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.

July 25, 2017
IssuerIchigo Hotel REIT Investment Corporation (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: Wataru Orii, President
Inquiries: Hiroto Tajitsu, Head of Administration
Tel: +81-3-3502-4892

Hotel Acquisition (Urbain Hiroshima Executive)
Ichigo Investment Advisors (“IIA”), the asset management company of Ichigo Hotel REIT,
decided today to acquire a Hiroshima hotel, Urbain Hiroshima Executive.
1. Acquisition Summary
Hotel Name

Urbain Hiroshima Executive

Hotel No.1

F-3 021

Hotel Type

Stay-Only

Date Built

June 2008

Form of Ownership

Trust beneficiary interest in real estate (juekiken)

Appraisal Value2

JPY 2,080,000,000

Acquisition Price3

JPY 1,800,000,000
Domestic operating company(Please see “Seller Profile” in Section 4.)

SellerContract Date

July 25, 2017

Closing Date

August 1, 2017

Financing Method

Cash-on-hand and bank loans4

Settlement Method

Lump-sum payment

1

The initial letter “F” is Ichigo Hotel REIT’s regional code for where the hotel islocated, in this case the Chugoku/Shikoku region in western Japan.
2
Appraisal value is as of June 1, 2017.
3
Acquisition price excludes incidental expenses such as property, city planning, andconsumption taxes.
4
Financing details will be announced when determined.

12. Acquisition RationaleIchigo Hotel REIT is committed to maximizing shareholder value by executing on its
growth plan and leveraging the value-add capabilities of its sponsor Ichigo. Taking
advantage of IIA’s sourcing network, Ichigo Hotel REIT is acquiring Urbain Hiroshima
Executive, financing the acquisition with cash-on-hand and bank loans.
Urbain Hiroshima Executive (“Urbain Hotel”) is a stay-only hotel located a 5-minute
walk from JR Hiroshima Station, the largest train station in the Chugoku Region.
On the back of growing inbound tourism, Hiroshima has set a new record for annual
tourist visits for five consecutive years. Hiroshima is a globally recognized tourist
destination featuring two UNESCO World Heritage sites, the Hiroshima Peace
Memorial and Itsukushima Shrine.
Urbain Hotel provides convenient access for both business and leisure travelers due toits proximity to the Shinkansen (bullet train) exit of Hiroshima Station as well as readyaccess to Hiroshima Airport, Mazda Stadium (home ground to the Hiroshima Carps, amajor Japanese baseball team), and the Hiroshima CBD. Large-scale redevelopment
underway at Hiroshima Station and its neighboring Futaba no Sato district is also
expected to contribute to further growth.
Built in June 2008, Urbain Hotel can accommodate diverse traveler needs through its
array of attractively designed single, double, and twin rooms. Including complimentary
breakfasts, drinks in the first floor guest lounge, and Japanese bath facilities, Urbain
Hotel boasts an outstanding service offering that was recognized in the Michelin
Guide’s Hiroshima 2013 Special Edition and has received multiple awards from major
Japanese online booking services.
Urbain Hotel has a fixed rent lease with a forecast NOI yield of 6.3%. Ichigo Hotel
REIT believes the acquisition of Urbain Hotel will increase shareholder value via
increased earnings, earnings stability, and portfolio quality.
As a result of today’s acquisition, Ichigo Hotel REIT’s January 2018 NOI and EPS are
forecast to increase by JPY 57 million and JPY 86, respectively,2

3. Hotel Details
Location and Features
Urbain Hotel is located a 5-minute walk from the Shinkansen (bullet train) exit ofHiroshima Station, the largest train station in the Chugoku Region.
Urbain Hotel caters to both business and leisure demand given its convenient access tothe Shinkansen terminal, Hiroshima Airport, and major tourist sites.
Urbain Hotel can accommodate diverse traveler needs, given its array of single,
double, and twin rooms, all boasting attractive designs and furnished with amenities
to support guest comfort and convenience.
Photos and Location Map3

Legal Form of Asset
Trustee
Period of Trust Contract
Location
Property RightAreaLandZoningCoverage Ratio
Floor Area Ratio
Property Right
Use1
Building Structure
Total Floor Area
Construction
DateAppraiser
Appraisal Value

Hotel Overview
Trust beneficiary interest in real estate (juekiken)
SMBC Trust Bank Ltd. (Expected)
August 1, 2017 – July 31, 2027 (Expected)
16-13 Wakakusacho, Higashi-ku, Hiroshima
Freehold
693.96m2
Commercial
80%400%Freehold
HotelRC, 14 Floors
2,756.20m2
June 27, 2008
Daiwa Real Estate Appraisal Co., Ltd.
JPY 2,080,000,000
June 1, 2017

