Ichigo Hotel Reit Investment Corp. · TSE:3463

Ichigo Hotel Reit Investment — July 2018 Fiscal Period Earnings Presentation

55 slides from Ichigo Hotel Reit Investment's earnings presentation, Sep 13, 2018

  1. Slide 1: Ichigo Hotel July 2018 Fiscal Period Corporate Presentation

    Ichigo Hotel (3463) Ichigo Hotel July 2018 Fiscal Period Corporate Presentation September 13, 2018 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: Condolences for recent natural disasters

    We express our deepest condolences to all those affected by the recent heavy rainfall in western Japan, Typhoon Jebi, and the Hokkaido earthquake, and our wishes for the earliest possible recovery. © 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: Agenda

    July 2018 Results Ongoing Earnings Growth  July 2018 Highlights  Asset Sale & Acquisition to Maximize  July 2018 Earnings Breakdown Shareholder Value  Variable Rents Up on Strong Hotel  January 2019 Acquisition: Court Hotel Operating Results Kurashiki  Earnings Stability via Geographic  Portf

  5. Slide 5: July 2018 Results

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

  6. Slide 6: July 2018 Highlights

    July 2018 Highlights Achievements Drivers JPY 854M • Continued organic and accretive acquisition-driven Net Income +JPY 56M (+7.0%) YOY earnings growth JPY 8,537 (12 variable rent hotels) RevPAR +JPY 285 (+3.5%) YOY • ADR +3.9% YOY JPY 1.64B • Organic growth +JPY 58M (+3.9%) NOI +JPY 117M (+7.7%) YO

  7. Slide 7: July 2018 Earnings Breakdown

    July 2018 Earnings Breakdown (JPY million) July 2017 July 2018 Forecast (B) vs. Forecast Major Variation Factors (vs. Forecast) Actual Actual (A) (March 2018) (B) - (A) (M Operating Revenue 1,687 1,814 1,810 +3 Above forecast: 5 hotels; On forecast: 1 hotel; Variable Rent 757 803 799 +3 Below foreca

  8. Slide 8: Variable Rents Up on Strong Hotel Operating Results

    Variable Rents Up on Strong Hotel Operating Results Variable Rent Hotels (12 Hotels) Feb 1, 2017 - Feb 1, 2018 - Difference YOY Jul 31, 2017 Jul 31, 2018 Room Revenue (JPY M) 2,730 2,836 +105 +3.9% Revenue (JPY M) 3,134 3,261 +126 +4.0% RevPAR (JPY) 8,252 8,537 +285 +3.5% Occupancy 93.4% 92.9% -0.4%

  9. Slide 9: Earnings Stability via Geographic Diversification

    Earnings Stability via Geographic Diversification YOY by Region (Feb – Jul 2018) RevPAR Occupancy ADR 18 Hotels (excludes Grandpark-Inn Yokohama, Hotel Suave Kobe Asuta, and Hotel Livemax Nihombashi-Hakozaki) +16% +11% +3% +8% +17% +5% +5% +3% +3% +3% +8% +2% +4% +3% +3% +2% +0% +0% +7% -1% -1% -1%

  10. Slide 10: Across-the-Board Actions to Grow Earnings

    Organic Growth Across-the-Board Actions to Grow Earnings Grow Revenues − Value-Add Capex  Guest room and lobby renovations (Smile Hotel Tokyo Asagaya)  Entrance and lobby renovation (Valie Hotel Tenjin)  Renovation to add 4 new guest rooms (Smile Hotel Kyoto Shijo) Capex JPY 46.0M, Rent increase:

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

    Organic Growth Value-Add Capex – Smile Hotel Tokyo Asagaya Completed all phases of a full-renovation to respond to increasing leisure and inbound needs − Forecast rent increase JPY 39.6M p.a. (NOI +20% vs. pre-acquisition) − ROI 34.7%（Total renovation cost JPY 114M） © Ichigo Investment Advisors Co.,

