Slide 1: FY16/2 Q3 Corporate Presentation
FY16/2 Q3 (March – November 2015) Corporate Presentation April 23, January 13,2015 2016 Ichigo g ((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: Creating peace of mind through honest and committed management
Creating peace of mind through honest and committed management. management © 2016 Ichigo Inc. All rights reserved.
Slide 5: Thank You from Ichigo
Thank You from Ichigo Ichigo e exists ists to ser serveeo ourr tenants and societ society, create value al e for o ourr shareholders shareholders, and be trusted stewards of the environment. As Japan's first zero-carbon public real estate firm, we are deeply committed to supporting the balanced, gre
Slide 6: Agenda
Commitment: 100% Shift Up 2016 Achievement ‒ FY16/2 Q3: OP 3.0X, Recurring Profit 3.2X, EPS 3.2X YOY ‒ Segment S t P&L Breakdown B kd ‒ Shift Up 2016 Mid-Term Business Plan Progress ‒ Second FY16/2 Full-Year Forecast Upward Revision ‒ New FY16/2 Full-Year Forecast Details Powerful Value-Add Business
Slide 7: Commitment: 100% Shift Up 2016 Achievement
Commitment: 100% Shift Up 2016 Achievement © 2016 Ichigo Inc. All rights reserved. 7
Slide 8: FY16/2 Q3: OP 3.0X, Recurring Profit 3.2X, EPS 3.2X YOY
FY16/2 Q3: OP 3.0X, Recurring Profit 3.2X, EPS 3.2X YOY (Million Yen) FY15/2 Q3 FY16/2 Q3 vs Full-Year Full-Year Forecast (Reference) Cumulative Cumulative YoY Forecast R i d on O Revised Oct. t 9 FY15/2 A Actual t l (YoY) (YoY) Revised on Oct. 9 Revenues 14,748 44,500 +201.7% 47,000 94.7% 42,705 Gr
Slide 9: Segment P&L Breakdown
Segment P&L Breakdown ‒ Asset Management OP 5.8X YOY on Across-the-Board Increases in Acquisition, Disposition, and Performance Fees ‒ Value-Add Rental Income 1.4X YOY (Million Yen) Revenues Operating Profit FY15/2 Q3 FY16/2 Q3 Full-Year vs Full-Year FY15/2 Q3 FY16/2 Q3 Full-Year vs Full-Year Earnin
Slide 10: Shift Up 2016 Mid-Term Business Plan Progress
Shift Up 2016 Mid-Term Business Plan Progress ‒ Have Achieved All Shift Up 2016 KPI’s as of FY16/2 Q3 Progress on Key Performance Indicators (KPI) (Million Yen) FY14/2 FY15/2 FY16/2 Q3 (9M) Plan Actual vs. Plan Plan Actual vs. Plan 12M Plan 9M Actual vs. 12M Plan Gross Profit 7,400 7,435 100.5% 11,5
Slide 11: Second FY16/2 Full-Year Forecast Upward Revision
Second FY16/2 Full-Year Forecast Upward Revision Re-Revising Up FY16/2 Full-Year Earnings Forecast (Initially Revised Up Last October), Driven by Value-Add Earnings (Million Yen) FY16/2 FY16/2 FY16/2 Full-Year Newly Full-Year Forecast Change Full-Year Initial Revised Forecast Revised on Oct. 9 * For
Slide 12: New FY16/2 Full-Year Forecast Details
New FY16/2 Full-Year Forecast Details (Million Yen) Revenues Segment Profit (Operating Profit) FY16/2 Full-Year FY16/2 Full-Year FY16/2 Full-Year FY16/2 Full-Year Segment Newly Revised Forecast Revised YoY Newly Revised Forecast Revised YoY Forecast on Oct. 9 Forecast on Oct. 9 Asset Management 5,03
Slide 13: Powerful Value-Add Business Model Underpins Growth
Powerful Value-Add Business Model Underpins Growth © 2016 Ichigo Inc. All rights reserved. 13
Slide 14: Powerful Value-Add Business Model
Powerful Value-Add Business Model Significant Value-Add and Asset Management Business Synergies Renewable V l Add Business Value-Add B i Model M d l Energy Solar Power Plants Infrastructure Fund ((Listing g TBD)) Real Estate Ichigo g Real Estate Office Ichigo Office REIT (8975) Acquisition Value V l
Slide 15: Ichigo Hotel REIT (3463) Listing
Ichigo Hotel REIT (3463) Listing Listed on November 30, 2015, with Ichigo Supplying the Hotel Assets, Generating Q3 Value-Add Earnings of JPY 6B Prime location hotels servicing both business and tourists REIT’s strong start backed by on-going expansion of inbound tourism Portfolio growth to dr