Appraisal Date
Value by Direct Capitalization
JPY 2,090,000,000
MethodNumber of Guest Rooms
171
Yuki Construction, Hiroshima Branch, First-Class Registered
Architect2
Architects Office2
Builder
Yuki Construction, Hiroshima Branch
Structural Engineer2
Sasaki Architects Structure Design Office2
Inspection Agency
House Plus Chugoku Region
PML (Assessor)
4.95% (Sompo Risk Management & Health Care Inc.)
Collateral
None (expected)
Lease Overview
Tenant Overview
1
Number of Tenants
Monthly Rental Income
Hotel operator did not provide consent to disclose.*
DepositHotel operator did not provide consent to disclose.
Leasable Area
2,756.20m2
Leased Area
2,756.20m2
Occupancy
N/A (previous owner did not lease the hotel)
Property Management
Building Management & Strategy Inc.
CompanyMaster Lease Company
N/A
Master Lease Type–4

6.3%
NOI yield3
4
NOI yield (post-depreciation) 4.8%
Special Items
None* Urbain Hiroshima Executive has a fixed-rent lease contract.
1

Building Structure refers to the structure mentioned in the real estate register. The
following abbreviations are used with regards to structure: RC stands for reinforcedconcrete; and SRC for steel-reinforced concrete.
2
Names of the architect, builder, structural engineer, and inspection agency are those as ofwhen the building was built.
3
NOI yield = forecast NOI (net operating income) divided by the acquisition price, whereNOI is taken from the real estate appraisal report and is derived using the Direct
Capitalization Method (DCM).
4NOI Yield (post-depreciation) = NOI plus depreciation divided by the acquisition price.
Depreciation is an estimated value calculated by IIA using the straight-line method.

5

Appraisal Overview
Hotel Name

Urbain Hiroshima Executive

Appraisal Value

JPY 2,080,000,000

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Date

June 1, 2017
AmountAppraisal Value
Value by Direct
Capitalization Method
IncomeMaximum
Obtainable Rental
IncomeVacancy LossNoteValuation determined via both a directJPY 2,080,000,000
capitalization valuation and DCF valuation
JPY 2,090,000,000
JPY 129,960,000
JPY 129,960,000–Expenses
Administrative andMaintenanceExpensesUtility Expenses

JPY 16,509,275

Repair Expenses

JPY 2,920,583

PM Fee– Borne by tenant– Borne by tenant
Based on the average of the past 12 years ofengineering reports
Based on the level of similar assets and set at
JPY 1,440,000
JPY 120,000 per month

Leasing Brokerage
Fees
Taxes
Insurance
Premiums
Other Expenses
Net Operating Income(NOI)
Income on
Investment ofDeposits Received
Capital ExpenditureNet Profit–
JPY 10,684,372

JPY 164,720 Based on insurance estimates, etc.
JPY 1,299,600

1.0% of Income calculated as variable
expenseJPY 113,450,725
Based on comprehensive assessment of theJPY 649,800 investment and procurement of the deposits
received
Based on average renewal expense of the past
JPY 3,510,667
12 years in engineering reports
JPY 110,589,858
Based on transactions of similar assets andcomprehensive assessment of the asset’s
5.3% location, its individual characteristics,
property right, as well as recent decline of
hotel cap ratesCap Rate

Value via DCF Method

Based on FY2017 actual amounts (includingdepreciable asset tax)

JPY 2,070,000,000

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 upon risk-adjusted NOI6

Value via Cost Approach

JPY 1,370,000,000

Land

58.6%

Building

41.4%

Sum of building prices divided by sum ofbuilding and land prices

Notes
None

4. Seller Profile
NameAddress
Representative
Principal Businesses
CapitalEstablishment DateRelationship withIchigo Hotel REITor IIA
Net Assets
Total Assets
Major Shareholder
and Shareholding
Ratio

Yuki Corporation Co., Ltd.
1-6-2 Shin Kamata, Ota-ku, Tokyo
Harukuni Nakamoto, Representative Director
Ownership, management, operation, and consulting of hotels
and related businesses
JPY 30 million
October 26, 1993
The seller does not have any capital, personnel, or business
relationship of note with Ichigo Hotel REIT or IIA. In addition,
the seller is not an interested party as defined in theEnforcement Ordinance of the Investment Trust and Investment
Corporation Law or the internal rules of IIA.
The seller has not given consent to disclose the information.
The seller has not given consent to disclose the information.
The seller has not given consent to disclose the information.

5. Broker Profile
Name
Relationship withIchigo Hotel REIT
or IIABrokerage Fee

The broker has not given consent to disclose the information.
The broker does not have any capital, personnel, or business
relationship of note with Ichigo Hotel REIT or IIA. In addition,
the broker is not an interested party as defined in theEnforcement Ordinance of the Investment Trust and Investment
Corporation Law or the internal rules of IIA.
The broker has not given consent to disclose the information.

