Ichigo Hotel Reit Investment Corp. · TSE:3463

Ichigo Hotel Reit Investment — July 2017 Fiscal Period Earnings Presentation

59 slides from Ichigo Hotel Reit Investment's earnings presentation, Sep 13, 2017

  1. Slide 1: Ichigo Hotel REIT July 2017 Fiscal Period Corporate Presentation

    Ichigo Hotel REIT (3463) Ichigo Hotel REIT July 2017 Fiscal Period Corporate Presentation September 13, 2017 Ichigo Hotel REIT Investment Corporation (3463) Ichigo Investment Advisors Co., Ltd. © 2017 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved.

  2. Slide 2: Ichigo Preserves and Improves Real Estate

    Ichigo Preserves and Improves Real Estate © 2017 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved.

  3. Slide 3: © 2017 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights

    © 2017 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved.

  4. Slide 4: July 2017 Results

    July 2017 Results  July 2017 Highlights  Increased Post-Acquisition NOI  July 2017 Earnings Breakdown  March 2017 Acquisition: Grandpark-Inn  Revenue +4.2% YOY at Variable Rent Yokohama Hotels  August 2017 Acquisition: Urbain Hiroshima  RevPAR +5.5% YOY at Variable Rent Executive Hotels  Geo

  5. Slide 5: July 2017 Results

    July 2017 Results © 2017 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 5

  6. Slide 6: July 2017 Highlights

    July 2017 Highlights Achievements Drivers • Increased occupancy and ADR by focusing on RevPAR JPY 8,237 (Variable Rent Hotels) hotels with upside in high-demand locations and Organic +JPY 433 (+5.5%) YOY price points Growth • Increased earnings stability via increased JPY 1.52B NOI +JPY 823M (+117.7

  7. Slide 7: July 2017 Earnings Breakdown

    July 2017 Earnings Breakdown (JPY million) vs. Initial July 2016 July 2017 Initial Forecast Major Variation Factors (vs. Forecast) Forecast Operating Revenue 774 1,687 1,692 -4 Variable Rent 351 757 760 -2 Increase: 7 Hotels; Decrease: 4 Hotels Fixed Rent 387 870 869 – Increase in renewal fee income

  8. Slide 8: Revenue +4.2% YOY at Variable Rent Hotels

    Revenue +4.2% YOY at Variable Rent Hotels ‒ Variable Rent Hotels = the Major Driver of Earnings ‒ Increased GOP by Matching Restaurant Service Hours to Guest Demand ‒ Higher Revenue in Sapporo, Tokyo, Nagoya, Osaka, and Matsuyama Driving Growth (+JPY 126M YOY) Total Revenue (Room + Retail) Room Reve

  9. Slide 9: RevPAR +5.5% YOY at Variable Rent Hotels

    RevPAR +5.5% YOY at Variable Rent Hotels ‒ Occupancy Increase (+4.9% YOY) Driving Higher RevPAR ‒ See continued ADR Growth Potential RevPAR ADR (JPY) / Occupancy (%) 93.4% 91.7% 91.3% +JPY 433 88.5% (+5.5%) +JPY 17 (+0.2%) JPY JPY JPY JPY 8,784 8,822 8,820 JPY 8,727 JPY JPY 8,237 JPY 8,003 8,020 7,8

  10. Slide 10: RevPAR +6% YOY – Growth in Every Region except Kyoto

    RevPAR +6% YOY – Growth in Every Region except Kyoto YOY by Region (6 Months) RevPAR 17 Hotels (excludes Hotel Livemax Nihombashi- Hakozaki, Hotel Suave Kobe Asuta, and Occupancy ADR Grandpark-Inn Yokohama) -9% +10% +18% +8% +8% +8% +7% +5% +4% +6% +10% +1% +6% -3% +8% +3% +5% +4% +2% -4% 0% -1% -4%

  11. Slide 11: Growth Strategy

    Growth Strategy © 2017 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 11

  12. Slide 12: Hotel Market Environment

    Hotel Market Environment No. of Guests by Hotel Type (Japanese Guests) No. of Guests by Hotel Type (Inbound Guests) (million persons) (million person) 200 30 25 150 20 100 15 10 50 5 0 0 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 Business Hotels Japanese Inns Resort Hotels Business

