[For Information Purpose Only.
The Japanese language press release should be referred to as the original.]
May 17, 2019
To All Concerned Parties
Name of REIT Issuer:
Invincible Investment Corporation
Naoki Fukuda, Executive Director(Securities code:8963)
Asset manager:
Consonant Investment Management Co., Ltd.
Naoki Fukuda, CEOContact: Jun Komo
General Manager of Planning Department(Tel. +81-3-5411-2731)

Notice concerning Revision of Forecast of Financial Results
for the 32nd Fiscal Period Ending June 2019As a result of the sale of Spacia Ebisu with the expected gain on sale, Invincible Investment
Corporation (“INV”) is announcing the updated forecasts of financial results for the fiscal period
ending June 2019 (32nd Fiscal Period).
1.

Revision of forecasts of financial results for the fiscal period ending June 2019 (from January 1,
2019 to June 30, 2019 )Total
Distribution
AmountOperating
Revenues

Operating
IncomeOrdinary
Income

JPY million

JPY million

JPY million

JPY million

JPY million

14,923

9,804

8,890

8,889

8,964

Revised forecast (B)JPY million
21,514

JPY million
16,233

JPY million
15,318

JPY million
15,318

JPY million

Amount of variance(B) – (A)JPY million
6,591

JPY million
6,428

JPY million
6,428

JPY million
6,428

JPY million

Rate of variance((B) – (A)) / (A)

%

%

%

%

%

44.2

65.6

72.3

72.3

-

Previous forecast (A)(announced on
February 21, 2019)

Net Income

8,964
-

This English language notice is a translation of the Japanese-language notice released on May 17, 2019 and was prepared solely for theconvenience of, and reference by, non-Japanese investors. It is not intended as an inducement or solicitation for investment. We caution
readers to undertake investment decisions based on their own investigation and responsibility.
This translation of the original
Japanese-language notice is provided for informational purposes only, and no warranties or assurances are given regarding the accuracy orcompleteness of this English translation. Readers are advised to read the original Japanese-language notice. In the event of any discrepancy
between this translation and the Japanese original, the latter shall prevail in all respects.

1

JPY

JPY

JPY

Distribution
per Unit(Including
Excess Profit
Distribution
per Unit)(Note 1)
JPY

1,568

1,568

14

1,582

JPY

JPY

JPY

JPY

2,703

1,582

-

1,582

JPY

JPY

JPY

JPY

1,135

14

(14)

-

%

%

%

%

72.4

0.9

(100.0)-Earnings per
Unit(Note 1)

Distribution
per Unit(Excluding
Excess Profit
Distribution
per Unit)

Excess Profit
Distribution
per Unit(Note 1)

(Note 1)

Previous forecast (A)(announced on
February 21, 2019)
Revised forecast (B)Amount of variance(B) – (A)Rate of variance((B) – (A)) / (A)(Note 1)

The number of investment units issued and outstanding at the end of the fiscal period: 5,666,840 units.

(Reference)
Assumptions underlying the forecast of financial results and distributions for the fiscal period ending
June 2019 are provided in Appendix 1.

2.

Reasons for the revision and disclosure of forecast of financial results

INV is revising its forecasts of the financial results for the fiscal period ending June 2019, as theoperating revenue and net income for the fiscal period ending June 2019 are expected to increaseby 10% and 30% or more, respectively, from the previous forecasts announced in “Financial
Summary for the December 2018 Fiscal Period (from July 1, 2018 to December 31, 2018)” dated
February 21, 2019 due to an expected gain on sale1 of 5.6 billion JPY as a result of the sale of
Spacia Ebisu (the “Property”) as announced in the press release “Notice concerning Sale ofDomestic Trust Beneficiary Interest” dated today. INV plans to retain substantially all of the saleproceeds in order to acquire future additional assets. The closing of sale of the Property is
expected to occur on June 19, 2019. INV plans to pay out dividends as if the Property was held
through June 30, 2019.
In addition, INV is incorporating the effect of the investment structure change (the “Structure
Change”) with regard to the two Cayman hotels as announced in the press release “Noticeconcerning Change of Investment Structure regarding Overseas Assets” dated May 9, 2019. The
effect of the Structure Change is that instead of INV earning net income on a 3-month delayed basis(which was recognized after the closing of fiscal periods of the Cayman SPC), INV earns theincome in real time. As this change happened during the fiscal period ending June 2019, from an
accounting perspective, INV expects to recognize an extra three months of net income from theseproperties, or JPY 826 million. INV does not plan to pay out this extra income given that it is a
one-time accounting occurrence and instead plans to pay out dividends based on the net income
This English language notice is a translation of the Japanese-language notice released on May 17, 2019 and was prepared solely for theconvenience of, and reference by, non-Japanese investors. It is not intended as an inducement or solicitation for investment. We caution
readers to undertake investment decisions based on their own investigation and responsibility.
This translation of the original
Japanese-language notice is provided for informational purposes only, and no warranties or assurances are given regarding the accuracy orcompleteness of this English translation. Readers are advised to read the original Japanese-language notice. In the event of any discrepancy
between this translation and the Japanese original, the latter shall prevail in all respects.

