Slide 1: FY16/2 Corporate Presentation
FY16/2 Corporate Presentation April April 23, 2015 19, 2016 Ichigo (2337) © 2016 Ichigo Inc. All rights reserved. www.ichigo.gr.jp/english
Slide 2: © 2016 Ichigo Inc. All rights reserved.
© 2016 Ichigo Inc. All rights reserved.
Slide 3: © 2016 Ichigo Inc. All rights reserved.
© 2016 Ichigo Inc. All rights reserved.
Slide 4: Building a richer future together
Building a richer future together © 2016 Ichigo Inc. All rights reserved.
Slide 5: Condolences for the Kumamoto earthquakes
We express our deepest W d t condolences d l tto allll who have suffered from the recent earthquakes in Kumamoto. © 2016 Ichigo Inc. All rights reserved.
Slide 6: Agenda
FY16/2 Full-Year Earnings New MTP Power Up 2019 ‒ Operating Profit & EPS 1.9X YoY ‒ Power Up 2019 ‒ Revised Forecasts Up Twice ‒ Powerful Value Value-Add Add Business Model ‒ Segment P&L Breakdown ‒ Achieved All Shift Up 2016 KPIs Appendix: Financial & Real Estate Data Powerful Value-Add Business Mo
Slide 7: FY16/2 Full-Year Earnings
FY16/2 Full-Year Earnings © 2016 Ichigo Inc. All rights reserved. 7
Slide 8: Operating Profit and EPS 1.9X YOY
Operating Profit and EPS 1.9X YOY (Million Yen) Initial Full Year vs Full-Year FY15/2 FY16/2 YOY Forecast Forecast Revenues 42,705 49,699 +16.4% 45,000 110.4% Gross Profit 12,166 19,863 +63.3% 16,500 120.4% Operating Profit 8,189 15,417 +88.3% 11,700 131.8% Recurring Profit 7,255 13,889 +91.4% 10,25
Slide 9: Revised Forecasts Up Twice
Revised Forecasts Up Twice Upward Revisions in October 2015 and January 2016 Actual Results Exceeded Final Forecast (Million Yen) 2016/02 Forecast Revisions 2016/02 Initial Forecast October 2015 January 2016 Actual Revenues 45,000 47,000 49,000 49,699 Operating Profit 11,700 14,000 14,800 15,417 R R
Slide 10: Segment P&L Breakdown
Segment P&L Breakdown ‒ Asset Management OP 3.7X YOY ‒ Value-Add OP 1.6X YOY ‒ Clean Energy Revenues 2 2.7X 7X YOY (Million Yen) Revenues Operating Profit Earnings Drivers vs Full Segment Full-Year Full-Year vs Initial (YOY change is shown in FY15/2 FY16/2 YOY Year FY15/2 FY16/2 YOY Forecast Forecas
Slide 11: Achieved All Shift Up 2016 KPIs
Achieved All Shift Up 2016 KPI’s Shift Up 2016 Mid-Term Business Plan (FY14/2 to FY16/2) Gross Profit 25 86 yen 25.86 en Operating Profit (million yen) 19,863 Net Income 7X EPS Plan 15,500 G Growth th 13.58 yen 15 417 15,417 12,925 12,166 11,500 11,400 9.83 yen 9,050 8,189 7,400 7,435 7,700 6,761 6,
Slide 12: Powerful Value-Add Business Model Underpins Growth
Powerful Value-Add Business Model Underpins Growth © 2016 Ichigo Inc. All rights reserved. 12
Slide 13: Ichigo Hotel REIT (3463) Listing
Ichigo Hotel REIT (3463) Listing Listed on November 30, 2015 with a Portfolio of Prime Location Hotels Servicing Both Business Travelers and Tourists Strong operating start start, backed by on-going on going expansion of inbound tourism Generated Q3 profits of JPY 6B via Ichigo sale to REIT of v
Slide 14: On-Going Ichigo Office REIT (8975) Growth
