Japan Hotel REIT Investment Corporation(TSE: 8985)

Midterm Financial Results
FY12/2019 (20th Period)

Japan Hotel REIT Investment Corporation
Japan Hotel REIT Advisors Co., Ltd.
http://www.jhrth.co.jp/en/

August 22, 2019

Table of Contents

Appendix 1

Ⅰ. Midterm Settlement of Accounts for FY12/2019 - Highlights
1. Highlights of Midterm for FY12/2019

3

Ⅱ. Summary of Midterm Settlement of Accounts andRevenue Forecast for the Full Fiscal Year
1. Midterm Results for the Fiscal Year Ending December 20196

2. Revenue Forecast for the Full Year Ending December 20197

3. Balance Sheet

8

Ⅲ. External Growth
1. Successive External Growth10

2. Two New Properties Acquired in 201911

1. Portfolio

13

2. Portfolio Diversification

14

1. JHR's Investment Targets

34

2. Simultaneous Pursuit of Stability and Upside Potential

35

3. External Growth Strategy

36

4. Internal Growth Strategy

37

5. Financial Strategy

38

6. Initiatives for Sustainability

39

7. Benefits Program for Unitholders

41

Appendix 2

Ⅳ. Portfolio

Ⅴ. Internal Growth

JHR's Characteristics and Strategy

Information on Properties

1. Property List

43

2. Summary of Lease Contracts

45

3. Major CAPEX Ⅲ by Hotels

47

4. The Five HMJ Hotels – Highlights

48

5. Portfolio Map

49

Appendix 3

Investors Composition and Investment Unit Price

1. Rent Structures

16

2. Performance of the 21 Hotels with Variable Rent, etc.

17

3. RevPAR Variance to Previous Year by Region of
the 21 Hotels with Variable Rent, etc. (2019)18

4. Active Asset Management19

1. Summary of the Asset Management Company

54

5. Capital Expenditure and Depreciation

22

2. Features and Governance of the Asset Management Company

55

24

Ⅶ. Market Environment
1. Market Environment

51

2. Changes in Investment Unit Price and Market Capitalization

52

Appendix 4

Ⅵ. Financial Conditions
1. Financial Conditions

1. Major Unitholders and Classification of Unitholders

29

1

Summary of the Asset Management Company

Ⅰ. Midterm Settlement of Accounts for FY12/2019- Highlights

1. Highlights of Midterm for FY12/2019
1. External Growth(*1)▶ Improvement in hotel performance and increase of rent through active asset management▶ Strategic property replacement

41 properties/JPY286.8Bn
Total AcquisitionPrice

3 properties/
JPY32.6Bn

32.6Bn JPY18.6Bn

JPY

44 properties/JPY319.4Bn◆Sale of Properties in August

2018

Total Funds
Raised throughPublic Offerings

3 properties/- JPY10.1Bn(*1)

Sale in 2018

Total Book Value Total Sales Price ofof Sold Properties Sold Properties

Total Gain on Sale:

1.9Bn

10.1Bn JPY12.1Bn

JPY

2018

RevPAR(JPY)

2017

Acquired

Sold

Full YearAcquisition in 2017

◆Public Offering in June

End of FY12/2017

 RevPAR and GOP

GOP(JPY MM)End of FY12/2016

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

Variance

2018

2019
Variance(forecast)

15,957 15,951 (0.0%) 14,552 14,453 (0.7%) 17,338 17,425 +0.5%

11 HMJ Hotels

21 hotels with
17,911 17,898 (0.1%)
variable rent, etc.

13,950 13,864 (0.6%)

11 HMJ Hotels

41 properties/JPY309.3Bn ▶ Conservative financial management

2 properties/
JPY65.1Bn

Total Funds
Raised throughPublic Offerings

LTV(*5)65.1Bn JPY33.3Bn

40.6%

JPY

Hilton Tokyo Odaiba

 Diversified funding methods by issuance of investment
corporation bonds(as of the end of June 2019)

Acquisition in 2019

Total AcquisitionPrice

Acquired

2019

2019

3. Strengthening of Financial Base

◆Public Offering in January

As ofAugust 22, 20192018

Second Half

21 hotels with
13,833 13,940 +0.8% 12,817 12,765 (0.4%) 14,831 15,097 +1.8%
variable rent, etc.

JPY

End of FY12/2018

2019
Variance(forecast)First Half

Hotel Oriental Express
Osaka Shinsaibashi

43 properties/JPY374.5Bn

Costs forAverage Life ofInterest-Bearing
Debt
Debt

1.1%

5.3 years

 Status of Credit Rating
JCR

R&I

A+ (stable)

A (stable)• Issuance of investment corporation bonds for individual
investors (The fourth time)(June 2019) Total JPY8Bn• Issuance of investment corporation bonds (Green Bonds)(The first time as J-REITs specializing in hotels)(July 2019) Total JPY2Bn⇒ The proceeds will be allocated to the funds for
repayment of procured fund for renovation of Oriental
Hotel Fukuoka Hakata Station and the funds forconstruction for renovation, etc. of other hotels(*1) Stating total amount of the acquisition price.
(*2) 11 HMJ Hotels are Kobe Meriken Park Oriental Hotel, Oriental Hotel tokyo bay, Namba Oriental Hotel, Hotel Nikko Alivila, Oriental Hotel
Hiroshima, Okinawa Marriott Resort & Spa, Sheraton Grand Hiroshima Hotel (ACTIVE-INTER CITY HIROSHIMA), Holiday Inn Osaka
Namba, Hilton Tokyo Narita Airport, International Garden Hotel Narita and Hotel Nikko Nara.
(*3) 21 hotels with variable rent, etc. are HMJ 11 Hotels plus ibis Tokyo Shinjuku, ibis Styles Kyoto Station, ibis Styles Sapporo, Mercure
Sapporo, Mercure Okinawa Naha, Mercure Yokosuka, the b ikebukuro, the b hachioji, the b hakata and the b suidobashi.
(*4) Oriental Hotel Fukuoka Hakata Station is excluded from the 21 hotels with variable rent, etc. as major renovation works withsuspension of its hotel operation was implemented from October 2018 to April 8, 2019.
(*5) Stating LTV by total asset for the end of December 2019 (forecast).

3

1. Highlights of Midterm for FY12/2019 (cont.)
Dividends Per Unit Growth(JPY)

The amount of sales effect(*)

4,000
3,420

3,500

98
2,155

+15.0%

3,890
204

-5.2%

3,686

+1.7%

0.0%

(excluding theamount of sales effect)(excluding theamount of sales effect)

FY12/2014

FY12/2015

FY12/2016

FY12/2017

FY12/2018

FY2019/12

FY12/2018

FY2019/12(15th Period)(16th Period)(17th Period)(18th Period)(19th Period)(20th Period(19th Period(20th Period(forecast))(annualized))(annualized forecast))

NAV Per Unit Growth(JPY)70,000+18.7%

60,00046,272+37.0%

40,00030,000

+3.9%

+3.0%

+2.6%

63,38582,48579,407

77,12975,20980,00050,000FY12/2014

FY12/2015

FY12/2016

FY12/2017

FY12/2018

FY2019/12(15th Period)(16th Period)(17th Period)(18th Period)(19th Period)(20th Period(forecast))(*)(Reference: annualized effect)
3,706
3,643

3,686

+38.1% 2,877

2,000
1,500

+5.6%

+7.7%

2,975

3,000
2,500

3,683

The amount of sales effect represents dividends per unit which are increasing due to sales of properties.

4

Ⅱ. Summary of Midterm Settlement of Accounts andRevenue Forecast for the Full Fiscal Year

1. Midterm Results for the Fiscal Year Ending December 2019

Properties(Unit: JPY MM)
FY12/2018(19th Period)

FY12/2019(20th Period)

Actual(A)

Actual(*1)(B)(B)–(A)

Breakdown of Variance
Two
Properties
Acquired in2019(*4)

Three
Properties
Sold in2018(*3)%

Major Causes of Variance ofExisting Properties

Existing
Properties

Fixed rent, etc.

No. of Properties

44

43

(1)

–

• Increase of rent from hotels

JPY56 MM

Acquisition Price

319,474

374,508

55,034–• Increase of rent from office andcommercial tenants, etc.

JPY23 MM

Operating Revenue

12,321

12,719

398

3.2%

(229)

762

(134)

• Utilities income, etc.

JPY4 MM

12,321

12,719

398

3.2%

(229)

762

(134)

683

9.2%

(163)

762

84

(284) (5.8%)

(65)

–

(219)

Variable rent

(207)

759

(167)

• Variable rent from the 21 hotels with variable rent, etc.
JPY(20) MM

Real Estate
Operating Revenue(total)

JPY84 MM

Fixed Rent, etc.

60.3%

7,430 63.8%

8,113

Variable Rent

39.7%

4,891 36.2%

4,606

10,294

10,679

384

2,031

2,165

133

(25)

64

95

Asset Retirement
Obligations Expenses

1

1

0

–

–

0

Loss on Retirement ofNoncurrent Assets

11

218

207

–

–

207

• Impact on suspension of the sales due to majorrenovation at Oriental Hotel Fukuoka Hakata Station
JPY(159) MM

NOI after
Depreciation(*2)

8,250

8,294

44

(181)

695

(470)

(total) JPY(219) MM

Other Operating
Expenses

930

1,001

70

7,319

7,293

Non-Operating Income

28

9

(18)

Non-Operating Expenses

959

948

(11)

Ordinary Income

6,387

6,354

(33) (0.5%)

Net Income

6,387

6,353

(33) (0.5%)

NOI(*2)
Depreciation

Profit and Loss

Variance

Operating Income

3.7%

0.5%

(26) (0.4%)• Revenue sharing, etc.

JPY(39) MM(*1) For detail, please refer to Midterm Financial Report for the Fiscal YearEnding December 31, 2019 (January 1, 2019–December 31, 2019)
dated August 22, 2019.
(*2) Each is calculated using the following formula:
NOI (Net Operating Income) = Real estate operating revenue − Realestate operating costs + Depreciation + Loss on retirement of
noncurrent assets + Asset retirement obligations expenses
NOI after depreciation = Real estate operating revenue − Real estate
operating costs(*3) Representing R&B Hotel Higashi-nihonbashi, the b akasaka-mitsukeand the b ochanomizu, which JHR sold in FY12/2018 (19th Period).
(*4) Representing Hilton Tokyo Odaiba and Hotel Oriental Express Osaka
Shinsaibashi which JHR acquired in FY12/2019 (20th Period).

6

2. Revenue Forecast for the Full Year Ending December 2019
(Unit: JPY MM)
FY12/2019(20th Period)
Forecast
Previous
This Time
Forecast(*2)(A)(B)

FY12/2018(19th Period)

Properties

Actual(A)

Forecast This Time
(Annualized Effect)(B)-(A)

Major Causes of Variance

%

41

43

43

43

–

Acquisition Price

309,370

374,508

374,508

374,508–

Operating Revenue

28,25328,876

28,66629,527(210)(0.7%)

26,31828,876

28,66629,527(210)(0.7%)

Fixed Rent, etc.

56.2% 14,788 58.8% 16,989 59.7% 17,102 60.8% 17,945

112

0.7%

Variable Rent

43.8% 11,529 41.2% 11,886 40.3% 11,563 39.2% 11,582(323)(2.7%)

Gain on Sale ofProperties, etc.
Profit and Loss

Breakdown

No. of Properties

Real Estate Operating
Revenue

NOI

1,934

–

–

–

–

–

22,10424,49824,29824,827(200)(0.8%)NOI Yield

7.1%

6.5%

6.5%

6.6%

(0.1%)NOI after Depreciation

17,974

19,584

19,411

19,853(173)(0.9%)NOI Yield after Depreciation

5.8%

5.2%

5.2%

5.3%

(0.0%)

Other Operating Expenses

1,916

2,213

2,183

2,248

(29)

–

17,993

17,371

17,227

17,604(143)(0.8%)

31

0

9

9

9

Operating Income
Non-Operating Income

1,813

2,096

1,962

1,940

(134)

16,211

15,274

15,274

15,6730

Extraordinary Income

–

–

–

–

–

Extraordinary Losses andCorporate Tax

1

1

1

1

–

16,21015,273

15,273

15,672

0

0.0%

563

1,177

1,177

867

–

–

Reserve for Special
Advanced Depreciation(1,174)

–

–

–

–

–

Total Dividends

Non-Operating Expenses

Ordinary Income

Net Income
Use of Negative Goodwill

Dividend(reference)

0.0%

15,602

16,44816,448

16,5370

0.0%

Number of Units Issued(Unit)

4,010,847

4,462,347

4,462,347

4,462,347––

Dividend per Unit (JPY)

3,890

3,686

3,686

3,706

–

–

7

Fixed rent, etc.
• Increase of rent from hotels
JPY100 MM• Increase of rent from office and commercial tenants, etc.
JPY8 MM• Utilities income, etc.
JPY3 MM(total) JPY112 MM
Variable rent
• Variable rent from the 21 hotels with variable rent, etc.
JPY(373) MM• Oriental Hotel Fukuoka Hakata Station
JPY75 MM
• Revenue sharing, etc.
JPY(24) MM(total) JPY(323) MM

Use of Negative Goodwill(*3)
FY12/201850-year amortization amount
Loss on retirement of noncurrent assets
Correspondence to major renovation work
(Total)FY12/201950-year amortization amount
Loss on retirement of noncurrent assets
Correspondence to major renovation work
Correspondence to dilution, etc.

