Investment
Invincible Corporation
TSE Code: 8963

http://www.invincible-inv.co.jp/eng/

1

Table of Contents


Executive Summary

p. 4



Favorable Environment for Limited Service/Extended Stay Hotels

p. 10



Track Record and Strategy of Invincible Investment Corporation

p. 14



Repositioning of Portfolio and Opportunities for Future Growth

p. 17



Appendixp. 22

Investment
Invincible Corporation

Executive Summary

Invincible

Investment
Corporation

Repositioning and Refinancing Measures Announced on May 21, 2014
Repositioning of Portfolio
Sale of 7 Senior Housing Properties

Opportunity to Increase Assets
 Memorandum of Understanding (“MOU”)# of properties

7

Aggregate sales price

JPY 5,400 mn

with Fortress entities regarding the potential

Profit on sale(1)JPY 984 mn

purchase of 26 additional limited

Sales NOI cap rate(2)5.74%

 Senior housing has relatively limited upside due to longterm and fixed rent lease contracts
 Taking advantage of the increase in investment activity
in the senior housing market, Invincible sold each
property at an attractive cap rate, thus generating a profit

service/extended stay hotels (“Portfolio”),
most of which are operated by Flexstay
Hotel Management Co., Ltd. (“FHM”)
 MOU provides Invincible Investment

Debt Refinancing


New Syndicate Loan (B) at 1 month TIBOR +0.80% sets a new benchmark for Invincible’s
borrowing costsExpanded bank group now includes Mizuho
Bank and Sumitomo Mitsui Trust BankInterest-Bearing Debt Profile Before Refinancing
Loans

Balance(JPY mn)

Interest Rate

New Syndicate Loan（A）

20,350

1.65% (4)Prudential LPS Loan

11,0002.50%

Acquisition of 2 Limited Service/Extended Stay Hotels
Located in Tokyo

Corporation (“Invincible”) with a right ofPrudential LPS Loan B

9,960

1.90%

# of properties

2

first look for a 1 year period with respect toTotal

41,310

1.94%(5)Aggregate acquisition price

JPY 5,435 mn

the acquisition of the Portfolio

Aggregate appraisal value

JPY 5,490 mn(as of December 31, 2013)
Refinancing of Prudential LPS Loan and Partial Paydown of
Syndicate Loan (A) with New Syndicate Loan

Acquisition normalized
NOI cap rate(3)6.01%

 Invincible intends to proactively seek toclose the acquisition of all or part of the 26

Interest-Bearing Debt Profile After Refinancing
Loans

Balance(JPY mn)

Interest Rate

New Syndicate Loan（B）

13,500

0.95% (6) Focus on asset class with expanding market share in thehospitality market

New Syndicate Loan（A）

17,586

1.65%(4) Increased demand from foreign and domestic tourists, aswell as steady demand from business customers

Prudential LPS Loan B

9,960

1.90%

Total

41,046

1.48%(5)Hotel MyStays
Kanda, Tokyo

Hotel MyStays
Asakusa, Tokyo

properties covered by the MOU(Anticipated refinancing date, effective May 23, 2014)

Quality assets with stable income and rent
upside to promote internal revenue growth

Potential pipeline for further external
growth through property acquisitions(Note 1) Profit on sale was calculated using the book values as of December 31, 2013; this number will differ based on book value at the time of sale.
(Note 2) The sales NOI cap rate was calculated based on 2013 NOI, sum of the 20 th and 21st period NOI attributed to 7 senior housing properties of
JPY 309.8 mn divided by the aggregate sales price.
(Note 3) The acquisition normalized NOI cap rate has been calculated based on the aggregate 2014 normalized NOI forecast for the two hotels divided by the aggregate acquisition
price. The aggregate 2014 normalized NOI forecast assumes a hypothetical acquisition of the two hotels by Invincible immediately prior to the beginning of 1H/2014, and is based on(i) historical figures provided by FHM for the two properties from January through March 2014 (as adjusted to reflect an expected change in trust fees, management fees andinsurance expenses upon the acquisition by Invincible), (ii) Invincible’s forecasted figures for the remaining period (including, in the case of the period from the date of acquisition toJune 30, 2014, figures that are consistent with the assumptions used to calculate the 1H/2014 forecast) and (iii) treating initial property-related taxes for the two hotels as if they were
expensed and not capitalized.

Investment
Invincible Corporation

Expected to significantly lower
weighted average interest rates(Note 4) 1 month TIBOR + 1.50%. As for the first interest calculation period, two-month TIBOR + 1.50%.
(Note 5) Weighted average assuming the applicable interest rate for New Syndicate Loan (A) and New Syndicate Loan
(B) are as of May 21, 2014.
(Note 6) 1 month TIBOR + 0.80%. As for the first interest calculation period, two-month JPY TIBOR + 0.80%.