  12. Slide 12: Value-Add Capex – Valie Hotel Tenjin

    Organic Growth Value-Add Capex – Valie Hotel Tenjin Completed entrance and entry lobby renovations to drive higher earnings − Guest room renovations in 2015 and the launch of a new restaurant and lounge in 2016 increased ADR +24% & NOI +70% vs. pre-acquisition − Improvements targeted at attracting m

  13. Slide 13: Ongoing Earnings Growth

    Ongoing Earnings Growth © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 13

  14. Slide 14: Asset Sale & Acquisition to Maximize Shareholder Value

    Accretive Acquisition-Driven Growth Asset Sale & Acquisition to Maximize Shareholder Value − Accelerate Organic Growth and Maximize Gains on Asset Sale in a Strong Seller’s Market − Fully Distribute Gains on Sale as a Dividend to Shareholders and Reinvest Principal Proceeds in Hotel with Strong Grow

  15. Slide 15: January 2019 Acquisition: Court Hotel Kurashiki

    Accretive Acquisition-Driven Growth January 2019 Acquisition: Court Hotel Kurashiki − Acquired from Ichigo (2337), Ichigo Hotel’s sponsor − 6.9% NOI Yield, +23% NOI vs. Smile Hotel Asakusa Sold in August − Further Earnings Growth Expected on Back of Growing Inbound and Business Demand Major Tourist

  16. Slide 16: Portfolio Growth

    Accretive Acquisition-Driven 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 h

  17. Slide 17: Value-Add Capex Driving Earnings (Capex Plan)

    Organic Growth Value-Add Capex Driving Earnings (Capex Plan) ‒ Renovating Low-Return Spaces to Add Six New Rooms ‒ Capturing Changes in Market Demand with High-Return Capex Hotel Wing Nest Hotel Naha Court Hotel Kurashiki International Nagoya Convert suite to 3 guest rooms, Capex Convert storage spa

  18. Slide 18: First J-REIT No Fixed Fee, Performance Fee-Only Structure (1)

    First J-REIT No Fixed Fee, Performance Fee-Only Structure (1) ‒ Proposing Amendments to Ichigo Hotel’s AM Fee Structure to Increase Shareholder Alignment 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% – Ass

  19. Slide 19: First J-REIT No Fixed Fee, Performance Fee-Only Structure (2)

    First J-REIT No Fixed Fee, Performance Fee-Only Structure (2) New Fee Structure 15% Lower on an Actual To-Date + Forecast Basis (Cumulative sum of actual AM fees since Ichigo Hotel’s listing (Jan 2016 – Jul 2018) plus forecast AM fees (Jan 2019 – Jul 2019)) Actual AM Fees (Jan 2016 – Jul 2018) + For

  20. Slide 20: January 2019 and July 2019 Forecasts

    January 2019 and July 2019 Forecasts © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 20

  21. Slide 21: January 2019 Forecast

    January 2019 Forecast Dividend JPY 5,429, +64.4% YOY Resulting from Full Distribution of Gains on Sale as Dividend to Shareholders (JPY million) Jan 2019 Jan 2019 Jan 2018 Previous Forecast Revised (B) - (A) Major Factors for Variation Actual (A) (April 2018) Forecast (B) Operating Revenue 1,782 2,4

  22. Slide 22: July 2019 Forecast

    July 2019 Forecast − Operating Revenue Increase via Acquisition and Sale − Gains on Sale Not Incorporated in Forecast (JPY million) July 2018 July 2019 (B) - (A) Major Factors for Variation Actual (A) Forecast (B) Operating Revenue 1,814 1,823 +9 Expected RevPAR at Variable Rent Hotels: JPY 8,572 Va

  23. Slide 23: Appendix: Portfolio Details

    Appendix: Portfolio Details © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 23

  24. Slide 24: 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-1 A-2 A-3 Smile Hotel Smile Hotel Hotel Livemax Grandpark-Inn Comfort Hotel Hotel Wing Comfort Hotel Comfort Hotel Nest Hotel Nest Hotel Comfort Tokyo Asagaya Asakusa1 Nihombashi- Yokohama Hamamatsu International Central

