Slide 1: FY18/2 Q1 Corporate Presentation
FY18/2 Q1 Corporate Presentation January July 13,13, 2017 2017 Ichigo (2337) © 2017 Ichigo Inc. All rights reserved. www.ichigo.gr.jp/en/
Slide 2: Ichigo Preserves and Improves Real Estate
Ichigo Preserves and Improves Real Estate © 2017 Ichigo Inc. All rights reserved.
Slide 3: © 2017 Ichigo Inc. All rights reserved.
© 2017 Ichigo Inc. All rights reserved.
Slide 4: Contents
Contents FY18/2 Q1 Earnings ‒ Operating Profit -48%, Net Income -60% YOY ‒ Segment Earnings Details ‒ Stock + Flow Earnings Model ‒ Strong Financial Position Powerful Value-Add Business Model Underpins Growth ‒ Capital-Efficient Asset Turnover ‒ Centro Acquisition ‒ Large Q2 Value-Add Asset Sale ‒ I
Slide 5: FY18/2 Q1 Earnings
FY18/2 Q1 Earnings © 2017 Ichigo Inc. All rights reserved. 5
Slide 6: Operating Profit -48%, Net Income -60% YOY
Operating Profit -48%, Net Income -60% YOY Quiet P&L Quarter, but Business and Earnings On-Plan Drop out of FY17/2 Q1 JPY 29.2B asset sale to Ichigo Office REIT and JPY 2.4B extraordinary gain from CIAM share sale Earnings to accelerate from Q2 on large Value-Add asset sale (JPY million) FY17/2
Slide 7: Segment Earnings Details
Segment Earnings Details Stock AM Fees Up Value-Add and Clean Energy Down (JPY million) Revenue Operating Profit Earnings Drivers Segment Full-Year Full-Year (Parentheses show YOY change in FY17/2 Q1 FY18/2 Q1 YOY vs. Forecast FY17/2 Q1 FY18/2 Q1 YOY vs. Forecast Forecast Forecast Gross Profit) AM F
Slide 8: Stock + Flow Earnings Model
Stock + Flow Earnings Model Stock Earnings (Primarily Rental Income, AM Fees, and FIT Solar Power Sales) Flow Earnings (Primarily Profits on Value-Add Real Estate Sales ) (JPY million) Fixed Expenses (Fixed SG&A + Interest Expense) 26,806 25,994 19,863 14,011 12,949 8,973 12,166 4,553 Gross 7,435 Pr
Slide 9: Strong Financial Position
Strong Financial Position Average Interest Rate and Loan Term Weighted Average Interest Rate WeightedLoan Average Average Loan Term Period (Interest Rate) (Loan Term, Years) 2.5% 12 10.8 years 10.6 years 9.0 years 2.0% 9 1.96% 8.7 years 1.71% 5.9 years 1.5% 6 1.41% 1.24% 1.14% 1.0% 3 FY14/2 FY15/2 F
Slide 10: Powerful Value-Add Business Model Underpins Growth
Powerful Value-Add Business Model Underpins Growth © 2017 Ichigo Inc. All rights reserved. 10
Slide 11: Capital-Efficient Asset Turnover
Capital-Efficient Asset Turnover Acquired JPY 12.3B and Sold JPY 7.0B of Real Estate in Q1 Buy Acquisitions − Deploy cash − Increase borrowings Residential 5 Assets JPY 3.6B Office 1 Asset JPY 0.5B Retail 1 Assets JPY 1.8B Hotel 2 Assets JPY 2.7B Logistics 2 Assets JPY 3.5B Total 11 Assets JPY 12.3B
Slide 12: Centro Acquisition
Centro Acquisition Tokyo-Based Real Estate Operator Acquired July 3, 2017 JPY 5B Central Tokyo real estate assets Storage Plus (100% subsidiary): indoor self-storage business Tenuto (65% subsidiary): agri-venture that develops systems to reuse industrially-generated CO2 Accelerate Growth via N
Slide 13: Large Q2 Value-Add Asset Sale
Large Q2 Value-Add Asset Sale Central Tokyo Office Building (Acquired 2007) Originally purchased for ongoing rental income (Building met current earthquake resistance standards, but did further seismic reinforcement) Building functional aging (built in 1973) and FAR allowance expansion suggested
Slide 14: Ichigo Office (8975) Strategic Portfolio Restructuring
