O

April 19, 2021

Financial Results for the Fiscal Period
from September 1, 2020 to February 28, 2021
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 31, 2021
Scheduled Commencement Date of Cash Distribution Payment: May 17, 2021

1. Business Results for the Fiscal Period from September 1, 2020 to February 28,
2021(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, 2021

11,560

0.3

5,266

(1.2)

4,862

(0.7)

August 31, 2020

11,520

1.0

5,332

0.5

4,898

0.7

IncomeIncomebeforebeforeNet income Net income/ income
incomeper unit
net assets
taxes/
taxes/
operatingtotal assets
incomeNet income

(%)*

(yen)

(%)

(%)

(%)

For the period ended
February 28, 2021

4,861

(0.7)

9,874

3.3

1.6

42.1

August 31, 2020

4,897

0.7

10,108

3.5

1.6

42.5

* 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, 2021

10,080

5,074

–

–

104.4

3.4

August 31, 2020

10,108

4,897

–

–

100.0

3.5

(Note 1) The payout ratio for the fiscal period ended February 28, 2021 is calculated based on
the following formula due to the issuance of new units during the period.
payout ratio = total amount of dividends (not including distribution in excess of earnings)
÷ net income × 100(Note 2) Distribution per unit for the fiscal period ended February 28, 2021 is calculated by
dividing ¥5,074 million (retained earnings of ¥4,861 million plus reversal of reserves for
reduction entry of ¥213 million) by the total number of investment units issued.

(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)

47.5
46.2

299,964
291,448

As ofFebruary 28, 2021
August 31, 2020

317,740
305,840

151,023
141,213(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, 2021

6,931

(2,739)6,916

22,682

August 31, 2020

6,790

(7,062)(895)

11,5742

2. Forecasts for the Fiscal Period from March 1, 2021 to August 31, 2021 andFiscal Period from September 1, 2021 to February 28, 2022
(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)

For the period ending

August 31, 2021

11,875

2.7

5,289

0.4

4,835 (0.5)

4,834 (0.6)

9,750

–

February 28, 2022 11,906

0.3

5,449

3.0

4,995

4,994 3.3

9,920

–

3.3

* Percent figures show changes from previous period.

Note 1:
The net income per unit projections for the fiscal period ending August 31, 2021 and the fiscal
period ending February 28, 2022 are ¥9,602 and ¥9,920, respectively.
Note 2:Distribution per unit for the fiscal period ending August 31, 2021 has been calculated assumingthat ¥4,908 million that is the sum of ¥74 million in reversal of reserves for reduction entry and¥4,834 million in net income will be distributed.

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, 2021:

503,472 units

As of August 31, 2020:

484,522 units(2) The number of treasury investment units as of the period-end
As of February 28, 2021:- units

As of August 31, 2020:- 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.

3

30th Period (February 2021) 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 129 properties at a total acquisition price of¥318,441 million (assets at time of listing: 27 properties at a total acquisition price of ¥101,385
million).
Investment Environment
During the six months ended February 28, 2021 (the “30th Period”), the Japanese economy
showed signs of recovery despite the situation continuing to be difficult due to the impact of novel
coronavirus disease (COVID-19). Amid the recovery of exports due to the economies of major
trade partners improving, production activities, primarily in the manufacturing industry, steadily
recovered as well. Corporate earnings, primarily in the manufacturing industry, also recovered.
Furthermore, despite personal consumption also recovering as a result of various policies, there
was weakness, primarily in the consumption of services, such as travel and eating out, due to thedeclaration of a state of emergency applicable to 11 prefectures due to the infection disease
spreading again in January, 2021.
In NAF’s main investment area, the residential rental market, despite the expected impact, suchas the number of contracts concluded decreasing significantly due to the stagnation of tenant
recruiting activities because of the spread of infection, in the previous period, tenant recruiting
activities in the period under review has generally returned to normal. However, there are signs
that the balance of supply and demand of rental apartments will change in central Tokyo, which
has been extremely tight thus far, as tenants’ needs are diversifying due to lifestyle changes thatcame about because of the spread of infection.
In the real estate trading market, transactions by investors in Japan and overseas were carried out
in a proactive manner as demand from investors with regard to rental apartments, whereoccupancy and revenue is stable, was steady.
External Growth (Acquisition and sale of properties)
During the period under review, NAF newly acquired 35% co-ownership of Park Axis Toyocho
Shinsui Koen in October 2020 (acquisition price of ¥2,233 million).

