Ichigo Hotel Reit Investment Corp. · TSE:3463

Ichigo Hotel Reit Investment — H1 2019 Earnings Presentation

63 slides from Ichigo Hotel Reit Investment's earnings presentation, Sep 12, 2019

  1. Slide 1: Corporate Presentation - July 2019 Fiscal Period

    Ichigo Hotel (3463) Ichigo Hotel July 2019 Fiscal Period Corporate Presentation September 12, 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-hote

  2. Slide 2: Make The World More Sustainable

    Make The World More Sustainable © 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: © 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.

  5. Slide 5: Contents

    July 2019 Results January 2020 and July 2020 Forecasts  July 2019 Highlights  January 2020 Forecast  July 2019 Earnings Breakdown  July 2020 Forecast  Ichigo Hotel Operating Results  RevPAR Up in Kyushu, Hokkaido, and Ichigo’s Commitment to ESG Chugoku/Shikoku  Ichigo Sustainability Policy 

  6. Slide 6: July 2019 Results

    July 2019 Results © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 6

  7. Slide 7: July 2019 Highlights

    July 2019 Highlights Results Details JPY 804M • Hit by new hotel supply in Kyoto and Osaka, which Net Income -JPY 50M (-5.9%) YOY peaked out in 2019 and is now decreasing • Drive further earnings growth and geographic 2 Hotels (Kumamoto & Hiroshima) Acquisitions (Acquisition Price: JPY 3.72B) divers

  8. Slide 8: July 2019 Earnings Breakdown

    July 2019 Earnings Breakdown (JPY million) Jul 2018 Jul 2019 Forecast (B) vs. Forecast Major Variation Factors (vs. Forecast) Actual Actual (A) (Mar 2019) (A) - (B) Operating Revenue 1,814 1,789 1,785 +4 Above forecast: 3 hotels; Below forecast: 7 hotels Variable Rent 803 735 750 -14 Increase in var

  9. Slide 9: Ichigo Hotel Operating Results

    Ichigo Hotel Operating Results Variable Rent Hotels (13 Hotels) Feb 1, 2018 Feb 1, 2019 Difference YOY – Jul 31, 2018 – Jul 31, 2019 Room Revenue (JPY M) 3,042 2,885 -157 -5.2% Revenue (JPY M) 3,517 3,349 -167 -4.8% RevPAR (JPY) 8,221 7,773 -449 -5.5% Occupancy 92.6% 89.7% -2.9% -3.2% ADR (JPY) 8,87

  10. Slide 10: RevPAR Up in Kyushu, Hokkaido, and Chugoku/Shikoku

    RevPAR Up in Kyushu, Hokkaido, and Chugoku/Shikoku YOY by Region (Feb 2019 – July 2019) 19 Hotels (excludes Grandpark-Inn Yokohama, Hotel Wing International Kobe Shin Nagata Ekimae, Nest Hotel Kumamoto, RevPAR Occupancy ADR and Valie Hotel Hiroshima) Tokai/ Chugoku/ Total Portfolio Hokkaido Tokyo Ch

  11. Slide 11: Actions to Grow Earnings

    Actions to Grow Earnings Following Actions Forecast to Increase NOI by JPY 23.8M p.a. (+1.9%*) – Value-Add Capex: NOI +JPY 11.3M p.a.  Nest Hotel Naha, Court Hotel Kurashiki (details on pp. 12-13) – Hotel Operator Contract Renewals: NOI +JPY 11.1M p.a.  Higher minimum rent guarantees at 4 hotels (

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

    Value-Add Capex: Nest Hotel Naha Increased guest capacity to capture leisure demand − Converted 2 low-use Japanese tatami mat rooms into 4 Western triple rooms Total Capex Earnings Increase ROI Forecast Economics JPY 22.0M +JPY 3.7M p.a. 16.9% Completed in July 2019 Before After  Converted into tri

  13. Slide 13: Value-Add Capex: Court Hotel Kurashiki

    Value-Add Capex: Court Hotel Kurashiki Increased guest capacity to capture leisure demand − Converted 3 suites into 6 double rooms Total Capex Earnings Increase ROI Forecast Economics JPY 39.0M +JPY 7.6M p.a. 19.5% Completed in July 2019 Before After  Converted into 6 double rooms to capture both b

