Ichigo Preserves and Improves Real Estate[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.

September 26, 2018
IssuerIchigo Office REIT Investment Corporation (“Ichigo Office,” 8975)
1-1-1 Uchisaiwaicho, Chiyoda-ku, Tokyo
Representative: Yoshihiro Takatsuka, Executive Director
www.ichigo-office.co.jp/english
Asset Management Company
Ichigo Investment Advisors Co., Ltd.
Representative: Wataru Orii, President
Inquiries: Hiroto Tajitsu, Head of Administration
Tel: +81-3-3502-4891

Asset Acquisition (Ichigo Uchi Honmachi Building)
Ichigo Investment Advisors (“IIA”), the asset management company of Ichigo Office,decided today to acquire the Ichigo Uchi Honmachi Building.
1. Asset Acquisition Summary
Asset Number
Asset Name1

O-91
Ichigo Uchi Honmachi Building

Asset Type

OfficeDate Built

May 1992

Legal Form of Asset Trust beneficiary interest in real estate (juekiken)
Appraisal Value2

JPY 2,000 million

Acquisition Price3

JPY 1,900 million

Seller4

Domestic special purpose company

Contract Date

September 26, 2018

Closing Date

September 28, 2018

Financing Method5

Cash-on-hand and loans

Settlement Method

Lump-sum payment

1

Ichigo Office will change the building name from the Cross Road Uchi Honmachi
Building to the Ichigo Uchi Honmachi Building after the acquisition. For purposes ofthis release, the building is referred to as the Ichigo Uchi Honmachi Building.
2
Appraisal value is calculated by Daiwa Real Estate Appraisal as of September 1, 2018,
and is compliant with the appraisal guidelines of IIA as well as the rules of The
Investment Trusts Association, Japan.
3
Acquisition Price excludes incidental expenses such as fees and property, city
planning, and consumption taxes.

1

4

The seller, a domestic special purpose company, did not provide consent to disclose its
name.
5
For financing details, please refer to today’s release “New Loans.”
2. Acquisition Rationale
As a specialized office REIT that focuses on mid-size offices, Ichigo Office continues to
execute on its strategy to grow shareholder value through strong asset acquisitions. The
asset being acquired is located in Chuo-ku, Osaka, an area with strong tenant demand
and upside rent potential. Post-acquisition, Ichigo Office expects to drive further
earnings growth through value-add capex.
Including the acquisition of two mid-size office buildings during the October 2018
fiscal period, Ichigo Office’s post-acquisition portfolio totals 77 assets, 93% of which
are offices. Ichigo Office expects to continue to grow its specialized, mid-size office
portfolio to drive further earnings growth.
The Ichigo Uchi Honmachi Building’s tenants fully comply with the “Real Investment
Trust Issuer Management Report” (Japanese only) submitted on July 26, 2018.
Please refer to Section 3 “Details of the Ichigo Uchi Honmachi Building” immediately
below for additional details on the asset’s features and characteristics that underpinned
the acquisition decision.
3. Details of the Ichigo Uchi Honmachi Building
Ichigo Office has specialized capabilities to operate, add value to, and increase theprofitability of mid-size office assets, and determined that this acquisition would
leverage those capabilities to drive higher asset and portfolio value. In evaluating thisasset for acquisition, it took into consideration the following features andcharacteristics:(1) Location
The Ichigo Uchi Honmachi Building is located in Osaka’s Tanimachi Yonchome, anarea with a major road that has a cluster of government buildings including the Osaka
Prefectural Government Office and the Osaka Legal Affairs Bureau on the east side of
the road and an office area including offices of small- and medium-sized companies,
law offices, and tax accounting offices on the west side.
Given its proximity to Honmachi, Osaka’s central business district, the Tanimachi
Yonchome area sees demand from diverse tenants due to its convenient location andrelatively low rents.
Despite robust tenant demand, the supply of new buildings in Osaka is limited andoffice vacancies are decreasing.
(2) Features
The Ichigo Uchi Honmachi Building is a mid-size office building located within a threeminute walk from Tanimachi Yonchome Station on the Osaka Municipal Subway
Tanimachi and Chuo Lines, with high visibility given its location along Honmachi Dori,a major road.
Each floor is sub-divisible with a standard floor plate of 96 tsubo (317m2). The
building’s common areas were refurbished in 2012.

