Ichigo Office(8975)

Ichigo Office April 2019 Fiscal Period
Corporate Presentation
June 14, 2019

Ichigo Office REIT Investment Corporation (8975)
Ichigo Investment Advisors Co., Ltd.

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

www.ichigo-office.co.jp/english

Make The World
More Sustainable© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

April 2019 Results

Ichigo Office ESG

 April 2019 Highlights
 April 2019 Earnings
 April 2019 Financial Metrics
 18 Consecutive Periods of Dividend Growth– No. 1 vs. All J-REITs
 Growing Shareholder Value: Continued Growth in Base EPS
 Growing Shareholder Value: Continued Growth in NAV
 Sustained High Office Occupancy: 99.3%
 Organic Growth: Driving Rental Growth Organic Growth: Existing Tenants at Higher Rents
 Organic Growth: New Tenants at Higher Rents
 Acquisition-Driven Growth: April 2019 Acquisitions

 Ichigo Office’s Sustainability Commitment
 Environmental
 Social
 GovernanceAppendix Financial & Portfolio Data
 About Ichigo Office

Ichigo Office Growth Strategy
 Driving Shareholder Value via Organic Growth & Pro-Active
Acquisitions/Sales
 Sustainable Growth to Maximize Shareholder Value
 Value-Add Capex (1) Ichigo Uchi Honmachi Building Value-Add Capex (2) Ichigo Uchikanda Building Investing for Long-Term Growth May 2019 Acquisition & Sale Accretive to Shareholders
 Driving Higher NOI & Harvesting Gains in Strong Market
 Sustainable Growth with Sponsor Support
 Access to Ichigo’s Robust Pipeline of Office Assets
 October 2019 Forecast April 2020 Forecast© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

5April 2019 Results© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

6

April 2019 Highlights
Achievements
AcquisitionDriven
GrowthOrganic Growth

Financing• Sold 2 retail assets(Gains on sale JPY 650M)• Acquired 2 office assets in central Tokyo(acquisition price JPY 6B)

Details• Gains on sale exceeding unrealized gains• Sold retail assets with significant expectedmaintenance costs & acquired office assets withgrowth potential• Annual NOI +JPY 69M• Occupancy: 99.3%• Maintaining 99+% occupancy• 52 upward rent renewals (avg +8.5%)• Rent renewals +JPY 7.0M per month• 22 new tenants at higher rents (avg +20.8%) • New tenants + JPY 3.7M per month• Bond Issuance• New Loans• Refinancing

JPY 1BJPY 3BJPY 5.8B• 3rd Bond Issuance(7-year maturity, 0.75% interest rate)• Hedging interest rate risk (96.9% of loans are
fixed rate; 7.5 year avg. maturity on new loans)

Base EPS1

JPY 2,000(+JPY 55, +2.8% vs. October 2018)• Continued Base EPS growth: +JPY 30 vs. initial
forecast of JPY 1,970 (+1.5%)

FFO2

JPY 2,558• FFO growth driving Base EPS & dividend growth

Dividend

JPY 2,255

NAV3

JPY 87,934(+JPY 69, +2.8% vs. October 2018)(+JPY 241, +12.0% vs. October 2018)(+JPY 1,977, +2.3% vs. October 2018)

1 Base EPS = EPS – Capital Gains

2 FFO = Funds From Operations• Includes gains on sale of JPY 186 per share• 18 consecutive periods of dividend growth –No.1 vs. all J-REITs• Unrealized gains JPY 31.5B  JPY 34.3B (+2.7B)

3 NAV = BPS + Unrealized Capital Gains© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

7

April 2019 Earnings(JPY million)
October 2018
ActualApril 2019
Actual (A)April 2019
Forecast (B)vs. Forecast(A) - (B)Operating Revenue

7,632

8,451

8,356

+94

Operating Profit

3,745

4,510

4,457

+53

Recurring Profit

2,958

3,733

3,665

+67

Net Income

2,980

3,732

3,664

+67

–

382

376

+6

105

105

105

–

Dividend

JPY 2,014

JPY 2,255

JPY 2,215+JPY 40EPS

JPY 1,945

JPY 2,000

JPY 1,970+JPY 30

NOI

5,496

5,648

5,615

+33

No. of Assets

85

85

85

–

Occupancy

99.2%

99.3%

98.5%

+0.8%

Dividend Reserve (-)
Dividend Reserve Release (+)

Major Variation Factors (vs. April 2019 Forecast)
Increase in Rental Income +70
Increase in common area services income +50(Ichigo Nagoya Building +5)(Ichigo Fushimi Building +4)(Ichigo Shibuya Dogenzaka Building +4)
Increase in other income +17(renewal fee, restoration & cleaning fee)
Increase in Other Operating Income +23
Increase in gains on sale of real estate +23
Increase in Rental Expenses +39
Increase in utilities expenses +30
Increase in property tax +6
Increase in Operating Expenses (excluding Rental Expenses) +1
Increase in performance fee to asset manager +17
Decrease in other expenses through cost reduction -16
Increase in Non-Operating Revenue +3
Increase in reversal of accrued dividends +1
Decrease in Non-Operating Expenses -11
Decrease in interest expenses (including bond interest) -3
Decrease in up-front loan fees & related expenses -8
Reference: Capex
April 2019 Actual 442
Reference: April 2019 Reserves (Post-Dividend)
Negative Goodwill Reserve 9,529
Dividend Reserve 2,637* NOI = Rental Income - Rental Expenses + Depreciation
No. of Assets and Occupancy are Period-End© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

8

April 2019 Financial Metrics
Longer Debt Maturity and More Fixed-Rate Loans
April 2018

October 2018

April 2019

FFO (per Share)

JPY 2,454

JPY 2,489

JPY 2,558

Dividend

JPY 1,964

JPY 2,014

JPY 2,255

NAV (per Share)

JPY 84,076

JPY 85,957

JPY 87,934

LTV

46.9%

47.6%

48.1%

Average Interest Rate

1.02%

1.02%

1.00%

Average Debt Maturity

5.8 years

6.0 years

6.2 years% Fixed Rate Loans

90.9%

94.0%

96.9%

* FFO = Net Income + Depreciation + Loss on Disposal of Fixed Assets + Liability for Asset Retirement Obligation + Loss on Asset Sale Gain on Asset Sale - Extraordinary Gain + Extraordinary Loss
LTV = Interest-Bearing Liabilities/Total Assets
Average Debt Maturity is Period-End© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

9

18 Consecutive Periods of Dividend Growth – No. 1 vs. All J-REITs(JPY)+13.2% CAGR

2,255
1,904

1,387

1,494

1,537

1,541

1,547

1,603

1,706

1,923

1,930

1,964

2,014

1,740

1,219
899*

979*

1,031*

737*

April
2010

October
2010

April
2011

October
2011

April
2012

October
2012

April
2013

October
2013

April
2014

October
2014

April
2015

October
2015

April October
2016
2016

April
2017

October
2017

April October
2018
2018

April
2019

* April 2010 to October 2011 dividends adjusted to reflect stock split on November 1, 2011; CAGR = Compound Annual Growth Rate
© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

