Growth Strategies

JHR aims to maximize investment value of unitholders based on the following growth strategies.

External Growth Strategy	Acquire highly competitive hotel real estate, etc., in areas that can potentially attract "demand by both domestic and inbound leisure customers" in the medium to long term Improve profitability, stability, and quality of the overall portfolio

Emphasize the superiority of buildings and facilities (infrastructure), operations (services), locations of hotel real estate, etc.

• The prime investment targets are "full-service hotels" and "resort hotels" that have high barriers to entry due to operation and management know-how, capital investments and locations
• For "limited-service hotels," the creditworthiness of the hotel lessee, the age of the building, location, guest room composition and profitability are important
• For limited-service hotels that specialize in selling single rooms, we will consider acquiring them individually, taking into account the specifications and upside potential of the hotel
• In particular, we will actively consider purchasing hotels that can be expected to grow internally through an aggressive asset management strategy and hotels that can be expected to generate synergies with existing properties

Strategic investment areas

• Hokkaido area, Tokyo and bay area, Osaka/Kyoto area, Fukuoka area, and Okinawa area

Investigate and plan the internal growth strategy in property acquisition

• At the time of contract renewal, etc., investigate appropriate rent levels and structures as well as the potential for cost savings and building and facility improvement
• Promote internal growth by collaborating with lessees and operators, especially when the hotel has variable rent structure, etc.

Respond to various investment opportunities by utilizing HMJ's efficient hotel operation platform, know-how for operational improvement, etc.

Internal Growth Strategy	Pursue both stability and upside potential by steadily implementing active asset management strategies

Plan and implement the "Active Asset Management Strategy" for revenue upside

• Make strategic CAPEX which will improve profitability and strengthen competitiveness mainly at hotels with high growth potential
• Raise rent or change the rent structures to achieve upside revenue
• Reduce the management contract fee for properties that are under the management contract
• Increase hotel revenue through collaboration with high-quality operators
• Attract inbound demand through rebranding to international brands
• Make proactive proposals to build effective hotel operating structures which aim to maximize GOP from the perspective of both hotel sales and expenses
• Stimulate and capture domestic demand by creating products utilizing the characteristics of each hotel in line with the current market environment

Plan and execute strategic capital investments for steady revenue, and monitor lessees

• Analyze the creditworthiness of hotel lessees, understand income and expenses of each hotel, and improve rent-payment capacity of hotel lessees though close monitoring
• Maintain and improve the rent-paying capacity of tenants, etc., through capital expenditures, which lead to maintaining and enhancing competitiveness and asset value

Financial Strategy	Ensure healthy and stable finance Strengthen lender formation and relationships with financial institutions Diversify financing methods

Maintain good relationship with financial institutions

Improve financial stability by fixing interest rates, etc., as necessary, while considering the diversification of repayment periods

Optimize funding costs

Diversify financing methods such as public offerings and issuance of investment corporation bonds

Maintain LTV level at a maximum of 50% (total asset base) for the time being