Ichigo Hotel Reit Investment Corp. · TSE:3463

Ichigo Hotel Reit Investment — July 2022 fiscal period Earnings Presentation

62 slides from Ichigo Hotel Reit Investment's earnings presentation, Sep 14, 2022

  1. Slide 1: Ichigo Hotel July 2022 Fiscal Period Corporate Presentation

    Ichigo Hotel (3463) Ichigo Hotel July 2022 Fiscal Period Corporate Presentation September 14, 2022 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 message

    We would like to express our deepest condolences to all those affected by the global Covid pandemic and by the war and humanitarian crisis in Ukraine, along with our heartfelt wish for the immediate cessation of hostilities in Ukraine and the earliest and fullest possible recovery for all. Take care

  3. Slide 3: Make The World More Sustainable

    Make The World More Sustainable © 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

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

  6. Slide 6: Agenda

    July 2022 Results Ichigo’s Commitment to ESG  July 2022 Highlights  Climate Positive: CO2 Reduction > Emissions  July 2022 Earnings Breakdown  Ichigo Sustainability Policy  YOY Increases in Revenue, RevPAR,  RE100 by 2025 On Track Occupancy, & ADR  Full ESG Transparency & Disclosure  RevPAR

  7. Slide 7: July 2022 Results

    July 2022 Results © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 7

  8. Slide 8: July 2022 Highlights

    July 2022 Highlights Results Details Asset Comfort Hotel Nagano • Expected to capture both business and leisure demand • Acquired with cash-on-hand Acquisition (Acquisition Price JPY 670M) • +JPY 93M (+34.5% YOY) JPY 361M Net Income +JPY 50M (+16.2%) vs. revised forecast • +JPY 148M (+69.5%) vs. ini

  9. Slide 9: July 2022 Earnings Breakdown

    July 2022 Earnings Breakdown (JPY million) vs. Jul 2021 Jul 2022 Forecast (B) Forecast Forecast Major Variation Factors (vs. Forecast) Actual Actual (A) (Jul 2022) (Mar 2022) (A) - (B) Operating Revenue 1,117 1,248 1,197 +51 1,069 Increase in variable rent +62 (Nagoya, Sapporo Ekimae, Variable Rent

  10. Slide 10: YOY Increases in Revenue, RevPAR, Occupancy, & ADR

    YOY Increases in Revenue, RevPAR, Occupancy, & ADR Variable Rent Hotels (15 Hotels) Feb 1, 2021 Feb 1, 2022 Feb 1, 2019 Change YOY - Jul 31, 2021 - Jul 31, 2022 - Jul 31, 2019 Room Revenue (JPY M) 1,008 1,852 +844 +83.7% 2,583 Total Revenue (JPY M) 1,140 1,988 +848 +74.4% 2,902 RevPAR (JPY) 2,865 4,

  11. Slide 11: RevPAR Increase YOY in All Regions

    RevPAR Increase YOY in All Regions YOY by Region (Feb 2022– July 2022) 21 Hotels (excludes Capsule Plus Yokohama, Washington Hotel Plaza Shimonoseki Eki Nishi, and Comfort Hotel Nagano) RevPAR Occupancy ADR Total Tokai/ Chugoku/ Portfolio Hokkaido Tokyo Chubu Kyoto Osaka Kobe Shikoku Kyushu +632% +6

  12. Slide 12: Full Recovery in Occupancy to Pre-Covid Level

    Full Recovery in Occupancy to Pre-Covid Level Variable Rent Hotels (Jan 2020 – July 2022) RevPAR Occupancy ADR 84.7% 84.4% 68.8% 7,302 65.4% 54.9% 6,166 50.4% 5,132 5,020 4,383 4,381 4,522 4,348 2,865 3,112 2,531 2,408 Jan 2020 Jul 2020 Jan 2021 Jul 2021 Jan 2022 Jul 2022 (JPY) No. Hotels 14 15 15 1

  13. Slide 13: Ichigo Hotel Portfolio Occupancy Exceeds Market Recovery

    Ichigo Hotel Portfolio Occupancy Exceeds Market Recovery − Hotel demand recovery continues − Ongoing recovery expected due to government lifting Covid-related restrictions and expanding inbound travel − Covid impact on business hotels was minimal compared to other hotel types Ichigo Hotel Occupancy

