Invincible Investment Corporation
Follow on Acquisition
TSE Code : 8963

May 25, 2017

Acquisition Highlights
Acquisition of High Quality Select Service Hotel in Central Tokyo

Acquisition price of JPY 8.0 billion, funded with cash on hand and additional borrowing for a 4.7% appraisal cap rate
Large hotel rooms of 28.5 square meters can accommodate three to five guests; plus 14 serviced apartment units
A five minute walk to Hamamatsucho Station on the JR Line and Tokyo Monorail provides direct access to Haneda Airport
After Acquisition, 2017 DPU expected to increase by JPY 49 to JPY 2,770 which is 4.0% above last year and 1.8% above forecast

Hotel and Residential Showing Strong Growth in 2nd Quarter







A series of successful operational improvement initiatives at Mystays forecasted to result in same store hotel NOI growth of 3.4%1 in the
2nd quarter compared to the 2nd quarter of 2016. Initial bookings for the summer indicate that this trend should continue
A residential rent program systematically applied over the past three years has accelerated with the replacement of Property Managers at
16 residential properties in December, 2016
Residential NOI is expected to increase 4.4%2 in the 2nd quarter compared to last year
Robust Sponsor Pipeline of 21 hotels / 5,996 rooms including Sheraton Grande Tokyo Bay Hotel, Rihga Royal Hotel Kyoto, Hotel MyStays
Premier Sapporo Park3 facilitates external growth

MyStays Hotel Management Initiatives to Provide for Internal Growth







Promotional campaigns, an improved website and enhanced revenue management analytics are expected to increase direct bookings andmaximize revenue on high demand days
Converted 261 rooms to non‐smoking with an additional 314 rooms to be converted by July. Since conversion, the non‐smoking rooms inthese properties had an average RevPAR 7.8% higher than the respective smoking rooms4
Renegotiation of linen and cleaning contract costs which is expected to provide annual savings of JPY 45 million5
MyStays has signed 12 new contracts with travel agents, airlines and OTAs based in China, Hong Kong, Taiwan and Korea to diversify its
channel and distribution mix

Potential Synergies with SoftBank GroupIn February 2017, Fortress Investment Group LLC(“FIG LLC”) announced that it had entered into a definitive merger agreement with
SoftBank Group Corp. (“SoftBank”) pursuant to which SoftBank will acquire 100% of FIG LLC. The transaction is subject to certain
regulatory approvals, and is expected to close in the second half of 2017. If completed, Invincible believes that this transaction could create
various potential synergies that might benefit Invincible, including enhancing banking relationships, cooperation in technology androbotics, and additional contacts with corporate Japan(Note 1) Based on 38 hotel properties; of the 48 hotel properties in our portfolio as of the end of April 2017, 9 hotels with fixed‐rent lease agreements as well as Hotel MyStays Kanda, which were renovated in 2016, are excluded(Note 2) Based on the 66 residential properties owned as of the end of 2015 / Excludes one‐off insurance‐related revenues and expenses(Note 3) We do not intend to acquire any of the properties for Sponsor Pipeline as of the date of this material and there is no assurance that we will acquire any of these properties in the future(Note 4) Based on the hotels owned by INV as of the end of April, completed such conversion by the end of February 2017, and have both smoking room and non‐smoking room after such conversion. The percentage is calculated by comparing the sumof the RevPAR of smoking room and non‐smoking room at each hotel multiplied by the number of room converted at each hotel.
(Note 5) Compared with the annual cost in 2016, assuming relevant 21 hotels owned by INV as of the end of December 2016 were owned since the beginning of 2016, calculated based on actual 2016 full year results. Performance of the properties
acquired in 2016 is based on actual results provided by sellers.

1Performance of Existing Properties
Both hotel and residential NOI are forecasted to show strong NOI growth of 3.4% and 4.4% respectively year‐on‐year from
April to June 2017
Hotel NOI1(JPY mn)

Jan－MarApr－Jun

+3.4％

3,000

‐1.8％

Total NOI1,2

Residential NOI2

2,515

(JPY mn)

Jan－MarApr－Jun

900

+1.4％

2,601

2,500

850

2,200 2,160

+4.4％
845

833

878

840

(JPY mn)

Jan－MarApr－Jun

+3.7％

4,000

3,500

‐0.9％

3,356

3,479

3,033 3,006
3,000

2,000
800

2,500

1,500

1,0000

2016
2017
2016
2017
(Actual) (Actual) (Actual) (Forecast)

Jan－Jun(JPY mn)
5,000
4,800

2,0000

2016
2017
2016
2017
(Actual) (Actual) (Actual) (Forecast)

Jan－Jun(JPY mn)
1,750

+1.0％
4,715

750 0

+2.9％

2016
2017
(Actual) (Actual)

Jan－Jun(JPY mn)

1,723

6,600

4,762

2016
2017
(Actual) (Forecast)

+1.5％

6,486

6,390
1,700

6,400

1,674

4,600
1,650

6,200

1,600

6,000

4,400
4,200
4,00002016(Actual)2017(Forecast)

1,55002016(Actual)2017(Forecast)

5,80002016(Actual)(Note 1) Based on 38 hotel properties; of the 48 hotel properties in our portfolio as of the end of April 2017, 9 hotels with fixed‐rent lease agreements as well as Hotel MyStays Kanda, which were renovated in 2016, are excluded(Note 2) Based on the 66 residential properties owned as of the end of 2015. Excludes one‐off insurance‐related revenues and expenses