2

The first floor is occupied by a convenience store and the upper floors are occupied by
office tenants, including manufacturing companies and construction consulting
companies.
(3) Building Exterior and Location

3

Asset Name
Form of Ownership
Trustee
Period of Trust Contract
Location
Property Right
Area
Land
ZoningCoverage Ratio
Floor Area Ratio
Property Right
Use
Building Structure
Total Floor Area
Date Built
Appraiser
Appraisal Value

Asset Overview
Ichigo Uchi Honmachi Building
Trust beneficiary interest in real estate (juekiken)
Mizuho Trust & Banking Co., Ltd.
September 28, 2016 – September 28, 2026 (expected)
1-3-5 Uchi Honmachi, Chuo-ku, Osaka City, Osaka
Freehold
522.31m2
Retail80%
800%
Freehold
Office, parking
Steel Reinforced Concrete, B1/10F
4,239.50m2
May 21, 1992
Daiwa Real Estate Appraisal Co., Ltd.
JPY 2,000 million
September 1, 2018

Appraisal Date
Value by Direct Capitalization
JPY 2,080 million
MethodHaseko Corporation, Iwaki Architects OfficeArchitect1
Joint Venture of Haseko Corporation and Fujiki Komuten Co.,
Builder1
Ltd.
Structural Designer1
Haseko Corporation
1
Inspection Agency
Osaka City
PML (Assessor)
6.95% (Sompo Risk Management & Health Care Inc.)
Collateral
None (expected)
Tenant & Lease Overview (as of August 31, 2018)
Number of Tenants
16
Monthly Rental Income
JPY 8.112 million
Tenant Security Deposits
JPY 76.109 million
2
Leasable Area
2,829.16m2
Leased Area2
2,725.11m2
Oct 2016 Apr 2017 Oct 2017 Apr 2018 Oct 2018
Occupancy
96.3%
96.3%
96.3%
96.3%
96.3%
Property Management
Dai-ichi Building Co., Ltd. (expected)
Company
Ichigo Office REIT Investment Corporation (expected)
Master Lease Company
Pass-through (expected)
Master Lease Type

4

Special Items
1. Part of the security door encroaches the eastern neighbor. A memorandum of understanding
exists which agrees to rectify the situation when a large-scale renovation or reconstruction
is implemented in the future.
2. An engineering report indicates that there is insufficient smoke ventilation in the ninth-floor
hallway. The seller has agreed to rectify the issue at the seller’s expense after theAcquisition Date.
1

Names of the architect, builder, structural designer, and inspection agency are those as ofwhen the building was built.
2
The leased area in the rental contract signed on December 12, 2014 between the seller andthe seventh-floor tenant is c. 70m2 less than the actual leased area. For the purposes of thisrelease, the asset’s leasable area, leased area, and occupancy reflect the actual leased area.
Post-acquisition, Ichigo Office will sign a memorandum of understanding with the tenantwith respect to the leased area.

5

Appraisal Details
Asset Name
Appraisal Value
Appraiser
Appraisal Date

Appraisal Value
Value by Direct Capitalization
MethodIncomeMaximum Obtainable
Rental Income
Vacancy Loss
Expenses
Administrative andMaintenance Expenses
Utility Expenses
Repair Expenses
PM FeeLeasing Brokerage Fees
Taxes
Insurance Premiums
Other Expenses
Net Operating Income(NOI)
Income on Investment of
Deposits Received
CapitalExpenditure
Net Profit
Cap Rate
Value via DCF Method
Discount Rate
Terminal Cap Rate

Ichigo Uchi Honmachi Building
JPY 2,000,000,000
Daiwa Real Estate Appraisal Co., Ltd.
September 1, 2018
Amount (JPY)
Note
Based on a DCF valuation, and
2,000,000,000 verified using a direct capitalization
valuation
2,080,000,000
139,422,021
Based on an analysis of potential rental
145,570,332 income, common area service income,parking lot income, and other income
6,148,311 Based on long-term vacancy rates
39,255,221
Based on similar assets and past actual
9,549,900
amounts
Based on similar assets and past actual
8,728,400
amounts
Based on engineering reports and
4,029,300
similar assets
Based on similar assets and past actual
2,551,602
amounts
Based on expected turnover rate and789,167 tenant acquisition costs for similar
assets
11,745,358 Based on FY2018 actual amounts
Based on a quote from an insurance
321,180
company
1,540,314 Based on past actual amounts
100,166,800
920,778 Based on a 1.0% investment yield
3,202,300

