O

April 16, 2020

Financial Results for the Fiscal Period
from September 1, 2019 to February 29, 2020
Nippon Accommodations Fund Inc. (NAF) is listed on the Tokyo Stock Exchange (J-REIT) withthe securities code number 3226. (Website: https://www.naf-r.jp/english/)
Executive Director:
Investment TrustManagement Company:
President and CEO:Inquiries:

Takashi Ikeda

Mitsui Fudosan Accommodations Fund Management Co., Ltd.
Tateyuki Ikura
Tetsuji Kawakami, Director and Chief Financial Officer
Tel: +81-3-3246-3677
Scheduled Filing Date of Securities Report:
May 29, 2020
Scheduled Commencement Date of Cash Distribution Payment: May 15, 2020

1. Business Results for the Fiscal Period from September 1, 2019 to February 29,
2020(1) Operating Results(in millions of yen, rounded down; except as noted)
Total revenues

Operating income(%)*

Income before income
taxes

(%)*

(%)*

For the period ended
February 29, 2020

11,401

(7.8)

5,307

(12.8)

4,866(13.5)

August 31, 201912,361

10.5

6,084

17.3

5,624

18.9

IncomeIncomebeforebeforeincomeNet income Net income/ income
taxes/
per unit
net assets
taxes/
operatingtotal assets income

Net income

(%)*

(yen)

(%)

(%)

(%)

For the period ended
February 29, 2020

4,865

(13.5)

10,041

3.4

1.6

42.7

August 31, 2019

5,623

18.9

11,606

4.0

1.9

45.5

* Percent figures show changes from previous period.

1(2) Distributions(in millions of yen, rounded down; except as noted)
Total
Distribution
Total
distributions Distribution in
per unit
excess of
distributions inDistributions/(not including (not including
Payout ratio
earnings
excess of
net assets
distributions in distributions in
per unit
earnings
excess ofexcess of
earnings)
earnings)
(yen)
(yen)
(%)
(%)

For the period ended
February 29, 2020

10,042

4,865

–

–

100.0

3.4

August 31, 2019

10,449

5,062

–

–

90.0

3.6

Note:
For the period ended August 31, 2019, the amounts of “Total distributions” and “Net income”
are different because a part of retained earnings (¥561 million) was retained internally.

(3) Financial Position(in millions of yen, rounded down; except as noted)

Total assets

Net assets

Net assets/
total assets

Net assets per
unit

(%)

(yen)

As of
February 29, 2020

301,946

141,18146.8

291,382

August 31, 2019

303,133

141,37846.6

291,790

Cash flows fromoperating activities

Cash flows frominvesting activities(4) Cash Flows(in millions of yen, rounded down; except as noted)

Cash flows fromfinancing activities

Cash and cash
equivalents

For the period ended
February 29, 2020
August 31, 2019

6,832
10,103(730)(6,170)2(6,063)297

12,741
12,702

2. Forecasts for the Fiscal Period from March 1, 2020 to August 31, 2020 and
Fiscal Period from September 1, 2020 to February 28, 2021
(in millions of yen, rounded down; except as noted)

Total
revenues

Distribution
per unit
Distribution in
Income(notexcess ofbeforeNet income including
earnings
income taxes
distributions
per unit
in excess ofearnings)

Operatingincome

(%)*

(%)*

(%)*

(%)*

(yen)

(yen)

11,567 1.5
August 31, 2020
February 28, 2021 11,552 (0.1)

5,201 (2.0)

4,740 (2.6)

4,739 (2.6)

9,780

–

5,382

4,919

4,918 3.8

10,150–For the period ending
3.5

3.8

* Percent figures show changes from previous period.

Note:
The net income per unit projections for the fiscal period ending August 31, 2020 and the fiscal
period ending February 28, 2021 are ¥9,780 and ¥10,150, respectively.