JPY262 MM
JPY35 MMJPY265 MM
JPY563 MM
JPY262 MM
JPY247 MM
JPY357 MM
JPY310 MM(Total) JPY1,177 MM(*1) For detail, please refer to Midterm Financial Report for the Fiscal YearEnding December 31, 2019 (January 1, 2019–December 31, 2019) dated
August 22, 2019.
(*2) Stating the figures of forecast announced in Financial Report for the Fiscal
Year Ended December 31, 2018 (January 1, 2018–December 31, 2018)
dated February 20, 2019.
(*3) Please refer to P.26 for the use of negative goodwill (reserve for temporary
difference adjustment).

3. Balance Sheet(Unit: JPY MM)ASSETS
Current Assets(as of)(*1)

Cash and Deposits

Operating Accounts
Receivables
OthersNoncurrent Assets
Net Property andEquipment(*2)

Buildings in TrustLand in Trust(*3)

OthersIntangible Assets
Other Assets
Leasehold and Security
Deposits
OthersDeferred Assets

FY12/2018
End ofFiscal Year2018.12.31

FY12/2019
End of
Midterm2019.6.30

Variance

40,26637,18427,855
24,811(12,411)(12,372)

2,474

1,795

(679)

607
309,993

1,248
377,752

640
67,758272,889

340,542

67,652

107,874
163,151
1,864
33,915
3,188

118,416
219,893
2,231
33,851
3,358

10,54256,742
367
(64)
169

162

162

–

3,025
296

3,195
411

169
114

LIABILITIESCurrent Liabilities(as of)Operating Accounts Payable
Short-Term Loans Payable
Current Portion of Investment Corporate
Bonds Payable
Current Portion of Long-Term Loans
PayableAccounts Payable
Advances Received
OthersLong-Term Liabilities
Investment Corporation Bonds
Long-Term Loans Payable
Tenant Leasehold and Security Deposits
Derivative Liabilities
OthersTOTAL LIABILITIESNET ASSETS
Unitholders' Capital
Capital Surplus
Reserve for Temporary Difference
Adjustment
Reserve for Special Account for Tax
Purpose Reduction Entry
Unappropriated Retained Earnings
OthersTOTAL ASSETS

350,556

406,018

55,461TOTAL NET ASSETSTOTAL LIABILITIES AND NET ASSETS

FY12/2018
End ofFiscal Year2018.12.31

FY12/2019
End of
Midterm2019.6.30

Variance

17,0201,941–

18,086
1,572
900

1,065
(368)
900

2,000

–

(2,000)11,117

13,709

2,592

1,028
882
52
130,163
31,60091,954
5,634
514
460
147,184

606
895
402
160,91139,600114,162
5,717
983
447
178,997

(422)
13
350
30,7478,000
22,20883469(12)31,812

153,516
21,746

186,894
21,74633,378–12,357

11,794

(563)

–

1,174

1,174

16,213(461)
203,372
350,556

6,353
(941)
227,021406,018(9,859)(480)
23,64855,461(*1) Cash and deposits in trust is included.
(*2) The sum of buildings 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.

8

Ⅲ. External Growth1. Successive External Growth Improvement of the quality of JHR's portfolio and successive external growth through strategic asset replacement
Growth in Asset Size(*1), etc. (JPY MM)+21.1%+27.1%+11.4%-3.2%+30.2%+7.0%
122,285+21.4%

130,883+9.1%

158,902173,429

225,723

286,801

319,474309,370

April 2012 FY12/2012 FY12/2013 FY12/2014 FY12/2015 FY12/2016 FY12/2017 FY12/2018(merger)(13th Period) (14th Period) (15th Period) (16th Period) (17th Period) (18th Period) (19th Period)

374,508

FY12/2019(20th Period)(annualized effect)NOI Yield(*2)

–

6.2%

6.2%

6.3%

6.6%

6.6%

6.7%

7.1%

6.5% (6.6%)

NOI Yield after
Depreciation(*2)

–

4.5%

4.8%

5.0%

5.3%

5.4%

5.5%

5.8%

5.2% (5.3%)

NAV per Unit–

JPY32,321

JPY36,074

JPY46,272

JPY63,385

JPY75,209

JPY77,129

JPY79,407

JPY82,485

No. of Properties

28

28

28

30

36

41

44

41

43

No. of Acquisition

2

2

3

9

5

3

2

Acquisition Price

JPY10.8Bn

JPY32.6Bn

JPY15.7Bn

JPY57.0Bn

JPY61.0Bn

JPY32.6Bn

JPY65.1Bn

No. of Dispositions

2

2

1

3

3

JPY0.8Bn

JPY2.6Bn

JPY0.7Bn

JPY4.8Bn

JPY12.1Bn

Sale Price(*1) Asset size is based on the aggregate acquisition price of the properties at the end of each fiscal period.
(*2) NOI yield for FY12/2012 is hypothetical annualized based on actual NOI after merger.

10

Aim forSuccessive
Growth

2. Two New Properties Acquired in 2019
 An acquisition of largest(*1) asset in our portfolio and trophy asset
for JHR Scarce large-scale full-service hotel in the middle of Tokyo Located in "Osaka Minami" area, one of Kansai's foremost tourist
destinations
 Can accommodate two or more person in all guest rooms

Hilton Tokyo Odaiba

Hotel Oriental Express Osaka Shinsaibashi

Changes in Major Indicators(*2)(JPY)
35,00030,00025,00020,00015,00010,0005,000
0Occupancy Rates (right axis)
26,41721,48327,513

24,692

Changes in Major Indicators(*2)

ADR (left axis)
30,10830,917

26,60028,30927,397

27,974

29,622

89.7%

95.1%

94.0%

88.6%

85.9%

2015

2016

2017

2018

2019

2016
–

2017
2,625

2018
3,097

2019
2,768

First Half Second Halfof 2019of 2019(forecast)

43.0%

55.5%

54.0%

48.5%

GOP (JPY MM)% of InboundVisitors(*3)(*3)

25,13532,447

81.3%(forecast)

(*1)
(*2)

29,263

RevPAR (left axis)

91.3%

(JPY)

100%

12,000

75%

9,000

50%

6,000

25%

3,000

0%

0

GOP (JPY MM)% of InboundVisitors(*3)

Occupancy Rates (right axis)

ADR (left axis)

RevPAR (left axis)
10,429

9,927

10,021

8,632

9,209

8,868

87.0%

91.9%

92.3%

91.5%

2018

2019

First Half ofSecond Half of 2019

(forecast)

2019(forecast)

2018
104

2019
175

94.5%

97.8%

9,611

9,544

Based on the acquisition price.
All the data is obtained from the current tenant and is unaudited basis. ADR and RevPAR include service charge.
The data is not necessarily calculated by accounting treatment, etc. adopted by JHR. JHR and Japan Hotel REIT Advisors Co., Ltd. (hereinafter called "JHRA") cannot guarantee accuracy of the numbers.
As Hotel Oriental Express Osaka Shinsaibashi opened in April 2018, the figures for 2018 state the figures from April to December 2018.
Guest room sales by inbound visitors are calculated based on numbers of guest rooms sold. Percentage of inbound visitors for 2019 states the actual figures for the first half.

11

100%
75%
50%
25%
0%

Ⅳ. Portfolio

1. Portfolio Portfolio consisting of competitive hotels in areas with strong leisure lodging demand Selectively invest in locations with high growth potential of leisure demand such as Strategic Investment Areas
Portfolio Summary

Strategic Investment Areas and Locations of Properties(as of August 22, 2019)

Total Assets
JPY374.5Bn

Properties acquired in 2019
Existing properties
Strategic Investment Areas

Hokkaido Area

No. of Hotels

Okinawa Area

43 Hotels(34 in Strategic Investment Areas)

No. of Guest Rooms

11,701 Rooms

Tokyo & the Bay Area(*1)

Fukuoka
Area

Osaka/Kyoto Area(*2)(*1) Bay Area includes the coastal area of Tokyo Bay in Kanagawa and Chiba prefectures.
(*2) Osaka/Kyoto Area refers to Osaka and Kyoto prefectures.

Tokyo 23 wards

13

2. Portfolio Diversification
 Widely diversified and high-quality portfolio Appeal to inbound visitors by international brands
By Area and Rent(*1)

By Hotel Brand(*2)
Others(F) 0.8%(F) 1.7%(V) 2.2%

(V)

(V)

4.6%

3.2%

(Kyoritsu Maintenance)

(F)

4%

17.1%
(F)

5.4%
7.1% Chubu
Kyushu4.9%(excluding Okinawa)

5.1%

16%
Hotel Nikko

the b

8%

ibis/Mercure (Accor)

Hokkaido
Chugoku(F)

Oriental Hotel

3%

4.8%

(V) 1.6%

14%

Dormy Inn, etc.

Tokyo

7.0%

Sheraton(excluding Tokyo)

13.3%

21.7%

Kansai

Hilton31%(F)

By Grade(*2)

11.7%

6.3%

(F)

(V)
4.7%

4%

By Hotel Type(*2)

5%

8.0%
4.3%

5%

Economy
(V)

(V)
4.2%

Mariott

International Brand: 55%

13.6%(excluding Osaka)
8.5% Osaka

(F)

7%

Kanto

Okinawa

Holiday Inn (IHG)

8%

3.6%

20.7%

6.7%
(V)

(V)

(F)
7.0%

LuxuryResort21%

21%

Mid-price

Fixed Rent (F)Variable Rent (V)

60.8%

39.2%

42%

(*1) Based on the annualized rent in revenue forecast of FY12/2019.
(*2) Based on the acquisition price.

14

Limitedservice
33%

Uppermiddle

Full-service

33%

47%

Ⅴ. Internal Growth1. Rent Structures
Stability

Upside(FY12/2019 forecast)

Fixed rent

Fixed rent +Revenue sharing

Fixed rent + Variable rent

Variable rentManagement contract

Lease contract

Lease contract

Lease contract

Lease contract

Management contract

Fixed

○

○

○

–

–

–

Variable–

A certain percentage of sales
exceeding the threshold

A certain percentage of
hotel GOP

A certain percentage of hotelrevenue or hotel GOP

Hotel GOP–

JPY2,796MM(9.5%)

JPY3,794MM(12.8%)

JPY17,862MM(60.5%)

JPY1,877MM(6.4%)

JPY3,197MM(10.8%)

JPY29,527MM(100.0%)

Fixed Rent,
etc.(*2) (%)

JPY2,796MM(9.5%)

JPY3,383MM(11.5%)

JPY10,770MM(36.5%)

JPY535MM(1.8%)

JPY459MM(1.6%)

JPY17,945MM(60.8%)

Variable
Rent (%)–

JPY411MM(1.4%)

JPY7,091MM(24.0%)

JPY1,341MM(4.5%)

JPY2,738MM(9.3%)

JPY11,582MM(39.2%)

Low

Low

High

High

High

–

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

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

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

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

Rent Structure(*1)

Type of Contract
Type of
Rent

Real Estate
Operating Revenue(%)(breakdown)(annualized forecast for
FY12/2019)

Involvement inHotel Operation

1) Renewal of building and
CAPEX Paid by JHR
facilities

Total

No. of Properties

11

6

18

3

5

43

Acquisition Price(%)

JPY37,300MM(10.0%)JPY44,216MM(11.8%)

JPY245,628MM(65.6%)

JPY17,723MM(4.7%)

JPY29,640MM(7.9%)JPY374,508MM(100.0%)

The Beach Tower Okinawa
Hotel Francs
CANDEO HOTELS
UENO-KOEN
HOTEL ASCENT FUKUOKA
And other hotels

Hilton Tokyo Bay
Hotel Keihan Universal City
Sotetsu Fresa Inn ShimbashiKarasumoriguchi
Smile Hotel
Nihombashi Mitsukoshimae
Hotel Vista Kamata Tokyo
Comfort Hotel Tokyo
Higashi Nihombashi

The Twelve HMJ Hotels(*3)
the b ikebukuro
the b hachioji
the b hakata
the b suidobashi

Hilton Nagoya
Mercure Yokosuka
Chisun Inn Kamata

ibis Tokyo Shinjuku
ibis Styles Kyoto Station
ibis Styles Sapporo
Mercure Sapporo
Mercure Okinawa Naha–

Hotels＜Acquisition in 2019＞

Hilton Tokyo Odaiba
Hotel Oriental Express Osaka
Shinsaibashi(*1) Rent structure is categorized according to the rent contract for hotels of each asset owned by JHR.
(*2) Fixed rent includes fixed rent and utility income based on rent contract of non-hotel portion (offices, signage, car parks, retail shops, etc.) of asset owned by JHR.
(*3) The Twelve HMJ Hotels are 11 HMJ Hotels plus Oriental Hotel Fukuoka Hakata Station.