  13. Slide 13: Growth Strategy Action Plan

    Growth Strategy Action Plan ‒ Eliminated AUM Target – Full Focus on Shareholder Value Maximization ‒ Made Timeline Flexible to Respond to Market Environment Stage I Stage II Continuous Dividend Growth via External Growth, Organic Growth, and Strong Financial Base • Construct a diversified portfolio

  14. Slide 14: Ichigo Hotel REIT Growth (1)

    Ichigo Hotel REIT Growth (1) NOI: JPY 0.18B → JPY 1.52B (+746.1%) Dividend per Share: JPY 4,200 → JPY 6,411 (+52.6%) NOI Dividend per Share JPY 6,238 JPY 6,411 JPY 4,200 JPY 3,101 JPY 3,224 (July 2017) (July 2018) JPY 1,523M JPY 2,825 JPY 1,458M (20 hotels) (July 2016) (19 hotels) JPY 3,137 JPY 3,18

  15. Slide 15: Ichigo Hotel REIT Growth (2)

    Ichigo Hotel REIT Growth (2) NAV per Share: JPY 107,461 → JPY 139,940 (+30.2%) Portfolio NAV Unrealized gains JPY 137,197 JPY 139,940 JPY 13,363 JPY 16,106 JPY 113,393 JPY 107,461 JPY 49.1B JPY 11,256 JPY 47.6B (20 hotels) (19 hotels) JPY 5,325 JPY 20.4B JPY 20.4B (9 hotels) (9 hotels) January 2016

  16. Slide 16: Driving Earnings via Value-Add Capex

    Organic Growth Driving Earnings via Value-Add Capex Value-Add Capex Driving Earnings Growth  Return: +JPY 37.8M p.a., ROI 21.0% Expected Rental Completion Investment Income Increase Hotel Renovation Details Purpose ROI Date (JPY M) (JPY M per annum) Boost revenue by capturing higher tourist Apr 201

  17. Slide 17: Value-Add Capex – Nest Hotel Naha

    Organic Growth Value-Add Capex – Nest Hotel Naha Converted Banquet Space Into 5 Additional Guest Rooms (JPY 27.8M)  Added 2 double rooms and 3 triple rooms  Renovation period: May 2017 to June 2017  Forecast return: +JPY 4.8M p.a., ROI 17.3% Before After Converted into 2 double rooms and 3 triple

  18. Slide 18: Value-Add Capex – Smile Hotel Tokyo Asagaya

    Organic Growth Value-Add Capex – Smile Hotel Tokyo Asagaya Renovation of Hallway and 28 Rooms on the 5th Floor (JPY 28.9M)  Renovated 20 single rooms into double rooms to cater to 2 or more guests  Of these, 6 guest rooms are with flexible layout to accommodate 3 guests  Renovation period: June 2

  19. Slide 19: Additional Value-Add Capex – Smile Hotel Tokyo Asagaya

    Organic Growth Additional Value-Add Capex – Smile Hotel Tokyo Asagaya Renovate to increase guest comfort and thus leisure demand to drive higher earnings Smile Hotel Tokyo Asagaya Phase 1 (July 2017 Fiscal Period) 5F Renovate guest rooms (5F) Timing: July 2017 Capex: JPY 28.9M Forecast return: JPY 9

  20. Slide 20: Growing Earnings at Existing Hotels

    Organic Growth Growing Earnings at Existing Hotels Chisun Inn Osaka Hommachi – Operator rent increase  +JPY 13.3M p.a. (c. +13%) – 10% fixed rent increase plus variable rent rate increase Smile Hotel Tokyo Asagaya – Retail tenant rent increase  Replaced first floor retail tenant at contract termin

  21. Slide 21: Actions to Grow Earnings at Smile Hotel Kyoto Shijo

    Organic Growth Actions to Grow Earnings at Smile Hotel Kyoto Shijo Despite Current Revenue Downturn, NOI Above Level at Acquisition ‒ New hotel supply nearby ‒ ADR decrease on lower market ADR at Acquisition July 2016 (Actual) July 2017 (Actual) (Appraisal-Value Based) ＋ January 2017 (Actual) ＋ Janu