2017(Forecast)2Performance Indicators of Hotel Properties
For the fiscal period June 2017, INV forecasts year‐on‐year growth for ADR and GOP will be 0.4% and 0.9% respectively
Occupancy1
Jan‐Mar

ADR1

Apr‐JunJan‐MarApr‐Jun

90%

9,600

‐1.4pt89.1%

Jan‐Mar

90.9% 90.9%

9,392

‐0.4%

9,482

‐1.9%
8,000

8,913 8,880

85%

8,800

80%

8,400

7,940

8,534 8,621

7,789

2017

(Actual) (Actual)

2016

2017

2016

(Actual) (Forecast)

2017(Actual) (Actual)

Jan‐Jun
9,500

9,155

89.3%

2017

(Actual) (Actual)

2,745

2,346 2,305

2016

2017

2016

(Actual) (Forecast)

2017(Actual) (Actual)

Jan‐Jun
8,400

9,188

2,661

‐1.8%

1,500

2016

(Actual) (Forecast)+0.4%‐0.6pt90%

2017

Jan‐Jun

95%

89.9%

2016

+3.1%

2,000

6,000

8,000

2016

Apr‐Jun

3,000

2,500

7,000

75%

Jan‐Mar

+1.0%
9,000

9,200

87.7%

GOP1,2

Apr‐Jun+1.0%+0.1pt95%

RevPAR1

2017

Jan‐Jun
5,100

‐0.3%
8,233

2016

(Actual) (Forecast)

+0.9%

5,050

5,007

8,208

9,000

8,200

5,000

8,500

8,000

4,900

85%

80%

75%

8,000

7,800

4,800

2016

2017

2016

2017

2016

2017

2016

2017

(Actual)(Forecast)(Actual)(Forecast)(Actual)(Forecast)(Actual)(Forecast)(Note 1) Based on 38 hotel properties; of the 48 hotel properties in our portfolio as of the end of April 2017, 9 hotels with fixed‐rent lease agreements as well as Hotel MyStays Kanda, which were renovated in 2016, are excluded(Note 2) In calculating the GOP, the rent paid for APA Hotel Yokohama‐Kannai, is regarded as GOP of the hotel since GOP is not disclosed by the operator

3

DPU Growth
After Acquisition, 2017 DPU expected to increase by JPY 49 to JPY 2,770 which is 4.0% above last year and 1.8% above forecast
Change in 2017 DPU forecast
(JPY)
3,000

1,600

+4.0％

2,663
2,500

2,770

June Period

1,400
1,200

1,240

1,254
14

Before

After

1,000

+30.1％

8000

2,047
2,000

1,477

1,516

+56.7％

Upper :
December
PeriodDecember Period
1,600

1,306

Before

After

1,400

1,187

1,000
8000

500

1,516
35

1,200

1,500

1,000

1,481

+160.7％

733

501
237

1,186

1,254

860
573

Lower :
June
Period

3,000
2,800

Full Year
2,721

2,770

49

2,600
2,400
2,200

264

2,000

0

2013

2014

2015

2016

2017
(Forecast)

1,8000

BeforeAfter

4

2017 DPU Impact
DPU will increase by JPY 49 as a result of acquisition

Forecast
at the beginning of term
June
PeriodDecember
PeriodFull Year

Forecast after acquisition
June
PeriodVariance

December
PeriodVariance

Full Year

Variance

Operating Revenues (JPY mn)

9,285

10,49819,7839,282‐210,687

189

19,969186

Operating Income (JPY mn)

5,268

6,245

11,513

5,311

42

6,402

157

11,714200

Ordinary Income (JPY mn)

4,590

5,652

10,242

4,653

62

5,776

123

10,429186

Net Income (JPY mn)

4,589

5,651

10,241

4,652

62

5,775

123

10,428186

DPU without distribution inexcess of earnings (JPY)

1,185

1,460

2,645

1,205

20

1,495

35

2,700

55

55

21

76

49

‐6

21

‐

70

‐6

1,240

1,481

2,721

1,254

14

1,516

35

2,770

49

DPU in excess of earnings (JPY)DPU (Total) (JPY)5

MyStays Initiatives to Capitalize on Updated Customer Preferences & Market Trends
MyStays is taking the following actions based on extensive operational analysis and customer feedback through TrustYou1 Analytics

At the Hotel

Converting 575 rooms to non‐smoking
to better adapt to updated customer
preferences (by July 2017)
On average, RevPAR has increased by
7.8% for the rooms converted to non‐smoking rooms2
Reduced linen and cleaning costs byrenegotiating the contracts (annual
savings JPY 45 million)2

Revenue ManagementHotel MyStays Hamamatsucho

Online Marketing

Website

Increased overbooking ratios and continue to monitor them inorder to maximize occupancy and offset increased cancelations.
For example, the first four months of 2017 had 607 nights6 thatwere 99%+ occupied compared to 252 in the same period a year
earlier
Implement new revenue management software

Improved website with easier booking navigation and star ratingsfrom TrustYou
Streamlined information architecture and rewrote all copyright inorder to have better user experience and SEO3; updated picturesand content for each hotel and region
In the second half of the year,
MyStays will implement a new
booking engine, web site redesign,a CRM system4 which will allow
for an enhanced loyalty program5for core Japanese business andleisure travelers







