Nippon Accommodations Fund Inc.
36th Period (September 2023 – February 2024) Investor Presentation
Q&AQ

Can you tell us about your external growth policy? Although the sponsor has alreadyannounced its long-term management policy, were there any changes in the property supplystance?

AThe part of the long-term vision involving NAF indicates that our sponsor is targeting asset
recovery via around ¥2 trillion in sales through FY2026, but we are not presently aware ofany specific figures for the period covering the current and upcoming fiscal years. We intendto speak with the sponsor about business plans for the current fiscal year in due course. The
sponsor is, however, actively engaged in asset recovery, and seeks to control its balance
sheet, so we increasingly anticipate the potential to acquire properties from the sponsor.

Q

Amid the robust trend of rising rents at tenant turnover, the ratio of units for which rent has
increased at renewal also rose to reach 15.8% during the 36th period. Do you feel progresshas been made toward a ratio of 20%? And is the mood in the industry leaning toward higherrents at the time of renewal?

AWe feel progress has been made in that the peak leasing season this year also proceededsmoothly. We typically begin discussing renewal with tenants about six months before theend of their lease agreements, so we expect to see the percentage change in rent at renewal
expand over the current period and into the upcoming period, during which the results ofrenewal discussions are actually reflected. We believe that the way in which tenants accept
higher rents at renewal is more important than the mood of the industry in this respect. With
houses for sale only available at higher prices, tenants are struggling to shift into homeownership, meaning there is high demand for rental housing. Amid rising rents, the cost ofmoving as compared to the cost of renewing rental agreements and staying in place seems
to be bolstering the ratio of tenants choosing to renew their leases to some degree. As thetrend toward rising rents takes hold throughout the market, we feel the mood among tenants
to accept higher rents will improve. As a result, we feel the industry will also come to focus
on renewals.

QIs there room for further expansion in the percent change in new rent at tenant turnover?

AAs far as the outlook for new rents rising going forward is concerned, we feel progress will
also be made during the busy season from March to April during the current 37th period aswell. The rent change at tenant turnover during the 36th period was 5.6%, yet our outlook isfor at least some growth over the previous period.
Q

Distribution per unit for the February 2024 period was ¥11,459 while the expecteddistribution per unit for the February 2025 period a year from now is ¥11,210. Even if
distribution per unit comes in slightly above expected levels, the February 2025 period will
likely stay at the same level as the February 2024 period. Is this because costs and interest
rates will increase even as rents rise so that distribution per unit a year from now will remain
even with the current level?

AAlthough we have always taken a somewhat conservative view of performance expectations
that includes interest rates, operational costs, rent change at tenant turnover, and churn rate,
for example, if these factors improve more than expected, we might be able to lift the results
for the 38th period to the level of the 36th period. At the current forecast stage, however, wedo not assume an upswing in these factors. Although we do expect leeway in interest rates
and costs, in practice, we aim to increase distribution per unit by pursuing cost savings,
improved occupancy rates, and a greater degree of rent change at tenant turnover andrenewal.

QCan you tell us about NAF's interest-bearing debt costs? Looking at the repayment schedule
for interest-bearing debt going froward, for a time starting in the February 2025 period,
interest rates on debt to be repaid will decline significantly. Will this lead to a change in yourprocurement policy? Although future increases in interest costs are unavoidable, do you feel
you can still maintain growth in distribution per unit?

AWe are aware that we are now entering the refinancing stage for the low-interest debt weacquired in the past. In light of the outlook for higher future interest rates, however, we will
not blindly focus on long-term fixed interest rate loans, but will instead combine long-termand short-term borrowing periods, as well as incorporate variable interest rate loans, in aneffort to ensure procurement costs do not increase noticeably. Based on our simple estimates,
even a conservative outlook shows rental income growing at 1% annually. Amid the outlook
for higher future interest rates, however, if we procure refinancing for all debt at about 1.5%in the future, an annual top line growth rate of 1% will serve to cancel out the higher interest
rate costs, as long as we do not assume changes in costs besides interest rates. In practice, if
we can procure refinancing at a lower cost than this estimate, we feel we can further improve
distribution per unit.

