Ichigo Hotel Reit Investment Corp. · TSE:3463

Ichigo Hotel Reit Investment — H2 FY2018 Earnings Presentation

55 slides from Ichigo Hotel Reit Investment's earnings presentation, Mar 15, 2018

  1. Slide 1: Corporate Presentation – January 2018 Fiscal Period

    Ichigo Hotel (3463) Ichigo Hotel January 2018 Fiscal Period Corporate Presentation March 15, 2018 Ichigo Hotel REIT Investment Corporation (3463) Ichigo Investment Advisors Co., Ltd. © 2018 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. www.ichigo-

  2. Slide 2: Ichigo Preserves and Improves Real Estate

    Ichigo Preserves and Improves Real Estate © 2018 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved.

  3. Slide 3: © 2018 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights

    © 2018 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved.

  4. Slide 4: Agenda

    January 2018 Results Ongoing Growth  January 2018 Highlights  Hotel Market Environment  January 2018 Earnings Breakdown  Ichigo Hotel Growth Results  Revenue, RevPAR, Occupancy & ADR  Growth Strategy Roadmap All Up Year-on-Year  Organic Growth: Driving Earnings via  Earnings Stability via Ge

  5. Slide 5: January 2018 Results

    January 2018 Results © 2018 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 5

  6. Slide 6: January 2018 Highlights

    January 2018 Highlights Achievements Drivers JPY 841M • Continued organic and external growth Net Income +JPY 33M (+4.2%) YOY • Organic growth +2.5% vs. initial forecast JPY 8,234 (12 variable rent hotels) • Increased both occupancy and ADR RevPAR +JPY 214 (+2.7%) YOY • +0.2% vs. initial forecast JP

  7. Slide 7: January 2018 Earnings Breakdown

    January 2018 Earnings Breakdown (JPY million) Jan 2017 Jan 2018 Initial Forecast vs. Initial Forecast Major Variation Factors (vs. Forecast) Operating Revenue 1,560 1,782 1,770 +11 Variable Rent 681 748 736 +11 Increase: 8 hotels; Decrease: 4 hotels Fixed Rent 823 974 974 – Other 54 59 58 – Increase

  8. Slide 8: Revenue, RevPAR, Occupancy, & ADR All Up Year-on-Year

    Revenue, RevPAR, Occupancy, & ADR All Up Year-on-Year Higher RevPAR and Value-Add Capex to Increase Number of Guestrooms Driving Revenue Growth Variable Rent Hotels (12 Hotels) Aug 1, 2016 - Aug 1, 2017 - Difference YOY Jan 31, 2017 Jan 31, 2018 Room Revenue (JPY M) 2,690 2,775 +85 +3.2% Revenue (JP

  9. Slide 9: Earnings Stability via Geographic Diversification

    Earnings Stability via Geographic Diversification YOY by Region (Aug 2017 – Jan 2018) RevPAR +9% Occupancy ADR +5% +5% +4% +4% -1% +3% +2% +3% -1% +3% +1% +5% +3% +4% +3% +3% +2% +3% 0% 0% 0% -2% -4% +5% 18 Hotels (excludes Grandpark-Inn Yokohama, Hotel Suave Kobe Asuta, and Hotel Livemax Nihombashi

  10. Slide 10: Portfolio Overview & Growth

    Portfolio Overview & Growth IPO July 2016 January 2017 July 2017 January 2018 (November 30, 2015) Fiscal Period Fiscal Period Fiscal Period Fiscal Period Portfolio Size Portfolio Size Portfolio Size Portfolio Size Portfolio Size 9 hotels 9 hotels 19 hotels 20 hotels 21 hotels JPY 20.4B JPY 20.4B JPY

  11. Slide 11: Organic Growth: Value-Add Capex – Smile Hotel Tokyo Asagaya

    Organic Growth: Value-Add Capex – Smile Hotel Tokyo Asagaya − Full renovation to respond to shift in market needs and maximize its prime location − Installed larger beds to increase capacity and capture leisure and inbound guest demand (ADR +14%) − Forecast rent increase JPY 39.6M p.a. (+20% vs. NOI

