Outline of
Nippon Accommodations Fund

Disclaimer
Please be sure to read these notes before reading this document.
This English document is intended for informational purposes only. The contents of this document do notconstitute an offer to sell or solicitation of an offer to buy or sell any security of Nippon Accommodations
Fund Inc. or otherwise, nor is it advice or the recommendation of Nippon Accommodations Fund Inc. to enter
into any transaction.
Information in this document other than that concerning past or present facts contains future projections.
Such future projections are based on certain assumptions and judgments made in light of the information
obtained as of the time of the posting of such projections. Moreover, such future projections include and may
be affected by unknown risks and uncertainties. For these reasons, such future projections are not meant toguarantee the actual performance, management results, financial details or other future matters of Nippon
Accommodations Fund Inc. Actual results may differ greatly from the performance, management results,financial details and other matters expressed or implied by such future projections.
Information contained in this document is presented as of the relevant time of its issuance. This document
does not reflect any changes in circumstances that may have occurred subsequent to its issuance. In
addition, the Nippon Accommodations Fund Inc. is not responsible for updating the information in it.
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1

Overview of Our Strengths
1. Investment in “ Accommodation Assets”
Nippon Accommodations Fund (NAF) will invest in “ Accommodation Assets” ; newly
developed properties created in response to ongoing social and lifestyle changes
NAF defines “ Accommodation Assets” as rental apartments, dormitory/student apartments,
serviced apartments, senior residences and corporate housing (NO HOTEL PROPERTIES)NAF will work to maximize the value of “ Accommodation Assets” by providing
accommodations (services that satisfy diverse tenant needs)

2. Utilization of the Mitsui Fudosan Group
The Mitsui Fudosan Group has structured a value chain as a one-stop service provider fromplanning/development to management/operation of “ Accommodation Assets”
NAF will make full use of the Mitsui Fudosan Group’s value chain for its investment
management
Mitsui Fudosan’s properties and the Mitsui Fudosan Group’s extensive real estate
information network will give NAF greater access to investment opportunities

2Portfolio Summary
Portfolio Map

Investment Criteria

Kita-kuToshima-ku
Arakawa-ku
10
Bunkyo-ku
Taito-ku
15
Nakano-ku
820
18 24 23 Sumida-ku
6
19
Shinjuku-ku
21
3
22
Shibuya-ku
4 12

Setagaya-ku
2 Meguro-ku

Chiyoda-ku

16
17
5 Minato-ku
14
11
7

Shinagawa-ku

Chuo-ku
13
1
9

Koto-ku

Edogawa-ku

AreaTokyo 23 wards (80% or more)
Greater Tokyo
Other Major Cities(Sapporo, Sendai, Nagoya, Kyoto, Osaka, Kobe,
Hiroshima, Fukuoka)
Investment size
JPY1 bn or more per property (in principle)
Ownership interest
Fee Simple (in principle)
Building structure
RC or SRC (No wooden structures)

Portfolio by Area

Portfolio by Category(acquisition price-based)(unit-based)

Greater Tokyo:
2.1% (2 properties)
JPY 2,120 mn

Ota-kuOther Major Cities
2.4% (1 property)
JPY 2,440 mn

Large(3BR or more)
231 units
Family(2BR)
520 units

25
26

27
Properties
Total
JPY 101,380
mn

27

95.5%
Tokyo 23 wards
95.5% (24 properties)
JPY 96,820 mn

8.4%

Others (retail):
0.1%
3 units
Single (studio)
879 units

31.8%
18.8%

Total units:
2,758
Compact(1BR)
1,128 units

40.9%

3

Portfolio Summary (cont’d)
No.

Name

Location

Acquisition Price(JPY mn) (Note)

Portfolio Share(%)

Rentable Area(sq. m.)Rentable Units(units)

PML
(%)

1

Okawabata Apartment Communities(River Point Tower, Park Side Wings, Chuo-ku, Tokyo
Pier West House)