2that was expected under the structure in place prior to the Structure Change.
Due to the fact that the gain on sale of the Property discussed above will be retained by INV for
future asset acquisitions and the fact that the increased net income from the Structure Change
discussed above will not be paid out as dividends, INV does not make any changes to the forecastof DPU from the previous forecasts announced in “Financial Summary for the December 2018
Fiscal Period (from July 1, 2018 to December 31, 2018)” dated February 21, 2019.
Finally, mainly due to the fact that the gain from sale of the Property will be retained by INV, thedistribution payout ratio will not be large enough to fulfill the tax conduit requirement2 of paying out
at least 90% of net distributable income as dividends. However, INV has tax-loss carry forwards inthe amount of JPY 22.6 billion (mainly arising out of disposition of the assets in December 2010
fiscal period) which is more than enough to fully offset the expected taxable income. As a result,
INV does not expect to be required to pay any income taxes for the fiscal period ending June 2019.
(Note 1) Expected gain on sale is calculated by deducting the estimated transfer related cost and is an
estimate as of today, and is subject to change.
(Note 2) Investment corporations under the J-REIT system can deduct the amount of cash distributions in
calculating its taxable income as long as they satisfy certain conditions (conduit requirements), in
order to prevent double taxation between J-REIT and unitholders.

Website of INV: http://www.invincible-inv.co.jp/eng/

This English language notice is a translation of the Japanese-language notice released on May 17, 2019 and was prepared solely for theconvenience of, and reference by, non-Japanese investors. It is not intended as an inducement or solicitation for investment. We caution
readers to undertake investment decisions based on their own investigation and responsibility.
This translation of the original
Japanese-language notice is provided for informational purposes only, and no warranties or assurances are given regarding the accuracy orcompleteness of this English translation. Readers are advised to read the original Japanese-language notice. In the event of any discrepancy
between this translation and the Japanese original, the latter shall prevail in all respects.

3

(Appendix 1)<Assumptions Underlying the Forecast of Financial Results and Distribution for
the June 2019 Fiscal Period>
Item

Assumptions

Fiscal period

The June 2019 fiscal period: from January 1, 2019 to June 30, 2019 (181 days)

Assets undermanagement

Based on the properties held as of the date of this document (131 properties and apreferred equity interest in one TMK), INV assumes the transfer of Spacia Ebisu on
June 19, 2019 and that there will be no other changes through the end of the fiscal
period ending June 30, 2019.

As of the end of the June 2019 fiscal period: 5,666,840 units
Units outstanding

INV assumes that there will be no change to the 5,666,840 units issued and outstanding
as of today through the end of the fiscal period ending June 30, 2019.

Balance as of the end of the fiscal period ending June 30, 2019: JPY 229,873 million(borrowing: JPY 225,873 million, investment corporation bonds: JPY 4,000 million)
Interest-bearing liabilities

INV assumes that out of the debt balance of JPY 229,873 million as of today, regarding
other loans maturing during the June 2019 fiscal period, INV intends to refinance at asimilar condition. INV assumes no other new loan or prepayment of loan through theend of the June 2019 fiscal period.

This English language notice is a translation of the Japanese-language notice released on May 17, 2019 and was prepared solely for theconvenience of, and reference by, non-Japanese investors. It is not intended as an inducement or solicitation for investment. We caution
readers to undertake investment decisions based on their own investigation and responsibility.
This translation of the original
Japanese-language notice is provided for informational purposes only, and no warranties or assurances are given regarding the accuracy orcompleteness of this English translation. Readers are advised to read the original Japanese-language notice. In the event of any discrepancy
between this translation and the Japanese original, the latter shall prevail in all respects.