  12. Slide 12: Organic Growth: Across-the-Board Actions to Grow Earnings

    Organic Growth: Across-the-Board Actions to Grow Earnings Capturing Leisure and Inbound Guest Demand − Installed larger beds (Nest Hotel Osaka Shinsaibashi, Nest Hotel Matsuyama) Capex: JPY 2.9M, Rent increase p.a.: JPY 1.5M, ROI 51.7% − Increased number of non-smoking rooms preferred by leisure and

  13. Slide 13: Organic Growth: Increasing NOI of Acquired Hotels

    Organic Growth: Increasing NOI of Acquired Hotels − Steady organic growth via measures to respond to market changes such as value-add capex − NOI 5.6%  6.3% (on book value of JPY 45.3B) YOY by Region 2017 NOI / Appraisal NOI at Acquisition January 2018 Book Value / Book Value at Acquisition +39% +3

  14. Slide 14: Share Buyback to Grow Shareholder Value

    Share Buyback to Grow Shareholder Value − Grow value for shareholders via share buyback, organic growth, and external growth (2nd J-REIT to do buyback) − Shares have outperformed TSE REIT Index post-buyback (JPY) 140,000 Number of 2,610 shares Ichigo Hotel (3463) Shares (1.0% of total shares outstan

  15. Slide 15: Ongoing Growth

    Ongoing Growth © 2018 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 15

  16. Slide 16: Hotel Market Environment (1)

    Hotel Market Environment (1) Business hotel demand remains robust and growing − Inbound business hotel guests: +420.0% (vs. 2011) − Continued growth expected due to increasing domestic and inbound tourism; Government target of 40 million inbound tourists by 2020 No. of Guests by Hotel Type (Japanese

  17. Slide 17: Hotel Market Environment (2)

    Hotel Market Environment (2) UN World Tourism Organization（UNWTO）Forecasts Total International Tourists to Reach 1.8B in 2030 (+36.9% vs. 2017) − Asia/Pacific forecast +65.1％ vs. 2017 − 2017 total growth rate +7% YOY, highest pace in seven years (average annual growth at +4％ plus since 2010) − 2017

  18. Slide 18: Ichigo Hotel Growth Results (1)

    Ichigo Hotel Growth Results (1) NOI: JPY 699M (July 2016) → JPY 1.62B (January 2018) +131.6% Dividend: JPY 5,962 (2016) → JPY 6,429 (2018 forecast) +7.8% NOI Dividend JPY 6,403 JPY 6,429 JPY 5,962 JPY 3,162 JPY 3,302 (Jan 2019) (Jan 2018) JPY 3,137 (Jan 2017) JPY 1,620M JPY 1,523M (21 hotels) JPY 1,

  19. Slide 19: Ichigo Hotel Growth Results (2)

    Ichigo Hotel Growth Results (2) Appraisal Value：JPY 21.4B → JPY 56.4B (+163.7%) Unrealized Gains: JPY 737M → JPY 4.9B (+561.1%) NAV per Share: JPY 107,461 → JPY 143,045 (+33.1%) Appraisal Value NAV (JPY) (JPY) Unrealized gains Unrealized gains per share 56.4B 53.8B +4.9B 51.6B +4.1B +3.4B 143,045 13

  20. Slide 20: Growth Strategy Roadmap

    Growth Strategy Roadmap Flexibly Responding to Market Environment Stage I Stage II Continuous Dividend Growth via External Growth, Organic Growth, and Strong Financial Base • Construct a diversified portfolio to pursue both income • Drive higher earnings via economies of scale from increased stabili

  21. Slide 21: Organic Growth: Driving Earnings via Value-Add Capex (1)

    Organic Growth: Driving Earnings via Value-Add Capex (1) − Increased Rental Income via Value-Add Capex: +JPY 21.9M − Added 15 New Guestrooms (as of Feb 2018) − Will Continue High-ROI Value-Add Capex to Respond to Shifting Market Needs July 2018 Value-Add Capex Plan Expected Rental Hotel Name Value-A

  22. Slide 22: Driving Earnings via Value-Add Capex (2)

    Driving Earnings via Value-Add Capex (2) Smile Kyoto Shijo: Increased Number of Guestrooms to Drive Higher Earnings − Added four new guestrooms via splitting up four existing rooms − 1.8X revenue increase − Capex: JPY 46M, Forecast return: +JPY 7.2M p.a., ROI 15.7% Before After Guestroom with wasted