On-Going Ichigo Office REIT (8975) Growth Ichigo Office REIT Converted from Multi-Asset Class REIT to a Specialized Office REIT in September 2015 IIchigo hi C Co-Purchased P h d 13 Mid-Size Mid Si Office Offi Assets A t with ith Ichigo I hi Offi Office REIT, REIT Granting Ichigo Office REIT Preferen
Slide 15: Value-Add as Earnings Driver
Value-Add as Earnings Driver FY16/2 Value-Add Earnings of JPY 8.0B on Sales of 18 Assets Acquired for JPY 31.4B Weighted Average Increase in Value: +34.1% +34 1% Average Holding Period: 19 months FY16/2 Value-Add Sales – Breakdown by Holding Period Net Gain Average holding period: Net Gain +20.5% +J
Slide 16: Value-Add Case – Kyoto Hotel
Value-Add Case – Kyoto Hotel Increased NOI via Strategic Value-Add CAPEX and Improved Operations; Sold to Ichigo Hotel REIT at 3X the Acquisition Price (vs. 4.2X in NOI) Located on Kyoto Shijo Shijo-dori, dori, convenient to major tourist venues Rebranded and renovated all guestrooms and exterio
Slide 17: Value-Add Case – Tokyo Retail
Value-Add Case – Tokyo Retail Win-Win Deep Value-Add Thanks to Strong Tenant Relationships Prime location retail (B1/3F) in Daikanyama (Shibuya) Rectified illegally extended exterior stairs and removed inside stairs with tenant consent. Converted hallway and Converted stairway and stairway to us
Slide 18: Capital-Efficient Asset Acquisitions
Capital-Efficient Asset Acquisitions Synergies S i with ith IIchigo hi Offi Office REIT and d IIchigo hi H Hotel t l REIT S Supportt High ROE and Stable Earnings FY16/2 Ichigo g Group p Acquisitions: q 55 assets, JPY 126.2B Ichigo: 45 assets, JPY 85.6B; Ichigo Office REIT: 10 assets, JPY 40.5B Ichig
Slide 19: National Solar Power Plant Portfolio (1)
National Solar Power Plant Portfolio (1) Serving Local Communities and the Environment Ichigo Engaru Higashimachi (1.24MW) Total Operating and In-Development Ichigo Motomombetsu (1.40MW) Ichigo Engaru Kiyokawa Ichigo Solar Power Plants: (1.12MW) 35 Plants (112MW) Ichigo Abira Toasa (1.17MW) Ichigo Y
Slide 20: National Solar Power Plant Portfolio (2)
National Solar Power Plant Portfolio (2) Feed-In Tariff Hokkaido 12.2MW 40 yen：20 Plants, 34MW 36 yen：9 Plants, 68MW 32 yen：6 Plants, 10MW Tohoku 4.6MW (2.3MW) Tokyo In-D 56.8MW Development + In-O Chugoku 18.9MW In-Op Operation peration Okinawa 8.4MW (7.5MW) Kyushu K h 1.4MW Chubu 3.2MW Shikoku 6.1M
Slide 21: National Solar Power Plant Portfolio (3)
National Solar Power Plant Portfolio (3) By Customer (as of Apr 19, 2016) By Feed-in-Tariff (as of Apr 19, 2016) By Operating Timeline (as of Feb 29, 2016) Chubu Kyushu Tohoku3% 1% 4% To start 32 yen operation 9% in >2 years Shikoku 9% >1 year in 5% operation Okinawa 40 yen 26% 8% 30% To start opera
Slide 22: Strong Financial Position
Strong Financial Position W i ht d A Weighted Average IInterest t t Rate R t and d Average A Loan L P Period i d W i ht d A Weighted Average IInterest t t Rate R t (Interest Rate) Average Loan Period (Loan Period, Year) 3.0% 11.0 2 56% 2.56% 9.0 years 2.5% 9.0 2.22% 8.7 years 1 96% 1.96% 2.0% 7.0 5.
