revision of Operating Forecast andForecast of Dividend,” when the property acquisitions or public offerings were resolved.

Note: NOI (Net Operating Income)=Real estate operating revenue-Real estate operating costs＋Depreciation＋Loss on retirementof noncurrent assets, NOI yield＝NOI/acquisition price, NOI after depreciation＝Real estate operating revenue–Real estate
operating costs, NOI yield after depreciation＝NOI after depreciation/acquisition price10

2. Properties Acquired / to be Acquired in 2016
Year

(Acquired in February 2016)(To be Acquire in April 2016)

Name of Property

CANDEO HOTELS UENO-KOEN

Hotel Centraza Hakata

Address

Taito-ku, Tokyo

Hakata-ku, Fukuoka-shi, Fukuoka Prefecture

Completion
Acreage

12/20091,559.03㎡

09/1985
2,163.42㎡

Total Floor Space

7,030.10㎡

18,640.55㎡

Structures

Steel-framed bldg

Steel-reinforced concrete

Floors

12 floors

Acquisition Price

JPY6,705M

12 floors + 3 fl below ground,
1 penthouse
JPY7,197M

Appraisal Value

JPY6,820M

JPY7,240M

Type

Limited service

Full service

Grade
Total No. of Guest
Rooms
Rent Scheme
NOI Yield (*)

Mid-priced

Mid-priced

268 rooms

194 rooms

Fixed rent

Fixed rent + Variable rent

4.3%

5.6%

External
Appearance of the
Building(Assumed at thetime of acquisition)(*) NOI yield which is described in the press release, “Notice Concerning (Revision of) Operating Forecast andForecast of Dividend,” when the property acquisitions were resolved.

Note: NOI (Net Operating Income)=Real estate operating revenue-Real estate operating costs＋Depreciation＋Loss on retirementof noncurrent assets, NOI yield＝NOI/acquisition price, NOI after depreciation＝Real estate operating revenue–Real estate
operating costs, NOI yield after depreciation＝NOI after depreciation/acquisition price11

3. Continuous Property Acquisitions
Changes in Asset Size（*）
 Realize external growth by acquiring properties in a way unique to REIT specializing in hotels
 Acquired 18 hotel assets, around JPY130 billion in total acquisition price since the merger(JPY M)

260,000

資産残高の純増額
Net Increase in Asset Size

240,000

225,723

Aim to expand
the size of portfolio
on a continuing basis
13,902220,000
200,000

52,294

180,000

173,429
158,902

160,000
140,000

130,883

122,285

120,000

8,598

28,019158,902122,285

122,285

130,883

April 2012
(Effective Date of Merger)

FY12/2012(13th Period)

FY12/2013(14th Period)

100,000

FY12/2014(15th Period)

FY12/2015(16th Period)

Disposition
28(*) Asset size refers to the total amount of acquisition price.

2

2

1

3

28

28

30

36

12

38
properties
in total

239,626

173,42922
3
9・Hotel Keihan Universal City ・Hilton Tokyo Bay・ibis Styles Sapporo
・the b akasaka-mitsuke
・Hotel Sunroute Shimbashi ・ibis Styles Kyoto Station ・Mercure Sapporo
・the b ikebukuro
・Mercure Okinawa Naha ・the b ochanomizu
・the b hachioji
・the b hakata
・Hotel Francs
・Mercure Yokosuka
・Okinawa Marriott
Resort & Spa
・ACTIVE-INTER CITYHIROSHIMA

Acquisition

Total Properties

225,723

14,527

FY12/2016(17th Period)
2
Properties acquired(disclosed as ofFeb. 24, 2016)
・CANDEO HOTELS
UENO-KOEN(Acquisition price JPY6,705M)

・Hotel Centraza Hakata(Planned acquisition price JPY7,197M)

38

4. Status of Portfolio after Property Acquisitions
 Ratio of rent types(*1)
FY12/2014

FY12/2015

Variable
rent
29%

Fixed
Fixed
rent
rent
59%
61%

Fixed
rent
71%

 Diversification of operators(*2)
FY12/2014
Kyoritsu
Maintenance9％

Others
19%

Accor
17%

Hilton
15％



HMJ
40%

Kyoritsu Maintenance
7％

the b
9%

Hokkaido
7%

Okinawa
17%

Kansai23%

Kanto(excluding
Tokyo)
29％(*1) Based on proportion of rental income(*2) Based on acquisition price

Variable
rent
Fixed
rent
59%

39%

Others14%

Kyoritsu Maintenance7％

the b 8%

Accor
14%

Sheraton
8％ (*3)
Marriott7％

FY12/2015
Kyushu4%
Hokkaido
6%

Okinawa
19.7%

41%

FY12/2016 (Forecast) (*4)

HMJ
31%

Hilton11％

FY12/2014
Tokyo
15%

Variablerent
Variablerent
41%

FY12/2015

Diversification(*2)

Others9%

FY12/2016 (Forecast) (*4)

Others
9%
Tokyo

Accor
13%

Kanto
(excluding
Tokyo)
Kansai 24％

18%

Others
9%

13

Tokyo
21%

Kanto
(excluding
Tokyo)
19%
Kansai 23％

Okinawa17%(*3) Calculations are based on the acquisition price of the entire ACTIVE-INTER CITY HIROSHIMA.
(*4) The forecast for FY12/2016 includes Hotel Centraza Hakata which is scheduled to be acquired in April 2016.

Sheraton
7% (*3)
Marriott6%

FY12/2016 (Forecast) (*4)
Hokkaido
5%

Okinawa
20%

HMJ
29%

Hilton11％

Kyushu6%

19%

Others19%

IV. Internal Growth1. Rent Schemes
Stability

Upside(As of the end of December 2015)

Type of rent

Fixed rent

Fixed rent + Revenue 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
exceeding the threshold

GOP of hotel-

17,033（100%）
10,311（60.5%）
6,722（39.4%）

Rent
schemes

Fixed
Variable

Real estate operating
revenue (JPY M) (%)
Fixed(Break- rent (%)down) Variable
rent (%)
Involvement in hotel
operation

2,612（15.3%）
2,612（15.3%）ーーLow

CAPEX paid by JHR

1) Renewal of building andfacilities

No. of properties

11

Acquisition price(JPY M) (%)

30,950
13.7%
Hakone Setsugetsuka
The Beach Tower Okinawa
Dormy Inn Kumamoto
Hotel Francs(7 other hotels)

Hotels

A certain percentage of hotel GOP A certain percentage of hotel GOP

3,394（19.9%）
2,988（17.5%）
406（2.3%）

8,055（47.2%）
4,190（24.6%）
3,864（22.6%）

225（1.3%）
36（0.2%）
188（1.1%）

2,746（16.1%）
483（2.8%）
2,263（13.2%）

Low

High

High

High

1)

Renewal of building andfacilities< 3) Strategic investment>

540,47017.9%
Smile Hotel Nihombashi
Mitsukoshimae
Hotel Vista Kamata Tokyo
Hotel Keihan Universal City
Hotel Sunroute Shimbashi
Hilton Tokyo Bay

1)

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

1)

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

13
122,190

2
2,473

54.1%

1.0%

Kobe Meriken Park Oriental Hotel Chisan Inn Kamata
Mercure Yokosuka
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
ACTIVE-INTER CITY HIROSHIMA(*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 revenue sharing or variable rent, etc. after the acquisitions.
(*4) Ratios of operating revenue and acquisition price are ratios by each type of rent against total amount (rounded down to the first decimal place).