Ichigo Office (8975) Strategic Portfolio Restructuring Increased Portfolio Scale, Quality, and Stability − Sold 3 prime location office assets in Tokyo to Ichigo Office (total JPY 7B) − Acquired from Ichigo Office 4 non-office assets with significant on-going costs − Increased Ichigo Office NOI (+JP
Slide 15: Ichigo Green (9282) EPS Growth
Ichigo Green (9282) EPS Growth Sold 2 Solar Power Plants to Ichigo Green − Diversifies Ichigo Green’s portfolio by adding plants in Japan’s Chugoku Region − EPS +17.9% impact Ichigo Yamaguchi Aionishi ECO Power Plant Ichigo Yamaguchi Sayama ECO Power Plant Panel Output 1.24MW Panel Output 2.35MW FIT
Slide 16: Ichigo Office REIT and Ichigo Hotel REIT Dividend Growth
Ichigo Office REIT and Ichigo Hotel REIT Dividend Growth Ichigo Office REIT (8975) Dividend Growth Ichigo Hotel REIT (3463) Dividend Growth 14 Consecutive Periods of Dividend Growth – Grow Dividend by Leveraging Ichigo’s No.1 vs. All J-REITs Value-Add Capabilities Forecast Actual +2.3% +3.8% JPY 6,1
Slide 17: Ichigo Office (8975) Environmental Sustainability Initiatives
Value-Add Ichigo Office (8975) Environmental Sustainability Initiatives CASBEE (Comprehensive Assessment System for Built Environment Efficiency) Certification Ichigo Marunouchi Building: S Rank (Highest) Ichigo Kanda Nishikicho Building: A Rank DBJ (Development Bank of Japan) Green Building Cer
Slide 18: Ichigo Akasaka 317 Building
Value-Add Ichigo Akasaka 317 Building Renovated Prime Location Office Building to Target Fast-Growing Companies as Tenants, and Converted Floors to Retail Use Opened Akasaka Bar Yokocho on First Floor, Gathering Nine Different Bars in One Place (June 2017) Redesigned an irregularly-shaped floor to
Slide 19: Clean Energy Business Growth
Clean Energy Business Growth Ichigo Showamura Ogose ECO Power Plant (43.3MW) Development ahead of schedule − Started full plant inspection and installation of monitoring terminals − Test-operation start date: July 3, 2017 − Forecast NOI: JPY 1.4B New Solar Power Plant Development Ichigo Showamura
Slide 20: Share Buyback Completion
Share Buyback Completion Purpose: Grow Value for Ichigo’s Shareholders Number of Shares 4,627,400 shares (0.92% of total shares outstanding) Amount JPY 1,499,979,200 Buyback Period April 24, 2017 – April 28, 2017 Buyback Method In-market purchases via trust bank Average Share Price JPY 324 © 2017 Ic
Slide 21: Appendix: Financial & Real Estate Data
Appendix: Financial & Real Estate Data © 2017 Ichigo Inc. All rights reserved. 21
Slide 22: Powerful Value-Add Business Model
Powerful Value-Add Business Model Significant Synergies between Ichigo’s Value-Add and Asset Management Businesses Value-Add Business Model Green Infrastructure Solar Plants Buy Ichigo Green (9282) Sell Office Real Third- Estate Party Ichigo Office REIT (8975) Value-Add Investors Real 不動産 Hotel Esta
Slide 23: Demolish and Rebuild
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 24: Value-Add Sample Earnings Model
Value-Add Sample Earnings Model 5.5% NOI yield, JPY 2B purchase, LTV 75%, 1.5% interest rate on borrowings, JPY 50M Capex, 15% increase in NOI, 3-year Value-Add period NOI at Acquisition (JPY 110M NOI/year) － (JPY 22.5M interest/year) ＝ JPY 87.5M NOI/year NOI÷ Initial Investment ＝17.5% NOI return du
Slide 25: Consolidated Risk-Based Balance Sheet
Consolidated Risk-Based Balance Sheet Mark-to-Market Consolidated Balance Sheet: JPY 312.0B (Book Value JPY 275.1B + Unrealized Gains JPY 36.9B) Non-Recourse Loans & Related Liabilities Non-Recourse Loan- JPY 74.2B Related Assets Consolidated Risk-Based Balance Sheet: JPY 237.8B JPY 106.3B (Book Val
