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.

September 24, 2021
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/en
Asset Management Company
Ichigo Investment Advisors Co., Ltd.
Representative: Hiroshi Iwai, President
Inquiries: Hidehito Iwasaka, Head of Ichigo Hotel
Tel: +81-3-3502-4892

Subordinated Bond Issuance to Ichigo
Ichigo Hotel today decided to issue JPY 370 million of callable bonds (subordinatedand limited to qualified institutional investors) (the “Subordinated Bonds”) to its
sponsor, Ichigo, in order to further strengthen its financial base amid the Covid
pandemic.
1. Bond Details
Name
Allottee
Total Issue AmountForm of Bond Certificate
Bond Denomination AmountIssue Price
Redemption Price
Offering Method
Subscription Period
Payment Date
Redemption Date and Method(Including Early Redemption)

Ichigo Hotel Second Callable Unsecured
Investment Corporation Bond (subordinated andlimited to qualified institutional investors)
Ichigo Inc. (“Ichigo”)
JPY 370 million
Pursuant to the Act on Book-Entry Transfer ofCorporate Bonds and Shares, bond certificates will
not be issued.
JPY 370 million
Par (JPY 100)
Par (JPY 100)
Private placement limited to qualified institutional
investors
September 24, 2021
September 30, 2021
Lump sum redemption on March 31, 2027
The principal may be redeemed in whole or in part
before maturity at par (JPY 100) after the firstinterest payment date (March 31, 2022). If Ichigo
Hotel decides on an early redemption, Ichigo Hotelmust notify bondholders the amount and theredemption date 10 business days prior to the early
redemption date. The Subordinated Bonds may bepurchased and cancelled at any time on and after
the day following the payment date unless
1Interest Rate
Interest Payment Date

Subordination Agreement

Transfer Restrictions

Financial Covenants
Collateral
Credit Rating
Bond Administrator
Fiscal, Issuing, and Paying Agent
Underwriters1

otherwise stipulated by the depository. In the eventthe redemption date (or early redemption date) is
not a business day, payment shall be made on theprior business day. Details on redemption are in“Subordination Agreement” below.
2.0% (fixed rate)
March 31 and September 30 every year (the firstinterest payment date will be March 31, 2022). If
an interest payment date is not a business day,payment shall be made on the previous businessday. The interest payment is calculated on a 365day basis for each calculation period (the period
starting on the payment date and ending on the firstinterest payment date, or the subsequent periods
starting on subsequent interest payment dates andending on the following interest payment date,where the first day of each period is not included in
the interest calculation). Interest payments arerounded to the nearest whole number. Interest
payments are made pursuant to the Subordination
Agreement below, and there are no stipulations
regarding accumulated interest.
In the event of an Ichigo Hotel liquidation or
rehabilitation, Subordinated Bonds will be treatedas subordinated bankruptcy claims or subordinatedrehabilitation claims. If proceedings related toliquidation under Japanese law, or liquidation,
bankruptcy, or rehabilitation pursuant to laws
outside of Japan arise and are ongoing, neither
interest nor principal payment will be made until
senior claims have been repaid in full.
Sales of the Subordinated Bonds require theapproval of Ichigo Hotel, and can only be sold toqualified institutional investors as defined in
Article 10, Clause 1 of the Cabinet Office
Ordinance Relating to Definitions Prescribed in
Article 2 and Article 2, Paragraph 3, Clause 1 of
the Financial Instruments and Exchange Law.1
None
The bonds are not secured by any collateral nor
guaranteed, and no assets have been reserved ascollateral for the Subordinated Bonds.
None
None
SMBC
SMBC Nikko Securities

Ichigo, the allottee, has agreed to not transfer the Subordinated Bonds without priorconsent of Ichigo Hotel.

