Slide 1: FY17/2 Q1 Corporate Presentation
FY17/2 Q1 Corporate Presentation April 23, 2016 July 14, 2015 Ichigo (2337) © 2016 Ichigo Inc. All rights reserved. www.ichigo.gr.jp/english
Slide 2: © 2016 Ichigo Inc. All rights reserved.
© 2016 Ichigo Inc. All rights reserved.
Slide 3: © 2016 Ichigo Inc. All rights reserved.
© 2016 Ichigo Inc. All rights reserved.
Slide 4: Ichigo Preserves and Improves Real Estate
Ichigo Preserves and Improves Real Estate © 2016 Ichigo Inc. All rights reserved.
Slide 5: Agenda: FY17/2 Q1 Earnings and Value-Add Business Model
FY17/2 Q1 Earnings ‒ OP 2.1X, EPS 2.3X YOY ‒ Earnings Growing Across All Segments ‒ Robust Cash Flow and Cash-On-Hand ‒ Strong Financial Position Powerful Value-Add Business Model Underpins Growth ‒ On-Going Ichigo Office REIT (8975) Growth ‒ Ichigo Office REIT: 12 Consecutive Periods of Dividend Gr
Slide 6: FY17/2 Q1 Earnings
FY17/2 Q1 Earnings © 2016 Ichigo Inc. All rights reserved. 6
Slide 7: OP 2.1X, EPS 2.3X YOY
OP 2.1X, EPS 2.3X YOY ‒ Revenue Growth 5.2X YOY on Asset Sales to Ichigo Office REIT ‒ Value-Add Segment Driving Earnings Growth (Million Yen) FY16/2 FY17/2 Full Year vs Full-Year YOY Q1 Q1 Forecast Forecast Revenues 8,903 46,415 +421.3% 125,600 37.0% Gross Profit 3,627 6,612 +82.3% 23,867 27.7% Ope
Slide 8: Earnings Growing Across All Segments
Earnings Growing Across All Segments ‒ Value-Add OP 2.8X YOY ‒ Value-Add Rental Income/Gain on Sale Split: 48%:52% (Million Yen) Revenues Operating Profit Earnings Drivers Segment Full-Year Full-Year (Gross Profit Basis, YOY FY16/2 Q1 FY17/2 Q1 YOY vs Forecast FY16/2 Q1 FY17/2 Q1 YOY vs Forecast For
Slide 9: Robust Cash Flow and Cash-On-Hand
Robust Cash Flow and Cash-On-Hand FY17/2 Q1 +JPY 14.9B Buy Sale of Value-Add Assets − Use cash (Real Estate for Sale) − Increase borrowings Cash Flow from Operating Activities +JPY 37.6B Acquisition of Value-Add Assets (Real Estate for Sale) -JPY 23.9B +JPY 4.8B Sale of CIAM Shares Value- (Investmen
Slide 10: Strong Financial Position
Strong Financial Position Weighted Average Interest Rate and Average Loan Period Weighted Average Interest Rate (Interest Rate) (Loan Period, Year) Average Loan Period (Interest Rate) 3.0% 11 Year) (Loan Period, 2.5% 10.0 years 9.6 years 2.22% 2.56% 9.0 years 9.0 years 2.5% 9.0 years 9 8.7 years 1.9
Slide 11: Powerful Value-Add Business Model Underpins Growth
Powerful Value-Add Business Model Underpins Growth © 2016 Ichigo Inc. All rights reserved. 11
Slide 12: On-Going Ichigo Office REIT (8975) Growth
On-Going Ichigo Office REIT (8975) Growth Completed Sale of 13 Mid-Size Office Assets (JPY 29.2B) to Ichigo Office REIT, Driving Portfolio and Dividend Growth Ichigo Office REIT Portfolio Growth May 24, 2016 April 2016 Period Asset Acquisitions Change (After Asset Sales) No. of Assets 73 13 86 +17.8
Slide 13: 12 Consecutive Periods of Dividend Growth – No. 1 vs. All J-REITs
Ichigo Office REIT 12 Consecutive Periods of Dividend Growth – No. 1 vs. All J-REITs Currently Forecasting 14 Consecutive Periods of Dividend Growth 1,890 1,900 yen yen (Forecast) (Forecast) 1,706 1,740 yen yen 1,603 (Actual) 1,537 1,541 1,547 yen 1,494 yen yen yen yen 1,387 1,219 yen yen 1,031 979
Slide 14: Value-Add Driving Earnings
Value-Add Driving Earnings In Addition to Rental Income from Value-Add Assets of JPY 2.7B, Value-Add Asset Sales Generated Earnings of JPY 2.9B, of Which Third-Party Sales Generated JPY 2.3B. FY17/2 Q1 Value-Add Sales Breakdown JPY 40.6B (18 Assets) JPY 2.9B (18 Assets) Third-Party JPY 11.2B (5 Asse
