Make The World
More Sustainable[Provisional Translation Only]
This English translation of the original Japanese document is provided solely for information purposes.
Should there be any discrepancies between this translation and the Japanese original, the latter shall prevail.

January 31, 2020
IssuerIchigo Hotel REIT Investment Corporation (“Ichigo Hotel,” 3463)
1-1-1 Uchisaiwaicho, Chiyoda-ku, Tokyo
Representative: Osamu Miyashita, Executive Director
www.ichigo-hotel.co.jp/english
Asset Management Company
Ichigo Investment Advisors Co., Ltd.
Representative: Hiroshi Iwai, President
Inquiries: Hidehito Iwasaka, Head of Ichigo Hotel
Tel: +81-3-3502-4892
Hotel Acquisition (HOTEL EMIT SHIBUYA)
Ichigo Hotel decided today to acquire the HOTEL EMIT SHIBUYA in central Tokyo.
1. Acquisition Summary
Hotel Name

HOTEL EMIT SHIBUYA

Hotel Number1

C-4 025

Hotel Type

Lodging-focused

Date Built

January 2018

Form of Ownership

Trust beneficiary interest in real estate (juekiken)

Appraisal Value2

JPY 4,200,000,000

Acquisition Price3

JPY 3,700,000,000

Seller4

Third-party Japanese company

Contract Date

January 31, 2020

Closing Date

February 25, 2020

Financing MethodCash-on-handSettlement Method

Lump-sum payment

1

The initial letter “C” is Ichigo Hotel’s region code for where the hotel is located, in
this case Tokyo. Please see page 10 for region code details.
2
Appraisal Value is calculated by Tanizawa Sogo Appraisal as of December 1, 2019,and is in compliance with the appraisal guidelines of Ichigo Investment Advisors(“IIA”) as well as the rules of the Investment Trusts Association of Japan.
3
Acquisition Price excludes incidental expenses such as fees and property, city
planning, and consumption taxes.
4The seller, a third-party Japanese company, did not provide consent to disclose its
name.
12. Acquisition Rationale
Ichigo Hotel continues to execute on its strategy to grow earnings and dividends for its
shareholders.
As part of that strategy, Ichigo Hotel is today acquiring the HOTEL EMIT SHIBUYA
near Shibuya Station, one of Tokyo’s top transportation hubs and retail and officecenters, and one which is expected to attract many visitors during the Tokyo Olympics.
Ichigo Hotel will acquire the hotel at 11% discount to appraisal value using proceedsfrom the sale of the Hotel Premio Vista Kyoto announced in the August 27, 2019 release“Hotel Sale (Hotel Premio Vista Kyoto).” Today’s acquisition is forecast to increase
Ichigo Hotel’s annual NOI by JPY 144 million.
The HOTEL EMIT SHIBUYA is a six-minute walk from Shibuya Station on the JR
Yamanote Line, Tokyu Toyoko Line, Keio Inokashira Line, and Tokyo Metro Subway
Lines. The hotel is located within one of Tokyo’s most popular retail and cultural
districts, and is within easy walking distance of two more, Harajuku and Omotesando.
The hotel is also near the headquarters of NHK, Japan’s national broadcaster, as well as
the NHK Studio Park, NHK Hall concert venue, Yoyogi National Stadium, Yoyogi Park,and Shibuya Public Hall theater. The prime location enables it to capture stable businessdemand as well as leisure demand.
As rapid re-development projects are underway around Shibuya Station, office andretail demand is expected to continue to grow. However, new supply of hotels is very
limited in the area, allowing Ichigo Hotel to benefit from ongoing visitor demand.
Tourist demand in Tokyo has been firm, with inbound demand forecast to continue
increasing. Shibuya will continue to attract inbound tourists given the popularity of its
retail and cultural offerings.
The hotel’s current operator is SHIDAX DAISHINTO HUMAN SERVICE Inc.
(“SHIDAX DHS”), a hotel operator in the SHIDAX Group. Ichigo Hotel will enter intoa lease contract with sponsor Ichigo’s hotel operator, Hakata Hotels, to take over thehotel’s operating rights. Hakata Hotels will subcontract hotel operations to SHIDAXDHS, which will continue operating the hotel.
Ichigo Hotel will work closely with Hakata Hotels and SHIDAX DHS to capture thecontinuing growth potential from inbound tourism.

