Ichigo Hotel Reit Investment Corp. · TSE:3463

Ichigo Hotel Reit Investment — H2 FY2018 Earnings Presentation

59 slides from Ichigo Hotel Reit Investment's earnings presentation, Mar 14, 2019

  1. Slide 1: Ichigo Hotel January 2019 Fiscal Period Corporate Presentation

    Ichigo Hotel (3463) Ichigo Hotel January 2019 Fiscal Period Corporate Presentation March 14, 2019 Ichigo Hotel REIT Investment Corporation (3463) Ichigo Investment Advisors Co., Ltd. © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. www.ichigo-hotel

  2. Slide 2: Ichigo Preserves and Improves Real Estate

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

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

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

  4. Slide 4: Contents

    January 2019 Results Ongoing Earnings Growth  January 2019 Highlights  Growth Driver: Value-Add Capex  January 2019 Earnings Breakdown  Growth Driver: Hotel Operator Replacement  Accretive Asset Sale & Acquisition  Growth Driver: Strong Inbound Demand  Steady Operating Results Despite Natural

  5. Slide 5: January 2019 Results

    January 2019 Results © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 5

  6. Slide 6: January 2019 Highlights

    January 2019 Highlights Achievements Drivers • Gains on sale of Asakusa asset: JPY 694M JPY 1,398M Net Income +JPY 557M (+66.2%) YOY • Limited impact from natural disasters due to geographically diversified portfolio Asset Court Hotel Kurashiki • Asset acquisition via Ichigo sponsor support Acquisit

  7. Slide 7: January 2019 Earnings Breakdown

    January 2019 Earnings Breakdown (JPY million) Jan 2018 Jan 2019 Forecast (B) vs. Forecast Major Variation Factors (vs. Forecast) Actual Actual (A) (Sep 2018) (A) - (B) Operating Revenue 1,782 2,439 2,448 -8 Above forecast: 4 hotels Variable Rent 748 701 711 -9 Below forecast: 7 hotels Fixed Rent 974

  8. Slide 8: Accretive Asset Sale & Acquisition

    Accretive Asset Sale & Acquisition Smile Hotel Asakusa Sale Price: JPY 2.70B (1.4X Book Value) Sale  Gains on sale exceeded NAV-based unrealized gains (1.3X appraisal value)  Fully distributed gains on sale as dividend to shareholders (JPY 694M) Court Hotel Kurashiki Acquisition Price: JPY 1.73B (

  9. Slide 9: Steady Operating Results Despite Natural Disasters

    Steady Operating Results Despite Natural Disasters Variable Rent Hotels (12 Hotels) Aug 1, 2017 Aug 1, 2018 Difference YOY - Jan 31, 2018 - Jan 31, 2019 Room Revenue (JPY M) 2,797 2,764 -32 -1.2% Revenue (JPY M) 3,241 3,207 -33 -1.0% RevPAR (JPY) 8,264 8,137 -127 -1.5% Occupancy 92.0% 91.2% -0.8% -0

  10. Slide 10: Geographic Diversification Supports Earnings Stability

    Geographic Diversification Supports Earnings Stability Negative Results in Kyoto and Osaka Offset by Other Regions YOY by Region (Aug 2018 – Jan 2019) 18 Hotels (excludes Grandpark-Inn Yokohama, Hotel Suave RevPAR Occupancy ADR Kobe Asuta, and Hotel Livemax Nihombashi-Hakozaki) Tokai/ Chugoku/ Total

  11. Slide 11: Actions to Grow Earnings

    Actions to Grow Earnings – Following Actions Forecast to Increase NOI by JPY 23.8M p.a. – Revenue Drivers:  Value-Add Capex: NOI +JPY 18.2M p.a. Capex Capex Hotel Capex Details NOI Increase ROI Timing Amount Convert storage space to guest Sept 2018 Hotel Wing International Nagoya JPY 14.3M +JPY 2.8

  12. Slide 12: Value-Add Capex: Nest Hotel Naha

    Value-Add Capex: Nest Hotel Naha Increased guest room capacity to cater to needs of guests traveling with family or friends − Increased guest capacity in 6 double rooms (capacity increased by 6 guests) − Split 2 suites into 4 double rooms (capacity increased by 8 guests) − Expected outcome: +JPY 9.9

  13. Slide 13: Value-Add Capex: Hotel Wing International Nagoya

    Value-Add Capex: Hotel Wing International Nagoya Converted non-revenue generating storage spaces into 4 single rooms − Outcome: +JPY 2.8M p.a. rental income − Forecast ROI 19.8% (Total capex JPY 14.3M, joint investment with operator) Before After Converted 2 storage spaces into guest rooms 4 single