Promoting 5% off Membership
campaign to increase direct bookings,
save commissions, and encourage repeat
customers
Launched affiliate marketing programwith CBTC Bank Co., Ltd. (largest credit
card issuer in Taiwan) in 4Q 2016
Recently started affiliated marketing
programs with Hong Kong Airlines and
ANA / Union Pay
Increased online marketing (including
multiple property campaigns) throughpaid search, emails, banner ads, andFacebook ads

the CBTC campaign

MyStays Website

Offline Marketing

MyStays corporate sales teamfocusing on building group corporate
business to resorts and conference
center properties

SoftBank SynergiesIn anticipation of the announced acquisition of
FIG LLC by SoftBank, MyStays plans to workwith SoftBank to identify how MyStays may
benefit from SoftBank’s deep experience andownership of companies involved in artificial
intelligence, website design, and robotics(Note 1) TrustYou analyzes hundreds of millions of travel reviews and is one of the world’s largest guest feedback platforms(Note 2) Please refer to the notes on page 1(Note 2) SEO (search engine optimization) is a methodology of strategies, techniques and tactics used to increase the amount of visitors to a website by obtaining a high‐ranking placement in the search results page of a search engine(Note 3) CRM stands for “Customer Relationship Management”, and the CRM system is a system that manages contact with customers including customer information utilized for CRM(Note 4) The loyalty program means the membership program of the hotel, and customers who become members can get points and benefits by reservation and staying at the hotels(Note 3) The number of nights means the sum of nights at which each of 34 MyStays hotels owned by INV as of the end of April 2017 (excluded Hotel Epinard Nasu) achieved over 99% occupancy

6

MyStays Hotel Operations and Initiatives
MyStays Uniquely Caters to Inbound Tourists

In the past six months, MyStays has expanded its
distribution channels to include new relationships with 12
travel agents, airlines and OTAs in China, Hong Kong,
Taiwan and Korea
MyStays website and guest relations offer 5 languages
including Japanese, English, Chinese (Simplified),
Chinese (Traditional), and Korean

Front desks are usually multi‐lingual staffed with guest
relations providing back‐up services

Easy communication with the customers through website,chat, email, and phone

MyStays hotels provide Free Wi‐Fi

Increased services for Chinese speaking guests


Hired additional Chinese speaking staff



24‐hour support in Chinese via online chat and phone
hotline

Increased presence on C‐Trip*, 6 hotels with Silver Medalstatus and 30 ‘China Friendly’ hotels

Conveniently accepts Union Pay at all hotel locations



Chinese signage throughout the hotels*C‐trip is the largest online travel site in China and provides certification
marks for Chinese traveler friendly hotels.
Requirement

Broader International Customer Base

China Friendly

Electric kettle, Free Wi‐Fi, CUP card, Tea bag,
Chinese breakfast, Chinese notation of hotel
facilities, 3.8 or more for reviews, Full day Front
ChineseGold Medal status

Lowest price, C‐trip has
price advantage overother OTA

Silver Medal status

Provided same rates andnumber of rooms by all
OTAs, Benefits for C‐trip

Increased revenue from foreign guests1
50%
YoY+18.7pt

40%

YoY+3.5ptYoY+4.4pt30%
YoY+11.9pt

20%
10%

3.8%

34.4%

37.9%

2015

2016

Provided more than 2rooms per day to C‐trip(or use unified
management software),4 points or more forreviews

42.3%

15.7%

0%

2013

2014

2017
Jan‐AprChinese breakfast at MHM hotels

Union Pay

(Note 1) Overseas Sales Ratio refers to the sales revenue booked through overseas Online Travel Agents as a percent of the total room revenue, and is calculated based on the 29 hotels out of the 35 hotels managed by MHM for INV’s portfolio as ofthe end of December 2016, and does not include the six hotels, Hotel MyStays Nagoya‐Sakae, Hotel MyStays Haneda, Hotel MyStays Utsunomiya, Hotel MyStays Gotanda Station, Hotel Epinard Nasu, Hotel MyStays Haneda, and Hotel
MyStays Premier Kanazawa, which have no data for the period from 2013 through 20167

Residential Rent Increase Initiative (1)A rent increase program systematically applied over the past three years created the foundation for sustained NOI growth
NOI1,2
1H (Jan‐Jun)(JPY million)

Occupancy and Average Rent per Tsubo per Month1
Average Rent per Tsubo per Month3 (Left)

2H (Jul‐Dec)

(JPY)

3,500

10,400

+4.4%
3,000

Occupancy 4 (Right)

2,962

+2.2%
3,093

3,161

100

+1.1%

10,200
2,500

+3.8%
1,496

+1.2%
1,553

+1.5%
1,572

10,000

95.2

95.0

94.5

10,19190

10,082

9,935
80

2,000
9,800
1,500

70
9,600

1,000

1,466

+5.1%

1,540

+3.1%

1,588

500

0

60
9,400

2015
(Actual)2016(Actual)2017(Forecast)

9,20002015(Actual)2016(Actual)

50
0

2017
(Forecast)(Note 1) Based on the 63 residential properties owned as of the end of December, 2014
(Note 2) Excludes one‐off insurance‐related revenues and expenses(Note 3) Average Rent per Tsubo per Month is calculated by dividing the total residential rental revenue including common area charges for each month by the sum of total residential leasable area at the end of each month, indicating the averagerent per Tsubo weighted by leased area
(Note 4) Occupancy is calculated by dividing the sum of total residential leased area by the sum of total residential leasable area at the end of each month of each year8Residential Rent Increase Initiative (2)In December 2016, Invincible replaced the property managers at 16 properties, accelerating the effectiveness of this program Invincible anticipates additional changes in property managers and other initiatives to grow the NOI from the residential
assets.