  25. Slide 25: Multi-Faceted Portfolio Diversification

    Multi-Faceted Portfolio Diversification Location Fixed vs. Variable Rent Hotel Operator (Acquisition-price basis) (Hotel-rent basis) (Hotel-rent basis) Kobe Fukuoka 2.9% 2.7% Yokohama 2.9% Nagoya Osaka 5.2% 18.1% Okinawa Other 7.4% 28.5% Nest Hotel As of Japan Variable Rent Jul 31, 2018 Hokkaido Kyo

  26. Slide 26: Individual Hotel Summary

    Individual Hotel Summary Jul 2018 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, Hokkaido 5,734.9

  27. Slide 27: Individual Hotel Operating Results

    Individual Hotel Operating Results (year-on-year) No. of July 2018 (January 2018 - July 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 10,591 (+15.8%) 98.0 (+0.

  28. Slide 28: 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 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 Hotel Hotel Nam

  29. Slide 29: Fixed/Variable Rent, RevPAR, ADR & Occupancy Trends

    Fixed/Variable Rent, RevPAR, ADR & Occupancy Trends Fixed/Variable Rent (JPY thousand) Jul 2016 Jan 2017 Jul 2017 Jan 2018 Jul 2018 Rent Ratio Rent Ratio Rent Ratio Rent Ratio Rent Ratio Fixed Rent 423,063 54.6% 878,775 56.3% 930,906 55.1% 1,034,015 58.0% 1,010,663 55.7% Fixed Rent from Operators 38

  30. Slide 30: Variable Rent Hotel Details

    Variable Rent Hotel Details A-1 Nest Hotel Sapporo Ekimae Location Sapporo, Hokkaido Operating Results (August 2017 – July 2018) ADR RevPAR Occupancy (right) (right) (left) (JPY) 5-minute walk from Sapporo Station on 100% 25,000 Access Sapporo City Metro Namboku Line 80% 20,000 Nest Hotel Japan 60%

  31. Slide 31: Variable Rent Hotel Details

    Variable Rent Hotel Details C-1 Smile Hotel Tokyo Asagaya Location Suginami-ku, Tokyo Operating Results (August 2017 – July 2018) ADR RevPAR Occupancy (right) (right) (left) (JPY) 1-minute walk from Asagaya Station on JR 100% 12,500 Access Chuo/Sobu Line 80% 10,000 60% 7,500 K.K. Hospitality Operato

  32. Slide 32: Variable Rent Hotel Details

    Variable Rent Hotel Details D-2 Hotel Wing International Nagoya Location Nagoya, Aichi Operating Results (August 2017 – July 2018) ADR RevPAR Occupancy (right) (right) (left) 2-minute walk from (JPY) Marunouchi Station on both Nagoya Subway 100% 12,500 Access Network Sakuradori 80% 10,000 Line and T

  33. Slide 33: Variable Rent Hotel Details

    Variable Rent Hotel Details E-2 Hotel Vista Premio Kyoto Location Kyoto Operating Results (August 2017 – July 2018) ADR RevPAR Occupancy (right) (right) (left) 5-minute walk from (JPY) Kyoto Shiyakushomae 100% 25,000 Access Station on Kyoto City Subway Tozai Line 80% 20,000 Vista Hotel 60% 15,000 Op

  34. Slide 34: Variable Rent Hotel Details

    Variable Rent Hotel Details E-5 Nest Hotel Osaka Shinsaibashi Location Osaka Operating Results (August 2017 – July 2018) ADR RevPAR Occupancy (right) (right) (left) 1-minute walk from (JPY) Nagahoribashi Station on Osaka Municipal 100% 12,500 Access Subway Sakaisuji Line 80% 10,000 and Nagahoritsuru

  35. Slide 35: Variable Rent Hotel Details

    Variable Rent Hotel Details G-1 Valie Hotel Tenjin Location Fukuoka Operating Results (August 2017 – July 2018) 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., Ltd. 40