4

Impact on Earnings per Unit (EPU) and Distribution per Unit (DPU) EPU for 1H/2014 originally projected to be JPY 465
 Forecast EPU for 1H/2014 is expected to increase from JPY 465 to JPY 775 primarily due to one-time gains from sale of the Bon
Sejour properties
 Normalized EPU, eliminating the impact of the one time gains from the Bon Sejour sale and assuming the portfolio shift andrefinancing occurred immediately prior to the start of 1H/2014, is expected to be JPY 521

 Invincible currently expects to set DPU for 1H/2014 at JPY 550, which Invincible believes represents a more appropriate
approximation of the targeted DPU based upon review of future prospects including ongoing income improvement efforts,
continued efforts to lower borrowing costs and progress on its strategic plan

1H/2014 EPU and Simulated Normalized EPU/DPU
1,000
800
(4)

400
200

(253)

314

600

775

465

521

550

1H/2014
Simulated
Normalized
EPU

1H/2014
Revised DPU
Forecast

0
1H/2014
Estimate EPU
Prior toRevision

Forecast
Revision

EffectofTransactions

1H/2014
RevisedEPU

Normalization(Note 1) “Forecast Revision” reflects the updated actual operating income from the portfolio in 2014 to date, and the revised expectations for the remaining period for the first half of 2014 compared to the initial forecast.
(Note 2) “Effect of Transactions” is the sum of the following adjustments:(i) One-time gains relating to the sale of the seven senior housing properties.
(ii) Forecasted operating income after May 23, 2014 includes forecast operating income through June 30, 2013 for two acquired hotels. Operating income from the seven senior housing properties which have been sold is not included inforecasted operating income following May 23, 2014.
(iii) One-time costs related to the refinancing (repayment premiums, professional expenses and other).
(iv) Interest expense to be incurred from May 23, 2014 under new loans less interest expense that would have been incurred on and after May 23, 2014 under portion of existing loans that are to be refinanced on such date.
(v) Other operating expenses.
(Note 3) “Normalization” is the sum of the following adjustments:(i) Excluding one-time gains of the sale of Bon Sejour properties(ii) Effects assuming that the change of portfolio and refinancing occurred prior to the beginning of 1H/2014.
(iii) Effects assuming initial property-related taxes for the two hotels as if they were expensed and not capitalized.

Investment
Invincible Corporation

5

Summary Financials Actual, Forecast and Simulated Normalized Adjusted Forecast

RevisedOriginal
Forecast

ActualSimulated
Normalized
Adjusted

Adjustments

Forecast(3)Forecast(6)20th period
1H 2013(JPY mn)
NOI

21st period
2H 2013

22nd period
1H 201422nd period
1H 2014

2,008

2,006

1,969

1,966

4

-

-

-

984

(984)

-

Depreciation expenses

(543)

(527)

(538)

(539)

(7)

(546)

Asset management fees

(125)

(125)

(125)

(125)

-

(125)

Other operating expenses

(108)

(88)

(114)

(113)

-

(113)

1,231

1,265

1,192

2,172

(987)

1,185

Gain on sale of properties (net)Operating income
Non-operating revenues

1,970

3

355

-

-

-

-

Finance related costs

(96)

(579)

(62)

(578)

516

(62)

Interest expenses

(800)

(672)

(396)

(375)

74

(301)

(1)

(16)

(1)

-

-

-

335

353

732

1,219

(399)

820

Other non-operating expenses
Ordinary income
Extraordinary income / loss

-

-

-

-

-

-

335

352

731

1,218

(398)

820

1,348,292

1,573,179

1,573,179

1,573,179

Earnings per unit (JPY)

249

259

465

775

DPU(2) (JPY)

264

237

464

Total debt outstanding as of fiscal period end

43,851

41,31041,20841,00040,944

Appraisal values of properties

74,34775,43075,43076,09976,09959.0

53.8

Net income
Investment units outstanding

1,573,179

(1)

(4)

(253)

521
550

54.8

54.6

53.9

DSCR(5)Weighted average interest rate(%)

1.9

2.2

3.5

3.5

3.6

3.67

3.23

1.94

1.84

1.48

NOI yield based on acquisition price(%)

5.3

5.2

5.2

4.8

4.8

LTV (%) appraisal value basis

Investment
Invincible Corporation(Note 1) The earnings per unit forthe 21st Period is calculated using theweighted average number ofinvestment units for the 21st Period(1,362,959)(Note 2) DPU for the 20th Period isbased on 1,348,292 investment units;
21st period and 22nd period are based
on 1,573,179 investment units(Note 3) Revised forecast dataassumes refinancing takes place on
May 23, 2014
(Note 4) LTV calculation: total
outstanding interest bearing debt
÷Portfolio appraisal value (existing
Portfolio uses December 2013
appraisal values, new acquisitions
use March 2014 appraisal values)(Note 5) DSCR calculation:(Operating Profits + Depreciation) ÷(Scheduled Amortization + Interest
Expense)(Note 6) “Normalization” is the sumof the following adjustments:(i) Excluding one-time gains of thesale of Bon Sejour properties(ii) Effects assuming that the changeof portfolio and refinancing occurredprior to the beginning of the 22nd
period.
(iii) Effects assuming initial propertyrelated taxes for the two hotels as if
they were expensed and not
capitalized.