Change in Rent for New Contracts1
Increase

Flat

Change in Rent for Renewal Contracts1

Decrease

100%
80%

100%

35.8%

20.5%

23.4%

23.6%

0.6%

60%

19.7%

25.4%

16.3%

61.8%

60.9%

60.8%

38.1%

39.1%

39.1%

2014

2015

2016

2017
Jan‐Apr

0.0%
51.0%

60%

99.3%

40%

40%

57.2%

56.8%

36.4%

51.0%

62.8%
20%

0%

2013

2014

2015

2016

2017
Jan‐Apr

827

649

943

783

417

95.5

94.0

94.7

95.9

95.4

1.15

1.01

1.23

1.15

0.93

100%

18.3%

Increase
8.8%

Decrease
9.7%
10.3%

2013
No. ofRenewals
Renewal Rate4 (%)

818

872

1,209

1,126

590

81.2

84.7

85.4

83.7

81.9

Average Rent Increase / Decrease5
(%)

Flat

8.6%

New Lease

45.0%

42.8%

46.3%

36.6%

Total
2.7
2.3

1.9

2.0

1.9

1.3

1.5

63.3%

Renewal

3.0
2.5

80%
60%

49.0%

0.1%

0%

Change in Rent for All Contracts1

1.6

1.11.3

1.2

1.21.2

1.2

1.0

40%

46.2%

20%

46.9%

43.9%

54.7%

‐0.5

0%

2013

0.5
0.0

18.4%

(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)Decrease
0.1%

20.9%

27.8%

No. of
New Contracts
Occupancy2 (%)
Net Leasing Cost
(No. of months)3

Flat
0.0%

80%

22.3%

20%

Increase
0.1%

2014

2015

2016

2017
Jan‐Apr

0.0
‐0.1
‐0.3
2013

Based on the properties owned at the end of period. 63 properties for 2013, 63 properties for 2014, 66 properties for 2015, and 68 properties for 2016,, 70 properties for 2017 Jan‐Apr
Occupancy is calculated by dividing the sum of total residential leased area by the sum of total residential leasable area at the end of each month of each year
Net Leasing Cost (Multiple of Monthly Rent) = Advertising Expenses (Multiple of Monthly Rent) + Free Rent (Multiple of Monthly Rent) – Key Money (Multiple of Monthly Rent)
Renewal rate is calculated by “Number of Renewals during the Period” ÷”Number of Cases Targeted for Renewal during the Period”
Weighted average of monthly rent increase or decrease (%) of new or renewal contracts, or the total of both, compared with previous contracts of properties owned at the end of period

2014

2015

2016

2017
Jan‐Apr9

Overview of Property for Acquisition
Basic Information

Hotel MyStays Premier Hamamatsucho

Address

 Large room size of 28.5 square

meters offers strong productdifferentiation in Tokyo market
 Located in close proximity toHamamatsucho Station, providing
direct access to Haneda airport, near
the Shiodome business district, andwalking distance to Ginza Fully renovated in November 2016
 14 serviced apartments
 Restaurant renovated in April 2017,

open for breakfast, lunch and dinner,
managed by 3rd party Roughly half of room revenue iscontributed by inbound guests,
boosting Double Occupancy Ratio3

Hamamatsucho 1‐8‐5, Minato‐ku, Tokyo

Rentable Space

5 minute walk from
Hamamatsucho Station(JR Line, Tokyo Monorail)
1994
Hotel : 120 rooms
Serviced Apartment : 14 units
6,151.93m2

Land Area

1,070.53m2

NOI (estimated)1

JPY 368 million

AccessCompletion Date
No. of Rooms

Hotel KPI2
Occupancy

90.4%

ADR

JPY 16,184

RevPARJPY 14,629

Double Occupancy
Ratio3
Overseas Sales Ratio4

2.62
57.2％

(Note 1) Annual NOI in 2017 calculated by combining actual monthly NOI from January to April
2017 and anticipated monthly NOI from May to December 2017 estimated by INV(Note 2) Occupancy, ADR, RevPAR, Double Occupancy Ratio : for April 2017 / Inbound Ratio :Average monthly rate since completion of renovation (from November 2016 to April 2017)(Note 3) Double Occupancy Ratio means average number of guest per occupied room, and is
calculated by dividing the total number of guests by the total number of occupied rooms
during the same period(Note 4) Overseas Sales Ratio refers to the sales revenue booked through overseas Online Travel
Agents as a percent of the total room revenue

120 rooms (Room size : 28.5m2 / all non‐smoking rooms）
Deluxe King (3 people)
75 rooms