3. Other
1. Changes in significant accounting policies, Changes in accounting estimates and Restatement(1) Changes in significant accounting policies due to revisions in accounting standards andothers: None
(2) Changes other than in the above item (1): None
(3) Changes in accounting estimates: None
(4) Restatement: None
2. Total number of investment units issued(1) The total number of investment units issued (including treasury investment units) as of theperiod-end
As of February 29, 2020:

484,522 units

As of August 31, 2019:484,522 units(2) The number of treasury investment units as of the period-end
As of February 29, 2020:- units

As of August 31, 2019:- units

Disclaimer:
The above forecasts are based on information currently available to NAF and on certain
assumptions deemed to be reasonable. Actual operations may differ substantially due to anumber of factors. Accordingly, the forecasts are not a guarantee of any cash distribution
amount.

3

28th Period (February 2020) Overview of Investment
Main Trend of NAF
NAF is a J-REIT that invests in “Accommodation Assets,” which it defines as real estate that ismainly used/may be used for residence or hotels. Based on the Act on Investment Trusts andInvestment Corporations (hereinafter “Investment Trust Act”), NAF was established on October 12,
2005, and was listed on the Real Estate Investment Trust Securities Market (J-REIT Market) of theTokyo Stock Exchange on August 4, 2006 (securities code number: 3226).
Since being listed, NAF has continued to acquire properties and the assets under management at
the end of the period under review consisted of 126 properties at a total acquisition price of¥309,723 million (assets at time of listing: 27 properties at a total acquisition price of ¥101,385
million).
Investment Environment
During the six months ended February 29, 2020 (the “28th Period”), despite signs of weakness
primarily in exports and production due to a slowdown in overseas economies and the impact ofnatural disasters, etc., the Japanese economy stayed on a moderate recovery trend, including
moderate increases in capital investment, against a backdrop of improvements in corporate
earnings and the employment and income situation. However, a novel coronavirus (COVID-19)
has been spreading since January, and it has begun to have a major impact on the economy andsociety.
In NAF’s main investment area, the residential rental market, occupancy rates remained high at
rental apartments in central areas, with an ongoing trend of increases in rents. Stable demand forrental apartments is expected in the 23 wards of Tokyo, where nearly 90 percent of NAF’s rental
apartments portfolio is located, and in the urban areas of other major cities(Note). Contributing factors
include the continuing influx of people into these areas from other regions. At the same time, thebalance of supply and demand is expected to remain favorable for the time being due to the limited
supply of the quality rental apartments in which NAF typically invests.
Concerning the real estate trading market, the acquisition environment remains challenging due tofactors such as acquisition and disposition prices for quality rental real estate remaining high.
(Note) “Other major cities” refers to each of the urban areas of Sapporo, Sendai, Nagoya, Osaka, Kyoto, Kobe,
Hiroshima and Fukuoka.

External Growth (Acquisition and sale of properties)
No properties were acquired during the period under review, and NAF’s assets under management
at the end of the period under review were unchanged from the end of the previous period.

4Internal Growth (Management and operation of properties held by NAF)
NAF has chosen Mitsui Fudosan Residential Lease Co., Ltd. as property management company
on management of NAF’s rental apartments portfolio. The company and Mitsui Fudosan
Accommodations Fund Management Co., Ltd., the asset management company of NAF,
collaborate in the management of properties NAF owns, implementing effective management andoperational activities based on regional characteristics and the individual features of each property.
Specifically, NAF maintains and improves its rent levels and occupancy rate through theimplementation of a leasing strategy that has been formulated for each individual property. In
addition, NAF aims to reduce costs by utilizing the merits of outsourcing all property managementtasks to the property management company while examining, whenever necessary, the adequacyof the grade of property management, cost of management and operation.
Meanwhile in the management of “Hospitality Facilities” (Note), NAF contracts out the management
and operational activities to a professional operator or business corporation. The asset
management company regularly monitors the management and operational activities, and makes
adjustments through professional dialog with the operator or business corporation as necessary.
In order to maintain and improve the competitiveness of NAF’s portfolio, operations are adequately
planned and carried out at the asset management company. These include appropriate renewal
work according to the property age, and work to enhance the property value. In addition, NAF is
not only making continuous efforts to reduce costs, but also introducing such features asenvironmentally friendly, energy-saving facilities in a timely manner.
In the period under review, NAF carried out renovations in private areas at Okawabata Apartment
Communities. At other properties, NAF planned and implemented such works as changing thelighting in common areas to LED lighting.
(Note) “Hospitality Facilities” is a generic term for “Accommodation Assets” that includes the four categories of“Dormitories, Corporate Housing,” “Serviced Apartments,” “Senior Residences,” and “Hotels,” excluding“Rental Apartments.”