16

2. Performance of the 21 Hotels with Variable Rent, etc.
Performance and Forecast of Major Indicators
Occupancy (right axis)

ADR (left axis)

RevPAR (left axis)

Total of the 21 Hotels with Variable Rent, etc.
(JPY)
20,00015,00010,000
5,000
0

+0.8%

13,94050%

89.3%

13,833
87.2%

Second Half ofSecond Half ofFull Year

Full Year2019 Actual2018 Actual2019 Forecast

2018 Actual2019 Forecast

16,497

19,771-1.4%

19,49818,24017,338+0.5%

17,425

15,957

87.7%

89.4%

87.5%

88.5%

12,765
86.5%

14,831
87.1%

+1.8%

First Half ofFirst Half of2018 Actual

-0.4%

100%

15,097-0.7%

12,81787.3%

15,852

15,861

17,020

+0.4%

-0.1%

16,904

14,74914,68587.9%

0%HMJ11 Hotels(JPY)
20,00015,00010,0005,000
016,674
14,552
87.3%

-1.1%
-0.7%

14,45387.6%

20,000

8,000

100%

15,951

50%First Half ofSecond Half ofSecond Half ofFull Year

Full Year2018 Actual2019 Actual2018 Actual2019 Forecast

2018 Actual2019 Forecast

Total of the 21 hotels withvariable rent, etc.

17,911-0.1%

17,898

13,950-0.6%

13,86416,00012,000-0.0%

18,025First Half of

Performance and Forecast of GOP(JPY MM)-1.2%

HMJ11 Hotels

Full Year 2018

Full Year 2019

(Actual)(forecast)

170%3. RevPAR Variance to Previous Year by Region of the 21 Hotels with Variable Rent, etc. (2019)
 Diverse Portfolio Growth in RevPAR was achieved in many major cities

Hokkaido (2 properties)<2017 vs 2018: -0.0%>+16.3%+9.3%+1.2%

Total of 21 properties<2017 vs 2018: +0.5%>
+1.8%

+0.8%

-0.4%
First Half of2019

First Half of2019

Second Half of Full Year 20192019 (forecast)(forecast)Second Half of Full Year 20192019 (forecast)(forecast) ibis Styles Sapporo
 Mercure Sapporo

Hiroshima (2 properties)<2017 vs 2018: +2.2%>+3.2%

Okinawa (3 properties)<2017 vs 2018: -2.3%>

-2.4%

-2.8%

First Half of
2019

-2.7%

Second Half of Full Year 20192019 (forecast)(forecast) Hotel Nikko Alivila
 Okinawa Marriott Resort & Spa Mercure Okinawa NahaFirst Half of
2019

+4.3%

Narita (2 properties)<2017 vs 2018: +6.5%>
+8.3%
+5.7%
+3.0%

+3.7%

Second Half of Full Year 20192019 (forecast)(forecast)First Half of2019 Oriental Hotel Hiroshima
 ACTIVE-INTER CITY HIROSHIMA(Sheraton Grand Hiroshima Hotel)

Second Half of Full Year 20192019 (forecast)(forecast) Hilton Tokyo Narita Airport
 International Garden Hotel Narita

Tokyo and Bay Area (5 properties)<2017 vs 2018: +5.1%>+2.2%

Fukuoka (1 property)<2017 vs 2018: +0.4%>
+4.7%
+2.9%
+0.9%

Osaka, Kyoto (3 properties)<2017 vs 2018: -5.0%>+0.5%

 Oriental Hoteltokyo bay
 ibis Tokyo Shinjuku-1.0%
 the b ikebukuro
First Half of Second Half of Full Year 2019  the b hachioji
20192019 (forecast)(forecast) the b suidobashi+0.0%First Half of2019 the b hakata(*)

Second Half of Full Year 20192019 (forecast)(forecast)

-3.8%

-7.6%
First Half of2019 Namba Oriental Hotel

Second Half of Full Year 2019  Holiday Inn Osaka Namba
2019 (forecast)(forecast) ibis Styles Kyoto Station

Stating major hotels in each area out of the 21 hotels with variable rent, etc.

18

Properties owned by JHR

4. Active Asset Management
 Implement Active Asset Management at both hotel and REIT sides
 Accelerate internal growth through both revenue enhancement and cost control

HotelsExamples of Active Asset Management
Improvement of Hotel
Revenue
Reduction of Hotel
Operating Costs

 Strategic capital expenditure (e.g., renovation of rooms to increase RevPAR) Rebranding according to each hotel's characteristics
 Synergy from sharing guest by hotels located nearby in the same group Renewal of a hotel booking system Integration of back-office operations
 Optimization of staffing● Cost reduction by joint purchasing in the same group
 Reduction of utility costs

REIT

Improve GOP

Improvement of Real
Estate Operating Revenue Rent increase by revision of rent scheme, etc.
⇒ The Five HMJ Hotels(*), CANDEO HOTELS UENO-KOEN, Chisun Inn Kamata,Comfort Hotel Tokyo Higashi Nihombashi, HOTEL ASCENT FUKUOKA, and rent
from non-hotel tenant, etc.

Reduction of Real Estate
Operating Costs

 Reduction of cost for Property Management and Trust, management contract fee,and ground rent, etc.
Improve NOI

Maximize DPU(*)

The Five HMJ Hotels are Kobe Meriken Park Oriental Hotel, Oriental Hotel tokyo bay, Namba Oriental Hotel, Hotel Nikko Alivila and Oriental Hotel Hiroshima.

19

4. Active Asset Management (cont.) Promote internal growth through renovation and rebrand, etc. as a part of Active Asset Management
 Increase rent through revision of rent scheme, etc.
Rebranded and Reopened Oriental Hotel Fukuoka Hakata Station (April 2019)
 Overview＜After＞

Rebranded and reopened on April 9, 2019 after the six-month renovation from
October 2018

＜Before＞

Investment: JPY3.1Bn•

Increased in guest rooms (+27 rooms) and made all rooms types double
room or larger•

Established a 24 hour gym and converted a pool area into a rooftop garden•

Established a smoking area and smoking is banned within the building•

Enhanced convenience by consolidating back offices into one space Effects of Renovation•

ADR Improvement: +41.7% compared to the figures before renovation(Full year for 2019 (forecast): JPY18,882)•

Becoming a more attractive hotel by step up to a higher grade(Upper middle)＜After＞＜Before＞＜After＞

20＜Before＞

4. Active Asset Management (cont.) Promote internal growth through renovation and rebrand, etc. as a part of Active Asset Management
 Increase rent through revision of rent scheme, etc.
Okinawa Marriott Resort & Spa
Renovation of Restaurant

Track Record of Rent Scheme Revision•

 Renovation of All Day Dining "ALL STAR BUFFET"
May 7, 2019–July 15, 2019 (Reopen on July 20, 2019)
Capital expenditure: JPY142MM• Elimination of deterioration (building age: 14 years)• Consolidated buffet tables to one location and increased thenumber of seats (200 seats ⇒ 343 seats)• Promoting barrier-free operations by eliminating steps＜Before＞

Hotel Vista Kamata Tokyo
Fixed-rent
Fixed and Revenue Sharing•

ibis Tokyo Shinjuku
Changed to Management Contract

2014年4月
Apr.
2014

•

Smile Hotel Nihombashi Mitsukoshimae
Fixed-rent
Fixed and Revenue Sharing

2014年7月
Jul. 2014•

Hotel Keihan Universal City
Fixed-rent
Fixed and Revenue Sharing

2014年12
Dec.
2014
月

•

ibis Styles Sapporo
Changed to Management Contract

2015年7月
Jul. 2015•

the b suidobashi
Fixed-rent

2017年7月
Jul. 2017•

CANDEO HOTELS UENO-KOEN
Fixed-rent Increase

2018年1月
Jan.
2018

•

Comfort Hotel Tokyo Higashi Nihombashi
Fixed-rent
Fixed and Revenue Sharing•

ibis Styles Kyoto Station
Reduction of Management Contract Fee•

Hilton Tokyo Bay
Revision of Rent (Increase)2019年4月
Apr.
2019

•

HOTEL ASCENT FUKUOKA
Fixed-rent/
Fixed-rent Increase/
Traditional Lease
Fixed-lease2019年8月
Aug.
2019

•

Mercure Yokosuka
Revision of Contract (Effectively increase)＜After＞
2019年1月
Jan.
2019

21

Variable-rent•

2012年7月
Jul. 2012

 Cost reduction, Revenue Increase and Increase ofcustomer satisfaction

Chisun Inn Kamata
Fixed-rent

Fixed and Variable-rent

5. Capital Expenditures and Depreciation
 Strengthen competitiveness and improve asset value by continuing investment in CAPEX(JPY MM)

7,000

6,000

5,000

Total CAPEX
including the renovation
at Oriental Hotel
Fukuoka Hakata Station

Clarification of CAPEX

6,863

CAPEX Ⅰ

capital investment related to renewal of buildings, facilities, and equipment which is
required to maintain proper values of propertiesCAPEX Ⅱ

capital investment for fixtures and furnishings that are not directly related to building
structures or facilities but necessary for operating hotels

CAPEX Ⅲ

strategic capital investment for renewals including guest rooms, banquet rooms, restaurant
and others in order to maintain or to improve the competitiveness of the hotels

1,690
3,147

Depreciation
4,636
4,091
3,725

4,000
3,294
2,772

3,000
2,214

2,297

2,000
1,079
1,000

0

Asset Size
(JPY MM)

(*)

1,306
854
58
167

343
203

622

629

760

130,883

158,902

FY12/2012(*)

FY12/2013

258
198

2,619

2,400

783

1,811
36

2,898
469

Excluding the renovation
at Oriental Hotel
Fukuoka Hakata Station

1,456

3,716

3,056

454

476

913

475

781

1,954

1,798

511

640

2,348

1,134

1,324

173,429

225,723

286,801

319,474309,370

374,508

FY12/2014

FY12/2015

FY12/2016

FY12/2017

FY12/2018

FY12/2019 (forecast)Since FY12/2012 is irregular nine months period, the numbers for capital expenditure in FY12/2012 are the accumulated actual numbers from January to December, 2012. On theother hand, the number for depreciation is the annualized number.

22

Ⅵ. Financial Conditions

1. Financial Conditions
Changes in LTV (total asset base)

Term of Interest-Bearing Debt

45%

42.8%
39.7%

40%

39.9%

39.0%

40.6%

(*)

End of

End of

End of

End of

FY12/2016

FY12/2017

FY12/2018

FY12/2019 (expected)(16th Period)(17th Period)(18th Period)(19th Period)(20th Period)

1.5%
1.5%

3.7

1.2%

Costs for Interest-Bearing Debt

(year)

5.3

6.0

4.7

4.8

1.1%

1.1%

1.1%

0.5%

End of

End of

End of

End of

End of June 2019

FY12/2015

FY12/2016

FY12/2017

FY12/2018

Midterm FY19/2019(16th Period)(17th Period)(18th Period)(19th Period)(20th Period)

96.6%

Repayment Schedule of Interest-Bearing Debt
(JPY MM)

5.0

1.0%

0.0%

91.3%

As of the end ofJun. 2019

97.7%

Changes in Costs for Interest-Bearing Debt(*1) and
Average Life of Debt(*2)
5.0

90.4%

As of the end of
Dec. 2018

LTV as of the end of each period/year. LTV for the end of June 2019 was 41.5%.

2.0%

0.5%
8.1%

Fixed Interest Rate Ratio

End of
FY12/2015

Average Life of Debt

As of the end of June 2019

9.6%(*) Long-term represents debts with original
maturity over one year, and short-term
represents debts with original maturity
within one year.

35%
30%

As of the end of Dec. 2018

Short termLong-term(scheduled repayment
within one year)
Long-term50%(as of the end of June 2019)30,0004.0
3.0

25,0002.0

20,0001.0

15,0000.0

10,000

Loans

0

24

10,00019,00018,05017,35016,90015,772 1,000

13,682
12,300 6,000

11,400

1,500

7,917

13,10017,05018,00010,800 10,900

5,000(*1) Weighted-average costs for interest-bearing debt (including up-front fee, etc.) as of the end ofeach period/year. Rounded off to one decimal place.
(*2) Average life of debt as of the end of each period/year.

28,000Investment Corporation Bonds

8,000

4,250
2019

2020

2021

2022

2023

2024

2025

2026

8,000

2027

2028

2029

1. Financial Conditions (cont.)
Lender List for Interest-Bearing Debt

Breakdown of Interest-Bearing Debt
(Unit: JPY MM)

Balance(as of the end of
Dec. 2018)

Balance(as of the end ofJun. 2019)

Balance%

Balance%

Sumitomo Mitsui Banking Corporation

26,431

19.3%

32,851

19.5%

6,420

Shinsei Bank, Ltd.

15,035

11.0%

19,285

11.5%

4,250

Mizuho Bank, Ltd.

15,03011.0%

18,800

11.2%

3,770

Sumitomo Mitsui Trust Bank, Limited

10,5407.7%

14,040

8.3%

3,500

Resona Bank, Limited

9,360

6.8%

10,360

6.2%

1,000

Development Bank of Japan Inc.

3,780

2.8%

5,550

3.3%

1,770

Fukuoka Bank, Ltd.