Slide 23: New MTP Power Up 2019
New MTP Power Up 2019 © 2016 Ichigo Inc. All rights reserved. 23
Slide 24: Power Up 2019 Key Goals & KPIs
Power Up 2019 Key Goals & KPIs Key Goals 1. Drive Further Sustainable Growth in Ichigo’s Core Businesses 2 Develop 2. D l New N I hi Businesses Ichigo B i 3. Deepen Ichigo’s Core Capabilities and Corporate Strength Power Up 2019 KPIs (Key Performance Indicators) (Million Yen) FY16/2 (Actual) FY17/2
Slide 25: Power Up 2019 KPIs (2)
Power Up 2019 KPIs (2) Power Up 2019: February 2017 – February 2019 Operating Profit 29.00 yen Net Income EPSS (million yen) 25.86 yen 1.6X OP in 3Y Years 25,000 15,417 14,800 12,925 FY16/2 (Actual) FY19/2 Capital Efficiency ROE:>15% Dividend DOE: >3% © 2016 Ichigo Inc. All rights reserved. 25
Slide 26: Power Up 2019 JPX-Nikkei 400 Top 200 Ranking
Power Up 2019 JPX-Nikkei 400 Top 200 Ranking Additional Target: JPX-Nikkei 400 Top 200 Ranking by August 2019 Anticipate p entering g JPX-Nikkei 400 this August g By August 2019, the final year of Power Up 2019, Ichigo will seek to rank within the JPX-Nikkei 400’s top 200 companies Note: While t
Slide 27: Power Up 2019 Key Initiatives
Power Up 2019 Key Initiatives Profitability Sustainability • List Ichigo’s Ichigo s solar assets on the TSE’s TSE s new • Grow both financial stability and earnings Infrastructure Fund Market (3) Finance as a • De-collateralize loans, lengthen loan • Support the on-going growth of Ichigo Office Stra
Slide 28: Adoption of Progressive Dividend Policy
Adoption of Progressive Dividend Policy Progressive Dividend: Previous year’s dividend is the floor for the current year’s dividend. Dividend will be raised (or kept flat) but not cut, providing shareholders with downside dividend protection Newly setting minimum DOE (dividend on equity) payout
Slide 29: Powerful Value-Add Business Model
Powerful Value-Add Business Model Significant Value-Add and Asset Management Business Synergies Value-Add Value Add Business Model Renewable Energy Solar Plants Buy Infrastructure Fund (Preparing for Listing) Sell Office Real Third- Value- Estate I Party Investors t Add Ichigo Office REIT (8975) Rea
Slide 30: FY17/2 Full-Year Forecast
FY17/2 Full-Year Forecast Operating Profit +20.0% and Recurring Profit +18.1% VS FY16/2 Net Income +2.9% Due to Increased Tax Burden (Million Yen) FY17/2 FY16/2 vs FY16/2 (Forecast) (Actual) (Forecast) Revenues 125,600 49,699 +152.7% Operating Profit 18,500 15,417 +20.0% Recurring Profit 16,400 13,8
Slide 31: FY17/2 Full-Year Forecast Details
FY17/2 Full-Year Forecast Details (Million Yen) Revenues Segment Profit (Operating Profit) FY17/2 FY16/2 FY17/2 FY16/2 vs Forecast vs Forecast (Forecast) (Actual) (Forecast) (Actual) Asset sset Management a age e t 5,079 5,0 9 5,067 5,06 +0.2% 0 % 2,386 ,386 2,879 ,8 9 -17.1% % Value-Add 109,297 42,
Slide 32: Appendix: Financial & Real Estate Data
Appendix: Financial & Real Estate Data © 2016 Ichigo Inc. All rights reserved. 32
Slide 33: Value-Add Social Significance
Value-Add Social Significance End Demolish and Rebuild and Embrace Value-Add ‒ Preserve and enhance high-function real estate ‒ Sustainable S t i bl R Reall E Estate t t serving i a Sustainable S t i bl S Society i t ・Preserve & Improve Value‐Add ・Higher-Quality Tenant Services ・Higher Functionality
Slide 34: Value-Add Sample Earnings Model
Value-Add Sample Earnings Model 5.5% NOI, JPY 2B purchase, LTV 70%, 1.5% interest rate, JPY 50M capex, 20% increase in NOI, 3-year value-add period At Acquisition NOI (JPY 110M NOI/year) － (JPY 21M interest/year) ＝ JPY 89M NOI/year NOI÷ Initial Investment ＝14.8% NOI return during investment period .