  14. Slide 14: Ongoing Earnings Growth

    Ongoing Earnings Growth © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 14

  15. Slide 15: Growth Driver: Value-Add Capex

    Growth Driver: Value-Add Capex − Adding 8 new guest rooms in July 2019 period − Continuing high-ROI value-add capex to meet changes in demand trends From IPO July 2019 (Forecast) (Nov 30, 2015) to Court Hotel Cumulative January 2019 Nest Hotel Naha Kurashiki Renovate and Capex Add 6 new guest Add 2

  16. Slide 16: Growth Driver: Hotel Operator Replacement

    Growth Driver: Hotel Operator Replacement Replacing Operator of Hotel Suave Kobe Asuta − New lease will both increase fixed rent & add variable rent − Changing hotel name to Hotel Wing International Kobe Shin Nagata Ekimae (June 2019) − Higher demand from June with completion of nearby government bu

  17. Slide 17: Growth Driver: Strong Inbound Demand

    Growth Driver: Strong Inbound Demand − New hotel supply forecast to peak in 2019 − Domestic demand firm while inbound demand continues to grow Growth in New Hotel Supply By Major City vs. 2017 Total Number of Tourists in Domestic Lodging Facilities (million persons) 20.0% 600 東京都 大阪市 札幌市 名古屋市 京都市 福岡

  18. Slide 18: Strong Growth Track Record

    Strong Growth Track Record (JPY) (JPY) 160,000 6,000 NAV per Share (left axis) 5,487 Gains on Sale from Smile Hotel Asakusa Sale2 150,000 DPS (right axis) 5,000 146,317 145,726 143,045 3,096 139,940 140,000 137,197 4,000 3,352 3,302 3,137 3,101 2,825 130,000 3,000 120,000 2,000 1 1,375 113,393 110,0

  19. Slide 19: Ongoing Potential to Drive Increased Shareholder Value

    Ongoing Potential to Drive Increased Shareholder Value Dividend Growth and Highly Secure Earnings Base Support Further Growth in Shareholder Value Dividend Growth Highly Secure Earnings Base • Pro-actively execute value-add capex Organic Growth • Dispose of hotels with limited growth potential • Geo

  20. Slide 20: Portfolio Growth Opportunity via Ichigo Sponsor Support

    Portfolio Growth Opportunity via Ichigo Sponsor Support 16 Hotels (JPY 43.9B) in Sponsor Pipeline as of January 31, 2019 − Locations: Major cities such as Tokyo, Yokohama, Osaka, Fukuoka, and Kumamoto − New hotels also in-development Completed New Hotel Fukuoka Opened: April 2018 Yokohama Shinjuku K

  21. Slide 21: July 2019 and January 2020 Forecasts

    July 2019 and January 2020 Forecasts © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 21

  22. Slide 22: July 2019 Forecast

    July 2019 Forecast Reflects expected negative impact from new hotel supply in Kyoto and Osaka and conservative forecast of variable-rent income (JPY million) Jul 2019 Jul 2019 Jul 2018 Previous Forecast Revised (B) - (A) Major Factors for Variation Actual (A) (Sep 2018) Forecast (B) Operating Revenu

  23. Slide 23: January 2020 Forecast

    January 2020 Forecast Lower forecast reflects drop off of January 2019 gains on sale (JPY 694M) (JPY million) Jan 2019 Jan 2020 (B) - (A) Major Factors for Variation Actual (A) Forecast (B) Operating Revenue 2,439 1,773 -666 Variable Rent 701 713 +11 Expected RevPAR at Variable Rent Hotels: JPY 8,29

  24. Slide 24: Appendix: Hotel Market Environment

    Appendix: Hotel Market Environment © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 24

  25. Slide 25: Business Hotel Demand Strong and Growing

    Business Hotel Demand Strong and Growing Business hotels benefit from both robust domestic demand and growing inbound demand − 183M domestic business hotel guests in 2018, +1% YOY − 33M inbound business hotel guests in 2018, +16% YOY No. of Guests by Hotel Type (Domestic) No. of Guests by Hotel Type

  26. Slide 26: Minpaku (Airbnb, etc.) Serves <1% of Tourists Nationwide

    Minpaku* (Airbnb, etc.) Serves <1% of Tourists Nationwide No. of Guests at Minpaku Rentals by Prefecture Japan Hokkaido Tokyo Aichi 600,000 3.0% 150,000 3.0% 300,000 3.0% 30,000 3.0% % of Total Number of % of Total Number of % of Total Number of % of Total Number of Tourists Tourists Tourists Touris