3,610

2.6%

5,450

3.2%

1,840

The Nomura Trust and Banking Co., Ltd.

4,190

3.1%

4,160

2.5%

(30)

MUFG Bank, Ltd.

4,135

3.0%

4,135

2.5%

-

Lenders/Bond Name

Variance

The Nishi-Nippon City Bank, Ltd.

1,600

1.2%

3,550

2.1%

1,950

Aozora Bank, Ltd.

2,435

1.8%

3,435

2.0%

1,000

The Chiba Bank, Ltd.

2,670

2.0%

2,900

1.7%

230

Hiroshima Bank, Ltd.

2,927

2.1%

1,927

1.1%

(1,000)

Sompo Japan Nipponkoa Insurance Inc.

828

0.6%

1,828

1.1%

1,000

The Shizuoka Bank, Ltd.

500

0.4%

500

0.3%

0

75.4% 128,771

76.5%

25,700Total of Bank Loans

103,071

As of the end of Dec. 2018
Loans
Investment
Corporation Bonds

Investment Corporation Bonds

2,000

1.5%

-

-

(2,000)

4th Investment Corporation Bonds without Collateral

1,500

1.1%

1,500

0.9%

-

6th Investment Corporation Bonds without Collateral

3,000

2.2%

3,000

1.8%

-

8th Investment Corporation Bonds without Collateral

1,100

0.8%

1,100

0.7%

-

9th Investment Corporation Bonds without Collateral

1,000

0.7%

1,000

0.6%

-

8,600

6.3%

6,600

3.9% (2,000)

Total of Investment Corporation Bonds(for institutional investors)

5th Investment Corporation Bonds without Collateral

6,000

4.4%

6,000

3.6%

-

9,000

6.6%

9,000

5.3%

-

10th Investment Corporation Bonds without Collateral

10,000

7.3%

10,000

5.9%-

11th Investment Corporation Bonds without Collateral

-

-

8,000

4.8%

8,000

Total of Investment Corporation Bonds(for individual investors)

25,00018.3%

33,000

19.6%

8,000

Total of Investment Corporation Bonds

33,60024.6%

39,600

23.5%

6,000

136,671 100.0% 168,371 100.0%

31,700Total of Interest-Bearing Debt

76.5%

Status of Credit Rating
Japan Credit Rating Agency, Ltd.
(JCR)

A+ (stable)

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

A

(stable)Status of Reserve for Special Advanced Depreciation
 A part of gain on sale of three properties sold in 2018 are retained
as reserve for special advanced depreciation

Investment Corporation Bonds(for individual investors)
7th Investment Corporation Bonds without Collateral

23.5%

24.6%

75.4%

Investment Corporation Bonds(for institutional investors)
3rd Investment Corporation Bonds without Collateral

As of the end of June 2019

Reserve for special
advanced depreciation

25

JPY1,174MM

1. Financial Conditions (cont.)
Negative Goodwill

Changes in Appraisal Value (Unrealized Gains)<Policy for Use of Negative Goodwill>(JPY: Bn)

1. Add JPY262 million (50-year amortization amount ofnegative goodwill) to dividends every period•

500

Cope with losses caused by property dispositions
Cope with loss on retirement of noncurrent assets
Cope with dilution of dividend per unit
Cope with inconsistency between tax and accounting treatments(Amortization of fixed-term leasehold of land, amortization ofasset retirement obligations, etc.)
Cope with suspension of sales and such due to major renovation
works with significant impact on revenues＜Amount used in FY12/2018＞50-year amortization amount on negative goodwill
Cope with loss on retirement of noncurrent assets
Cope with major renovation works
Total amount
Balance of Negative Goodwill after the end of
December 2018

＜Amount to be used in FY12/2019＞50-year amortization amount on negative goodwill
Cope with loss on retirement of noncurrent assets
Cope with major renovation works
Adjustment for dilution
Total amount
Balance of Negative Goodwill after the end of
December 2019 (forecast)

:
:
:
:

439.3

437.5

122.1

130.7

398.7

400

302.1

300

148.5

113.8

78.7

JPY262MM
JPY35MMJPY265MM
JPY563MM

205.4
200

34.8

374.3

JPY11,794MM

:
:
:
:
:

522.9

Unrealized Gains

2. In addition to above, dividends will be increased in
response to the following••••

Book Value

284.9
100

JPY262MM
JPY247MM
JPY357MM
JPY310MM
JPY1,177MM

170.5

317.2

306.7

38.5%

42.6%

223.3

0

Ratio of
Unrealized
Gains

JPY10,616MM(*) The "50-year amortization amount of negative goodwill" includes amortization, etc. of fixed-termleasehold of land, asset retirement obligations, etc. of Oriental Hotel Fukuoka Hakata Station and
HOTEL ASCENT FUKUOKA, which were purchased in the year ended December 2016 (17th Period).

20.4%

35.2%

39.9%

FY12/2014
FY12/2015
FY12/2016
FY12/2017
FY12/2018 End of June
(15th Period) (16th Period) (17th Period) (18th Period) (19th Period)
2019(20th Period)(*) Unrealized gains are calculated by subtracting book value from appraisal value.

26

39.7%

Memo

27

Ⅶ. Market Environment

1. Market Environment (cont.) The number of inbound continues to increase
the government's target: 40 million in 2020, 60 million in 2030

 Approximately 86% inbound visitors are from Asian countries
 Double-digit growth in inbound visitors from Europe, USA andAustralia

Changes in Number of Inbound Visitors

Inbound Visitors by Country in 201831,191+8.7%
28,691

30,0008,000

24,039+21.8%

25,441

19,737

2,000

1,526

Source: Number of International Visitors to Japan by Japan National Tourism Organization(JNTO)(*) The numbers for Jan.-Apr. 2019 are provisional numbers, and May–Jun. are estimatednumbers.

USA

Canada331

95

Russia215

Germany

334 305

France2019

154

United Kingdom

2018Jan.-Jun. Jan.-Jun.

Vietnam2018

Philippines

2017

Malaysia

2016

Thailand2015

Hong Kong

0437 468 397 504 389

India

1,000

2014

8.2%

1,132

6,041

2013

11.1%

15
10
5

2,208

-1.1%

10,8807,962

2012

11.0% 11.6%

7.6%

6.6%

Taiwan

0

13.5%

10.1%

4.2%

China

5,000

8,358

14.6%

8.2%

3,000 5.6%

10,363

12.6%

20

4,757

4,000

16,969

14.7%

13.9%

Indonesia

13,413

18.8%

5,000

16,633
15,89921,049+47.1%
15,000

+4.6%

25

22.7%

7,539

Singapore

20,000

6,000

30

25.9%

7,000

+19.4%
25,000

8,380

0
1,468

-5

552

Others

9,000

Number of Inbound Visitors
Tourists

South Korea

35,00010,000

Increase (decrease) compared tothe previous year (%)(Thousands)

Australia(Thousands)-10

Source: Visitor Arrivals by Country/Area & Purpose of Visit for 2018 (provisional figures)by
Japan National Tourism Organization (JNTO)

29

1. Market Environment
 New supply of rooms has been increasing, mainly in Tokyo
and Osaka

 Inbound visitors drew the lodging demand The number of overnight guests has been solid
Changes in Number of Overnight Guests in Japan

Number of New Supply of Rooms in Hotels/Ryokans in Japan(Guest nights in millions)

600

500

<Japan>(No. of Rooms)

No. of Japanese Overnight Guests
No. of Inbound Overnight Guests

80,000

+5.6%
538
+3.5%
+6.5% -2.3%
510
504
+1.6%
492
+6.0%
474
466
439

54,32360,00040,00020,0000
Ratio of New Supply
Excl. Tokyo, Osaka(%: change from theprevious year)400

16,51732,988

413

432

429

438

423

444

12,000

+4.3%
262
251

6,000
0
Ratio of New Supply

200

100

0

CAGR (Compound Average Growth Rate)of Japanese overnight guests+18.3%+1.2%+14.8%+46.4%+5.8%+33.8%+27.3%
80
69
66
45
33
26
2012

2013

2014

2015

2016

2017

94
2018

205

(%: change from theprevious year)

210

46

52

+3.9%
+2.9%

+3.4%
+2.4%

+2.8%
+2.5%

2016

2017

2018

2019

2020

2021~

<Tokyo>

2018

2019

Jan.-Jun. Jan.-Jun.

Source: Statistics of Overnight Travel by Japan Tourism Agency(*) Rounded off to the nearest millions of people.
Numbers for Jan.-May 2019 are second preliminary figure, numbers for June 2019 are
first preliminary figure.

11,828
6,107

Ratio of New Supply(%: change from theprevious year)

13,513

15,748

7,853

5,866

5,767

5,660
+4.1%

+3.8%

+7.4%

+7.9%

+8.5%

+3.1%

2016

2017

2018

2019

2020

2021~

<Osaka>8,626

10,000047,475

+3.4%
+2.5%

15,0005,000

32,732

+2.1%
+1.7%

(No. of Rooms)+13.6%

58,068

+1.1%
+0.7%

18,000430

65,000

Supply Forecast

32,268(No. of Rooms)

300

Actual

5,018
1,402

11,907
6,825

8,086

5,541

5,082

+1.8%

+6.3%

+10.2%+12.8%

+7.7%

+5.3%

2016

2017

2018

2019

2020

2021~

Source: Estimated by the Asset Management Company using data from "Public Health Administration Report" by Ministry of
Health, Labour and Welfare (MHLW), a weekly hotel & restaurant magazine (HOTERES), and Nikkei Telecom.
(*) Ratio of new supply is the number of new rooms to be supplied in a year to the stock of rooms at the beginning of theyear. With regard to the above data, please note that in case the number of rooms are stated as "to be determined" byhotels, the asset management company has used 180, the average number of new supply of hotel rooms, for calculation.

30

1. Market Environment (cont.)
 Coming big sports events in Japan
Rugby World Cup Japan 2019

The 2020 Tokyo Olympic and Paralympic Games
Venue Map

Overview and Match Venues
Date: September 20 toNovember 2(44 days)

Tokyo Stadium(Rugby, Football)Match: 48 matches
City: 12 cities
Tickets to be sold: 1.8 million

Olympic Village

Sapporo DomePortion purchasedin overseas: 33%
Expected Overseas Visitors
to Japan for the Matches: 400,000 visitors
Hanazono Rugby
Stadium
Fukuoka
Hakatanomori
Stadium

Odaiba Marine Park

Kamaishi
RecoveryMemorial
Stadium

Date
Olympic: July 24 to August 9
Paralympic: August 25 to September 6

Kumagaya
Rugby Stadium

Source: Prepared by the Asset Management Company based on the website of Bureau of Olympic andParalympic Games Tokyo 2020 Preparation

Changes in Number of International Tourist Arrivals
after Olympics and Paralympics(times)
1.25
1.20
1.15
1.10
1.05
1.00
0.95

International Stadium
Yokohama
City of Toyota
Stadium

Kumamoto
Stadium

Oita
Stadium

IBC/MPC Tokyo
International Exhibition
Centre (Tokyo Big Sight)

Shiokaze ParkTokyo Stadium

Kobe Misaki
Stadium

Olympic Stadium(Opening and Closing
Ceremonies, etc.)

Shizuoka
Stadium Ecopa

Greece (Athens Olympics in 2004)
China (Beijing Olympics in 2008)

Olympic

One year

UK (London Olympics in 2012)
Brazil (Rio de Janeiro Olympics in 2016)

Two years

Three years

Four years

year
after
after
after
after
Source: Prepared by the Asset Manager based on the data from "International tourism, number ofarrivals" by World Bank and "Tourism Highlights 2018 Edition" by UNWTO(*1) The data were statistics in the past and those will be not guaranteed for the change after Tokyo
Olympics and Paralympics.
(*2) Figures one year after Olympic in Brazil are estimated figures.

Hotels owned by JHR
Stadiums

Source: Prepared by the Asset Management Company based on the official website of
Rugby World Cup 201931

1. Market Environment (cont.)
 Approximately 5% increase is expected in air passenger
traffic in Asia-Pacific in coming 20 years

 Various international events, conferences, and infrastructure
improvement are scheduled on and after 2019, and further growthof tourism industry is expected

World Air Passenger Traffic Forecast (2018–2038)

Coming Major Events related to Tourism, etc. in Japan
International Events,
Conferences, etc.

2019 • 7th International Conference on • Large increase in tourism budget following
introduction of International Tourist Tax
African Development• Shinko Pier Cruise Terminal (Yokohama)(Yokohama) (Aug.)• Rugby World Cup Japan 2019 Expansion(nationwide) (Sep. – Nov.)
2020 • Tokyo 2020 Summer
Olympics & Paralympics
Games (nationwide)(Jul. – Sep.)• New area is planned to open in Universal Studio
Japan (Nintendo-themed)• "Large-scale Development at Tokyo Disneyland",new areas and facilities are planned to open
(Beauty and the Beast, etc. is themed)• Tokyo International Cruise Terminal is plannedto open in Odaiba (July)+4.4%/year
1,903

Europe+4.3%/year
169

7,784

359

753

Middle East
+4.7%/year

Africa
+3.8%/year

3,443
1,856

2,781

North America+3.1%/year

Asia-Pacific+5.3%/year

423

864

Latin America+3.6%/year■ RPK in 2018 (Actual) ■ RPK in 2038 (forecast) Percentage in Average Growth 2019–2038
Source: Prepared by the Asset Management Company based on ”Worldwide Market Forecast of Private
Aircraft (2019–2038) by Japan Aircraft Development Corporation(*) RPK (Revenue Passenger Kilometers) represents transportation performance with revenue passengers
on board and flown. The number of revenue passengers × Transportation distance (kilometers).