Slide 35: Consolidated Risk-Based Balance Sheet
Consolidated Risk-Based Balance Sheet Consolidated Current Value Balance Sheet Total: JPY 279.9B (Total Assets: JPY 251.7B + Unrealized Gains JPY 28.1B Non-Recourse Loans & Non-Recourse Loan- Related Liabilities Related Assets JPY 66.2B Consolidated Risk-Based Balance Sheet JPY 84.2B Total Assets JP
Slide 36: Significant Unrealized Gains on Balance Sheet
Significant Unrealized Gains on Balance Sheet Total Unrealized Gains: JPY 28.0B (Appraisal Value Basis) Real estate directly held by Ichigo (Million Yen) Book Value as of Cap Rate Appraisal Value Location NOI Unrealized Gain February 2016 NOI/Book Value after w rite-dow n as of February 2016 Tokyo 8
Slide 37: Business Segments
Business Segments Asset Management generates fee income via managing the Tokyo Stock Exchange-listed J-REITS (Ichigo Office REIT and Ichigo Hotel Asset Management REIT) and private funds and providing real estate services related to real estate acquisition, operation (PM/BM), and disposition. Value-
Slide 38: Consolidated Balance Sheet
Consolidated Balance Sheet (Million Yen) FY 16/2 Unrealized Outside Unrealized FY15/2 YOY Market Value Gain on Listed B/S Investors' Gain Securities 2 Interest Cash and Cash Equivalents 19,383 28,779 897 +9,396 28,779 - Operating Loans Receivable (Value-Add) 2,330 1,324 - -1,006 1,324 - Operational
Slide 39: Consolidated Balance Sheet: Segment Breakdown
Consolidated Balance Sheet: Segment Breakdown (Million Yen) Cash and Operating Operational Real Estate Intangible Investments Segment g Cash Cas Loans oa s est e ts Investments Fixed ed Assets ssets Other Ot e Assets ssets Total ota Assets ssets f Sale for S l A Assets t iin SSecurities iti Equivale
Slide 40: Consolidated P&L: Gross Profit Segment Breakdown
Consolidated P&L: Gross Profit Segment Breakdown (Million Yen) Revenues Gross Profit YOY FY15/2 FY16/2 Change FY15/2 FY16/2 Change (Gross Profit) Asset Management 3,967 5,067 +1,099 1,786 3,281 +1,494 +83.6% Asset Management Fees 1,312 1,670 +357 1,224 1,658 +434 +35.5% PM/BM Fees 2 503 2,503 2 201
Slide 41: Consolidated P&L: Results vs. Initial & Final Forecasts
Consolidated P&L: Results vs. Initial & Final Forecasts (Million Yen) Full-Year Earnings Forecast FY16/2 (12M) FY16/2 Full-Year Forecast (12M) Revision (Jan. 2016) vs Full-Year Gross vs Full-Year Operating vs Full-Year Gross Operating Gross Operating Revenues Revenues Revenues Forecast Profit Foreca
Slide 42: Asset Management AUM Detail