29,69629.3

43,812.41

544

4.9
9.9
8.9

2

Park Axis Gakugei Daigaku

Setagaya-ku, Tokyo

1,760

1.7

2,437.66

64

9.7

3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24

Park Axis Ichigay a
Park Axis Shibuy a Jinnan
Park Axis Aoyama Kotto-doriPark Axis Kagurazaka Stage
Park Axis Shirokanedai
Park Axis Bunkyo Stage
Park Axis Tsukishima
Park Axis Otsuka
Park Axis Minami Azabu
Park Axis Shibuy aPark Axis Nihonbashi Stage
Park Axis Hamamatsu-choPark Axis Hongo no Mori
Park Axis Tameike Sanno
Park Axis Roppongi Hinokicho Koen
Park Axis Ochanomizu Stage
Park Axis Okachimachi
Park Cube Hongo
Park Cube Kanda
Park Cube Ichigaya
Park Cube Asakusa Tawaramachi
Park Cube Ueno
Tokyo 23 Wards Total
Park Cube Keio Hachioji
Park Cube Keio Hachioji II
Greater Tokyo Total
Park Axis Meieki Minami
Other Major Cities Total
Grand Total

Shinjuku-ku, Tokyo
Shibuya-ku, Tokyo
Minato-ku, Tokyo
Shinjuku-ku, Tokyo
Minato-ku, Tokyo
Bunkyo-ku, Tokyo
Chuo-ku, Tokyo
Toshima-ku, Tokyo
Minato-ku, Tokyo
Shibuya-ku, Tokyo
Chuo-ku, Tokyo
Minato-ku, Tokyo
Bunkyo-ku, Tokyo
Minato-ku, Tokyo
Minato-ku, Tokyo
Bunkyo-ku, Tokyo
Taito-ku, Tokyo
Bunkyo-ku, Tokyo
Chiyoda-ku, Tokyo
Shinjuku-ku, Tokyo
Taito-ku, Tokyo
Taito-ku, Tokyo

2,570
3,230
1,730
1,400
5,140
4,440
930
1,655
3,939
1,282
7,557
2,025
2,910
2,860
2,170
9,710
1,070
1,760
2,454
1,794
2,508
2,233
96,824
991
1,130
2,121
2,440
2,440
101,385

2.5
3.2
1.7
1.4
5.1
4.4
0.9
1.6
3.9
1.3
7.5
2.0
2.9
2.8
2.1
9.6
1.1
1.7
2.4
1.8
2.5
2.2
95.5
1.0
1.1
2.1
2.4
2.4
100.003,313.33
2,766.62
1,537.24
1,891.05
4,704.44
6,078.93
1,383.99
2,606.37
3,938.14
1,094.28
10,025.40
2,426.45
3,317.94
2,710.69
2,054.46
12,025.25
1,621.73
2,160.12
3,194.59
2,127.50
4,012.68
3,041.61
124,282.88
2,814.32
3,082.32
5,896.64
5,565.13
5,565.13
135,744.65

84
75
40
59
99
154
30
52
64
20
184 Residential, 1 Retail

8.5
8.7
9.2
8.4
12.0
7.2
10.1
7.4
9.2
10.7
11.3
9.4
11.2
9.8
9.5
10.0
10.3
10.1
10.9
9.1
9.1
10.8

25
26
27

Hachioji-shi, Tokyo
Hachioji-shi, Tokyo
Nagoya-shi, Aichi

80
86 Residential, 1 Retail
70
46
324
42
60
95
51
76
91
2,490 Residential, 2 Retail52
47 Residential, 1 Retail
99 Residential, 1 Retail169
169
2,758 Residential, 3 Retail(Note): “Acquisition Price” does not include acquisition-related expenses, property tax (to be capitalized) and consumption tax (not refundable for residential properties).
Amounts are rounded down to the nearest million.

9.6
9.5
5.8
5.1

4

Investment in Accommodation Assets
Social Background

Range of Residential Property“ Accommodation Assets”

Changes inFamily Structure

High

Corporate Housing/
Dormitory/
Student Apartments

Diversified Needs for Residential Properties

Serviced Apartments

HotelServices

Senior Residences

Rental Apartments

Houses Built for Retail Sale

Changes in Lifestyles

Low
Short

Long

Concept of “ Accommodations”“ Accommodate” ＝ “ to provide satisfactory service”
From simply “renting space” to “providing accommodations” in response to more diversified needs of tenants
Objective: Maximize value of “ Accommodation Assets”

NAF will invest in “ Accommodation Assets”
Mainly rental apartments but also dormitory/student apartments,
serviced apartments, senior residences and corporate housing (NO HOTELS).
5

Rental Apartment Market Characteristics (1)DemandEstimated Number of Households(Year 2000=100)
115