Slide 16: Capital-Efficient Asset Acquisition
Capital-Efficient Asset Acquisition Balance B l Sh Sheett M Managementt and dS Synergies i withith IIchigo hi Offi Office REIT and d Ichigo Hotel REIT Driving Higher ROE and Higher Earnings FY16/2 Ichigo g Group p Acquisitions: q 45 assets, JPY 105.2B Ichigo: 35 assets, JPY 64.7B; Ichigo Office REIT
Slide 17: Long-Term Debt
Long-Term Debt W i ht d A Weighted Average IInterest t t Rate R t and d Average A Loan L P Period i d Weighted Average Interest Rate (Interest Rate) (Loan Period, Year) Average Loan Period 3.0% 11 2.56% 9.0 years 2.5% 9.0 years 9 2.22% 1.96% 2.0% 7 5.9 years 1.71% 4 7 years 4.7 1.5% 1.45% 5 3.6 year
Slide 18: Extensive Ichigo Hotel REIT Asset Pipeline
Extensive Ichigo Hotel REIT Asset Pipeline Currently Owned + Highly-Likely Pipeline: 21 assets, JPY 47B FY16/2 Q3 cumulative acquired hotels: 6 assets, JPY 9.9B (Already sold to Ichigo Hotel REIT: 1 asset, asset JPY 2 2.5B) 5B) Highly-likely pipeline (signed contracts, etc.): 15 assets, JPY38.1B
Slide 19: Value-Add Earnings Driver
Value-Add Earnings Driver FY16/2 Cumulative Value-Add Earnings of JPY 7.9B on Sales of 17 Assets Acquired at JPY 22.9B Weighted Average Value Increase: +34.3% +34 3% FY16/2 Q3 Cumulative Value-Add Sales Breakdown by Holding Period Net Gain Average holding period: Net Gain +20.5% +JPY 2.5B 21 months
Slide 20: New Clean Energy Business Developments
New Clean Energy Business Developments As of November 30, 2015, 31 Ichigo Solar Plants (106MW) are Operating (24 plants, 42MW) or In-Development (9 plants, 62MW) Feed-in Tariff: 40 yen: 20 plants, 34MW; 36 yen: 8 plants, 67MW; 32 yen: 3 plants, 5MW Listing of Ichigo Solar Assets on TSE Infrastructur
Slide 21: Clean Energy Operating Profit Growth Roadmap
Clean Energy Operating Profit Growth Roadmap Forecast JPY 1.6B Annual OP by FY20/2 OP F Forecastt based b d on 31 Pl Plants, t 106MW 1.58B 1.52B 1.55B * 20-Year OP Forecast = NOI minus Depreciation minus SG&A. Forward 1.49B SG&A estimate uses FY17/2 forecast 1.37B SG&A of JPY 450M, wound down in 1.3
Slide 22: Appendix: Financial & Real Estate Data
Appendix: Financial & Real Estate Data © 2016 Ichigo Inc. All rights reserved. 22
Slide 23: Demolish and Rebuild
Value-Add Social Significance End Demolish and Rebuild and Embrace Value-Add ‒ Preserve and enhance high-function real estate ‒ Sustainable S t i bl R Reall E Estate t t serving i a Sustainable S t i bl S Society i t ・Renovate, rectify, and repair Value‐Add ・Raise earthquake resistance Focus on tena
Slide 24: Value-Add Sample Earnings Model
Value-Add Sample Earnings Model ‒ 5.5% NOI, JPY 2B purchase, LTV 70%, 1.5% interest rate, JPY 50M capex, 20% increase in NOI, 3-year holding period ‒ Tenant leasing, aesthetic improvement, building code violation remedy, earthquake retrofit, etc. At Acquisition NOI (JPY 110M NOI/year) － (JPY 21M int
Slide 25: Consolidated Risk-Based Balance Sheet
Consolidated Risk-Based Balance Sheet Consolidated Balance Sheet Total Assets JPY 232.1B Non-Recourse Loans & Non-Recourse Loan- Related Liabilities Related Assets JPY 66.7B Consolidated Risk-Based Balance Sheet JPY 85.7B Total Assets JPY 165.3B Non-Recourse Loan- Related IGH Equity JPY 18.9B Cash &
Slide 26: Significant Unrealized Gains on Balance Sheet
Significant Unrealized Gains on Balance Sheet Total Unrealized Gains: JPY 19B (Appraisal Value Basis) Real estate directly held by Ichigo (Million Yen) Book Value as of Cap Rate Appraisal Value Location NOI Unrealized Gain November 2015 NOI/Book Value after w rite-dow n as of November 2015 Tokyo 84,
Slide 27: Business Segments