Asset Management AUM Detail FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 (12M) (12M) (12M) (12M) (12M) Ichigo Office REIT (8975) AUM (Fiscal Year End) JPY 106B JPY 104B JPY 121B JPY 124B JPY 165B AM Fee % (Average) 0.61% 0.63% 0.65% 0.65% 0.64% AM Fee Gross Profit (Actual) JPY 719M JPY 663M JPY 733M JPY 759M
Slide 43: Ichigo-Owned Real Estate Portfolio
Ichigo-Owned Real Estate Portfolio Assets by Type Assets by Location Ground Lease Other As of February 29, 2016 3% 2% Other (Billion Yen) Mixed Sendai 11% 6% 2% Nagoya Residence 7% 12% Of f ice Tokyo Kanto 41% 49% 9% Hotel 16% Osaka 10% Retail 20% Fukuoka 12% Sendai 48 4.8 Tokyo 90.7 Assets by Size
Slide 44: Value-Add Full Asset Breakdown (1)
Value-Add Full Asset Breakdown (1) 108 Assets, Book Value JPY 184.7B, Forecast NOI JPY 10.9B (6.0%) Building g Acquired q Expected p Ichigo g Forecast Equity q y Forecast N No. A Asset t Class Cl A Asset t Type T L Location ti A Acquisition i iti P Price i Age Date NOI/Year Investment Multiple1 IRR2
Slide 45: Value-Add Full Asset Breakdown (2)
Value-Add Full Asset Breakdown (2) Building Acquired Expected Ichigo Forecast Equity * Forecast No No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 16 Retail Real Estate for Sale Yokohama City, Kanagawa 2 years <JPY 1B 2012/10 JPY 32M JPY 171M ― ― 17
Slide 46: Value-Add Full Asset Breakdown (3)
Value-Add Full Asset Breakdown (3) Building Acquired Expected Ichigo Forecast Equity Forecast No No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 31 Office Real Estate for Sale Shibuya-ku, Tokyo 5 years JPY 1B-2B 2014/04 JPY 60M JPY 1,090M 1.25 x 12.0
Slide 47: Value-Add Full Asset Breakdown (4)
Value-Add Full Asset Breakdown (4) Building Acquired Expected Ichigo Forecast Equity Forecast No No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 46 Residence Real Estate for Sale Chiyoda-ku, Tokyo 12 years JPY 2B-3B 2014/12 JPY 119M JPY 332M 2.18 x 2
Slide 48: Value-Add Full Asset Breakdown (5)
Value-Add Full Asset Breakdown (5) Building Acquired Expected Ichigo Forecast Equity Forecast No No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 61 Mixed (Office/Retail) Operating Loan Shinjuku-ku, Tokyo 52 years JPY 1B-2B 2014/12 JPY 103M JPY 57M 15
Slide 49: Value-Add Full Asset Breakdown (6)
Value-Add Full Asset Breakdown (6) Building Acquired Expected Ichigo Forecast Equity Forecast No No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 76 Office Real Estate for Sale Nagoya City, Aichi 31 years JPY 2B-3B 2015/07 JPY 126M JPY 71M 2.54 x 271.