15

1)

Total

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

529,640
13.1%
ibis Tokyo Shinjuku
ibis Styles Kyoto Station
ibis Styles Sapporo
Mercure Sapporo
Mercure Okinawa Naha

36
225,723100%

2. Performance of Major Hotels Adopting Variable Rent Scheme, etc.
Major Performance Indicators of Rooms Departments
Occupancy rate (right axis)

HMJ’s Five Hotels(JPY）

17,551+9.5%

Accor’s Six Hotels
19,212

17,00015,245+10.5%+7.3%

20,608+8.3%

18,237

16,843

100%
80%

40%

10,00017,000
9,760

3,000

87.7%

88.5%

2014
Actual2015
Actual2016
Forecast

0%

10,605

8,137
3,000

+12.2%

9,130
86.1%

87.2%

2015
Actual2016
Forecast

100%

12,94010,000

11,103+8.6%

14,05180%+11.2%

+8.7%

100%

80%

17,00080%

13,43040%

60%
10,000

0%

7,132
88.0%

3,000

3,000

87.9%

88.7%

2014
Actual2015
Actual2016
Forecast

0%16+13.9%

14,00012,000

8,000
6,000

8,842
8,124

+9.3%

9,666

+9.6%

8,901

91.9%

92.1%

2015
Actual2016
Forecast

Change in GOP+14.1%+10.7%

11,656

+8.9%

7,558

10,532

9,230
Total

6,302

+10.1%

6,941

HMJ’s
Five Hotels

2,075
Accor’sSix Hotels
Five854“the b” Hotels
0
2014
Actual+21.0%

2,000

85.8%

+9.1%

2014
Actual

4,000
20%

8,104

20%

（JPY M)

10,00060%

12,352

+9.4%

9,984

2014
Actual15,138(JPY）

40%

Total of 3 Hotel Groups

+7.7%

100%

60%

11,448

83.4%

(JPY）

17,000+7.9%

10,000

20%
86.9%

+8.7%

RevPAR (left axis)

Five “the b” Hotels

(JPY）

60%

ADR (left axis)

2,512+14.7%

1,215

1,079
+26.3%

2015
Actual2,882+12.6%

2016
Forecast

40%
20%
0%

3. HMJ’s Five Hotels - Highlights
Changes in Total Sales and GOP
25,00024,68823,304
21,13921,396

20,223

+8.9％

6,941

6,302

6,155

7,000

6,000
5,500

5,158

5,136

8,000

6,500

+10.1％

5,645（JPY M)

7,500
7,558

5,696
15,00023,186

22,29621,994

21,312

6,296

Sales

20,000GOP

GOP

Total Sales（JPY M)

5,000
10,0004,500
CY2008

CY2009CY2010CY2011CY2012

CY2013

CY2014

CY2015

CY2016(Forecast)

Changes in KPI
20,00019,000ADR
17,97018,463

86.1%

ADR・RevPAR

16,00015,00014,00013,000Occupancy Rate

77.9%

77.8%

15,846

17,197
15,980

RevPAR
14,367

12,845
CY2007

CY2008

CY200914,886

15,245

90.0%
85.0%

18,237

17,551
16,843

95.0%

＋8.3％

＋10.5％

80.0%
75.0%
70.0%

12,696

12,00016,200

88.5%
87.7%

17,29776.7%

19,212

+9.5％

80.4%

73.8%

13,999

86.9%

82.7%

18,00017,00020,608+7.3％

CY201012,16013,400CY2011CY201265.0%

17CY2013

CY2014

CY2015

CY2016(Forecast)Occupancy Rate

(JPY）

21,0004. Case Studies of Internal Growth Strategy
Case Study of Six “the b” Hotels

Case Study of Accor’s Six Hotels
ibis Tokyo Shinjuku : Renovation of Guest Rooms

the b suidobashi (former Dormy Inn Suidobashi) :Rebranding

Guest Room

Guest Room

 Configuration of guest rooms
・Changed single bedrooms to double bedrooms (14 rooms)
Attract leisure demand*A 3-year project is in progress to renovate all guest rooms(from 2015 through 2017)

 Renew facilities
・Renewed drainage pipes
Lobby

Mercure Sapporo and ibis Styles Sapporo :Creation of Synergy Effects

 Operator
・Switched the operator to Ishin Hotels, which is familiar with the Tokyo market

 Rebranding to ibis Styles Sapporo (Former Best Western Hotel Sapporo
Nakajima Koen)
・Changed the operator to Accor, the operator of Mercure Sapporo

 Rent scheme
・ Changed from fixed rent to fixed rent + variable rentPursue upsidePursue synergy effects by operating hotels located nearby

 Configuration of guest rooms
・ Changed double bedrooms to twin rooms (21 rooms)
Attract leisure demand Synergy effects by rebranding
・Sales: Sales increase by receiving large-group reservations through allocating guests
between the two hotels.
・Costs: Cost reductions by sharing purchasing information, integration of back office
staff, etc.

 Introduction of the concept of “the b” hotels
・ Create a stylish space which is comfortable and clean
Boost competitiveness Pursue maximization of GOP

18

５．Capital Expenditure and Depreciation
 JHR will focus on CAPEX III in 2016 and invest strategically to maintain and improve hotels’ competitiveness(*1)（JPY M）

CAPEX ICAPEX IICAPEX III

Depreciation

3,500

3,207

3,000

2,722

2,500
2,072
1,869

2,000

2,212

2,322

2,242

2,214

2,297

788
1,811

1,842

36

1,500

1,306
999

1,000

500

0
(*2)(*3)

1,096

668
793

118

1,079

1,236
786

600

258
591

283

2,532

2,400

518

49
156

378

322

90
177

FY2006

FY2007

FY2008FY2009

516
21
213

233
36
322

281

FY2010FY2011

854

198

58
167

622

629

CY2012

CY2013

640

454

343
203
1,134

1,289

760

CY2014

CY2015

CY2016(*1) CAPEX I is capital investment related to renewal 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 through CY2015 is actual number for the period from January through December each year. The plan for CY2016 for the period from January
2016 through December 2016 is based on the operating forecast in the Financial Report for the Fiscal Year Ending December 2016 dated February 24, 2016.
(*3) The former NHF spent JPY31M (from October 2011 through December 2011) and former JHR spent JPY90M (from September 2011 through December 2011), respectively, in addition to the amount indicated above.

19

V. Financial Status

1. Financial Status
Breakdown of Interest-Bearing Debt

Changes in Costs for Interest-Bearing Debt(*1) and Average Life of Debt(*2)

As of the end of Dec. 2015

As of the end of Dec. 2014
Average life of debt

2.2%

2.0%

3.7 years

3.3 years

2.0%
1.8%

Costs for interest-bearing debt

2.4 years

1.6%

1.5%

1.7%

1.4%
1.2%
1.0%
End of FY12/2013(14th Period)

End of FY12/2014(15th Period)

11.7%

7.4％

(Year)

4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0

Loans

92.6％

Investment
Corporation
Bonds

88.3%

Term of Interest-Bearing Debt
As of the end of Dec. 2015

As of the end of Dec. 2014
Short-termLong-term (scheduled repayment
within one year)
Long-term

End of FY12/2015(16th Period)

8.8%

14.6％

13.5%

85.4％

77.7%

(*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.

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

Changes in LTV (Total Asset Base)

Repayment Schedule of Interest-Bearing Debt

50.0%

(JPY M)
25,00046.7%

20,000

43.8%

45.0%

43.1%

42.8%

(As of the end of Dec. 2015)
22,894

FY12/2013(14th Period)

FY12/2014(15th Period)

FY12/2015(16th Period)

13,544

13,323
20,394

5,000

40.0%

Investment Corporation Bond
17,20015,00010,000FY12/2012(13th Period)

Borrowing

2,500

9,679

9,679

8,317
13,3232,000

13,544

6,317

12,300
1,500

6,000

10,800

11,200

5,516
5,516

0
2016

(*) Change in LTV as of the end of each fiscal period/year.

21

2017

2018

2019

2020

2021

2022

2023

1. Financial Status (Cont.)
Lender List for Interest-Bearing Debts

Status of Credit Rating (16th Period (As of the End of December 2015))(JPY M)

Lenders

Balance As of the End of
Balance As of the End of This
Previous Period (As of the End of
Period (As of the End of Dec. 2015)
Dec. 2014)

Balance

Percentage

Balance

Percentage

Variance
Balance

Japan Credit Rating Agency, Ltd.
(JCR)

A (prospectus: positive)

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

A- (prospectus: positive)*As of November 26, 2015

*As of October 29, 2015

Sumitomo Mitsui Banking Corporation

20,20524.9%

25,052

24.4%

4,847

Shinsei Bank, Limited

10,318

12.7%

13,528

13.2%

3,209

Mizuho Bank, Ltd.

9,526

11.7%

13,295

12.9%

3,769

Resona Bank, Limited

7,002

8.6%

8,113

7.9%

1,111

The Tokyo Star Bank, Limited

8,199

10.1%

8,109

7.9%

- 89

・Total amount of investment
corporation bonds: JPY6 billion

Sumitomo Mitsui Trust Bank, Limited

6,998

8.6%

8,096

7.9%

1,098

・Term: 7 years

The Nomura Trust and Banking Co., Ltd.