10Growing Shareholder Value: Continued Growth in Base EPS
Base EPS +18.9% since April 2017
October 2019 Dividend +JPY 50 on Gains on Sale – Second Consecutive
Period of Distributing Gains on Sale to Shareholders
Base EPS
Release from Dividend Reserve and Negative Goodwill Reserve
Gains on Sale

Dividend

1,923
241

1,682

April 2017

(JPY)

2,255

2,140

186

2,095

69

50
69

1,930
106

1,964
107

2,014

1,824

1,857

1,945

2,000

2,021

2,026

October 2017

April 2018

October 2018

April 2019

October 2019
(Forecast)April 2020
(Forecast)69

Base EPS = EPS – Capital Gains© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

69

11

Growing Shareholder Value: Continued Growth in NAV
Growing Value via Value-Add Capex & Pro-Active Acquisitions/Sales
NAV per share+39.3%

70,11773,49376,40078,336

October
2016

April
2017

(JPY)

81,15584,07685,957April
2018

October
2018

87,934

63,140

April
2015

October
2015

April
2016

October2017© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

April
2019
12

Sustained High Office Occupancy: 99.3%
High Occupancy, Rising Rents, Decreasing Free-Rent
Occupancy (Office)

Average Rent per Tsubo (3.3m2)
Office (All)

100%
98.5%

99.1%

98.9%
98.2%

98.5%

97.1%

97.4%

(JPY)

Office (Central Tokyo)

99.3%

16,80098.9%

16,80016,90016,90097.2%
Occupancy
Free Rent-Adjusted Occupancy

14,10095%90%April 2017

October 201717,200April 2018

Average Free-Rent Period:
October 2018 1.1 months
April 2019
0.9 months

October 2019

April 2019

All Offices(Central Tokyo)

Apr 2017
71 Assets(40 Assets)

14,200

Oct 2017
74 Assets(42 Assets)

14,200

Apr 2018
74 Assets(42 Assets)

14,500

Oct 2018
77 Assets(44 Assets)

14,600

Apr 2019
79 Assets(45 Assets)

Occupancy is Period-End© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

13

Organic Growth: Driving Rental Growth
New Tenants/
Increased Space

Departing Tenants/
Decreased Space

Renewals at
Higher Rent

-18

+7

+24

Change due toTenant Movements+JPY 6M (+0.6%)(JPY million)

Change due to
Lease Renewals+JPY 7M (+0.7%)

1,058
1,045
+2.5% p.a.

October 2018

Monthly Rent

April 2019

Change in Occupancy:
99.1% (October 2018)  99.3% (April 2019)* Change in Occupancy is like-for-like and thus excludes newly acquired or sold assets© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

14

Organic Growth: Existing Tenants at Higher Rents+8.5% Average Increase at Renewal, +JPY 7M Monthly Increase in Rents
New Rent vs. Previous Rent

Change in Total Rents(Office, Leased Area Basis)(Office)■ Downward■ Flat

1.4%

0.2%

66.4%

66.4%

(Monthly rent, JPY thousand)UpwardDownward
Rent Change■ Upward
0.1%

0%

70.2%

7,024
+7,024

Downward:
None

Flat: 192 tenants

82.8%

3,736

4,075

2,838

+4,056+3,399+2,826
1,197

32.1%

33.3%

29.8%
17.1%

Oct 2017

Apr 2018

Oct 2018

Apr 2019

Upward:52 tenants
Average increase:
+8.5%

-337
Oct 2017-18-11

Apr 2018

Oct 2018

Apr 2019

Oct 2019* Oct 2019 reflects leases in place as of May 15, 2019.

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

15

Organic Growth: New Tenants at Higher Rents
85% of New Tenants at Higher Rents+20.8% Average Increase from New Tenants
New Tenant Rent vs. Previous Tenant Rent

Impact on Rental Income from Tenant Turnover (Office)(Office, Leased Area Basis)■ Downward■ Flat

11.8%
4.5%

28.5%

(Monthly rent, JPY thousand)■ Upward

13.6%

12.1%

0%

0%

9,500

Downward:
2 new tenants
Average decrease:-6.0%

UpwardDownward
Rent Change+8,9206,793

Flat: None

4.1%

3,876

+4,955
86.4%

83.7%

87.9%
Upward:22 new tenants
Average increase:+20.8%

67.3%+3,7502,313+2,093
399
-220

-18

-579

-125

Oct 2018

Apr 2019-1,838
Oct 2017

Apr 2018

Oct 2018

Apr 2019

Oct 2017

Apr 2018

Oct 2019* Oct 2019 reflects leases in place as of May 15, 2019.
© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

16

Acquisition-Driven Growth: April 2019 Acquisitions
Acquired 2 Offices in Central Tokyo (Total JPY 6B)
Ichigo Minami Otsuka Building

Ichigo Nogizaka Building

Acquisition Date

December 21, 2018

December 28, 2018

Area

Toshima-ku, Tokyo

Minato-ku, Tokyo

Investment
Rationale

Convenient access to central Tokyo; only 1 station
away from Ikebukuro Station, a major rail hub

At center of the Akasaka, Roppongi,
Aoyama areas favored by foreign corporations

Acquisition Price

JPY 2,780M

JPY 3,315M

NOI Yield

4.6%

4.1%

Location

6-min walk from Otsuka Station on JR Yamanote
Line and 3-min walk from Shin-Otsuka Station on
Marunouchi Line2-min walk from Nogizaka Station on Chiyoda
Line and 8-min walk from Roppongi Station on
Oedo Line

Occupancy

100%

100%

SellerJapanese Third Party

Japanese Third Party

Asset* Forecast NOI Yield and Occupancy at acquisition© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

17

Ichigo Office Growth Strategy© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

18

Driving Shareholder Value via Organic Growth &Pro-Active Acquisitions/Sales
Shareholder Value Growth (Post-May 2016 Public Offering)
NAV per Share1

Base EPS2

Dividend3

JPY 76,400 ➡ JPY 87,934(+15.0%)

JPY 1,602 ➡ JPY 2,000(+24.8%)JPY 1,904 ➡ JPY 2,0694(+8.7%)

2 October 2016 Actual vs. April 2019 ActualBase EPS = EPS – Capital Gains

3 October 2016 Actual vs. April 2019 Actual

1 October 2016 Actual vs. April 2019 Actual

Buildout of Specialized Office Portfolio■ NAV per Share (JPY)■ Base EPS (JPY)

Deepening Foundation for Long-Term Growth■ Dividend (JPY)

1,682
84,076

2,069

2,014

2,000

1,945

1,857

1,824
1,602

April 2019 dividend excludes capital gains

1,964

1,930

1,923

1,904

4 Excludes capital gains (JPY 186)

85,95787,934

81,15576,400PeriodTotal
OfficeOct 2016
85 Assets
70 Assets

78,336

Apr 2017
82 Assets
70 Assets

Oct 2017
85 Assets
74 Assets

Apr 2018
82 Assets
74 Assets© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