  27. Slide 27: New Hotel Room Supply in Japan

    New Hotel Room Supply in Japan +12% No. of New Hotel Rooms Planned for Completion (after March 31, 2018) New Supply Japanese Inns Hotels % Increase of New Supply 2,000,000 +12% 1,500,000 1,000,000 500,000 +27% +35% +14% +29% +44% +25% +35% +13% +17% +22% +5% +6% +7% +4% 全Japan 名Nagoya 0 東Tokyo 大Osak

  28. Slide 28: Appendix: Portfolio Details

    Appendix: Portfolio Details © 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-3 B-1 D-1 D-2 D-3 D-4 A-1 A-2 A-3 Smile Hotel Hotel Livemax Grandpark-Inn Comfort Hotel Hotel Wing Comfort Hotel Comfort Hotel Nest Hotel Nest Hotel Comfort Tokyo Asagaya Nihombashi- Yokohama Hamamatsu International Central International Suzuka Sap

  30. Slide 30: Portfolio Growth

    Portfolio Growth IPO January 2017 July 2017 January 2018 January 2019 (November 30, 2015) Fiscal Period Fiscal Period Fiscal Period Fiscal Period Portfolio Size Portfolio Size Portfolio Size Portfolio Size Portfolio Size 9 hotels 19 hotels 20 hotels 21 hotels 21 hotels JPY 20.4B JPY 47.6B JPY 49.1B

  31. Slide 31: Individual Hotel Summary

    Individual Hotel Summary Jan 2019 Appraisal Leasable Acquisition Book Value Unrealized Hotel Value Hotel Name Lease Terms Location Area Price (JPY M) Cap Rate Gains (JPY M) No. 2 (JPY M) (m ) (JPY M) (A) (% ) (B) - (A) (B) A-1 Nest Hotel Sapporo Ekimae Variable + Fixed Rent Sapporo 5,734.93 2,160 2,

  32. Slide 32: Individual Hotel Operating Results

    Individual Hotel Operating Results (year-on-year) No. of January 2019 (August 2018 - January 2019) Hotel No. Hotel Name Lease Terms Location Guest Rooms RevPAR (JPY) Occupancy (%) ADR (JPY) Revenue (JPY M) A-1 004 Nest Hotel Sapporo Ekimae Variable + Fixed Rent Sapporo 162 9,821 (+17.9%) 95.8 (-0.9%

  33. Slide 33: Individual Hotel Financials

    Individual Hotel Financials (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 F-4 Comfort Hotel Total Nest Hotel Nest Hotel Comfort Smile Hotel Comfort Hotel Vista Chisun Inn Nest Hotel Comfort Court Smile Hotel Comfort Hotel Central Smile Hotel Nest Hotel Valie Hote

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

    Fixed/Variable Rent, RevPAR, ADR, & Occupancy Trends Total Rent Fixed/Variable Rent (excludes Other Revenue) (JPY thousand) Jan 2018 Jul 2018 Jan 2019 Rent Ratio Rent Ratio Rent Ratio Fixed Rent 1,034,015 58.0% 1,010,663 55.7% 1,043,696 59.8% Variable Rent 41.6% Fixed Rent from Operators 974,852 54.

  35. Slide 35: Variable Rent Hotel Details

    Variable Rent Hotel Details A-1 Nest Hotel Sapporo Ekimae Location Sapporo Operating Results (February 2018 – January 2019) ADR RevPAR Occupancy (right) (right) (left) 5-minute walk from (JPY) Sapporo Station on 100% 25,000 Access Sapporo City Metro Namboku Line 80% 20,000 Nest Hotel Japan 60% 15,00

  36. Slide 36: Variable Rent Hotel Details

    Variable Rent Hotel Details C-1 Smile Hotel Tokyo Asagaya Location Suginami-ku, Tokyo Operating Results (February 2018 – January 2019) ADR RevPAR Occupancy (right) (right) (left) (JPY) 1-minute walk from 100% 12,500 Access Asagaya Station on JR Chuo/Sobu Line 80% 10,000 60% 7,500 K.K. Hospitality Op

  37. Slide 37: Variable Rent Hotel Details

    Variable Rent Hotel Details E-1 Smile Hotel Kyoto Shijo Location Kyoto Operating Results (February 2018 – January 2019) ADR RevPAR Occupancy 5-minute walk from (right) (right) (left) (JPY) Shijo Station on Kyoto 100% 25,000 City Subway Karasuma Access Line and Karasuma 80% 20,000 Station on Hankyu K

