NEWS RELEASE
Jun 01, 2011

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

Nippon Accomodations Fund Inc.
Issuer Rating: AARating Outlook: Stable

RATIONALE:
Nippon Accommodations Fund Inc. (NAF) is a real estate investment trust (J-REIT) that went public inAugust 2006. The fund invests in "accommodation assets" primarily for rental purposes, including
dormitories, student apartments, serviced apartments, senior residences and corporate housing. Mitsui
Fudosan Co., Ltd. serves as its sponsor.
NAF places a focus on convenient areas in Tokyo's 23 wards. It has created a quality portfolio
consisting mainly of "Park Axis" brand rental apartments developed by its sponsor. The Reit raised capitalthrough a pubic offering in March 2011 for the second time since the financial crisis, and has acquired 19
properties for 30.7 billion yen in total from the sponsor and the other firm using the proceeds from thepublic offering and borrowings. The properties purchased from the sponsor totaled 22.6 billion yen, andmost of them are relatively new rental apartments with a high occupancy rate, such as Shibaura Island AirTower, for example. From the other firm, the Reit acquired "other accommodation assets (dormitories andstudent apartments)" totaling 8.1 billion yen for the first time since its listing. The average NOI yield for 19
properties based on appraisal by real estate appraisers is 6.6%. This suggests that the above acquisitions
have helped improving profitability of the portfolio.
As a result of the abovementioned property acquisitions, NAF's asset size has grown to 217.7 billion
yen. Approximately 86.5% of its rental apartments are located in Tokyo's 23 wards, with most of them
being a large building priced at 2.8 billion yen at the time of acquisition on average. The average building
age of approximately 6.6 years (as of end-February 2011) shows that NAF has kept its portfolio quality athigh levels even after the abovementioned acquisitions. Furthermore, apartments available for rent in theoverall portfolio are well-diversified, exceeding 8500 units.
The occupancy rates of its rental apartments are high, trending at 95.3% as of end-April 2011. The unit
rent fell only 0.7% during the end-August 2010 to end-February 2011 period. Given a sustained
population inflow into the Tokyo Metropolitan area and a fall in new rental apartment supply, the supplydemand condition of rental apartments should continue to be favorable for the foreseeable future. NAF'scompetitive properties may show solid performance going forward.
The March 11 Great East Japan Earthquake has slightly damaged some of NAF's properties, but noravages that seriously affect the investment performance have been reported. The Reit holds only one
property in the Tohoku region. Since its portfolio's PML (probable maximum loss) rate for the risk ofearthquake occurring in the future is low at 4%, risk is mitigated.
Although the LTV ratio had been 55% at the highest, trending at slightly high levels in recent years, thelatest public offering has lowered the ratio to a little over 50%. The LTV ratio is still somewhat high, but
NAF enjoys favorable access to the capital market and excels in fundraising capability. Accordingly, its
financial risk is limited.
NAF's borrowings after its listing are all unsecured. NAF stably obtains long-term fixed rate loans madeby major domestic financial institutions. Since the average remaining term of debts is relatively long (alittle below three years), with the maturities staggered every year through 2018. NAF is also believed tobe in an advantageous position compared with other Reits in terms of funding costs.
The Rating Outlook is Stable. NAF plans to continue acquiring large properties, mainly relatively newbuildings developed by the sponsor in Tokyo's 23 wards where tenant demand is robust, going forward.
The Reit is expected to maintain the quality of portfolio and high occupancy rate and continue with soundRating and Investment Information, Inc. Nihonbashi 1-chome Bldg., 1-4-1, Nihonbashi, Chuo-ku, Tokyo 103-0027, Japan
Investors Service Division TEL.03-3276-3511 FAX.03-3276-3413 http://www.r-i.co.jp E-mail infodept@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
financial management.
The primary rating methodologies applied to this rating are provided at "Rating Methodology for JREIT" and "Basic Methodologies for R&I's Credit Rating". The methodologies are available at the web site
listed below, together with other rating methodologies that are taken into consideration when assigning
the rating.
http://www.r-i.co.jp/eng/sf/about/methodology/index.html
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
StableISSUE AMOUNT (mn):
ISSUE PERIOD:
RATING:

Shelf Registration (Bonds)
JPY 100,000
From Jul 18, 2009 to Jul 17, 2011
AA-, Affirmed (Preliminary)Unsec. 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

A preliminary rating is assigned when a provisional credit rating is needed for an individual obligation
on which final terms have not been determined. A credit rating finally assigned may differ from thepreliminary rating depending on, among others, the details of the actual contract of the individual
obligation.

Rating and Investment Information, Inc. Nihonbashi 1-chome Bldg., 1-4-1, Nihonbashi, Chuo-ku, Tokyo 103-0027, Japan
Investors Service Division TEL.03-3276-3511 FAX.03-3276-3413 http://www.r-i.co.jp E-mail infodept@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.