NEWS RELEASE
Apr 08, 2020

R&I Affirms A+, Stable: Hankyu Hanshin REIT, Inc.
Rating and Investment Information, Inc. (R&I) has announced the following:
ISSUER:

Hankyu Hanshin REIT, Inc.
Issuer Rating: A+, Affirmed
Rating Outlook: Stable

RATIONALE:
Hankyu Hanshin REIT, Inc. (HHR) is a real estate investment trust (REIT) which was listed in 2005.
HHR mainly invests in real estate with retail-use/office-use zones in the Kansai region. It is sponsored bythe Hankyu Hanshin Holdings Group (the sponsor group).
HHR is working to enhance the quality and profitability of its portfolio and reduce future risks throughcontinuous asset replacement. In March 2020, the REIT announced that it will acquire three properties,
including an office building in central Tokyo and an urban retail facility (site) in central Osaka, for about
8.3 billion yen and transfer two properties -- a limited service hotel in Tokyo and a retail facility (site) in thesuburb of Hiroshima City -- for about 6.2 billion yen. It aims to continue to acquire properties atappropriate prices in close cooperation with the sponsor group.
HHR ensures stable earnings from retail facilities by making long-term lease contracts with tenants inmost properties, including flagship Hankyu Nishinomiya Gardens. Another strength is that it focuses ondensely populated areas primarily along the Hankyu and Hanshin railway lines.
As regards office-use facilities, some tenants moved out from Shiodome East Side Building. Thanks tothe steady progress of subsequent leasing activities, however, the rent level of the building rosecompared to that before tenant replacement. The occupancy rate of office-use zones at Sphere Tower
Tennozu is trending at 100%, and HHR agreed with some tenants in the building to increase a rent.
The fixed-rent portion constitutes most of total rent income, whereas the variable-rent portion, which
varies according to the sales of tenants, accounts for only 2.4% of total as of November 2019. The impactof the novel coronavirus outbreak on earnings is therefore considered to be limited.
The level of leverage continues to be managed appropriately. The LTV ratio in HHR's definition (basedon an appraisal value, including security deposits and guarantees and excluding matched money tosecurity deposits and guarantees) and the ratio of interest-bearing debt to total assets are at sound levelsof 39.3% and 43.6%, respectively, as of November 2019. With the appraisal value exceeding the bookvalue by 19.8% as of the same month, unrealized gains increased.
Under favorable relationships with domestic major banks, HHR continues stable funding. The averageremaining term to maturity is as long as 5 years (as of November 2019), with fixed interest rates on mostdebts and staggered due dates.
The Rating Outlook is Stable. Backed by support from the sponsor group with a robust business basein the Kansai region, HHR maintains prudent investment and steady operation of properties. The level ofleverage is conservative, and its funding is solid. The asset size is somewhat small, but is of marginal
concern at present, given stable earnings from the portfolio. The issue of the novel coronavirus has so far
exerted only a limited impact on earnings. R&I will keep a close eye on how it affects the leasing marketand the financial environment in the future.
The primary rating methodology applied to this rating is provided at "Rating Methodology for REITs".
The methodology is available at the web site listed below, together with other rating methodologies thatare taken into consideration when assigning the rating.
https://www.r-i.co.jp/en/rating/about/rating_method.html■Contact: Sales and Marketing Division, Customer Service Dept.
■Media Contact : Corporate Planning Division (Public Relations)Rating and Investment Information, Inc.

TEL.+81-(0)3-6273-7471 E-mail. infodept@r-i.co.jp
TEL.+81-(0)3-6273-7273

TERRACE SQUARE, 3-22 Kanda Nishikicho, Chiyoda-ku, Tokyo 101-0054, Japan https://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 https://www.r-i.co.jp/en/docs/policy/site.html.
© Rating and Investment Information, Inc.

NEWS RELEASE
R&I RATINGS:ISSUER:RATING:

Hankyu Hanshin REIT, Inc. (Sec. Code: 8977)
Issuer Rating
A+, Affirmed

RATING OUTLOOK:

Stable■Contact: Sales and Marketing Division, Customer Service Dept.
■Media Contact : Corporate Planning Division (Public Relations)Rating and Investment Information, Inc.

TEL.+81-(0)3-6273-7471 E-mail. infodept@r-i.co.jp
TEL.+81-(0)3-6273-7273

TERRACE SQUARE, 3-22 Kanda Nishikicho, Chiyoda-ku, Tokyo 101-0054, Japan https://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 https://www.r-i.co.jp/en/docs/policy/site.html.
© Rating and Investment Information, Inc.