Tokyo Population Forecast

Homeownership Rate by Age(Thousands)
12,800

(%)
1978

1988

1998

2003

Average

59.9

61.1

60

60.9

- 25

9.9

4.5

2.7

2.7

25-54

58.6

58.9

54.1

52.9

55-59

79

79.3

76.7

76.7

60-64

77.9

80.3

79.2

78.9

77.4

81.2

80

75.5

79.4

80.3

12,70012,600110

12,50012,40012,300105

12,20012,100100

12,000

2000

2005

Tokyo Area
Kansai Area
Other Areas

20102015 (CY)

Nagoya Area
Fukuoka

Steady growth of households

65-74
2000

2005

2010

2015 (CY)

National Ins titute of Population andSocial Security Research
Tokyo Metropolitan Gov't

Rising population in Tokyo

75.9
75-

Decreasing homeownership ratein the 25-54 age bracket(Note 1) “Tokyo Area” includes Tokyo, Saitama, Chiba and Kanagawa;“Nagoya Area” includes Aichi, Gifu and Mie; and “Kansai Area”
includes Kyoto, Osaka, Hyogo and Nara. “Fukuoka” means
Fukuoka Prefecture alone. “Other Areas” means nationwide
households (estimated) excluding Hokkaido, Miyagi, Tokyo Area,
Nagoya Area, Kansai Area and Fukuoka.

6

Rental Apartment Market Characteristics (2)SupplyNumber of Rental Apartments(Nationwide)

Stability
Number of Housesin Tokyo by Floor Space (2003)(1,000 units)
1,000(1,000 units)
1,200

800

1,000

600

800

400

600

Residential and Office Rents(Total floor space: Sq. m.)

400

200

200

0
89

91

93

95

97

99

01

03

05 (CY)85 87 89 91 93 95 97 99 01 03 05(CY)0-29

Public Enitity
Individual

Corporate
Total

Limited supply fromprivate companies(Note 1) “Rental housing” means houses built for rent.
(Note 2) “Public Entity” means the central government (including
Urban Renaissance Agency), local governments and related
entities; “Corporate” means stock companies and limited
companies; and “Individual” means individuals, sole
proprietors and non-corporate organizations.

(1985 = 100)
170
160
150
140
130
120
110
100
90

30-49

50-69

70-99

100-149

150-

Company Housing (Priv ate & Public)
Rental (Priv ate)
Rental (Other)
Rental (Public )Owned and occupied

Private rental houses(Tokyo, non-wooden, over 30 sq. m.)
Offices (Tokyo)

Relatively scarce quality apartments

Relatively stable rents(Note 1) “Owned and occupied” means houses held by households
who reside therein.
(Note 2) “Rental (Public)” means rental apartments owned by Urban
Development Corporation (currently Urban RenaissanceAgency), local prefectural governments, municipal
governments and other related public housing corporations;“Rental (Private)” means non-wooden multifamily housing
held by individuals or companies; “Company Housing (Private& Public)” means corporate housing and apartments for
employees, “Rental (Other)” means rental apartments
excluding “Rental (Public),” “Rental (Private)” and “Company
Housing.”(Note 1) “Private rental houses (Tokyo non-wooden, over 30 sq. m.)”shows indexed rent per 3.3 sq. m. of rental apartments of 30
sq. m. or larger located in the 23 wards of Tokyo, excluding
wooden houses. “Office (Tokyo)” shows indexed rent derived
from average rent of surveyed buildings located in Ota, Koto,
Shinagawa, Shibuya, Shinjuku, Sumida, Taito, Chuo, Chiyoda,
Toshima, Nerima, Minato and Meguro wards in Tokyo,
Machida-shi, Kawasaki-shi, Yokohama-shi, Saitama-shi,
Chiba-shi and Mito-shi, as well as tenant leasing of certain
tenants of the surveyed buildings in Shibuya, Chuo andMinato wards, and Kawasaki-shi and Mito-shi.