  36. Slide 36: 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

  37. Slide 37: 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

  38. Slide 38: 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

  39. Slide 39: Appendix: Hotel Market Environment

    Appendix: Hotel Market Environment © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 39

  40. Slide 40: Hotel Market Environment (1)

    Hotel Market Environment (1) Business hotel demand remains robust and growing − Inbound business hotel guests: +420% (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 G

  41. Slide 41: Hotel Market Environment (2)

    Hotel Market Environment (2) Inbound Tourism Growth in Not Only Tokyo − Cumulative total number of inbound hotel guests up in all regions since 2011 − Hotel guests in regional areas account for 41% of total inbound hotel guests in 2017 Inbound Hotel Guests by Regional Area (2011 vs. 2017) (thousand)

  42. Slide 42: Hotel Market Environment (3)

    Hotel Market Environment (3) New Hotel Room Supply by Prefecture New Supply Japanese Inns Hotels 200,000 28% 150,000 11% 35% 100,000 6% 23% 2% 15% 15% 18% 28% 10% 33% 50,000 3% 5% 3% 5% 2% 9% 1% 5% 15% 2% 7% 5% 8% 1% 14% 3% 6% 6% 2% 2% 7% 1% 1% 3% 5% 7% 10% 10% 4% 16% 6% 4% 2% 4% 18% 0 Tokyo Hokkaid

  43. Slide 43: Appendix: Loan Details & Shareholder Composition

    Appendix: Loan Details & Shareholder Composition © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 43

  44. Slide 44: Stable Financial Base

    Stable Financial Base − Loans with shorter maturities are floating rate to take advantage of current low interest rates − 74% of loans are fixed to hedge against a rise in interest rates Outstanding Loan Balance Jul 31, 2016 Jan 31, 2017 Jul 31, 2017 Jan 31, 2018 Jul 31, 2018 Amount JPY 8.50B JPY 19

  45. Slide 45: Loan Details

    Loan Details Loan Balances Amount Floating/ Interest Rate Loan Lender Borrowing Date Maturity (JPY million) Fixed (%) Term Loan I SMBC, Mizuho, Shinsei, Resona 3,250 Floating 0.65364 November 30, 2015 November 30, 2018 Term Loan II SMBC, Mizuho, Shinsei, Resona 5,250 Fixed 1.08000 November 30, 2015

  46. Slide 46: Shareholder Composition

    Shareholder Composition Major Shareholders (as of July 31, 2018) Shareholdings by Shareholder Type Foreign Corporations & Individuals Domestic Financial Institutions No. of Name Share Non-Financial Domestic Corporations Domestic Individuals Shares (Shares) 100% 1 The Master Trust Bank of Japan, Trus

  47. Slide 47: Appendix: Other

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

  48. Slide 48: 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

  49. Slide 49: 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-carbon

  50. Slide 50: Ichigo Hotel (3463) and Ichigo Synergies

    Ichigo Hotel (3463) and Ichigo 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 Hotel Bu

  51. Slide 51: Portfolio Growth Potential via Ichigo Sponsor Support

    Portfolio Growth Potential via Ichigo Sponsor Support 20 Hotels (JPY 47.8B) in Sponsor Pipeline as of July 31, 2018 − Locations: Major cities such as Tokyo, Yokohama, Osaka, Fukuoka, Kumamoto, and Okinawa − New hotels also in-development Completed New Hotel Kanazawa Opened: Dec 2017 In-Development Y

  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 Office REIT. Ichigo has thus made sustainability a key priority, and

  53. Slide 53: Global Best-Practice Corporate Governance

    Global Best-Practice Corporate Governance Proactive in ESG investments and asset management to build an attractive long- term asset portfolio – All Ichigo Hotel Directors are independent, third party, non-Ichigo employees – External advisors participate in the asset management company’s decision-mak

  54. Slide 54: 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

  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

Ichigo Hotel REIT Investment — July 2018 Fiscal Period Earnings Presentation on 6ix