Slide 15: Hotel Capex to Increase ADRs
Value-Add Hotel Capex to Increase ADRs Tokyo Hotel (Capex JPY 10M) − Centrally located hotel close to tourist attractions, generating significant demand from both business travelers and tourists − Converted 6 twin-bed rooms to triple-bed rooms (ADR +JPY 3.8M p.a.) − Renovated entrance floor and fron
Slide 16: Hotel LED Lighting
Value-Add Hotel LED Lighting Annual JPY 5.6M Savings on JPY 29.5M Capex (ROI 19%) via Lower Energy Costs & Lighting Replacement Costs Minimized Energy Consumption (KWh/year) Energy Costs (thousand yen/year) Replacement Cost Cost Facility Location (thousand Reduction Before LED After LED Difference B
Slide 17: Kumamoto Earthquake Damage Recovery
Value-Add Kumamoto Earthquake Damage Recovery On-The-Ground Ichigo Relief and Recovery Ichigo Assets in Kumamoto: 1 Hotel and 1 Residence (Ichigo), 1 Office (Ichigo Office REIT) Ichigo management and technical support team on the ground in Kumamoto on the first day after the initial April 14 qua
Slide 18: Infrastructure Fund Listing Progress
Infrastructure Fund Listing Progress Establishment of Ichigo Green Infrastructure Investment Corporation (June 2016) Tax-advantaged solar ETF that will offer shareholders an opportunity to invest in the rapidly expanding green infrastructure asset class Green, safe, and contributory to Japan’s e
Slide 19: National Solar Power Plant Portfolio (1)
National Solar Power Plant Portfolio (1) Serving Local Communities and the Environment Ichigo Engaru Higashimachi (1.24MW) Total Operating and In-Development Ichigo Motomombetsu (1.40MW) Ichigo Engaru Kiyokawa Ichigo Solar Power Plants: (1.12MW) 36 Plants (113MW) Ichigo Abira Toasa (1.17MW) Ichigo Y
Slide 20: National Solar Power Plant Portfolio (2)
National Solar Power Plant Portfolio (2) By Customer By Feed-in-Tariff By Operating Timeline Chubu Kyushu 2% Tohoku 3% 4% 32 yen 9% Shikoku 5% >1 year in 40 yen Okinawa To start operation 31% 8% operation 31% TEPCO within 1 - 2 years Hokkaido 50% 49% 11% 36 yen 0.5 - 1 year in 60% operation Chugoku
Slide 21: CIAM Share Sale
CIAM Share Sale Sold All CITIC International Assets Management (CIAM ) Shares in Q1 Proceeds of JPY 6.0B to be redeployed to fund further growth; Also recorded extraordinary gain on sale of JPY 2.4B Divestment consistent with Ichigo’s strategy to focus on its core Japan home market With this s
Slide 22: Appendix: Financial & Real Estate Data
Appendix: Financial & Real Estate Data © 2016 Ichigo Inc. All rights reserved. 22
Slide 23: Powerful Value-Add Business Model
Powerful Value-Add Business Model Significant Value-Add and Asset Management Business Synergies Value-Add Business Model Renewable Energy Solar Plants Buy Ichigo Green Infrastructure Fund Sell Office Real Third- Estate Party Ichigo Office REIT (8975) Value-Add Investors Real 不動産 Hotel Estate Preserv
Slide 24: Value-Add Social Significance
Value-Add Social Significance Sustainable Real Estate Serving a Sustainable Society End Demolish and Rebuild and Embrace Value-Add ‒ Preserve and enhance high-function real estate ‒ Lengthen useful life and improve quality of existing assets via Value-Add ・Preserve & Improve Value-Add ・Higher-Qualit
Slide 25: Value-Add Sample Earnings Model