  14. Slide 14: Acquisitions Increasing Geographic Diversification

    Acquisitions Increasing Geographic Diversification Nest Hotel Kumamoto Valie Hotel Hiroshima Hotel Acquisition Date April 25, 2019 July 19, 2019 Area Kumamoto City Hiroshima City Acquisition Price JPY 2.22B JPY 1.50B Appraisal Value JPY 2.44B JPY 1.73B NOI Yield1 6.8% 7.1% 15-min walk from Hiroshima

  15. Slide 15: Ongoing Earnings Growth

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

  16. Slide 16: Ongoing Actions to Drive Increased Shareholder Value

    Ongoing Actions to Drive Increased Shareholder Value Dividend Growth and Highly Secure Earnings Provide Strong Foundation for Further Growth in Shareholder Value Drive Further Dividend Growth Organic Growth Acquisition-Led Growth • Proactively execute value-add capex • Grow with sponsor support • Di

  17. Slide 17: Operator Changes to Generate Higher Earnings (1)

    Operator Changes to Generate Higher Earnings (1) Hotel Wing International Kobe Shin Nagata Ekimae − Completed full renovation and re-opened on June 1 under new Hotel Wing International brand − Brought in new operator with no contract downtime − New operator contract increases fixed rent and newly ad

  18. Slide 18: Operator Changes to Generate Higher Earnings (2)

    Operator Changes to Generate Higher Earnings (2) Valie Hotel Hiroshima − Started full-renovation upon acquisition in July 2019. Scheduled to re-open under new brand in September (de minimis downtime) − Variable-rent lease will allow Ichigo Hotel to benefit from earnings growth on increased inbound t

  19. Slide 19: Acquisitions and Sale Accretive to Shareholders

    Acquisitions and Sale Accretive to Shareholders Sold Hotel Vista Premio Kyoto (Announced on August 27, 2019） − Proceeds will be used to fund future asset acquisitions and value-add capex Acquisitions & Sale Portfolio Outcome Generated Gains on Sale Significantly Higher than Appraisal-Based Unrealize

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

    Portfolio Growth Opportunity via Ichigo Sponsor Support 18 Hotels (JPY 55B) in Ichigo Sponsor Pipeline as of July 31, 2019 − Stay-only hotels across Japan − Locations: Major cities such as Tokyo, Yokohama, Osaka, Kyoto and Fukuoka Yokohama Shinjuku Fukuoka Fukuoka Osaka © Ichigo Investment Advisors

  21. Slide 21: January 2020 and July 2020 Forecasts

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

  22. Slide 22: January 2020 Forecast

    January 2020 Forecast Dividend +49.3% vs. Previous Forecast (JPY million) Jan 2020 Jan 2020 Jan 2019 Previous Forecast Revised (B) - (A) Major Factors for Variation Actual (A) (Mar 2019) Forecast (B) Operating Revenue 2,439 1,773 2,383 -56 Variable Rent 701 713 665 -35 Expected RevPAR at Variable Re

  23. Slide 23: July 2020 Forecast

    July 2020 Forecast Dividend -4.9% YOY (JPY million) Jul 2019 Jul 2020 (B) - (A) Major Factors for Variation Actual (A) Forecast (B) Operating Revenue 1,789 1,789 – Expected RevPAR at Variable Rent Hotels: JPY 7,612 (-0.6% YOY) Variable Rent 735 809 +73 Increase due to acquisition: +72 Fixed Rent 984

  24. Slide 24: Ichigo's Commitment to ESG

    Ichigo’s Commitment to ESG © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 24

  25. Slide 25: Ichigo Sustainability Policy

    Ichigo Sustainability Policy Harmony with the Environment Ichigo actively monitors and minimizes the environmental impact of its business operations. Energy Conservation, CO2 Reduction, and Recycling Ichigo seeks to contribute to a low-carbon, low-waste society by reducing energy consumption, extend