• “Large-scale Expansion Project at Tokyo Disney
Sea", new theme port is planned to open(“Fantasy Springs”)• Extension of Kyushu Shinkansen(Takeo Onsen and Nagasaki)• Extension of Hokuriku Shinkansen(Kanazawa and Tsuruga)

2023• Mixed-use developments including convention
center in Rinku Central Park
(Izumisano-City, Osaka)2024• Integrated Resorts commence operation• New subway station, “Yumeshima” is planned toopen, and station building is planned to open

Future Airport Development Plan
New Chitose Airport 2020

• Expansion of terminal building

Narita International End of Oct.,
Airport2019• Extension of night time flight operating hours by
1 hourHaneda Airport

2025 • World Expo 2025
(Osaka, Kansai Expo 2025)
2027

World as a whole

1,9742021 • World Masters Games 2021
Kansai (May)• 19th FINA World Aquatics
Championships 2021 Fukuoka(Jul. – Aug.)
2022(unit: 1Bn passenger kilometers)

4,559

Others• Linear Chuo Shinkansen line commences
operation(*) As events are those scheduled as of July 31, 2019 and may be changed.

322030 and thelatter half of2030s• Departure and arrival slots will be increased to400,000 times in 2030 and 500,000 in latter halfof the 2030s from 256,000 in FY2018 (actual)

2020• Expansion of departure and arrival slots ofinternational flights (from 60,000 to 99,000)

Kansai International Until 2025
Airport• Increase in capacity to accept passengers by
about 10 million a year

Fukuoka Airport

2025• Commencement of the second runway

Naha Airport

2020• Commencement of the second runway(*) These are plans as of July 31, 2019 and may be changed later.

Appendix 1
JHR's Characteristics and Strategy

1. JHR's Investment Targets
Strong ability in acquiring properties

Aim to increase dividend
for mid to long term Highly recognized as Japan's largest J-REIT specializing
in hotels
 High presence and credibility in the property market bycontinuously acquiring properties Capability to propose various acquisition schemes and to
execute acquisitions

High capability in achieving internal growthHighcapability inachievinginternal
growthStrongability inacquiringproperties

 Management approach through active asset management
strategies that achieves a good balance between stability
and upside potential
 Increase in hotel revenue through collaboration with highquality operators
 Attract inbound demand through enhanced international
brand portfolio
 Strengthen and maintain competitiveness by investing inappropriate capital expenditures

Stablefinancingcapability

Stable financing capability
 Secure sound and stable finance Diversify financing methods

34

2. Simultaneous Pursuit of Stability and Upside Potential
 JHR pursues both stability and upside potential by steadily implementing growth strategies

Ensure Stable Revenue

Pursue UpsideManagement
contract structure

Fixed rent structure

Variable rent
structure

Revenue sharing
structure

Active Asset Management Strategies

 Appropriate monitoring of hotel operation
 Capital expenditures to maintain competitiveness and asset value

 Change in rent structures and rebranding Strategic capital expenditures, etc.

Maintain and improve rent-paying capacity of tenants, etc.

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

Proportion of Rental Income

Proportion of Rent Structures(as of August 22, 2019)(Annualized effect (forecast) of FY12/2019)

Fixed rent only(*)

Fixed rent

Variable rent(*)

60.8%

39.2%

11 properties
Variable rent, etc.(*)

32 properties

Variable rent, Rent from revenue sharing andIncome from management contracts.

(*)

35

Fixed rent + variable rent structure
Fixed rent + revenue sharing structure
Variable rent structure and management contract structure.

3. External Growth Strategy
Recognition of External
Environment
Trend of the Hotel
Investment Market

 Amid gradually recovering
economy, hotel revenue hasremained stable as a result of
stable domestic leisure demand andstrong growth of inbound tourists
mainly from Asian countries.
 Hotel assets have further
strengthened their position as
investment targets due to
expectations for big events such as
the Rugby World Cup Japan in 2019
and the 2020 Tokyo Olympics andParalympics. In addition,competition for acquisitions in the
hotel investment market is severe,due to the decline in yields on otherasset classes and the increase in
the number of players in hotel
investment and hotel development,
including new private funds.
 New supply of hotels is on the rise,
responding to the increasing
number of inbound visitors.
Depending on specifications,locations, capability of hotel
operators, the superiority or
inferiority in competitiveness ofhotel is becoming more clearly.
Therefore, differentiation between
hotels is becoming more important.

Basic Policies
 Acquire highly competitive hotel real estate, etc. in areas that have potential to attract "demand byboth domestic and inbound leisure customers" in the medium to long-term
 Improve profitability, stability, and quality of the overall portfolio

Key Measures
 Emphasize the superiority of buildings and facilities (infrastructure), operations (services), and locationsof hotel real estate, etc.
• The prime investment targets are "full-service hotels" and "resort hotels" that have high barriers toentry due to operation and management know-how, capital outlay and locations• In the case of "limited-service hotels," the creditworthiness of the hotel lessee, the age of thebuilding, location, guest room composition and profitability are important• Limited service hotels specialized in selling single rooms are carefully chosen• Especially, proactively review the purchase of hotels that have potential for internal growth byimplementing active asset management or the possibility of synergy effect with the existing properties 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 structure upon renewal, etc., cost reduction
possibilities, and possibilities to improve buildings and facilities• Particularly, if the hotel pays variable rent, etc., promote internal growth through collaboration withlessees and/or operators

36

4. Internal Growth Strategy
Recognition of External
Environment
Hotel Market Environment
 In addition to stable domestic
leisure demand, due to thegovernment policy to promote
tourism nation, the number of
inbound tourists, mainly from
Asian countries, is continuing torise. Amid such growth
expectation for Japan's tourism
and hotel industries, although
there are needs to carefully
monitor some impact by supplyof new hotels and Minpaku(private lodging for a fee),demand for accommodation is
expected to stay firm.

Basic Policies
 Pursue both stability and upside potential by steadily implementing active asset management strategies

Key Measures Planning and execution of the active asset management in order to realize pursuit in upside revenue• Make strategic CAPEX which will improve profitability and strengthen competitiveness mainly at hotels
with high growth potential• Raise rent and change to rent structures that can achieve upside revenue• Reduction of management contract fee of properties under management contract• Attract inbound demand through rebranding to international brands• Make proactive proposals to build effective hotel operating structures which aim to maximize GOP,
from the perspective of both hotel sales and expenses• Increase hotel revenue through collaboration with high-quality operators
 Planning and execution of strategic CAPEX which secure steady revenue, and monitoring of lessees• Analyze the creditworthiness of hotel lessees, understand hotel income and expenditures, closely
observe and improve rent-paying capacity• Maintain and improve rent-paying capacity of tenants, etc. through capital expenditures, which leadto maintain competitiveness and asset value37

5. Financial Strategy
Recognition of External
Environment
Trend of Financing Environment
and Interest Rates
 In the first half of 2019, boththe number of J-REIT public
offerings (including IPOs) andthe amount of funding were
below the previous year’s level,
but the Tokyo Stock Exchange
REIT Index remained firm andconditions remained favorable.
 As for investment corporation
bonds, issuance of green bonds
increased. Interest rates arealso on a declining trend as
long-term interest rates decline.
 There is no particular change inthe lending attitude of financial
institutions. Both short-termand long-term interest rates
remain at low levels. Althoughdrastic change may not happen
in the financial environment,
some attention should be paid
to fluctuations in long-term
interest rates mainly due tointernational factors.

Basic Policies
 Ensure healthy and stable finance Strengthen lender formation and relationships with financial institutions
 Diversify financing methods

Key Measures
 Maintain LTV level at a maximum of 50% (total asset base) for the time being
 Diversify financing methods such as public offerings and issuance of investment corporation bonds
 Improve financial stability by extending and diversifying repayment periods and fixing interest rates,etc.
 Optimize borrowing costs38

6. Initiatives for Sustainability
Aiming for mid to long-term growth to coexist with society and environment and working on to enhance sustainability based onsuitable actions for ESG issues
Sustainability Policy
 JHR and JHRA have established "Sustainability
Policy", which defines material issues andinitiatives for sustainability in our business
Sustainability Policy

Acquisition of BELS Certification(*1)
 JHR has acquired a BELS certification for our two properties, Hotel Nikko Alivila and Mercure Okinawa
Naha, for the first among J-REIT owned hotels
Hotel Nikko Alivila

Mercure Okinawa Naha Monitoring and improvement ofenvironmental performance in our portfolio
 Promotion of comfortable, healthy, secureand safe hotels
 Promotion of ESG in value chains Consideration for and contribution to local
communities
 Initiatives for our officers and employees Compliance as corporate citizens
 Improvement of transparency andengagement with our stakeholders

GRESB Real Estate Assessment(*3) (September 2018)
 JHR has received a "Green Star" designation, as it is evaluatedin both areas "Management & Policy" and "Implementation &Measurement" with regards to initiatives for environmental
considerations and sustainability▶ Highest ranking
Acquired

Green Star▶ “GRESB Rating”
Acquired

SMBC Environment Assessment
Loan(*2) (March 2018)
 Acquisition of "A" grade• Took out a loan using the SMBC
Environmental Assessment
Loan which evaluated JHR's
excellent initiatives forenvironmental
considerationsin assetmanagement

4-starIssuance of Green Bonds (July 2019)
 Issuance of the twelfth unsecured investment
corporation bonds of JHR (Green Bonds)(for the first among J-REIT specializing in hotels)
Amount: JPY2Bn
Duration: 5 years
 Usage of the Green Bonds• Funds to repay procured funds for renovationof Oriental Hotel Fukuoka Hakata Station• Funds for constructions for renovation etc. ofthe other hotels(*1) BELS (Building-Housing Energy-Efficiency Labeling System) is a display system of energy conservation performance of a building set by Ministry of Land, Infrastructure, Transport and Tourism.
(*2) "SMBC Environmental Assessment Loan" assesses status of corporate initiatives for environmental considerations, on loan execution and establishment of lending conditions, based on environmental assessment
criteria developed independently by Sumitomo Mitsui Banking Corp. and the Japan Research Institute, Limited.
(*3) The GRESB is an annual benchmarking program to evaluate ESG considerations of property companies and real estate funds. The GRESB Real Estate Assessment is distinguished by its comprehensive evaluation of
initiatives for sustainability of property companies, REITs and real estate funds, not of individual properties. GRESB rating is a relative evaluation based on comprehensive scores and the highest being "5-stars".

39

6. Initiatives for Sustainability (cont.)
Initiatives led by JHR

Initiatives led by each hotel

Initiatives for renovation works at hotels in
consideration of saving energy and environment
 Oriental Hotel Fukuoka Hakata Station

Promotion of Eco-Cleaning in HMJ Hotels
 Hotel Nikko Alivila• Changed from central air conditioning to individual air conditioning⇒ Enable to operate air conditionings only in necessary areas tosave energy and improve comfortability of guests

Two types of promotion named"Eco-Cleaning" and"No- Cleaning" are available• Change all lighting to LEDs
⇒ Promote energy conservation

The hotel gives post cards toguests who selects "Eco-cleaning"＜After＞

In addition, the hotel gives a
JPY1,000 voucher which can beused in the hotel to guests who
select "No-cleaning"＜Before＞

 Promotion of Eco-Cleaning

Other than the above hotel, 10 out of 13 HMJ Hotels has
introduced the "Eco-Cleaning"
What is "Eco-Cleaning":
Encourage cost and CO2 reductions by selecting "no sheets
replacement" or "no room cleaning"

Initiatives for plastic reduction

Initiatives for renovation for smoking ban

 Okinawa Marriott Resort & Spa

 HMJ Hotels and other hotels•• Abolished the use of plastic straws and replaced all withpaper straws (since February 2019)

In order to improve the satisfaction of hotel guests and hotel
staff, JHR has been implementing renovation for non-smoking
rooms

 Hilton Nagoya• Abolished the use of plastic straws and started to use
paper straws• Discontinued the use of PET bottles in guest rooms and started
to use bins instead• Non-smoking room ratio (based on the room numbers):

89% (the beginning of 2018) ⇒ 96% (the end of March 2019)⇒ Promote a comfortable stay environment for hotel guests and ahealthy and comfortable working place for employees ibis Styles Sapporo• Abolished the use of plastic straws

40

7. Benefits Program for Unitholders
JHR implemented benefits program for unitholders to obtain a better understanding, improve their satisfaction and expand the investor
base. JHR also expanded the benefits program in 2019 by adding two newly acquired hotels, aggregated coverage to 20 hotels.
Eligible recipients of complimentary couponsComplimentary coupons will be sent to those who hold ten or more JHR units
at the end of June every year (end of the midterm settlement)<FY2019 (plan)>
Eligible unitholders: 12,120
Valid period: One year between October 1, 2019 to September 30, 2020