2

3. Description and Location of the HOTEL EMIT SHIBUYAThe HOTEL EMIT SHIBUYA is located in the heart of Shibuya and caters to business,leisure, and inbound demand due to its convenient access to the NHK Broadcasting
Center, NHK Hall, Yoyogi National Stadium, Yoyogi Park, and Shibuya Public Hall.
The hotel is within walking distance from Shibuya station and is located near
Omotesando and Harajuku, two other popular shopping and cultural areas. The guest
rooms are mostly single-bed rooms, and with some double rooms, capable ofaccommodating the diverse needs of travelers. The guest rooms feature stylish room
decor with furniture by Japan’s major interior goods brand, ACME Furniture.
The HOTEL EMIT SHIBUYA is a BELS-certified asset. BELS (Building-housing
Energy-efficiency Labeling System) is a public evaluation system that assesses theenergy efficiency of nonresidential buildings by assigning a ranking of from one to fivestars. The HOTEL EMIT SHIBUYA was ranked four stars.

3Legal Form of Asset
Trustee
Period of Trust Contract
Location
Property RightAreaLandZoningCoverage Ratio
Floor Area Ratio
Property RightUse
Building Structure1
Total Floor Area
Date Built
Appraiser
Appraisal ValueAppraisal Date
Value by Direct Capitalization
MethodNumber of Guest Rooms
Architect2
Builder2
Structural Designer2
Inspection Agency2
PML (Assessor)
Collateral
Tenant Overview
Number of Tenants

Rental Income3

Deposit
Leasable Area
Leased Area
Occupancy

Hotel Details
Trust beneficiary interest in real estate (juekiken)
Mitsubishi UFJ Trust and Banking Corporation
February 25, 2020 – February 28, 2030 (Expected)
1-8-11 Jinnan, Shibuya-ku, Tokyo
Freehold
388.82m2
Commercial
100%366%
Freehold
HotelSteel 7F
1,470.52m2
January 24, 2018
Tanizawa Sogo Appraisal Co., Ltd.
JPY 4,200,000,000
December 1, 2019
JPY 4,340,000,000
72
K PARTNERS ARCHITECTS Co., Ltd.
Nakano Corporation
K PARTNERS ARCHITECTS Co., Ltd.
Japan ERI Co., Ltd.
6.57% (Sompo Risk Management & Health Care Inc.)
None
Lease Details
1
Minimum Guaranteed Rent*: JPY 73,792,067 p.a.
Variable Rent: Monthly GOP (Gross Operating Profit) –(Monthly Minimum Guaranteed Rent + Percentage ofMonthly GOP)
* Minimum Guaranteed Rent from March 1, 2020 toFebruary 28, 2021
No lease or guarantee deposit
1,470.52m2
1,470.52m2
AugustSeptember October November December
2019201920192019
2019
100%
100%
100%
100%100%4

Property Management
Company
Master Lease Company
Master Lease TypeAppraisal NOI Yield4
Post-Depreciation NOI Yield5

Building Management & Strategy Inc.

Ichigo Hotel REIT Investment Corporation
Pass-through
4.1%
3.7%
Special Items
An engineering report indicates the following issues with the building. The seller has agreed torectify them at the seller’s expense by the acquisition date.
1. An outdoor signboard permit has not been confirmed for the hotel’s outdoor signboards
exceeding a total size of 10m2.
2. A polycarbonate roof over guest washing/drying machines on the west side of the building
should be considered a building extension. However, the hotel has not applied for a permit.
3. A polycarbonate roof over a washing machine on the north side of the building should beconsidered a building extension. However, the hotel has not applied for a permit.
4. A tent-type storage space under an outdoor stairway should be considered a building
extension. However, the hotel has not applied for a permit.
5. The studded paving blocks (for visually handicapped people) may not be properly placedon an access ramp between a public road and the hotel entrance intercom.
6. There may be less than the required 150mm of space between a water storage tank and adrainage pipe.
1

Building Structure refers to the structure described in the real estate registry.
Names of the architect, builder, structural designer, and inspection agency are those as ofwhen the building was built.
3
Rental Income includes all rent from hotel facilities.
4
Appraisal NOI Yield = Appraisal NOI (Net Operating Income) in the real estate appraisal
report divided by the Acquisition Price. This figure is independently calculated by IIA
based upon the above data and is therefore not in the real estate appraisal report itself.
5
Post-Depreciation NOI Yield = Appraisal NOI in the real estate appraisal report minus
Depreciation, divided by the Acquisition Price. Depreciation is independently calculated
by IIA using the straight-line method, and the Post-Depreciation NOI Yield is calculated
by IIA based upon the above data and are therefore not in the real estate appraisal report
itself.
25Hotel Name
Appraisal Value
Appraiser
Appraisal Date