  26. Slide 26: Ichigo ESG – Environmental

    Ichigo ESG – Environmental Sustainable Real Estate Solar and Wind Energy: Safe and Clean Preserve & Enhance Existing Buildings Annual Power Generation Annual CO2 Reduction to End Wasteful Demolish & Rebuild 141,699,548 kWh 93,521,697 kg ‒ Lengthen useful life of real estate ‒ Shrink footprint by red

  27. Slide 27: Ichigo ESG – Social

    Ichigo ESG – Social Sports & Arts Children’s Cancer Treatment Supporting Outstanding, Supporting University of Miyazaki World-Class Athletes Faculty of Medicine’s Program for ‒ Weightlifting Children with Cancer ‒ Riflery ‒ Issued CSR bond & donated a portion of ‒ Track & Field underwriter commissio

  28. Slide 28: Ichigo ESG – Governance

    Ichigo ESG – Governance First J-REIT No Fixed Fee, Performance Fee-Only Structure  Performance-linked fee structure to support shareholder value creation  Pro-active, dynamic management of Ichigo Hotel assets on behalf of shareholders Best Practice Governance REIT Asset Management Company (AMC) Mo

  29. Slide 29: Appendix: Hotel Market Environment

    Appendix: Hotel Market Environment © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 29

  30. Slide 30: 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 Tokyo Osaka Sapporo Nag

  31. Slide 31: 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

  32. Slide 32: New Hotel Room Supply in Japan

    New Hotel Room Supply in Japan No. of New Hotel Rooms (vs. March 31, 2018) New Supply Japanese Inns Hotels % Increase of New Supply 250,000 +28% 200,000 150,000 +40% 100,000 +33% +46% 50,000 +20% +32% +36% +14% +17% +25% +12% +5% +9% +10% +7% 0 Tokyo Osaka Sapporo Nagoya Yokohama Naha Kobe Hiroshima

  33. Slide 33: Appendix: Portfolio Details

    Appendix: Portfolio Details © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 33

  34. Slide 34: Hotel Map

    Hotel Map Tokyo Kanto Hokkaido Hokuriku/Tokai C-1 C-3 B-1 A-1 A-2 A-3 D-1 D-2 D-3 D-4 Variable Rent Fixed Rent Smile Hotel Hotel Livemax Grandpark-Inn Nest Hotel Nest Hotel Comfort Comfort Hotel Hotel Wing Comfort Hotel Comfort Hotel Tokyo Asagaya Nihombashi- Yokohama Sapporo Ekimae Sapporo Odori Ho

  35. Slide 35: Portfolio Growth

    Portfolio Growth IPO January 2017 July 2017 through January 2019 July 2019 (November 30, 2015) Fiscal Period Fiscal Period Fiscal Period IPO Acquisitions PO Acquisitions July 2017 January 2018 January 2019 Bank Loan Acquisition 9 hotels 10 hotels 1 hotel 1 hotel 1 hotel 2 hotels JPY 20.4B JPY 27.2B

  36. Slide 36: Individual Hotel Summary

    Individual Hotel Summary Jul 2019 Appraisal Leasable Acquisition Book Value 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 5,734.93 2,160 2,

  37. Slide 37: Individual Hotel Operating Results

    Individual Hotel Operating Results (year-on-year) No. of July 2019 (February 2019 - July 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 11,129 (+5.1%) 98.3 (+0.4%) 11

  38. Slide 38: Individual Hotel Financials

    Individual Hotel Financials (JPY thousand) A-1 A-2 A-3 C-1 D-1 D-3 D-4 E-1 E-2 E-3 E-5 F-1 F-2 F-4 F-5 G-1 G-2 G-3 Smile Comfort Smile Total Nest Hotel Nest Hotel Comfort Comfort Comfort Hotel Vista Chisun Inn Nest Hotel Comfort Court Valie Valie Hotel Hotel Central Hotel Nest Hotel Nest Hotel Nest

  39. Slide 39: Fixed/Variable Rent, RevPAR, ADR, & Occupancy Trends

    Fixed/Variable Rent, RevPAR, ADR, & Occupancy Trends Total Rent Fixed/Variable Rent (excludes Other Revenue) (JPY thousand) Jul 2018 Jan 2019 Jul 2019 Rent Ratio Rent Ratio Rent Ratio Fixed 988,147 54.5% 1,020,028 58.4% 1,029,238 57.5% Variable Fixed rent from Operators 952,653 52.5% 984,468 56.4% 9