6

Financing Cost Reduction While Further Enhancing Solid Bank Formation
 Continued efforts to reduce financing costs with support from leading Japanese and global banks
 1 month TIBOR + 0.80% sets new benchmark for Invincible’s borrowing costs
 Expanded bank group provides greater financing availability and flexibility
Weighted Average Interest Rate(1)DSCR(2)

1.94%
3.6x

1.48%
2.2x

Dec. 31, 2013

May. 23, 2014
(Forecast)

Before (7 Institutions) (as of December 31, 2013)

The Bank of Tokyo‐Mitsubishi
UFJ, Ltd.
13% (JPY 5,500 mn)

Shinsei Bank, Limited
10% (JPY 4,000 mn)
Citibank Japan Ltd.
5% (JPY 2,000 mn)

Aozora Bank, Ltd. 3%(JPY 1,350 mn)

Invincible

Investment
Corporation

22nd period 1H 2014
(Simulated Normalized
Adjusted Forecast)

After (9 Institutions) (as of anticipated refinancing date, effective May 23, 2014)

Sumitomo Mitsui Banking
Corporation
13% (JPY 5,500 mn)
Prudential Mortgage
Asset Holdings 1
Japan. 51%(JPY 20,960 mn)

21st period 2H 2013

Shinsei Trust & Banking
Co., Ltd.
5% (JPY 2,000 mn)

Sumitomo Mitsui Banking
Corporation
20% (JPY 8,252 mn)

Prudential Mortgage
Asset Holdings 1
Japan. 24%(JPY 9,960 mn)

Aozora Bank, Ltd. 3%(JPY 1,166 mn)

The Bank of Tokyo‐Mitsubishi
UFJ, Ltd.
20% (JPY 8,252 mn)

Shinsei Trust & Banking
Co., Ltd.
4% (JPY 1,728 mn)
Citibank Japan Ltd.
4% (JPY 1,728 mn)
Sumitomo Mitsui
Trust Bank, Ltd. 7%(JPY 3,000 mn)

Shinsei Bank, Limited
8% (JPY 3,456 mn)(Note 1) Based on the applicable rate as of May 21, 2014
(Note 2) DSCR calculation: (Operating Profits + Depreciation) ÷ (Scheduled Amortization + Interest Expense)

Mizuho Bank, Ltd. 9%(JPY 3,500 mn)

7Acquisition of Two Limited Service/Extended Stay Hotels Expected toPromote Stability and Upside Potential
The two acquired hotels have demonstrated strong occupancy, cash flow and GOP margins(1)(5)

Area
Tokyo
Tokyo

Hotel Mystays Kanda
Hotel Mystays Asakusa
Total

Numberof
Guest Rooms
126
160
286

Total Floor Area(sqm)
2,585.72
3,327.38

Normalized
NOI (JPY mn)(2014E)
164
162

Acquisition
Price(JPY mn)
2,851
2,584

Acquisition
Normalized NOICap
Rate(2)
5.76%
6.28%

5,913.10

326

5,435

6.01%

Stability

Growth Hotels are located near major business and tourism centers and arewithin walking distance to major subway/train stations

 Portfolio occupancy for the two hotels has increased to 91.3%(3)YTD (as of March 2014) from 86.3% compared to the same period
in 2013

 High GOP margin of 56.3%(3) in 2013 as a result of low cost businessmodel unlike full-service hotels with high cost business models
 Strong mix of weekly/monthly stays (36.4%) (2013)
 Corporate contracts represent greater than 25% of the revenue base Revenue is up 17.2%(3) in 2013 compared to 2012 and 16.1%(3) YTD(as of March 2014) compared to the same period in 2013
 RevPAR(4) is up 8.3%(3) in 2013 compared to 2012 and 16.8%(3) YTD(as of March 2014) compared to the same period in 2013
 Affordable but increasing ADR of ¥5,638 as of 2013

Hotel MyStays Kanda

Hotel MyStays Asakusa

Locations of the 2 Hotels and Landmarks Nearby
Sensoji Temple
UenoPark

Asakusa
StationUeno StationTokyo
SkyTreeAkihabara
StationHotel MyStays Asakusa

Ochanomizu
StationKanda Station

Invincible

Investment
Corporation(Note 1) See Appendix for further detail regarding each property’s financial and operating
Tokyo Station
performance.
(Note 2) Cap rate is calculated as 2014E NOI divided by acquisition price.
(Note 3) Calculated based on the sum of the figures of the two hotels. See appendix for further detail regarding each property’s financial
and operating performance.
(Note 4) Excluding the period in which Hotel MyStays Asakusa was undergoing a 2-month renovation completed in January 2013
(Note 5) “GOP”, Gross Operating Profit is the amount equivalent to gross revenue of hotel minus staff cost, cost of materials and utilities,
advertisement cost and other expenses. “GOP margins” is calculated in accordance with the following formula: GOP margins= GOP / Total
Operating Revenues