QWith rising rents on a solid footing, will your policy be to focus on internal growth overproperty acquisitions, or do you intend to purchase available properties? Please tell us aboutyour property acquisition appetite.
A

We do not intend to proceed based solely on internal growth. And we will maintain ourpolicy whereby we acquire properties that will help strengthen our portfolio and increase
distribution per unit. We are aware, however, that the real estate acquisition market remains
in a heated state, which means we will be careful about acquiring properties. On the otherhand, we also intend to steadily achieve internal growth.

QCan you tell us about the types of acquired properties? Whereas you acquired hotels in theprevious period, do you now intend to focus on acquiring properties in the Park Axis Series
from the sponsor pipeline, or do you intend to continue acquiring hotels, for example?

AAs described during the presentation, the sponsor pipeline is abundant and accumulatingeach year. We could rely on the sponsor pipeline if we simply wanted to acquire any property,
but given the strength of the condominium business, it is difficult to acquire these properties
from the sponsor side at the present time. We also feel that it will become increasingly
difficult to acquire these properties from the market, so we intend to capture opportunities
by acquiring properties from outside through two-way transactions of NAF's properties, forexample. In terms of the portfolio, hotels and other hospitality facilities, including thoseacquired during the previous period, account for 5.7% of acquisitions, yet on an investment
basis, the portfolio can tolerate up to 10%, which is why we intend to acquire any properties
that are judged to help strengthen the portfolio. In either case, we have not changed ourpolicy regarding external growth, and will actively acquire properties given the opportunity.

Q

Do you foresee rising repair and other operational costs in addition to debt costs?

A

We are currently advancing renewal investments in a systematic manner in order to maintainand improve asset value, and although repair costs are rising slightly, this increase is notexcessive at the present time. Despite regularly incurring repair and restoration costs, thetotals amount to ¥500 to 600 million per period, meaning the overall impact of an increaseof a few percent would be limited. We will conduct regular asset maintenance in order toavoid sudden occurrences of major repair costs going forward, while at the same timeworking to curb costs through discussions with suppliers.

Q

Although rents are rising steadily, do you take a different stance on rents depending on theattributes of your tenants, for example foreign national tenants or corporate lease-holder
tenants who have a high tolerance for rising rents as a part of their efforts to enhance
employee benefits or treatment?

A

Although around 40% of portfolio tenants are leases under corporate names, most

corporations do not enter batch lease agreements. Instead, in most cases, individual
employees basically choose their own properties after which their company signs the leaseagreement, so we do not take a different stance depending on whether the agreement is madeby a company or individual. The ratio of foreign national portfolio tenants is around 5%, soonly has a small overall impact, and we do not expect rents to increase for reasons ofnationality. It is our understanding that rents are rising due to tight market supply anddemand.
QDo you sense any changes in the case of companies entering into agreements afteremployees choose a room, for example companies increasing the upper limit on rents aspolicy?

AAt the present time, we do not sense any changes in rental regulations or increases in upper
rent limits on the company side. Although this is just my personal opinion, any company
looking to revise these conditions would have to discuss this move with its labor union. And
I do not see any movement toward companies going this far to make revisions, and this is
not a current trend based solely on what I have heard.

■ This document is intended for informational purposes, and is not intended to sell or solicit an offer
to buy or sell any security or other financial instrument of the Investment Corporation.
■ Unless explicitly indicated, the information provided in this document does not constitute thedisclosure or asset management reports required under the Financial Instruments and Exchange Act
or the Act on Investment Trusts and Investment Corporations.
■ Nippon Accommodations Fund Inc. has exercised due care in providing the information in thisdocument, but does not guarantee its accuracy or completeness.
■ The information in this document contains future projections, but such statements do not guarantee
future performance.
■ The Investment Corporation is not responsible for updating the information in this document. The
information in this document may be changed without prior notice.
REIT Management Company: Mitsui Fudosan Accommodations Fund Management Co., Ltd.
(Financial Instruments Firm: Kanto Finance Bureau (registration) No. 401
Member of the Investment Trusts Association, Japan)