Deluxe Twin (5 people)
18 rooms

Superior Twin (3 people)
24 rooms

Superior Queen (3 people)
3 rooms10

Surrounding Attractions
Direct access to Haneda, Japan’s busiest and world’s fifth busiest airport, and in close proximity to world famous shopping andtourist destinations
Ginza Area (1.5km)

Toranomon Hills (1.0km)

Shiodome Business District (770m)

Tokyo Tower / Shiba Park (950m)

Hama‐rikyu Gardens (320m)
Hamamatsucho Station (500m)＊Linear distance from hotel in parentheses

Haneda Airport

11

Sponsor PipelineThe acquisition of Hotel MyStays Premier Hamamatsucho is from sponsor pipelineRobust pipeline of 30 assets provides opportunity for growth and stability, even after the anticipated acquisition

Properties Covered by the MOU1,2
HotelsResidential properties
No. ofApartment
Units

Location

Type3

No. ofRooms

StatusRenovation /Construction
Completion

1 Hotel MyStays Premier Akasaka

Minato‐ku, Tokyo

Limited327

In Operation

Jul 2016

22 Gran Charm Hiroo

Shibuya‐ku, Tokyo121

2 Hotel MyStays Yokohama Kannai

Yokohama, Kanagawa

Limited166

In Operation

Oct 2016

23 Plestay Win Kinshicho

Sumida‐ku, Tokyo92

3 Rihga Royal Hotel Kyoto

Kyoto, Kyoto

Full

489

In Operation

Sep 2016

24 Gran Charm Kichijoji

Musashino, Tokyo

28

4 Narita Excel Hotel Tokyu

Narita, Chiba

Full

706

In Operation‐

25 Green Patio Noda

Noda, Chiba

240

5 Hotel MyStays Premier Sapporo Park

Sapporo, Hokkaido

Full

418

In Operation

Jul 2015

26 Dainichi F‐45

Urayasu, Chiba

54

6 Hotel MyStays Sapporo Station

Sapporo, Hokkaido

Limited242

In Operation‐

27 Gran Charm Urayasu

Urayasu, Chiba

54

Oita, Oita

Limited145

In Operation‐

28 Gran Charm Urayasu 5

Urayasu, Chiba

54

8 Art Hotel Hirosaki City

Hirosaki, Aomori

Full

134

In Operation‐

29

Ichikawa, Chiba

52

9 Beppu Kamenoi Hotel

Beppu, Oita

Resort322

In Operation

Oct 2015

Ichikawa, Chiba

48

10 Fusaki Resort Village

Ishigaki, Okinawa

Resort195

In Operation

Jun 2015

11 Sheraton Grande Tokyo Bay Hotel

Urayasu, Chiba

Full

1,016

In Operation

Dec 2016

12 Hotel MyStays Shin Osaka Conference Center

Osaka, Osaka

Limited397

In Operation

Jun 2016

13 Art Hotel Asahikawa

Asahikawa, Hokkaido

Full

265

In Operation‐

14 Hotel MyStays Kanazawa Castle

Kanazawa, Ishikawa

Limited206

In Operation

Mar 2016

15 Hotel JAL City Matsuyama

Matsuyama, Ehime

Full

161

In Operation‐

No. of Apartment Units

16 Hotel MyStays Ueno East

Taito‐ku, Tokyo

Limited150

In Operation

Mar 2016

17 (tentative) Hotel MyStays Honmachi 3‐chome

Osaka, Osaka

Limited120 Under Construction

Nov 2017

743

18 Hotel Mystays Sapporo Nakajima Park

Sapporo, Hokkaido

Limited86

In Operation

May 2016

19 Flexstay Inn Sakuragicho

Yokohama, Kanagawa

Limited70

In Operation

Sep 2016

Taito‐ku, Tokyo

Limited161

In Operation

Jun 2016

Shinagawa‐ku, Tokyo

Limited220

In Operation

Nov 2016

No.

Property name

7 Hotel MyStays Oita

20 MyCUBE by MYSTAYS Asakusa Kuramae
21 Hotel MyStays Premier Omori

No.

Property nameLocation

Gran Charm Minami
Gyotoku I
Gran Charm Minami
30
Gyotoku II

No. of Hotel Rooms

5,996(Note 1) MOU providing preferential negotiation rights.
(Note 2) We do not intend to acquire any of the properties listed above as ofthe date of this material and there is no assurance that we will
acquire any of these properties in the future(Note 3) “Limited” refers to “Limited Service Hotel”, “Full” refers to “FullService Hotel”, and “Resort” refers to “Resort Hotel”

12Major Sponsor Pipeline Properties
Hotel MyStays Premier Akasaka(327 rooms)

Hotel MyStays Premier Sapporo Park (418 rooms)

Sheraton Grande Tokyo Bay Hotel

Rihga Royal Hotel Kyoto(1,016 rooms)(489 rooms)(Note) We do not intend to acquire any of the properties above as of the date of this material and there is no assurance that we will acquire any of these properties in the future

13

Portfolio Growth
The portfolio continues to build a critical mass Performance variances at one property offset by other properties


Pre‐Acquisition

Post‐Acquisition

126 properties

127 properties

No. of properties

Residential
32.9%

Portfolio Composition
by Property Type1

Residential
32.0%
Hotel
63.2%

Hotel
62.2%
Others2
4.8%

Others2
5.0%
Greater Tokyo : 65.4%
Others17.2%

Portfolio Composition
by Geography1,3Kansai area
9.0%
Chubu area
8.5%
Greater Tokyo