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Internal Growth (Management and operation of properties held by NAF)
In this environment, as a result of Mitsui Fudosan Residential Lease Co., Ltd., the property
management company of NAF, and Mitsui Fudosan Accommodations Fund Management Co., Ltd.,the asset management company of NAF, properly collaborating and working on management andoperation of NAF’s rental apartments portfolio, occupancy rates for rental apartments improved
from 96.0% at the end of the previous period (the 29th Period) to 96.8% at the end of the period
under review, and rent change before and after turnover maintained an upward trend at 3.2% at
the time of tenant turnover. In addition, NAF aims to reduce costs by utilizing the merits ofoutsourcing all property management tasks to the property management company while examining,whenever necessary, the adequacy of the grade of property management, cost of management
and operation.
Meanwhile in the management of “Hospitality Facilities” (Note), rental revenue is stable because NAF
concludes long-term contracts regarding fixed rents to a professional operator or businesscorporation. Regarding the circumstances of each property, despite the difficult situation continuing
due to reduced demand for hotels, dormitories and corporate housing as well as senior residences
have been stably occupied in general. In addition, 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, such as
appropriate renewal work according to the property age, and work to enhance the property value,
are systematically carried out, and in the period under review, NAF carried out renovations inprivate areas at Okawabata Apartment Communities. In addition, NAF is not only making
continuous efforts to reduce costs, but also introducing such features as environmentally friendly,
energy-saving facilities, which includes changing the lighting in common areas to LED lighting, ina timely manner.
(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, NAF procured ¥9,800 million in funds by issuing a total of 18,950 investment units
by public offering and third-party allocation, and newly borrowed ¥2,000 million in funds fromfinancial institutions in order to appropriate funds for the acquisition of new properties. In addition,
NAF pursued financing from various sources with diversified repayment dates and an emphasis
on long-term, fixed-rate loans in its procurement of funds by taking into account market trends andinterest rate levels, and refinancing existing loans.
As a result, at the end of the period, total interest-bearing debt amounted to ¥159,500 million(¥2,000 million increase from previous period), the long-term debt ratio was 98.1%, the long-term,
fixed-rate debt ratio was 95.6%, and the loan-to-value (LTV) ratio was 50.2%. The average annual
current maturity of long-term interest-bearing debt was 4.6 years and the number of financial
institutions was 26. Furthermore, the weighted average interest rate at the end of the period was
0.54%.
NAF also has secured a commitment line for the purpose of securing flexible and stable fund5

procurement 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 corporation
bonds for public offering in July 2019. The remaining balance of the planned issuance amount at
the end of the period is ¥96,000 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 February 28, 2021 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 ¥11,560 million, operating income of¥5,266 million, income before income taxes of ¥4,862 million and net income of ¥4,861 million. In
addition to the above, NAF has decided to distribute ¥5,074 million that is the sum of ¥213 million
in reversal of reserves for reduction entry and the full amount of retained earnings in accordancewith the Distribution Policy (Article 34 of the Articles of Incorporation) set forth by NAF. The
distribution per unit was ¥10,080.

6

Management Policy and Issues for the 31st Period Onward
Looking ahead, the uncertain situation is expected to continue for the Japanese economy due tothe impacts of COVID-19. Furthermore, it is necessary to give consideration to risks impacting thereal estate market and financial and capital markets due to economic stagnation in Japan andoverseas due to the lengthening of the impact.
While the supply of quality rental apartments in which NAF would invest is generally limited 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), it is necessary to pay attention to factors such as thepossibility that the influx of people from other regions will decrease due to the impact of COVID19, and changes in needs for residences due to the spread of working from home and teleworking
as well as the diversification of working styles.
Concerning the real estate trading market, the placement of quality rental apartments as stable
investment assets is not expected to change, but trends among financial and capital markets andinvestors resulting from the spread of COVID-19 should be carefully assessed.
(Note) “Other major cities” refers to each of the urban areas of Sapporo, Sendai, Nagoya, Osaka, Kyoto, Kobe,
Hiroshima and Fukuoka.