4,100

5.1%

3,892

3.8%

- 208

・Rate: 0.82%

The Hiroshima Bank, Ltd.

1,492

2.3%

1,927

1.7%

434

Development Bank of Japan Inc.

1,879

1.9%

1,788

1.7%

- 91

The Chiba Bank, Ltd.

1,531

1.8%

1,734

1.9%

203

Mitsubishi UFJ Trust and Banking Corporation

1,000

1.8%

1,435

1.4%

435

Aozora Bank, Ltd.

350

1.2%

1,435

1.4%

1,085

The Bank of Fukuoka, Ltd.

1,488

1.2%

1,418

0.9%

- 70

• Cope with dilution of DPU at issuance of investment units during the period

Sompo Japan Nipponkoa Insurance Inc.

996

0.4%

945

1.4%

- 51

• Cope with inconsistency between tax and accounting treatments

75,08992.6%

90,772

88.3%

15,682

2,500

3.1%

2,500

2.4%

0

2,000

2.5%

2,000

1.9%

0

1,500

1.8%

1,500

1.5%

0

-

-

6,000

5.8%

6,000

Investment Corporation Bond (Sub-Total)

6,000

7.4%

12,000

11.7%

6,000

Total Interest-Bearing Debt

81,089100.0%

102,772

100.0%

21,682

Borrowing (Sub-Total)
2nd Investment Corporation Bond without
collateral (3-year bond)
3rd Investment Corporation Bond without
collateral (5-year bond)4th Investment Corporation Bond without
collateral (7-year bond)
5th Investment Corporation Bond without
collateral (7-year bond)

22

Issuance of Retail Bonds(Investment Corporation Bonds)
Issued investment corporation bonds to retail investors(JHR’s first time)

Fixation Ratio
As of end of
Dec. 2014

As of end of
Dec. 2015

89.8%

84.8%

Use of Negative Goodwill• Cope with losses caused by property dispositions in order to replace properties• Cope with loss on retirement of noncurrent assets resulting from renovations, etc.

（Cope with amortization of fixed-term leasehold rights of land, amortization ofasset retirement obligations, etc.)
 JHR plans to announce in FY2016 regarding its change in policy for using negative
goodwill as a result of change in the law.

Amount of negative goodwill used
Jan. through Dec. 2015

JPY60M

Balance of negative goodwill
as of end of Dec. 2015

JPY13.8B

VI. Market Environment

1-1. Market Environment
Changes in the Number of Inbound Visitors by
Purpose

Breakdown of Inbound Visitors by Country

The growth in the total number of inbound visitors is accelerating.
The key driver of growth is inbound leisure tourists.
Total Number(in thousands)

Tourists

Business Visitors

The number of inbound visitors from Asian countries accounts forjust over 80% of the total inbound visitors.

2015

Others
19,73720,00018,000

Other Asian
countries
7.0%

16,00014,00013,412HK
7.7%

10,362
10,88010,0008,609

8,345 8,349
8,000

4,754 4,770

5,954

4,000

4,368

2,693

2,717

2000

2001

Asia
82.9%

6,218

5,237 5,210

6,041

6,048

4,981

6,361
4,759
4,057

Source: Japan National Tourism
Organization (JNTO)

3,839

3,095

3,055

2002

2003

0
2004

2005

2006

2007

2008

2009

South
Korea
20.3%

7,962

6,788

6,136
6,000

Taiwan
18.6%

8,356

7,333
6,726

China
25.3%

Thailand
4.0%

12,0002,000

Outside
AsianCountries
17.1%

2010

2011

2012

2013

2014

2015

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

24

1-2. Market Environment
Changes in Performance Index of Rooms Departments by City
 In 2013, RevPAR in major cities grew by slightly over 10%, but Kyoto, Kobe, and Naha were still lagging and waiting for higher ADR (Average Daily Rate).
 In 2014, ADR (Average Daily Rate) in Kyoto and Naha, which had slow growth in past years, increased and RevPAR grew in many cities.
 In 2015, an increase in RevPAR accelerated in all major cities led by Osaka.
ADR (Average Daily Rate)

ADR (Average Daily Rate)2013

Increase rate (%)
21.0

Increase rate (%)

2015
Osaka 30.4%

31.0
16.0
Osaka 10.9％

Sapporo 10.6％

26.0

Tokyo 11.7％

11.0

Fukuoka 10.3％
6.0
Hiroshima 9.1％

-2.0

Kyoto 7.5%

Kobe 3.3%

1.0
0.0

2.0

4.0

6.0

21.0

Naha 9.1%

8.0

10.0

12.0

Kyoto 16.6%

Occupancy rate
Increase rate (%)-4.0

Naha 18.6%
Sapporo 19.6%

16.0
Tokyo 12.5%

ADR（Average Daily Rate)
Increase rate (%)

11.0

2014

Osaka 20.7%

21.0
Kyoto 15.6%

Hiroshima
11.0%

Kobe 18.7%

Fukuoka 15.0%

6.0

16.0
Fukuoka 14.2％

11.0
6.0

Tokyo 9.9％
Hiroshima
2.7％

1.0

-2.0

-4.0

Sapporo 11.7％

0.0

2.0

1.0

Naha 16.8%-1.0

Kobe 5.9％

4.0

6.0

8.0

10.0

12.0
Occupancy rate
Increase rate (%)

1.0
-4.0

3.0

5.0

7.0 Occupancy rate

Increase rate (%)
Source: Prepared by Asset Management Company based on data of STR
Global.
(*) The size of balloons represents year-on-year growth rate of RevPAR.

25

1-3. Market Environment
Comparison of Key Property Indexes in Major Cities Around the World (2015)
Name of city (ADR in US$, Occupancy rate)

ADR (US$)
300.0

Paris

US$1=JPY121.1(282.3, 76.5%)
New York(265.2, 84.8%)

250.0
LondonTaipei(201.1, 70.0%)

Singapore

200.0

Seoul

(163.6, 68.9%)(209.4, 82.5%)(219.9, 82.2%)

Hong Kong

Tokyo

150.0

(200.3, 84.6%)(150.1, 86.7%)
Osaka

Shanghai(132.2, 90.8%)(100.0, 73.7%)

100.0
Bangkok(95.8, 75.2%)

Beijing (90.4, 71.4%)

50.0
65.0

70.0

75.0

80.0

85.0

90.0

95.0
Occupancy rate (%)

Source: Prepared by Asset Management Company based on data of STR Global(*) The numbers in the chart show ADR and occupancies. For ADR, annual ADR for 2015 is converted into US$ (exchange rate as of the end of December 2015).

26

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
Implement various rent schemes which meet each hotel’s character
Variable rent

Fixed rent

Revenuesharing

Income frommanagement
contracts

Ensure stable revenue

Pursue upside(revenue improvement)

Increase in tenants’ rent-paying capacity
through improvement in hotels’ performance

Increase in rental income, etc. throughimprovement in hotels’ performance

Percentage of rental income

Proportion of rent schemes

Fixed rent61%

(As of the end of December 2015)

Only fixed
rent

Variablerent, etc.

11 properties Variable

39%(*)

rent, etc. (*)

25 properties(*) Fixed rent + variable rent method(*) Variable rent
Revenue sharing
Income from management contracts

Fixed rent + revenue sharing method
Variable rent method
Management contract method28

2. Key Points to Promote Growth Cycle
Strong ability in acquiring properties
 Highly recognized as Japan’s largest J-REIT
specializing in hotels
 High presence and credibility in theproperty market by continuously acquiringproperties
 A variety of proposals on and execution of
acquisition schemes

Aim to pay higher dividendHigh
capability inachievinginternal
growthStrong ability
in acquiringproperties
Stablefinancingcapability

High capability in achieving internal growth Management methods that achieve a goodbalance between stability and upside
potential
 Increase in hotel revenue resulting fromcollaboration with high-quality operators
 Maintain and boost competitiveness byinvesting in appropriate capital expenditure
Stable financing capability
 Secure sound and stable finance Diversification of financing methods29

3. External Growth Strategy
Perception of External
Environment
Trend of the Hotel Investment
Market Along with a rise in hotel revenue

Basic Policies
 Acquire hotel real estate that is capable of attracting “domestic and inbound leisure customers.”
 Improve profitability, stability, and quality of the overall portfolio.

due to economic recovery andincrease in domestic and inbounddemand, hotel assets are gaining
attractiveness as investment target.
In addition, since the yields of other

Key Measuresasset classes are decreasing andhotel investors are increasing,competition to acquire hotel assets

have become intense, and yields ontransactions are on a downward
trend.
 This trend is predicted to continue
for some time and transaction prices
are expected to rise further.
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.

