NEWS RELEASE
Jun 04, 2014

R&I Affirms AA-, Stable: Nippon Accommodations Fund Inc.
Rating and Investment Information, Inc. (R&I) has announced the following:
ISSUER:

Nippon Accommodations Fund Inc.
Issuer Rating: AA-, Affirmed
Rating Outlook: Stable

RATIONALE:
Nippon Accommodations Fund Inc. (NAF) is a real estate investment trust (J-REIT) that went public inAugust 2006. The REIT invests in rental apartments in general and "accommodation assets" primarily forrental purposes, including dormitories, student apartments, serviced apartments, senior residences andcorporate housing. Mitsui Fudosan Co., Ltd. serves as a sponsor.
NAF focuses on properties situated in convenient areas in Tokyo's 23 wards and creates a quality
portfolio consisting mainly of "Park Axis" brand rental apartments developed by its sponsor. Although themajority of its properties are acquired from the sponsor, NAF also steadily piled up those acquired fromexternal sources. As a result, the asset size of the REIT has expanded to 287.7 billion yen.
The environment for acquiring quality residential properties has become even more severe. Although
NAF has been able to acquire properties at a price below appraisal value, the NOI yield is somewhat
lower than before because of market conditions. It should continue to be important for the REIT tomaintain a cautious investment stance with due considerations to profitability.
Of NAF's rental apartment assets, 86.5% are located in Tokyo's 23 wards. Most of them are large
buildings priced at 2.6 billion yen on average at the time of acquisition. In addition to this, since theaverage building age stands at approximately 8.8 years (both price and age are as of end-February2014), NAF has kept its portfolio quality at high levels. The REIT has a very diverse portfolio, with thenumber of apartment units under management exceeding 10,000.
While the occupancy rate (rental apartments only) is trending high at 95-97%, a fall in the unit rent has
nearly stopped. Thanks to the sustained influx of population into Tokyo's 23 wards as well as a low levelof new apartment supply, the supply-demand balance of rental apartments is projected to stay favorable
for the time being. R&I believes NAF's competitive properties will keep performing well going forward.
Since NAF is in the process of external growth, its short-term upper limit of the LTV ratio is set at 55%.
This suggests that its leverage is somewhat high as with the case of other residential REITs. Even so,given that the REIT is able to access the capital market at favorable terms and has a strong fundraising
capacity, financial risk is mitigated. Thanks to rises in the appraisal value of its properties, the REIT has
unrealized gains.
All debts are unsecured. NAF has been able to finance debts, most of which being long-term, fixedrate loans from major domestic financial institutions. The average remaining term of debts is about fouryears, with due dates staggered every year through 2024. Financing costs are also lower compared tothose of other REITs.
The Rating Outlook is Stable. Going forward, NAF intends to continue acquiring properties, particularly
large builgings located in Tokyo's 23 wards where tenant demand is robust, with a focus on thosedeveloped by the sponsor in recent years. The REIT is thereby expected to maintain portfolio quality andthe high occupancy rate. Although its funding base is solid, the LTV ratio is currently rising. R&I will pay
attention to how the REIT will control leverage in the future.
The primary rating methodologies applied to this rating are provided at "Basic Methodologies for R&I's
Credit Rating" and "Rating Methodology for J-REIT". The methodologies are available at the web site
listed below, together with other rating methodologies that are taken into consideration when assigningthe rating.
■Contact: Investors Service Division
TEL.+81-(0)3-3276-3511■Media Contact : Corporate Planning Division (Public Relations) TEL.+81-(0)3-3276-3438

Rating and Investment Information, Inc.

E-mail. infodept@r-i.co.jp

Nihonbashi 1-chome Mitsui Bldg., 1-4-1, Nihonbashi, Chuo-ku, Tokyo 103-0027,

http://www.r-i.co.jp

Credit ratings are R&I's opinions on an issuer's general capacity to fulfill its financial obligations and the certainty of the fulfillment of its individual obligations as promised (creditworthiness) and are notstatements of fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment.
R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties. R&I is notliable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by the issuer. For details,
please refer to http://www.r-i.co.jp/eng/policy/policy.html.
© Rating and Investment Information, Inc.

NEWS RELEASE
http://www.r-i.co.jp/eng/cfp/about/methodology/index.html
R&I RATINGS:ISSUER:RATING:RATING OUTLOOK:

Nippon Accommodations Fund Inc. (Sec. Code: 3226)
Issuer Rating
AA-, Affirmed
StableUnsec. Str. Bonds No.1

Issue Date

Maturity Date

Issue Amount (mn)Nov 14, 2014

JPY 10,000

RATING:

Nov 15, 2007
AA-, Affirmed

Unsec. Str. Bonds No.2

Issue Date

Maturity Date

Issue Amount (mn)

Jul 29, 2016

JPY 7,000

RATING:

Jul 30, 2010
AA-, Affirmed■Contact: Investors Service Division
TEL.+81-(0)3-3276-3511■Media Contact : Corporate Planning Division (Public Relations) TEL.+81-(0)3-3276-3438

E-mail. infodept@r-i.co.jp

Rating and Investment Information, Inc.

Nihonbashi 1-chome Mitsui Bldg., 1-4-1, Nihonbashi, Chuo-ku, Tokyo 103-0027,

http://www.r-i.co.jp

Credit ratings are R&I's opinions on an issuer's general capacity to fulfill its financial obligations and the certainty of the fulfillment of its individual obligations as promised (creditworthiness) and are notstatements of fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment.
R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties. R&I is notliable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by the issuer. For details,
please refer to http://www.r-i.co.jp/eng/policy/policy.html.
© Rating and Investment Information, Inc.