O

April 17, 2019

Financial Results for the Fiscal Period
from September 1, 2018 to February 28, 2019
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 30, 2019
Scheduled Commencement Date of Cash Distribution Payment: May 17, 2019

1. Business Results for the Fiscal Period from September 1, 2018 to February 28,
2019(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 28, 201911,186

1.3

5,185

5.1

4,729

6.5

August 31, 2018

11,047

1.6

4,935

(0.4)

4,439

(0.2)

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

(%)*

(yen)

(%)

(%)

(%)

For the period ended
February 28, 2019

4,728

6.5

9,759

3.4

1.6

42.3

August 31, 2018

4,438

(0.2)

9,161

3.2

1.5

40.2

* Percent figures show changes from previous period.

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

For the period ended
February 28, 2019

9,706

4,702

0

0

99.5

3.4

August 31, 2018

9,161

4,438

0

0

100.0

3.2

Note:
For the period ended February 28, 2019, the amounts of “Total distributions” and “Net income”
are different because a part of retained earnings (¥26 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 28, 2019296,877

140,45747.3

289,889

August 31, 2018294,692

140,16747.6

289,290(4) Cash Flows(in millions of yen, rounded down; except as noted)

Cash flows fromoperating activities

Cash flows frominvesting activities

Cash flows fromfinancing activities

Cash and cash
equivalents

For the period ended
February 28, 2019
August 31, 2018

8,093
6,775

(5,564)(2,114)2(2,438)(3,947)

8,471
8,380

2. Forecasts for the Fiscal Period from March 1, 2019 to August 31, 2019 andFiscal Period from September 1, 2019 to February 29, 2020
(in millions of yen, rounded down; except as noted)

Total
revenues

Distribution
per unit
Distribution in(not
Incomeexcess of
Net income including
beforeearnings
distributions
income taxes
per unit
in excess ofearnings)

Operatingincome

(%)*

(%)*

(%)*

(%)*

(yen)

(yen)

11,345

1.4

5,126 (1.1)

4,652 (1.6)

4,651 (1.6)

9,600

0

February 29, 2020 11,357

0.1

5,248

4,773

4,772 2.6

9,850

0

For the period ending

August 31, 2019

2.4

2.6

* Percent figures show changes from previous period.

Note:
The net income per unit projections for the fiscal period ending August 31, 2019 and the fiscal
period ending February 29, 2020 are ¥9,600 and ¥9,850, 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 28, 2019:484,522 units

As of August 31, 2018:

484,522 units(2) The number of treasury investment units as of the period-end
As of February 28, 2019:- units

As of August 31, 2018:- 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.

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26th Period (February 2019) Overview of Investment
External Growth (Acquisition and sale of properties)
During the period under review, NAF newly acquired a total of three properties with a totalacquisition price of ¥4,600 million: two properties in September 2018 and one property in January
2019. NAF sold Park Cube Ikebukuro Kanamecho in September 2018 (acquisition price in March
2007: ¥1,600 million, sale price: ¥1,600 million).
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 common and private areas at
Okawabata Apartment Communities. At other properties, NAF planned and implemented suchworks as changing the lighting 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 ¥149,500 million(¥2,000 million increase from previous period), the long-term debt ratio was 94.6%, the long-term,
fixed-rate debt ratio was 92.0%, and the loan-to-value (LTV) ratio was 50.4%. The average annual

4current maturity of long-term interest-bearing debt was 4.2 years and the number of financial
institutions was 25. Furthermore, the weighted average interest rate at the end of the period was
0.61%.
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 (it was increased by ¥5,000 million in October 2018).
With respect to financing through investment corporation bonds, NAF filed a shelf-registration
statement regarding its establishment of a maximum issuance amount for investment corporation
bonds for public offering in July 2017. 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 18, 2017 to July 17, 2019

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 28, 2019 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 ¥11,186 million, operating income of¥5,185 million, income before income taxes of ¥4,729 million and net income of ¥4,728 million.
Part of the capital gains resulting from the sale of Park Cube Ikebukuro Kanamecho is to beinternally reserved as a reserve for reduction entry. In addition to the above, NAF has decided to
distribute the majority of the ¥4,703 million balance remaining after deduction of ¥26 million ofreserve for reduction entry from retained earnings in accordance with the Distribution Policy (Article
34 of the Articles of Incorporation) set forth by NAF. The distribution per unit was ¥9,706.

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Management Policy and Issues for the 27th Period Onward
External Growth (New acquisition of properties)
Concerning the real estate trading market, environment for property acquisitions is expected toremain difficult, for example, prime real estate prices remaining at a high level.
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 futureissuances 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.

6

Significant Subsequent Events
Not applicable(Reference information)
The sales contract for the following asset was concluded on March 20, 2019. On March 28, 2019,(1) 45% co-ownership has been acquired, and (2) 55% co-ownership is planned to be acquiredon April 19, 2019. The “Acquisition price” is exclusive of miscellaneous expenses for acquisition,
fixed property taxes, urban planning taxes, consumption taxes, and local consumption taxes.
Park Axis Oshiage Terrace
Acquisition price:

Appraised value:
Type of property:
Location (residence indication):
Completion date:
Structure/Number of stories:
Rentable units:
Rentable area:
Sellers:(1) ¥1,174.5 million (45% of co-ownership)(2) ¥1,435.5 million (55% of co-ownership)
Total ¥2,610 million¥2,750 million(date of value appraisal: January 31, 2019)
Real estate39-12 Mukojima 3-chome, Sumida-ku, Tokyo
December 27, 2016
Flat-roofed reinforced concrete structure/9 stories
80
2,498.08 m2(1) Marubeni Corporation(2) Mitsui Fudosan Residential Co., Ltd.