Value-Add Sample Earnings Model 5.5% NOI, JPY 2B purchase, LTV 75%, 1.5% interest rate, JPY 50M capex, 15% increase in NOI, 3-year value-add period At Acquisition NOI (JPY 110M NOI/year) － (JPY 22.5M interest/year) ＝ JPY 87.5M NOI/year NOI÷ Initial Investment ＝17.5% NOI return during investment peri
Slide 26: Consolidated Risk-Based Balance Sheet
Consolidated Risk-Based Balance Sheet Consolidated Current Value Balance Sheet As of May 31, 2016 Total: JPY 272.6B Assets JPY 244.0B + Unrealized Gains JPY 28.5B Non-Recourse Loans & Non-Recourse Loan- Related Liabilities Related Assets JPY 60.4B Consolidated Risk-Based Balance Sheet JPY 79.5B Asse
Slide 27: Significant Unrealized Gains on Balance Sheet
Significant Unrealized Gains on Balance Sheet Total Unrealized Gains: JPY 28.5B (Appraisal Value Basis) Real estate directly held by Ichigo (Million Yen) Book Value as of Cap Rate Appraisal Value Location NOI Unrealized Gain May 31, 2016 NOI/Book Value after write-down as of May 2016 Tokyo 70,365 4,
Slide 28: Business Segments
Business Segments Asset Management generates fee income via management of Ichigo Office REIT (8975) and Ichigo Hotel REIT (3463) and private funds Asset Management and providing real estate services related to real estate acquisition, operation (PM/BM), and disposition. Value-Add preserves and impro
Slide 29: Consolidated Balance Sheet
Consolidated Balance Sheet (Million Yen) FY 17/2 Q1 Unrealized Gain Outside Unrealized FY16/2 YOY Market Value on Listed B/S Investors' Gain Securities 2 Interest Cash and Cash Equivalents 28,779 35,183 1,037 +6,404 35,183 ― ― Operating Loans Receivable (Value-Add) 1,324 1,324 ― ― 1,324 ― ― Operatio
Slide 30: Consolidated Balance Sheet: Segment Breakdown
Consolidated Balance Sheet: Segment Breakdown (Million Yen) Cash and Operating Operational Real Estate Intangible Investments Segment Cash Loans Investments Fixed Assets Other Assets Total Assets for Sale Assets in Securities Equivalents Receivable in Securities Asset Management 393 ― ― ― 37 1,606 ―
Slide 31: Consolidated P&L: Gross Profit Segment Breakdown
Consolidated P&L: Gross Profit Segment Breakdown (Million Yen) Revenues Gross Profit YOY Segment (Gross Profit) FY16/2 Q1 FY17/2 Q1 Change FY16/2 Q1 FY17/2 Q1 Change Asset Management 1,529 1,185 -343 1,103 734 -368 - 33.4% Asset Management Fees 509 438 -71 505 435 -70 - 13.8% PM/BM Fees 530 567 +37
Slide 32: Consolidated P&L: Results vs. Forecast
Consolidated P&L: Results vs. Forecast (Million Yen) セグメ ント内訳 FY17/2 Q1 (3M) FY17/2 Full-Year Forecast (12M) Segment vs Full-Year Gross vs Full-Year Operating vs Full-Year Gross Operating Revenues Revenues Forecast Profit Forecast Profit Forecast Profit Profit Asset Management 1,185 23.3% 734 24.5%
Slide 33: Asset Management AUM Detail
Asset Management AUM Detail FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 FY17/2 Q1 (12M) (12M) (12M) (12M) (12M) (3M) Ichigo Office REIT AUM (Fiscal Year End) JPY 106.1B JPY 104.3B JPY 120.5B JPY 123.8B JPY 165.1B JPY 191.9B (8975) AM Fee % (Average) 0.61% 0.63% 0.65% 0.65% 0.64% 0.68%* AM Fee Gross Profit (A
Slide 34: Ichigo-Owned Real Estate Portfolio
Ichigo-Owned Real Estate Portfolio As of May 31, 2016 Assets by Type Assets by Location Ground Other Lease 1% 3% Nagoya 2% (Billion Yen) Mixed Sendai Other 6% 4% 12% Hotel Residence 30% 14% Osaka Tokyo 10% 43% Retail Fukuoka 21% Office 25% 14% Kanto 15% Sendai 6.4 Tokyo 72.8 Kanto Assets by Size 26.