Hotel MyStays Kanda

8

Favorable Environment for Limited Service/Extended Stay Hotels

Invincible

Investment
Corporation

Hospitality Sector: Improving Fundamentals


Occupancy rates in Tokyo and Osaka areas are at 10-year
highs





Economic growth in Asia coupled with an emerging middle class are key catalysts for the increase in foreign guests

Weaker yen and senior population trigger growing
Number of hotel starts
domestic tourism
4,500
4,000
3,500

3,000
2,500 of new hotel supply has been low in
Rate of increase
2,000
1,500
5000
recent years,1,000
helping
to maintain strong occupancy

Number of New Building Starts in the Accommodation Sector

Hotel Occupancy Rate by Location

Number of hotel starts

65%

2000

2012

65%

2010

70%

2008

70%

2006

75%

2004

75%

Sapporo

90%

90%

500

85%

85%

450

80%

400

75%

75%

350

Source: Hoteres. Figures above represent overall accommodation data

Investment
Invincible Corporation

Floor space (1,000 sqm)

417
19

440

456

26

33

399

413

423

2011

2012

2013

2012

2010

2008

2006

2004

2002

349

2000

2012

2010

2008

2006

2004

2002

65%

2000

65%

Number of new hotel building starts

Number of Overnight Stays (mn)

80%

70%

4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0

Source: Ministry of Land, Infrastructure and Tourism (MLIT)

Kyoto

70%

Floor space (1,000 sqm)

4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0

2002

80%

2012

80%

2010

85%

2008

85%

2006

90%

2004

90%

2002

Osaka

2000

Tokyo

300

310
22

301
18

250

288

283

2008

2009

26
323

200

Source: MLIT

2010

Japanese guests

Foreign guests

10

# of Slots
800,000

Key Drivers of Hospitality Demand700,000
600,000Government efforts to increase foreign visitors
including tourism promotion and visa reform

60,000500,000

9,000

400,000
300,000

Infrastructure improvements and promotion efforts inconnection with the 2020 Tokyo Olympics

294,000

350,000

Growth of Low Cost Carriers (LCCs)

100,000 200,000 220,000

Japan Inbound Visitors (mn)97,000

Increased airport capacity at Haneda
and350,000 350,000

Narita330,000
airports 330,000
330,000

200,000

60,00060,00090,00060,000235,000

220,000

270,000 300,000

250,000- Capacity Expansion
AirportSource： JNTO, Japan Tourism Agency

FY3/09A
FY3/10A
FY3/11A
FY3/12A
FY3/13A
FY3/14E
FY3/15E# of Slots
NaritaHaneda Domestic
Haneda International
747,000 +48.5%
750,000
700,000
503,000
650,000
600,000
550,000
500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
FY3/09A
FY3/10A
FY3/11A
FY3/12A
FY3/13A
FY3/14E
FY3/15E
Source： MLIT
NaritaOutbound and Inbound LCCs in Operation

LCC Market Share in Japan (# of Seats):Target announced
by government

30

30.0
25.0

25
18.0

20
15
8.6

10

6.2

10.4

8.4

5
0
2010 2011 2012 2013

Launch Date
2011/7
2009/3
2011/12
2008/112010/3
2010/7
2010/122011/5
2007/3

Airline Company
Jin Air
Jeju AirTway Air
Cebu Pacific Air
Air Busan
Jetstar Asia
Air Asia X
Eastar Jet
Jetstar Airways

2016

2020

2030

Destination
Sapporo, Naha, Nagasaki, Incheon
Kansai, Chubu, Fukuoka, Narita, Incheon, Gimpo
Fukuoka, Incheon
Kansai, Manila
Busan, Fukuoka, Kansai, Narita
Kansai, Manila, Taipei, Singapore
Kuala Lumpur, Haneda, Kansai
Incheon, Narita, KansaiGold Coast, Cairns, Sydney, Manila, Narita, Kansai, Nagoya, Singapore,
Darwin24.0%

Japan (Domestic)

17.1%

8.8%
5.1%

2012/3Peach Aviation

Kansai, Sapporo, Fukuoka, Nagasaki, Naha, Ishigaki, Kagoshima, Sendai,
Narita, Matsuyama, Incheon, Hongkong, Taoyuan, Busan

2012/6

SpringShanghai, Ibaraki, Kansai,
Takamatsu, Saga

2012/7
2012/102013/12

Jetstar Japan
Scoot
Vanilla Air (Air Asia Japan)

Narita, Kansai, Oita, Sapporo, Chubu,
Fukuoka, Naha, Kagoshima, Matsuyama, Takamatsu

0.4%

1.0%

2007
1.0%

4.8%

0.6%

2008
0.8%

9.0%

4.7%
1.2%

2.0%

2009

7.6%
4.4%

1.9%

2.6%

4.5%

5.1%

4.8%

2011

2012

2013

4.7%

2.7%
2010

2001
2002– Centre2003
Source: CAPA
for Aviation,2004
OAG, MLIT2005

Investment
Corporation

8.8%

5.9%

0.4%

1.2%
0.6%2014 (Jan-

1.