  38. Slide 38: Variable Rent Hotel Details

    Variable Rent Hotel Details E-3 Chisun Inn Osaka Hommachi Location Osaka Operating Results (February 2018 – January 2019) ADR RevPAR Occupancy 5-minute walk from (right) (right) (left) (JPY) Sakaisuji-Hommachi 100% 12,500 Access Station on Osaka Municipal Subway 80% 10,000 Chuo Line 60% 7,500 SHR Ho

  39. Slide 39: Variable Rent Hotel Details

    Variable Rent Hotel Details F-2 Nest Hotel Matsuyama Location Matsuyama, Ehime Operating Results (February 2018 – January 2019) ADR RevPAR Occupancy (right) (right) (left) 25-minute drive from (JPY) Matsuyama Airport, 3-minute walk from 100% 12,500 Access Katsuyamacho Station 80% 10,000 on Iyo Railw

  40. Slide 40: Variable Rent Hotel Details

    Variable Rent Hotel Details G-1 Valie Hotel Tenjin Location Fukuoka Operating Results (February 2018 – January 2019) ADR RevPAR Occupancy (right) (right) (left) (JPY) 6-minute walk from Tenjin Station on 100% 12,500 Access Fukuoka City Subway 80% 10,000 Kuko Line 60% 7,500 Operator The Court Co., Lt

  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 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., Ltd. Op

  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 © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment

  44. Slide 44: Appendix: Loan Details & Shareholder Composition

    Appendix: Loan Details & Shareholder Composition © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 44

  45. Slide 45: Stable Financial Base

    Stable Financial Base − Shorter-term loans are floating rate to take advantage of current low interest rates − 80% of loans are fixed to hedge against a rise in interest rates Outstanding Loan Balance Jan 31, 2017 Jul 31, 2017 Jan 31, 2018 Jul 31, 2018 Jan 1, 2019 Amount JPY 19.50B JPY 19.95B JPY 21

  46. Slide 46: Loan Details

    Loan Details Loan Balances Amount Floating/ Interest Rate Loan Lender Borrowing Date Maturity (JPY million) Fixed (%) Term Loan II SMBC, Mizuho, Shinsei, Resona 5,250 Fixed 1.08000 November 30, 2015 November 30, 2020 Term Loan III SMBC, Mizuho, Shinsei, Resona, Fukuoka, Nishi-Nippon City 2,000 Float

  47. Slide 47: Shareholder Composition

    Shareholder Composition Major Shareholders (as of January 31, 2019) By Number of Shares Held: No. of Foreign Corporations & Individuals Domestic Financial Institutions Name Share Non-Financial Domestic Corporations Domestic Individuals Shares (Shares) 100% 1 Japan Trustee Services Bank, Ltd., Trust

  48. Slide 48: Appendix: Growth Roadmap, Sponsor, Governance, Sustainability, Shareholder Alignment

    Appendix: Growth Roadmap, Sponsor, Governance, Sustainability, Shareholder Alignment © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 48

  49. Slide 49: 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

  50. Slide 50: Ichigo Hotel's Sponsor: Ichigo (2337)

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

  51. Slide 51: Synergies Between Ichigo Hotel and Sponsor

    Synergies Between Ichigo Hotel and Sponsor ‒ 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 Ichigo Hotel (3463) Buy Sponsor: Ichigo (2337) Buy Buy Hot

  52. Slide 52: Ichigo Sustainability Activities

    Ichigo Sustainability Activities Ichigo Sustainability Policy Ichigo believes that working on behalf of society and the environment is a fundamental social responsibility and will support the sustainable growth of Ichigo and Ichigo Hotel REIT. Ichigo has thus made sustainability a key priority, and

  53. Slide 53: Global Best-Practice Corporate Governance

    Global Best-Practice Corporate Governance Strong focus on ESG issues to support long-term value growth for shareholders – All Ichigo Hotel Directors are Independent Directors – External experts also support asset management decision-making – Risk & Compliance Committee carries out ongoing monitoring

  54. Slide 54: First J-REIT No Fixed Fee, Performance Fee-Only Structure

    First J-REIT No Fixed Fee, Performance Fee-Only Structure Overwhelming Shareholder Support (99.3% Yes Vote at AGM) Before Change After Change Asset Management Fee Structure (Until January 31, 2019) (From February 1, 2019) AM Fee I Total Asset Value X 0.4% – Asset Asset Size- Acquisition Price X 1% –

  55. Slide 55: 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

  56. Slide 56: MEMO

    MEMO © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 56

  57. Slide 57: MEMO

    MEMO © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 57

  58. Slide 58: MEMO

    MEMO © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 58

  59. Slide 59: 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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