July 23, 2010

Nippon Accommodations Fund Inc.'s ¥7 Billion
Unsecured Bonds Rated 'A+'
Primary Credit Analysts:
Roko Izawa, Tokyo (81) 3-4550-8674; roko_izawa@standardandpoors.com
Yumi Oikawa, Tokyo (81) 3-4550-8775; yumi_oikawa@standardandpoors.com

TOKYO (Standard & Poor's) July 23, 2010--Standard & Poor's Ratings Services
today assigned its 'A+' rating to Nippon Accommodations Fund Inc.'s (NAF;
A+/Negative/A-1) proposed ¥7 billion series 2 unsecured bonds, due July 29,
2016. The rating reflects NAF's strong business position, high asset quality,and moderately conservative financial profile.
NAF is a Japanese real estate investment trust (J-REIT) that specializes inresidential properties. As such, NAF has a strong business position in theJ-REIT market and commands high market recognition. The company's operating
strategy is to invest in high quality residential properties for lease thatare mainly located in the 23 wards of Tokyo, backed by the real estate
management and development capabilities and brand recognition of its sponsor,Mitsui Fudosan Co. Ltd. (BBB+/Stable/A-2). As of June 30, 2010, NAF owned aportfolio of residential properties with a total purchase price of about¥187.0 billion. The portfolio has a high average occupancy rate, indicatingthat the properties generate stable cash flows. Despite ongoing difficult
business conditions, NAF has resumed its acquisition activities. Indeed, sinceNovember 2009, the company has been able to purchase a relatively large volumeof properties by leveraging its sponsor network.
NAF maintains a moderately conservative financial profile and a high degree offinancial flexibility. Nevertheless, we see some risk factors that could
affect NAF's credit quality including: (1) NAF is seeing some downward
pressure on rental income, especially from its expensive residential units. Inaddition, the company's debt-to-capital ratio has remained high for four
consecutive fiscal terms through the eighth fiscal term (ended February 2010),
and its financial indicators remain weak; and (2) Given current real estatemarket conditions, NAF is likely to actively pursue external growth. As
funding conditions in the equity market have yet to fully recover, we see awww.standardandpoors.com/ratingsdirect

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Nippon Accommodations Fund Inc.'s ¥7 Billion Unsecured Bonds Rated 'A+'

possibility that the company may incur some delays in improving its financial
profile.
Key credit factors for NAF will include changes in its profitability measuresand financial indicators, including leverage ratio and interest coverage
ratio.
RELATED CRITERIA AND RESEARCH"Rating Policy For Japanese Real Estate Investment Trusts," published May 9,
2001.
RATING ASSIGNED
Nippon Accommodations Fund Inc.
Unsecured J-REIT bonds (series 2)

RatingA+A Japanese-language version of this media release is available on Standard &Poor's Research Online at www.researchonline.jp, or via CreditWire Japan onBloomberg Professional at SPCJ <GO>.

Standard & Poor’s | RatingsDirect on the Global Credit Portal | July 23, 2010

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