Ichigo Hotel Reit Investment Corp. · TSE:3463

Ichigo Hotel Reit Investment — July 2016 Fiscal Period Earnings Presentation

59 slides from Ichigo Hotel Reit Investment's earnings presentation, Sep 14, 2016

  1. Slide 1: Ichigo Hotel REIT July 2016 Fiscal Period Corporate Presentation

    Ichigo Hotel REIT July 2016 Fiscal Period Corporate Presentation September 14, 2016 Ichigo Hotel REIT Investment Corporation (3463) Ichigo Investment Advisors Co., Ltd. © 2016 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. www.ichigo-hotel.co.jp/en

  2. Slide 2: © 2016 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights

    © 2016 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved.

  3. Slide 3: Ichigo Preserves and Improves Real Estate

    Ichigo Preserves and Improves Real Estate © 2016 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved.

  4. Slide 4: Contents

    July 2016 Financial Results Growth Strategy  Financial Highlights  Growth Roadmap  Results Above Forecast  Ichigo Hotel REIT and Ichigo Sponsor  July 2016 Results (Feb-Jul, 6 Months) Synergies  July 2016 Results (Aug-Jul, 12 Months)  Portfolio Growth via Ichigo’s Sponsor  Strategic Value-Add

  5. Slide 5: July 2016 Financial Results

    July 2016 Financial Results © 2016 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 5

  6. Slide 6: Financial Highlights

    Financial Highlights July 2016 Results Drivers/Dividend Growth RevPAR 7,693 yen • Higher variable rents (+356 yen, +4.8% year-on-year) Organic Growth 699 million yen • Higher operating revenue and lower NOI (+58 million yen, +9.0% vs. most recent operating expenses forecast) • +489 yen, +20.9% vs. f

  7. Slide 7: Results Above Forecast

    Results Above Forecast (JPY million) Forecast January 2016 July 2016 (as of March Difference Major Factors for Variation 2016) Operating Revenue 197 774 730 +44 Increase in variable rent: +43 Variable Rent 66 351 308 +43 (Smile Hotel Kyoto Shijo +20, Nest Hotel Sapporo Ekimae +10, Fixed Rent 119 387

  8. Slide 8: July 2016 Results (Feb-Jul, 6 Months)

    July 2016 Results (Feb-Jul, 6 Months) RevPAR +4.8% and ADR +7.8% Year-on-Year Total Portfolio 7 Hotels with Variable Rents July 15 July 16 YoY July 15 July 16 YoY RevPAR（yen） 7,337 7,693 +4.8% 7,918 8,709 +10.0% ADR（yen） 7,915 8,531 +7.8% 8,291 9,349 +12.8% Occupancy 92.7% 90.2% -2.7% 95.5% 93.2% -2

  9. Slide 9: July 2016 Results (Aug-Jul, 12 Months)

    July 2016 Results (Aug-Jul, 12 Months) RevPAR +9.6% and ADR +11.8% Year-on-Year Total Portfolio 7 Hotels with Variable Rents August 2014 - August 2015 - August 2014 - August 2015 - YoY YoY July 2015 July 2016 July 2015 July 2016 RevPAR（yen） 7,051 7,724 +9.6% 7,537 8,634 +14.6% ADR（yen） 7,639 8,543 +

  10. Slide 10: Strategic Value-Add Capex – Nest Hotel Sapporo Odori

    Strategic Value-Add Capex – Nest Hotel Sapporo Odori Guest Room Renovations (JPY 16.6mm investment) Twin / Triple-Bed Room  Renovated 12 twin-bed rooms to be flexibly used as triple-bed rooms  Brightened rooms and enhanced design  Post-renovation performance (as of July 2016) RevPAR： 15,387 yen (

  11. Slide 11: Loan Details

    Loan Details Loan Balance Strong Lender Group January 31, 2016 July 31, 2016 August 17, 2016 Outstanding Loan Balance JPY 8.5B JPY 8.5B JPY 19.5B LTV Management Long-Term Loan Ratio 100.0% 100.0% 100.0% Interest Rate Risk Management Fixed-Rate Loan Ratio 61.8% 61.8% 73.1% Average Borrowing Rate 0.96

  12. Slide 12: Portfolio Details

    Portfolio Details © 2016 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 12