  23. Slide 23: Portfolio Growth Potential via Ichigo Sponsor Support

    Portfolio Growth Potential via Ichigo Sponsor Support 25 Hotels (JPY 57.8B) in Sponsor Pipeline as of January 31, 2018 − Locations: Major cities such as Tokyo, Yokohama, Osaka, Nagoya, Fukuoka, Kumamoto, and Naha − New hotels also in-development Completed New Hotel 1 New Hotel 2 Osaka Fukuoka Opened

  24. Slide 24: Stable Financial Base

    Stable Financial Base − Loans with shorter maturities are floating rate to take advantage of current low interest rates − 70% of loans are fixed to hedge against a rise in interest rates Outstanding Loan Balance Jan 31, 2016 Jul 31, 2016 Jan 31, 2017 Jul 31, 2017 Jan 31, 2018 Amount JPY 8.50B JPY 8.

  25. Slide 25: July 2018 and January 2019 Forecasts

    July 2018 and January 2019 Forecasts © 2018 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 25

  26. Slide 26: July 2018 Forecast

    July 2018 Forecast External Growth (1 Additional Asset) and Organic Growth via Higher Variable Rents (JPY million) July 2018 July 2018 July 2017 Previous Forecast Revised (B) - (A) Major Factors for Variation Actual (A) (September 2017) Forecast (B) Operating Revenue 1,687 1,805 1,810 +122 Increase

  27. Slide 27: January 2019 Forecast

    January 2019 Forecast − Operating Revenue Equivalent to January 2018 − Increase in Operating Expenses to Hit Operating Profit (JPY million) Jan 2018 Jan 2019 (B) - (A) Major Factors for Variation Actual (A) Forecast (B) Operating Revenue 1,782 1,780 -1 Expected RevPAR at Variable Hotels:： JPY 8,424

  28. Slide 28: Appendix: Portfolio Details

    Appendix: Portfolio Details © 2018 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 28

  29. Slide 29: Hotel Map

    Hotel Map Tokyo Kanto Hokuriku/Tokai Hokkaido C-1 C-2 C-3 B-1 D-1 D-2 D-3 D-4 A-2 A-3 A-1 Smile Hotel Smile Hotel Hotel Livemax Grandpark-Inn Comfort Hotel Hotel Wing Comfort Hotel Comfort Hotel Nest Hotel Nest Hotel Comfort Tokyo Asagaya Asakusa Nihombashi- Yokohama Hamamatsu International Central

  30. Slide 30: Multi-Faceted Portfolio Diversification

    Multi-Faceted Portfolio Diversification Portfolio Characteristics Location Hotel Operator Kobe Fukuoka 2.9% 2.7% Yokohama 2.9% Other 27.6% Nest Hotel Nagoya Japan Osaka 39.7% 5.2% 18.1% Hospitality Okinawa Operations 7.4% 16.1% Greens 16.6% Hokkaido Kyoto 7.7% 15.9% Chugoku/ Fixed vs. Variable Rent

  31. Slide 31: Individual Hotel Summary

    Individual Hotel Summary Leasable Acquisition Book Value Jan 2018 Appraisal Unrealized Hotel Hotel Name Lease Terms Location Area Price (JPY M) Value Cap Rate Gains (JPY M) No. 2 (m ) (JPY M) (A) (JPY M) (B) (% ) (B) - (A) A-1 Nest Hotel Sapporo Ekimae Variable + Fixed Rent Sapporo, Hokkaido 5,734.9

  32. Slide 32: Individual Hotel Operating Results

    Individual Hotel Operating Results (year-on-year) No. of January 2018 (August 2017 - January 2018) Hotel Hotel Name Lease Terms Location Guest No. RevPAR (JPY) Occupancy (%) ADR (JPY) Revenue (JPY M) Rooms A-1 Nest Hotel Sapporo Ekimae Variable + Fixed Rent Sapporo, Hokkaido 162 8,332 (+0.4%) 96.7 (

  33. Slide 33: Individual Hotel Financials

    Individual Hotel Financialsは当初予想より9.4%上昇 (JPY thousand) No. A-1 A-2 A-3 C-1 C-2 D-1 D-3 D-4 E-1 E-2 E-3 E-5 F-1 F-2 G-1 G-2 Smile Comfort Smile Total Nest Hotel Nest Hotel Comfort Smile Comfort Comfort Hotel Vista Chisun Inn Nest Hotel Comfort Hotel Hotel Central Hotel Nest Hotel Valie Hotel Nest Ho