4

Item

Assumptions
INV expects to record operating revenues as follows:
June 2019
Fiscal Period
JPY 12,234 million(JPY 8,497 million)(JPY 4,168 million)(JPY 4,329 million)

・Rental revenues(of these, hotel rents)(fixed hotel rents)(variable hotel rents)
・Management contract
revenue
・TMK Dividend amount・TK Dividend amount・Gain on sale
Total operating revenues
Operating revenues

JPY 550 million
JPY 892 million
JPY 2,215 million
JPY 5,622 million
JPY 21,514 million

We estimate the amount of dividends on the preferred equity interests (TMK dividend)
based on the performance of the underlying asset and the assumed amount ofexpenses incurred by the TMK.
Due to the Structure Change, INV receives revenue from the Cayman Hotels as TK
dividend until May 9, 2019 and recognizes management contract revenue from the
Cayman Hotels on and after May 10, 2019. The forecasts of TK dividend andmanagement contract revenue are based on estimated performance of the underlying
assets and the assumed amount of expenses incurred by the TK operator or the hotelmanagement company. TK dividend and management contract revenue have been
calculated based on the exchange rate of 1 USD = 110.00 JPY, as the exchange rate is
fixed based on the currency put/call options.
Rental revenues are calculated based on estimates as of the date of this document. In
addition, INV assumes there will be no delinquencies or non-payment of rent by tenants.

This English language notice is a translation of the Japanese-language notice released on May 17, 2019 and was prepared solely for theconvenience of, and reference by, non-Japanese investors. It is not intended as an inducement or solicitation for investment. We caution
readers to undertake investment decisions based on their own investigation and responsibility.
This translation of the original
Japanese-language notice is provided for informational purposes only, and no warranties or assurances are given regarding the accuracy orcompleteness of this English translation. Readers are advised to read the original Japanese-language notice. In the event of any discrepancy
between this translation and the Japanese original, the latter shall prevail in all respects.

5

Item

Assumptions
INV expects to incur property related expenses and management contract expenses outof operating expenses as follows:・Facility management fees(of these, repair costs)
・Taxes and other public charges(Note)
・Insurance expenses
・Depreciation expenses

Operating expenses

June 2019
Fiscal Period
JPY 652 million(JPY 27 million)
JPY 550 million
JPY 51 million
JPY 3,297 million

・Other expenses
Total property related expenses
and management contract
expenses

JPY 205 million
JPY 4,756 million(Note) Property taxes and city planning taxes on the assets acquired in 2018 are
calculated on a pro-rata basis with the previous owners and settled at the time ofacquisition, and are not recorded for the fiscal period ended December 31, 2018 and will
be recorded from the fiscal period ending June 30, 2019 as the amount equivalent tosuch settlement is included in the acquisition cost.
INV expects to incur other operating expenses other than the property related expenses
or management contract expenses as follows:
June 2019
Fiscal Period
JPY 525 million

・Other operating expenses(of these, asset management
fees)(JPY 300 million)

INV expects to record net operating income as follows:

・NOI

June 2019
Fiscal Period
JPY 14,433 million(of these, domestic hotel NOI)(JPY 8,057 million)(of these, overseas hotel NOI)(JPY 512 million)(of these, residential NOI)NOI(JPY 2,571 million)(of these, TMK dividend amount)(JPY 892 million)(of these, TK dividend amount)(JPY 2,215 million)

NOI calculation method in the above table is as follows(up to May 9, 2019)
・NOI＝ Rental Revenues ‐ Property Related Expenses + Depreciation Expenses +Dividend on the preferred equity interest (TMK dividend) + Dividend on TK interest (TK
dividend)(on and after May 10, 2019)
・NOI＝ Rental Revenues ‐ Property Related Expenses + Depreciation Expenses +Dividend on the preferred equity interest (TMK dividend) + (Management Contract
Revenue ‐Management Contract Expense)

This English language notice is a translation of the Japanese-language notice released on May 17, 2019 and was prepared solely for theconvenience of, and reference by, non-Japanese investors. It is not intended as an inducement or solicitation for investment. We caution
readers to undertake investment decisions based on their own investigation and responsibility.
This translation of the original
Japanese-language notice is provided for informational purposes only, and no warranties or assurances are given regarding the accuracy orcompleteness of this English translation. Readers are advised to read the original Japanese-language notice. In the event of any discrepancy
between this translation and the Japanese original, the latter shall prevail in all respects.