Appraisal Value
Value by Direct
Capitalization Method
IncomeMaximum
Obtainable Rental
IncomeVacancy LossExpenses
Administrative &MaintenanceExpensesUtility Expenses
Repair Expenses
PM FeeLeasing
Brokerage Fees
Taxes

Appraisal Details
HOTEL EMIT SHIBUYAJPY 4,200,000,000
Tanizawa Sogo Appraisal Co., Ltd.
December 1, 2019
AmountNote
Based on a DCF valuation, and verified
JPY 4,200,000,000 using a direct capitalization valuation
and DCF valuation
JPY 4,340,000,000
JPY 165,640,008
JPY 165,640,008–
JPY 12,699,510– Borne by tenant– Borne by tenant
Based on the average of the past 12
1,250,000 years of engineering reports and pastexpenses at similar assets
1,200,000 Based on estimates–
9,296,200

Based on FY2019 actual amounts(including depreciable asset tax)

Insurance
Premiums

125,110 Based on insurance estimates

Other Expenses

828,200

Net Operating
Income (NOI)
Income on
Investment ofDeposits Received
CapitalExpenditure
Net Profit

0.3% of rental income (accounted for asa variable expense)

JPY 152,940,498–Based on the average of the past 12
JPY 5,380,000 years of engineering reports and past
expenditures at similar assets
JPY 147,560,498
Based on transactions of similar assets
and comprehensive assessment of the3.4%
asset’s location, its individual
characteristics, and property rights

Cap Rate

6

Value via DCF Method

JPY 4,140,000,000

Discount Rate

Based on transactions of similar assets
and the yields of financial assets with3.5%
the asset’s individual characteristics
taken into account

Terminal Cap Rate

3.6% Based upon risk-adjusted NOI

Value via Cost ApproachLandJPY 4,190,000,000
87.0%
Sum of building and FF&E values
13.0% divided by sum of building, FF&E, andland values

BuildingNotes
None
4. Seller Profile
Name

Third-party Japanese company

Relationship withIchigo Hotel or IIA

The seller does not have any capital, personnel, or business
relationship of note with Ichigo Hotel or IIA. In addition, theseller is not a related party as defined in the Enforcement
Ordinance of the Investment Trust and Investment Corporation
Law or the internal rules of the Asset Management Company.

5. Ownership History
The HOTEL EMIT SHIBUYA was not acquired from a related-party seller.
6. Broker Profile
Name

The broker did not provide consent to disclose its name.

Relationship withIchigo Hotel or IIA

The broker does not have any material capital, personnel, ortransactional relationship with Ichigo Hotel or IIA. In
addition, the broker is not a related party as defined in theEnforcement Ordinance of the Investment Trust andInvestment Corporation Law or the internal rules of theAsset Management Company.

Broker Fee

The broker did not provide consent to disclose the fee.

7. Related-Party Transaction
Hakata Hotels, a consolidated subsidiary of Ichigo, IIA’s parent company, will become
the tenant of the hotel as of February 25, 2020. Because Hakata Hotels is a related party
as defined in the Ordinance of the Investment Trust and Investment Corporation Law
and IIA’s internal rules, Ichigo Hotel obtained prior approval as a related-party
transaction from IIA’s Board of Directors.

7

8. Acquisition Schedule
Ichigo Hotel Board Resolution Date
Contract Date
Acquisition and Settlement Date

January 31, 2020
January 31, 2020
February 25, 2020 (Expected)

9. Earnings Outlook
The acquisition of the HOTEL EMIT SHIBUYA is forecast to increase Ichigo Hotel’s
July 2020 fiscal period NOI and dividend by c. JPY 60 million and JPY 100,respectively. As the acquisition date is February 25, 2020, the acquisition will not
impact January 2020 fiscal period earnings.
While Ichigo Hotel is not currently revising its existing earnings forecast for the July
2020 fiscal period, the HOTEL EMIT SHIBUYA has a variable-rent lease agreement,and Ichigo Hotel will work with Hakata Hotels and the current hotel operator to drive
further value growth. Should an earnings forecast revision become necessary, Ichigo
Hotel will promptly disclose the details.
Appendix A: Engineering Report Summary
Inspector Name
Inspection Date
Short-Term Repair Expenses1
Long-Term Repair Expenses2
Current Replacement Cost

Tokio Marine & Nichido Risk Consulting Co., Ltd.
December 2019–
JPY 52,278,000
JPY 499,400,000

1

Short-Term Repair Expenses are defined as repair expenses considered necessary
beyond the scope of ordinary maintenance within a year from the time of inspection.
2Long-Term Repair Expenses are defined as cumulative repair expenses considerednecessary for the maintenance of the hotel within twelve years from the time ofinspection.