2008

201

Apr)

Taipei, Singapore, Narita
Narita, Naha, Sapporo, Fukuoka, Incheon, Busan, Taoyuan

Source: MLIT

Invincible

20.3%

International

2006

2007

2009

11

Limited Service / Extended Stay Business Model




100%

Superior GOP margin of 56.3% compared to other hotel
types(1)Growing market share
Balanced mix of daily / weekly / monthly visitors

Diversified customer base including strong
corporate base

Increasing revenues in hotel segmentcompared to declining trend in office rents

90%
80%

Balanced Mix of Daily/Weekly/Monthly Visitors of 2 Hotels (Kanda/Asakusa)

Accommodation Guests in Japan – By Accommodation Type70%

(April 2013 to March 2014 )(2)

60%

100%
90%
50%
80%
40%
70%
60%
30%
50%
20%
40%
30%
10%
100% 20%
0%
10%
2008
75% 0%

50%

1.4%

1.2%

2.8%

6.9%

18.1%

18.3%

17.3%

14.5%

7.2%
14.8%

7.5%
14.7%

27.3%

26.3%

23.6%

25.3%

24.1%

22.6%

19.9%

19.3%

19.0%

15.0%

15.3%

15.7%

33.3%

34.9%

37.3%

38.3%

38.6%

39.6%

2009
2008
76.7%

2010

2009 66.9%2010

Extended Stay/Limited Service Hotel('Business Hotel')

2011

2012

73.1%
2011

Full Service Hotel('City Hotel')2012

RyokanMonthly
25.6%

2013
74.3%
2013

Resort Hotel

Others25%
Source: MLIT
33.1%
26.9%
25.7%
23.3%
0%
Corporate 2010
Contract Rate for2011
the 2 Acquired2012
Hotels (Kanda/Asakusa)
2013
Corporate Contract

Daily
63.3%

Weekly11.1%

Source: FHM

Historical RevPAR / Average Office Rent (2011–2013)(3)

127.9%

Non-Corporate

130%

100%

26.4%

32.0%

26.4%

25.6%

75%

120%

108.3%
110%

100.0%

100%

50%
73.6%

68.0%

73.6%

74.4%

25%

90%

95.2%

80%

0%
2010

2011

2012

2013

70%
2011

2012

90.8%

2013

Acquired 2 Hotels (Rev PAR)
Source: FHM, based on revenues

Investment
Invincible Corporation

Source: Sanko Estate

Market Average (Office-Average Asking Rent, Tokyo 5 wards)(Note1) GOP margin for the two acquired hotels is higher than GOP margins for full service hotels that were reported by Japan Hotel REIT in 2013.
(Note2) The percentages are based on revenues. Daily/Weekly/Monthly are defined as Daily=1~6, Weekly=7~29, Monthly=over 30 night stays basis.
(Note3) RevPAR is calculated as the average of the figures of the two newly acquired hotels in Kanda and Asakusa. Tokyo 5 wards consist of Chiyoda-ku,
Chuo-ku, Minato-ku, Shinjuku-ku and Shibuya-ku. The percentages are based upon the average of the Asakusa and Kanda figures. All figures
are indexed to 2011 base.

12

Track Record and Strategy of Invincible Investment Corporation

Invincible

Investment
Corporation

Track Record of Unit Holder Value Growth
STEP 1

STEP 2

STEP 3
May 2014 Transactions

December 2013

July 2011~

External Growth

FinanceFinance

Internal Growth Initiated aggressive cost reduction plan
resulting in JPY 209 mn in savings between
2011 and 2012
 Increased portfolio occupancy from 92.9%(1)
as of the end of June 2011 to 96.6% as of theend of March 2013

 Reduced average interest rate from 3.66% to
1.94%

External Growth （2012/9）

 Commenced rent increase program forresidential assets

36,24528,938

 Moved to aggressively lower net leasing costs
through extensive cost cutting analysis of theresidential portfolio

Finance Continued to significantly lower weighted
average interest rates through additional debt
refinancing
 Expanded bank group

Earnings Per Unit (JPY)40,00032,000Internal GrowthInternal Growth

Net Asset Value (NAV) (JPY mn)(2)30,539

 Memorandum of Understanding with Fortressentities Enhanced financial stability through thirdparty allotment of new units mainly to
Fortress Group Acquisition of 24 new properties without
dilutive equity issuances

30,222

 Acquisition of two hotels

 Significant decrease of interest expense due
to refinancing of Shinsei Trust Loan A/B,
mega-banks led syndicate loans, creating astronger bank group formation