Details of the benefits program
Five complimentary coupons for accommodations and fivecomplimentary coupons for restaurants(*)
10% discount from the best rate for accommodation by each
hotel and 10% discount for restaurants(*) Complimentary coupons for restaurants are only available at selected hotels

Hotels that offer the Benefits Program
The 14 HMJ Hotels

Kobe Meriken Park
Oriental Hotel

Sheraton Grand
Hiroshima Hotel

Oriental Hoteltokyo bay

Namba
Oriental Hotel

Oriental Hotel Fukuoka Holiday Inn
Hakata Station
Osaka Namba

Hotel Nikko Nara

Newly Added

Oriental Hotel
Hiroshima

The Six Accor Hotels

Hotel Nikko Alivila

Hilton Tokyo
Narita Airport

Hilton Tokyo Odaiba

Okinawa Marriott
Resort & Spa

International Garden Hotel Narita

Hotel Oriental Express Osaka Shinsaibashi

41

ibis Tokyo Shinjuku

ibis Styles Kyoto Station

Mercure Sapporo

ibis Styles Sapporo

Mercure Okinawa Naha

Mercure Yokosuka

Appendix 2
Information on Properties

1. Property List (1/2)(as of the end of June 2019)
Appraisal ValueNo.

Hotel Type(*1)

Property Name

Grade
(*2)

No. of
Guest
Rooms

LocationAge(*3)

Acquisition
Price(JPY MM)(*4)

Book Value(JPY MM)(*5)

19th Period(as of December 31,
2018)

20th Period(as of June 30, 2019)

Appraisal
Value(JPY MM)CAP Rate

Appraisal
Value(JPY MM)CAP Rate

Investment
Ratio
(*6)

Revenue
P/L fromfrom Real
Real Estate
NOI
Estate(JPY1,000) Operation
Operation(JPY1,000)(*7)(JPY1,000)
(*7)
(*7)

NOI Yield(forecast)(*8)

1

Kobe Meriken Park Oriental Hotel

Full-service

Uppermiddle

319

Hyogo

24.0

10,9009,871

15,8005.2%

16,2005.1%

2.9%

504,988379,913

216,016

9.3%

2

Oriental Hotel tokyo bay

Full-service

Mid-price

511

Chiba

24.2

19,90017,83934,1004.5%

34,900

4.4%

5.3%

916,509857,463641,508

9.0%

3

Namba Oriental Hotel

Limited-service

Mid-price

258

Osaka

23.3

15,00014,62832,9004.3%

32,9004.1%

4.0%

742,215

690,136

610,772

9.3%

Full-service

Uppermiddle

227

Hiroshima

25.8

4,100

4,164

4,350

7.5%

4,370

7.5%

1.1%

218,792

196,652

153,415

10.4%

4

Oriental Hotel Hiroshima

5

Hotel Nikko Alivila

ResortLuxury397

Okinawa

25.3

18,90018,16731,5004.9%

32,9004.8%

5.0%

589,764

515,796

359,058

9.7%

6

The Beach Tower Okinawa

ResortMid-price

280

Okinawa

15.3

7,610

6,622

9,810

4.5%

10,0004.4%

2.0%

255,524

234,229

168,256

6.1%

7

Hakone Setsugetsuka

ResortMid-price

158

Kanagawa

12.8

4,070

3,710

5,200

5.0%

5,300

4.9%

1.1%

147,482

135,741

89,552

6.6%

8

Dormy Inn Kumamoto

Limited-service

Mid-price

291

Kumamoto

11.4

2,334

2,145

3,000

5.7%

3,060

5.6%

0.6%

97,23086,72965,3947.3%

9

the b suidobashi

Limited-service

Mid-price

99

Tokyo

32.9

1,120

1,209

1,940

4.3%

1,940

4.1%

0.3%

52,361

45,62831,880

8.7%

(*9)

10

dormy inn・global cabin Asakusa

Limited-service

Economy

75

Tokyo

22.3

999

946

1,330

4.0%

1,330

3.9%

0.3%

31,997

27,61820,875

5.4%

11

Hakata Nakasu Washington Hotel Plaza

Limited-service

Mid-price

247

Fukuoka

24.3

2,130

2,034

4,440

4.6%

4,520

4.4%

0.6%

120,000

112,000

99,000

10.5%

12Nara Washington Hotel Plaza

Limited-service

Mid-price

204

Nara

19.3

2,050

1,799

2,430

5.2%

2,440

5.0%

0.5%

75,00066,00049,000

6.5%

13

R&B Hotel Ueno-hirokoji

Limited-service

Economy

187

Tokyo

17.2

1,720

1,812

1,950

4.0%

2,010

3.9%

0.5%

48,646

41,50633,357

4.7%

14

Comfort Hotel Tokyo Higashi
Nihombashi

Limited-service

Economy

259

Tokyo

11.4

3,746

3,541

5,680

4.4%

5,830

4.3%

1.0%

152,351

136,978

118,862

6.8%

15

Smile Hotel Nihombashi Mitsukoshimae

Limited-service

Economy

164

Tokyo

22.3

2,108

2,025

3,120

4.1%

3,160

4.0%

0.6%

87,423

79,682

69,483

6.5%

16

Toyoko Inn Hakata-guchi Ekimae

Limited-service

Economy257

Fukuoka

17.8

1,652

1,428

2,780

4.5%

2,780

4.5%

0.4%

70,51963,88754,777

7.7%

17

Hotel Keihan Universal City

ResortMid-price

330

Osaka

18.0

6,000

5,926

13,9004.9%

13,9004.9%

1.6%

457,124

419,574

376,957

11.1%

18

Chisun Inn Kamata

Limited-service

Economy

70

Tokyo

16.2

823

777

1,440

4.5%

1,450

4.5%

0.2%

41,54138,06032,4439.3%

19

Hotel Vista Kamata Tokyo

Limited-service

Economy

105

Tokyo

27.4

1,512

1,465

2,040

4.5%

2,040

4.5%

0.4%

46,86739,71027,272

6.6%

20

Sotetsu Fresa Inn ShimbashiKarasumoriguchi(*10)

Limited-service

Mid-price

220

Tokyo

11.3

4,800

4,813

8,810

4.0%

8,970

3.9%

1.3%

279,734

248,202237,326

7.9%

21

Hilton Tokyo Bay

ResortLuxury

828

Chiba

31.0

26,05026,46039,6004.4%

40,4004.3%

7.0%

989,059

846,589763,274

6.7%

22

ibis Tokyo Shinjuku

Limited-service

Mid-price

206

Tokyo

38.8

7,243

8,011

9,650

4.2%

10,2004.0%

1.9%

329,048

232,130

176,362

7.2%

23

ibis Styles Kyoto Station

Limited-service

Mid-price

215

Kyoto

10.3

6,600

6,678

11,500

4.4%

11,6004.3%

1.8%

236,489

213,830

195,785

6.4%

24

ibis Styles Sapporo

Limited-service

Mid-price278

Hokkaido

8.9

6,797

6,636

10,800

4.9%

11,2004.7%

1.8%

289,026

225,463

184,453

8.4%

25

Mercure Sapporo

Limited-service

Mid-price285

Hokkaido

10.2

6,000

5,888

10,700

4.7%

11,0004.6%

1.6%

370,423265,809220,680

9.6%

43

1. Property List (2/2)(as of the end of June 2019)
Appraisal ValueNo.

Property Name

Hotel Type
(*1)

Grade
(*2)

No. of
Guest
Rooms

LocationAge(*3)

Acquisition
Price(JPY MM)(*4)

Book Value(JPY MM)(*5)

19th Period(as of December 31,
2018)

20th Period(as of June 30, 2019)

Appraisal
Value(JPY MM)CAP Rate

Appraisal
Value(JPY MM)CAP Rate

Investment
Ratio
(*6)

Revenue
P/L fromfrom Real
Real Estate
NOI
Estate(JPY1,000) Operation
Operation(JPY1,000)(*7)(JPY1,000)
(*7)
(*7)

NOI Yield(forecast)
(*8)

26

Mercure Okinawa Naha

Limited-service

Mid-price

260

Okinawa

9.9

3,000

2,875

7,760

4.8%

7,760

4.6%

0.8%

172,205

135,954

107,235

10.1%

27

the b ikebukuro

Limited-service

Mid-price

175

Tokyo

37.0

6,520

6,594

7,330

4.3%

7,350

4.2%

1.7%

182,222

169,494

152,843

5.3%

28

the b hachioji

Limited-service

Mid-price

196

Tokyo

32.9

2,610

2,683

2,780

5.2%

2,790

5.1%

0.7%

94,68582,64367,4136.3%

29

the b hakata

Limited-service

Mid-price

175

Fukuoka

21.8

2,300

2,344

4,530

4.4%

4,710

4.3%

0.6%

120,631

114,519

103,841

10.3%

30

Hotel Francs

Full-service

Mid-price

222

Chiba

27.9

3,105

3,168

4,090

4.7%

4,090

4.6%

0.8%

150,000

117,91396,7097.6%

31

Mercure Yokosuka

Full-service

Mid-price

160

Kanagawa

25.7

1,650

1,663

2,940

4.7%

3,000

4.6%

0.4%

200,934

145,652

126,507

13.9%

361

Okinawa

14.4

14,95014,92418,6005.0%

18,7004.9%

4.0%

300,619

258,432

121,724

6.4%

32

Okinawa Marriott Resort & Spa

ResortUppermiddle

33

ACTIVE-INTER CITY HIROSHIMA

Full-service

Luxury238

Hiroshima

8.8

17,32017,495

21,1004.6%

21,7004.5%

4.6%

780,667

561,725

460,672

6.8%

34

CANDEO HOTELS UENO-KOEN

Limited-service

Mid-price

268

Tokyo

9.5

6,705

6,671

7,630

4.0%

7,630

4.0%

1.8%

174,989

161,831

141,877

4.8%

35

Oriental Hotel Fukuoka Hakata
Station(*11)

Full-service

Uppermiddle

221

Fukuoka

34.0

7,197

10,055

8,500

4.7%

14,0004.6%

1.9%

199,999

77,322-268,084

6.3%

36

Holiday Inn Osaka Namba

Limited-service

Mid-price

314

Osaka

10.9

27,00027,134

27,200

4.4%

27,200

4.3%

7.2%

515,258

491,559

413,899

3.7%

37

HOTEL ASCENT FUKUOKA

Limited-service

Economy263

Fukuoka

20.2

4,925

5,171

6,540

4.9%

6,630

4.8%

1.3%

216,587

145,991

127,579

6.1%

38

Hilton Nagoya

Full-service

Luxury

460

Aichi

30.4

15,25015,565

15,7004.3%

16,000

4.2%

4.1%

695,425

342,754

266,440

4.8%

548

Chiba

25.9

13,175

13,412

13,4004.7%

13,7004.6%

3.5%

407,814365,072

270,507

6.0%

39

Hilton Tokyo Narita Airport

Full-service

Uppermiddle

40International Garden Hotel Narita

Full-service

Mid-price

463

Chiba

23.1

9,125

9,210

9,440

4.9%

9,650

4.8%

2.4%

309,065

286,897219,216

6.4%

Full-service

Uppermiddle

330

Nara

21.3

10,373

10,461

11,200

4.9%

11,2004.8%

2.8%

284,853

260,930

193,209

5.3%

Limited-service

Mid-price

124

Osaka

1.4

2,738

2,835

–

–

3,050

4.6%

0.7%

47,73546,32440,982

5.1%

714,630

713,404

654,448

4.4%

12,719,646 10,679,564 8,294,221

6.6%

41

Hotel Nikko Nara

42

Hotel Oriental Express Osaka
Shinsaibashi

43

Hilton Tokyo Odaiba

Full-service

Uppermiddle

453

Tokyo

23.5

62,40063,505––69,400

3.7%

16.7%

Total or Average (43 properties)––

11,701-

21.3

374,508374,378

437,510

4.6%

522,960

4.5%

100.0%

(*1)
(*2)
(*3)
(*4)
(*5)
(*6)
(*7)

Under the category of Hotel Type, "Full-service" is full-service hotel, "Resort" is resort hotel, and "Limited-service" is limited-service hotel.
Mainly based on ADR, etc., JHR has classified the hotels into four categories as "luxury," "upper-middle," "mid-price," and "economy."
Average age: Weighted average calculated as follows. The sum of (acquisition price of each property x property age)/Total acquisition price.
The acquisition price in the Purchase & Sale Agreement for the Beneficial Interest in Trust, etc. is indicated. (Consumption tax, amount equivalent to consumption tax, brokerage fee, and other purchase-related costs are excluded.)Book value as of the end of June 2019.
Investment ratio indicate percentage of the acquisition price of the each asset to the total acquisition price. Numbers beyond one decimal place is rounded off.
Actual for six months from January to June 2019. Since the lessees did not agree to disclose numbers in units of JPY1,000 for No. 11 and 12, amounts are rounded down to the nearest JPY million. Since No.42 and 43 were acquired during theperiod, numbers after acquisition is indicated.
(*8) NOI yield (forecast) states forecast NOI yield (annualized) for FY12/2019. NOI yield for the portfolio is calculated as follows: Total NOI for FY12/2019 (forecast) (annualized) ÷ total acquisition price of properties held as of the end of FY12/2019.
(*9) The name of the hotel was changed from Dormy Inn EXPRESS Asakusa on August 4, 2019.
(*10) The name of the hotel was changed from Hotel Sunroute Shinbashi on April 23, 2019.
(*11) The name of the hotel was changed from Hotel Centraza Hakata on April 9, 2019. The hotel grade was changed from "Mid-price" to "Upper-middle."