Financial Strategy (Overview of funds procurement)
NAF’s basic policy is to carry out operations in a conservative manner that gives consideration tosuch matters as maintaining stable distributions in the medium and long term. During the period
under review, while taking into account market trends and interest rate levels, NAF pursued
financing from various sources with diversified repayment dates and an emphasis on long-term,
fixed-rate loans in its procurement of funds.
As a result, at the end of the period, total interest-bearing debt amounted to ¥153,500 million(¥1,000 million decrease from previous period), the long-term debt ratio was 98.0%, the long-term,
fixed-rate debt ratio was 95.4%, and the loan-to-value (LTV) ratio was 50.8%. The average annual
current maturity of long-term interest-bearing debt was 4.4 years and the number of financial
institutions was 25. Furthermore, the weighted average interest rate at the end of the period was
0.57%.
NAF also has secured a commitment line for the purpose of securing flexible and stable fundprocurement methods. At the end of the period under review, its total maximum borrowing amountwas ¥15,000 million.
With respect to financing through investment corporation bonds, NAF filed a shelf-registration
statement regarding its establishment of a maximum issuance amount for investment corporation5

bonds for public offering in July 2019. The remaining balance of the planned issuance amount at
the end of the period is ¥100,000 million.
Planned issuance amountUp to ¥100,000 million

Scheduled period of issuance

From July 25, 2019 to July 24, 2021

Purpose for funds

Acquisition of specified new assets (as defined in Article 2,
Paragraph 1 of the Act on Investment Trusts and Investment
Corporations), repayment of borrowings, redemption of
investment corporation bonds, repayment of tenant security
deposits, payment for maintenance and renovations, andoperational use

Rating of NAF as of February 29, 2020 is as follows.
Rating agency
Rating and Investment Information, Inc.
(R&I)
S&P Global Ratings Japan Inc. (S&P)

Rating subject
Issuer credit rating

RatingA A - (Trend of rating: Stable)

Long-term corporate
Short-term corporate

A + (Outlook for rating: Stable)
A -1

Overview of Performance and Distribution
In the period under review, NAF recorded total revenues of ¥11,401 million, operating income of¥5,307 million, income before income taxes of ¥4,866 million and net income of ¥4,865 million. In
addition to the above, NAF has decided to distribute the majority of retained earnings in accordancewith the Distribution Policy (Article 34 of the Articles of Incorporation) set forth by NAF. The
distribution per unit was ¥10,042.

