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 30, 2020
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: Hidehito Iwasaka, Head of Ichigo Hotel
Tel: +81-3-3502-4892

Hotel Sale (Nest Hotel Naha)
Ichigo Hotel decided today to sell Nest Hotel Naha for JPY 5.3 billion. The sale is being
executed at 1.4X book value and 1.3X appraisal value, generating gains on sale ofc. JPY 1.26 billion in the January 2020 fiscal period.
1. Sale Summary
Hotel Name
Nest Hotel Naha
Hotel No.
G-2 013
Hotel Type
Lodging-Focused
Date Built
February 1975
Form of Ownership
Trust beneficiary interest in real estate (juekiken)
Acquisition Date
August 17, 2016
1Appraisal Value
JPY 4,190,000,000
2Sale Price
JPY 5,285,000,000
Book Value3
JPY 3,787,815,000
Gains on Sale4
c. JPY 1.26 billion
Buyer
Third-Party Japanese CompanyBroker
N/A
Contract Date
January 30, 2020
Transaction Date
January 31, 2020
Closing Date
January 31, 2020
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.
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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 working to increase the stability of its portfolio to maximize value for itsshareholders. To this end, Ichigo Hotel acquired the Nest Hotel Kumamoto in April
2019 and the Valie Hotel Hiroshima in July 2019, and sold the Hotel Vista Premio
Kyoto in August 2019. Ichigo Hotel is selling the Nest Hotel Naha to further diversify
its portfolio.
The Nest Hotel Naha is a lodging-focused hotel located in the center of Naha City and aseven-minute drive from the Naha Airport. Since acquiring the Nest Hotel Naha inAugust 2016, Ichigo Hotel has worked in partnership with the hotel operator to increase
the hotel’s value, raising its appraisal value, as calculated by third-party appraisers, by
11% (JPY 420 million) since acquisition.
Having received an offer from a buyer that values the hotel at 1.3X appraisal value and1.4X book value, Ichigo Hotel has decided that it can best serve the interests ofshareholders by selling the hotel. The decision reflects Ichigo Hotel’s judgement that it
has already executed on most of the opportunities for value-add renovations, leaving
limited potential for further earnings growth. Ichigo Hotel also took into considerationthat the expected gains on sale would equal ten periods (i.e., five years) worth of NOI.
As a result, Ichigo Hotel decided to sell the hotel and deploy the gains on sale towards
growth investments that will create more value for shareholders.
As a result of today’s sale, Ichigo Hotel expects to generate gains on sale of c. JPY 1.26
billion in the January 2020 fiscal period.
Ichigo Hotel will continue its actions to drive earnings at its hotels and maximize
shareholder value.

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3. Hotel Overview
Hotel Overview
Hotel Name
Nest Hotel Naha
Form of Ownership
Trust beneficiary interest in real estate (juekiken)
Address
1-6-1 Nishi, Naha City, Okinawa
Property Right
FreeholdArea
2,322.62m2
LandZoning
Commercial
Coverage Ratio
80%
Floor Area Ratio 400%
Property Right
Freehold
Use
Hotel
1
Building
Structure
Steel/RC 11F
Total Floor Area 9,240.20m2
February 28, 1975
Date Built
Number of Tenants
1
Fixed Rent: JPY 108,391,987 p.a.
Variable Rent: Monthly GOP (Gross Operating Profit) –Monthly Rental Income(Monthly Minimum Guaranteed Rent + Percentage ofMonthly GOP)
Deposit
Lease deposit: 25,200,000 yen, No guarantee deposit
Leasable Area
9,240.20m2
Leased Area
9,240.20m2
Aug 2019 Sep 2019 Oct 2019 Nov 2019 Dec 2019
Occupancy
100%100%100%100%100%Acquisition Price
JPY 3,750 million
Appraiser
Daiwa Real Estate Appraisal Co., Ltd.
Appraisal Date
July 31, 2019Value
JPY 4,190 million
1
Steel/RC = Steel-Reinforced Concrete