44

2. Summary of Lease Contracts (1/2)(as of the end of June 2019)
Lease
Type

Rent
Structure(*1)

Fixed-lease

Fixed +
Variable

No.

Property Name

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

8

Dormy Inn Kumamoto

Lease/ Expiration
Hotel Operator/
MC
Date of
Hotel Consulting andContract
Management Company Term

LesseeHotel Management Japan Co., Ltd.

Fixed-lease

Fixed(Fixed rent) JPY3,221MM/year +(Variable rent) When the total GOP of The In principle, the same rent will be
To be expired
Jan. 2016 Structure was modified
applied until expiration of theFive HMJ Hotels exceeds GOP base(Dec.)
amount (JPY3,351MM), the excess x 85% contract.
is paid20

Jun. 2026

JPY42MM/month20

Oct. 2026

JPY24MM/month

12Mar. 2023

JPY16MM/month9

dormy inn・global cabin Asakusa

Lease

Fixed

20

Mar. 2020

JPY5MM/month

Hakata Nakasu Washington Hotel
Plaza

Lease

Fixed

3

Mar. 2021

JPY20MM/month

11 Nara Washington Hotel Plaza

Lease

Fixed

Lease

Fixed

Comfort Hotel Tokyo Higashi
13
Nihombashi

Fixed+Revenue
Fixed-leasesharing

Smile Hotel Nihombashi
14
Mitsukoshimae
15 Toyoko Inn Hakata-guchi EkimaeLease

16 Hotel Keihan Universal City

Lease

17 Chisun Inn Kamata

18 Hotel Vista Kamata Tokyo
19

Sotetsu Fresa Inn ShimbashiKarasumoriguchi

20 Hilton Tokyo Bay
21 ibis Tokyo Shinjuku
22 ibis Styles Kyoto Station
23 ibis Styles Sapporo

Lease

Fixed-lease

Variable

Lease

Fixed+Revenue
sharing

25 Mercure Okinawa Naha–

26 Mercure Yokosuka

Fixed-lease

27 the b ikebukuro

Fixed-lease

28 the b hachioji

Fixed-lease

29 the b hakata

Fixed-lease
Fixed-lease

Fixed +
Variable
Fixed +
Variable
Fixed +
Variable
Fixed +
Variable

JPY11MM/month

Apr. 2022

JPY8MM/month

20

Jan. 2028

JPY21MM/month + Revenue sharing

20

Mar. 2020

JPY11MM/month + Revenue sharing

30

Sep. 2031

JPY11MM/month

K.K. Hotel Keihan

20Jun. 2021

Nondisclosure(*4)

Nondisclosure(*4)

2Dec. 2019

Hotel GOP x 86%(If the amount is below zero, it will be
JPY0)

4

Dec. 2021

JPY7MM/month + Revenue sharing

Solare Hotels &Resorts Co., Ltd.

SHR Hotels, Co., Ltd.

Vista Hotel Management Co., Ltd.

15

Mar. 2023

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

JPY18MM/month + Revenue sharing

No rule has been stipulated.
Rent can be modified throughmutual agreement.

－

－

－

－

Same

Apr. 2011
Apr. 2018
Apr. 2017
Oct. 2007

Increased(+3.0%)
Same(Introduced revenue
sharing)Renewed(same)
Increased (+9.4%)

Jul. 2014 Structure was modified.

－
－

－

－
－
To be
discussed(Apr.)To be expired(Mar.)－－－To be expired(Mar.)

－

－

－

－

－

To be expired(Mar.)－－－－

Renewed(the calculation method To be expired
Jul. 2017of variable rent was(Dec.)
modified)
Contract was renewed(the calculation method
Jul. 2015－of revenue sharing was－－

modified)－－

RenewedJan. 2019(Increased)
Changed toJul. 2012
management contract－－

Renewed(Jan.)－

4

Dec. 2022

JPY163MM/month + Revenue sharing

12

Jun. 2024

Amount equivalent to hotel GOP–

1Dec. 2019

Amount equivalent to hotel GOP

–

－

－

5

Dec. 2019

Amount equivalent to hotel GOP–

Dec. 2014

Changed to
management contract

To be expired(Dec.)To be expired(Dec.)

15

Sep. 2029

Amount equivalent to hotel GOP

–

－

－

－

－

10

Apr. 2024

Amount equivalent to hotel GOP

–

－

－

－

－

AAPC Japan K.K.

5

Aug. 2024

Linked to hotel GOP

Ishin Ikebukuro Operations K.K.

7

Jan. 2022

JPY163MM/year + Linked to hotel GOP

Ishin Hachioji Operations, Y.K.

7

Jan. 2022

JPY98MM/year + Linked to hotel GOP

Ishin Hakata Operations K.K.

7

Jan. 2022

JPY82MM/year + Linked to hotel GOP

Ishin Suidobashi Operations K.K.

－

Contract was renewed
Rent can be modified throughApr. 2017(same)
mutual agreement every three years.
Rent can be modified throughContract was renewed
Apr. 2018
mutual agreement.
(same)
Rent can be modified through－－mutual agreement.

Toyoko Inn Co., Ltd.

Management
contract
Management
contract
VariableMar. 2020

20－

Rent can be modified throughApr. 2017
mutual agreement every three years.

THE KAMOGAWA GRAND HOTEL, LTD

Greens Co., Ltd.

Fixed+Revenue
Sotetsu Hotel Development Co., Ltd.(*3)
sharing
Fixed+Revenue
THE DAI-ICHI
Hilton International
Fixed-leasesharing
BUILDING CO., LTD.
Company
Management–
contract
Management–
contract
Management–－
AAPC Japan K.K.
contract–

20

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

Rent can be modified throughmutual agreement.
Rent can be modified throughmutual agreement every five
years.
Rent can be modified throughmutual agreement.
No rule has been stipulated.

Fixed-lease

24 Mercure Sapporo

30 the b suidobashi

Fixed+Revenue
sharing
Fixed
Fixed+Revenue
sharing

Washington Hotel K.K.

Rent Modification Schedule(2019 to 2020)
2019
2020

Dec. 201910

12 R&B Hotel Ueno-hirokoji

Rent Modification Summary

Rent Modification Summary(After acquisition)
TimingCondition

8

Okura Nikko HotelManagement Co., Ltd.

Kyoritsu Maintenance Co., Ltd.

Contractual Rent(*2)

5

Jun. 2020

JPY85MM/year + Linked to hotel GOP

45

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

RenewedAug. 2019(Effectively increased)

－

－
－
－

Renewed(Aug.)

－

－

－

－

－

－

－

－

－

－

－

－

－

－

To be expired(June)

Jul. 2015

Rebranded2. Summary of Lease Contracts (2/2)(as of the end of June 2019)
No.

Property Name

31 Hotel Francs

Lease
Type

Rent
Structure(*1)

Fixed-lease

Fixed

Fixed-lease

Fixed +
Variable

33 ACTIVE-INTER CITY HIROSHIMA Fixed-lease

Fixed +
Variable

34 CANDEO HOTELS UENO-KOEN

Fixed

32 Okinawa Marriott Resort & Spa

Fixed-lease

Lease/ Expiration
Hotel Operator/
MC
Date of
Hotel Consulting andContract
Management Company Term

LesseeK.K. Bridal Produce
Lagoon resort Nago Co., Ltd.

K.K. A.I.C Hiroshima
Management

Luxury Hotels
International of
Hong Kong Limited.

Candeo Hospitality Management, Inc.

19

Oct. 2024

5

Dec. 202011

Dec. 2026

20

Feb. 2030

Oriental Hotel Fukuoka
Hakata Station

Fixed-lease

Fixed +
Variable

Hotel Centraza Co., Ltd.

4

Dec. 201936 Holiday Inn Osaka Namba

Fixed-lease

Fixed +
VariableOW Hotel Operations KK

15

Oct. 2031

37 HOTEL ASCENT FUKUOKA

Fixed-lease

Fixed

K.K.ASCENT.

7

Mar. 2026

Lease

Variable41

Dec. 2029

35

38 Hilton Nagoya

Nagoya Hilton Co.,Ltd.

Hilton International
Company

Fixed-leas

Fixed +
Variable

KK NaritaKosuge Operations

20

Jun. 2037

40 International Garden Hotel Narita Fixed-lease

Fixed +
Variable

KK NaritaYoshikura Operations

10

Jun. 2027

41 Hotel Nikko Nara

Fixed-lease

Fixed +
Variable

Hotel Management
Okura Nikko Hotel
Co., Ltd.
Management Co., Ltd.

3

Dec. 2020

39

Hilton Tokyo Narita
Airport42

Hotel Oriental Express Osaka
Shinsaibashi

Fixed-lease

Fixed +
Variable

K.K. HOTEL ORIENTAL EXPRESS

10

Mar. 2028

43

Hilton Tokyo Odaiba

Fixed-lease

Fixed +
Variable

Tokyo Humania Enterprise Inc.

11

Dec. 2029(*1) Rent structure is as follows:
Fixed: Fixed rent
Variable: Variable rentManagement contract: Management contract
Fixed + Variable: Property paying both fixed and variable rent
Fixed + Revenue sharing: When the sales of the hotel exceed pre-determined amount, additional rent is paid

Contractual Rent(*2)
JPY25MM/month

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

Rent Modification Summary(After acquisition)
TimingCondition

Rent Modification Schedule(2019 to 2020)
2019
2020

－

－

－

－

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

－－－

To be expired(Dec.)

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

－

－

－

－

Rent can be modified throughmutual agreement every three
years.

Jul. 2016

Renewed－－In principle, the same rent will
be applied until expiration of thecontract.

－－

To be expired(Dec.)－

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

－

－

－

－

Nondisclosure(*4)

Rent can be modified throughmutual agreement every three
years.

Apr. 2019

Renewed(Apr.)－

Nondisclosure(*4)

Rent can be modified throughmutual agreement.

Changed to fixed-termlease contract andrenewed the contract(Increased)

－

－

－

－

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

－

－

－

－

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

－

－

－

－

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

－－－

To be expired(Dec.)

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

－

－

－

－

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

－

－

－

－

(Fixed rent) JPY550MM/year +(Variable rent) When the total GOP
exceeds GOP base amount (JPY700MM),
the excess x 90% is paid
(Fixed rent) JPY348MM/year +(Variable rent) When the total GOP
exceeds GOP base amount (JPY468MM),
the excess x 82.5% is paid
Nondisclosure(*4)(Fixed rent) JPY400MM/year +(Variable rent) When the total GOP
exceeds GOP base amount (JPY425MM),
the excess x 90% is paid
(Fixed rent) JPY576MM/year +(Variable rent) When the total GOP
exceeds GOP base amount (JPY650MM),
the excess x 92.5% is paid

(Fixed rent) JPY444MM/year +(Variable rent) When the total GOP
exceeds GOP base amount (JPY550MM),
the excess x 86.5% is paid
(Fixed rent) JPY336MM/year +(Variable rent) When the total GOP
exceeds GOP base amount (JPY360MM),
the excess x 98% is paid
(Fixed rent) JPY420MM/year +(Variable rent) When the total GOP
exceeds GOP base amount (JPY470MM),
the excess x 91.5% is paid
(Fixed rent) JPY110MM/year +(Variable rent) When the total GOP
exceeds GOP base amount (JPY128MM),
the excess x 91% is paid
(Fixed rent) JPY3,100MM/year,
JPY1,600MM/year on and after January 1,
2022(Variable rent)• Until December 31, 2019: When
AGOP(*5) exceeds AGOP base amount(JPY2,450MM), the excess x 30% is paid
• On and after January 1, 2020: When
AGOP exceeds AGOP base amount(JPY2,970MM), the excess x 30% is paid
• On and after January 1, 2022: When
AGOP exceeds AGOP base amount(JPY1,660MM), the excess x 98% is paid(*2) Amount including car park and CAM without tax.
(*3) The lessee is changed to Sotetsu Hotel Management CO., LTD. on May 1, 2019.
(*4) The detailed content of the contract is not disclosed as consent on disclosure has not been obtained from the lessee.
(*5) AGOP (adjusted GOP) is the amount calculated by subtracting certain fees and other items from GOP.