Slide 26: Significant Unrealized Gains on Balance Sheet
Significant Unrealized Gains on Balance Sheet Total Unrealized Gains: JPY 36.9B (Appraisal Value Basis) Real estate directly held by Ichigo (JPY million) Book Value as of Cap Rate Appraisal Value as of Location NOI Unrealized Gains May 31, 2017 NOI/Book Value after Write-dow n May 31, 2017 Tokyo 105
Slide 27: Business Segments
Business Segments Asset Management generates fee income via management of Ichigo Office REIT (8975), Ichigo Hotel REIT (3463), and Ichigo Green Asset Management (9282), and providing real estate services related to real estate acquisition, operations, and disposition. Value-Add preserves and improve
Slide 28: Consolidated Balance Sheet
Consolidated Balance Sheet (JPY million) FY18/2 Q1 Unrealized Outside Market Unrealized Gains on FY17/2 YOY B/S Investors' Value Gains Listed Interest Securities 2 Cash and Cash Equivalents 47,678 45,542 567 -2,136 45,542 – – Operational Loan Investments (Value-Add) 1,324 1,324 – – 1,830 +505 – Oper
Slide 29: Consolidated Balance Sheet: Segment Breakdown
Consolidated Balance Sheet: Segment Breakdown (JPY million) Cash and Operational Power Operational Real Estate Fixed Intangible Securities Other Segment Cash Securities Plants Total Assets Loans for Sale Assets Assets Investments Assets Equivalents Investments for Sale Asset Management – – – – – – 9
Slide 30: Consolidated P&L: Gross Profit Segment Breakdown
Consolidated P&L: Gross Profit Segment Breakdown (JPY million) Revenue Gross Profit YOY Segment (Gross Profit) FY17/2 Q1 FY18/2 Q1 Change FY17/2 Q1 FY18/2 Q1 Change Asset Management 1,185 681 -503 734 670 -64 -8.7% Asset Management Fees 438 511 +73 435 508 +73 +16.8% PM/BM Fees 567 – -567 122 -3 -12
Slide 31: Consolidated P&L: Results vs. Forecast
Consolidated P&L: Results vs. Forecast (JPY million) ン FY18/2 Q1 (3M) FY18/2 Full-Year Forecast (12M) Segment vs. Full- vs. Full- vs. Full- Gross Operating Gross Operating Revenue Year Year Year Revenue Profit Profit Profit Profit Forecast Forecast Forecast Asset Management 681 27.4% 670 27.3% 504 3
Slide 32: Asset Management AUM Detail
Asset Management AUM Detail FY13/2 FY14/2 FY15/2 FY16/2 FY17/2 FY18/2 Q1 (12M) (12M) (12M) (12M) (12M) (3M) Ichigo Office REIT (8975) AUM (Fiscal Year End) JPY 104.3B JPY 120.5B JPY 123.8B JPY 165.1B JPY 194.5B JPY 196.9B 1 AM Fee % (Average) 0.63% 0.65% 0.65% 0.64% 0.69% 0.70% AM Fee Gross Profit (
Slide 33: Asset Management – Ichigo REITs and YieldCo
Asset Management – Ichigo REITs and YieldCo Ichigo Green IPO Expands Ichigo’s J-REIT and YieldCo Line-Up Forecast Dividend Yield REIT/YieldCo Listing Date Characteristics (Based on Closing Share Price on Portfolio June 30, 2017) 85 assets JPY 196.9B ・Specialized Office REIT focused on mid- size offi
Slide 34: Ichigo-Owned Real Estate Portfolio
Ichigo-Owned Real Estate Portfolio Asset Type Asset Location Ground Other Nagoya (JPY billion) Mixed Lease 3% 4% 2% 5% Sendai 3% Other 7% Osaka 4% Residence Office 11% 31% Fukuoka Tokyo 14% 52% Sendai Retail 5.8 20% Tokyo Hotel Kanto 99.7 26% 18% Kanto 35.4 Asset Size Nagoya Osaka 3.4 8.0 Fukuoka Ot
Slide 35: Value-Add Asset Breakdown (1)