  22. Slide 22: Increased Post-Acquisition NOI

    Organic Growth Increased Post-Acquisition NOI Value-Add Capex Driving Post-Acquisition NOI Increases IPO Public Offering March 2017 August 2017 Total November 2015 August 2016 9 Hotels 10 Hotels 1 Hotel 1 Hotel Acquired Assets 21 Hotels Smile Hotel Kyoto Shijo, etc. Nest Hotel Osaka Shinsaibashi, et

  23. Slide 23: March 2017 Acquisition: Grandpark-Inn Yokohama

    External Growth March 2017 Acquisition: Grandpark-Inn Yokohama ‒ Located close to Yokohama Station, one of the busiest stations in the Tokyo Metro area ‒ Fixed rent contract to support earnings stability ‒ Added a female guest-only area with special amenities to broaden the range of guests beyond ca

  24. Slide 24: August 2017 Acquisition: Urbain Hiroshima Executive

    External Growth August 2017 Acquisition: Urbain Hiroshima Executive ‒ 171 guest room hotel located a 5-minute walk from JR Hiroshima Station ‒ Located in a globally recognized tourist destination with steady inbound tourism ‒ Fixed rent hotel increasing shareholder value via increased earnings and e

  25. Slide 25: Geographically Diversified Portfolio

    External Growth Geographically Diversified Portfolio 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 hotel

  26. Slide 26: Stable Financial Base (1)

    Financing Stable Financial Base (1) <40% LTV Provides Room for Additional Low-Cost Borrowing Outstanding Loan Balance Loan Amount and LTV n(JPY million)) 25,000 45.0% Aug 2017 Outstanding loans LTV 21,750 Jul 31, 2016 Jan 31, 2017 Jul 31, 2017 (after new loans) 19,500 19,950 20,000 Amount JPY 8.50B

  27. Slide 27: Stable Financial Base (2)

    Financing Stable Financial Base (2) ‒ Shorter-term loans are floating rate loans, taking advantage of current low interest rates ‒ 70% of loans are fixed to hedge against a rise in interest rates Fixed-to-Floating Ratio and Average Interest Rate Loan Maturity Distribution Fixed-Rate Loan Ratio Float

  28. Slide 28: January 2018 and July 2018 Forecasts

    January 2018 and July 2018 Forecasts © 2017 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 28

  29. Slide 29: January 2018 Forecast

    January 2018 Forecast Dividend Forecast: JPY 3,187 +JPY 50 (+1.6%) vs. January 2017 (JPY million) January 2018 January 2018 January 2017 Initial Forecast Revised (C) - (A) Major Factors for Variation Actual (A) (March 15, 2017) Forecast (C) (B) Operating Revenue 1,560 1,698 1,770 +209 Expected RevPA

  30. Slide 30: July 2018 Forecast

    July 2018 Forecast Dividend Forecast: JPY 3,224 +JPY 123 (+4.0%) vs. July 2017 (JPY million) July 2017 July 2018 (B) - (A) Major Factors for Variation Actual (A) Forecast (B) Operating Revenue 1,687 1,805 +117 Expected RevPAR at Variable Rent Hotels: JPY 8,448 (+2.6% vs. July 2017) Increase: 8 Hotel

  31. Slide 31: Appendix: Portfolio Details

    Appendix: Portfolio Details © 2017 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 31

  32. Slide 32: Hotel Map

    Hotel Map Tokyo Hokkaido Smile Hotel Smile Hotel Hotel Nest Hotel Sapporo Nest Hotel Comfort Hotel Tokyo Asagaya Asakusa Livemax Ekimae Sapporo Odori Kushiro Nihombashi- Hakozaki ▶ Sapporo ▶ Kushiro Acquired in Acquired in Kinki (Kyoto/Osaka) Chugoku/Shikoku March 2017 August 2017 Comfort Hotel Nest

  33. Slide 33: Cash Flow Stability via Multi-Faceted Portfolio Diversification

    Cash Flow Stability via Multi-Faceted Portfolio Diversification Portfolio Characteristics Location Kobe Hotel Operator Kanto 3.0% 3.0% Chugoku/ Shikoku 5.7% Hokuriku/Tokai Other Hokkaido 20.0% 24.7% 8.0% Nest Hotel Japan 38.8% Kyushu/Okinawa 10.4% Osaka 18.8% Greens Tokyo 17.6% 14.6% Kyoto Hospitali