  14. Slide 14: Increasing Stability via Contract Renewals & Rebranding

    Increasing Stability via Contract Renewals & Rebranding Timing Hotel Name Lease Terms Changes Variable+Fixed • Increased fixed rent Jun 2020 Smile Hotel Tokyo Asagaya Lease Renewal Rent • Revised variable rent The OneFive Okayama Fixed  • Operator change to Hakata Hotels Oct 2020 Variable+Fixed Reb

  15. Slide 15: Strengthened Portfolio via Hotel Acquisition (1)

    External Growth Strengthened Portfolio via Hotel Acquisition (1) Comfort Hotel Nagano (Acquisition Price JPY 670M, Acquired on May 31, 2022) • A lodging-focused hotel located in Nagano City, one of the major cities in the Kanto Koshinetsu Area • Acquired using proceeds from a Jan 2020 hotel sale & c

  16. Slide 16: Strengthened Portfolio via Hotel Acquisition (2)

    External Growth Strengthened Portfolio via Hotel Acquisition (2) Hotel Sunshine Utsunomiya (Acquisition Price JPY 2.2B, Acquired on Sep 20, 2022) • A lodging-focused hotel located in Utsunomiya City of Tochigi Prefecture, the largest city in the North Kanto area • Stable business demand from one of

  17. Slide 17: Shareholder Discount Program

    Shareholder Program (1) Shareholder Discount Program Program Established to Express Gratitude to Ichigo Hotel Shareholders and to Support the Hotel Industry Impacted by Covid Special Discount Rates (including hotels not owned by Ichigo Hotel) Minacia Co., Ltd. K.K. Hospitality Operations  Hotel Win

  18. Slide 18: Ichigo J.League Shareholder Program

    Shareholder Program (2) Ichigo J.League Shareholder Program Represents Two Firsts for a Shareholder Program in Japan − First Japanese company to include not just its own shareholders, but also the shareholders of the REITs and YieldCo that it manages, in its shareholder program (70,000 shareholders

  19. Slide 19: Sustainability as a Key Management Priority

    Sustainability as a Key Management Priority © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 19

  20. Slide 20: Sustainability Initiatives (1)

    Sustainability Initiatives (1) Minimizing Environmental Impact of Ichigo Hotel-Owned Assets Environmental Certifications − HOTEL EMIT SHIBUYA (BELS 4 Stars) − Joined GRESB Real Estate Assessment in 2021 − Awarded 2 Stars in GRESB rating − Won Green Star designation − Energy efficiency assessments fo

  21. Slide 21: Sustainability Initiatives (2)

    Sustainability Initiatives (2) Shift to Renewable Energy − Began sourcing renewable energy at 9 hotels as of July 2022 fiscal period − 15 remaining hotels to be transitioned sequentially Renewable Energy Transition Completed Court Hotel Suzuka The OneFive Okayama HOTEL EMIT SHIBUYA Capsule Plus Yoko

  22. Slide 22: Market Environment & Forecast Assumptions

    Market Environment & Forecast Assumptions Hotel Market Continues Recovery Occupancy and ADR Forecasts for 15 Variable Hotels − Forecasting Occupancy at -10~-20%, ADR at -30~-40%, and RevPAR -40%~ -50% vs. 2019 (Pre-Covid) levels July 2019 July 2020 July 2021 July 2022 July 2023 YOY Actual Actual Act

  23. Slide 23: January 2023 Forecast

    January 2023 Forecast Dividend JPY 1,106, -17.8% YOY  Decrease in Dividend YOY due to fall-off of previous period’s extraordinary gain, despite YOY NOI increase (JPY million) Jan 2023 Jul 2023 Jan 2022 Previous Revised (B) - (A) Major Factors for Variation Actual (A) Forecast Forecast (B) (Mar 2022

  24. Slide 24: July 2023 Forecast

    July 2023 Forecast Dividend JPY 1,380, -2.7% YOY  YOY NOI increase; Conservative forecast of non-operating expenses (JPY million) Jul 2022 Jul 2023 (B) - (A) Major Factors for Variation Actual (A) Forecast (B) Operating Revenue 1,248 1,326 +78 Increase in variable rent +164 (Sapporo Ekimae, Sapporo

  25. Slide 25: Ichigo's Commitment to ESG

    Ichigo’s Commitment to ESG © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 25