The rental apartment market will continue to remain competitive due toscarcity of quality assets

7

The Mitsui Fudosan Group’s Value Chain
Operation, Planning /Development of
Accommodation Business
Understanding of supply/demand trends in themarket by analysis of statisticalinformation/data on housing for sale andrental apartments, occupancy surveys of new
properties and fixed property observation
Examination of micro market characteristics
and needs based on a long track record(experience) in case studies of potential
properties/development project areas,
housing to real estate brokers,
rent/occupancy historical data

Development of site acquisition strategy based on
macro market and potential demand trends
Large collection of site information supported byproperty development capabilities of all types fromsmall buildings to complex development/large
development projects

MarketResearch/Analysis

Feedback to
Planning/
Development

Understanding of tenant needs,
feedback for reinvestment anddevelopment
Renewal/renovation(reinvestment) based on
appropriate investment return
analysis
Value-added services that takeadvantage of scale

Site
Acquisition

Planning
DesignComprehensive
operating system
conducted by the
Mitsui Fudosan GroupManagement/Operation

Construction
Management/
Supervision

Leasing

Property management
Mitsui Fudosan Housing Service
Co., Ltd.

Residential
Building
Maintenance

Detailed development of target customers
and property concepts according to purpose,
number of residents, family structure andlifestyle
Planning of strategic plan variations,specifications, grades and tastes suitablefor established target and concept
Strategic plan design discussed from theviewpoints of design, safety, functionality,
management/operation, running cost andmaintenance/renewal
Acquisition of approval, cost control,
scheduling, design/construction
management (use of real estatedevelopment expertise gained from tenant
feedback)
Quality control (use of rental apartments
construction/design checklist covering
approx. 1,300 inquiries)
On-site meetings/checks by respective
professionals in construction, structure andfacilities
Individual plan evaluation, discussions onliving environment, competitive landscapeand other conditions, and setting of rent
details
Construction of framework to convey
product appeal (use of leasing specialist)
Control/Use of leasing agency network

Initial Leasing
Tenant Brokerage

8Mitsui Fudosan’s “ Accommodation Asset”
Development Capabilities
Understanding of residential land/development
information based on considerable
condominium development experience in major
cities nationwide

Condominium Development

Mitsui Fudosan

Development Information/
Tenant Needs

Multipurpose Real Estate Development
Large Re-Development Projects

Breadth of information fromvarious brands

Top quality
condominiums
High-grade urban
condominiums

Park Axis series ofurban apartments

City living
condominiums

Large developments

High-rise
condominiums
Large-scale developmentsthat create an environment

Toyosu Redevelopment
Use: Residential,
Shopping Center “ LalaPort Toyosu”

Nihonbashi Mitsui Tower
Location: Nihonbashi Muromachi,
Chuo-ku, Tokyo
Kasumigaseki Building
Location: Kasumigaseki,
Chiyoda-ku, Tokyo

Units of Condominiums Soldby Mitsui Fudosan(Ranking)
1
3(Units)
8,000

5
7
9
11
13
15

6,000
4,000
2,000
0
89 90 91 92 93 9495 96 97 98 99 00 01 02 03 04 05 (CY)
Other Cities

Tokyo Midtown Project
Location: Akasaka, Minato-ku, Tokyo
Use: Office, Retail, Hotel,
Residential, Art Museum

Office Building Development/Management

Flow of information supported by large supply

Greater Tokyo

Understanding of development information/tenantneeds brought from multipurpose real estatedevelopment experience

Use of Mitsui Fudosan’s
Accommodation
Assetdevelopment
capabilities, taking
advantage of awide range of realestate/tenant
information

Retail Property Development/Management
COREDO Nihonbashi
Location: Nihonbashi, Chuo-ku,
TokyoTOKYO-BAY LaLaPort
Location: Hamamachi,
Funabashi-shi, Chiba

Ranking9

Mitsui Fudosan’s Apartment Development Capabilities
Apartment Development
Park Axis Series
Okawabata Apartment Communities
Completed in 1988 and 1989
2,152 units completed (as of March 2006)
Total units: 544
Park Axis Series Track Record and Pipeline
Part of Okawabata River City 21 Development(Unit)
project
1,500
1,231River Point Tower is Tokyo’s first high-rise
1,000
apartment building
667 598472
Large-scale complex development project including 500
194
127
633
28
condominiums, rental apartments, and office and310retail facilities on approx. 9 ha. of land2000 2001 2002 2003 2004 2005 2006 (CY)
Provides daily convenience for tenants with
(Source) Mitsui Fudosan Co., Ltd.
restaurants and sports facilities as well as 24-hour
Actual Estimate
manned service including concierge services

Large Apartment Development Projects
Minami Aoyama 1-Chome (Tokyo Metro Gov’t)
Residential Complex Reconstruction
Project (Note)(JV among Mitsui Fudosan, Tokyo Metro Gov’t, ITOCHU and
Taisei)To be completed in 2007

Shibaura Island Project A1, A3 Blocks(JV among Mitsui Fudosan, Ken, Orix Real Estate, Nippon Steel City Produce
and Daiwa House.)

