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.

August 27, 2019
REIT Issuer
Ichigo 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: Hiroto Tajitsu, Head of Administration
Tel: +81-3-3502-4892

Hotel Sale (Hotel Vista Premio Kyoto)
Ichigo Hotel decided today to sell Hotel Vista Premio Kyoto for JPY 4.5 billion. The
sale is being executed at 1.3X book value and 1.2X appraisal value, generating gains onsale of c. JPY 660 million in the January 2020 fiscal period.
1. Sale Summary
Hotel Name
Hotel Vista Premio Kyoto
Hotel No.
E-2 002
Hotel Type
Stay-Only
Date Built
June 2008
Form of Ownership
Trust beneficiary interest in real estate (juekiken)
Acquisition DateNovember 30, 2015
1Appraisal Value
JPY 3,820,000,000
2Sale Price
JPY 4,500,000,000
3Book Value
JPY 3,576,737,000
4Gains on Salec. JPY 660 million
Buyer
Third-Party Japanese SPCBroker
Third-Party Japanese Company
Contract Date
August 27, 2019
Transaction Date
October 31, 2019
Closing Date
October 31, 2019
Transaction Method
Sale of trust beneficiary interest in real estate
1Appraisal Value is as calculated by Daiwa Real Estate Appraisal Co., Ltd. as of July
31, 2019, and is compliant with the appraisal guidelines of Ichigo Investment Advisors(IIA) as well as the rules of The Investment Trusts Association, Japan.
2Sale Price excludes incidental expenses such as fees and property, city planning, andconsumption taxes.
3Book Value is an estimate based on the most recent book value (July 2019 fiscal
period-end), adjusted for expected capital expenditures and depreciation through theTransaction Date.
1

4

Gains on Sale are an estimate, calculated as the Sale Price less Book Value andestimated sale expenses, and are subject to change.

2. Sale Rationale
Ichigo Hotel is committed to growing value for its shareholders. Consistent with thiscommitment, it became Japan’s second J-REIT to conduct a share buyback in October
2017, and became the first (and still only) J-REIT to deploy a no fixed fee, performancefee-only AM fee structure in 2018.
In further keeping with this commitment to serve Ichigo Hotel shareholders, Ichigo
Hotel is working to increase the stability of its portfolio via geographic diversification.
The sale of the Hotel Vista Premio Kyoto will decrease Ichigo Hotel’s holdings in theKyoto/Osaka area, and comes after Ichigo Hotel increased its holdings in two otherregional cities by acquiring the Nest Hotel Kumamoto in April and the Valie Hotel
Hiroshima in July.
Since acquiring Hotel Vista Premio Kyoto in November 2015, Ichigo Hotel has worked
in partnership with the hotel operator to increase the hotel’s value, increasing its
appraisal value, as calculated by third-party appraisers, by 5.5% (JPY 200 million) sinceacquisition.
Having received an offer from a buyer that values the hotel at 1.3X book value and 1.2X
appraisal value, Ichigo Hotel has decided that it is in the best interest of shareholders tosell the hotel. The decision reflects Ichigo Hotel’s judgement that it has limited ability
to further exploit its capabilities in executing value-add renovations because the hotel’sremaining value-add potential is now very limited. Ichigo Hotel also took into
consideration the increasing hotel supply in the Kyoto/Osaka areas, which could
negatively affect the hotel’s long-term earnings potential as well as Ichigo Hotel’soverall portfolio performance. As a result, Ichigo Hotel decided to sell the hotel anddeploy the gains on sale towards growth investments that will further grow shareholder
value.
As a result of today’s sale, Ichigo Hotel expects to generate gains on sale of c. JPY 660
million in the January 2020 fiscal period, increasing net income by c. JPY 396 million(+49.4%).