  34. Slide 34: Fixed/Variable Rent, RevPAR, ADR & Occupancy Trends

    Fixed/Variable Rent, RevPAR, ADR & Occupancy Trends Fixed/Variable Rent (JPY thousand) Jan 2016 Jul 2016 Jan 2017 Jul 2017 Jan 2018 Rent Ratio Rent Ratio Rent Ratio Rent Ratio Rent Ratio Fixed Rent 131,079 66.2% 423,063 54.6% 878,775 56.3% 930,906 55.1% 1,034,015 58.0% Fixed Rent from Operators 119,

  35. Slide 35: Variable Rent Hotel Details

    Variable Rent Hotel Details A-1 Nest Hotel Sapporo Ekimae Operating Results (Feb 2017 - Jan 2018) ADR RevPAR Occupancy Location Sapporo, Hokkaido (right) (right) (left) (JPY) 5-minute walk from 100% 15,000 Sapporo Station on Access 80% 12,000 Sapporo City Metro Namboku Line 60% 9,000 Nest Hotel Japa

  36. Slide 36: Variable Rent Hotel Details

    Variable Rent Hotel Details C-1 Smile Hotel Tokyo Asagaya Operating Results (Feb 2017 - Jan 2018) ADR RevPAR Occupancy Location Suginami-ku, Tokyo (right) (right) (left) (JPY) 100% 10,000 1-minute walk from Access Asagaya Station on JR 80% 8,000 Chuo/Sobu Line 60% 6,000 K.K. Hospitality Operator Ope

  37. Slide 37: Variable Rent Hotel Details

    Variable Rent Hotel Details D-2 Hotel Wing International Nagoya Operating Results (Feb 2017 - Jan 2018) ADR RevPAR Occupancy Location Nagoya, Aichi (right) (right) (left) (JPY) 2-minute walk from 100% 10,000 Marunouchi Station on both Nagoya Subway Access 80% 8,000 Network Sakuradori Line and Tsurum

  38. Slide 38: Variable Rent Hotel Details

    Variable Rent Hotel Details E-2 Hotel Vista Premio Kyoto Operating Results (Feb 2017 - Jan 2018) ADR RevPAR Occupancy Location Kyoto (right) (right) (left) (JPY) 5-minute walk from 100% 20,000 Kyoto Shiyakushomae Access 80% 16,000 Station on Kyoto City Subway Tozai Line 60% 12,000 Vista Hotel Operat

  39. Slide 39: Variable Rent Hotel Details

    Variable Rent Hotel Details E-5 Nest Hotel Osaka Shinsaibashi Operating Results (Feb 2017 - Jan 2018) ADR RevPAR Occupancy Location Osaka (right) (right) (left) (JPY) 1-minute walk from 100% 10,000 Nagahoribashi Station on Osaka Municipal Access 80% 8,000 Subway Sakaisuji Line and Nagahoritsurumi- 6

  40. Slide 40: Variable Rent Hotel Details

    Variable Rent Hotel Details G-1 Valie Hotel Tenjin Operating Results (Feb 2017 - Jan 2018) ADR RevPAR Occupancy Location Fukuoka (right) (right) (left) (JPY) 100% 10,000 6-minute walk from Tenjin Station on Access 80% 8,000 Fukuoka City Subway Kuko Line 60% 6,000 Operator The Court Co., Ltd. 40% 4,0

  41. Slide 41: Fixed Rent Hotel Details

    Fixed Rent Hotel Details A-3 Comfort Hotel Kushiro B-1 Grandpark-Inn Yokohama Location Kushiro, Hokkaido Location Yokohama, Kanagawa 6-minute walk from 2-minute walk from Yokohama Station on Access Kushiro Station on JR Access JR Line, private Nemuro Main Line railways, and subway Operator Greens Co

  42. Slide 42: Fixed Rent Hotel Details

    Fixed Rent Hotel Details D-3 Comfort Hotel Central International Airport D-4 Comfort Hotel Suzuka Location Tokoname, Aichi Location Suzuka, Mie 5-minute walk from Central International Airport, 3-minute walk from Access 3-minute walk from Central Access Shirako Station on International Airport Stati

