Nippon Accommodations Fund : Financial Results for the Fiscal Period from March 1, 2021 to August 31, 2021

October 19, 2021

Financial Results for the Fiscal Period from March 1, 2021 to August 31, 2021

Nippon Accommodations Fund Inc. (NAF) is listed on the Tokyo Stock Exchange (J-REIT) with the securities code number 3226. (Website: https://www.naf-r.jp/english/)

Executive Director:	Takashi Ikeda
Investment Trust
Management Company:	Mitsui Fudosan Accommodations Fund Management Co., Ltd.
President and CEO:	Tateyuki Ikura
Inquiries:	Tetsuji Kawakami, Director and Chief Financial Officer
	Tel: [phone]
Scheduled Filing Date of Securities Report:	November 30, 2021
Scheduled Commencement Date of Cash Distribution Payment:	November 15, 2021

1. Business Results for the Fiscal Period from March 1, 2021 to August 31, 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
August 31, 2021	11,986	3.7	5,428	3.1	4,978	2.4
February 28, 2021	11,560	0.3	5,266	(1.2)	4,862	(0.7)
								Income	Income
								before
								before
					Net income Net income/		income
		Net income			income
			per unit	net assets		taxes/
						taxes/
								operating
							total assets
									income
			(%)*		(yen)	(%)	(%)	(%)
For the period ended
August 31, 2021	4,978	2.4	9,887	3.3	1.5	41.5
February 28, 2021	4,861	(0.7)	9,874	3.3	1.6	42.1

* Percent figures show changes from previous period.

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(2) Distributions			(in millions of yen, rounded down; except as noted)
	Distribution	Total	Distribution in	Total
	per unit	distributions
	(not including	(not including	excess of	distributions in	Payout ratio	Distributions/
	distributions in distributions in	earnings	excess of		net assets
	excess of	excess of	per unit	earnings
	earnings)	earnings)
	(yen)		(yen)		(%)	(%)
For the period ended
August 31, 2021	10,035	5,052	-	-	101.5	3.3
February 28, 2021	10,080	5,074	-	-	104.4	3.4

(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 August 31, 2021 is calculated by dividing

¥5,052 million (retained earnings of ¥4,978 million plus reversal of reserves for reduction entry of ¥74 million) by the total number of investment units issued. In addition, 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/	Net assets per
	total assets	unit
			(%)	(yen)
As of
August 31, 2021	327,824	150,926	46.0	299,772
February 28, 2021	317,740	151,023	47.5	299,964

(4) Cash Flows		(in millions of yen, rounded down; except as noted)
	Cash flows from	Cash flows from	Cash flows from	Cash and cash
	operating activities	investing activities	financing activities	equivalents
For the period ended
August 31, 2021	7,171	(20,482)	4,925	14,297
February 28, 2021	6,931	(2,739)	6,916	22,682

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

(in millions of yen, rounded down; except as noted)

											Distribution
											per unit	Distribution in
						Income				(not
	Total		Operating					excess of
			before		Net income	including
	revenues	income			earnings
		income taxes				distributions
									per unit
											in excess of
											earnings)
		(%)*		(%)*			(%)*			(%)*	(yen)	(yen)
For the period ending
February 28, 2022	12,132	1.2	5,671	4.5	5,212	4.7	5,211	4.7	10,350	-
August 31, 2022	12,187	0.5	5,529	(2.5)	5,066	(2.8)	5,065	(2.8)	10,060	-

• Percent figures show changes from previous period.
  Note:

The net income per unit projections for the fiscal period ending February 28, 2022 and the fiscal period ending August 31, 2022 are ¥10,350 and ¥10,060, 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 and others: None
2. Changes other than in the above item (1): None
3. Changes in accounting estimates: None
4. Restatement: None

1. Total number of investment units issued

1. The total number of investment units issued (including treasury investment units) as of the period-end

As of August 31, 2021:	503,472 units
As of February 28, 2021:	503,472 units
(2) The number of treasury investment units as of the period-end
As of August 31, 2021:	- units
As of February 28, 2021:	- 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 a number of factors. Accordingly, the forecasts are not a guarantee of any cash distribution amount.

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31st Period (August 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 is mainly used/may be used for residence or hotels. Based on the Act on Investment Trusts and Investment 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 the Tokyo 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 134 properties at a total acquisition price of ¥337,930 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, 2021 (the "31st Period"), the Japanese economy showed signs of recovery, despite the continuing severe situation due to the impact of the novel coronavirus disease (COVID-19). Exports increased moderately due to the recovery of overseas economies, and corporate performance and capital investment, especially in the manufacturing industry, also recovered. However, personal consumption continued to be weak, primarily in the consumption of services, as the number of people infected with COVID-19 continued to increase. In NAF's main investment area, the residential rental market, the number of tenant signing contracts and contract cancellations decreased significantly compared to previous years due to the thorough refrain from going out in the same period of the previous year, but in the period under review, tenant recruitment activities were generally conducted as usual even though the spread of the infections continued.

In the real estate trading market, transactions were carried out in a proactive manner as demand from investors with regard to rental apartments, where occupancy and revenue is stable, was steady.

External Growth (Acquisition and sale of properties)

During the period under review, NAF acquired seven properties in total (acquisition price of ¥19,400 million) including four properties (of which, two were additional acquisition of co-ownership) in April 2021 and three properties in June 2021.

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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 and operation of NAF's rental apartments portfolio, occupancy rates for rental apartments were 95.7% at the end of the period under review, and rent change before and after turnover maintained an upward trend at 2.0% at the time of tenant turnover. In addition, NAF aims to reduce costs by utilizing the merits of outsourcing 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 business corporation. Regarding the circumstances of each property, despite the continuing difficult situation 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 facility upgrades and renovations in private areas at Okawabata Apartment Communities, etc. 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, in a 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 to such matters as maintaining stable distributions in the medium and long term. In the period under review, NAF continued to pursue 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 and interest rate levels, and refinancing existing loans.

As a result, at the end of the period, total interest-bearing debt amounted to ¥169,500 million (¥10,000 million increase from previous period), the long-term debt ratio was 97.6%, the long-term,fixed-rate debt ratio was 95.3%, and the loan-to-value (LTV) ratio was 51.7%. The average remaining maturity of long-terminterest-bearing debt was 4.8 years and the number of financial institutions was 26. Furthermore, the weighted average interest rate at the end of the period was 0.52%.

NAF also has secured a commitment line for the purpose of securing flexible and stable fund procurement methods. At the end of the period under review, its total maximum borrowing amount was ¥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

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