  13. Slide 13: Hotel-Specific Operating Results

    Hotel-Specific Operating Results July 2016 Period RevPAR: 7,693 yen (+1,453 yen YoY, +23.3%) No. of July 2016 (February 2016 - July 2016) No. Name Location Guest Acquisition Date RevPAR Occupancy ADR Revenue Rooms (yen) (% ) (yen) (mm yen) 8,430 98.3 8,578 316 A-1 004 Nest Hotel Sapporo Ekimae Sappo

  14. Slide 14: Significant Portfolio Growth via Ichigo Sponsor Support

    Significant Portfolio Growth via Ichigo Sponsor Support  Grew Portfolio from JPY 20.4B to JPY 47.6B (2.3X)  Increased Market Cap and Liquidity via Follow-On Share Offering Further Growth JPY 27.2B Quickly Achieve JPY 47.6B Portfolio Growth Portfolio Size JPY 20.4B July 22 Pre-Acquisition Post-Acqu

  15. Slide 15: Increased Cash Flow Stability via Portfolio Diversification

    Increased Cash Flow Stability via Portfolio Diversification Post-Acquisition Portfolio (Acquisition Price Basis) Location Hotel Type Chugoku/ Kyushu/ Shikoku Okinawa Tokyo 5.9% 10.8% 15.1% Hokuriku/ Tokai 20.6% Kinki 39.4% Stay-Only Hokkaido/ Hotels Tohoku 100.0% 8.2% Asset Rent Type Top 3 Variable

  16. Slide 16: Post-Acquisition Portfolio (as of August 17, 2016)

    Post-Acquisition Portfolio (as of August 17, 2016) Tokyo Smile Hotel Smile Hotel Hotel Tokyo Asagaya Asakusa Livemax ▶ Sapporo Nihombashi- Hakozaki ▶ Kushiro Hokkaido/Tohoku Kinki ▶ Kyoto Nest Hotel Sapporo Nest Hotel Comfort Hotel Smile Hotel Hotel Vista Chisun Inn Ekimae Sapporo Odori Kushiro Kyot

  17. Slide 17: Growth Strategy

    Growth Strategy © 2016 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 17

  18. Slide 18: Growth Roadmap

    Growth Roadmap Stage I Stage II Continuous Dividend Growth via External Growth, Organic Growth, and a Strong Financial Base • Construct a diversified portfolio to pursue both income • Quickly achieve JPY100B total asset size by taking full stability and earnings growth advantage of Ichigo’s sponsor

  19. Slide 19: Ichigo Hotel REIT and Ichigo Sponsor Synergies

    Ichigo Hotel REIT and Ichigo Sponsor Synergies  Leverage Ichigo Group’s proprietary sourcing network  Increase asset value through Ichigo’s real estate value-add capabilities  Drive higher returns for Ichigo Hotel REIT shareholders Ichigo’s Value-Add Business Model Buy Sponsor Support:  Asset Wa

  20. Slide 20: Portfolio Growth via Ichigo's Sponsor Support

    External Growth Strategy Portfolio Growth via Ichigo’s Sponsor Support 13 Assets (JPY 30B) in Sponsor Pipeline as of July 31, 2016  Locations: Major cities such as Yokohama, Osaka, Nagoya, Fukuoka, and Kumamoto  Includes development projects to build new hotels  Asset acquisitions via Ichigo’s pr

  21. Slide 21: Value-Add Capex Plan

    Organic Growth Strategy Value-Add Capex Plan Capex Focus on Driving Earnings Growth  Capture tourist demand  Increase guest satisfaction and ADRs  Convert non-revenue-generating space into guest rooms at hotels with occupancy of >90% Smart Renovations and Equipment Renewals  Maintain asset value

  22. Slide 22: Maximize Variable Rents & Increase NOI

    Organic Growth Strategy Maximize Variable Rents & Increase NOI  Maximize Variable Rents Advise and support hotel operators to grow revenues — Drive tourist demand — Monitor and enhance customer satisfaction — Review sales strategy based on market and competition — Optimization of operating expenses

  23. Slide 23: January 2017 and July 2017 Forecasts

    January 2017 and July 2017 Forecasts © 2016 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 23

  24. Slide 24: January 2017 Fiscal Period Forecast

    January 2017 Fiscal Period Forecast  Dividend forecast: 2,917 yen  10 New Assets Supporting EPS & DPS Growth (JPY million) July 2016 Actual January 2017 (B) - (A) Major Factors for Variation (A) Forecast (B) Operating Revenue 774 1,547 +773 Increase in rent due to 10 newly acquired assets Variable