Oct 2018
85 Assets
77 Assets

Apr 2019
85 Assets
79 Assets
19

Sustainable Growth to Maximize Shareholder Value
2019/42022/4

Goal

Sustainable Growth to Maximize Shareholder Value
Build Robust Portfolio & Drive Sustainable Growth
Organic Growth• Provide differentiated Ichigo Layout Office and Ichigo Lounge
high-quality office spaces• Increase asset value & investment returns via value-add capex• Maintain & drive earnings growth with a focus on tenant satisfaction• Support tenant growth via tenant networking and business matching• Minimize downtime at re-tenanting and free-rent periods

Acquisition-Driven Growth

Action Plans• Pursue acquisition-driven growth opportunities via bridge funds & sponsor support• Build a durable growth model via asset acquisitions/sales & full-scale, value-add
asset renovations➡ Leverage Ichigo’s market-leading value-add capabilities

Finance & IR
• Diversify funding (accretive equity financing, green bonds, retail bonds, etc.)• Raise credit rating & enter global REIT indices (FTSE EPRA / NAREIT）• Further improve borrowing terms

ESG• Acquire environmental certifications and achieve energy reduction goals• Promote wheelchair access, etc. barrier-free design at assets• Maintain and strengthen best-in-class J-REIT governance© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

April 2022 Targets
Base EPS
JPY 2,000 ➡ JPY 2,200(+10.0%)

Dividend
JPY 2,069 ➡ JPY 2,269(+9.7%)

Credit Rating
A
A+➡
(Stable) (Stable)
Global REIT Indices*

Index Entry*Target only if >JPY 250B in AUM

20

Organic Growth

Value-Add Capex (1) Ichigo Uchi Honmachi Building
2nd Ichigo Lounge Completed at Ichigo Uchi Honmachi Building in Osaka– Increase tenant satisfaction via high-quality shared work space designed to help
tenants communicate and collaborate• Renovated an entire floor which had contained conference rooms and a common area
• Used part to create Ichigo Lounge: a shared lounge and conference room space available to tenants, designed for comfort & functionality• Converted remaining area into new tenant office space, increasing rental income

Office Section(175m2)

Ichigo Lounge Communication Space

Driving Earnings via New Office Space

Outcomes

Ichigo Lounge

Capex

JPY 19M

NOI+JPY 7M

ROI

38.3%

2 Conference Rooms for Tenant Use© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

21

Organic Growth

Value-Add Capex (2) Ichigo Uchikanda Building
Fully-Fitted Ichigo Layout Office to Reduce Tenant Costs & Accelerate Move-In– Office space designed to facilitate open innovation and communication• Simultaneous completion of 2 Ichigo Layout Offices (9th and 10th floors)• Flexible layouts that can be changed by tenants, with glass-walled conference rooms, movable fixtures & furniture, & a

design that facilitates open innovation and communication.
• Superior functionality commands higher rents – maximizing ROI by leasing the space via an open bid process

Outcomes

9th Floor Office (140m2)

Tenant Discussion Space

10th Floor Office (120m2)

Conference Room with Flexible Layout© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

Capex

JPY 24MNOI Increase+JPY 8M

ROI

33.4%

Ichigo Uchikanda Building22

Acquisition-Driven Growth

Investing for Long-Term Growth
Option to Acquire High-Quality Office to Drive Earnings Growth
Acquisition of TK equity interest in a mid-size Tokyo office asset via bridge fund (JPY 50M)
Acquired preferential negotiation right to buy asset
Bridge Fund Overview
Operator

Tachikawa Holdings GK

TK Investment
AmountJPY 1,150M(IOR investment amount JPY 50M)

Asset

Trust beneficiary interest in
Unizo Tachikawa Building

Asset Overview
Unizo Tachikawa Building
Location

Tachikawa, Tokyo

Access8-min walk from Tachikawa Station on JR
Chuo Line; 7-min walk from Tachikawa Kita
Station on Tama Toshi Monorail Line

Acquisition Price

JPY 3,830M

Exercise Period

May 16, 2021

Appraisal Value

JPY 3,930M

Occupancy

96.9% (as of May 31, 2019)

Description

Mid-size office building located in Tachikawa,a business center in suburban Tokyo© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

23

May 2019 Acquisition & Sale Accretive to Shareholders
Gains on Sale Significantly Exceed Unrealized Gains
Sale Funds Acquisition of Fukuoka Office with Rental Upside
Acquisition/Sale Objectives– Generate Positive Portfolio Outcomes
Portfolio

JPY 203B → JPY 203.2B

Office %94.6% → 95.5%

NOI+JPY 12M per annum– Drive sustainable growth leveraging Ichigo sponsor support
 Acquired preferential negotiation right to buy back Ichigo Fiesta Shibuya Building if Ichigo redevelops
 Executing on sustainable growth strategy leveraging Ichigo’s value-add capabilities– Generate Gains on Sale significantly higher than appraisal-based Unrealized Gains (i.e., Sale Price > Appraisal Value) Gains on Sale (JPY 440M) to be retained subject to J-REIT conduit rules and used to fund growth investments
such as the Ichigo Hakata East Building acquisition
Sale – Ichigo Fiesta Shibuya Building– AreaShibuya-ku, Tokyo– Book Value
JPY 1.96B– Appraisal Value
JPY 2.21B– Closing Date
May 30, 2019
– Sale Price
JPY 2.4B– Gains on Sale
JPY 440M

Acquisition – Ichigo Hakata East Building
Area

Fukuoka

Location

4-min walk from Hakata Station on JR
Lines & Fukuoka City Subway Kuko Line

Closing Date

May 31, 2019

Acquisition Price

JPY 2.25B

NOI Yield at
Acquisition

5.2%

Occupancy

98.1%

Description

Mid-size office located in Fukuoka’scentral commercial district© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

24

Driving Higher NOI & Harvesting Gains in Strong Market
Acquisitions & Sales Over Past Two Years
April 2017 & October 2017

Sales
(10 assets)

April 2018 & October 2018

Acquisitions & Sales

Acquisitions & Sales• Sold 4 assets (serviced• Sold 3 retail assets toapartments and retailassets) to Ichigo• Sale price JPY 4.4B
(Gains on sales JPY 30M)

Acquisition

April 2019

October 2019

Acquisitions & Sales

Acquisition & Sale

• Sold 2 retail assets to third-

third-party• Sold 1 retail asset

party• Sale price JPY 6B

to Ichigo• Sale price JPY 3.6B

(Gains on sales JPY
1.59B)• Sale price JPY 2.4B

(Gains on sales JPY 640M)(Gains on sale
JPY 440M)

Ichigo Fiesta Shibuya
Building• Acquired 3 mid-size office• Acquired 2 mid-size• Acquired 1 mid-

• Acquired 2 mid-size office• Acquired 1 mid-size

assets from Ichigo• Acquisition price JPY 7B

office assets from
Ichigo• Acquisition price JPY
5.5B

size office asset
from third-party• Acquisition price
JPY 1.9B

assets from third-parties• Acquisition price JPY 6B

office asset from Ichigo• Acquisition price
JPY 2.25B

Acquisitions(9 assets)