•

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.

•Hotels specialized in selling single rooms only are carefully chosen.

•

Especially review the purchase of hotels that have potential for internal growth in a proactive manner.

Strategic investment areas•

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 variable rent, etc., promote internal growth through collaboration with the operators.

30

4. Internal Growth Strategy
Basic Policies

Perception of External
Environment
General Market Conditions
 Thanks to effects of various
measures implemented by JapanesePrime Minister Shinzo Abe’s
administration to assure that thenation will be out of deflation, andsimultaneously accomplish
revitalization of economy andrestoration of fiscal health, thenation’s economy continues torecover mildly despite someweakness.

 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
 In addition to stable demand on
domestic leisure, the number of
inbound tourists, mainly from Asian
countries, is continuing to increase
due to the government-led
measures to promote the country
and weak yen, etc. With such strong
tailwinds for Japan’s tourism andhotel industries, demand foraccommodation is expected tocontinue strongly, driven by
domestic and inbound leisuredemand.

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 guests.

•

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 investment to maintain asset value and current revenue.

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

315. 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 level
over a medium term.
 On the other hand, long-term
interest rates, which are at ahistorical low, need to be paid close 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

attention to unforeseeable
circumstances.

32

6. 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.


Eligible recipients of complimentary coupons

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

 Coupon redemption (October 2014 through September 2015)
Rooms

Five complimentary coupons for accommodations and five complimentary coupons forrestaurants

No. of Coupon
Used

No. of People
Who Used
Coupons

No. of Coupon
Used

No. of People
Who Used
Coupons

Kobe Meriken Park Oriental Hotel

345

391

736

2,109

Oriental Hotel tokyo bay

1,402

1,763

1,587

4,525

Namba Oriental Hotel

218

281

133

329

Hotel Nikko Alivila

257

481

542

1,463

Details of the benefits program

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

Restaurants

HotelsOriental Hotel Hiroshima

232

272

257

681

2,454

3,188

3,255

9,107

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

Total

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

HMJ’s five hotels and Accor’s six hotels

 HMJ’s five hotels

Kobe Meriken Park Oriental Hotel

Namba Oriental Hotel

Oriental Hotel Hiroshima Accor’s six hotels

Oriental Hotel tokyo bay

ibis Tokyo Shinjuku

Hotel Nikko Alivila

Mercure Sapporo

33

ibis Styles Kyoto Station

Mercure Okinawa Naha

ibis Styles Sapporo

Mercure Yokosuka

Appendix 2
Information on Properties

1. Property List (1/2)（As of Dec. 31st 2015）
Appraisal value
No.

Property Name

Hotel Type

Grade

(*1)

(*2)

No. of
Guest
Room

Location

Acquisition
Age
Book Value
Price

15th Period(as of 12.31.2014)(*3)(JPY M)(*4)(JPY M)(*5)

Appraisal
Value(JPY M)(*6)

CAP Rate

16th Period(as of 12.31.2015)
Appraisal
Value(JPY M)

Investment
Ratio

CAP Rate(*7)

Revenue from
Real Estate
Operation

NOI

P/L from Real
Estate Operation

NOI Yield(Actual)(JPY1000)(*8)(JPY1000)(*8)(JPY1000)
(*8)

(*9)

1

Kobe Meriken Park Oriental Hotel

Full-service

Upper-middle

319

Hyogo

20.5

10,90010,12012,5005.8%

13,3005.5%

4.8%

1,110,773

827,720474,249

7.6%

2

Oriental Hotel tokyo bay

Full-service

Mid-price

503

Chiba

20.7

19,90018,69827,7004.8%

32,600

4.6%

8.8%

1,732,754

1,612,380

1,124,380

8.1%

3

Namba Oriental Hotel

Limited-service

Mid-price

257
(*11)

Osaka

19.8

15,00014,775

19,2004.7%

27,000

4.4%

6.6%

1,279,514

1,179,589

993,375

7.9%

4

Oriental Hotel Hiroshima

Full-service

Upper-middle

227

Hiroshima 22.3

4,100

4,078

4,150

7.8%

4,180

7.5%

1.8%

421,449

374,552

304,195

9.1%

5Hotel Nikko Alivila

ResortLuxury396

Okinawa

21.8

18,90018,556

21,3005.7%

25,400

5.3%

8.4%

1,604,117

1,452,185

1,126,712

7.7%

6

The Beach Tower Okinawa

ResortMid-price

280

Okinawa

11.8

7,610

6,882

8,400

5.3%

9,070

4.9%

3.4%

511,010466,552

346,795

6.1%

7

Hakone Setsugetsuka

ResortMid-price

158

Kanagawa

9.3

4,070

3,797

4,480

5.9%

4,730

5.6%

1.8%

294,946

272,184

190,332

6.7%

8

Dormy Inn Kumamoto

Limited-service

Mid-price

294

Kumamoto

7.9

2,334

2,232

2,790

6.3%

2,950

5.8%

1.0%

194,460

170,974

131,364

7.3%

9

the b suidobashi (*10)

Limited-service

Mid-price

99

Tokyo

29.4

1,120

1,230

1,620

5.0%

1,750

4.5%

0.5%

95,85780,58763,050

7.2%

10

Dormy Inn EXPRESS Asakusa

Limited-service

Economy

77

Tokyo

18.8

999

963

1,080

4.8%

1,220

4.4%

0.4%

63,99555,28043,016

5.5%

11

Hakata Nakasu Washington Hotel Plaza

Limited-service

Mid-price

247

Fukuoka

20.8

2,130

2,076

2,780

5.6%

3,680

5.1%

0.9%

240,000

224,000

197,000

10.5%

12Nara Washington Hotel Plaza

Limited-service

Mid-price

204

Nara

15.8

2,050

1,916

2,160

5.9%

2,330

5.5%

0.9%

151,000

134,000

93,000

6.6%

13

R&B Hotel Ueno-Hirokoji

Limited-service

Economy

187

Tokyo

13.8

1,720

1,761

1,670

4.8%

1,810

4.4%

0.8%

99,14484,75571,987

4.9%

14

R&B Hotal Higashi-Nihombashi

Limited-service

Economy

202

Tokyo

17.8

1,534

1,528

1,850

5.2%

1,960

4.9%

0.7%

122,207105,294

87,593

6.9%

15

Comfort Hotel Tokyo Higashi Nihombashi

Limited-service

Economy

259

Tokyo

7.9

3,746

3,655

4,740

5.2%

5,110

4.7%

1.7%

270,114

239,672

204,084

6.4%

16

Smile Hotel Nihombashi Mitsukoshimae

Limited-service

Economy

164

Tokyo

18.8

2,108

2,056

2,550

4.8%

2,850

4.5%

0.9%

150,510

134,600

116,388

6.4%

17

Toyoko Inn Hakataguchi Ekimae

Limited-service

Economy257

Fukuoka

14.3

1,652

1,498

2,280

5.6%

2,490

5.1%

0.7%

141,039

127,984

106,594

7.7%

18

Hotel Keihan Universal City

ResortMid-price

330

Osaka

14.5

6,000

6,020

8,920

5.9%

13,6005.5%

2.7%

796,456

718,442634,605

12.0%

19

Chisan Inn Kamata

Limited-service

Economy

70

Tokyo

12.7

823

806

886

5.3%

1,270

4.7%

0.4%

70,44561,20549,632

7.4%

20

Hotel Vista Kamata Tokyo

Limited-service

Economy

106

Tokyo

23.9

1,512

1,473

1,520

5.1%

1,870

4.7%

0.7%

113,644

98,871

76,467

6.5%

21

Hotel Sunroute Shimbashi

Limited-service

Mid-price

220

Tokyo

7.8

4,800

4,873

6,360

4.7%

7,420

4.2%

2.1%

379,770

317,967

296,872

6.6%

22

Hilton Tokyo Bay

ResortLuxury

818

Chiba

27.5

26,05026,10930,7004.9%

34,400

4.5%

11.5%

1,953,746

1,648,528

1,488,585

6.3%

23

ibis Tokyo Shinjuku

Limited-service

Mid-price

206

Tokyo

35.3

7,243

7,559

7,740

4.8%

8,830

4.4%

3.2%

645,794441,934

382,513

6.1%

24

ibis Styles Kyoto Station

Limited-service

Mid-price

215

Kyoto

6.8

6,600

6,752

7,020

5.0%

8,590

4.6%

2.9%

483,439

419,855

388,127

6.4%

35

1. Property List (2/2)（As of Dec. 31st 2015）
Appraisal value
No.

Property Name

Hotel Type

Grade

(*1)