External Growth (New acquisition of properties)
NAF steadily acquires competitive properties that can respond to future changes in demand trends,
leveraging our pipeline to the Mitsui Fudosan Group and enhancing information channel at theasset management company.
While concentrating on a property acquisition strategy of stable acquisition of “Rental Apartments,”
NAF will acquire “Hospitality Facilities,” which are properties that offer stable revenue andcompetitiveness over the long term. NAF will keep the Hospitality Facilities’ share of the portfolio(based on acquisition price) to a maximum of 10% in the near-term, and carry out operations that
carefully select properties to acquire.
Internal Growth (Management and operation of leasehold properties)
NAF aims to achieve solid internal growth while maintaining asset value in the long term by carryingout dynamic leasing that can flexibly respond to the balance of supply and demand in the market
going forward and changes in tenants’ needs as well as maintaining and improving rent levels andoccupancy rate, and reducing costs, 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 future7

issuances 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 applicable(Reference information)
The following asset was acquired on April 5, 2021. The “Acquisition price” is exclusive of
miscellaneous expenses for acquisition, fixed property taxes, urban planning taxes, consumption
taxes, and local consumption taxes.
Park Cube Oimachi Residence
Acquisition price:
Appraised value (Notes 1, 2):
Type of property:
Location (residence indication):
Completion date:
Structure/Number of stories:
Rentable units (total):
Rentable area (total):
Seller:Park Axis Toyocho Shinsui Koen
Acquisition price:
Appraised value (Notes 1, 3):
Type of property:
Location (residence indication):
Completion date:
Structure/Number of stories:
Rentable units (total):
Rentable area (total):
Seller:¥1,742 million¥1,960 million(date of value appraisal: October 31, 2020)
Real estate (30% of co-ownership)
22-16 Oi 1-chome, Shinagawa-ku, Tokyo
January 10, 2018
Flat-roof reinforced concrete structure/15 stories
170 residential, 1 retail, etc.
4,271.17 m2
Mitsui Fudosan Residential Co., Ltd.

¥4,147 million¥4,391 million(date of value appraisal: October 31, 2020)
Real estate (65% of co-ownership)
34-4 Minamisuna 2-chome, Koto-ku, Tokyo
August 29, 2014
Flat-roof reinforced concrete structure/14 stories
190 residential, 2 retail, etc.
7,254.57 m2
Mitsui Fudosan Residential Co., Ltd.

8

Park Axis Ofuna
Acquisition price:
Appraised value (Note 1):
Type of property:
Location (residence indication):
Completion date:
Structure/Number of stories:
Rentable units:
Rentable area:
Seller:Campus terrace Waseda
Acquisition price:
Appraised value (Note 1):
Type of property:
Location (residence indication):
Completion date:
Structure/Number of stories:
Rentable area:
Seller:¥2,100 million¥2,320 million(date of value appraisal: October 31, 2020)
Real estate9-29 Kasama 1-chome, Sakae-ku, Yokohama-shi,
Kanagawa
January 12, 2010
Flat-roofed steel reinforced concrete structure/6
stories
73
4,752.68 m2
Mitsui Fudosan Residential Co., Ltd.

¥1,810 million¥1,870 million(date of value appraisal: October 31, 2020)
Real estate39-13 Sekiguchi 1-chome, Bunkyo-ku, Tokyo
January 31, 2020
Flat-roofed steel reinforced concrete structure/7
stories
1,747.51 m2
Mitsui Fudosan Residential Co., Ltd.

9

Note 1: The outline of real estate appraisal reports (obtained from Daiwa Real Estate Appraisal
Co., Ltd. Japan Real Estate Institute and JLL Morii Valuation & Advisory K.K.) as ofFebruary 28, 2021, which is the 30th period closing date, is as follows.
(in millions of yen, except as noted)
CostmethodIncome capitalization method
Appraised
value

Value
calculated bydirectcapitalization
methodPark Cube Oimachi
Residence (Note 2)

1,960

1,950

Park Axis Toyocho Shinsui
Koen (Note 3)

4,511

Name of Property

Park Axis Ofuna
Campus terrace Waseda

Appraisalcompany

Value
calculatedby DCFmethodDiscount
rate

Terminal
cap rate

Costmethod
value

3.7%

1,890

3.5%

3.9%

1,380

Daiwa Real EstateAppraisal Co., Ltd.