To be completed in
2007, 2008
Total units: 2,000

Total units: 390

NAF has acquired Okawabata Apartment Communities (544 units) and 19 buildings of Park Axis series (1,744 units)(Note) Acquisition of the above buildings is not planned as of July 2006.

10

Leveraging the Mitsui Fudosan Group’s Residential
Property Management/Operation Capabilities
Management/Operation Capabilities Leveraging Expertise of the Mitsui Fudosan Group
Unified property / tenant management data
Promotes efficient and sure operation
Mitsui Fudosan Housing Lease will manage/operate all of NAF’s assets
Property Management

RESIDENT FIRST Co., Ltd.

Initial Leasing/Tenant Brokerage
Efficient leasing enabled by direct sales from a Mitsui Fudosan Group
company with deep understanding of the property
Able to obtain direct customer feedback for use in development,
management/operation and acquisition of assets

Mitsui Fudosan Housing Service Residential Building MaintenanceCo., Ltd.
Extensive experience mainly in condominiums sold by Mitsui Fudosan

Sustain asset value growth over the long term to maintain and improve rent and occupancy
Case of Okawabata Apartment Communities
Rent and Occupancy of Okawabata Apartment Communities

Taking advantage of Group companies’ engineering
capabilities and accumulated expertise in condominiums

Efficient CapEx from a long-term perspective:
Repair of external wall (1999)
Renewal of home security system (2000 – 2003)
Renewal of residential air-conditioning ahead of schedule(2000 - ), etc.

Rent per tsubo
Occupancy(renewal rent per tsubo in 98/1H = 100)
150
100%
140
Occupancy
90%
130
120
New Rent
Total Avg. Rent
80%
110
100
70%
90
Chuo-ku Avg. Market Rent (10-yr-old building)
80
60%
98/1H

99/1H

98/6 2H 99/6

00/1H 01/1H
02/1H 03/1H
04/1H
05/1H
2H00/6 2H01/6 2H 02/6 2H 03/6 2H 04/6 2H 05/6 2H(Yr)

Okawabata Apartment Communities have maintained the above rent/occupancy even17-18 years after completion11

Property Brand Strategy“ Park Axis” Series
Residential rental apartments planned / developedby Mitsui Fudosan
Leverages Mitsui Fudosan’s expertise incondominium businessFeatures design, facilities and finishes to fit urban
lifestyles

Residence
Loca
tion

LOCATION
Area set up that was quick tonote “ migration back to central
Tokyo”
Areas offered very popular inrental market, can expect stabledemand in futureManagement

RESIDENCE
Basic specifications fordurability and sound insulat ion
Space designs that appeal
to resident s
Fixt ures and finishes thatconsider aesthetics, livability,
advanced features andconvenience
Security measures to provide
safe urban living

MANAGEMENT
Appropriate long-term
maintenance & improvement planand common area management
menu
Securing high-quality tenants
through strong sales capabilities
and rigorous screening“ Park Cube” Series
Quality

Planned / developed by third parties other than the
Mitsui Fudosan Group
Meets NAF’s own construction and design standards

Basic specifications fordurability and sound insulat ion
Fixt ures and finishes thatconsider functionality, advancedfeat ures and convenience
Security that provides safe andsecure residential spaces

Appropriate long-term
maintenance & improvement
plan and common area
management menu
Securing high-quality tenants
through strong sales capabilities
and rigorous screening

Management

Brand value enhanced by total quality management

Portfolio with potential for sustainable asset value growth over the long term
12Brand Strategy I
Development
Development Plans
Plans toto MeetMeet Diversified
Diversified Demands
Demands

SupportSupport Services
Services forfor Resident
Resident Convenience
Convenience

Taking advantage of the Mitsui Fudosan Group’s marketing expertise,the “Park Axis” series is designed with a detailed targeting strategy
considering location and surrounding environment. Apartments aredeveloped according to those plans (floor plan, facilities, etc.) to meet
specific target demands in response to a wide range of lifestyles andlifestages.