 Capital infusion from Fortress Groupthrough subscription of new units

31,791 1 month TIBOR + 0.80% set new borrowing
benchmark

900
775

750
600

521

24,000465
450

16,000
300

8,000

150

95

85

2012 1H

2012 2H

249

259

2013 1H

2013 2H(1,997)002011 2H2012 1H

2012 2H

Investment
Invincible Corporation2013 1H

2013 2H2011 2H(Note1) Occupancy at the end of June 2011 is calculated excluding the impact from the sale of New
Edobashi Building (sold on October 21, 2011)(Note2) NAV=End-of-period Amount of Net Assets – Undistributed Profit + End-of period appraisal
Value – Tangible property(Note3) See the notes on the pages 5 and 6 for the definition of “normalize”

1H/2014
Estimate
EPU
Prior toRevision

1H/2014
RevisedEPU

1H/2014
Simulated
Normalized
EPU(3)

14

Focus on Unit Holder Value
Continued intensive asset management of the existing
portfolio by reducing financing costs and implementing
proactive property management initiatives to increase rents
and decrease leasing expenses

Unit Price and Market Capitalization of Invincible(Unit Price)(Market Cap, JPY bn)

35,000Invest in a balanced portfolio of properties that provide stable
income as well as a clearly delineated growth plan35

32,50030,000

Seek to acquire hospitality assets with positive fundamentals,
and to enhance profitability of existing residential properties
by implementing Invincible’s rent increase/leasing cost
reduction plan30

27,50025,00025

22,500

Expand relationships with Japanese and global financial
institutions so as to increase access to low cost financing and toincrease flexibility and availability

20,00020

17,50015,000Enhance investor communication efforts to broaden domestic
and foreign unit holder base15

12,50010,000

Steadily increase assets and market capitalization

10

7,500
5,000

5

2,500
0
'12/1

0
'12/5

'12/10

Unit Price (JPY)

Invincible

Investment
Corporation

'13/3

'13/7

'13/12'14/5

Market Capitalization (JPY bn)

Source: Bloomberg as of May 16, 201415

Repositioning of Portfolio and Opportunities for Future Growth

Invincible

Investment
Corporation

Strategic Repositioning of Portfolio
Portfolio focused on both increased stability and growth potential
Portfolio Comparison by Property TypePortfolio Comparison by Geography Commenced rent increase program for residential assets on December 9, 2013
 From January 1, 2014 to May 15, 2014 average rents increased byapproximately 1.4% and 0.6% on new leases and renewal leases,
respectively, as compared to prior leases for same units 76.1% of the Portfolio is located in Greater Tokyo, of which 69.1% is locatedin the Tokyo 23 wards

 Two Limited Service / Extended Stay Hotels: 2013 revenue growth was 17.2%
over 2012 and 16.1% YTD (as of March 2014) compared to same period in
2013

Before(1)Retail7.3%

Senior Housing
6.0%

Before(1)Others
10.8%

Chubu
6.2%
Greater Tokyo Area
excludingTokyo 23 wards
9.4%

Residential
75.3%

Retail7.2%

Central 5 wardsof Tokyo
26.0%

Kansai
9.1%

Office11.4%

After(2)Greater Tokyo Area: 73.9% (Tokyo 23 wards: 64.5%)

Parking
0.1%

Hotel
7.0%

After(2)Residential
74.5%

Investment
Invincible Corporation

Greater Tokyo Area: 76.1% (Tokyo 23 wards: 69.1%)

Parking
0.1%

Office11.2%

Note: Based on acquisition priceNote (1): As of December 31, 2013
Note (2): As of May 23, 2014

Tokyo 23 Wards
excludingCentral 5 wards
38.5%

Others10.7%
Kansai
8.4%
Chubu
4.8%
Greater Tokyo Area
excludingTokyo 23 wards
7.1%

Central 5 wardsof Tokyo
29.3%

Tokyo 23 Wards
excludingCentral 5 wards
39.7%

17

Overview of MOU
Arrangement to pursue further external growth
Overview

 Executed a MOU on May 21, 2014
with Fortress entities regarding thepotential purchase of 26 additional
limited service/extended stay hotels
 MOU provides Invincible with aright of first look for a 1 year periodwith respect to the acquisition of thePortfolio Proactively seek to close theacquisition of all or part of 26
properties subject to due diligenceand financing

Location of the Properties

Hotel MyStays
Sakaisuji-Honmachi

Hotel Vista Premio
DojimaFlexstay Inn
Shinsaibashi

Hotel Nets Hakodate

Hotel MyStays
OtemaeHotel MyStays Utsunomiya

Hotel MyStays Nagoya-Sakae

Hotel MyStays Kameido P1
Hotel MyStays Kameido P2
Flexstay Inn Kiyosumi-Shirakawa

Hotel MyStays Kyoto-Shijo

Hotel MyStays Ueno
Hotel MyStays Nippori

Flexstay Inn Sugamo
Flexstay Inn Higashi-JujoFlexstay Inn Tokiwadai

Flexstay Inn Ekoda

Hotel
MyStaysShin-Urayasu

Flexstay Inn Iidabashi
Flexstay Inn Shirogane
Hotel MyStays Yokohama
Hotel MyStays Fukuoka-Tenjin-Minami