  26. Slide 26: 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

  27. Slide 27: Climate Positive: CO2 Reduction > Emissions

    Climate Positive: CO2 Reduction > Emissions Ichigo’s Clean Energy Growth Addressing Critical Environmental Issues CO2 Reduction vs. CO2 Emissions (tons) ■ Total Ichigo Power Plant CO2 Reduction ■ Total Ichigo CO2 Emissions (Scope1+2) 2.5X CO2 Reduction vs. CO2 Emissions 137,848 115,884 Further Reduc

  28. Slide 28: RE100 by 2025 On Track

    RE100 by 2025 On Track Ichigo RE100 Progress FY23/2 Forecast RE100 Transition Impact CO2 Reduction 35,815 tons Renewable Energy % Reduction 47.2% Ratio 60.4% CO2 Emissions of Cars (+7.2pts vs. FY22/2 Q4) × 15,572 Note: % Reduction = Amount of CO2 reduction vs. 75,890 tons (FY20/2 actual) Annual CO2

  29. Slide 29: Ichigo ESG – Environmental

    Ichigo ESG – Environmental Sustainability-Driven & Climate Positive Effective Use of Existing Real Estate Towards a Net Zero Carbon Society J-REIT Initiatives Preserve & Improve Real Estate Community-Based, Productive Use of Pro-Active Environmental to End Wasteful Demolition Idle Land for Clean Ene

  30. Slide 30: Ichigo ESG – Social

    Ichigo ESG – Social Contributing to a Sustainable Society Contributing to Regional Revitalization Ichigo University Sports Initiatives Ichigo works to revitalize local communities Ichigo established Ichigo University in May and promote regional economic 2013 to support employees’ continuing As a top

  31. Slide 31: Ichigo ESG – Governance

    Ichigo ESG – Governance Global Best Practice Governance No Fixed Fee, Best Practice Governance Performance Fee- Only Structure REIT Asset Management Company (AMC)  Shifted to performance-  Monitors Asset Management Company  Best Practice linked fee structure to • All Ichigo Hotel Directors are In

  32. Slide 32: Appendix: Portfolio Details

    Appendix: Portfolio Details © Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 32

  33. Slide 33: Hotel Map

    Hotel Map Tokyo Kanto/Koshinetsu Hokkaido Hokuriku/Tokai C-1 C-3 C-4 B-1 B-2 A-1 A-2 A-3 D-1 D-2 D-3 D-4 Smile Hotel Hotel Livemax HOTEL Capsule Plus Comfort Hotel Nest Hotel Nest Hotel Comfort Comfort Hotel Hotel Wing Comfort Hotel Comfort Hotel Tokyo Asagaya Nihombashi- EMIT Yokohama Nagano Sappor

  34. Slide 34: Portfolio Growth

    Portfolio Growth IPO January 2017 through July 2022 (Nov 30, 2015) Fiscal Periods IPO Acquisitions Jan 2017 Jul 2017 Jan 2018 Jan 2019 July 2019 Jan 2020 July 2020 Jan 2021- Jul 2022 9 Hotels 10 Hotels 1 Hotel 1 Hotel 1 Hotel 2 Hotels 2 Hotels Jan 2022 1 Hotel JPY 20.4B JPY 27.2B JPY 1.4 B JPY 1.8 B

  35. Slide 35: Portfolio Lease Details

    Portfolio Lease Details Operator Diversification Driving Earnings Stability (as of July 31, 2022) Lease Terms Fixed Rent Fixed + Variable Rent Variable Rent Total Form of Contract Lease Lease Lease Lease – Fixed Rent Yes Yes Yes – – Fixed Portion of Fixed Portion of Hotel Excess Above Fixed Variable

  36. Slide 36: Individual Hotel Summary

    Individual Hotel Summary (as of July 31, 2022) Jul 2022 Appraisal Leasable Acquisition Book Value Unrealized Hotel Value Hotel Name Lease Terms Location Area Price (JPY M) Cap Rate Gains (JPY M) No. (JPY M) (m2) (JPY M) (A) (%) (B) - (A) (B) A-1 Nest Hotel Sapporo Ekimae Variable + Fixed Rent Sappor

  37. Slide 37: July 2022 Fiscal Period Individual Hotel Operating Results

    July 2022 Fiscal Period Individual Hotel Operating Results (year-on-year) No. of July 2022 (February 2022 - July 2022) 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 162 5,156 (+55