6. Acquisition Schedule
Contract Date
Acquisition and Settlement Date

July 25, 2017
August 1, 2017 (Expected)

7. Earnings Outlook
Because the acquisition is scheduled for August 1, 2017, there is no July 2017 earnings
impact. While the January 2018 earnings forecast remains unchanged, NOI and EPS areexpected to increase by JPY 57 million and JPY 86, respectively.

7

Appendix A: Engineering Report Summary
Inspector Name
Inspection Date
Short-Term Repair Expense1
Long-Term Repair Expense2
Current Replacement Cost

Tokio Marine & Nichido Risk Consulting Co., Ltd.
May 2017–
JPY 77,175,000
JPY 736,800,000

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.
2Long-Term Repair Expense is defined as cumulative repair expenses considerednecessary for the maintenance of the hotel within twelve years from the time ofinspection.

8

Appendix B: Post-Acquisition Portfolio
PrefectureLeaseTerms

Acquisition
Price2(JPY million)% ofPortfolio3

Hokkaido

Variable2,160

4.2

Hokkaido
Nest Hotel Sapporo Odori
Hokkaido
Comfort Hotel Kushiro
Kanagawa
Grandpark-Inn Yokohama
Tokyo
Smile Hotel Tokyo Asagaya
Tokyo
Smile Hotel Asakusa
Hotel Livemax NihombashiTokyo
Hakozaki
Shizuoka
Comfort Hotel Hamamatsu
Hotel Wing International
Aichi
NagoyaComfort Hotel Central
Aichi
International Airport
Mie
Comfort Hotel Suzuka
Kyoto
Smile Hotel Kyoto Shijo
Kyoto
Hotel Vista Premio Kyoto
Osaka
Chisun Inn Osaka Hommachi
Hyogo
Hotel Suave Kobe Asuta
Nest Hotel Osaka
Osaka
Shinsaibashi
Okayama
Comfort Hotel Okayama
Ehime
Nest Hotel Matsuyama
Hiroshima
Urbain Hiroshima Executive
Fukuoka
Valie Hotel Tenjin
Okinawa
Nest Hotel Naha
Total 21 Hotels

Variable
Fixed
Fixed
Variable
Variable

1,450300
1,490
3,910
1,920

2.8
0.6
2.9
7.7
3.8

Fixed

1,360

2.7

Fixed

1,550

3.0

Variable

2,670

5.2

Fixed

5,308

10.4

Fixed
Variable
Variable
Variable
Fixed4

300
4,480
3,600
1,630
1,490

0.6
8.8
7.1
3.2
2.9

Variable

7,600

14.9

Fixed
VariableFixed
Variable
Variable

1,200
1,610
1,800
1,380
3,750
50,958

2.4
3.2
3.5
2.7
7.4
100.0

Hotel
No.1

Hotel Name

A-1 004 Nest Hotel Sapporo Ekimae
A-2 008
A-3 018B-1 020
C-1 012
C-2 014
C-3 016
D-1 006
D-2 003
D-3 011
D-4 019E-1 001E-2 002
E-3 005
E-4 007
E-5 010F-1 017
F-2 015
F-3 021G-1 009G-2 013
12The initial letter (A, B, etc.) is a regional code which identifies the area in which the hotel is located.
CodeARegion
Hokkaido/Tohoku

BKantoCDEFTokyo
Hokuriku/TokaiKinki
Chugoku/Shikoku

GKyushu/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,
Okinawa

Acquisition 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).
9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.
4While Hotel Suave Kobe Asuta’s lease contract includes a variable rent clause, it has never been
triggered. Because Ichigo Hotel REIT does not anticipate receiving variable rent at this hotel, it has
been classified as a fixed rent hotel.

10Appendix C: Number of Guests Staying in Hiroshima Prefecture(Million)
Japanese Guests (Left Axis)

Inbound Guests (Right Axis)

101.08.2

86.8

7.0

7.5

7.9
0.8

60.6

0.5

4
0.4
20.2

0.3

00.0
2012

2013

2014

2015

2016

Note: Data prepared by IIA based on Japan Tourism Agency’s“Statistical Survey of Travelers.”
Appendix D: Number of Tourists Visiting Hiroshima City
Tourists Visiting Hiroshima City (Left Axis)
Inbound Tourists (Right Axis)

15

11.5

12.0

11.7(Million)
2.0
12.6

10.9
10

1.2
1.0
1.0

5
0.7
0.5
0.4
00.0
2012

2013

2014

2015

2016

Note: Data prepared by IIA based on Hiroshima City’s “Numberof Tourists Visiting Hiroshima 2016.”11Appendix E: Number of Guests Staying in Hiroshima City(Million)
6

5.4
4.5

4.6

2013

2014

4.8

4.1

30
2012

2015

2016

Note: Data prepared by IIA based on Hiroshima City’s “Numberof Tourists Visiting Hiroshima 2016.”

12