Win
GotandaBuilding

IchigoHongo
Building

OimachiCenterBuilding

Win Gotanda
Building 2

MIF
Building

IchigoUchi Honmachi Building

Ichigo Minami
IchigoOtsuka Building Nogizaka Building

Portfolio Size

JPY 194.5B → JPY 203.2B (+JPY 8.7B)

NOI Increase*

Office %88.1% → 95.5% (+7.4%)

Gains onSales

Outcomes

Ichigo Hakata East
Building

JPY 290M per annum+JPY 2.72B* NOI Increase = Forecast NOI of acquired assets calculated by IIA minus actual NOI of sold assets© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

25

Acquisition-Driven Growth

Sustainable Growth with Sponsor Support
Pursuing Long-Term Sustainable Growth by Leveraging Ichigo’s MarketLeading Value-Add Capabilities
Buy

Sell

Ichigo Office

Ichigo(8975)(TSE1 2337)

ThirdParty
Investors

Buy

Preserve and improve real estateleveraging
Ichigo’s value-add capabilities

Real
EstateValue-Add

Buy/SellAsset Warehousing
Sell

Ichigo Office Sourcing Strengths
・ Sourcing Diversity: Ichigo Office proprietary sourcing routes + Ichigo sponsor network
・ Strong Sponsor Support: Ichigo assets fully available to Ichigo Office for acquisition
・ Stable Sourcing: Backed by Ichigo value-add capabilities, so less sensitive to market environment© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

26

Acquisition-Driven Growth

Access to Ichigo’s Robust Pipeline of Office Assets
Ichigo’s Office Assets: c. JPY 60B (as of February 28, 2019)

Hakata Ekimae Square(Fukuoka)

Tradepia Odaiba(Tokyo)Kakyoin Plaza(Sendai)

Kichijoji Central Building(Tokyo)Ichigo Akasaka 317 Building(Tokyo)Ogaku Building(Tokyo)© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

Hakata MST(Fukuoka)

Hakata Eki Higashi 113 Building(Fukuoka)27

October 2019 Forecast(JPY million)
April 2019
Actual (B)October 2019
Forecast (A)vs. April 2019(A) - (B)

Major Variation Factors (vs. April 2019)

Operating Revenue

8,451

8,266

-184

Operating Profit

4,510

4,357

-152

Recurring Profit

3,733

3,537

-195

Net Income

3,732

3,536

-195

Dividend Reserve (-)

382

362

-20

Dividend Reserve Release (+)

105

105

–

Dividend

JPY 2,255

JPY 2,140-JPY 115EPS

JPY 2,000

JPY 2,021+JPY 21

NOI

5,648

5,640

-8

85

85

–

No. of Assets
Occupancy

99.3%

98.3%

-1.0%

Decrease in Gains on Sale of Real Estate -228
April 2019 668, October 2019 440
Increase in Rental Income +43
Increase due to April 2019 asset acquisition +43
Increase due to October 2019 asset acquisition +59
Decrease due to April 2019 asset sale -39
Decrease due to October 2019 asset sale -58[Existing Assets]
Increase in common area services income +21(Ichigo Nishiki First Building +5)(Ichigo Nakano North Building +4)
Increase in utilities income due to weather fluctuation +42
Decrease in renewal fee and restoration & cleaning fee -27
Increase in Rental Expenses +33
Increase due to April 2019 asset acquisition +30
Increase due to October 2019 asset acquisition +23
Decrease due to April 2019 asset sale -24
Decrease due to October 2019 asset sale -14[Existing Assets]
Decrease in utilities expenses due to weather fluctuation +32
Increase in property tax due to October 2018 asset acquisition +16
Decrease in depreciation -22
Decrease in maintenance fees -9
Decrease in Operating Expenses (excluding Rental Expenses) -65
Decrease in April 2019 performance fee to asset manager -67
Decrease in asset sale fee -12
Icrease in other operating expenses +12
Decrease in Non-Operating Revenue -30
Decrease in April 2019 insurance payment income -27
Increase in Non-Operating Expenses +12
Increase in interest expense (including bond interest) +10
Reference: Capex
October 2019 Forecast 699* NOI = Rental Income - Rental Expenses + Depreciation
No. of Assets and Occupancy are Period-End

Reference: October 2019 Reserves (Post-Dividend)
Negative Goodwill Reserve 9,424
Dividend Reserve 2,999© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

28

April 2020 Forecast(JPY million)
October 2019
Forecast (B)Operating Revenue

April 2020
Forecast (A)8,266

vs. October 2019(A) - (B)

7,789

-477

Operating Profit

4,357

3,925

-432

Recurring Profit

3,537

3,105

-431

Net Income

3,536

3,105

-431

Dividend Reserve (-)

362

–

-362

Dividend Reserve Release (+)

105

105

–

Dividend

JPY 2,140

JPY 2,095-JPY 45EPS

JPY 2,021

JPY 2,026+JPY 5

NOI

5,640

5,639

–

No. of Assets

85

85

–

Occupancy

98.3%

98.5%

+0.2%

Major Variation Factors (vs. October 2019)
Decrease in October 2019 Gains on Sale of Real Estate -440
Decrease in Rental Income -38
Increase due to October 2019 asset acquisition +10
Decrease due to October 2019 asset sale -12[Existing Assets]
Increase in common area services income +8(Ichigo Uchikanda Building +8)(Ichigo Omori Building +6)(Ichigo Kudan Building -3)
Decrease in utilities income due to weather fluctuation -44
Decrease in Rental Expenses -39
Increase due to October 2019 asset acquisition +6
Decrease due to October 2019 asset sale -6[Existing Assets]
Decrease in utilities expenses due to weather fluctuation -51
Increase in maintenance fees +4
Increase in other expenses +6
Decrease in Operating Expenses (excluding Rental Expenses) -6
Increase in performance fee to asset manager +16
Decrease in April 2019 asset sale fee -6
Decrease in non-deductible consumption tax -17
Reference: Capex
April 2020 Forecast 631
Reference: April 2020 Reserves (Post-Dividend)
Negative Goodwill Reserve 9,319
Dividend Reserve 2,999* NOI = Rental Income - Rental Expenses + Depreciation
No. of Assets and Occupancy are Period-End© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

29

Ichigo Office ESG© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

30

Ichigo Office ESG

Ichigo Office’s Sustainability Commitment
Ichigo Sustainability Policy
Ichigo believes that working on behalf of society and the environment is a fundamental social responsibility and will support the sustainable growth of
Ichigo and Ichigo Office. Ichigo has thus made sustainability a key priority, and has established the following Sustainability Policy to actively work to
reduce Ichigo’s environmental impact and support sustainable outcomes.
1. Harmony with the Environment
Ichigo actively monitors and minimizes the environmental impact of its real estate operations.
2. Energy Conservation, CO2 Emissions Reduction, and Recycling
Ichigo seeks to contribute to a low-carbon, low-waste society by lowering its energy consumption, extending the useful life of its
assets, actively recycling, and reducing waste and water consumption.
3. Regulatory and Environmental Compliance
Ichigo complies with all environmental laws and regulations and Ichigo’s own independently-established environmental rules. Ichigo
also carefully monitors and complies with all applicable changes in laws and regulations.
4. Training and AwarenessIchigo promotes understanding of its Sustainability Policy and works to increase sustainability awareness among all Ichigo employees.
Ichigo will also promote sustainability in coordination with Ichigo stakeholders, seeking understanding and cooperation onsustainability from Ichigo partner companies and tenants.
5. Sustainability Performance Communication and Disclosure
Ichigo communicates this Sustainability Policy and Ichigo’s sustainability initiatives to society at large. Ichigo also obtains
certifications for its sustainability activities on an ongoing basis.
6. Green Procurement
Ichigo will implement green procurement measures, such as environmentally-sensitive building materials and sustainable design, in
Ichigo’s building renovations, as well as selecting partner companies based on their environmental sustainability initiatives.