  38. Slide 38: Individual Hotel Financials

    Individual Hotel Financials (JPY thousand) A-1 A-2 A-3 C-1 C-4 D-1 D-3 D-4 E-1 E-3 E-5 F-1 F-2 F-4 F-5 G-1 G-3 Nest Nest Comfort Smile The The The Total Comfort Smile Hotel HOTEL Comfort Comfort Nest Hotel The Hotel Hotel Hotel Central Hotel OneFive Nest Hotel OneFive Valie Hotel OneFive Nest Hotel

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

    Fixed/Variable Rent, RevPAR, ADR, & Occupancy Trends Fixed/Variable Rent (JPY thousand) Jul 2021 Jan 2022 Jul 2022 Rent Ratio Rent Ratio Rent Ratio Fixed 976,196 87.3% 962,540 85.5% 929,692 74.5% Fixed Rent from Operators 947,031 84.7% 933,355 82.9% 900,497 72.1% Rent Other (Rent from Retail Tenants

  40. Slide 40: Variable Rent Hotel Details

    Variable Rent Hotel Details A-1 Nest Hotel Sapporo Ekimae ADR RevPAR Occupancy Location Sapporo Operating Results (Aug 2021 – Jul 2022) (right) (right) (left) (JPY) 5-minute walk from 100% 10,000 Sapporo Station on Access Sapporo City Metro 80% 8,000 Namboku Line 60% 6,000 Nest Hotel Japan Operator

  41. Slide 41: Variable Rent Hotel Details

    Variable Rent Hotel Details B-1 Capsule Plus Yokohama Location Yokohama, Kanagawa 6-minute walk from Access Yokohama Station on JR/ Subway Line The hotel operator did not give consent to disclose data. Operator nine hours Inc. Guest Rooms 169 Acquisition JPY 1.49B Price C-1 Smile Hotel Tokyo Asagaya

  42. Slide 42: Variable Rent Hotel Details

    Variable Rent Hotel Details C-4 HOTEL EMIT SHIBUYA ADR RevPAR Occupancy Location Shibuya-ku, Tokyo Operating Results (Aug 2021 – Jul 2022) (right) (right) (left) (JPY) 100% 10,000 6-minute walk from Shibuya Station on JR, Access 80% 8,000 Tokyu, Keio, and Tokyo Metro Lines 60% 6,000 40% 4,000 Operat

  43. Slide 43: Variable Rent Hotel Details

    Variable Rent Hotel Details E-1 Smile Hotel Kyoto Shijo Location Kyoto ADR RevPAR Occupancy Operating Results (Aug 2021 – Jul 2022) (right) (right) (left) 5-minute walk from (JPY) Shijo Station on Kyoto 100% 7,500 City Subway Karasuma Access 80% 6,000 Line and Karasuma Station on Hankyu Kyoto Main L

  44. Slide 44: Variable Rent Hotel Details

    Variable Rent Hotel Details E-4 Hotel Wing International Kobe Shin Nagata Ekimae Location Kobe ADR RevPAR Occupancy Operating Results (Aug 2021 – Jul 2022) (right) (right) (left) (JPY) 2-minute walk from 100% 10,000 Shin Nagata Station Access 80% 8,000 on JR Kobe Line and JR Sanyo Honsen Line 60% 6,

  45. Slide 45: Variable Rent Hotel Details

    Variable Rent Hotel Details F-1 The OneFive Okayama Location Okayama ADR RevPAR Occupancy Operating Results (Aug 2021 – Jul 2022) (right) (right) (left) (JPY) 15-minute walk from 100% 7,500 Okayama Station on Access Sanyo Shinkansen, 80% 6,000 Sanyo Main Line, Uno Line 60% 4,500 40% 3,000 Operator H

  46. Slide 46: Variable Rent Hotel Details

    Variable Rent Hotel Details F-4 The OneFive Garden Kurashiki Location Kurashiki, Okayama ADR RevPAR Occupancy Operating Results (Aug 2021 – Jul 2022) (right) (right) (left) (JPY) 100% 10,000 8-minute walk from Access Kurashiki Station on 80% 8,000 JR Sanyo Main Line 60% 6,000 Operator Hakata Hotels