Slide 35: Value-Add Full Asset Breakdown (1)
Value-Add Full Asset Breakdown (1) 100 Assets, Book Value JPY 171.0B, Forecast NOI JPY 10.6B (6.2%) Acquired Expected Forecast Equity Forecast No. Asset Class Asset Type Location Building Age Acquisition Price Ichigo Investment Date NOI/Year Multiple1 IRR2 1 Other Fixed Asset Matsudo City, Chiba 44
Slide 36: Value-Add Full Asset Breakdown (2)
Value-Add Full Asset Breakdown (2) * Acquired Expected Forecast Equity Forecast No. Asset Class Asset Type Location Building Age Acquisition Price Ichigo Investment Date NOI/Year Multiple1 IRR2 17 Retail Fixed Asset Toshima-ku, Tokyo 5 years ≧JPY 3B 2013/03 JPY 228M JPY 340M ― ― 18 Retail Real Estat
Slide 37: Value-Add Full Asset Breakdown (3)
Value-Add Full Asset Breakdown (3) Acquired Expected Forecast Equity Forecast No. Asset Class Asset Type Location Building Age Acquisition Price Ichigo Investment Date NOI/Year Multiple1 IRR2 32 Retail Fixed Asset Fukuoka City, Fukuoka 10 years JPY 1B-2B 2014/04 JPY 59M JPY 279M ― ― 33 Office Real E
Slide 38: Value-Add Full Asset Breakdown (4)
Value-Add Full Asset Breakdown (4) Acquired Expected Forecast Equity Forecast No. Asset Class Asset Type Location Building Age Acquisition Price Ichigo Investment Date NOI/Year Multiple1 IRR2 47 Residence Real Estate for Sale Koto-ku, Tokyo 9 years JPY 1B-2B 2014/12 JPY 96M JPY 270M 1.56 x 14.6% 48
Slide 39: Value-Add Full Asset Breakdown (5)
Value-Add Full Asset Breakdown (5) Acquired Expected Forecast Equity Forecast No. Asset Class Asset Type Location Building Age Acquisition Price Ichigo Investment Date NOI/Year Multiple1 IRR2 62 Retail Fixed Asset Fukuoka City, Fukuoka 12 years <JPY 1B 2014/12 JPY 42M JPY 212M ― ― 63 Retail Real Est
Slide 40: Value-Add Full Asset Breakdown (6)
Value-Add Full Asset Breakdown (6) Acquired Expected Forecast Equity Forecast No. Asset Class Asset Type Location Building Age Acquisition Price Ichigo Investment Date NOI/Year Multiple1 IRR2 92 Office Real Estate for Sale Fukuoka City, Fukuoka 8 years JPY 1B-2B 2015/07 JPY 87M JPY 353M 1.82 x 17.7%
Slide 41: Value-Add Full Asset Breakdown (7)
Value-Add Full Asset Breakdown (7) Acquired Expected Forecast Equity Forecast No. Asset Class Asset Type Location Building Age Acquisition Price Ichigo Investment Date NOI/Year Multiple1 IRR2 108 Hotel Real Estate for Sale Suzuka City, Mie 8 years <JPY 1B 2016/02 JPY 25M JPY 95M 1.60 x 59.7% 109 Hot
Slide 42: Reference: Japanese Feed-in-Tariff (FIT)
Reference: Japanese Feed-in-Tariff (FIT) What is a FIT? ‒ A policy mechanism designed to accelerate the deployment of renewable energy such as solar and wind, guaranteeing a long-term sale price for electricity (in Japan, 20 years) at a fixed price. ‒ Japan’s FIT is updated every year. Tariff per Gu
Slide 43: Clean Energy Earnings
Clean Energy Earnings Revenue Growth Via New Plants Coming Online OP +49.3% YOY (FY16/2 Q1 OP = JPY 143M vs. FY15/2 Q1 JPY 96M) (Million Yen) FY16/2 FY17/2 Q1 FY17/2 Full-Year vs Full-Year (12M) (3M) Forecast (12M) Forecast Revenues 1,628 556 11,152 5.0% Cost of Goods Sold 945 302 8,087 3.7% Gross P
Slide 44: Individual Solar Power Plant P&L Breakdown (1)
Individual Solar Power Plant P&L Breakdown (1) Total 20-Year Forecast IRR for All Plants: 38.5% p.a. Fixed Panel Forecast Equity Tariff Operation Expected Ichigo Forecast No. Solar Power Plant Area Output Depreciation Multiple (If held (Pre-tax, Start Date NOI/Year Investment IRR2 (MW) for 20 years)
Slide 45: Individual Solar Power Plant P&L Breakdown (2)
Individual Solar Power Plant P&L Breakdown (2) Fixed Panel Forecast Equity Tariff Operation Expected Ichigo Forecast No. Solar Power Plant Area Output Depreciation Multiple (If held (Pre-tax, Start Date NOI/Year Investment IRR2 (MW) for 20 years) 1 yen) 21 Ichigo Toyokawa Mitocho Sawakihama ECO Powe
Slide 46: Consolidated Balance Sheet: Assets