Business Segments Asset Management generates fee income via managing the Tokyo Stock Exchange-listed J-REITS (Ichigo Office REIT and Ichigo Hotel Asset Management REIT) and private funds and providing real estate services related to real estate acquisition, operation (PM/BM), and disposition. Value-
Slide 28: 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 29: Consolidated Balance Sheet
Consolidated Balance Sheet (Million Yen) FY16/2 Q1 FY16/2 H1 FY16/2 Q3 Unrealized Outside Quarter-on- Unrealized FY15/2 Market Value Gain on Listed B/S B/S B/S Investors' Quarter Gain Securities 2 Interest Cash and Cash Equivalents 19,383 21,065 21,913 31,078 859 +9,165 31,078 — Operating Loans Rece
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 428 — — — 40 1,662 —
Slide 31: Consolidated P&L: Gross Profit Segment Breakdown
Consolidated P&L: Gross Profit Segment Breakdown (Million Yen) Revenues Gross Profit YoY (Gross Profit) (G P fit) FY15/2 Q3 FY16/2 Q3 Change FY15/2 Q3 FY16/2 Q3 Change Asset Management 2,974 4,178 +1,204 1,267 2,834 +1,566 +123.6% Asset Management Fees 973 1,337 , +364 889 1,328 , +438 +49.3% PM/BM
Slide 32: Consolidated P&L: Progress vs. New Full-Year Forecast
Consolidated P&L: Progress vs. New Full-Year Forecast (Million Yen) FY16/2 Q3 (9M) FY16/2 Full-Year Forecast (12M) vs Full-Year vs Full-Year Operating vs Full-Year Operating Revenues Gross Profit Revenues Gross Profit Forecast Forecast Profit Forecast Profit Asset Management 4,178 82.9% 2,834 86.3%
Slide 33: Asset Management AUM Detail
Asset Management AUM Detail FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 Q3 (12M) (12M) (12M) (12M) (9M) Ichigo Office REIT AUM (Fiscal Year End) JPY 106B JPY 104B JPY 121B JPY 124B JPY 166B (8975) AM Fee % (Average) 0.61% 0.63% 0.65% 0.65% 0.63% AM F Fee Gross G Profit P fit (Actual) (A t l) JPY 719M JPY 663
Slide 34: Ichigo-Owned Real Estate Portfolio
Ichigo-Owned Real Estate Portfolio Assets by Type A Assets t by b Location L ti Other Other As of November 30, 2015 2% 5% Hotel 5% Ground Sendai (Billion Yen) Lease Nagoya g y 3% Mixed 3% 8% 7% Osaka Office 8% Residence 46% Tokyo 14% Kanto 53% 10% Retail Fukuoka 23% 13% Sendai 48 4.8 Tokyo 87.0 Asse
Slide 35: Value-Add Full Asset Breakdown (1)
Value-Add Full Asset Breakdown (1) 99 Assets, Book Value JPY 164.4B, Forecast NOI JPY 9.6B (5.9%) Building Acquired Expected Ichigo Forecast Equity Forecast No No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 1 Retail Real Estate for Sale Minato-ku, T
Slide 36: Value-Add Full Asset Breakdown (2)
Value-Add Full Asset Breakdown (2) Building Acquired Expected Ichigo Forecast Equity * Forecast No No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 16 Mixed (Office/Retail) Real Estate for Sale Hiratsuka City, Kanagawa 20 years <JPY 1B 2012/02 JPY 81M
Slide 37: Value-Add Full Asset Breakdown (3)
Value-Add Full Asset Breakdown (3) Building Acquired Expected Ichigo Forecast Equity Forecast No No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 31 Mixed (Office/Retail) Real Estate for Sale Shibuya-ku, Tokyo 31 years <JPY 1B 2014/03 JPY 48M JPY 108M
Slide 38: Value-Add Full Asset Breakdown (4)
Value-Add Full Asset Breakdown (4) Building Acquired Expected Ichigo Forecast Equity Forecast No No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 46 Retail Real Estate for Sale Fukuoka City, Fukuoka 12 years JPY 1B-2B 2014/11 JPY 93M JPY 135M 10.70 x
Slide 39: Value-Add Full Asset Breakdown (5)
Value-Add Full Asset Breakdown (5) Building Acquired Expected Ichigo Forecast Equity Forecast No No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 61 Residence Real Estate for Sale Shinjuku-ku, Tokyo 9 years <JPY 1B 2014/12 JPY 18M JPY 55M 1.80 x 21.1%
Slide 40: Value-Add Full Asset Breakdown (6)