(*2)

No. of
Guest
Room

Location

Acquisition
Age
Book Value
Price

15th Period(as of 12.31.2014)(*3)(JPY M)(*4)(JPY M)(*5)

Appraisal
Value(JPY M)(*6)

CAP Rate

16th Period(as of 12.31.2015)
Appraisal
Value(JPY M)

Investment
Ratio

CAP Rate(*7)

Revenue from
Real Estate
Operation

NOI

P/L from Real
Estate Operation

NOI Yield(Actual)(JPY1000)(*8)(JPY1000)(*8)(JPY1000)
(*8)

(*9)

25

ibis Styles Sapporo

Limited-service

Mid-price278

Hokkaido

5.4

6,797

6,802

7,080

5.7%

7,940

5.3%

3.0%

573,050475,680

404,3897.0%

26

Mercure Sapporo

Limited-service

Mid-price285

Hokkaido

6.7

6,000

6,023

6,170

5.5%

7,840

5.1%

2.7%

651,976

439,825

362,969

7.3%

27

Mercure Okinawa Naha

Limited-service

Mid-price

260

Okinawa

6.4

3,000

2,971

3,220

5.4%

5,730

5.1%

1.3%

392,480

319,576

269,897

10.7%

28

the b akasaka-mitsuke

Limited-service

Mid-price

122

Tokyo

13.1

6,250

6,313

6,420

4.4%

6,730

4.2%

2.8%

262,591

258,959

239,816-29

the b ikebukuro

Limited-service

Mid-price

175

Tokyo

33.5

6,520

6,599

6,770

4.8%

7,040

4.6%

2.9%

330,644

326,021

299,015-30

the b ochanomizu

Limited-service

Mid-price

72

Tokyo

16.4

2,320

2,357

2,470

4.5%

2,540

4.4%

1.0%

105,117

102,184

93,641-31

the b hachioji

Limited-service

Mid-price

196

Tokyo

29.4

2,610

2,687

2,720

5.8%

2,920

5.5%

1.2%

200,646

194,205

173,458-

32

the b hakata

Limited-service

Mid-price

175

Fukuoka

18.3

2,300

2,349

2,370

5.2%

2,700

4.9%

1.0%

154,833

150,818

135,421-

33

Hotel Francs

Full-service

Mid-price

222

Chiba

24.4

3,105

3,165

3,500

5.3%

3,900

4.9%

1.4%

229,558

227,037

188,452-

34

Mercure Yokosuka

Full-service

Mid-price

160

Kanagawa 23.2

1,650

1,668

1,680

4.9%

1,760

4.8%

0.7%

154,815

97,37676,445-35

Okinawa Marriott Resort & Spa

ResortUpper-middle

361

Okinawa

10.8

14,95015,062

15,4005.4%

16,700

5.2%

6.6%

722,575

712,453

608,650-36

ACTIVE-INTER CITY HIROSHIMA

Full-service

Luxury238

Hiroshima

5.4

17,32017,943

17,9004.8%

17,9004.8%

7.7%

34,635

17,620

2,600

-

-

-

8,639

-

17.6

225,723

223,372

260,096

100.0%

16,739,118(*12)

14,570,880(*12)

11,845,683
(*12)

6.6%

Total or Average-

302,110-(*1) Under the category of Hotel Type, “Full-service” is full-service hotel, “Resort” is resort hotel, and “Limited-service” is limited-service hotel.
(*2) Mainly 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 December 2015.
(*6) No. 28-36 are appraisal value at the time of acquisition.
(*7) Percentage of the acquisition price of the each asset to the total acquisition price. Numbers beyond one decimal place is rounded off.
(*8) Actual for one year from January through December 2015. Since the lessees did not agree to disclose numbers in units of JPY1000 for Nos. 11 and 12, amounts are rounded down to the nearest JPY 1M.
(*9) No. 28-36 were acquired during the fiscal year 2015 and NOI yields (actual) are not calculated. Also the average NOI yield = the actual NOI for FY12/2015 ÷ total acquisition price of properties held as of the end of FY12/2015.
(*10) “Dormy Inn Suidobashi” was rebranded to “the b suidobashi” on July 1, 2015.
(*11) The number of guest rooms of Namba Oriental Hotel is changed from 257 to 258 on February 2, 2016.
(*12) Since three properties, Comfort Hotel Shin-Yamaguchi, Daiwa Roynet Hotel Akita, and Hotel Sunroute Niigata, were sold during the fiscal year December 2015, the numbers are different from those described on page 5 “1. Operational Performance.”36

2. Summary of Lease Contracts (1/2)（As of Dec. 31st 2015）
Rent Modification Summary
No．

Property Name

Lease Type

Rent Type(*1)

1

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

Fixed-lease

Fixed

7

Hakone Setsugetsuka

Fixed-lease

Fixed

Hotel Operator/Hotel
Consulting andManagement Company

LesseeLease/ Remaining
MC
Contract
Term
Term
(*2)

Fixed
+Variable

Hotel Management
Japan Co., Ltd.

Period

8

4

20

11

JPY42M/month20

11

Okura Nikko HotelManagement Co., Ltd.
(*6)

9

Dormy Inn Kumamoto
Dormy Inn EXPRESS Asakusa

10 Hakata Nakasu Washington Hotel Plaza
11 Nara Washington Hotel Plaza

Fixed-lease
Lease
Lease
Lease

Fixed

12

Fixed

20

Fixed

3

Fixed

20

7
１
2
4

Condition(*4)

Rent Modification
Schedule(2016 - 2017)

2016

2017

Sep. 2011

Scheme ismodified.

--

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

-

-

-

-

JPY24M/month

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

-

-

-

－

JPY16M/month

Rent can be modified throughmutual agreement every three years.

-

-

-

－

JPY5M/month

Rent can be modified throughApr. 2012
mutual agreement every three years.

-

To be expired(March)

JPY20M/month

Rent can be modified throughmutual agreement.

--

JPY11M/month

Rent can be modified throughmutual agreement.

-

-

-

-

Apr. 2011

Increased(+3.0%)--

Kyoritsu Maintenance Co., Ltd.
8

Rent Summary(Fixed rent)
JPY3,221M/year+
In principle, the same rent will be(Variable rent)
applied until expiration of the
When the total GOP of HMJ's fivecontract.
hotels exceeds GOP base amount(JPY3,351M), the excess x 81.5% ispaid.(*7)

Abilitas Hospitality Co., Ltd.
(*5)
Fixed-lease

Contractual Rent(*3)

(Acquisition to End of
December 2015)

Washington Hotel K.K.

Same

Apr. 2015 Contract is renewed. (same)

12 R&B Hotel Ueno-Hirokoji

Lease

Fixed

20

6

JPY8M/month

Rent can be modified throughmutual agreement.

13 R&B Hotel Higashi-Nihombashi

Lease

Fixed

20

2

JPY10M/month

Rent can be modified throughmutual agreement.

Apr. 2013

Same

-

-

14 Comfort Hotel Tokyo Higashi Nihombashi Fixed-lease

Fixed

Greens Co., Ltd.

20

12

JPY21M/month

Rent can be modified throughmutual agreement every five years.

Jan. 2013

Same

-

-

15 Smile Hotel Nihombashi Mitsukoshimae

Lease

Fixed+Revenue
sharing

The Kamogawa Grand Hotel, Ltd.

20

1

JPY11M/month+ Revenue sharing

Rent can be modified throughmutual agreement.

Apr. 2014

Scheme is modified.

-

To be expired(March)16 Toyoko Inn Hakataguchi Ekimae

Lease

Fixed

Toyoko Inn Co., Ltd.

30

16

JPY11M/month

No rule has been stipulated.

Oct. 2007

Increased(+9.4%)

-

-

Lease

Fixed+Revenue
sharing

K.K. Hotel Keihan

20

6Nondisclosure

Nondisclosure

Jul. 2014

Scheme is modified.

-

-

1

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

17 Hotel Keihan Universal City
18 Chisan Inn Kamata

Fixed-lease

Variable

Solare Hotels &Resorts Co., Ltd.