【Concierge Service】
Providing reception services similar to thoseof a concierge (customer relations at hotels)
to satisfy needs of tenants looking for aquality lifestyle as well as everyday services.
【Household Services】
Providing services in partnership with otherservice providers to increase tenantconvenience in areas including housecleaning, furniture/home appliance leasing,food catering and transportation service toand from hospital/school.
【Payment by Credit Card】
24-hour Internet credit card payments
available for initial payments (deposit andkey money)

Combining
Combining Function
Function andand Aesthetic
Aesthetic Design
DesignFor the “Park Axis” series to maintain its appeal for a long period oftime, Mitsui Fudosan’s designs combine function and aesthetic designin everything from the façade (exterior), entrance and corridor to thedoorway of each unit. In cooperation with architects and/or interior
designers, additional differentiation is sought to offer a design suitable
to its surrounding environment and customer attributes.
For example, Ryoichi Misawa, President of Misawa Associates, hasbeen selected to cooperate on Park Axis Nihonbashi Stage, andMasuo Fujiwara, President of We & F, is cooperating on Park Axis
Aoyama Kotto-dori and Park Axis Tameike-Sanno.

Reception (Park Axis Nihonbashi Stage)

SupportSupport Services
Services toto Ensure
Ensure Safety
Safety andand Comfort
Comfort【C-Desk】
24/7, toll free service to accept/respond torequests for rent renewal and issuance ofcertification of parking space as well as
trouble shooting including water leaks, airconditioning and water heater problems【Tenant Guidebook】
Distribution of “Tenant Guidebook” to assist
tenants from moving in to moving out. It also
explains procedures for paying water, gas,
electricity and other utility bills.
The above is a summary of services/support already provided insome of the buildings in the portfolio at IPO. These services are notnecessarily available at all buildings. NAF is willing to improve andprovide these services/support to more buildings.

(Image picture)(Tenant Guidebook)13

Brand Strategy II
More
More quality,
quality, safety
safety andand comfort
comfort inin anan advanced
advanced information/telecommunications
information/telecommunications environment
environment
The “Park Axis” series is designed and constructed under total quality management based on Mitsui Fudosan’s expertise incondominiums, considering easy facility renewals, maintenance and convenience of tenants. It takes a proactive approachto ensure safety and comfort, key issues in today’s society, in providing rental apartments.

Diagram of Security Measures
Front Door

Security Cameras

Floors and Bordering Walls(Dimple key & double lock/thumbturnfor crime prevent ion)

The front door of each unit
uses a dimple key thatmeets crime prevention
standards. A double lockand thumbturn further
enhance security.

Floor slabs more than 200mm thick andbordering walls at least 180mm thickcontribute to sound insulation.

Bordering
wall
180mm

Installed in entrance hall, parking lots andother areas. Prevents intrusion of prowlers.

Autolock

Security camera(reference photo)

A cameraequipped autolock
system allows
residents to checkvisitors by video as
well as voice.

Entrance Zone

protects privacy and prevents
intrusion into building withautolock system

Border Zone

prevents entry of
prowlers past fence
and in greenery

Parking Lot/Bicycle Parking
Lot/Motorc ycle Lot Zone
prevents theft of cars, etc., withsecurity cameras and lights

Aut olock operating panel(reference photo)

Elev ators

Double lock(reference photo)Dimple key (basic concept)

Diagram of floors &bordering walls

Floor slab thickness
Approx. 200mm or
more

Doors have security windows, and security
cameras are installed in elevator cages. In
addition, a monitor showing the inside of
the cage is installed in the elevator hall on
the entrance floor to help prevent danger
inside the closed elevator.
Inside elevator(reference photo)

Infor mation / Communications
Vertical Wastewater Pipes
For hard-to-upgrade water drainage piping
inside units, maintenance-free cast iron pipes
are used.

Security w indow

Units are high-speed Internet ready, andare equipped with fiber optic wiring. They
can also furnish a variety of information
content, including satellite and cable TV.

Light with Motion Sensor

Window Security
Sensors

The light goes onwhen it senses
human movement for
an intimidating effecton prowlers.

Installed in ground-floor units.
In the event of a break-in, an
alarm sounds and a security
company is notified.
Emergency call button

Monitor

Security sensor(reference photo)Light with motion sensor(reference photo)

The above illustrates a model unit and a general plot plan of Park Axis Ochanomizu Stage. This is not applicable to all properties.