4,472

3.9%

4,361

3.6%

4.1%

4,108

Japan Real Estate
Institute

2,370

2,400

4.8%

2,330

4.6%

5.0%

1,610

JLL Morii Valuation& Advisory K.K.

1,910

1,940

4.0%

1,870

3.8%

4.2%

1,190

JLL Morii Valuation& Advisory K.K.

Directcap rate

These properties are applicable to forward commitments (refers to the postdated sales
contract under which payment and delivery shall be made at least one month after theconclusion of the contract, or any other contract similar thereto) by investment
corporations as provided for in 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 dateof 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 the internal rules of the asset
management company to disclose the continually conducted appraised value as of the
30th period closing date.
Note 2: The figures “Appraised value,” “Value calculated by direct capitalization method,” “Value
calculated by DCF method,” and “Cost method value” that pertain to Park Cube Oimachi
Residence describe amounts that are equivalent to 30% ownership acquired on April 5,2021 presented above.
Note 3: The figures “Appraised value,” “Value calculated by direct capitalization method,” “Value
calculated by DCF method,” and “Cost method value” that pertain to Park Axis Toyocho
Shinsui Koen describe amounts that are equivalent to 65% ownership acquired on April
5, 2021 presented above.

10

Forecasts of Investment Performance
The forecasts for the 31st period (from March 1, 2021 to August 31, 2021) and for the 32nd period(from September 1, 2021 to February 28, 2022) are as follows. For the underlying assumptions offorecasts, please refer to “Underlying assumptions of forecasts for the 31st period (from March 1,
2021 to August 31, 2021) and the 32nd period (from September 1, 2021 to February 28, 2022)”
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

31st period(August 2021)¥11,875 million¥5,289 million¥4,835 million¥4,834 million

32nd period(February 2022)¥11,906 million¥5,449 million¥4,995 million¥4,994 million¥9,750¥9,920¥―¥―(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 31st period (from March 1, 2021 to August 31,2021) and the 32nd period (from September 1, 2021 to February 28, 2022)
Item
Number of operating days:
Investment assets/
Total revenues

Underlying assumptions- From March 1, 2021 to August 31, 2021 (184 days)- From September 1, 2021 to February 28, 2022 (181 days)- The number of properties held by NAF as of the date of thisdocument is 131 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 February 28, 2022.
- The average month-end occupancy rates for total properties forthe 31st period and 32nd period are expected to be 96.1% and96.2%, respectively.
- The actual figures may change due to factors such as transfer ofproperties.

11

Item
Operating expenses

Interest-bearing debt/
Non-operating expenses

Number of units issued

Distribution per unit
(not including distributions inexcess of earnings)

Underlying assumptions- The fixed property taxes and urban planning taxes recognized as
expenses are expected to be ¥631 million for the 31st period and¥631 million for the 32nd period. However, when an investment
asset is acquired, the fixed property taxes and urban planning taxes
that are settled with the previous owner according to the number ofdays the asset is owned are not recognized as expenses because
they are included in the acquisition price.
- 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 ¥2,034 million for the
31st period and ¥2,008 million for the 32nd period.
- It is assumed that NAF’s balance of interest-bearing debt, whichis ¥159,500 million as of the date of this document, shall not change
until February 28, 2022. In addition, it is assumed that loans that
become due during the period will be fully refinanced.
- Interest expense and interest expenses on investment corporation
bonds, etc. are expected to be ¥448 million for the 31st period and¥448 million for the 32nd period.
- Amortization of costs related to the issuance of new units, etc. is
expected to be ¥5 million for the 31st period and ¥5 million for the
32nd period.
- We assume 503,472 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 February
28, 2022.
- Distribution (distribution per unit) is calculated assuming it will bein accordance with the Distribution Policy set forth in the Articles ofIncorporation of NAF.
- Reversal of internal reserves (reserve for reduction entry) is
expected to be ¥74 million for the 31st period.
- 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.

12

Item
Distribution in excess ofearnings per unit
Other

Underlying assumptions- There is no distribution in excess of earnings planned as of thedate of this document.
- NAF has assumed no enforcement of such revisions to laws andregulations, tax systems, accounting standards, regulations of theTokyo Stock Exchange and rules of The Investment Trusts
Association, Japan, etc. that may affect the above forecasts.
- NAF’s forecasts assume no unforeseen significant changes ingeneral economic trends or conditions in the real estate market.

13

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.

14