Greater Tokyo : 66.2%
Others
16.7%

Tokyo
23 wards
55.5%

Kansai area
8.8%
Chubu area
8.2%

Tokyo
23 wards
56.6%

Greater Tokyo(ex. Tokyo 23 wards)(ex. Tokyo 23 wards)

9.9%

9.6%

(Note 1) Based on (anticipated) acquisition price(Note 2) “Others” includes Offices, Commercial facilities and Parking lots
(Note 3) Defined as follows: “Greater Tokyo” is Tokyo, Kanagawa, Chiba and Saitama. Greater Tokyo (ex, Tokyo 23 wards) is Tokyo (ex. Tokyo 23 Wards), Kanagawa, Chiba and Saitama. Kansai area is Osaka, Hyogo ,Kyoto, Shiga, Wakayama and Nara.
Chubu area is Aichi, Gifu, Mie, Shizuoka, Nagano, Yamanashi, Niigata, Toyama, Ishikawa and Fukui.

14

Portfolio Map After Anticipated Acquisition
Hotel MyStays Premier Hamamatsucho
No. ofProperties

No. ofResidential

No. ofHotelsNo. ofOthers

127

70

49

8

15

Revenue Impact on Acquisition of MyStays Premier Hamamatsucho
Residential rents, Hotel fixed rents, and office/retail rents comprise approximately 70% of total revenue

Post‐Acquisition

Pre‐Acquisition

Others1
5.8%

Others1
6.0%

Residential
34.2%

Hotel
(Variable)
30.0%

Residential
33.6%

Hotel
(Variable)
30.3%

Hotel
(Fixed)
30.3%

Hotel
(Fixed)
29.8%

70.0%

69.7%

(JPY million)(JPY million)

Revenue2
Hotel

Revenue2(Variable)

5,912

30.0%

(Fixed)

5,872

29.8%

Residential

6,746

34.2%

Others1

1,174

6.0%

19,704100.0%

Total

Hotel

(Variable)

6,090

30.3%

(Fixed)

6,087

30.3%

Residential

6,746

33.6%

Others1

1,174

5.8%

20,097100.0%

Total(Note 1) Include Offices, Commercial facilities and Parking lots
(Note 2) Pre‐Acquisition: Annual revenue, assuming all of INV‘s assets as of pre‐acquisition were owned since the beginning of 2016, calculated based on actual 2016 full year results. Performance of the properties acquired in 2016 and in March 2017 isbased on actual results provided by sellers. / Post‐Acquisition: Added 2017 revenue forecast (January‐April: Actual / May‐December: Forecast) for the anticipated property estimated by INV to the figures for “Pre‐Acquisition”(Note 3) The percentages are rounded to one decimal place

16

Financial Condition
New Borrowing will be contributed by Mizuho Bank as one of the main financing bank of INV, which will result further
reinforcement of INV’s lender formation
LTV(Appraisal Value Base)1 and Weighted Average Interest Rate2

New Borrowing(%)

Loan Name
Term Loan (G)TermBalance(years)(JPY mn)

4.5Interest Rate

7,321

Floating(1MT+0.55%)

(%)

59.0

60

4.0
54.8

3.66

55
50

LTV (left)
53.1

53.1

Average Interest rate (right)

1.95

45

1.07

1.06

42.2
0.63

40

(Total)JPY

163,990mn

Mizuho Bank
BTMU
SMTB
SMBC
Citibank
Shinsei Bank
Resona Bank
MUTBTokyo Star BankJapan Post Bank
Aeon Bank
DBJ
Fukuoka Bank
Shizuoka Bank
Nomura TB
Kagawa Bank
Daishi Bank
Hyakugo Bank
Hiroshima Bank
Towa Bank
Dai‐ichi Life Insurance
Gunma Bank

45.4

2.0

0.50

0.50

1.0

Jun
2016

Dec
2016

After
New
Borrowing

22.9x

22.2x

1.48

Lender Formation (After New Borrowing)

22.2%
13.0%
13.0%
12.8%
7.3%
7.1%
4.1%
3.4%
2.4%
2.4%
2.4%
1.8%
1.8%
1.5%
1.1%
0.6%
0.6%
0.6%
0.6%
0.5%
0.3%
0.3%

42.8

43.4

0.48

35
Jun
2013

Dec
2013

3.0

49.0

Jun
2014

Dec
2014

Jun
2015

Dec
2015

0.0

DSCR
25.0x
DSCR (based on Portfolio) 3
20.0x

DSCR(excluding Hotel Variable Rent)

