O

October 17, 2019

Financial Results for the Fiscal Period
from March 1, 2019 to August 31, 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:
November 29, 2019
Scheduled Commencement Date of Cash Distribution Payment: November 15, 2019

1. Business Results for the Fiscal Period from March 1, 2019 to August 31, 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
August 31, 201912,361

10.5

6,084

17.3

5,624

18.9

February 28, 201911,186

1.3

5,185

5.1

4,729

6.5

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

(%)*

(yen)

(%)

(%)

(%)

For the period ended
August 31, 2019

5,623

18.9

11,606

4.0

1.9

45.5

February 28, 2019

4,728

6.5

9,759

3.4

1.6

42.3

* 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
August 31, 2019

10,449

5,062

–

–

90.0

3.6

February 28, 2019

9,706

4,702

–

–

99.5

3.4

Note:
For the period ended August 31, 2019 and the period ended February 28, 2019, because apart of retained earnings (¥561 million and ¥26 million for each period, respectively) was
retained internally, the amounts of “Total distributions” and “Net income” are different.

(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
August 31, 2019

303,133

141,37846.6

291,790

February 28, 2019296,877

140,45747.3

289,889

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
August 31, 2019
February 28, 201910,103
8,093(6,170)(5,564)2297(2,438)12,7028,471

2. Forecasts for the Fiscal Period from September 1, 2019 to February 29, 2020and Fiscal Period from March 1, 2020 to August 31, 2020
(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)

February 29, 2020 11,336 (8.3)
11,436 0.9
August 31, 2020

5,249 (13.7)

4,773 (15.1)

4,772 (15.1)

9,850

–

5,212 (0.7)

4,735 (0.8)

4,734 (0.8)

9,770

–

For the period ending* Percent figures show changes from previous period.

Note:
The net income per unit projections for the fiscal period ending February 29, 2020 and thefiscal period ending August 31, 2020 are ¥9,850 and ¥9,770, 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 August 31, 2019:484,522 units

As of February 28, 2019:484,522 units(2) The number of treasury investment units as of the period-end
As of August 31, 2019:- units

As of February 28, 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.

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27th Period (August 2019) 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 August 31, 2019 (the “27th Period”), despite signs of weakness
primarily in exports, the Japanese economy stayed on a moderate recovery trend, with a moderateincrease in capital investment, steady corporate earnings and consistent improvement in theemployment situation. Looking ahead, despite some weakness remaining at present, the economy
is expected to continue its moderate recovery, supported by the effects of policies, while theemployment and income situation is improving. At the same time, attention should be given to theimpact of the consumption tax hike, effects of the increasingly tense situation over trade issues,
the situation of Brexit, etc., on the world economy, as well as the effects of fluctuations in thefinancial and capital markets, and other factors.
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)
During the period under review, NAF newly acquired 45% co-ownership of Park Axis Oshiage
Terrace in March 2019, 55% co-ownership of Park Axis Oshiage Terrace and Park Axis Ikegami
in April 2019, and Chisun Hotel Hiroshima in May 2019 (a total of three properties with a totalacquisition price of ¥5,750 million). NAF sold Park Axis Esaka Hiroshibacho in August 2019(acquisition price in March 2011: ¥2,369 million, sale price: ¥3,089 million).

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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 ¥154,500 million(¥5,000 million increase from previous period), the long-term debt ratio was 96.1%, the long-term,
fixed-rate debt ratio was 93.5%, and the loan-to-value (LTV) ratio was 51.0%. 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
0.59%.
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 August 31, 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 ¥12,361 million, operating income of¥6,084 million, income before income taxes of ¥5,624 million and net income of ¥5,623 million.
Part of the capital gains resulting from the sale of Park Axis Esaka Hiroshibacho is to be internallyreserved as a reserve for reduction entry. In addition to the above, NAF has decided to distributethe majority of the ¥5,063 million balance remaining after deduction of ¥561 million of reserve 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 ¥10,449.

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Management Policy and Issues for the 28th 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.
Significant Subsequent Events
Not applicable7Forecasts of Investment Performance
The forecasts for the 28th period (from September 1, 2019 to February 29, 2020) and for the 29th
period (from March 1, 2020 to August 31, 2020) are as follows. For the underlying assumptions offorecasts, please refer to “Underlying assumptions of forecasts for the 28th period (fromSeptember 1, 2019 to February 29, 2020) and the 29th period (from March 1, 2020 to August 31,
2020)” 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

28th period(February 2020)¥11,336 million¥5,249 million¥4,773 million¥4,772 million

29th period(August 2020)¥11,436 million¥5,212 million¥4,735 million¥4,734 million¥9,850¥9,770¥―¥―(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 28th period (from September 1, 2019 toFebruary 29, 2020) and the 29th period (from March 1, 2020 to August 31, 2020)
Item
Number of operating days:
Investment assets/
Total revenues

Underlying assumptions- From September 1, 2019 to February 29, 2020 (182 days)- From March 1, 2020 to August 31, 2020 (184 days)- The number of properties held by NAF as of the date of thisdocument is 126 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 August 31, 2020.
- The average month-end occupancy rates for total properties forthe 28th period and 29th period are expected to be 97.7% and97.3%, respectively.
- The actual figures may change due to factors such as transfer ofproperties.

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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

Underlying assumptions- The fixed property taxes and urban planning taxes recognized as
expenses are expected to be ¥603 million for the 28th period and¥611 million for the 29th 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.
Accordingly, for the fixed property taxes and urban planning taxes
for the assets acquired during the 27th period, the fixed property
taxes and urban planning taxes for fiscal year 2020 will berecognized as expenses from the 29th period.
- 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 ¥2,001 million forthe 28th period and ¥1,978 million for the 29th 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 August 31, 2020. In addition, it is assumed that loans that
become due during the period will be fully refinanced.
- Interest expense, etc. are expected to be ¥475 million for the 28th
period and ¥477 million for the 29th 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 August
31, 2020.
- 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.

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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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