6

Management Policy and Issues for the 29th Period Onward
Looking ahead, the difficult-to-predict environment is expected to continue for the Japanese
economy due to the impacts of the novel coronavirus (COVID-19). Furthermore, the economy inJapan and overseas has stagnated due to the further spread of infection, and attention should begiven to the risk of impact on financial and capital markets as well.
In the residential rental market, the balance of supply and demand is expected to remain favorable
due to the continuing influx of people into the 23 wards of Tokyo and the urban areas of other major
cities. Currently, there are no signs of major impacts due to the novel coronavirus (COVID-19), but
impacts due to the further spread of infection should be observed closely.
Concerning the real estate trading market, the placement of quality rental apartments as stable
investment assets is not expected to change, but trends among financial and capital markets andinvestors resulting from the spread of the novel coronavirus (COVID-19) should be carefully
assessed.
External Growth (New acquisition of properties)
NAF steadily acquires properties with highly competitive advantage from a medium- to long-term
perspective, leveraging our pipeline to the Mitsui Fudosan Group and enhancing information
channel at the asset management company.
While concentrating on a property acquisition strategy of stable acquisition of “Rental Apartments,”
NAF will also acquire “Hospitality Facilities” that offer stable revenue and competitiveness over thelong term. With respect to the acquisition of “Hospitality Facilities,” NAF will practice due diligence
depending on the asset’s characteristics.
NAF will keep the Hospitality Facilities’ share of the portfolio (based on acquisition price) to a
maximum of 10% in the near-term.
Internal Growth (Management and operation of leasehold properties)
In the residential rental market, the balance of supply and demand is expected to remain favorable
for the time being.
NAF aims to achieve solid internal growth in accordance with the investment policies bymaintaining customer satisfaction and asset value over the long term, maintaining and improving
rent levels and occupancy rate, and reducing costs, through brand strategies and tenant services
for the investment assets as well as through optimal management and operational activities thatutilize the value chain and highly specialized knowhow of the Mitsui Fudosan Group.
Financial Strategy
In regard to borrowings, taking into account borrowing cost, NAF will conduct financing activities
that emphasize on financing by long-term, fixed-rate loans and diversified repayment dates bytaking measures to counter future interest rate risks and refinancing risks. With respect to the upper
limit of LTV ratio, although the limit is set at around 60% in the asset management guidelines, NAF
is aiming for a near-term upper limit at a level of around 55% in its external growth process.
NAF will examine the necessity of issuance of new units by paying attention to market trends anddistribution amount levels, and taking into consideration the demand for funds for the purpose ofproperty acquisition, as well as our financial position. Additionally, NAF will examine future7

issuances of investment corporation bonds in accordance with market trends, within the range ofthe remaining balance of planned issuance amount for which shelf-registration of NAF bonds has
been carried out.
Significant Subsequent Events
Not applicable(Reference information)
The following asset was acquired on March 30, 2020. The “Acquisition price” is exclusive of
miscellaneous expenses for acquisition, fixed property taxes, urban planning taxes, consumption
taxes, and local consumption taxes.
Park Axis Akatsuka
Acquisition price:
Appraised value(Note):
Type of property:
Location (residence indication):
Completion date:
Structure/Number of stories:
Rentable units:
Rentable area:
Seller:¥2,420 million¥2,580 million(date of value appraisal: January 31, 2020)
Real estate (55% of co-ownership)
2-18 Akatsuka 2-chome, Itabashi-ku, Tokyo
September 12, 2018
Flat-roof reinforced concrete and steel structure/13
stories
156 residential, 3 retail, etc.
4,370.31 m2
Mitsui Fudosan Residential Co., Ltd.

Note: “Appraised value” describes an amount that is equivalent to 55% ownership.

8

Forecasts of Investment Performance
The forecasts for the 29th period (from March 1, 2020 to August 31, 2020) and for the 30th period(from September 1, 2020 to February 28, 2021) are as follows. For the underlying assumptions offorecasts, please refer to “Underlying assumptions of forecasts for the 29th period (from March 1,
2020 to August 31, 2020) and the 30th period (from September 1, 2020 to February 28, 2021)”
below.

Total revenues
Operating income
Income before income taxes
Net income
Distribution per unit
(not including distributions in excess of earnings)
Distribution in excess of earnings per unit

29th period(August 2020)¥11,567 million¥5,201 million¥4,740 million¥4,739 million

30th period(February 2021)¥11,552 million¥5,382 million¥4,919 million¥4,918 million¥9,780¥10,150¥―¥―(Note) The above forecasted figures are calculated based on certain assumptions at the time of preparation of thisinformation. Therefore, actual total revenues, operating income, income before income taxes, net income
and distribution per unit may change due to future acquisition or sale of investment assets, fluctuation in thereal estate market or other changes in the environment in which NAF operates. Accordingly, the forecasts
are not a guarantee of any cash distribution amount.