22. Reason for Bond IssuanceAmid an ongoing difficult market environment with low hotel demand due to the Covid
pandemic, Ichigo Hotel has maintained a stable financial base with JPY 4.4 billion cashon-hand as of the end of the July 2021 fiscal period.
Despite a gradual recovery in hotel demand, Ichigo Hotel continues to see decreased
revenue and earnings compared to pre-Covid levels, and a full-blown market recovery is
expected to take time.
With uncertainty abound from the Covid pandemic, Ichigo Hotel believes that further
strengthening its financial base is important for negotiating financing terms withfinancial institutions. Rather than selling quality portfolio assets or diluting net asset
value per share through issuing new shares via third-party allotment, Ichigo Hotel has
decided to issue subordinated bonds to its sponsor, Ichigo, following on from theprevious issuance in November 2020. The continued commitment and support from
Ichigo underpins Ichigo Hotel’s ability to drive sustainable value creation for its
shareholders.
3. Characteristics and Benefits of Subordinated Bond Issuance
The Subordinated Bonds have characteristics of both equity and debt. Although they arelegally considered debt and do not cause share dilution, in the event of bankruptcy or
rehabilitation, they are treated as subordinated bankruptcy claims or subordinatedrehabilitation claims. Furthermore, if proceedings related to liquidation under Japaneselaw, or liquidation, bankruptcy, or rehabilitation pursuant to laws outside of Japan arise
and are ongoing, the Subordinated Bonds are subordinated to other general claims, suchas bank loans, pursuant to the Subordination Agreement and thus have characteristics ofequity capital. The Subordinated Bond Issuance allows Ichigo Hotel to effectively
strengthen its equity base while avoiding any dilution of net asset value per share.
4. Rationale of Subordinated Bond Issuance Terms
Because there have been a limited number of subordinated bonds issued by investment
corporations in Japan, Ichigo Hotel conducted a multi-faceted analysis to determine
issuance terms including setting an interest rate based on information provided byfinancial institutions, interest rate spreads of existing subordinated investment
corporation bonds, interest rate spreads of other bonds issued by similar investment
corporations, and Ichigo Hotel’s forecast dividend yields.

3

5. Allottee Details(1) Allottee Overview
Company Name

Ichigo Inc.

Address

1-1-1 Uchisaiwaicho, Chiyoda-ku, Tokyo

Representative

Scott Callon, Chairman
Takuma Hasegawa, President

CapitalJPY 26.888 billion

Establishment Date

March 17, 2000

Major Shareholder

Ichigo Trust Pte. Ltd.

Principal Businesses

Asset Management, Sustainable Real Estate, Clean Energy

Relationship with
Ichigo Hotel or IIA

Parent Company of Ichigo Investment Advisors (IIA), theAsset Management Company(2) Allottee Selection Rationale
Ichigo Hotel aims to further strengthen its financial base via the Subordinated Bondissuance and maintain stable operations amid an uncertain market environment. The
selection of its sponsor, Ichigo, as allottee demonstrates Ichigo’s unwaveringcommitment and support for Ichigo Hotel, and is expected to serve as a strong
underpinning of Ichigo Hotel’s financial strategy, such as when negotiating financing
terms with financial institutions.
Ichigo currently owns 6,500 Ichigo Hotel shares (2.54% of shares outstanding) and is
the parent company of IIA, Ichigo Hotel’s asset management company.
(3) Related-Party Transactions
Transactions with the allottee, Ichigo, are related-party transactions as defined under theInvestment Trust and Investment Corporation Law (1951 Law, Act No. 198, including
subsequent revisions). Pursuant to its rules on related-party transactions, IIA’s Risk
Compliance Committee and Asset Management Committee reviewed and approved theterms and conditions of the Subordinated Bond issuance. Ichigo Hotel also received
approval from its Board of Directors.
6. Total Amount to be Raised and Use and Timing of Proceeds(1) Amount of Estimated Net Proceeds
JPY 3.63 million(2) Use of Proceeds and Scheduled Expenditure Date
The proceeds will first be retained as cash-on-hand through December 2021, and thendeployed towards operations and value-add capex as necessary.

47. Outstanding Loan and Bond Balance (as of September 30, 2021)(JPY million)
BeforeBond Issuance
(A)

After
Bond Issuance(B)

Short-term bank loans

7,000

7,000

–

Long-term bank loans

18,47018,470–Total bank loans

25,47025,470–Subordinated bonds

500

870

+370

25,97026,340+370

Total bank loans and bonds

Change(B) - (A)

8. Other(1) Equity Treatment of Subordinated Bonds
The Subordinated Bonds are a form of hybrid financing that has characteristics of both
equity and debt. Ichigo Hotel expects to receive lender approval for equity treatment of
the entire notional value of the Subordinated Bond.
(2) Investment Risks
Risks related to this bond issuance have no material impact on the “Investment Risks”
described in the latest Financial Report submitted on April 28, 2021.

Distribution of Loan and Bond Maturities (as of September 30, 2021)(JPY million)
8,000

7,000
6,000

Long-term Loans (fixed rate)Long-term Loans (floating rate)

1st Subordinated Bonds

2nd Subordinated Bonds

4,500

4,000

Short-term Loans

4,500
2,500
500

3,000
2,000

2,220

1,800

2,000

450

0

January
2022

0
July
2022

370

January
2023

July
2023

January
2021

July
2024

5

January
2025

0
July
2025

0
January
2026

July
2026

0
January
2027

0
July
2027