14

Support Agreements with the Mitsui Fudosan Group
External Growth Support

Mitsui Fudosan

Mitsui Real Estate Sales

Provides information on properties
developed and / or held by Mitsui
FudosanProvides information on third-party
property sales

Provides information on sale of thirdparty properties“ Real Estate
Information/Advisory
Service Agreement”
Provides advisory support for realestate operation/management

REIT
Management
Company

Mitsui Fudosan
Accommodations
Fund Management

Advice on operation management, longterm/large-scale renewal plans,acquisition assistance service“ Memorandum on Property
Information Provision”

Mitsui Fudosan Housing Lease“ Basic Agreement on Property
Management Service”
Provides comprehensive outsourcing ofMaster Lease (Note) and PM Service
Unified management of property

Provides real estate investment
information

information to promote sure andefficient operation
Efficient leasing using brandcomprehension

Mid to long-term rental housing market
trend information
New supply trend of apartments

Internal Growth Support

Note: Excluding master lease agreement of Okawabata
Apartment Communities by Mitsui Fudosan

15

Decision-Making Process and Mitigating
Conflict of Interest
Investment Policy & Acquisitions/Sale Decision Process

Compliance Checking System

Preliminary Plan
Approval of CCO

CheckChief Compliance Officer (CCO)

Related Party Transaction
When CCO questions from acompliance viewpoint

Proposal by
CIO

Investment
Committee

Approval ofCompliance
Committee

Compliance Committee
Check

CCO can suspend discussion
when he sees any problem in
discussion process

Requires approval by independent external
professional
Members: CCO (Chairman), CEO, 2 external professionals(Currently 1 lawyer and 1 CPA)

External professionals: Appoint professionals independent
from Mitsui Fudosan
Resolution: Need the votes of 2/3 or more and at least 1 outof the 2 independent external professionals

Related Party Transaction

Report to
Board of NAF

Related party transactions require consent of independent
external professional
16

Due Diligence by the REIT Management Company

The REIT management company makes overall investment
decisions using the following due diligence standards, which
are based on asset management guidelines.
Due DiligenceStandards

Legal Due
Diligence

Ownership Interest
Boundary

Mitsui Fudosan
Accommodations FundManagement

As part of the due diligence process, an appraisal reportand engineering report are obtained from third-party
professionals to make judgments. In addition, the REIT
management company conducts the following researchon its own to make investment decisions.

Property Due
Diligence
Location
Structure andFacilities
Building
Management
Earthquaketolerance/PML
Environment,
Soil, etc.

Use of Mitsui Fudosan’s Support①

Provides information on real estate investment (rental housing
market information)②

Advisory service (due diligence and review of engineeringdrawings and construction, etc.)

Double Check of Structural Validation
In principle, the REIT performs due diligence/confirmation when
acquiring each property* under a double-checking structure, using
one other company in addition to Mitsui Fudosan to ensurecompliance with new earthquake-resistant construction standards,
including structural calculation data sheets by the relevant expert.
* Excluding River Point Tower (Approved by the Minister of MoLIT)

Economic Due Diligence
Tenant survey

Earnings
related survey

Marketresearch

17

Financial Strategy
Financial Strategy
LTV (*): Max. 60%

Existing Loan(as of September 2006)

Weighted average interest rate:
Total: 1.40%
Long-term: 1.72%% of long-term fixed-rate interest bearing debt (*): 70.6%
Weighted average duration of long-term debt: 5.1 years# of lenders: 9
Unsecured/Unguaranteed(*): LTV= Interest Bearing Debt / Total Assets
Interest Bearing Debt = Loan + Bond

Maturity Diversification(Please see below)

Debt Maturity Ladder (As of September 2006)
Short-term: JPY 12.5 bn(JPY mn)

Long-term: JPY 30.0 bn

16,00014,000Total: JPY 42.5 bn

12,50011,00012,00010,000

8,000

8,000

6,000

6,000
4,000
1,000

2,000

3,000

2,000

(CY)

0

0
2006

2007

2008

2009

2010

2011

2012

2013

18

Related Companies/Structure of the REIT
Structure of the REIT
Asset Custodian
Chuo-Mitsui Trust & Banking

Transfer Agent
Transfer Agency
Chuo-Mitsui Trust & Banking Service Agreement
General Administrative Agent(Accounting)
HEISEIKAIKEISHA
General Administrative Agent(Taxation)
Price Waterhouse Coopers

Accounting Auditor

Asset Custody
Agreement

KPMG AZSA & Co.