Ichigo Sustainability Structure− The Head of Ichigo Office is responsible for promoting sustainability and ensuring compliance with the Sustainability Policy.
− Quarterly meetings to monitor sustainability efforts and compliance Attended by the Heads of Sustainability, Asset Management, and Administration
 Develop sustainability goals and initiatives in coordination with sponsor Ichigo− Training and Awareness Conduct annual sustainability training for Office REIT asset management staff− Information Disclosure Disclose sustainability goals and performance and communicate to stakeholders© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

31

Ichigo Office ESG

Environmental
GRESB Real Estate Assessment (started in 2016)− Awarded Highest Green Star Ranking in 2018 for second year in a row
 Assessment Key Points• Environmental Monitoring, Policy & Disclosure, Stakeholder Engagement
 Awarded Three Stars in the GRESB Rating (maximum five stars)

Environmental Certifications: 9 Assets, 19.0% of Total Leasable Area for Offices
CASBEE(Comprehensive Assessment System
for Built Environment Efficiency)
S rankIchigoTakamatsu
Building

IchigoMarunouchi
Building

BELS(Building-housing Energy-efficiency
Labeling System)
A rankEbisu
Green Glass

IchigoSakaisuji
Honmachi
Building

Ichigo Sendai
East Building

2 Stars (★★)

1 Star (★)

Ichigo Akihabara
North Building

Ichigo Omiya
Building(as of April 30, 2019)
DBJ Green Building

3 Stars (★★★) 2 Stars (★★)

Ichigo Nihonbashi
East Building

Win Gotanda
Building

Energy Efficiency Measures− HVAC renewals and LED light installations in common areas− Energy-saving diagnosis conducted by Tokyo Metropolitan Centerfor Climate Change Actions− Install energy-efficient HVAC using government subsidies
 HVAC update at Ichigo Toyamaeki Nishi Building(subsidies of JPY 7.3 million, 17% of JPY 43 million in construction costs)© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

Ichigo Toyamaeki Nishi Building

32

Ichigo Office ESG

SocialTenant Satisfaction Surveys to Learn & Respond to Tenant Needs− Promote exercise and convenience throughbike-sharing service

Bike Sharing

Night Patrol

Halloween Clean-Up

Snow Shoveling

Help Disaster-Struck Communities− Send engineers and donate emergency equipment tosupport disaster recovery and response

Participation in Local Community Associations
and Events

Elevator Emergency Kits,
AED

Drink Machines
to Support Disaster Zones

Emergency Drill

Healthy and Supportive Workplace− HR Training Employee skill and career development through Ichigo University classes• Over 20 classes on real estate, accounting, finance, and other topics offered annually Financial support for licenses and qualifications(Real Estate Securitization, Real Estate Broker, Real Estate Appraiser)− Promoting Work-Life Balance and Gender Equality
 Measures to support career development for parents such as maternity leave, child care leave, andshortened work days
• 100% of Employees Return from Maternity/Child Care Leave• 39.3% of Employees are Women− Combating Anti-Social Forces (Organized Crime) Operational structure to fully prevent transactions with anti-social forces© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

33

Ichigo Office ESG

Governance
REIT：
Monitors Asset Management Company− All Ichigo Office Directors are Independent Directors− Active dialogue and effective internal controls via Board
discussions led by REIT Executive Director− Draw upon expertise of REIT Supervisory Directors(qualified lawyers & accountants)

Asset Management Company (AMC)− Majority of AMC Directors (3 of 5) are Independent Directors− Independent asset management team & best-practiceexecution on behalf of Ichigo Office REIT within AMC− Compliance and Audit are directly under the AMC President tomonitor and review critical compliance matters− Ensure objectivity by including third-party, independentlawyers and accountants in the Investment Committee & Risk
& Compliance Committee

Independence of the Investment Corporation from Asset Management Company (AMC)➡ 31 of 63 J-REITs have AMC Presidents serving as Executive Director of the REIT
All Ichigo Office Directors are Independent
Independent Directors at Asset Management Company➡ Only 3 Asset Management Companies have any Independent Directors
The Majority of Ichigo Investment Advisors' Directors (3 of 5) are Independent

Ichigo Office (8975) and Ichigo Hotel (3463) are the only J-REITs (out of 63)
that both have an Asset Management Company (AMC) board that has a majority of Independent
Directors and whose AMC President does NOT serve as the Executive Director of the REIT

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

34

Appendix: Financial & Portfolio Data

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

35

April 2019 vs. October 2018 Earnings(JPY million)
October 2018
Actual (B)April 2019
Actual (A)vs. October 2018(A) - (B)

Major Variation Factors (vs. October 2018)
April 2019 Gains on Sale of Real Estate +668

Operating Revenue

7,632

8,451

+818

Operating Profit

3,745

4,510

+765

Recurring Profit

2,958

3,733

+774

Net Income

2,980

3,732

+751

–

382

+382

105

105

–

Dividend

JPY 2,014

JPY 2,255+JPY 241

EPS

JPY 1,945

JPY 2,000+JPY 55

NOI

5,496

5,648

+152

No. of Assets

85

85

–

Occupancy

99.2%

99.3%

+0.1%

Dividend Reserve (-)
Dividend Reserve Release (+)

Increase in Rental Income +149
Increase due to October 2018 asset acquisition +61
Increase due to April 2019 asset acquisition +107
Decrease due to April 2019 asset sale -105
[Existing Assets]
Increase in common area services income +128
(Ichigo Nishiki First Building +39)
(Ichigo Jingumae Building +12)
Decrease in utilities income due to weather fluctuation -44
Decrease in Rental Expenses -2
Increase due to October 2018 asset acquisition +28
Increase due to April 2019 asset acquisition +29
Decrease due to April 2019 asset sale -37[Existing Assets]
Decrease in utilities expenses due to weather fluctuation -28
Decrease in depreciation -10
Decrease in service provider expenses (mainly leasing brokerage fees) -5
Increase in maintenance fees +20
Increase in Operating Expenses (excluding Rental Expenses) +56
Increase in AM fees due to increased profits +23
Increase in April 2019 asset sale fee +18
Increase in non-deductible consumption tax +21
Decrease in other operating expenses -6
Increase in Non-Operating Revenue +27
Increase in insurance payment income +25
Increase in Non-Operating Expenses +17
Decrease in interest expenses (including bond interest) -1
Increase in up-front loan fees & related expenses +19
Decrease in Extraordinary Gains -23
Decrease in October 2018 insurance gain -23* NOI = Rental Income - Rental Expenses + Depreciation
No. of Assets and Occupancy are Period-End© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