19.8x

19.0x

4

15.0x

13.0x
10.0x

9.9x

13.7x
12.3x

10.8x

10.0x
6.1x
5.0x

1.9x

2.2x

6.2x

3.6x 3.5x

0.0x
Jun
2013

Dec
2013

Jun
2014

Dec
2014

Jun
2015

Dec
2015

Jun
2016

Dec
2016

Jun
2017
(Forecast)(Note 1) LTV (Appraisal Value Base) is calculated by the following formula: (Interest‐bearing debts at the end of the relevant fiscal period) / (Total appraisal value as of the end of the same period)
LTV (Appraisal Value Base) after new borrowing calculated by the following formula:(Interest‐bearing debts at March 14, 2017 + Total amount of new borrowing) / (Total appraisal value as of the end of December, 2016 + Total appraisal value for the anticipated property)(Note 2) The average interest rate is calculated by the following formula: (Total loan amount outstanding at the end of each fiscal period or after new borrowings multiplied by applicable interest rate at the end of each fiscal period for each loans or 1 month
TIBOR as of April 26, 2017 assumed to be applied as the base rate for each loans as for “after new borrowing”) / The loan amount outstanding at the end of each fiscal period or after new borrowing(Note 3) DSCR is calculated by dividing operating income, as adjusted for depreciation expenses from property rental business and any loss (gain) on sales of property by scheduled prepayments of loans payable and interest expense for the relevant period(Note 4) DSCR (excluding hotel variable rent) is in the same manner as DSCR, except for excluding hotel variable rent from operating income17Track Record of External GrowthStrong track record of acquiring core assets

Robust pipeline provides opportunity for acquisitions of properties contributing to portfolio growth and stability

Growth of AUM(JPY million)+12.2%

300,000

266,619

299,181
32,562

AUM1
250,000

New Acquisition1+53.4%

200,000

173,815+47.4%

150,000

117,927
100,000

92,804+52.8%

55,88877,16145,374

December 2013

December 2014

December 2015

December 2016

After AnticipatedAcquisition

No. of properties

71

91

111

124

127

Hotels

0

20

37

48

49

Residential

63

63

66

68

70

50,0000(Note 1) “AUM” is total acquisition amount of the properties owned as of the end of the relevant year, or the sum of AUM as of the end of April 2017 and total anticipated acquisition amount for “After Anticipated Acquisition”, and “New Acquisition”
shows total (anticipated) acquisition amount for the properties acquired in the relevant year or for the properties to be acquired18

Inbound Market (1)Inbound visitors reached a monthly record high in April 2017 as well as an annual record high of 24.0 million (+21.8% YoY)in 2016
 Japanʹs large array of attractive cities, tourist activities, food, culture, etc. encourage repeat Asian visitors


Inbound Visitors Composition by Country(January‐April 2017)

No. of Inbound Visitors to Japan(million)
70
60

Non‐Asia
16.4%
Asia1

Australia
2.2%

24.0 million

50

Other

40

Government Target(+21.8% YoY)

30

19.7

20

6.2

8.4

10.4

0

4.7

6.4

8.1

10.8

2011

2012

2013

2014

2015

2016

Source: JNTO

Jan‐Apr

Korea
24.9%

Hong Kong
7.7%
Taiwan15.9%

Philipines
1.6%

2020

9.0%

Thai 4.3%

Malaysia
1.6%

9.1
2017

Top 5 Countries
by Inbound Growth Rate

Indonesia
1.3%

60.0
40.0

20.4

USA
4.8%

Other Asia
2.9%

24.0

16.6

Other
(ex. Asia)

2

13.4

10

Asia
83.6%

China
23.9%

#1 Indonesia+ 45.5%#2 Russian+ 35.8%#3 South Korea+ 30.8%#4 Philippines+ 27.6%#5 Vietnam+ 26.0%2030
Source: JNTO

No. of Visitors to Japan and the Percent as Repeat Visitors(thousands)
7,000First time visit4 (Left)

Repeat Visitors %3 (Right)

80%

Second time / more5 (Left)

70%

6,000

60%

5,000

50%

4,000

40%
3,000

30%

2,000

20%

1,000

10%
0%

0

2Q

3Q

4Q

2010

1Q

2Q

3Q

2011

4Q

1Q

2Q

3Q

2012

4Q

1Q

2Q

3Q

2013

4Q

1Q

2Q

3Q

2014

4Q

1Q

2Q

3Q

2015

4Q

1Q

2Q

3Q

4Q

2016

1Q
2017

Source: JNTO, MLIT
(Note 1) Asia includes China, South Korea, Taiwan, Hong Kong, Thailand, Singapore, Malaysia, Indonesia, Philippines, Vietnam, and India(Note 2) Other Asia includes Indonesia, Vietnam and India(Note 3) “Repeat Visitor %” indicates percentage of inbound who answered their visit to Japan was for the second time or more in the survey ʺConsumption Trend Survey for Foreigners Visiting Japanʺ conducted by Japan Travel Agency(Note 4) “First time visit” indicates the number of foreign visitors to Japan which is calculated by multiplying the total number of inbound announced by JNTO in the relevant period by (1‐ Repeat Visitor % in the relevant period)(Note 5) “Second time or more” indicates the number of foreign visitors to Japan which is calculated by multiplying the total number of inbound announced by JNTO in the relevant period by Repeat Visitor % in the relevant period

19

Inbound Market (2)Japanese government initiatives focusing on increasing the number of inbound visitors has paid off, growth in inboundtourism has increased by 20% or more in each of the last five years

While inbound from Asia continues to grow highly, inbound from Europe, the United States and Australia is also steadily
growingDouble‐digit increase of total inbound visitors continues in 2017. Southeast Asian countries sustain strong growth momentum