Underwriters

REIT

Nomura Securities
Merrill Lynch Japan Securities

GeneralAdministrative
Service Agreement(Accounting)Daiwa Securities SMBC

Nippon Accommodations
Fund Inc.
(TSE 3226)

Underwriting
Agreement of
New Investment
Units

UBS Securities
Nikko Citigroup
Shinko Securities
Mizuho Securities

GeneralAdministrative
Service Agreement(Taxation)

Mitsubishi UFJ Securities
REIT Management Agreement andGeneral Administrative Service Agreement
REIT Management Company

Property Information Provider

Mitsui Real Estate Sales

Memorandum on
Provision ofReal Estate
Brokerage
Information

Mitsui Fudosan
Accommodations FundManagement

Master Property Manager

Basic Agreement on
Property Management

Mitsui Fudosan Housing
Lease

Agreement on Provision ofReal Estate Information/
Advisory Service
Real Estate Information/Advisory
Service Provider

Mitsui Fudosan

19

Overview of the REIT Management Company
Company Overview of Mitsui Fudosan Accommodations Fund Management Co., Ltd.
Address: 2-1-1 Nihonbashi Muromachi, Chuo-ku, Tokyo
Shareholders’ equity: JPY 300 mn
Shareholder: Mitsui Fudosan Co., Ltd. (100%)

General Meeting of
Shareholders

Organizational Chart

AuditorBoard of Directors
Compliance Committee

CCO
CEO

Investment Committee

Investment
Division

Investment,
Research & Strategy
Team

CIO

CFO

Asset Management
Team

Financial
Team

Financial
Division

Corporate Operation
Team

20

Appendix

Portfolio Overview: Okawabata Apartment
Communities
Okawabata Apartment Communities
Okawabata Apartment Communities
River Point Tower

Acquisition price:

JPY 29,696 mn

Appraisal value:

JPY 29,700 mn

Park Side Wings

Pier West House
Skylight Tower(Condominium building)Pier West Square(Commercial complex)

PML:

City Front Tower(Condominium building)River Point Tower

4.9 %Park Side Wings

9.9 %Pier West House

8.9 %Pier West House(Managed building forrental apartments)

Acquired asset

Riv er Point Tower(Rental apartments)

Acquired asset

Address: Chuo-ku, Tokyo
Units: 544

Park Side Wings(Rental apartments)

Acquired asset

Channel Mark Club
Sumida River(Sports facility/restaurant)

Okawabata Area Map

22

Portfolio Overview: Park Axis Series
Park Axis Shirokanedai

Park Axis Nihonbashi Stage

Acquisition price: JPY 5,140 mn
Appraisal value: JPY 5,140 mn

Acquisition price:

PML:

12.0 %

PML:

Address:

Minato-ku, Tokyo

Address: Chuo-ku, Tokyo

Units:

99

Units:

Appraisal value:

JPY 7,557 mn
JPY 7,570 mn

11.3 %
184 Residential; 1 Retail23

Portfolio Overview: Park Axis Series
Park Axis Ochanomizu Stage

Acquisition price:
Appraisal value:

JPY 9,710 mn
JPY 9,820 mn

Park Axis Meieki-Minami

Acquisition price:
Appraisal value:

JPY 2,440 mn
JPY 2,440 mn

PML:

10.0%

PML:

5.8 %

Address:

Bunkyo-ku, Tokyo

Address:Nakamura-ku, Nagoya

Units:

324

Units:

169

24

Portfolio Overview: Park Cube Series
Park Cube Kanda

Acquisition price:
Appraisal value:

JPY 2,454 mn
JPY 2,480 mn

Park Cube Keio Hachioji II

Acquisition price:
Appraisal value:

JPY 1,130 mn
JPY 1,130 mn

PML:

10.9 %

PML:

Address:

Chiyoda-ku, Tokyo

Address: Hachioji-shi, Tokyo

Units:

95

Units:

9.5 %47 Residential; 1 Retail25

Mitigating Conflict of Interest
Definition of Related Parties
1.

“ Stakeholders” (as defined in the investment trust law)2.

Shareholders of the REIT management company

3.

+
+

SPC, of which the shareholders of the REIT management company own more than 15%

Acquisition from Sponsor Related Party
Acquisition
price

≦

Appraisalvalue&

Approval of Compliance Committee

Status of 27 properties in the initial portfolio
15 out of 27 properties acquired constitute related-party transactions
All 27 properties acquired below appraisal value (Independent appraiser: Daiwa
Real Estate Appraisal, Morii Appraisal & Investment Consulting)26