36

Rapid Re-Tenanting After Vacancies
Newly Leased and Newly Vacated Office Space (m2)
Newly Leased
Newly Vacated

13,185

7,153

5,982

5,778

4,636

-4,028-6,498-6,355-5,300-5,237

October 2018

October 2019
(Forecast)-11,434
April 2017

October 2017

April 2018

April 2019

Newly Leased

6.4%

5.3%

11.3%

4.8%

3.5%

Newly Vacated

5.8%

5.7%

9.8%

4.4%

3.0%

Net Leasing

+655

-372

+1,751+477+608© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

TBD
3.9%
TBD

37

Borrowing Details (1)Loan Details

Average Interest Rate and Average Remaining Loan Maturity(Interest Rate)(Average Remaining Loan Maturity including Bonds, Years)5

2.5%
Average Interest Rate
2.0%

3.5 years

Borrowings and Bond Issuancein the April 2019 Period

Average Remaining Loan Maturity
Maturity

Interest
Rate

JPY 2.87B 7.8 years

0.975%(Fixed)JPY 1.4B 7.7 years

0.907%(Fixed)JPY 1.6B 7.3 years

0.850%(Fixed)JPY 3B

7.4 years

0.867%(Fixed)Bond

JPY 1B

7 years0.750%

Total/
Average

JPY 9.87B 7.5 years

0.889%

Amount4

3.2 years

3.4 years

3.2 years

3.3 years
3

1.5%

Bank
Loans

1.0%

1.02%

1.00%

1.02%

1.02%

2

1.00%
1

0.5%

0

0.0%
April 2017

October 2017

April 2018

October 2018

April 2019

9.1%

6.0%

3.1%

90.9%

94.0%

96.9%

Apr 2018

Oct 2018

Apr 2019

Fixed vs. Floating Loan Ratio
Fixed

Floating

17.7%

17.7%

82.3%

82.3%

Apr 2017

Oct 2017

100%

Fixed *
Floating* Fixed includes
floating loans
fixed via
interest rateswaps

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

0%38

Borrowing Details (2)Loan Maturity Distribution (as of April 30, 2019)
Bank Loans (fixed rate including fixed via interest rate swaps)
Bank Loans (floating rate)

Bonds(JPY million)

8,814

9,574

10,233

9,639

9,629

9,633

9,623
8,154
1,000

7,263
6,346
6,370

4,600

7,859

6,554

2,900

2,380

2,000
892

7,266

955

1,200

1,000

900

600
Oct 2019 Apr 2020 Oct 2020 Apr 2021 Oct 2021 Apr 2022 Oct 2022 Apr 2023 Oct 2023 Apr 2024 Oct 2024 Apr 2025 Oct 2025 Apr 2026 Oct 2026 Apr 2027 Oct 2027 Apr 2028 Oct 2028 Apr 2029

LTV (as of April 30, 2019)

(%)

55
LTV

LTV (Market Value-Basis)*

50

47.5%
46.0%

45.7%

46.9%

47.6%

48.1%

41.7%

41.7%

Oct 2018

Apr 2019

45

40

42.5%

42.4%
41.6%

41.5%

* Market Value =Total Assets +Unrealized Gains35
Oct 2016

Apr 2017

Oct 2017

Apr 2018© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

39

Lender Base and Ichigo Office Credit Rating
Lender Base (as of April 30, 2019)

Credit Rating(JPY million)(JPY million)
LenderAmountRatio

Credit Rating Agency

Japan Credit Rating Agency (JCR)

SMBC

27,89725.7%Type of Rating

Long-Term Issuer Rating

Mizuho Bank
Shinsei Bank

19,111
13,901

17.6%
12.8%

RatingA

MUFG Bank

11,883

11.0%

Rating Outlook

StableAozora Bank

10,105

9.3%

Resona Bank

8,795

8.1%

Development Bank of Japan
Bank of Fukuoka

3,400
3,310

3.1%
3.1%

ORIX Bank

2,268

2.1%

The Kagawa Bank

1,792

1.7%

Mizuho Trust

1,638

1.5%

1,219
105,324

1.1%
97.1%

Nishi-Nippon City Bank
Total
Bonds

AmountRatio

Unsecured Bond No.1
Unsecured Bond No.2

1,200
1,000

1.1%
0.9%

Unsecured Bond No.3

1,000

0.9%

3,200
108,524

2.9%

Total Bonds
Total Interest-Bearing Liabilities

100.0%© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

40

Continued Growth in Portfolio Unrealized Gains
Unrealized Gains of JPY 34.3B, +JPY 2.7B vs. October 2018
(JPY million)
300,000
Period-End Book Value

Period-End Appraisal Value

Unrealized Gains

15.01%

18%

15.98%
17.13%

13.09%
11.17%

250,000
9.36%

229,198
220,7998.18%
207,5375.13%

200,000
3.79%
1.55%
150,000

173,447
164,977

189,765

209,667
195,249

234,805

12%

219,100
190,506

197,617200,472

188,598

6%

174,955
161,7210%

126,359
121,741
112,433 114,182

100,000-6%

50,000

-12%

-18%

0
Oct 2014(70 assets)

Apr 2015(65 assets)

Oct 2015(77 assets)

Apr 2016(73 assets)

Oct 2016(85 assets)

Apr 2017(82 assets)

Oct 2017(85 assets)© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

Apr 2018(82 assets)

Oct 2018(85 assets)

Apr 2019(85 assets)

41

Lease Renewals
April 2019: Change in Monthly Rent by Asset TypeOct 31, 2018
(A)

New
Contracts

Contract
Terminations((JPY million)
UpwardDownward

Asset
Acquisiton

Asset Sale

Apr 30, 2019
(B)

Change(B) - (A)Change at
Existing
Assets

Office

1,045

+24

-18

+7

–

+23

–

1,082

+36

+13

Other

81

–

–

–

–

–

-18

63

-18

–

Total

1,127

+24

-18

+7

–

+23

-18

1,145

+18

+13

April 2019: Lease Renewals by Asset Type
Asset Type
UpwardDownward

Flat

Total

No. ofAssetsLeasedArea

Change in Rent
(Semi-Annual)

Change from
Previous Rent

Office52

19,026m2+JPY 42.1M

+8.5%

Other

–

–

–

–

Total

52

19,026m2+JPY 42.1M+8.5%

Office

–

–

–

–

Other

–

–

–

–

Total

–

–

–

–

Office192

44,928m2

–

–

Other

–

–

–

–

Total

192

44,928m2––

Office244

63,954m

2+JPY 42.1M

+2.6%

Other

–

–

–

–

+JPY 42.1M

+2.6%

Total

244

63,954m

2* Excludes assets sold during the April 2019 period© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