2

3. Hotel Overview
Hotel Overview
Hotel Name
Hotel Vista Premio Kyoto
Form of Ownership
Trust beneficiary interest in real estate (juekiken)
457 Matsugae-cho, Kawaramachi-dori Rokkaku Nishi-Iru,
Address
Nakagyo-ku, Kyoto
Property RightFreehold1Area
1,004.91m2
LandZoning
Commercial
Coverage Ratio
80%
Floor Area Ratio 700%
Property Right
FreeholdUseHotel2
BuildingStructure
Steel/RC B1F/6F
Total Floor Area 3,867.66m2
June 26, 2008
Date Built
Number of Tenants
3 (as of July 31, 2019)
Minimum guaranteed rent: JPY 12,500,000
Monthly Rental Income3
Variable rent: 35% of amount in excess, when GOP
exceeds JPY165 million p.a.
Deposit
The lessee did not consent to disclosure.
Leasable Area
3,867.66m2
Leased Area
3,867.66m2
Mar 2019 Apr 2019 May 2019 Jun 2019 Jul 2019
Occupancy
100%
100%
100%
100%
100%
Acquisition Price
JPY 3,600 million
Appraiser
Daiwa Real Estate Appraisal Co., Ltd.
Appraisal Date
July 31, 2019
Value
JPY 3,820 million
1Includes driveway (approximately 11.2m2) pursuant to Article 42, Paragraph 2 of the
Building Standards Act.
2
Steel/RC = Steel-Reinforced Concrete
3Monthly rental income excludes that from retail sections of the hotel.

3Hotel Name
Appraisal Value
Appraiser
Appraisal Date

Appraisal Details
Hotel Vista Premio Kyoto
JPY 3,820 million
Daiwa Real Estate Appraisal Co., Ltd.
July 31, 2019
Amount (JPY)

Appraisal Value
Value by DirectCapitalization Method
IncomeMaximum
Obtainable
Rental Income
Vacancy LossExpenses
Administrativeand MaintenanceExpensesUtility Expenses
Repair Expenses
PM Fees
Leasing
Brokerage Fees
Taxes
Insurance
Premiums
Other Expenses
Net Operating
Income (NOI)
Income on
Investment ofDeposits
Received
CapitalExpenditures
Net Profit
Cap Rate
Value via DCF
Method

Notes
Based on a DCF valuation, which is more
3,820,000,000 relevant than accounting value, and verified
using a direct capitalization valuation
3,880,000,000
191,098,668
192,304,812
Retail section vacancy loss based on
1,206,144 vacancy rates and competitiveness versus
similar assets
23,717,416
1,684,742 JPY120/month per 3.3m2 of leasable area
– Not recorded as borne by tenant
on the average of past 12 years of
3,020,667 Basedengineering reports
1,440,000 Based on the contractual amountsection leasing brokerage fees based
324,990 Retailon expected turnover rate and similar assets
15,133,500 Based on FY2019 actual amounts
202,530 Based on the actual amountsof rental income (accounted for as a
1,910,987 1.0%
variable expense)
167,381,252
444,993 Based on 1.0% yieldon average renewal expense of the4,777,333 Basedpast 12 years in engineering reports
163,048,912
Based on transactions of similar assets andcomprehensive assessment of the asset’s
4.2% alocation,
its individual characteristics, andmarket trends
3,800,000,000

Discount Rate

Based on transactions of similar assets and4.0% the yields of financial assets with the asset’s
individual characteristics taken into account

Terminal Cap Rate

4.4% Based on risk-adjusted NOI
4

Value via Cost Approach
Land

Amount (JPY)
4,710,000,000
87.7%

Notes

Sum of building and Furniture, Fixtures, &12.2% Equipment (FF&E) values divided by sumof building, FF&E, and land values
Notes
While the Value via Cost Approach results in a higher valuation, the appraiser used theAppraisal Value because it was deemed to better reflect the expected return on theinvestment.
Building

4. Buyer Profile
Name

Relationship withIchigo Hotel or IIA

The buyer, a third-party Japanese SPC, did not provide
consent to disclose its name.
The buyer does not have any additional capital, personnel,or transactional relationships with Ichigo Hotel or IIArequiring disclosure under Tokyo Stock Exchange rules. Inaddition, the buyer 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.