Inbound Visitors to Japan by Country
2012

2013
YoY

(thousand of persons)
2014

YoY

2015
YoY

2016
YoY

2017
Jan‐Apr
YoY

YoY

China

1,425

+36.6%

1,314

‐7.8%

2,409

+83.3%

4,994+107.3%6,373+27.6%

2,178

+9.6%

South Korea

2,043+23.2%

2,456+20.2%

2,755+12.2%

4,002+45.3%

5,090+27.2%

2,268+30.8%

Taiwan1,466+47.5%

2,211+50.8%

2,830+28.0%

3,677+29.9%

4,167+13.3%

1,447

+4.7%

Hong Kong

482+32.0%

746+54.9%

926+24.1%

1,524+64.6%

1,839+20.7%

700+23.9%

Thailand261+79.8%

454+74.0%

658+45.0%

797+21.2%

901+13.1%

390+10.6%

Malaysia

130+59.7%

177+35.6%

250+41.4%

305+22.4%

394+29.1%

148+17.5%

Indonesia

101+63.9%

137+34.8%

159+16.0%

205+29.2%

271+32.1%

122+45.5%

Philippines

85+34.8%

108+27.4%

184+70.0%

268+45.7%

348+29.6%

149+27.6%

Vietnam55+34.4%

84+53.1%

124+47.1%

185+49.2%

234+26.1%

113+26.0%

USA

717+26.7%

799+11.5%

892+11.6%

1,033+15.9%

1,243+20.3%

434+16.0%

UK

174+24.2%

192+10.2%

220+14.7%

258+17.5%

293+13.2%

109+7.5%

France130+36.6%

155+18.8%

179+15.3%

214+20.0%

253+18.3%

89+8.0%

Canada135+33.6%

153+12.9%

183+19.7%

231+26.5%

273+18.0%

105+23.8%

Australia

206+27.0%

245+18.5%

303+23.8%

376+24.3%

445+18.4%

198+14.2%

Other

947+35.2%

1,134+19.6%

1,343+18.5%

1,666+24.0%

1,914+14.9%

666+14.6%

Total

8,358

+34.4%

10,364+24.0%

13,413+29.4%

19,737+47.1%

24,039+21.8%

9,116+16.4%

Source: JNTO

20

Chinese Outbound Tourism Growth
1

2 Japan is the third most popular destination for Chinese

Chinese outbound tourists growth: +31% CAGR by 2020

(million)

Trend of Chinese Outbound Visitors

Top 7 Foreign Destinations1 for Chinese Tourists in 2015

500

500

(mn person)

8.0

5‐year CAGR
31%

400

7.73

6.0

5.25

4.96

300

4.0
200
100

70

57

83

98

128

1.68

2.0

1.19

1.15

1.11

Vietnum

France0.002010 2011 2012 2013

2015

2020E

Thailand

South
Korea

Japan

Singapore Malaysia

Source: CNTA

Source: CNTA and UNWTO(Note 1) Excludes Hong Kong, Taiwan and Macau

3

Japan has gradually relaxed visa
requirements for Chinese citizens.
Significant upside for further relaxation.

Relaxation of Visa Requirement for Chinese Citizens

4

（USD）
14,000Start
Month/Year

October
2016

Relaxation Measures
12,000

1.
2.

May
2017

3.
4.

5.
6.

Multiple‐entry visas for business purpose,and cultural or intellectual figures
Single‐entry visas for students and alumni
of certain universities
Multiple‐entry visas to applicants with
sufficient financial capability
Expansion of multiple‐entry Tohoku
Region visiting visas from 3 to 6
prefectures in the Tohoku Region
Multiple‐entry visas for individuals with
substantially high incomes
Simplified application procedures for
single‐entry visas for individual tourists

Source: Ministry of Foreign Affairs of Japan

China’s GDP per capita is expected to
grow 1.5x from 2014 to 2020
China’s GDP per capita(Actual/Forecast)
ActualForecast*A positive correlation between GDP per
capita and outbound visitor ratio can befound in Asian countries.
(When GDP per capita is higher, outboundvisitor ratio is also higher)
GDP per capita (horizontal axis) and outboundvisitor ratio as % of population (vertical axis) in 2013

10,000
8,000
6,000
4,000
2,000
0
Source: IMF, World Bank and UNWTO

Source: IMF and CEIC

21

Disclaimer
This material is for informational purposes only and not for solicitation to invest in, or recommendation to buy, certain
products of INV. You should consult with securities firms if you intend to purchase investment units of INV.
This material does not constitute or form a part of any disclosure document or an asset management report required by
the Financial Instruments and Exchange Act of Japan or regulations thereunder, the Investment Trust and Investment
Corporation Act of Japan or regulations thereunder, or the listing rules of the Financial Instruments Exchanges or otherrelated rules and regulations.
This material contains forward‐looking statements and these statements are based on certain assumptions and premises inconsideration of the available information as of the date of this material; therefore there may be currently unknown risks
and uncertainties in such statements. The contents of forward‐looking statements are subject to such risks, uncertainties,
assumptions and other factors. Accordingly, there is no assurance as to actual business performance, results of operations
or financial conditions.
INV has given its attention that the information provided herein does not contain mistakes or omissions. However, there is
no assurance given as to the accuracy, certainty or completeness, validity or fairness of any such information and suchinformation is subject to revision or retraction without prior notice.

INQUIRIES:
Consonant Investment Management Co., Ltd. (Asset Manager of INV)
Tel. +81‐3‐5411‐2731