Nippon Accommodations Fund Inc.
34th Period (September 2022 – February 2023) Investor Presentation
Q&AＱＡＱＡＱＡＱWhat is your outlook for rent change rates at tenant turnover and key money collection
rates for single type units?
Although it is reassuring that rent change rates at tenant turnover for single type units
have recovered to a point that allows for a positive outlook for the 35th period, given
the extremely large market, we do not anticipate a dramatic acceleration in the degreeof recovery going forward. Assuming that the gradual recovery in the economy
continues, we are expecting a slow upturn in rents for single type units. The key money
collection rate*, which stood at around 50% of monthly rent during the COVID-19
pandemic, has since recovered to around 60% of monthly rent.
* (Supplementary information) The key money collection rate here refers to theaggregate of all four categories. The key money collection rate for single type units has
trended around 30% of monthly rent since the COVID-19 pandemic.
What are your thoughts on the changes in the ratio of foreign national tenants at
Okawabata Apartment Communities prior to and after the COVID-19 pandemic?
For the most part, the ratio of foreign national tenants at all properties held is low ataround two to three percent. Since the ratio of foreign national tenants has not risen
significantly following the lifting of entry restrictions, we believe it is unlikely toincrease to any great extent in the future.
As far as external growth is concerned, while commenting on the Fund’s ample projectpipeline, capital markets remain in a somewhat unstable position. When acquiringproperties, do you believe that external growth geared toward increasing shareholder
value is still possible, or is it best to wait for capital markets to stabilize, in light of
expected cap rates and capital costs?
Capital markets continue to confront head winds. Current conditions suggest theoverheated cap rate remains unchecked. We believe that the environment is notconducive to external growth, for example, when considering a capital increase. Whenacquiring properties, we must also fully consider the implied cap rate and makejudgements based on the overall environment. Although it will depend on the form thatthe Bank of Japan’s financial policy takes going forward, we intend to maintain a stancethat allows us to take action at any time, under the assumption that opportunities foracquiring properties may arise due to changes in the relationship between interest rate
trends and cap rates.
Although you mentioned that rent momentum has improved with respect to internal

Ａ

Ｑ

Ａ

Ｑ

Ａ

Ｑ

Ａ

Ｑ
Ａ

growth, what is the gap between unit rents and market rents (the rent gap)?
We have not officially disclosed rent gap figures. Since rent change rates at tenantturnover during the 34th Period increased 3.5%, however, we believe the rent gap is up
around 2%.
From an internal growth perspective, what stage has the recovery in market rents
reached at this point? Has the recovery from the COVID-19 pandemic reached its final
stage, or do you foresee the market rising to and surpassing pre-COVID-19 pandemic
levels?
Trends in supply and demand prior to the COVID-19 pandemic mirrored theimmediately preceding extremely tight stage. We believe that market rents will shortly
enter a more favorable and virtuous cycle.
What is the Fund's stance on property acquisitions? Did the Fund forgo making any
acquisitions during the previous period because it is currently difficult to purchaseproperties? Or was the sponsor side unwilling to sell? Can you explain yourunderstanding regarding whether the Fund was unable to purchase properties despite
wanting to do so, or if the environment was not conducive to acquisition?
In addition to the sponsor side being poorly positioned to demand further profit
accumulation amid the robust conditions experienced by the subdivision businesstargeting private owners, we found it difficult to secure property sales offers. Despite asmall number of sales offers, we were unable to acquire properties in certain cases
because the cap rate stood at a level that was beyond our reach. From our viewpoint,
we indeed were looking to purchase, but were unable to do so. As far as the acquisitionof properties is concerned, while maintaining the consistent stance of seizing
opportunities, including from third parties, the terms and conditions were not rightduring the previous period.
Although the rental market remains strong in the large and family type unit categories,
what is your outlook for large and family type unit rents in the current environment
where rents are reaching a fairly high level.
There are few large and family type units on the rental apartment market, so their rarity
remains high. If we also consider the likelihood that the movement of people will
expand further, we believe this rarity will remain steady. This is why we intend toincrease rents while continuing to maintain the current level of rent change rates attenant turnover.
What is the Fund's current stance on its sales strategy?
The current portfolio does not contain any properties that we feel present concerns forthe future or that may have a negative impact on the Fund’s distribution per unit. Evenso, today is a good time to sell, so we feel there is potential to dispose of properties held
as part of the replacement of assets at the time of property acquisition. Having said this,
we do not intend to actively sell properties for the purpose of increasing distribution
per unit.
ＱＡ

Although the results for rent change rates at tenant turnover by area showed a decreaseof 0.9% in other major cities besides Tokyo, what are your thoughts for each city?
Over the previous period, excluding the busy spring leasing season, rent change rates
at tenant turnover tended to be sluggish for properties in other major cities besides
Tokyo, which depend significantly on demand from transferees in the spring. By city,although we do not consider the oversupply in Nagoya to have been resolved, Sapporo
and Fukuoka remain firm. Based on the aforementioned, we see investigating thepotential for property acquisition in these cities as an option.

■ This document is intended for informational purposes, and is not intended to sell or solicit anoffer to buy or sell any security or other financial instrument of the Investment Corporation.
■ Unless explicitly indicated, the information provided in this document does not constitute thedisclosure or asset management reports required under the Financial Instruments and Exchange
Act or the Act on Investment Trusts and Investment Corporations.
■ Nippon Accommodations Fund Inc. has exercised due care in providing the information inthis document, but does not guarantee its accuracy or completeness.
■ The information in this document contains future projections, but such statements do notguarantee future performance.
■ The Investment Corporation is not responsible for updating the information in thisdocument. The information in this document may be changed without prior notice.
REIT Management Company: Mitsui Fudosan Accommodations Fund Management Co., Ltd.
(Financial Instruments Firm: Kanto Finance Bureau (registration) No. 401
Member of the Investment Trusts Association, Japan)