SHR Hotels, Co., Ltd.

5-

Jul. 2012

Scheme is modified.

-

To be expired(June)

Jul. 2015

Contract is renewed(Modify the calculation
method of revenue
sharing.)--

19 Hotel Vista Kamata Tokyo

Lease

Fixed+Revenue
sharing

Vista Hotel Management Co., Ltd.

43

JPY7M/month+ Revenue sharing

In principle, the same rent will beapplied until expiration of thecontract.

20 Hotel Sunroute Shimbashi

Fixed-lease

Fixed+Revenue
sharing

Sunroute Co., Ltd.

15

7

JPY18M/month+ Revenue sharing

No rule has been stipulated.

-

-

-

-

21 Hilton Tokyo Bay

Fixed-lease

Fixed+Revenue
THE DAIICHI
sharing
BUILDING CO., LTD.

4

3

JPY157M/month+ Revenue sharing

Rent can be modified throughmutual agreement.

Jul. 2015

Contract is renewed.

--

Hilton International
Company37

2. Summary of Lease Contracts (2/2)（As of Dec. 31st 2015）
Rent Modification Summary
No．

Property Name

Lease Type

22 ibis Tokyo Shinjuku-

23 ibis Styles Kyoto Station-

24 ibis Styles Sapporo-

25 Mercure Sapporo-

26 Mercure Okinawa Naha-

Rent Type(*1)

Management
contract
Management
contract
Management
contract
Management
contract
Management
contract

LesseeHotel Operator/Hotel
Consulting andManagement Company-

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

Lease/ Remaining
MC
Contract
Term
Term
(*2)

Contractual Rent(*3)

(Acquisition to End of
December 2015)

Rent Summary

Rent Modification
Schedule(2016 - 2017)

PeriodCondition
(*4)

2016

2017

Scheme ismodified.

-

-

12

9

Amount equivalent to hotel GOP-

Jul. 20125

3

Amount equivalent to hotel GOP

-

-

-

-

-

-

-

5

4

Amount equivalent to hotel GOP-

Dec. 2014

Scheme ismodified.

15

14

Amount equivalent to hotel GOP

-

-

-

-

-

10

8

Amount equivalent to hotel GOP

-

-

-

-

-

-

-

-

-

27 Mercure Yokosuka

Fixed-lease

Variable

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

5

4

Linked to hotel GOP

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

28 the b akasaka-mitsuke

Fixed-lease

Fixed+Variable

Ishin Akasaka Operations, K.K.

7

6

JPY102M/year+ Linked to hotel GOP

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

-

-

-

-

29 the b ikebukuro

Fixed-lease

Fixed+Variable

Ishin Ikebukuro Operations K.K.

7

6

JPY163M/year+ Linked to hotel GOP

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

-

-

-

-

30 the b ochanomizu

Fixed-lease

Fixed+Variable

Ishin Ochanomizu Operations K.K.

7

6

JPY69M/year+ Linked to hotel GOP

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

-

-

-

-

31 the b hachioji

Fixed-lease

Fixed+Variable

Ishin Hachioji Operations, Y.K.

7

6

JPY98M/year+ Linked to hotel GOP

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

-

-

-

-

32 the b hakata

Fixed-lease

Fixed+Variable

Ishin Hakata Operations K.K.

7

6

JPY82M/year+ Linked to hotel GOP

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

-

-

-

-

33 the b suidobashi (*8)

Fixed-lease

Fixed+Variable

Ishin Suidobashi
Operations K.K.

5

5

JPY85M/year+ Linked to hotel GOP

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

Jul. 2015

Rebranded--

34 Hotel Francs

Fixed-lease

Fixed

K.K. Bridal Produce

199

Nondisclosure

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

-

-

-

-

-

-

-

-

-

-

-

-

35 Okinawa Marriott Resort & Spa

Fixed-lease

Fixed+Variable

Lagoon resort Nago Solare Hotels and Resorts
Co., Ltd.
K.K.

5

5

36 ACTIVE-INTER CITY HIROSHIMA

Fixed-lease

Fixed+Variable

K.K. A.I.C Hiroshima Management1111(*1) Rent type is as follows:(Fixed rent)
JPY550M/year+
In principle, the same rent will be(Variable rent)
applied until expiration of the
When the total GOP exceeds GOP contract.
base amount (JPY700M), theexcess x 90% is paid.
(Fixed rent)
JPY348M/year+
In principle, the same rent will be(Variable rent)
applied until expiration of the
When the total GOP exceeds GOP contract.
base amount (JPY468M), theexcess x 82.5% is paid.
(*4) Details of “Modified Scheme” is as follows.

Fixed: Fixed rent

No. 1 to No. 5: Variable rent was modified from sales-base to GOP-linked.

Variable: Variable rent

No. 15, 17: Revenue sharing scheme has been applied in addition to fixed rent.

Management contract: Management contract

No. 18: Fixed rent has been replaced with the variable rent due to the replacement of the lessee.

Fixed+Variable: Property paying both fixed and variable rent

No. 22, 24: JHR has commenced direct management contract schemes.
(*5) The hotel management support agreement with Abilitas Hospitaility Co., Ltd. expired on December 31, 2015 and HMJ operates hotels by itself.

Fixed+Revenue sharing: When the sales of the hotel (lessee) exceed pre-determined amount, additional rent is paid.
(*2) Remaining contract term as of the end of December, 2015.

(*6) The company name was changed from JAL Hotels Co., Ltd. to Okura Nikko Hotel Management Co., Ltd. on October 1, 2015.

(*3) Amount including car park and CAM without tax.

(*7) Variable rent rate was changed from 81.5% to 85% on January 1, 2016.
(*8) No. 33: Changed the lessee to Ishin Suidobashi Operations K.K. from July 2015. After rebranding the hotel to the b suidobashi, the rent scheme waschanged from fixed rent to fixed rent+variable rent.

38

3. Portfolio Map（As of end of April 2016 (Planned))

1

2

3

2

4
3

5

4

6

5

7
6

8

7

9

Limited-service hotel

8

Full-service hotel

Total Assets

Resort hotel
Kobe Meriken Park
Oriental Hotel

JPY239.6 Billion 10

Oriental Hoteltokyo bay

Namba Oriental
Hotel

Oriental Hotel
Hiroshima

Hotel Nikko
AlivilaThe Beach Tower
Okinawa

Hakone Setsugetsuka

11

12

13

14

15

16

the b suidobashi

Dormy Inn
Kumamoto

1725

No. of Hotels

38 Hotels
Total No. of
Guest Rooms

9,102 Rooms

Dormy Inn
EXPRESS Asakusa

Hakata Nakasu
Washington Hotel
Plaza

Nara Washington
Hotel Plaza

R&B Hotel
Ueno-Hirokoji

R&B Hotel Higashi- Comfort Hotel Tokyo Smile Hotel Nihom- Toyoko Inn
Nihombashi
Higashi-Nihombashi bashi Mitsukoshimae Hakataguchi Ekimae

18

19

20

21

22

23

24

Hotel Keihan
Universal City

Chisan Inn Kamata

Hotel Vista
Kamata Tokyo

Hotel Sunroute
Shimbashi

Hilton Tokyo Bay

ibis Tokyo
Shinjuku

ibis Styles
Kyoto Station

26

24

25

26

27

28

3

31

5

2 33

18

35

7
22

34
ibis Styles Sapporo

Guest Rooms/Hotel 29

Mercure Sapporo

MercureOkinawa Naha

the b akasaka-mitsuke

31

32

30

11 17 32 38

12

8Tokyo 23 wards
30

1

Avg. 240 Rooms

6

27

4 36

29

13 37
10

9
23
the b ikebukuro33

the b ochanomizu

34

the b hachioji

35

the b hakata

NEW

NEW

NEW

36

37

38

21

19
20
Hotel Francs

Mercure Yokosuka

Okinawa Marriott
Resort & Spa

ACTIVE-INTER CITY HIROSHIMA(Sheraton Hiroshima Hotel)

39

CANDEO-HOTELS UENOKOEN (acquired in
February 2016)

Hotel Centraza Hakata (tobe acquired in April 2016)