Investment
Invincible Corporation

Flexstay Inn Shinagawa
Flexstay Inn Nakanobu P1
Flexstay Inn Nakanobu P2

Hotel
MyStays
Maihama18

Overview of MOU
Property Photos

Hotel MyStays Maihama

Hotel MyStays Nagoya-Sakae

Hotel Vista Premio Dojima

Hotel MyStays Nippori

Investment
Invincible Corporation

Hotel MyStays Kyoto-Shijo

Flexstay Inn Iidabashi

19Overview of Flexstay Hotel Management
Subject hotels are managed by an experienced operator: Flexstay Hotel Management
Company Overview

Asset Management Initiatives

 Company Name: Flexstay Hotel Management Co., Ltd.

Competitive Advantages

 Date of Establishment: July 8, 1999

 Extensive know-how in selling rooms on a daily, weekly, andmonthly basis, thereby achieving more stable occupancies andhigher profit margins

 Acquired by Fortress in June 2012
 Representative: President and CEO Atsuki Asano Hotel operation and management under the following brands:
Hotel MyStays, Flexstay Inn, Monthly ResiStays
 Employees: 500 (as of April 30, 2014)
 Capital: JPY100 mn
 Properties under management: 47 properties (5,768 rooms), of
which 30 properties are owned by Fortress A corporate client base of over 2,200 corporations
Rebranding Reduced number of brands to reduce customer confusion andincrease focus
 Website reconstructed to provide easier navigation and provide
a more modern appearance Enhanced web marketing to stimulate untapped demand
including Free Independent Travelers (FITs)
Renovations
 Since 2011, FHM renovated 13 hotels (1,822 rooms)
 Strategic renovations increased ADR for renovated hotels
Revenue Management
 Various revenue management methods implemented, including
hiring a revenue manager to analyze market trends, in order tomaximize revenue
 Focus on employee training to improve efficiency and reduceturnoverCost Control

Investment
Invincible Corporation

 Promoting efficient and low cost operations via effective
procurement strategies
20Appendix

Invincible

Investment
Corporation

Property Summary – Hotel MyStays Kanda
Property Name
Location
Prefecture
AccessDate of Construction
Number of Guest Rooms
Total Floor Area
Land Area
Daily / Weekly / Monthly % (1)(2013)ADR (2013)(2)Occupancy (2013) (3)
RevPAR (2013) (4)Gross Revenue (2013)
GOP / GOP% (2013)
NOI (2013)

8,000
6,000

6,381
5,481

4,000

85.9%

6,120
5,206
85.1%

6,212
5,535

6,607
6,061
91.7%

71.5% / 9.5% / 19.0%
JPY 6,607
91.7%
JPY 6,061
JPY 286 mn
JPY 155 mn / 54.3%
JPY 145 mn



The hotel is located in Tokyo’s business district, a six minute walk from Kanda Station on the JR
Yamanote Line and the Tokyo Metro Ginza Line, which is one stop to both Tokyo Station andAkihabara Station, respectivelyIn addition, the location provides convenient access to Shin-Nihonbashi Station on the JR Sobu
Line as well as Kodenma-cho Station on the Tokyo Metro Hibiya Line95%

Room mix and configuration are targeted primarily towards business travelers, including project
personnel for extended assignments in Tokyo

92.7% 90%



Guest rooms are well-maintained, of which some are equipped with kitchenettes for longerstaying guests

ADR / RevPAR / OccupancyTrends (5)(JPY)

Hotel MyStays Kanda(Rebranded from Flexstay Kanda Inn)
1-2-2 Iwamotocho, Chiyoda-ku
Tokyo
6 minute walk from Kanda Station
December 2005
126
2,585.72 sqm
348.12 sqm

7,056
6,537

89.1%
85%

2,000

-

Ochanomizu
StationAkihabara
Station

80%
2010

2011
ADR

(JPY mn)

20132014 Estimate
Occupancy

NOI Trends (5)

200

150

2012
RevPAR

145
121

112

Kanda
StationHotel MyStays Kanda

164

Otemachi
Station

123

100

Tokyo
Station

50
0
2010

2011

2012

Source: FHM

Investment
Invincible Corporation20132014 Estimate(Note 1) The percentages are based on revenues. Daily/Weekly/Monthly are defined as Daily=1~6, Weekly=7~29, Monthly=over 30 nightstays basis.
(Note 2) Total room sales for period divided by aggregate number of days per room for which each room was occupied.
(Note 3) Total room sales for period divided by the number of days per room for which each room was available during the period.
(Note 4) Calculated based on the total number of guest rooms.
(Note 5) Please refer to the explanatory notes on slide 24.