Value-Add Asset Breakdown (1) 98 Assets, JPY 192.2B, Forecast NOI JPY 11.5B (6.4% Yield) Building Acquisition Ichigo Equity Forecast Equity Forecast No. Asset Type Classification Location Acquisition Price Expected NOI/Year Age Date Investment Multiple 1 IRR2 1 Wholesale Market Fixed Asset Matsudo,
Slide 36: Value-Add Asset Breakdown (2)
Value-Add Asset Breakdown (2) Building Acquisition Ichigo Equity Forecast Equity Forecast No. Asset Type Classification Location Age Acquisition Price Date Expected NOI/Year Investment Multiple 1 * IRR2 17 Retail Fixed Asset Toshima-ku, Tokyo 6 years ≧JPY 3B 2013/03 JPY 230M JPY 340M – – 18 Retail R
Slide 37: Value-Add Asset Breakdown (3)
Value-Add Asset Breakdown (3) Building Acquisition Ichigo Equity Forecast Equity Forecast No. Asset Type Classification Location Acquisition Price Expected NOI/Year Age Date Investment Multiple 1 IRR2 38 Mixed (Office/Retail) Real Estate for Sale Shinjuku-ku, Tokyo 41 years ≧JPY 3B 2014/07 JPY 188M
Slide 38: Value-Add Asset Breakdown (4)
Value-Add Asset Breakdown (4) Building Acquisition Ichigo Equity Forecast Equity Forecast No. Asset Type Classification Location Acquisition Price Expected NOI/Year Age Date Investment Multiple 1 IRR2 53 Residence Real Estate for Sale Chuo-ku, Tokyo 14 years <JPY 1B 2014/12 JPY 40M JPY 99M 2.96X 44.
Slide 39: Value-Add Asset Breakdown (5)
Value-Add Asset Breakdown (5) Building Acquisition Ichigo Equity Forecast Equity Forecast No. Asset Type Classification Location Acquisition Price Expected NOI/Year Age Date Investment Multiple 1 IRR2 70 Hotel Real Estate for Sale Aomori 9 years <JPY 1B 2015/06 JPY 51M JPY 113M 2.10X 20.2% 71 Retail
Slide 40: Value-Add Asset Breakdown (6)
Value-Add Asset Breakdown (6) Building Acquisition Ichigo Equity Forecast Equity Forecast No. Asset Type Classification Location Acquisition Price Expected NOI/Year Age Date Investment Multiple 1 IRR2 116 Retail Real Estate for Sale Sendai 28 years <JPY 1B 2016/04 JPY 48M JPY 86M 7.50X 28.4% 118 Ret
Slide 41: Value-Add Asset Breakdown (7)
Value-Add Asset Breakdown (7) Building Acquisition Ichigo Equity Forecast Equity Forecast No. Asset Type Classification Location Acquisition Price Expected NOI/Year Age Date Investment Multiple 1 IRR2 129 Residence Real Estate for Sale Shinjuku-ku, Tokyo 31 years <JPY 1B 2017/03 JPY 21M JPY 416M 1.1
Slide 42: Reference: Japan’s Feed-in-Tariff (FIT)
Reference: Japan’s 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. Guarantee Guar
Slide 43: Clean Energy Earnings
Clean Energy Earnings Gross Profit Decrease Due to Solar Power Plant Sales to Ichigo Green (9282) FY17/2 FY18/2 Q1 FY18/2 Full-Year vs. Full-Year (12M) (3M) Forecast (12M) Forecast Revenue JPY 12,352M JPY 373M JPY 3,216M 11.6% Cost of Goods Sold JPY 8,580M JPY 201M JPY 2,094M – Gross Profit JPY 3,77
Slide 44: Solar Power Plant Portfolio (1)
Solar Power Plant Portfolio (1) Ichigo (Operating) Ichigo (In-Development) (As of July 13, 2017) Panel Panel FIT Operation FIT Operation Solar Power Plant Area Output Solar Power Plant Area Output (Pre-tax) Start Date (Pre-tax) Start Date (MW) (MW) Ichigo Tokushima Higashi-Okinosu Shikoku 2.52 JPY 4
Slide 45: Solar Power Plant Portfolio (2)
Solar Power Plant Portfolio (2) (As of July 13, 2017) 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) 43 Plants (128MW) Ichigo Abira Toasa (1.16
Slide 46: Ichigo-Owned Solar Power Plant Details
Ichigo-Owned Solar Power Plant Details Total Operating and In-Development (As of July 13, 2017) Ichigo-Owned Solar Power Plants: 28 Plants (98.97MW) By Customer By Feed-In-Tariff By Operating Timeline (Electric Power Utility Co) Kyushu 5% Chubu Tohoku 6% 5% JPY 24 >1 year in Shikoku 10% JPY 40