The sales contract for the following asset was concluded on March 20, 2019. The planned
acquisition date is April 19, 2019. The “Acquisition price” is exclusive of miscellaneous expenses
for acquisition, fixed property taxes, urban planning taxes, consumption taxes, and local
consumption taxes.
Park Axis Ikegami
Acquisition price:
Appraised value:
Type of property:
Location (residence indication):
Completion date:
Structure/Number of stories:
Rentable units:
Rentable area:
Seller:¥1,260 million¥1,300 million(date of value appraisal: January 31, 2019)
Real estate
17-8, Ikegami 7-chome, Ota-ku, Tokyo
March 6, 2015
Flat-roofed reinforced concrete structure/5 stories
45
1,391.34 m2
Mitsui Fudosan Residential Co., Ltd.

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The sales contract for the following asset was concluded on January 29, 2019. The planned
acquisition date is May 30, 2019. The “Acquisition price” is exclusive of miscellaneous expenses
for acquisition, fixed property taxes, urban planning taxes, consumption taxes, and local
consumption taxes.
Chisun Hotel Hiroshima
Acquisition price:
Appraised value(Note):¥1,880 million¥1,910 million(date of value appraisal: November 30, 2018)
Real estate14-7 Nobori-cho, Naka-ku, Hiroshima-shi,
Hiroshima
November 22, 1986
Flat-roofed steel reinforced concrete structure/11
stories
4,275.59 m2
Not disclosed as the consent from the seller has notbeen obtained.

Type of property:
Location (residence indication):
Completion date:
Structure/Number of stories:
Rentable area:
Seller:(Note)The outline of real estate appraisal reports (obtained from DAIWA REAL ESTATEAPPRAISAL CO., LTD.) as of February 28, 2019, which is the 26th period closing date, is asfollows.
(in millions of yen, except as noted)
Cost method

Income capitalization method
Appraised value

1,910

Value calculatedby direct
capitalization
method1,910

Directcap rateValue
calculated by
DCF method

4.9%

1,910

Discount rate

4.7%

Terminal cap
rate
5.1%

Cost method
value
1,840

This property is applicable to forward commitments (refers to the postdated sales contract
under which payment and delivery shall be made at least one month after the conclusion of
the contract, or any other contract similar thereto) by investment corporations as provided forin the Comprehensive Guidelines for Supervision of Financial Instruments Business Operators
etc., defined by the Financial Services Agency. In the case of properties applicable to forward
commitments, if the closing date of the accounting period falls in the period between the
conclusion of the sales contract and the date of payment and delivery, it is specified in theinternal rules of the asset management company to disclose the continually conductedappraised value as of the 26th period closing date.

8Forecasts of Investment Performance
The forecasts for the 27th period (from March 1, 2019 to August 31, 2019) and for the 28th period(from September 1, 2019 to February 29, 2020) are as follows.
(in millions of yen, rounded down; except as noted)+Total revenues
Operating income
Income before income taxes
Net income
Distribution per unit (not including distributions
in excess of earnings) (yen)Distribution in excess of earnings per unit (yen)27th period(August 2019)11,345
5,126
4,652
4,651

28th period(February 2020)
11,357
5,248
4,773
4,772

9,600

9,850

―

―

Notes: Underlying assumptions of forecasts
Number of operating days:
Investment assets:

Expenses:- From March 1, 2019 to August 31, 2019 (184 days)- From September 1, 2019 to February 29, 2020 (182 days)- In the forecasts of investment performance, it is assumed that the
number of properties is 127 properties, comprising the 125
properties owned by NAF as of the date of this document as wellas the following properties that NAF plans to acquire.
<To be acquired on April 19, 2019>
Park Axis Ikegami, and Park Axis Oshiage Terrace (55% of coownership)<To be acquired on May 30, 2019>
Chisun Hotel Hiroshima- In the forecasts of investment performance, it is assumed that,after the acquisition of above property to be acquired, no
subsequent transfer of properties (such as acquisition of new
properties, sale of properties acquired, etc.) shall occur until
February 29, 2020.
- The average month-end occupancy rates for total properties forthe 27th period and 28th period are expected to be 97.3% and97.6%, respectively.
- The following expenses are assumed.
(in millions of yen)
27th period
28th period
Fixed property taxes and urban
605
605
planning taxes
Depreciation and amortization
2,022
2,012
Interest expense, etc.
474
474

9

Interest-bearing debt:

Number of units issued:

Distribution per unit:- It is assumed that NAF will procure a total amount of ¥5,000 million
in the 27th period to be used as funds for property acquisition.
- It is assumed that NAF’s balance of interest-bearing debt after theabove procurement that is ¥154,500 million shall not change until
February 29, 2020.
- We assume 484,522 units outstanding as of the date of thisdocument.
- It is assumed that there shall be no issuance of new units until
February 29, 2020.
–

The above forecasted figures are calculated based on certain assumptions at the time of
preparation of this information. Therefore, actual total revenues, operating income, income
before income taxes, net income and distribution per unit may change due to future acquisitionor sale of investment assets, fluctuation in the real estate market or other changes in theenvironment in which NAF operates. Accordingly, the forecasts are not a guarantee of any cash
distribution amount.

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.

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