  47. Slide 47: Variable Rent Hotel Details

    Variable Rent Hotel Details G-1 The OneFive Fukuoka Tenjin ADR RevPAR Occupancy Location Fukuoka Operating Results (Aug 2021 – Jul 2022) (right) (right) (left) (JPY) 100% 7,500 6-minute walk from Tenjin Station on 80% 6,000 Access Fukuoka City Subway Kuko Line 60% 4,500 40% 3,000 Operator Hakata Hot

  48. Slide 48: Fixed Rent Hotel Details

    Fixed Rent Hotel Details A-3 Comfort Hotel Kushiro B-2 Comfort Hotel Nagano Location Kushiro, Hokkaido Location Nagano 2-minute walk from 3-minute walk from Access Kushiro Station on JR Access Nagano Station on JR Nemuro Main Line Hokuriku Shinkansen Operator Greens Co., Ltd. Operator Greens Co., Lt

  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 3-minute walk from Airport, Access Shirako Station on Access 3-minute walk from Kintetsu Nagoya Line Central Intern

  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 Outstanding Loan Balance Jul 31, 2020 Jan 31, 2021 Jul 31, 2021 Jan 31, 2022 Jul 31, 2022 Amount JPY 25.47B JPY 25.47B JPY 25.47B JPY 25.47B JPY 25.47B Long-Term Loan Ratio 93.1% 72.5% 72.5% 72.5% 70.7% Fixed Rate Ratio 91.4% 70.7% 70.7% 70.7% 70.7% Average Interest Rate 0.87%

  52. Slide 52: Loan Details

    Loan Details Amount Floating/ Interest Rate Loan Lender Borrowing Date Maturity (JPY million) Fixed (%) (as of July 31, 2022) SMBC, Mizuho, Shinsei, Resona, Fukuoka, Term Loan 4 4,500 Fixed 0.90750% August 17, 2016 February 28, 2023 Nishi-Nippon City Term Loan 5 SMBC, Mizuho, Shinsei, Resona, Fukuok

  53. Slide 53: Shareholder Composition

    Shareholder Composition Major Shareholders (as of July 31, 2022) By Number of Shares Held No. Of Foreign Corporations & Individuals Domestic Financial Institutions Name Share Non-Financial Domestic Corporations Domestic Individuals Shares The Master Trust Bank of Japan, 36,820 44,388 42,114 1 34,906

  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: Ongoing Actions to Drive Increased Shareholder Value

    Ongoing Actions to Drive Increased Shareholder Value Portfolio Growth & Diversification Drive Earnings Growth & Stability Organic Growth External Growth Current Environment Current Environment • Both Japanese and inbound demand has dropped • Sales and acquisitions limited due to ongoing market signi

  56. Slide 56: Ichigo Hotel's Sponsor: Ichigo (2337)

    Ichigo Hotel’s Sponsor: Ichigo (2337) Core Businesses: Asset Management, Sustainable Real Estate, Clean Energy ‒ Manages Ichigo Hotel (3463), Ichigo Office (8975), and Ichigo Green (9282) ‒ Sustainable Real Estate business adds value to existing buildings by drawing upon its real estate technologies

  57. Slide 57: 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

  58. Slide 58: Strong Sponsor Support

    Strong Sponsor Support Changed Hotel Operator to Ichigo-owned Hakata Hotels − Veteran hotel operator with expertise in AI revenue management (PROPERA) – operates 13 hotels with focus on the Hakata (Fukuoka) area − Maintained high occupancy, substantially outperforming other hotels (Hotels using PROP

  59. Slide 59: Hakata Hotels & PROPERA

    Hakata Hotels & PROPERA − Hakata Hotels, a consolidated subsidiary of Ichigo, is a hotel operator operating 13 hotels across Japan with many located in the Hakata (Fukuoka) area − Hakata Hotels is deploying PROPERA, an AI-based revenue management system developed by Ichigo, to maximize earnings and

  60. Slide 60: Portfolio Growth Opportunity via Ichigo Sponsor Support

    Portfolio Growth Opportunity via Ichigo Sponsor Support 20 Hotels (JPY 62B) in Ichigo Sponsor Pipeline as of May 31, 2022 − Lodging-focused hotels across Japan − Locations: Major cities such as Hokkaido, Tokyo, Yokohama, Osaka, and Fukuoka Fukuoka Hokkaido Hiroshima Tokyo Fukuoka Yokohama Osaka © Ic

  61. Slide 61: 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

  62. Slide 62: 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 2022 fiscal period Earnings Presentation on 6ix