Slide 47: Consolidated Balance Sheet: Assets
Consolidated Balance Sheet: Assets (JPY million) FY14/2 FY15/2 FY16/2 FY17/2 FY18/2 Q1 vs. 17/2 Assets Current Assets Cash and cash equivalents 24,991 19,383 28,779 47,678 45,542 -2,136 Trade notes and accounts receivable 451 519 691 913 1,250 +337 Operational loan investments 1,100 2,330 1,324 1,32
Slide 48: Consolidated Balance Sheet: Liabilities & Net Assets
Consolidated Balance Sheet: Liabilities & Net Assets (JPY million) FY14/2 FY15/2 FY16/2 FY17/2 FY18/2 Q1 vs. 17/2 Liabilities Current Liabilities Trade notes and accounts payable 132 124 80 110 – -110 Short-term loans 950 1,416 2,188 805 1,385 +580 Short-term non-recourse loans – 48 79 611 611 – Bon
Slide 49: Consolidated P&L
Consolidated P&L (JPY million) FY18/2 FY14/2 FY15/2 FY16/2 FY17/2 FY18/2 Q1 FY17/2 Q1 Change vs. Full-Year (12M) (12M) (12M) (12M) (3M) (3M) (YOY) Forecast Forecast Revenue 35,101 42,705 49,699 109,253 12,915 46,415 -33,500 75,500 17.1% Cost of Goods Sold 27,666 30,539 29,835 82,446 8,914 39,803 -30
Slide 50: Consolidated Cash Flows from Operating Activities
Consolidated Cash Flows from Operating Activities (JPY million) FY14/2 (12M) FY15/2 (12M) FY16/2 (12M) FY17/2 (12M) FY18/2 (3M) Cash Flows from Operating Activities: Pre-tax net income 3,933 7,220 14,022 20,630 3,232 Depreciation 304 565 792 778 189 Share-based compensation expenses 69 112 174 223 5
Slide 51: Consolidated Cash Flows from Investing & Financing Activities
Consolidated Cash Flows from Investing & Financing Activities (JPY million) FY14/2 (12M) FY15/2 (12M) FY16/2 (12M) FY17/2 (12M) FY18/2 (3M) Cash Flows from Investing Activities: Payments into time deposits – -325 – -6,100 – Redemptions of time deposits – 325 – 201 – Payments for securities investmen
Slide 52: Appendix: Power Up 2019 Mid-Term Business Plan
Appendix: Power Up 2019 Mid-Term Business Plan © 2017 Ichigo Inc. All rights reserved. 52
Slide 53: 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) (JPY million) FY16/2 (Actual) FY17/2 (Actual) FY18/2 (
Slide 54: Target: Top 200 Ranking within the JPX-Nikkei 400 Index
Target: Top 200 Ranking within the JPX-Nikkei 400 Index Ichigo Targeting Ranking Within the Index’s Top 200 Companies by August 2019 (the Final Year of Power Up 2019) Note: While the JPX-Nikkei Index 400 does not provide an official ranking of its 400 constituents, it can be calculated based upon th
Slide 55: 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 Market (3) Finance as a • De-collateralize loans, lengthen loan • Support the ongoing growth of Ichigo Office Strategic Measure maturit
Slide 56: Adoption of Progressive Dividend & DOE Policy
Adoption of Progressive Dividend & DOE Policy Progressive Dividend: The 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 set a minimum DOE (dividend on equity)
Slide 57: MEMO
MEMO © 2017 Ichigo Inc. All rights reserved. 57
Slide 58: MEMO
MEMO © 2017 Ichigo Inc. All rights reserved. 58
Slide 59: Contact: Ichigo (TSE1 2337) Investor Relations
These materials were prepared to explain Ichigo’s businesses and are not for the purpose of soliciting investment in marketable securities issued by Ichigo. Ichigo does not guarantee the accuracy of the figures, information, estimates, or other statements included herein, and accepts no responsibili