Based on engineering reports andsimilar assets

97,885,278
Based on transactions of similar assets
and a comprehensive assessment of the
4.7%
asset’s location, its specificcharacteristics, and market trends
1,960,000,000
Based on transactions of similar assets
and the current yield of financial
4.5%
assets, taking into consideration theasset’s specific characteristics
4.9% Based upon risk-adjusted NOI
6

Value via Cost Approach
Land
Building

1,620,000,000
70.3%
29.7%
Notes

None
Appraisal NOI Yield: 5.3% (calculated by dividing NOI by Acquisition Price)7

4. Seller Profile
Name

The seller, a domestic special purpose company, did notprovide consent to disclose its name.

Relationship with
Ichigo Office or IIA

The seller does not have any capital, personnel, or business
relationship of note with Ichigo Office or IIA. In addition,
the seller is not an interested party as defined in the
Enforcement Ordinance of the Investment Trust andInvestment Corporation Law or the internal rules of theAsset Management Company.

5 Broker Profile
Name
Address
Representative
Principal Businesses
CapitalEstablishment Date

Mizuho Trust & Banking Co., Ltd.
1-2-1 Yaesu, Chuo-ku, Tokyo
CEO Tetsuo Iimori
Trust business and banking business
JPY 2,473,690,000 (as of March 31, 2018)
March 12, 2003

Relationship with
Ichigo Office or IIA

The broker does not have any capital, personnel, or
business relationship of note with Ichigo Office or IIA. In
addition, although the broker is not an interested party as
defined in the Enforcement Ordinance of the Investment
Trust and Investment Corporation Law, it is a related party
as defined in the internal rules of the Asset Management
Company since it is Ichigo Office’s custodian.

Broker Fee

The broker did not provide consent to disclose the brokerfee.

6. Acquisition Schedule
Ichigo Office Board Resolution Date
Contract Date
Closing Date

September 26, 2018
September 26, 2018
September 28, 2018 (expected)

7. Earnings Outlook
The impact of this acquisition on Ichigo Office’s October 2018 and April 2019 earnings
is minimal. Therefore, there is no revision to the earnings forecasts announced in Ichigo
Office’s April 2018 earnings results on June 14, 2018.

8

Reference
1. Rental Income and Expense Details of the Ichigo Uchi Honmachi Building(JPY million)
Forecast1

At Acquisition2

A. Rental Income
B. Rental Expenses(excluding depreciation)3
C. NOI (A-B)

127

122

35

38

92

83

D. NOI Yield4

4.9%

4.4%

E. Depreciation5

25

25

F. Post-depreciation NOI (C-E)

66

57

G. Post-depreciation NOI Yield

3.5%

3.0%

H. Occupancy6

95.0%

96.3%

1

Amounts exclude special factors in the year of acquisition and are calculated based on
current and future anticipated fluctuations in occupancy.
2
Shows first-year amounts used to calculate the DCF-based valuation, excluding
special factors in the year of acquisition.
3
Rent-related expenses include incidental expenses such as service provider expenses,
property, city planning, and consumption taxes, and other fees.
4
Forecast NOI yield and NOI yield at Acquisition are calculated by dividing theForecast NOI and NOI at Acquisition by the acquisition price, respectively (rounded
off to the nearest tenth of a percent.)
5
Depreciation is estimated by Ichigo Office.
6
Occupancy at acquisition is as of August 31, 2018.
2. Engineering Report Summary
Asset Name
Name of Inspector
Date of Inspection
Short-Term Repair Expenses1
Long-Term Repair Expenses2
Current Replacement Cost

Ichigo Uchi Honmachi Building
Tokio Marine & Nichido Risk Consulting Co., Ltd.
September 2018–
JPY 86.8 million
JPY 1,424.7 million

1

Short-Term Repair Expense is defined as repair expenses considered necessary beyond
the scope of ordinary maintenance within a year from the time of inspection.
2
Long-Term Repair Expense is defined as repair expenses considered necessary for the
maintenance of the asset within twelve years from the time of inspection.