  40. Slide 40: Variable Rent Hotel Details

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

  41. Slide 41: Variable Rent Hotel Details

    Variable Rent Hotel Details C-1 Smile Hotel Tokyo Asagaya Location Suginami-ku, Tokyo Operating Results (August 2019 – July 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 K.K. Hospitality 60% 7,500 Operato

  42. Slide 42: Variable Rent Hotel Details

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

  43. Slide 43: Variable Rent Hotel Details

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

  44. Slide 44: Variable Rent Hotel Details

    Variable Rent Hotel Details E-5 Nest Hotel Osaka Shinsaibashi Location Osaka Operating Results (August 2019 – July 2019) ADR RevPAR Occupancy (right) (right) (left) 1-minute walk from (JPY) 100% 12,500 Nagahoribashi Station Access on Osaka Municipal 80% 10,000 Subway Sakaisuji Line 60% 7,500 Nest Ho

  45. Slide 45: Variable Rent Hotel Details

    Variable Rent Hotel Details F-4 Court Hotel Kurashiki Location Kurashiki, Okayama Operating Results (August 2019 – July 2019) ADR RevPAR Occupancy (right) (right) (left) (JPY) 8-minute walk from 100% 12,500 Access Kurashiki Station on JR Sanyo Main Line 80% 10,000 60% 7,500 Operator The Court Co., L

  46. Slide 46: Variable Rent Hotel Details

    Variable Rent Hotel Details G-1 Valie Hotel Tenjin Location Fukuoka Operating Results (August 2019 – July 2019) ADR RevPAR Occupancy (right) (right) (left) (JPY) 6-minute walk from 100% 12,500 Tenjin Station on Access Fukuoka City Subway 80% 10,000 Kuko Line 60% 7,500 Operator The Court Co., Ltd. 40

  47. Slide 47: Variable Rent Hotel Details

    Variable Rent Hotel Details G-3 Nest Hotel Kumamoto Location Kumamoto Operating Results (August 2019 – July 2019) ADR RevPAR Occupancy (right) (right) (left) (JPY) 2-minute walk from 100% 12,500 Nishikarashimacho Access Station on Kumamoto 80% 10,000 City Tram Line 60% 7,500 Nest Hotel Japan Operato

  48. Slide 48: 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

  49. Slide 49: 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

  50. Slide 50: Appendix: Loan Details & Shareholder Composition

    Appendix: Loan Details & Shareholder Composition © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 50

  51. Slide 51: 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 Jul 31, 2017 Jan 31, 2018 Jul 31, 2018 Jan 31, 2019 July 31, 2019 Amount JPY 19.95B JPY 21.75B JPY

  52. Slide 52: 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 Floa

  53. Slide 53: Shareholder Composition

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

  54. Slide 54: Appendix: Growth Roadmap, Sponsor, Shareholder Alignment

    Appendix: Growth Roadmap, Sponsor, Shareholder Alignment © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 54

  55. Slide 55: Strong Growth Track Record

    Strong Growth Track Record Gains on Sale from Smile Hotel Asakusa Sale2 NAV per Share (JPY) 146,317 145,727 146,580 DPS (JPY) 143,040 137,197 139,940 3,096 113,393 107,462 5,457 102,472 3,302 3,352 3,137 3,101 3,154 2,825 1,3751 IPO January 2016 July 2016 January 2017 July 2017 January 2018 July 201

  56. Slide 56: 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

  57. Slide 57: Ichigo Hotel's Sponsor: Ichigo (2337)

    Ichigo Hotel’s Sponsor: Ichigo (2337) Core Businesses: Asset Management, Sustainable Real Estate, Clean Energy ‒ Also 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 zer

  58. Slide 58: 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

  59. Slide 59: 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% –

  60. Slide 60: 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

  61. Slide 61: MEMO

    MEMO © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 61

  62. Slide 62: MEMO

    MEMO © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 62

  63. Slide 63: 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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