  43. Slide 43: Fixed Rent Hotel Details

    Fixed Rent Hotel Details F-3 Urbain Hiroshima Executive Location Hiroshima 6-minute walk from Hiroshima Station on Access JR Sanyo Shinkansen and Sanyo Main Line Operator Yuki Corporation Guest Rooms 171 Acquisition JPY 1.80B Price © 2018 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Invest

  44. Slide 44: Appendix: Hotel Market Environment

    Appendix: Hotel Market Environment © 2018 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 44

  45. Slide 45: Hotel Market Environment (1)

    Hotel Market Environment (1) Trend in Number of Inbound Guests per Prefecture (1,000 persons) (1,000 persons) (1,000 persons) (1,000 persons) Tokyo Osaka Hokkaido Kyoto 12,000 12,000 12,000 12,000 10,000 10,000 10,000 10,000 9,350 8,013 8,153 8,000 8,000 8,000 8,000 6,221 5,755 6,162 6,000 6,000 6,0

  46. Slide 46: Hotel Market Environment (2)

    Hotel Market Environment (2) New Hotel Room Supply by Prefecture New Supply Japanese Inns Hotels 200,000 25% 150,000 9% 31% 100,000 5% 2% 19% 12% 14% 15% 25% 50,000 3% 8% 25% 4% 3% 5% 2% 0% 7% 5% 2% 5% 4% 11% 7% 1% 12% 3% 6% 3% 2% 1% 6% 1% 0% 2% 5% 7% 8% 10% 4% 9% 6% 2% 3% 4% 18% 0 Kumamoto Kagoshim

  47. Slide 47: Appendix: Loan Details & Shareholder Composition

    Appendix: Loan Details & Shareholder Composition © 2018 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 47

  48. Slide 48: Loan Details

    Loan Details Loan Balances Amount Interest Rate Loan Lender Borrowing Date Maturity (JPY million) (%) Term Loan I SMBC, Mizuho, Shinsei, Resona 3,250 0.65545 November 30, 2015 November 30, 2018 Term Loan II SMBC, Mizuho, Shinsei, Resona 5,250 1.08000 November 30, 2015 November 30, 2020 Term Loan III

  49. Slide 49: Shareholder Composition

    Shareholder Composition Major Shareholders (as of January 31, 2018) Shareholdings by Shareholder Type No. of Foreign Corporations & Individuals Domestic Financial Institutions Name Share Shares Non-Financial Domestic Corporations Domestic Individuals 100% 1 Japan Trustee Services Bank, Ltd., Trust A

  50. Slide 50: Appendix: Synergies with Sponsor Ichigo (2337)

    Appendix: Synergies with Sponsor Ichigo (2337) © 2018 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 50

  51. Slide 51: Ichigo Hotel’s Sponsor: Ichigo (2337)

    Ichigo Hotel’s Sponsor: Ichigo (2337) Core Businesses: Asset Management, Real Estate Value-Add, Clean Energy ‒ Manages Ichigo Hotel (3463), Ichigo Office (8975), and Ichigo Green (9282) ‒ TSE First Section, JPX-Nikkei 400 Member ‒ Deeply committed to CSR and Sustainability – Japan’s first zero-carbo

  52. Slide 52: Ichigo Hotel (3463) and Ichigo (2337) Synergies

    Ichigo Hotel (3463) and Ichigo (2337) Synergies  Strengthen acquisitions through leveraging Ichigo’s sourcing network  Increase asset value through Ichigo’s real estate value-add capabilities  Drive higher returns for Ichigo Hotel shareholders Buy Ichigo Hotel (3463) Ichigo (2337 – Sponsor) Buy R

  53. Slide 53: Ichigo Hotel Overview

    Ichigo Hotel Overview Ichigo Hotel Name Ichigo Hotel REIT Investment Corporation Securities Code 3463 Address 1-1-1 Uchisaiwaicho, Chiyoda-ku, Tokyo Executive Director Osamu Miyashita Fiscal Periods January (August 1 - January 31) and July (February 1 - July 31) Asset Management Company Name Ichigo

  54. Slide 54: MEMO

    MEMO © 2018 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 54

  55. Slide 55: Disclaimer

    Disclaimer These materials are for informational purposes only, and do not constitute or form a part of, and should not be construed as, an offer to sell or buy securities of Ichigo Hotel REIT Investment Corporation (Ichigo Hotel ). These materials may contain forward-looking statements regarding th

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