Slide 50: Value-Add Full Asset Breakdown (7)
Value-Add Full Asset Breakdown (7) Building Acquired Expected Ichigo Forecast Equity Forecast No No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 91 Office Real Estate for Sale Osaka City, Osaka 17 years JPY 1B-2B 2015/07 JPY 94M JPY 330M 1.14 x 16.1%
Slide 51: Value-Add Full Asset Breakdown (8)
Value-Add Full Asset Breakdown (8) Building Acquired Expected Ichigo Forecast Equity Forecast No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 99 Hotel Real Estate for Sale Suginami-ku, Tokyo 23 years JPY 2B-3B 2015/12 JPY 182M JPY 764M 1.74 x 74.4% 1
Slide 52: Reference: Japanese Feed-in-Tariff (FIT)
Reference: Japanese Feed-in-Tariff (FIT) What is a FIT? ‒ A policy mechanism designed to accelerate the deployment of renewable energy such as solar and wind, guaranteeing a long-term sale price for electricity (in Japan, 20 years) at a fixed price. ‒ Japan’s FIT is updated every year. Tariff per Gu
Slide 53: Clean Energy Near-Term Earnings
Clean Energy Near-Term Earnings ‒ Significant Revenue Growth ‒ Positive Operating Profit (FY16/2 OP = JPY 323M vs. FY15/2 JPY -93M) (Milli Yen) (Million Y ) FY15/2 FY16/2 FY16/2 Initial Full-Year vs Initial Full-Year (12M) (12M) Forecast Forecast Revenues 605 1,628 1,581 103.0% Cost of Goods Sold 41
Slide 54: Individual Solar Power Plant P&L Breakdown (1)
Individual Solar Power Plant P&L Breakdown (1) Total 20-Year Forecast IRR for All Plants: 39.1% p.a. Fixed Panel Forecast Equity Tariff Operation Expected Ichigo Forecast No. Area p Output Depreciation p p ((If held Multiple (P t (Pre-tax, St t Date Start D t NOI/Y NOI/Year I Investment t t IRR2 (MW
Slide 55: Individual Solar Power Plant P&L Breakdown (2)
Individual Solar Power Plant P&L Breakdown (2) Fixed Panel Forecast Equity Tariff Operation Expected Ichigo Forecast No. Area Output Depreciation Multiple (If held (Pre-tax, Start Date NOI/Year Investment IRR2 (MW) for 20 years)1 yen) 18 Ichigo Akkeshi Shirahama ECO Power Plant Hokkaido 0.81 40 Mar-
Slide 56: Consolidated Balance Sheet: Assets
Consolidated Balance Sheet: Assets (Milli Yen) (Million Y ) FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 vs FY15/2 Assets Current Assets Cash and cash equivalents 9 791 9,791 9,713 9 713 24,991 24 991 19,383 19 383 28,779 28 779 +9,396 +9 396 Trade notes and accounts receivable 1,069 548 451 519 691 +172 Oper
Slide 57: Consolidated Balance Sheet: Liabilities & Net Assets
Consolidated Balance Sheet: Liabilities & Net Assets (Milli Yen) (Million Y ) FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 vs FY15/2 Liabilities Current Liabilities Trade notes and accounts payable 57 64 132 124 80 -44 Short-term borrowings 170 484 950 1,416 2,188 +772 Short-term non-recourse loans － － － 48 7
Slide 58: Consolidated P&L
Consolidated P&L (Milli Yen) (Million Y ) Full-Year vs Full-Year FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 vs FY15/2 Forecast Forecast Revenues 18,952 16,397 35,101 42,705 49,699 +6,994 45,000 110.4% Cost of Goods Sold 15,030 11,422 27,666 30,539 29,835 -704 － － Gross Profit 3 921 3,921 4 974 4,974 7 435 7
Slide 59: Consolidated Cash Flows from Operating Activities
Consolidated Cash Flows from Operating Activities (Milli Yen) (Million Y ) FY12/2 (12M) FY13/2 (12M) FY14/2 (12M) FY15/2 (12M) FY16/2 (12M) Cash Flows from Operating Activities Pre-tax net income 1,976 1,693 3,933 7,220 14,022 Depreciation 166 230 304 565 792 Share-based compensation expenses 37 49
Slide 60: Consolidated Cash Flows from Investing & Financing Activities
Consolidated Cash Flows from Investing & Financing Activities (Million Yen) FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 Cash Flows from Investing Activities Payments into time deposits -352 -0 -0 -325 0 Proceeds from withdrawal of time deposits － 151 － 325 － Acquisition of investment securities － -15 － -210
Slide 61: MEMO
MEMO © 2016 Ichigo Inc. All rights reserved. 61
Slide 62: MEMO
MEMO © 2016 Ichigo Inc. All rights reserved. 62
Slide 63: Disclaimer
These materials were prepared to explain the Company’s businesses and are not for the purpose of soliciting investment in marketable securities issued by the Company. The Company does not guarantee the accuracy of the figures, information, estimates or other statements included herein, and accepts n