6

Item

Assumptions
INV expects to incur non-operating expenses as follows:

Non-operating expenses

Distribution per unit

・Interest expense
・Finance related costs・Interest for investment corporation
bonds
・Depreciation of investment
corporation bonds issuance
expenses
Total non-operating expenses

June 2019
Fiscal Period
JPY 600 million
JPY 298 million
JPY 11 million
JPY 3 million
JPY 914 million

The distribution per unit is calculated in accordance with the cash distribution policy as
set forth in INV’s Articles of Incorporation.
With respect to the distribution for the fiscal period ending June 30, 2019, INV expects todistribute an aggregate amount of JPY 8,964 million (distribution per unit: JPY 1,582),
after reserving JPY 6,353 million, a portion of the increase in net income due to theStricture Change and the sale of Spacia Ebisu, from the net income for the fiscal period
ending June 30, 2019 in the amount of JPY 15,318 million).
For the fiscal period ending June 30, 2019, INV expects to record deferred gain on
hedge of the interest rate swap and the currency option as the valuation and conversion
adjustments, etc. of JPY 108 million, which is equal to the amount for the fiscal period
ended December 31, 2018. The distribution per unit is calculated based on theassumption that fluctuation of the market value of the interest rate swap does not affectthe distribution per unit.
Distribution per unit may vary due to various factors, including changes of the assets
under management, fluctuation of rent income associated with reasons such as changeof tenants and occurrences of unexpected repairs.

This English language notice is a translation of the Japanese-language notice released on May 17, 2019 and was prepared solely for theconvenience of, and reference by, non-Japanese investors. It is not intended as an inducement or solicitation for investment. We caution
readers to undertake investment decisions based on their own investigation and responsibility.
This translation of the original
Japanese-language notice is provided for informational purposes only, and no warranties or assurances are given regarding the accuracy orcompleteness of this English translation. Readers are advised to read the original Japanese-language notice. In the event of any discrepancy
between this translation and the Japanese original, the latter shall prevail in all respects.

7

Item

Excess profit distribution
per unit

Assumptions
INV believes maintaining the stability of cash distributions over the medium term is oneof the most important factors in determining the amount of distribution for a given fiscal
period, and therefore, INV has adopted the policy to make distributions in excess of
profits in order to stabilize distributions, in cases where dilution of investment units orsignificant expenses are to be recorded in connection with, among other things, theacquisition of assets or the raising of capital, leading to a temporary decrease in
distribution per unit, taking into consideration the level of distribution per unit assuming
such acquisition of assets or capital raising had contributed for a full fiscal period.
INV may also consider making distributions in excess of profits for the purpose of
decreasing the impact from corporate tax increase arising from different rules in tax andaccounting practices, such as treatment on depreciation of fixed term land lease or asset
retirement obligation.
INV will not make distribution in excess of profits for the fiscal period ending June 30,
2019, as INV intends to retain a certain amount of the net income.

Excess profit distribution per unit

Other

June 2019
Fiscal Period-

INV assumes there will be no amendments to applicable laws and regulations, thetaxation system, accounting standards and other regulations.
On April 1, 2019, an amended Act on Special Measures Concerning Taxation wasenacted in Japan that amends the requirement that “a J-REIT must not hold 50% ormore of the shares or investment in another corporation” by expanding the regulation to
include investments in anonymous associations (tokumei kumiai or TK). By
implementing the Structure Change, INV expects to comply with the tax conduit
requirement in the fiscal period ending December 2019, which commences after theeffective date of the amended Act on Special Measures Concerning Taxation and the
new regulation is applicable.
In addition, INV assumes there will be no unforeseen material changes in general
economic trends, real estate market conditions and other trends and conditions.

This English language notice is a translation of the Japanese-language notice released on May 17, 2019 and was prepared solely for theconvenience of, and reference by, non-Japanese investors. It is not intended as an inducement or solicitation for investment. We caution
readers to undertake investment decisions based on their own investigation and responsibility.
This translation of the original
Japanese-language notice is provided for informational purposes only, and no warranties or assurances are given regarding the accuracy orcompleteness of this English translation. Readers are advised to read the original Japanese-language notice. In the event of any discrepancy
between this translation and the Japanese original, the latter shall prevail in all respects.

8