NEWS RELEASE
Jun 18, 2015

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 "accommodation assets", which are primarily rental apartments but also
include dormitories, student apartments, serviced apartments, senior residences and corporate housing.
Mitsui Fudosan Co., Ltd. serves as a sponsor.
After the public offering in March 2015, NAF acquired four new properties including "Park Axis" brandrental apartments for a total of 7.1 billion yen. The asset size has expanded to 294.9 billion yen.
Because of intense competition, the pace of property acquisitions has been slowing down. Given thesponsor's abundant pipeline of properties, however, NAF will fully be able to continue acquiring a certain
number of properties through careful selections.
Of NAF's rental apartment assets, 87.5% are located in Tokyo's 23 wards. Most of them are large
buildings priced at 2.7 billion yen on average at the time of acquisition. The average building age ofapproximately 9.5 years (as of end-February 2015) shows that NAF has kept its portfolio quality at highlevels. The REIT has a very diverse portfolio, with the number of rentable units exceeding 10,000.
While the occupancy rate (rental apartments only) is trending high at more than 95%, the rate ofchange of the unit rent turned positive in the latest term, for the first time since the collapse of Lehman
Brothers. Thanks to the sustained influx of population into Tokyo's 23 wards as well as a low level of newapartment supply, the supply-demand balance of rental apartments remains favorable. R&I believes
NAF's competitive properties will keep performing well.
In the process of external growth, its short-term upper limit of the LTV ratio is set at 55%. Thissuggests that its leverage is somewhat high as with the case of other residential REITs. After the abovementioned public offering, however, the LTV fell to about 51%. With the appraisal value rising, unrealized
gains are growing.
NAF has stable funding sources, most of which being long-term, fixed-rate loans from major domestic
financial institutions. The average remaining term of long-term debts is 4.9 years (as of end-February2015), with due dates staggered. Financing costs are also lower compared to those of other REITs.
The Rating Outlook is Stable. NAF intends to continue acquiring properties, particularly large buildings
located in Tokyo's 23 wards where tenant demand is robust, with a focus on those developed by thesponsor in recent years. The REIT is thereby expected to maintain portfolio quality and the highoccupancy rate. Its leverage is controlled below the target level, and the funding base is solid.
The primary rating methodology applied to this rating is provided at "Rating Methodology for J-REIT".
The methodology is available at the web site listed below, together with other rating methodologies thatare taken into consideration when assigning the rating.
http://www.r-i.co.jp/eng/cfp/about/methodology/index.html■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
R&I RATINGS:ISSUER:RATING:RATING OUTLOOK:

Nippon Accommodations Fund Inc. (Sec. Code: 3226)
Issuer Rating
AA-, Affirmed
StableUnsec. 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.