9

Portfolio Reference Information
Post-Acquisition Portfolio
No.
O-02
O-03
O-04
O-05
O-06
O-07
O-08
O-09
O-10
O-11
O-12
O-14
O-15
O-16
O-17
O-18
O-19
O-20
O-21
O-22
O-23
O-24
O-26
O-27
O-28
O-29

Area1

Asset Name
Ichigo Nishisando Building
Ichigo Mita Building
Ichigo Nanpeidai Building
Ichigo Hanzomon Building
Ichigo Hijirizaka Building
Ichigo Shibuya Kamiyamacho Building
Ichigo Akasaka 5 Chome Building
Ichigo Shibakoen Building
Ichigo Ebisu Nishi Building
Ichigo Ginza 612 Building
Ichigo Uchikanda Building
Ichigo Yotsuya 4 Chome Building
Ichigo Tameike Building
Ichigo Jimbocho Building
Ichigo Hakozaki Building
Ichigo Kudan 2 Chome Building
Ichigo Kudan 3 Chome Building
Ichigo Gotanda Building
Ichigo Shin Yokohama Building
Ichigo Minami Ikebukuro Building
Ichigo Nakano North Building
Ichigo Eitai Building
Ichigo Ikejiri Building
Ichigo Nishi Ikebukuro Building
Ichigo Nishi Gotanda Building
Ichigo Kichijoji Building

O-34 Ichigo Sakae Building
O-37 Ichigo Marunouchi Building
O-38 Ichigo Toyamaeki Nishi Building
O-39 Ichigo Mirai Shinkin Building
O-42 Ichigo Takamatsu Building
O-46 Ichigo Kanda Nishikicho Building
O-47 Ichigo Akihabara North Building

Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Tokyo Metro Area
Tokyo Metro Area
Tokyo Metro Area
Tokyo Metro Area
Tokyo Metro Area
Tokyo Metro Area
Central Tokyo
Tokyo Metro Area
Four Major Regional
CitiesFour Major Regional
CitiesOther Regional
CitiesOther Regional
CitiesOther Regional
CitiesCentral Tokyo
Central Tokyo
10

Acquisition
Price2(JPY million)% ofPortfolio3

3,254
2,740
1,920
1,550
1,200
1,505
735
1,100
1,917
1,773
1,140
550
580
1,820
1,150
763
844
5,060
1,816
1,460
764
1,490
2,030
639
765
2,160

1.6
1.4
1.0
0.8
0.6
0.8
0.4
0.6
1.0
0.9
0.6
0.3
0.3
0.9
0.6
0.4
0.4
2.5
0.9
0.7
0.4
0.7
1.0
0.3
0.4
1.1

4,705

2.4

6,710

3.4

1,650

0.8

1,158

0.6

3,010

1.5

2,130
5,500

1.1
2.8

No.

O-48 Ichigo Sakaisuji Honmachi Building
O-49
O-50
O-51
O-52
O-53
O-54
O-55
O-56

Ichigo Kanda Ogawamachi Building
Ichigo Hatchobori Building
Ebisu Green Glass
Ichigo Omori Building
Ichigo Takadanobaba Building
Ichigo Omiya Building
Ichigo Sagamihara Building
Ichigo Ofuna Building

O-57 Ichigo Sendai East Building
O-58 Ichigo Kumamoto Building
O-59
O-60
O-61
O-62
O-63
O-64
O-65
O-66
O-67
O-68
O-69

Ichigo Jingumae Building
Ichigo Shibuya Dogenzaka Building
Ichigo Hiroo Building
Ichigo Sasazuka Building
Ichigo Nihonbashi East Building
Ichigo Sakurabashi Building
Ichigo Shinkawa Building
Ichigo Kudan Building
Ichigo Higashi Gotanda Building
Axior Mita
Ichigo Higashi Ikebukuro Building

O-70 Koriyama Big-i (Office Section)
O-71 Ichigo Kawasaki Building
O-72 Ichigo Shibuya East Building
O-73 Ichigo Ningyocho Building
O-74 Ichigo Nishi Honmachi Building
O-75 Ichigo Hakata Building
O-76 Ichigo Nishiki First Building
O-77
O-78
O-79
O-80