Underlying assumptions of forecasts for the 29th period (from March 1, 2020 to August 31,
2020) and the 30th period (from September 1, 2020 to February 28, 2021)
Item
Number of operating days:
Investment assets/
Total revenues

Underlying assumptions- From March 1, 2020 to August 31, 2020 (184 days)- From September 1, 2020 to February 28, 2021 (181 days)- The number of properties held by NAF as of the date of thisdocument is 127 properties. In the forecasts of investment
performance, it is assumed that no transfer of properties (such as
acquisition of new properties, sale of properties acquired, etc.) shalloccur until February 28, 2021.
- The average month-end occupancy rates for total properties forthe 29th period and 30th period are expected to be 97.5% and97.7%, respectively.
- The actual figures may change due to factors such as transfer ofproperties.

9

Item
Operating expenses

Interest-bearing debt/
Non-operating expenses

Number of units issued

Distribution per unit
(not including distributions inexcess of earnings)

Distribution in excess ofearnings per unit
Other

Underlying assumptions- The fixed property taxes and urban planning taxes recognized as
expenses are expected to be ¥616 million for the 29th period and¥616 million for the 30th period. However, when an investment
asset is acquired, the fixed property taxes and urban planningtaxes that are settled with the previous owner according to thenumber of days the asset is owned are not recognized as
expenses because they are included in the acquisition price.
- The amounts recognized for the repairs and maintenanceexpenses and outsourcing expenses of buildings are the required
amounts forecast for the number of operating days. However,
because repairs and maintenance expenses and outsourcing
expenses may arise suddenly due to some unexpected cause(building damage, etc.), amounts usually vary depending on theyear, some expenses arise occasionally, etc., the repair andmaintenance expenses and outsourcing expenses for the numberof operation days may be different from the amounts forecast.
- We calculate depreciation and amortization expenses (including
ancillary expenses upon initial acquisition) using the straight-line
method, and the expenses are expected to be ¥1,996 million forthe 29th period and ¥1,961 million for the 30th period.
- It is assumed that NAF’s balance of interest-bearing debt, whichis ¥154,500 million as of the date of this document, shall not change
until February 28, 2021. In addition, it is assumed that loans that
become due during the period will be fully refinanced.
- Interest expense, etc. are expected to be ¥461 million for the 29th
period and ¥463 million for the 30th period.
- We assume 484,522 units outstanding as of the date of thisdocument. In the forecasts of investment performance, it isassumed that there shall be no issuance of new units until February
28, 2021.
- Distribution (distribution per unit) is calculated assuming it will bein accordance with the Distribution Policy set forth in the Articles ofIncorporation of NAF.
- The actual amount may change due to factors such as fluctuations
in rent revenues owing to changes in tenants, transfer of properties,
interest rate fluctuations, and additional issuance of investment
units.
- There is no distribution in excess of earnings planned as of thedate of this document.
- NAF has assumed no enforcement of such revisions to laws andregulations, tax systems, accounting standards, regulations of theTokyo Stock Exchange and rules of The Investment Trusts
Association, Japan, etc. that may affect the above forecasts.
- NAF’s forecasts assume no unforeseen significant changes ingeneral economic trends or conditions in the real estate market.

10Disclaimer:This financial report has been prepared in accordance with Japanese accounting standards andJapanese laws. Figures have been rounded down to eliminate amounts of less than one million
yen.
Please note that this English translation, a summary of the Japanese original document, is provided
solely for informational purposes. In the event of any discrepancy between the Japanese original
and this English translation, the Japanese original shall prevail.

11