22

Property Summary – Hotel MyStays Asakusa
Property Name
Location
Prefecture
AccessDate of Construction
Date of Renovation
Number of Guest Rooms
Total Floor Area
Land Area
Daily / Weekly / Monthly %(1)(2013)ADR (2013) (2)Occupancy (2013) (3)
RevPAR (2013) (4)Gross Revenue (2013)
GOP / GOP% (2013)
NOI (2013)

(JPY)
8,000

ADR / RevPAR / Occupancy Trends(5)

6,000
4,000
2,000

3,701
3,128
84.5%

3,576
2,887
80.7%

3,858
3,230

5,160

4,848
4,290



Guest rooms and public area were renovated in 2013 to update the image of the facility and to
capture increasing tourist demand in the area90%



In 2013, 3.7% of total revenue was from inbound (non-Japanese) customers, equivalent to anincrease of 20.8% compared to 201285%

45.2% of the total revenues are generated from weekly/monthly business which is primarily driven
by an existing customer base, including IT solution companies, maintained by the hotel operator(2013)

83.7%

-

80%
2010

2011
ADR

2012

2013

RevPAR(JPY mn)

148
150

104

100

89

Sensoji Temple

2014 Estimate

Ueno
Park

Occupancy

NOI Trends(5)200

JPY 4,848
88.5%
JPY 4,290
JPY 270 mn
JPY 157 mn / 58.3%
JPY 148 mn

The hotel is located in Asakusa, one of Tokyo’s major tourist destinations with popular attractions
including Tokyo Sky Tree (1.8 km from the hotel), Sensoji Temple (1.4 km) and the Kokugi
kan/Edo Tokyo Museum (1.0 km)

90.4%

88.5%

54.8% / 13.4% / 31.8%



95%
4,667

Hotel MyStays Asakusa(Rebranded from Weekly Mansion Asakusa)
1-21-11 Honjo, Sumida-ku
Tokyo
4 minute walk from Kuramae Station
January 1990
January 2013
160
3,327.38 sqm
827.53 sqm

Asakusa
StationKaminarimon

Ueno
Station162

Tokyo
SkyTree

104

Hotel MyStays
Asakusa

Akihabara
Station

50
0
2010

2011

2012

Source: FHM

Investment
Invincible Corporation20132014 Estimate

Ryogoku
Kokugikan(Note 1) The percentages are revenue basis. Daily/Weekly/Monthly are defined as Daily=1~6, Weekly=7~29, Monthly=over30 night stays basis.
(Note 2) Total room sales for period divided by aggregate number of days per room for which each room was occupied.
(Note 3) Total room sales for period divided by the number of days per room for which each room was available during the period.
(Note 4) Calculated based on the total number of guest rooms.
(Note 5) Please refer to the explanatory notes on slide 24.

23

Investment
Invincible Corporation
Explanatory notes regarding 2014 forecasts on Slides 22 and 23:
Adjusted ADR/RevPar/Occupancy Table:

The information for 2010-2013 is based on historical figures provided by FHM. The 2014 estimates are based on (i) historical figures provided by
FHM from January through March 2014 and (ii) Invincible’s forecasted figures for the remainder of the year (including, in the case of the period
from the date of acquisition to June 30, 2014, figures that are consistent with the assumptions used to calculate the 1H/2014 forecast).
NOI Table:
The NOI for 2010-2013 is based on historical figures provided by FHM (as adjusted to reflect an expected change in trust fees, management fees
and insurance expenses upon the acquisition by Invincible). The 2014 normalized NOI forecast assumes a hypothetical acquisition of the two
hotels by Invincible at immediately prior to the start of 1H/2014, and is based on (i) historical figures provided by the seller for the two properties
from January through March 2014 (as adjusted to reflect an expected change in trust fees, management fees and insurance expenses upon theacquisition by Invincible), (ii) Invincible’s forecasted figures for the remainder of the year (including, in the case of the period from the date ofacquisition to June 30, 2014, figures that are consistent with the assumptions used to calculate the 1H/2014 forecast) and (iii) treating initialproperty-related taxes for the two hotels as if they were expensed and not capitalized.

INQUIRIES:
Consonant Investment Management Co., Ltd. (Asset Manager of INV)
Planning & Finance Department
Tel. +81-3-5411-2731 (Investor Relations)Investment
Invincible Corporation◆ This material is for informational purposes only and not an offer to sell, solicitation to invest in, or recommendation tobuy, any products or securities of Invincible Investment Corporation (INV).
◆ This material does not constitute or form a part of any disclosure document or an asset management report requiredby 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 andpremises in consideration of the available information as of the date of this material; therefore there may be known andunknown 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, resultsof 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 andsuch information is subject to revision or retraction without prior notice.
◆ This presentation is being provided for your information and may not be reproduced, redistributed or passed on to
any other person or published, in whole or in part, for any purpose, without the prior written consent of INV.
INQUIRIES:
Consonant Investment Management Co., Ltd. (Asset Manager of INV)
Planning & Finance Department
Tel. +81-3-5411-2731 (Investor Relations)