42

Leased Area
April 2019: Leased Area by Asset Type((m²)

Oct 31, 2018

New Contracts

Contract
Terminations

Asset
Acquisition

Office238,766+4,636-4,028+5,303–244,679+5,912

+608

Other

22,483–––-4,154

18,328-4,154–

Total

261,250+4,636-4,0285,303-4,154

263,008+1,757+608

Asset Sale

Apr 30, 2019

Change at
Existing Assets

ChangeApril 2019: New Leases & Lease Terminations by Asset Type
New Leases

Lease Terminations
Asset Type

Upward

Flat

Total

LeasedArea

Total Rent
(Semi-Annual)

No. ofAssetsLeasedArea

Total Rent
(Semi-Annual)

Office22

4,075m2+JPY 134M

Office21

4,028m2-JPY 110M

Other

–

–

–

Other

–

–

–

4,075m2+JPY 134M

Total

2

+JPY 11M

Total
Downward

No. ofAssets22

Office

2

561m

Other

–

–

–

Total

2

561m2

+JPY 11M

Office

–

–

–

Other

–
－

–－

–

Total

–

–

–
2

Office24

4,636m

Other

–

–

–

Total

24

4,636m2+JPY 146M

21

4,028m2-JPY 110M+JPY 146M* Excludes assets sold during the April 2019 period© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

43

Survey of New & Departing Tenants: Why Relocating?
New Tenants

Departing Tenants

Opening a new office or moving to a better location

Moving to a different building for larger floor space or better location

Moving to a different building for larger floor space / adding floor space

Closing office

Reducing cost or floor space

Reducing cost or moving to a different building to integrate with other divisions

Other

Other

73.0%

Oct 2017

5.4%
8.1%

Oct 2017

24.3%

7.4%
11.1%

Apr 2018

14.3% 14.3%

6.9%
3.4%

Oct 2018

28.6%

10.7%

50.0%

10.7%

8.3%

Apr 2019

28.6%

9.5%

52.4%

9.5%

13.5%

Apr 2018

51.9%

29.6%

Oct 2018

51.7%

37.9%

Apr 2019

50.0%

37.5%

4.2%

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

29.7%

37.8%

67.9%

8.1%

3.6%

44

Decreasing Free-Rent Incentives
Free Rent Incentive Trends

Rental Income Loss due to Free Rent
(Months)

3

Tokyo Metro Area (Average)
Regional Cities (Average)

2.6(JPY million)
Loss from Free Rent

81

21

46

94

6,251

6,498

6,471

6,614

6,811

Apr 2017

Oct 2017

Apr 2018

Oct 2018

Apr 2019

89

2.1

Actual Rent Income

2
1.7
1.8
1.6

1.6
1.1
1.2

1

0.7

0.8

0
Apr 2017

Oct 2017

Apr 2018

Oct 2018

Apr 2019© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

45

Value-Add Capex Plan
Capex Tailored to Tenant Needs
Maintenance Costs, Capex, and Depreciation

October 2019 Capex Plan
(JPY million)

Asset Name

Details

Investment

Ichigo Toyamaeki Nishi Building

Air Conditioning Upgrade (Phase 3 of 3)

JPY 42M

Ichigo Sasazuka Building

Air Conditioning Upgrade (3rd & 6th floors)

JPY 31M

Ichigo Nogizaka Building

Common Area Renovation

JPY 20M

Ichigo Otsuka Building

Elevator Upgrade

JPY 20M

1,200

Maintenance

900

857

Capex

857

Depreciation

838
837
699
631

April 2020 Capex Plan

600

453

442

300

117

138

132

Apr 2019

Oct 2019
Forecast

Details

Investment

Ichigo Hakata Building

Exterior Wall Renovation

JPY 27M

Ichigo Kawasaki Building

Elevator Upgrade

JPY 27M

Ichigo Nogizaka Building

HVAC Upgrade

JPY 27M

Ichigo Higashi Ikebukuro Building Cubicle Upgrade

JPY 20M

137

0

Oct 2018

Asset Name

Apr 2020
Forecast© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

46

Organic Growth Strategy

Closing the Rent Gap
Rent Gap = When Existing Tenant Rents Don’t Rise as Fast as Market Rates
Close Gap by Renegotiating Below-Market Rent Contracts
Difference Between Tenant Rent and Market Rate
(Office, By Leased Area)

Difference at Time of Renewal (Before Renegotiation)■ >10%■ -10% to 0%(JPY million)■ 0% to 10%■ Below -10%300 (32.6%)
38

5%
All areas

Central Tokyo

238 (25.9%)
1.48%

23

1.48%

0.50%
0%

-0.34%

1.09%-0.12%

0.40%

199 (21.6%)

0.38%

184 (20.0%)
18

0.21%
-1.07%-0.43%-2.15%-2.35%-5%-6.20%-6.74%

35
Below-Market Rent Tenants

2.03%

51

87

16
52

49

62

90
63

113
68

67

83

-10%
Oct
2015

Apr
2016

Oct
2016

Apr
2017

Oct
2017

Apr
2018

Oct
2018

Apr
2019

Oct 2019© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

Apr 2020

Oct 2020

Apr 2021~

47

Portfolio Growth as REIT Specializing in Mid-Size Offices
As of October 31, 201885 assets

85 assets

85 assets

Office77 assets

79 assets

80 assets

Other

8 assets

6 assets

5 assets

Total

JPY 199.9B

JPY 203.0B

JPY 203.2B

Office

93%

95%

96%

Other

7%

5%

4%

Central Tokyo

57%

58%

57%

Tokyo Metropolitan Area

22%

22%

22%

Four Major Regional Cities

14%

14%

15%

Other Regional Cities

6%

6%

6%

Appraisal Value

JPY 229.1B

JPY 234.8B

JPY 235.0B

Leasable Area

263,440m

2

264,762m

2

266,494m

99.2%

99.3%

99.3%

923

921

932

5.5%

5.6%

5.6%

Portfolio Size

Area

Occupancy
No. of Tenants
NOI Yield•

As of May 31, 2019Total

No. of Assets••

As of April 30, 20192

Annualized NOI Yield. Four Major Regional Cities refers to Osaka, Nagoya, Fukuoka, and Sapporo.
Leasable Area, Occupancy, No. of Tenants as of May 31, 2019 are provisionally calculated using data of assets held as of April 30, 2019 and assets
acquired in the October 2019 period.
NOI Yield is calculated excluding assets sold in each period; NOI Yield of assets acquired in the October 2019 period are determined from the annual
NOI calculated using a DCF method based on appraisal value at acquisition.