Area1

Asset Name

Ichigo Ikenohata Building
Ichigo Ikebukuro East Building
Ichigo Motoazabu Building
Ichigo Otsuka Building

O-81 Ichigo Nagoya Building

Four Major Regional
CitiesCentral Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Tokyo Metro Area
Tokyo Metro Area
Tokyo Metro Area
Other Regional
CitiesOther Regional
CitiesCentral Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Tokyo Metro Area
Other Regional
CitiesTokyo Metro Area
Central Tokyo
Central Tokyo
Four Major Regional
CitiesFour Major Regional
CitiesFour Major Regional
CitiesTokyo Metro Area
Tokyo Metro Area
Central Tokyo
Tokyo Metro Area
Four Major Regional
Cities11

Acquisition
Price2(JPY million)% ofPortfolio3

1,940

1.0

2,210
1,905
5,900
3,850

1.1

1,580
3,430
1,174
2,000

1.0
3.0
1.9
0.8
1.7
0.6
1.0

1,840

0.9

1,450

0.7

7,200
3,650
3,960
4,780
4,700
2,500
2,360
3,190
3,660
1,800
4,570

3.6
1.8
2.0
2.4
2.4
1.3
1.2
1.6
1.8
0.9
2.3

1,660

0.8

1,750
1,350
1,450

0.9
0.7
0.7

2,190

1.1

1,380

0.7

2,000

1.0

5,130
3,010
1,890
2,740

2.6
1.5
0.9
1.4

3,420

1.7

Acquisition
Price2(JPY million)% ofPortfolio3

O-82 Ichigo Fushimi Building

2,340

1.2

O-83

1,330

0.7

1,040

0.5

3,500
3,100
2,300
1,680
3,300
2,200

1.8
1.6
1.2
0.8
1.7
1.1

1,900

1.0

185,897
1,970
1,310

93.0
1.0

1,210

0.6

2,400
1,620

1.2
0.8
1.2
0.9
0.7
7.0
100.0

No.

O-84
O-85
O-86
O-87
O-88
O-89
O-90
O-91
Z-02
Z-05
Z-09
Z-10
Z-11
Z-12
Z-13
Z-14

1

Area1

Asset Name

Four Major Regional
CitiesFour Major Regional
Ichigo Nishiki Building
CitiesFour Major Regional
Ichigo Minami Morimachi Building
CitiesIchigo Shibuya Udagawacho Building
Central Tokyo
Win Gotanda Building
Central Tokyo
Ichigo Hongo Building
Tokyo Metro Area
Oimachi Center Building
Central Tokyo
Win Gotanda Building 2
Central Tokyo
MIF Building
Central Tokyo
Four Major Regional
Ichigo Uchi Honmachi Building
CitiesSubtotal - Office (77 Assets)
Ichigo Fiesta Shibuya Building
Central Tokyo
Ichigo Machida East Building
Tokyo Metro Area
Other Regional
Konami Sports Club Izumi Fuchu
CitiesIchigo Shibuya Bunkamura Dori Building
Central Tokyo
Twicere Yokohama Isogo (Retail Section)
Tokyo Metro Area
Lions Square Kawaguchi
Tokyo Metro Area
Ichigo Shin Yokohama Arena Dori Building Tokyo Metro Area
Ichigo Kamata Building
Tokyo Metro Area
Subtotal - Other (8 Assets)
Total (85 Assets)

2,430
1,700
1,400
14,040199,937

0.7

Central Tokyo refers to Chiyoda, Minato, Chuo, Shinjuku, Shibuya, and Shinagawa Wards. Tokyo Metro
Area refers to Tokyo (excluding the six wards above), Kanagawa, Chiba, and Saitama Prefectures. Four
Major Regional Cities refers to Osaka, Nagoya, Fukuoka, and Sapporo.

2

Acquisition Price excludes incidental expenses such as consumption taxes and other fees. Assets O-02
through O-42 (31 assets) and assets Z-02 and Z-05 (2 assets) show the appraisal value as of October 31,
2011.
3% of Portfolio is based upon acquisition price.

12