  25. Slide 25: July 2017 Fiscal Period Forecast

    July 2017 Fiscal Period Forecast  Dividend Forecast: 2,838 yen (-79 yen vs January 2017)  Core Earnings Growth, but Taxes on 10 New Assets (Impact on Dividend: -200 yen) (JPY million) July 2016 Actual July 2017 (B) - (A) Major Factors for Variation (A) Forecast (B) Operating Revenue 1,547 1,638 +9

  26. Slide 26: July 2017 Forecast Upward Revision Details

    July 2017 Forecast Upward Revision Details Revised up forecast announced on July 2016 to reflect stronger operating performance of existing 9 assets and 10 newly-acquired assets (Announced in July 2016) (Announced in Sep 2016) (JPY million) July 2017 July 2017 (B) - (A) Major Factors for Variation P

  27. Slide 27: Continued Dividend Growth

    Continued Dividend Growth July 2016 March 2016 Revised Forecast September 2016 Actual July 2016 Revised Forecast Revised Forecast Initial Forecast 2,917 March 2016 2,825 2,838 yen Initial Forecast 2,606 yen 2,609 yen yen yen 2,455 yen Actual At IPO 471 yen 242 yen January 2016 January 2017 July 2016

  28. Slide 28: Appendices

    Appendices © 2016 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 28

  29. Slide 29: Hotel & Portfolio Data

    Hotel & Portfolio Data © 2016 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 29

  30. Slide 30: Hotel Details (Hokkaido & Tohoku Region)

    Hotel Details (Hokkaido & Tohoku Region) A-1 Nest Hotel Sapporo Ekimae Annual Operating Results (Aug 2015 to Jul 2016) Occupancy (le ft, %) ADR (r ight, ye n) RevPAR (r ight, yen) 100 18,000 95 15,000 90 12,000 85 9,000 80 6,000 75 3,000 Aug 20 15 Nov 20 15 Feb 2016 May 20 16 Converted 12 twin-bed r

  31. Slide 31: Hotel Details (Hokkaido & Tohoku Region)

    Hotel Details (Hokkaido & Tohoku Region) A-2 Nest Hotel Sapporo Odori Annual Operating Results (Aug 2015 to Jul 2016) Occupancy (le ft, %) ADR (r ight, ye n) RevPAR (r ight, yen) 100 18,000 95 15,000 90 12,000 85 9,000 80 6,000 75 3,000 Aug 20 15 Nov 20 15 Feb 2016 May 20 16 Converted 12 twin-bed ro

  32. Slide 32: Hotel Details (Hokuriku & Tokai Region)

    Hotel Details (Hokuriku & Tokai Region) D-1 Comfort Hotel Hamamatsu Annual Operating Results (Aug 2015 to Jul 2016) Occupancy (le ft, %) ADR (r ight, ye n) RevPAR (r ight, yen) 100 12,000 90 10,000 80 8,000 70 6,000 60 4,000 50 2,000 Aug 20 15 Nov 20 15 Feb 2016 May 20 16 D-2 Hotel Wing Internationa

  33. Slide 33: Hotel Details (Kinki Region)

    Hotel Details (Kinki Region) E-1 Smile Hotel Kyoto Shijo Annual Operating Results (Aug 2015 to Jul 2016) Occupancy (le ft, %) ADR (r ight, ye n) RevPAR (r ight, yen) 101 .0 25,000 100 .5 20,000 100 .0 15,000 99.5 10,000 99.0 5,000 Aug 20 15 Nov 20 15 Feb 2016 May 20 16 E-2 Hotel Vista Premio Kyoto A

  34. Slide 34: Hotel Details (Kinki Region)

    Hotel Details (Kinki Region) E-3 Chisun Inn Osaka Hommachi Annual Operating Results (Aug 2015 to Jul 2016) Occupancy (le ft, %) ADR (r ight, ye n) RevPAR (r ight, yen) 100 12,000 90 10,000 80 8,000 70 6,000 60 4,000 50 2,000 Aug 20 15 Nov 20 15 Feb 2016 May 20 16 E-4 Hotel Suave Kobe Asuta Annual Op