16

14 15
28

4. Major CAPEX III by Hotel
Unit: JPY M * (Numbers in parentheses are CAPEX amounts)
FY2006Former JHR

FY2007

Namba Oriental
Hotel

Hotel Nikko Alivila

Oriental Hotel
Hiroshima

FY2010FY2011FY2012FY2012（New）

CY2013

CY2014

CY2015

CY2016

ActualActualActualActualForecast

13th period
2012/4-2012/12

14th period
2013/1-2013/12

15th period
2014/1-2014/12

16th period
2015/1-2015/12

17th period
2016/1-2016/12

ActualActualActualActualActualActualActual

2nd period

3rd period

4th period

5th period

6th period

7th period(IPO-2006/8)(2006/9-2007/8)(2007/9-2008/8)(2008/9-2009/8)(2009/9-2010/8)(2010/9-2011/8)(2011/9-2012/3)-• Guest rooms on
12th and 13th
Kobe Meriken Park
floors (189)Oriental Hotel• Restaurant (51)

Oriental Hoteltokyo bay

FY2009

1st periodrdto 3 periodth

4 to 5 periodth

6 to 7 periodth

8 to 9 period

10 to 11 period

12th period(IPO-2007/9)(2007/10-2008/9)(2008/10-2009/9)(2009/10-2010/9)(2010/10-2011/9)(2011/10-2012/3)• Guest rooms on
10th and 11th
floors (222)• Pier (98)

• Bride’s room (68)
• Banquet room(46)

2
Former NHF

FY2008nd• Guest rooms on• Guest rooms on
9th and 10th floors
7th and 8th floors
(145)
(171)
• Banquet room
• Restaurant (58)(59)

• Guest rooms on
7th and 8th floors(93)• Suite (32)
• Restaurant (155)-• Restaurant (40)-

(Acquired in
Oct. 2007)

th

th

th

th

th

-

-

-

-

• Chapel (77)• Guest rooms, etc.
on 12th floor (135)

-

-

-

• Guest rooms on
4th floor andcorridors on 4th,
5th, and 6th floors(20)-• Guest rooms on
3rd to 8th floors(479)• Guest rooms on
1st to 6th floors ofSouth and Westwings (361)• Guest rooms on
5th and 6th floors(210)• Lobby (60)

• Guest rooms on
7th to 18th floors(347)• Tenant floor (23)• Banquet rooms
on 3rd and 4th
floors (138)

-

-

-

• Renovation of
banquet room on
3rd floor.
Renovation of
corner double
room to twin
room (21)-• Restaurant (79)

-

-

-

ibis Tokyo
Shinjuku

-

-

-

-

-

-

-

Okinawa Marriott
Resort & Spa

-

-

-

-

-

-

-

40

-

-

-

• Chapel (30)

• Guest rooms on 7th
floor (50)• Balconies on eachfloor (62)• Bar (80)-• Restaurant (45)--

• Guest rooms on 4th
floor (102)-• Corner rooms on
5th to 8th floors
(10)

-

-

• Guest rooms on 9th
floor (91)-

• Guest rooms on
3rd to 8th floors ofNorth building
and 3rd to 5th
floors of Central
building (333)-• Guest rooms on 9th
floor (55)• Restaurant (30)-

• Banquet rooms
on 23rd floor (10)-• Guest rooms on 7th
to 10th floors (41)
• Banquet room on
4th floor (30)--

• Lobby andrestaurant on 2nd
floor, and guest
rooms on 3rd,
5th,6th, and 9th
floors (170）-• Guest rooms on 3rdth
to 10 floor (164)
-

-

-

-

-

-

• Banquet rooms (25)Appendix 3
Comments on Performance of Major Hotels with Variable Rent

1. Performance Highlights of HMJ’s Five Hotels
Changes in Sales Volume, GOP, and Management Indicators(*) of HMJ’s Five Hotels
Actual Performance from January 2015 through December 2015

 Sales and GOP
1st half of the year

(JPY M)

2nd half of the year

GOP

(JPY M)
24,68825,00021,31220,00015,00021,994
6,155

5,645
11,632

12,196

22,29623,186

6,302

6,941

12,271

12,810

7,558

Against a backdrop of the strong market led by an increase in inbound tourists, therooms department attracted both domestic and inbound leisure demand proactively. As
a result, RevPAR increased in all five hotels. Rooms department sales increased by

8,000

GOP

Sales

30,000Total sales increased by JPY890M or 4.0% compared with the previous year.

6,000

JPY1,098M or 10.5％ compared with the previous year.
General banquet and restaurant sections in the food and beverage department saw anincrease in sales. But since sales of wedding section decreased due to a fierce

13,566competition in wedding industry, sales of the food and beverage department decreasedby JPY224M or 2.3% compared with the previous year.

4,000

Sales Forecast from January 2016 through December 2016

10,000
5,000

9,678

9,796

10,023

10,376

11,1210

2,000

CY2013

CY2014

CY2015

CY2016（Forecast）

The rooms department intends to attract both domestic and inbound demand in thehigher rate segment by refining the revenue management. Rooms department sales are
expected to increase by JPY977M or 8.5% compared with the previous year.

 Management Indicators

Occupancy Rate (%)
ADR (JPY)
RevPAR (JPY)GOP (JPY M)
GOP Ratio (%)

Total sales are expected to increase by JPY1,502M or 6.5% compared with the previous
year.

0
CY2012

Sales of the food and beverage department are predicted to increase by JPY502M or
5.3% compared with the previous year due to strengthened sales efforts by each of

CY2012

CY2013

CY2014 CY2015

82.7%
16,20013,400
5,645
26.5%

86.1%
17,297
14,886
6,155
28.0%

86.9%
17,551
15,245
6,302
28.3%

87.7%
19,212
16,8436,941
29.9%

CY2016(Forecast)
88.5%
20,60818,237
7,558
30.6%

wedding, general banquet, and restaurant sections.

GOP Forecast from January 2016 through December 2016


GOP is expected to increase by JPY617M or 8.9% compared with the previous year.

Although labor costs, etc. are expected to increase in association with improvement in service
levels and strengthened sales efforts, GOP ratio is expected to increase by 0.7 point comparedwith the previous year due to management efficiency and an increase in rooms department sales(*) Sales volume, GOP, and management indicators have been provided by a lessee or an operator.
CY2016 is a forecast: actual figures may differ due to various factors. (Same applies to other hotels hereafter.)which have high profit contribution.

42

2. Performance Highlights of Accor’s Five Hotels
Changes in Sales Volume, GOP, and Management Indicators(*) of Accor’s Five Hotels
 Sales and GOP
1st half of the year

2nd half of the year

(JPY M)

Sales

6,000

5,307
4,801

5,000
4,000

3,930

3,000

1,631

2,000

2,164

1,000

1,766

2,631

4,256
2,277
2,656

1,878

2,915

3,000
2,500

 In addition to attracting domestic leisure demand, the rooms department drew
inbound tourists proactively through the operator’s own network system(booking website). Sales of Mercure Sapporo, ibis Styles Sapporo, ibis Styles
Kyoto Station, Mercure Okinawa Naha especially remained strong, and rooms

2,000

department sales increased by JPY498M or 14.0％ compared with the previous
1,500

2,339
2,145

1,918

2,392

CY2014

CY2015

CY2016（Forecast）

year.

1,000

Sales Forecast from January 2016 through December 2016500

 Total sales are expected to increase by JPY506M or 10.5% compared with the00
CY2013

 Total sales increased JPY545M or 12.8% compared with the previous year.

GOP(JPY M)

Actual Performance from January 2015 through December 2015

GOP

previous year.
 The rooms department intends to continue attracting domestic and inboundleisure demand in the higher rate segment. Rooms department sales are
expected to increase by JPY431M or 10.6% compared with the previous year.

 Management Indicators

Occupancy Rate (%)
ADR (JPY)
RevPAR (JPY)GOP (JPY M)
GOP Ratio (%)

CY2013

CY2014

CY2015

81.9%
8,805
7,208
1,631
41.5%

82.8%
9,524
7,886
1,878
44.1%

85.7%
10,476
8,972
2,277
47.4%

CY2016(Forecast)
86.8%
11,391
9,889
2,631
49.6%

GOP Forecast from January 2016 through December 2016
 GOP is expected to increase by JPY354M or 15.5% compared with the previous year.
 GOP ratio is expected to increase by 2.2 points compared with the previous year
resulting from an increase in rooms department sales with high profit contribution andcost reduction measures, which Mercure Sapporo has been working on since theprevious year.

(*) Sales volume, GOP, and management indicators have been provided by a lessee or an operator.
CY2016 is a forecast: actual figures may differ due to various factors.