Value-Add Full Asset Breakdown (6) Building Acquired Expected Ichigo Forecast Equity Forecast No No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 76 Office Real Estate for Sale Fukuoka City, Fukuoka 26 years JPY 1B-2B 2015/07 JPY 75M JPY 42M 2.55 x 27
Slide 41: Value-Add Full Asset Breakdown (7)
Value-Add Full Asset Breakdown (7) Building Acquired Expected Ichigo Forecast Equity Forecast No No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 91 Office Real Estate for Sale Osaka City, Osaka 22 years JPY 1B-2B 2015/07 JPY 66M JPY 248M 1.29 x 15.6%
Slide 42: Ichigo Solar Power Plant National Map
Ichigo Solar Power Plant National Map 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) 31 Plants (106MW) Ichigo Abira Toasa (1.17MW) Ichigo Yube
Slide 43: Clean Energy Near-Term Earnings
Clean Energy Near-Term Earnings ‒ Significant Revenue Growth ‒ Profitable (FY16/2 Q3 OP = JPY 362M vs. FY15/2 Q3 JPY -68M) (Million Yen) FY16/2 Full-Year vs Full-Year FY15/2 FY16/2 Q1 FY16/2 H1 FY16/2 Q3 Forecast Revised Forecast Revised (12M) (3M) (6M) (9M) on Oct. 9 (12M) on Oct. 9 (12M) Revenues
Slide 44: Individual Power Plant P&L Breakdown (1)
Individual Power Plant P&L Breakdown (1) Total 20-Year Forecast IRR for All Plants: 34.7% p.a. Fixed Panel Forecast Equity Tariff Operation Expected Ichigo Forecast No. Area Output Depreciation p Multiple (Held (Pre tax (Pre-tax, Start Date NOI/Year Investment IRR2 (MW) for 20 years)1 yen) 1 Ichigo
Slide 45: Individual Power Plant P&L Breakdown (2)
Individual Power Plant P&L Breakdown (2) Fixed Panel Forecast Equity Tariff Operation Expected Ichigo Forecast No. Area Output Depreciation Multiple (Held (Pre-tax, Start Date NOI/Year Investment IRR2 (MW) for 20 years)1 yen) 18 Ichigo Akkeshi Shirahama S ECO CO Power Plant Hokkaido 0.81 40 Mar-15 J
Slide 46: Consolidated Balance Sheet: Assets
Consolidated Balance Sheet: Assets (Million Yen) Quarter-on- FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 Q2 FY16/2 Q3 Quarter Assets Current Assets C h and Cash d cashh equivalents i l t 9 791 9,791 9,713 9 713 24,991 24 991 19,383 19 383 21,913 21 913 31,078 31 078 +9,165 +9 165 Trade notes and accounts rec
Slide 47: Consolidated Balance Sheet: Liabilities & Net Assets
Consolidated Balance Sheet: Liabilities & Net Assets (Milli Yen) (Million Y ) Quarter-on- FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 Q2 FY16/2 Q3 Quarter Liabilties Current Liabilities Trade notes and accounts payable 57 64 132 124 82 105 +23 Short-term borrowings 170 484 950 1,416 740 1,255 +515 Short-term
Slide 48: Consolidated P&L
Consolidated P&L (Milli Yen) (Million Y ) Full-Year vs Full- FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 Q3 FY15/2 Q3 Year-on-Year Revised Year (12M） (12M） (12M） (12M） (9M） （9M) Forecast Forecast Revenues 18,952 16,397 35,101 42,705 44,500 14,748 +29,752 49,000 90.8% Cost of Goods Sold 15,030 11,422 27,666 3
Slide 49: Consolidated Cash Flows from Operating Activities
Consolidated Cash Flows from Operating Activities (Milli Yen) (Million Y ) FY12/2 (12M) FY13/2 (12M) FY14/2 (12M) FY15/2 (12M) FY16/2 Q3 (9M) Cash Flows from Operating Activities: Pre-tax net income 1,976 1,693 3,933 7,220 12,664 Depreciation 166 230 304 565 576 Share-based compensation expenses 37
Slide 50: Consolidated Cash Flows from Investing & Financing Activities
Consolidated Cash Flows from Investing & Financing Activities (Million Yen) FY12/2 (12M) FY13/2 (12M) FY14/2 (12M) FY15/2 (12M) FY16/2 Q3 (9M) Cash Flows from Investing Activities: Payments into time deposits -352 -0 -0 -325 -0 Proceeds from withdrawal of time deposits － 151 － 325 － Acquisition of i
Slide 51: 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