  34. Slide 34: Individual Hotel Summary

    Individual Hotel Summary July 2017 Appraisal Acquisition Book Value Unrealized Leasable Area Hotel No. Hotel Name Lease Terms Location Price (JPY M) Value Cap rate Gains (JPY M) (m 2) (JPY M) (A) (JPY M) (B) (%) (B) - (A) Variable + A-1 004 Nest Hotel Sapporo Ekimae Sapporo, Hokkaido 5,734.93 2,160

  35. Slide 35: Individual Hotel Operating Results

    Individual Hotel Operating Results (year-on-year) July 2017 (February 2017 - July 2017) No. of Guest Hotel No. Hotel Name Lease Terms Location Rooms RevPAR (JPY) Occupancy (% ) ADR (JPY) Revenue (JPY M) Variable + A-1 004 Nest Hotel Sapporo Ekimae Sapporo, Hokkaido 162 9,145 (+8.5%) 97.7 (-0.6%) 9,3

  36. Slide 36: 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 Comfort Hotel Total Nest Hotel Nest Hotel Comfort Smile Hotel Comfort Comfort Smile Hotel Hotel Vista Chisun Inn Nest Hotel Comfort Other Smile Hotel Central Nest Hotel Valie H

  37. Slide 37: Revenue, RevPAR, Occupancy & ADR (YOY)

    Revenue, RevPAR, Occupancy & ADR (YOY) YOY Growth Excluding Impact of 2016 Leap Year: Total Revenue +4.5%, Room Revenue +5.7% Variable Rent Hotels (12 Hotels) Variable Rent Hotels (12 Hotels) vs. Jul 2016 Jul 2017 Jul 2016 Revenue (JPY M) 3,003 3,129 +4.2% RevPAR (JPY) 7,804 8,237 +5.5% Occupancy 88

  38. Slide 38: 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 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% Fixed Rent from Each Operator 119,616 60.4% 387,253 50.0% 823,979

  39. Slide 39: Variable Rent Hotel Details

    Variable Rent Hotel Details A-1 Nest Hotel Sapporo Ekimae Operating Results (Aug 2016 – Jul 2017) ADR RevPAR Occupancy Location Sapporo, Hokkaido (right) (right) (left) (JPY) 100% 12,500 5-minute walk from Sapporo Station on Access 80% 10,000 Sapporo City Metro Namboku Line 60% 7,500 Nest Hotel Japa

  40. Slide 40: Variable Rent Hotel Details

    Variable Rent Hotel Details C-1 Smile Hotel Tokyo Asagaya Location Suginami-ku, Tokyo Operating Results (Aug 2016 – Jul 2017) ADR RevPAR Occupancy (right) (right) (left) (JPY) 100% 12,500 1-minute walk from Access Asagaya Station on JR 80% 10,000 Chuo/Sobu Line 60% 7,500 K.K. Hospitality 40% 5,000 O

  41. Slide 41: Variable Rent Hotel Details

    Variable Rent Hotel Details D-2 Hotel Wing International Nagoya Operating Results (Aug 2016 – Jul 2017) ADR RevPAR Occupancy Location Nagoya, Aichi (right) (right) (left) (JPY) 2-minute walk from 100% 12,500 Marunouchi Station on both Nagoya Subway Access 80% 10,000 Network Sakuradori Line and Tsuru

  42. Slide 42: Variable Rent Hotel Details

    Variable Rent Hotel Details E-2 Hotel Vista Premio Kyoto Operating Results (Aug 2016 – Jul 2017) ADR RevPAR Occupancy Location Kyoto (right) (right) (left) (JPY) 5-minute walk from 100% 25,000 Kyoto Shiyakusho- Access mae Station on Kyoto 80% 20,000 City Subway Tozai Line 60% 15,000 Vista Hotel 40%

  43. Slide 43: Variable Rent Hotel Details

    Variable Rent Hotel Details E-5 Nest Hotel Osaka Shinsaibashi Operating Results (Aug 2016 – Jul 2017) ADR RevPAR Occupancy Location Osaka (right) (right) (left) (JPY) 1-minute walk from 100% 12,500 Nagahoribashi Station on Osaka Municipal Access 80% 10,000 Subway Sakaisuji Line and Nagahoritsurumi-