43

3. Performance Highlights of Five “the b” Hotels
Changes in Sales Volume, GOP, and Management Indicators (*) of Five “the b” Hotels
 Sales and GOP(JPY M)

1st half of the year

2nd half of the year

GOP

Actual Performance from January 2015 through December 2015
(JPY M) Total sales increased by JPY303M or 15.1% compared with the previous year.

1,400

3,000

2,537

2,000
1,500

2,011

1,215
1,000

1,079

1,304

1,203

854
1,067

inbound tourists proactively due to the operator’s expansion of sales channels,in addition to drawing domestic demand. As a result, all five hotels increased
their RevPAR. Rooms department sales increased by JPY295M or 15.5 ％compared with the previous year.

800
600

1,000
500

 Against a backdrop of the strong market, the rooms department attracted

1,200

2,315

GOP

Sales

2,500

400

1,233

1,111

944

CY2014

 Total sales are expected to increase by JPY222M or 9.6% compared with theprevious year.

200
0

0

Sales Forecast from January 2016 through December 2016 The rooms department intends to continue attracting domestic and inboundleisure demand in the higher rate segment. Rooms department sales are

CY2016（Forecast）

CY2015expected to increase by JPY216M or 9.9%.

 Management Indicators

Occupancy Rate (%)
ADR (JPY)
RevPAR (JPY)GOP (JPY M)
GOP Ratio (%)

CY2014

CY2015

88.0%
8,104
7,132
854
42.4%

91.9%
8,842
8,124
1,079
46.6%

CY2016(Forecast)
92.1%
9,666
8,901
1,215
47.9%

GOP Forecast from January 2016 through December 2016
 GOP is expected to increase by JPY136M or 12.6% compared with the previous year.
 GOP ratio is expected to increase by 1.3 points compared with the previous year due toan increase in rooms department sales which has high profit contribution.

(*) Sales volume, GOP, and management indicators have been provided by a lessee or an operator.
CY2016 is a forecast: actual figures may differ due to various factors.

44

Appendix 4
Investors Composition and Investment Unit Price1. Major Unitholders and Unitholders of Investment Units
Top Ten Major Unitholders
 As of the End of December 2014

 As of the End of December 2015

Name

Ranking

No. of Units Percentage(*)

Name

Ranking

No. of Units Percentage(*)

1

Japan Trustee Service Bank, Ltd. (Trust)

524,068

18.77

1

Japan Trustee Service Bank, Ltd. (Trust)

540,062

17.17

2

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

287,523

10.30

2

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

417,042

13.26

3

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

252,508

9.04

3

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

330,953

10.52

4

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

118,089

4.23

4

Nomura Bank (Luxembourg) S.A.

128,733

4.09

5

Nomura Bank (Luxembourg) S.A.

97,7553.50

5The Nomura Trust and Banking Co., Ltd. (Investment Trust)

120,438

3.83

6

Shikoku Railway Company

58,311

2.08

6Shikoku Railway Company

58,311

1.85

7Goldman Sachs International

41,638

1.49

7

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

57,436

1.82

8

Nomura PB Nominees TK1 Limited

38,2691.37

8State Street Bank & Trust Company 505001

50,662

1.61

36,3141.30

9Nomura PB Nominees TK1 Limited

38,2691.21

29,695

1.06

10 NOMURA PB NOMINEES LIMITED OMNIBUS-MARGIN (CASHPB)

37,6991.19

1,484,170

53.17

Total

1,779,605

56.59

9

NOMURA PB NOMINEES LIMITED OMNIBUS-MARGIN (CASHPB)

10 The Bank of New York Mellon SA/NV10
Total(*) 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 December 2015. (Rounded off to two decimal places.)

Owners of the Investment Units As of the End of December 2014
OwnersIndividuals and Others

No. ofInvestors

No. of Units

22,227399,789

Financial Institutions(including Securities Firms)

95

Other Domestic Firms

313

Foreign Firms andIndividuals
Total
Individuals
and Others

231

1,370,607
145,417875,468

 As of the End of December 2015
No. of Investors

1.3%
0.4%
1.0%
97.2
%

No. of Units

31.3
%
5.2%

Owners49.1%

22,866 2,791,281
Financial Institutions(including Securities
Firms)

24,441

368,839112

1,627,971

Other Domestic Firms

353

124,108

Foreign Firms andIndividuals

276

1,023,309

Total
Other Domestic
Firms

No. of Units

Financial Institutions(including Securities Firms)

Individuals and Others

14.3%

No. ofInvestors

25,182 3,144,227

No. of Investors
1.4
0.4 %
%

No. of Units
1.0
%
32.5
%

97.0
%

3.9
%

11.7
%

51.7
%

Foreign Firms
and Individuals(*) Percentage of investors is percentage of owners in each segment to the total number of investors in JHR, and percentage of investment units is percentage of investment units owned in each segment to the total investment units
issued. (Both rounded off to one decimal place.)46

2. Changes in Investment Unit Price and Market Capitalization
Changes in the investment
unit price and market capitalization(Based on the closing price)

1/21/2016+170,000 units through PO
Market Capitalization

Price of the investment unit:
JPY89,500.-

2/17/2016+140,000 units through PO+7,680 units through OA

Total market capitalization:
JPY281.4B(JPY)

7/23/2015

100,000+3,905 units through OA(Based on the closing price of Dec. 30, 2015)

90,000Price of the investment unit:
JPY91,100.-(*)

6/23/2015

Investment unit price of JHR

80,00070,000Total market capitalization:
JPY301.9B

60,000(Based on the closing price of Jan. 29, 2016)

50,000Price of the real estate investment securities may
fall depending on the price of the real estate
under management or fluctuations of its
profitability, etc., and investors may suffer losses.
Investors may also suffer losses through thebankruptcy or deteriorated financial condition of
the issuer.
With reference to the risk of investment in JHR
units, see Securities Registration Statement of
JHR dated January 4, 2016.

40,0001/28/2015

4/18/2013+200,000 units through PO+510,000 units through PO

250,000

9/10/2014+170,000 units through PO

9/13/2012+240,000 units through PO
10/15/2012＋12,000 units through OA

200,000
150,000

30,000100,000

20,00050,00010,000
0

0

600
500

(*) 100 is the closing price of JHR unit, REIT
index and TOPIX at TSE dated April 2,
2012. REIT Index of TSE is an index of aweighted average of the market
capitalization of all REITs listed on TSE.

350,000
300,000

Comparison with REIT Index and
TOPIX of Tokyo Stock Exchange (TSE)(JPY M)

Investment unit price of JHR

TSE REIT Index

400
300
200
100
0

47

TOPIX

Appendix 5
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, Director-General of Kanto Local Finance Bureau No. 334
Member of The Investment Trusts Association, Japan

Organization Chart

Shareholders’ Meeting
AuditorBoard of Directors’ Meeting

Investment (and Operation)
Committee

Compliance Committee

Representative Director
Compliance Office

Investment Division

Asset Management

Operations Division

Finance & Planning Division

Acquisitions

Finance & Planning49

Accounting &ReportingGeneral Affairs

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 orhotel 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 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have any relationship with the sponsors-related persons.

including outside specialists, and attendance of the outside.
The committee consists of third-party members who do not

In principle, outside specialists are authorized to dismissAll deals involving sponsor-related persons in principle
need approval of the committee.

proposals.

（*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.

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Disclaimer
This material is prepared and provided solely for the purpose of providing information and not to offer, solicit, or do business, etc. with specific products
including 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, Act
on Investment Trusts and Investment Corporations and related government ordinances, Cabinet Office regulations, listing rules by Tokyo Stock Exchange,
Regulations of The Investment Trusts Association, Japan or other related 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, investment unit subscription rights or investment corporation bonds, financial institutions may charge
you pre-determined handling fees and other charges aside from the price of the investment units, investment unit subscription rights or investment corporation
bonds. Please ask financial institutions for the amount, upper limit, and calculation 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, holders of investment unit
subscription rights and investment corporation bonds may suffer losses due to economic conditions of the real estate market or securities market, interest rates,
the nature of investment units or investment unit subscription rights, dependency on mechanisms and related persons of investment corporations, changes inlegal 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, nature of the trust beneficiary rights under management, delisting of the investment units, orworsening 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
Director-General of Kanto Local Finance Bureau No. 334
Member of The Investment Trust Association, Japan