  35. Slide 35: Hotel Details (Kyushu & Okinawa Region)

    Hotel Details (Kyushu & Okinawa Region) G-1 Valie Hotel Tenjin Annual Operating Results (Aug 2015 to Jul 2016) Occupancy (le ft, %) ADR (r ight, ye n) RevPAR (r ight, yen) 100 12,000 90 10,000 80 8,000 70 6,000 60 4,000 50 2,000 Aug 20 15 Nov 20 15 Feb 2016 May 20 16 Newly opened a restaurant and a

  36. Slide 36: Hotel Details (Newly-Acquired Assets)

    Hotel Details (Newly-Acquired Assets) Hokkaido & Tohoku Region: A-3 Comfort Hotel Kushiro Location Kushiro, Hokkaido Hotel Type Stay-Only Guest Rooms 126 Leasable Area 3,1805.58 m 2 Structure RC, 9F Contract Fixed Rent Acquisition Price 300 mm yen Appraisal Value 413 mm yen NOI Yield 4.8% Tokyo Regi

  37. Slide 37: Hotel Details (Newly-Acquired Assets)

    Hotel Details (Newly-Acquired Assets) Tokyo Region: C-2 Smile Hotel Asakusa Location Taito-ku, Tokyo Hotel Type Stay-Only Guest Rooms 96 Leasable Area 1,793.43 m 2 Structure SRC, 10F Contract Fixed + Variable Rent Acquisition Price 1,920 mm yen Appraisal Value 2,020 mm yen NOI Yield 3.7% Tokyo Regio

  38. Slide 38: Hotel Details (Newly-Acquired Assets)

    Hotel Details (Newly-Acquired Assets) Hokuriku & Tokai Region: D-3 Comfort Hotel Central International Airport Location Tokoname, Aichi Hotel Type Stay-Only Guest Rooms 346 Leasable Area 11,599.63 m 2 Structure RC, 8F Contract Fixed Rent Acquisition Price 5,308 mm yen Appraisal Value 5,770 mm yen NO

  39. Slide 39: Hotel Details (Newly-Acquired Assets)

    Hotel Details (Newly-Acquired Assets) Kinki Region: E-5 Nest Hotel Osaka Shinsaibashi Location Osaka, Osaka Hotel Type Stay-Only Guest Rooms 302 Leasable Area 8,057.26 m 2 Structure SRC, 13F Contract Fixed + Variable Rent Acquisition Price 7,600 mm yen Appraisal Value 7,660 mm yen NOI Yield 4.6% Chu

  40. Slide 40: Hotel Details (Newly-Acquired Assets)

    Hotel Details (Newly-Acquired Assets) Chugoku & Shikoku Region: F-2 Nest Hotel Matsuyama Location Matsuyama, Ehime Hotel Type Stay-Only Guest Rooms 190 Leasable Area 6,671.94 m 2 Structure RC, 11F Contract Fixed + Variable Rent Acquisition Price 1,610 mm yen Appraisal Value 1,640 mm yen NOI Yield 5.

  41. Slide 41: Portfolio Summary (as of July 31, 2016)

    Portfolio Summary (as of July 31, 2016) As of July 31, 2016 Acquisition Leasable Jul 2016 Appraisal No. by Book Value Occupancy No. Asset Region Hotel Type Contract Location Price Area Region (mm yen) (%) Value Cap rate (mm yen) (m 2) (mm yen) (%) Hokkaido & Variable + A-1 004 Nest Hotel Sapporo Eki

  42. Slide 42: Portfolio Summary (Newly-Acquired Assets)

    Portfolio Summary (Newly-Acquired Assets) As of August 17, 2016 Acquisition Leasable Aug 2016 Appraisal No. by Acquisition Occupancy No. Asset Region Hotel Type Contract Location Price Area Value Cap rate Region Date (%) (mm yen) (m 2) (mm yen) (%) Hokkaido & A-3 018 Comfort Hotel Kushiro Stay-Only

  43. Slide 43: Individual Hotel Financials

    Individual Hotel Financialsは当初予想より9.4%上昇 (thousand yen) No. A-1 A-2 D-1 E-1 E-2 E-3 G-1 Total Nest Hotel Nest Hotel Comfort Chisun Inn Other Smile Hotel Hotel Vista Valie Hotel Property Sapporo Sapporo Hotel Osaka Kyoto Shijo Premio Kyoto Tenjin Ekimae Odori Hamamatsu Hommachi Real Estate (A) Manage