  44. Slide 44: Variable Rent Hotel Details

    Variable Rent Hotel Details G-1 Valie Hotel Tenjin Location Fukuoka Operating Results (Aug 2016 – Jul 2017) ADR RevPAR Occupancy (right) (right) (left) (JPY) 100% 12,500 6-minute walk from Tenjin Station on Access 80% 10,000 Fukuoka City Subway Kuko Line 60% 7,500 40% 5,000 Operator The Court Co., L

  45. Slide 45: Fixed Rent Hotel Details

    Fixed Rent Hotel Details A-3 Comfort Hotel Kushiro B-1 Grandpark-Inn Yokohama Kushiro, Yokohama, Location Location Hokkaido 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

  46. Slide 46: Fixed Rent Hotel Details

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

  47. Slide 47: Appendix: Hotel Market Environment

    Appendix: Hotel Market Environment © 2017 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 47

  48. Slide 48: Hotel Market Environment (1)

    Hotel Market Environment (1) Trend in Number of Inbound Guests per Prefecture (1,000 persons) Tokyo (1,000 persons) Osaka (1,000 persons) (1,000 persons) Kyoto Hokkaido 10,000 10,000 10,000 10,000 8,013 8,035 8,000 8,000 8,000 8,000 6,221 5,755 6,000 6,000 5,173 6,000 6,000 4,399 3,784 3,976 4,000 4

  49. Slide 49: Hotel Market Environment (2)

    Hotel Market Environment (2) Existing and New Hotel Room Supply by Region (Guest Rooms) 400,000 Existing Supply +5.3% New Supply 18,374 350,000 300,000 +4.7% 12,157 +7.3% +9.6% 250,000 17,668 20,885 200,000 +20.5% 346,689 30,581 +5.1% 150,000 6,953 259,593 240,837 +23.2% +7.0% 218,448 100,000 18,073

  50. Slide 50: Hotel Market Environment (3)

    Hotel Market Environment (3) Record 24M Inbound Tourists Visited Japan in 2016, +21.8% vs. 2015 2017 is Trending at the Highest Pace Ever, +17.3% vs. 2016 (16.4M Visitors Recorded in January to July) No. of Inbound Tourists No. of Guests Staying at Japanese Hotels (million) (million) 500 60 60 ■ Gov

  51. Slide 51: Appendix: Loan Details/Shareholder Composition/Sponsor

    Appendix: Loan Details/Shareholder Composition/Sponsor © 2017 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 51

  52. Slide 52: Loan Details

    Loan Details Loan Balances Amount Loan Lender Interest Rate Borrowing Date Maturity (JPY B) Term Loan I SMBC, Mizuho, Shinsei, Resona 3.25 0.63% November 30, 2015 November 30, 2018 Term Loan II SMBC, Mizuho, Shinsei, Resona 5.25 1.08% November 30, 2015 November 30, 2020 SMBC, Mizuho, Shinsei, Resona

  53. Slide 53: Shareholder Composition

    Shareholder Composition Major Shareholders (as of July 31, 2017) Shareholdings by Shareholder Type Domestic Individuals Financial Institutions Name Shares % (including securities companies) Other Domestic Corporations Foreign Corporations & Individuals 100% 1 Japan Trustee Services Bank, Ltd., Trust

  54. Slide 54: 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 REIT (3463), Ichigo Office REIT (8975), and Ichigo Green (9282) ‒ TSE First Section, JPX-Nikkei 400 Member ‒ Deeply committed to CSR and Sustainability – Japan’s first

  55. Slide 55: Ichigo Hotel REIT and Ichigo Sponsor Synergies

    Ichigo Hotel REIT and Ichigo Sponsor 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 REIT shareholders Buy Ichigo Hotel REIT (3463) Ichigo (Sponsor) Buy

  56. Slide 56: Portfolio Growth Potential via Ichigo Sponsor Support

    Portfolio Growth Potential via Ichigo Sponsor Support 24 Assets (JPY 52.5B) in Sponsor Pipeline as of July 2017  Locations: Major cities such as Tokyo, Yokohama, Osaka, Nagoya, Fukuoka, Kumamoto, and Naha  Includes new hotel developments Completed Development Project 1 Development Project 2 Tokyo

  57. Slide 57: Ichigo Hotel REIT Overview

    Ichigo Hotel REIT Overview Ichigo Hotel REIT 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 Na

  58. Slide 58: MEMO

    MEMO © 2017 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 REIT). These materials may contain forward-looking statements regardin

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