46

3. Major CAPEX Ⅲ by Hotels* (Numbers in parentheses are CAPEX amounts: JPY MM)
FY12/2012

FY12/2013

FY12/2014

FY12/2015

FY12/2016

FY12/2017

Bridal salon (76)-FY12/2018

FY12/2019 Plan

Kobe Meriken Park
Oriental Hotel

-

-

-

Chapel (36)

Guest rooms on 7F(50)
Balconies on eachfloor (62)Bar (85)

Oriental Hoteltokyo bay-

Restaurant (45)--

Guest rooms on 4F(101)

Guest rooms on 11F to
12F (140)-

Namba Oriental
Hotel

-

Corner rooms on
5F to 8F (10)--Guest rooms on 9F Guest rooms on 7F
Guest rooms on 6F (78)
(91)
(77)

-

Hotel Nikko Alivila--

Guest rooms on 3F to
8F of North building
and 3F to 5F ofcentral building (333)-

Guest rooms on 9F(55)
Restaurant (31)-Guest rooms on 1F, etc(16)-

Oriental Hotel
Hiroshima--

Banquet room on 23F(10)-

Guest rooms on 7F
to 10F (43)Banquet room on
4F (38)-Chapel (10)Guest rooms on 13F to
14F (14)

Ibis Tokyo
Shinjuku

Lobby and restaurant
on 2F, and guest
rooms on 3,5,7,9F
(170)

-

-

-

Guest rooms on 3F Guest rooms on 3F
to 10F (192)
to 10F (312)--Holiday Inn
Osaka Namba

-

-

-

-

-

-

Guest rooms on
4,6,7,12F (115)

Guest rooms on 10F to
11F (72)

ibis Styles Sapporo

-

-

-

-

-

-

Vacant space on 1F (28)-

Mercure Hotel
Sapporo

-

-

-

-

-

-

Banquet room (15)-the b Ikebukuro

-

-

-

-

-

-

Guest rooms on 3F to
10F, etc. (18)-

Okinawa Marriott
Resort & Spa

-

-

-

-

-

-

-

Restaurant (142)

Oriental Hotel
Fukuoka
Hakata Station

-

-

-

-

-

-

-

Major renovation works(1,690)47

Restaurant (30)
Private rooms at
Conversion to guest
restaurant and balcony,
rooms from brides room
etc. on 3F (19)(40)

4. The Five HMJ Hotels – Highlights
Change in GOP and GOP ratio(JPY MM)

GOP

10,000
6,296

6,000

5,136

5,696

5,645

5,158

4,000
2,000
0

27.0%

CY200824.3%
CY2009

26.6%

25.5%

26.5%

CY2010CY2011CY2012

6,155

6,302

28.0%

28.3%

CY2013

CY2014

7,591

6,941

7,765

8,033

7,986

45%

35%
31.8%

32.8%

CY2016

CY201729.9%

CY2015

34.2%

33.7%
25%

CY2018CY2019GOP Ratio

GOP

8,000

GOP ratio

15%(forecast)

Change in KPI(JPY)

20,00015,00010,000ADR
77.9%

19,767

15,398

CY200777.8%
20,30915,804

CY2008

RevPAR
73.8%
18,917

13,966
CY2009OCC
80.4%
17,577

14,129CY201076.7%
17,43013,376
CY2011

82.7%
17,82014,740CY2012

86.1%

86.9%

19,027

19,306

16,374

CY2013

16,770CY2014

87.7%

21,133
18,527

88.4%

91.0%

89.9%

91.5%

22,16819,85622,197

21,552

19,58819,963

19,954

19,731

80%
60%
40%
20%

CY2015

CY2016

CY2017

CY2018CY2019(forecast)

48

100%

0%

OCC

ADR・RevPAR

25,0005. Portfolio Map
Total Assets(as of August 22, 2019)

Limited-service hotel

JPY374.5Bn

Full-service hotel

1

2

3

4

5

6

Kobe Meriken Park
Oriental Hotel

Oriental Hoteltokyo bay

Namba
Oriental Hotel Hotel Nikko Alivila
Oriental Hotel Hiroshima

7

8

Resort hotel

No. of Hotels

43 Hotels

24

25

11

12

13

14

The Beach
HakoneTower Okinawa Setsugetsuka

9

10

15

16

the b
suidobashi

Comfort Hotel Smile Hoteldormy inn・ Hakata Nakasu Nara Washington R&B Hotel
Toyoko Inn
Hotel Plaza
Ueno-hirokoji Tokyo Higashi Nihombashi
global cabin Washington
Hakata-guchi
Nihombashi
Mitsukoshimae Ekimae
Asakusa
Hotel Plaza

Dormy Inn
Kumamoto

17

18

Hotel Keihan
Universal City

Chisun Inn
KamataNo. of
Guest Rooms

11,701 Rooms

23

28

20

21

Hotel Vista
Kamata Tokyo

Sotetsu Fresa
Inn ShimbashiKarasumoriguchi

22

23

24

Hilton Tokyo Bay

ibis Tokyo
Shinjuku

ibis Styles
ibis Styles
Kyoto Station Sapporo

27

25

26

MercureSapporoMercurethe b ikebukuro
Okinawa Naha

2 30

3 17 36 42

11 16
29 35 37

7

39 40

31

21

38

8

19

1

12 41

35

28

29

30

31

32

33

the b hachioji

the b hakata

Hotel Francs

MercureYokosuka

Okinawa Marriott
Resort & Spa

ACTIVE-INTER CITY
CANDEOHIROSHIMA (Sheraton HOTELSGrand Hiroshima Hotel)

34

Tokyo 23 wards

4 33
13 34

27
22
5
32
26

9
20

15

10
14

Oriental Hotel
Fukuoka
UENO-KOEN Hakata Station

Acquisition in 2019
36

37

38

39

Holiday Inn
Osaka Namba

HOTEL ASCENT Hilton Nagoya Hilton TokyoFUKUOKA
Narita Airport

40

41

42

43

International
Garden Hotel
NaritaHotel Nikko Nara

Hotel Oriental
Express Osaka
Shinsaibashi

Hilton Tokyo Odaiba

43

6
18
19

49

Appendix 3
Investors Composition and Investment Unit Price1. Major Unitholders and Classifications of Unitholders
Top 10 Major Unitholders
As of the end of December 2018

As of the end of June 2019

Name

Rank

No. of Units

%(*)

Rank

No. of Units%(*)

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

721,861

16.17

Name

1

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

629,007

15.68

1

2

Japan Trustee Service Bank, Ltd. (Trust)

492,388

12.27

2

Japan Trustee Service Bank, Ltd. (Trust)

531,521

11.91

3

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

190,271

4.74

3J.P. Morgan Bank Luxembourg S.A. 384500

337,322

7.55

4

BNYM AS AGT/CLTS 10 PERCENT

146,423

3.65

4

4.37

5

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

122,691

3.05

5

131,797

2.95

6

JP Morgan Chase Bank 385628

65,100

1.62

6

The Nomura Trust and Banking Co., Ltd. (Investment Trust)
Trust and Custody Services Bank, Ltd.
(Securities Investment Trust)
BNYM AS AGT Clients 10 PERCENT

195,422

122,1422.73

7State Street Bank West Client-Treaty 505234

62,579

1.56

7State Street Bank and Trust Company 505223

64,452

1.44

8

Shikoku Railway Company

58,311

1.45

8State Street Bank West Client-Treaty 505234

64,127

1.43

Mizuho Trust & Banking Co., Ltd.

55,166

1.37

9

Shikoku Railway Company

56,9891.27

52,313

1.30

10 CBNY DFA International Real Estate Securities Portfolio

54,8231.22

1,874,249

46.72

2,280,456

51.10

9

10 State Street Bank & Trust Company 505223
Total

Total

(*) The total units held by each investor to the total units issued by JHR as of the end of December 2018 and the end of June 2019 respectively. (Rounded off to two decimal places.)

Owners of the Investment Units
As of the end of December 2018
OwnersNo. ofInvestors

Individuals & Others

30,293

No. ofUnits

407,254

Financial Institutions(Incl. Securities Firms)

151

1,869,433

Other Domestic Firms

357

109,488

Foreign Firms &Individuals
Total

354

1,624,672

No. of Investors

0.5%

As of the end of June 2019

No. of Units

1.1%
1.1%

10.1%
40.5%
46.6%

97.2%

31,155 4,010,847
Individuals &Others2.7%
Financial Institutions(Incl. Securities Firms)

No. of
Units

OwnersNo. ofInvestors

Individuals & Others

28,383358,329

Financial Institutions(Incl. Securities Firms)

138

1,930,626

Other Domestic Firms

352

113,176

Foreign Firms &Individuals

370

2,060,216

Total

29,243 4,462,347

Other Domestic
Firms

Foreign Firms &Individuals

No. of Investors

0.4%

1.2%
1.2%

No. of Units

8.0%

46.1%
97.0%

43.2%

2.5%

(*) 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 by each segment to the total
investment units issued as of respective date. (Both rounded off to one decimal place.)51

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

JPY90,800

Total market capitalization:

JPY405.1Bn(JPY)
120,000

100,000(Based on the closing price of July 31, 2019)
(*1)

(*2)

Price of the real estate investment securities
may fall depending on the fluctuations ofprice of the real estate under management
or 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, please see
Securities Report dated March 20, 2019.
including OA

Comparison withREIT Index and TOPIX of
Tokyo Stock Exchange
(TSE)
(*)

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 a weighted
average of the market capitalization of all
REITs listed on TSE.

80,00060,000Market Capitalization
Investment Unit Price of JHR

Apr. 2013
PO JPY20.5Bn

Jun. 2015
PO(*2) JPY10.7Bn

Jan. 2016
PO(*2) JPY14.6Bn

Jan. 2015
PO(*2) JPY15.6Bn

Jun. 2017
PO(*2) JPY18.6Bn

Jul. 2016
PO(*2) JPY34.7Bn

Sep. 2014
PO JPY10.1Bn

Jan. 2019
PO(*2) JPY33.3Bn(JPY MM)450,000

300,000

Sep. 2012
PO(*2) JPY5Bn
150,000

40,00020,00000600

Investment Unit Price of JHR

TSE REIT Index

500

400

300

200

100

0

52

TOPIX

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
CapitalShareholders
Representative Director

August 10, 2004
JPY300MM as of June 30, 2019
Rockrise Sdn Bhd, Kyoritsu Maintenance Co., Ltd., ORIX Corporation
Hisashi Furukawa
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

Registration and Licenses

Financial Instruments Trading Company, Director-General of Kanto Local Finance Bureau No. 334
Member of The Investment Trusts Association, Japan
Member of The Japan Investment Advisers Association<Organization Chart>

Shareholders' Meeting
AuditorBoard of Directors' Meeting

Investment (andOperation) Committee

Compliance Committee
Representative Director
Compliance Office

Investment Division

Acquisitions

Public REIT

Operations Division

Private Fund

Planning

54

Finance

Accounting &Reporting

Personnel and
Administration

2. Features and Governance of the Asset Management Company
Mission Statement"Provide attractive hotel investment opportunities to investors as specialist in investment and management of hotel assets. Gain
trust from our stakeholders, and contribute to local communities and society through investing and managing hotel assets."

Code of Conduct
As an independent asset management company, all employees and officers at JHRA should have a "spirit of challenge" aiming
to constantly provide high added value.
Also, "teamwork" is inevitable to provide high added value.
JHRA recognizes "challenge" and "teamwork" as essential value which our code of conduct is based upon.

Challenge

Teamwork Respect teamwork and collaborate with team-mates Be a self-starter, take initiative and demonstrate drive Respect others. Respect values and opinions of others Set high goal and strive Promote "sharing" (idea, knowledge, information, goal,
achievement, joy of achievement, lesson, etc.)

 Respect creativity and innovation
 Promote challenge, free from fear of failure Make effort for open, frank and sincere communication

55

2. Features and Governance of the Asset Management Company (cont.)
Advanced Expertise Ability to propose transaction scheme, execute transaction, and plan and execute unprecedented measures of asset
management based on in-depth understanding of hotel operation and track record of such asset management.
 Extensive experience of renovation and rebranding through collaboration with many hotel lessees and hotel operators.
 Strong and long-term relationships with a large number of hotel lessees and hotel operators.
 High analytical skills and accurate judgement capacity based on rich information and data obtained through a broad
network and high credibility.

Ensured Independence No employee of JHRA is a seconded employee from sponsor.
 Part-time directors from our main sponsor, SC CAPITAL PARTNERS group and non-sponsor-related full-time directors
each account for half of JHRA's board of directors.
 With regard to transactions with sponsor-related parties and JHR, JHRA has set strict decision-making rules.
In principle, in addition to obtaining approval by Compliance Committee which includes an outside specialist, who isauthorized to dismiss proposals, JHRA is required to obtain approval from JHR's board of directors' meetings(directors are all third-party members who do not have any relationship with the sponsor-related parties).
 As our main sponsor, SC CAPITAL PARTNERS group is also an independent asset management company, it fully
understands and respects importance of JHRA's independency. JHRA conducts asset management business based
upon its own judgement.

56

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. Since neither JHR nor JHRA handles the offering and trading of 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, economic
situations including interest rate environment, the nature of investment units, investment unit subscription rights, and investment corporation bonds,
dependency on mechanisms and related persons of investment corporations, changes in legal systems related to real estate (include tax regulations, building
regulations and others), damage 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, or worsening financial position or insolvency of JHR.
For details, please refer to the Articles of Incorporation, Securities Registration Statement, Annual Securities Report and Extraordinary Report, etc. 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
Member of The Japan Investment Advisers Association

57