  44. Slide 44: Contractual Terms and RevPAR, ADR, & Occupancy Trends

    Contractual Terms and RevPAR, ADR, & Occupancy Trends Contractual Terms (thousand yen) January 2016 July 2016 Revenue Ratio Revenue Ratio Fixed Rent 131,079 66.2% 423,063 54.6% Fixed Rent from Each Tenant 119,616 60.4% 387,253 50.0% Other (Rent from Retail Tenants) 11,463 5.8% 35,810 4.6% Variable R

  45. Slide 45: Hotel Market Environment

    Hotel Market Environment © 2016 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 45

  46. Slide 46: Hotel Market Environment (1)

    Hotel Market Environment (1) Trends in Number of Guests per Region of Portfolio Asset (1,000 persons) (1,000 persons) (1,000 persons) (1,000 persons) Hokkaido Tokyo Shizuoka Aichi 5,000 5,000 5,000 5,000 3,917 4,070 4,000 4,000 4,000 4,000 3,000 2,937 3,000 3,000 3,000 1,802 2,180 2,000 2,000 2,000

  47. Slide 47: Hotel Market Environment (2)

    Hotel Market Environment (2) Record-High 20mm Inbound Tourists Visited Japan in 2015, with 2016 Seeing Continued Growth No. of Guests Staying at Domestic Hotels No. of Inbound Tourists (mm persons) (mm persons) 500 100 ■ Government Target 450 80 420 382 396 400 60 349 360 60 339 350 40 310 301 40 30

  48. Slide 48: Additional Loan Details

    Additional Loan Details © 2016 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 48

  49. Slide 49: Loan Details (1)

    Loan Details (1) As of July 31, 2016 Balance Borrowing Lender Borrowing Rate Drawdown Date Maturity Date (mm yen) Term Loan I SMBC,Mizuho, Shinsei, Resona 3,250 0.63182% November 30, 2015 November 30, 2018 Term Loan II SMBC, Mizuho,Shinsei,Resona 5,250 1.08000% November 30, 2015 November 30, 2020 To

  50. Slide 50: Loan Details (2)

    Loan Details (2) Lender Formation Contractual Terms (As of July 31, 2016) (As of August 17, 2016) (As of July 31, 2016) (As of August 17, 2016) Nishi-Nippon City Bank of Fukuoka 3% 3% Resona 10% Resona 11% Variable Shinsei Variable 15% SMBC Rent Rent SMBC Shinsei 39% 38% 27% 40% 12% Fixed Fixed Rent

  51. Slide 51: Portfolio Strategy/Asset Acquisition/Shareholder Composition

    Portfolio Strategy/Asset Acquisition/Shareholder Composition © 2016 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 51

  52. Slide 52: Ichigo Hotel REIT Portfolio Strategy

    Ichigo Hotel REIT Portfolio Strategy Initial Focus Primarily on Stay-Only Hotels that Deliver Both Earnings Stability and Income Growth Growth Potential Full-Service Hotels Located in or near train stations, tourist destinations, business centers, Resort Hotels government offices, shopping districts

  53. Slide 53: Hard/Soft Factors Considered in Asset Acquisitions

    Hard/Soft Factors Considered in Asset Acquisitions Hard Location Competitiveness Location Is the asset located near an airport, train station, business center, etc., and is it likely there will be sufficient regular customer traffic? Hard Physical Condition of Building Building What is the physical

  54. Slide 54: Shareholder Composition (as of July 31, 2016)

    Shareholder Composition (as of July 31, 2016) Major Shareholders Shares Held by Shareholder Type Name Shares % Domestic Individuals 1 Japan Trustee Services Bank, Ltd., Trust Account 24,975 18% & Others Foreign 18,104 Corporations Trust & Custody Service Bank, Ltd., Securities Investment 2 18,054 13

  55. Slide 55: Ichigo Hotel REIT Overview

    Ichigo Hotel REIT Overview Investment Corporation 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 Compa

  56. Slide 56: MEMO

    MEMO © 2016 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 56

  57. Slide 57: MEMO

    MEMO © 2016 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 57

  58. Slide 58: MEMO

    MEMO © 2016 Ichigo Investment Advisors Co., Ltd. Ichigo Hotel REIT Investment Corporation All rights reserved. 58

  59. Slide 59: 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 a solicitation of an offer to buy any securities of Ichigo Hotel REIT Investment Corporation (Ichigo Hotel REIT). These materials may contain f

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