8Appendix B: Post-Acquisition Portfolio
Hotel Name

Prefecture

Nest Hotel Sapporo Ekimae
Nest Hotel Sapporo Odori
Comfort Hotel Kushiro
Grandpark-Inn Yokohama
Smile Hotel Tokyo Asagaya
Hotel Livemax NihombashiHakozaki
HOTEL EMIT SHIBUYA
Comfort Hotel Hamamatsu
Hotel Wing International
NagoyaComfort Hotel Central
International Airport
Comfort Hotel Suzuka
Smile Hotel Kyoto Shijo
Chisun Inn Osaka
HommachiHotel Wing International
Kobe Shin Nagata Ekimae
Nest Hotel Osaka
Shinsaibashi
Comfort Hotel Okayama
Nest Hotel Matsuyama
Urbain Hiroshima Executive

Hokkaido
Hokkaido
Hokkaido
Kanagawa
Tokyo

Variable Rent
Variable Rent
Fixed Rent
Fixed Rent
Variable Rent

Acquisition
Price2(JPY million)
2,160
1,450
300
1,490
3,910

Tokyo

Fixed Rent

1,360

2.7

Tokyo
Shizuoka

Variable Rent
Fixed Rent

3,700
1,550

7.3
3.0

Aichi

Variable Rent

2,670

5.3

Aichi

Fixed Rent

5,308

10.4

MieKyoto

Fixed Rent
Variable Rent

300
4,480

0.6
8.8

Osaka

Variable Rent

1,630

3.2

Hyogo

Variable Rent

1,490

2.9

Osaka

Variable Rent

7,600

15.0

OkayamaEhimeHiroshima
Okayama
Hiroshima
Fukuoka
Kumamoto

Fixed Rent
Variable Rent
Fixed Rent
Variable Rent
Variable Rent
Variable Rent
Variable Rent

1,200
1,610
1,800
1,725
1,500
1,380
2,220
50,833

2.4
3.2
3.5
3.4
3.0
2.7
4.4
100.0

Hotel
No.1
A-1 004
A-2 008
A-3 018B-1 020
C-1 012
C-3 016
C-4 025
D-1 006
D-2 003
D-3 011
D-4 019E-1 001E-3 005
E-4 007
E-5 010F-1 017
F-2 015
F-3 021F-4 022
F-5 024
G-1 009
G-3 023
1Court Hotel Kurashiki
Valie Hotel Hiroshima
Valie Hotel Tenjin
Nest Hotel Kumamoto
Total 22 Hotels

LeaseTerms% ofPortfolio3
4.2
2.9
0.6
2.9
7.7

The initial letter (A, B, etc.) is a region code which identifies the area in which the hotel is located.

CodeARegion
Hokkaido/Tohoku

B

KantoCDE
F

Tokyo
Hokuriku/TokaiKinki
Chugoku/Shikoku

G

Kyushu/Okinawa

Prefectures
Hokkaido, Aomori, Iwate, Miyagi, Akita, Yamagata, Fukushima
Ibaraki, Tochigi, Gunma, Saitama, Chiba, Kanagawa, Yamanashi,Nagano, Niigata
TokyoToyama, Ishikawa, Fukui, Gifu, Shizuoka, Aichi, MieOsaka, Hyogo, Kyoto, Shiga, Nara, Wakayama
Tottori, Shimane, Okayama, Hiroshima, Yamaguchi, Kagawa,Tokushima, Kochi, Ehime
Fukuoka, Saga, Nagasaki, Kumamoto, Oita, Miyazaki, Kagoshima,Okinawa
9

2Acquisition Price is the price as indicated in the purchase and sales agreement for the hotel(excluding fees and incidental expenses such as property, city planning, and consumption taxes).
3% of Portfolio is the Acquisition Price of each hotel as a percentage of the Total Acquisition Pricefor the portfolio, rounded to the nearest tenth.

Appendix C: Annual Hotel Guests in Tokyo(million)
Japanese Guests (Left Axis)

Inbound Guests (Right Axis)
30

60.0
50.0
41.1

41.5

40.0

39.5

40.2

42.9

25

23.2

20

19.8
17.6

30.0
20.0

18.1

15

13.2

105

10.0
0.00
2014

2015

2016

2017

2018

Note: Data prepared by IIA based on the Japan Tourism Agency’s “Statistical Survey ofTravelers,” 2014 – 2018.

10