5. Broker Profile
The broker is a third-party Japanese company, and does not have any additional capital,personnel, or transactional relationships with Ichigo Hotel or IIA requiring disclosure
under Tokyo Stock Exchange rules. In addition, the buyer 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.
6. Forward Commitment
Because the Transaction Date is October 31, 2019, the sale of Hotel Vista Premio Kyoto(the “Sale”) constitutes a “forward commitment” 1 by Ichigo Hotel as stipulated in the“Comprehensive Guidelines for Supervision of Financial Instruments BusinessOperators” by the Financial Services Agency.
In the event of a violation of the provisions of the Sale by Ichigo Hotel or the buyer, theother party shall have the right to terminate the Sale and claim an amount equivalent to20% of the purchase price as penalty.
Because Ichigo Hotel is the seller, it is highly unlikely that Ichigo Hotel will not be able
to fulfill its obligations under the Sale.
1Refers to a post-dated purchase and sales agreement under which payment andproperty delivery shall be made at least one month after the conclusion of theagreement, or any other agreement similar thereto.

7. Settlement Method
Lump-sum payment on closing date5

8. Use of Sale Proceeds
Ichigo Hotel will retain the sale proceeds as cash-on-hand for future use, including asset
acquisitions and value-add capex.
9. Earnings Outlook
The sale is forecast to generate gains on sale of c. JPY 660 million in the January 2020
fiscal period. Ichigo Hotel will distribute 100% of this as a dividend to its shareholders.
Because the closing date is October 31, 2019, the sale does not impact the July 2019fiscal period earnings forecast. The impact of the sale on the January 2020 fiscal period
is detailed in today’s announcement “Earnings Forecast Revision for the January 2020
Fiscal Period.”

6Post-Sale 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
Comfort Hotel Hamamatsu
Hotel Wing InternationalNagoya
Comfort 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
1,450300
1,490
3,910

Tokyo

Fixed Rent

1,360

2.7

Shizuoka

Fixed Rent

1,550

3.0

Aichi

Variable Rent

2,670

5.2

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

14.9

Okayama
Ehime
Hiroshima
Okayama
Hiroshima
Fukuoka
Okinawa
Kumamoto

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

1,200
1,610
1,800
1,725
1,500
1,380
3,7502,220
50,883

2.4
3.2
3.5
3.4
2.9
2.7
7.4
4.4
100.0

Hotel
No.1
A-1 004
A-2 008
A-3 018B-1 020
C-1 012
C-3 016
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 009G-2 013
G-3 023
1Court Hotel Kurashiki
Valie Hotel Hiroshima
Valie Hotel Tenjin
Nest Hotel Naha
Nest Hotel Kumamoto
Total 22 Hotels

LeaseTerms% ofPortfolio3
4.2
2.8
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

BKantoCDEFTokyo
Hokuriku/TokaiKinki
Chugoku/Shikoku

GKyushu/Okinawa

Prefectures
Hokkaido, Aomori, Iwate, Miyagi, Akita, Yamagata, Fukushima
Ibaraki, Tochigi, Gunma, Saitama, Chiba, Kanagawa, Yamanashi,Nagano, Niigata
Tokyo
Toyama, Ishikawa, Fukui, Gifu, Shizuoka, Aichi, Mie
Osaka, Hyogo, Kyoto, Shiga, Nara, Wakayama
Tottori, Shimane, Okayama, Hiroshima, Yamaguchi, Kagawa,Tokushima, Kochi, Ehime
Fukuoka, Saga, Nagasaki, Kumamoto, Oita, Miyazaki, Kagoshima,Okinawa
7

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 Price forthe portfolio, rounded to the nearest tenth.

8