3Hotel Name
Appraisal Value
Appraiser
Appraisal Date

Appraisal Details
Nest Hotel Naha
JPY 4,190 million
Daiwa Real Estate Appraisal Co., Ltd.
July 31, 2019
Amount (JPY)

Appraisal Value

Notes
Based on a DCF valuation, which is more
4,190,000,000 relevant than accounting value, and verified
using a direct capitalization valuation

Value by Direct
Capitalization Method

4,230,000,000

IncomeMaximum
Obtainable
Rental Income
Vacancy LossExpenses

268,800,000

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
Method268,800,000–
18,664,490– Not recorded as borne by tenant– Not recorded as borne by tenant
on the average of past 12 years of
6,442,000 Basedengineering reports
1,440,000 Based on the contractual amount–
8,963,500 Based on FY2019 actual amounts
474,990 Based on the actual amountsof rental income (accounted for as a
1,344,000 0.5%
variable expense)
250,135,510
252,000 Based on 1.0% yieldon average renewal expense of the25,949,641 Basedpast 12 years in engineering reports
224,437,869
Based on transactions of similar assets andcomprehensive assessment of the asset’s
5.3% alocation,
its individual characteristics, andmarket trends
4,170,000,000

Discount Rate

Based on transactions of similar assets and5.1% the yields of financial assets with the asset’s
individual characteristics taken into account

Terminal Cap Rate

5.5% Based on risk-adjusted NOI4

Value via Cost Approach
Land

Amount (JPY)1,470,000,000
80.4%

Notes

Sum of building and Furniture, Fixtures, &19.6% Equipment (FF&E) values divided by sumof building, FF&E, and land values
Notes
Based on the hotel’s competitiveness in the leasing and acquisition market, the appraisal
was made based on the assumption that maximized utilization will continue as is, and a
DCF valuation (verified using a direct capitalization valuation) was the primary valuation
methodology employed, because it reflects market value and is thus more relevant thanaccounting value.
Building

4. Buyer Profile
Name

The buyer, a third-party Japanese company, did not provide
consent to disclose its name.

Relationship withIchigo Hotel or IIA

The buyer does not have any additional capital, personnel,or transactional relationships with Ichigo Hotel or IIA
requiring 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
N/A
6. Settlement Method
Lump-sum payment on closing date
7. 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.
8. Earnings Outlook
The sale is forecast to generate gains on sale of c. JPY 1.26 billion in the January 2020
fiscal period. Ichigo Hotel will distribute 100% of this as a dividend to its shareholders.
The impact of the sale on the January 2020 and July 2020 fiscal period is detailed intoday’s announcement “Earnings Forecast Revisions for the January 2020 and July
2020 Fiscal Periods.”

5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
1,450
300
1,490
3,910

Tokyo

Fixed Rent

1,360

2.9

Shizuoka

Fixed Rent

1,550

3.3

Aichi

Variable Rent

2,670

5.7

Aichi

Fixed Rent

5,308

11.3

MieKyoto

Fixed Rent
Variable Rent

300
4,480

0.6
9.5

Osaka

Variable Rent

1,630

3.5

Hyogo

Variable Rent

1,490

3.2

Osaka

Variable Rent

7,600

16.1

Okayama
Ehime
Hiroshima
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
47,133

2.5
3.4
3.8
3.7
3.2
2.9
4.7
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 017F-2 015
F-3 021F-4 022
F-5 024
G-1 009
G-3 023
1

Court Hotel Kurashiki
Valie Hotel Hiroshima
Valie Hotel Tenjin
Nest Hotel Kumamoto
Total 21 Hotels

LeaseTerms% ofPortfolio3
4.6
3.1
0.6
3.2
8.3

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

CodeARegion
Hokkaido/Tohoku

B

Kanto

CDEF

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,
Okinawa6

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.

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