Consolidated Balance Sheet: Assets (Million Yen) FY17/2 Q1 vs FY16/2 FY13/2 FY14/2 FY15/2 FY16/2 (This quarter) (Increase/Decrease) Assets Current Assets Cash and cash equivalents 9,713 24,991 19,383 28,779 35,183 +6,404 Trade notes and accounts receivable 548 451 519 691 1,494 +803 Operational inve
Slide 47: Consolidated Balance Sheet: Liabilities & Net Assets
Consolidated Balance Sheet: Liabilities & Net Assets (Million Yen) FY17/2 Q1 vs FY16/2 FY13/2 FY14/2 FY15/2 FY16/2 (This quarter) (Increase/Decrease) Liabilities Current Liabilities Trade notes and accounts payable 64 132 124 80 81 +1 Short-term borrowings 484 950 1,416 2,188 1,425 -763 Short-term n
Slide 48: Consolidated P&L
Consolidated P&L (Million Yen) FY17/2 FY13/2 FY14/2 FY15/2 FY16/2 FY17/2 Q1 FY16/2 Q1 Change vs Full-Year (12M) (12M) (12M) (12M) (3M) (3M) (YoY) Forecast Forecast Revenues 16,397 35,101 42,705 49,699 46,415 8,903 +37,512 125,600 37.0% Cost of Goods Sold 11,422 27,666 30,539 29,835 39,803 5,276 +34,
Slide 49: Consolidated Cash Flows from Operating Activities
Consolidated Cash Flows from Operating Activities (Million Yen) FY13/2 FY14/2 FY15/2 FY16/2 FY17/2 Q1 (12M) (12M) (12M) (12M) (3M) Cash Flows From Operating Activities Pre-tax net income 1,693 3,933 7,220 14,022 6,990 Depreciation 230 304 565 792 224 Share-based compensation expenses 49 69 112 174 5
Slide 50: Consolidated Cash Flows from Investing & Financing Activities
Consolidated Cash Flows from Investing & Financing Activities (Million Yen) FY13/2 FY14/2 FY15/2 FY16/2 FY17/2 Q1 (12M) (12M) (12M) (12M) (3M) Cash Flows from Investing Activities: Payments into time deposits -0 -0 -325 -0 -0 Proceeds from withdrawal of time deposits 151 — 325 — — Acquisition of inv
Slide 51: Appendix: Power Up 2019 Mid-Term Business Plan
Appendix: Power Up 2019 Mid-Term Business Plan © 2016 Ichigo Inc. All rights reserved. 51
Slide 52: Power Up 2019 Key Goals & KPIs
Power Up 2019 Key Goals & KPIs Key Goals 1. Drive Further Sustainable Growth in Ichigo’s Core Businesses 2. Develop New Ichigo Businesses 3. Deepen Ichigo’s Core Capabilities and Corporate Strength Power Up 2019 KPIs (Key Performance Indicators) (Million Yen) FY16/2 (Actual) FY17/2 (Forecast) FY19/2
Slide 53: Power Up 2019 JPX-Nikkei Top Ranking
Power Up 2019 JPX-Nikkei 400 Top 200 Ranking Additional Target: JPX-Nikkei 400 Top 200 Ranking by August 2019 Anticipate entering JPX-Nikkei 400 this August By August 2019, the final year of Power Up 2019, Ichigo will seek to rank within the JPX-Nikkei 400’s top 200 companies Note: While the JPX
Slide 54: Power Up 2019 Key Initiatives
Power Up 2019 Key Initiatives Profitability Sustainability • List Ichigo’s solar assets on the TSE’s new • Grow both financial stability and earnings Infrastructure Fund Market (3) Finance as a • De-collateralize loans, lengthen loan • Support the on-going growth of Ichigo Office Strategic Weapon ma
Slide 55: Adoption of Progressive Dividend Policy
Adoption of Progressive Dividend Policy Progressive Dividend: Previous year’s dividend is the floor for the current year’s dividend. Dividend will be raised (or kept flat) but not cut, providing shareholders with downside dividend protection Newly setting minimum DOE (dividend on equity) payout
Slide 56: Notice: Corporate Name Change on September 1, 2016
Notice: Corporate Name Change on September 1, 2016 To further focus on its core identity and unify its Japanese and English corporate names, Ichigo is simplifying its Japanese corporate name to Ichigo Inc. as of September 1, 2016. The change in the asset management subsidiary name is to reflect the
Slide 57: MEMO
MEMO © 2016 Ichigo Inc. All rights reserved. 57
Slide 58: MEMO
MEMO © 2016 Ichigo Inc. All rights reserved. 58
Slide 59: Disclaimer
These materials were prepared to explain the Company’s businesses and are not for the purpose of soliciting investment in marketable securities issued by the Company. The Company does not guarantee the accuracy of the figures, information, estimates or other statements included herein, and accepts n