“Ninjitsu Art of Transformation” does not target; you select the monster to Special Summon when you resolve its effect.
If “The Legendary Ocean” is active, your WATER monsters in your hand are lowered by 1 level so if you Special Summon from your hand using “Ninjitsu Art of Transformation”, you can Summon at 1 level lower (effectively making it Level +4 if looking at the original Level).