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

48

High Seismic Safety Level
Acquisition Guidelines− Seismic safety：Compliant with new seismic standard− Seismic PML1：Stand-alone PML of 20% or less, with a non-exceedance probability of
90% for the entire portfolio
Portfolio Assets Seismic Safety Profile (as of May 31, 2019)

Assets Built under Old SeismicStandard, but Seismic Renovation
Completed
4 assets(Leasable Area Ratio 6.7%)

Portfolio PML

Assets Built under Old SeismicStandard, but Original Construction
Met New Earthquake ResistanceStandard2
3 assets

2.52%(Leasable Area Ratio 3.3%)

as of May 31, 2019
Assets Built under Old Seismic Standard, but
Seismic Renovation Completed (4 assets)
Ichigo Sakae Building, Ichigo Mita Building, Ichigo Gotanda Building,and Ichigo Higashi Ikebukuro Building

New Earthquake ResistanceStandard
78 assets(Leasable Area Ratio 90.0%)

Assets Built under Old Seismic Standard, but Original Construction
Met New Earthquake Resistance Standard (3 assets)2
Ichigo Ginza 612 Building, Ichigo Ofuna Building, andIchigo Nagoya Building

1 PML (Probable Maximum Loss) is the maximum expected loss from a large-scale earthquake (defined as an earthquake with an expected frequency of occurrence once

every 475 years, or a 10% chance of occurrence within the next 50 years) occurring in the next 50 years, expressed as a ratio to the estimated replacement cost.
2 Assets evaluated as having seismic strength equivalent to new earthquake resistance standards and for which a third-party seismic evaluation report has been obtained.

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

49

Portfolio Details (1)as of April 30, 2019
Asset
Type

OfficeNo.

Asset Name

Area

Location

O-02 Ichigo Nishisando Building

Central Tokyo

Shibuya-ku, Tokyo

Acquisition
Book Value
Price(JPY M)(JPY M)

3,254

3,363

LeasableArea(m2)

4,564.63

Occupancy

100.0%

Apr 2019 Appraisal

Oct 2018 Appraisal

Value(JPY M)

Value(JPY M)

3,280

Cap rate

4.1%

3,170

Cap rate

4.2%

ChangeValue(JPY M)

Cap rate

+110

-0.1%
-0.1%

O-03 Ichigo Mita Building

Central Tokyo

Minato-ku, Tokyo

2,740

2,725

4,119.63

100.0%

3,580

4.2%

3,510

4.3%

+70

O-04 Ichigo Nanpeidai Building

Central Tokyo

Shibuya-ku, Tokyo

1,920

1,917

1,925.24

100.0%

2,600

3.6%

2,560

3.6%

+40

–

O-05 Ichigo Hanzomon Building

Central Tokyo

Chiyoda-ku, Tokyo

1,550

1,510

2,080.37

100.0%

1,940

3.8%

1,880

3.9%

+60

-0.1%

O-06 Ichigo Hijirizaka Building

Central Tokyo

Minato-ku, Tokyo

1,200

1,220

1,947.90

100.0%

1,440

4.6%

1,440

4.6%

–

–

O-07 Ichigo Shibuya Kamiyamacho Building

Central Tokyo

Shibuya-ku, Tokyo

1,505

1,373

1,321.54

100.0%

1,860

3.8%

1,810

3.9%

+50

-0.1%

O-08 Ichigo Akasaka 5 Chome Building

Central Tokyo

Minato-ku, Tokyo

735

720

683.86100.0%

826

3.8%

806

3.9%

+20

-0.1%

O-09 Ichigo Shibakoen Building

Central Tokyo

Minato-ku, Tokyo

1,100

1,100

1,602.29

100.0%

1,130

4.4%

1,130

4.4%

–

–

O-10 Ichigo Ebisu Nishi Building

Central Tokyo

Shibuya-ku, Tokyo

1,917

1,925

1,484.39

100.0%

2,480

3.8%

2,440

3.9%

+40

-0.1%

O-11 Ichigo Ginza 612 Building

Central Tokyo

Chuo-ku, Tokyo

1,773

1,777

1,387.09

100.0%

2,030

3.8%

2,000

3.9%

+30

-0.1%

O-12 Ichigo Uchikanda Building

Central Tokyo

Chiyoda-ku, Tokyo

1,140

1,122

1,378.83

81.1%

1,210

4.4%

1,170

4.4%

+40

–

O-14 Ichigo Yotsuya 4 Chome Building

Central Tokyo

Shinjuku-ku, Tokyo

550

510

780.64100.0%

576

4.3%

575

4.3%

+1

–

O-15 Ichigo Tameike Building

Central Tokyo

Minato-ku, Tokyo

580

524

494.14100.0%

688

3.9%

684

3.9%

+4

–

O-16 Ichigo Jimbocho Building

Central Tokyo

Chiyoda-ku, Tokyo

1,820

1,809

1,891.01

100.0%

2,380

4.2%

2,290

4.2%

+90

–

O-17 Ichigo Hakozaki Building

Central Tokyo

Chuo-ku, Tokyo

1,150

1,147

2,387.34

100.0%

1,150

4.5%

1,150

4.5%

–

–

O-18 Ichigo Kudan 2 Chome Building

Central Tokyo

Chiyoda-ku, Tokyo

763

733

1,288.31

100.0%

936

4.4%

915

4.4%

+21

–

O-19 Ichigo Kudan 3 Chome Building

Central Tokyo

Chiyoda-ku, Tokyo

844

822

1,302.43

100.0%

851

4.5%

851

4.5%

–

–

O-20 Ichigo Gotanda Building

Central Tokyo

Shinagawa-ku, Tokyo

5,060

4,860

5,346.39

100.0%

6,260

4.6%

6,250

4.6%

+10

–

O-21 Ichigo Shin Yokohama Building

Tokyo Metro Area

Yokohama

1,816

1,700

4,021.32

97.7%

1,920

4.7%

1,870

4.8%

+50

-0.1%

O-22 Ichigo Minami Ikebukuro Building

Tokyo Metro Area

Toshima-ku, Tokyo

1,460

1,380

1,491.51

100.0%

1,660

4.1%

1,630

4.1%

+30

–

O-23 Ichigo Nakano North Building

Tokyo Metro Area

Nakano-ku, Tokyo

764

739

1,250.85

100.0%

885

4.9%

885

4.9%

–

–

O-24 Ichigo Eitai Building

Tokyo Metro Area

Koto-ku, Tokyo

1,490

1,469

2,605.54

100.0%

1,270

4.8%

1,250

4.9%

+ 20

-0.1%

O-26 Ichigo Ikejiri Building

Tokyo Metro Area

Meguro-ku, Tokyo

2,030

1,954

2,385.69

100.0%

2,230

4.4%

2,220

4.5%

+10

-0.1%

O-27 Ichigo Nishi Ikebukuro Building

Tokyo Metro Area

Toshima-ku, Tokyo

639

604

1,261.91

100.0%

957

4.5%

837

4.6%

+120

-0.1%

O-28 Ichigo Nishi Gotanda Building

Central Tokyo

Shinagawa-ku, Tokyo

765

759

1,329.06

100.0%

826

4.6%

825

4.6%

+1

–

O-29 Ichigo Kichijoji Building

Tokyo Metro Area

Musashino City, Tokyo

2,160

2,200

4,210.87

100.0%

2,810

4.9%

2,800

4.9%

+10

–

O-34 Ichigo Sakae Building

Four Major Cities

Nagoya

4,705

4,689

3,928.12

100.0%

6,490

4.8%

6,480

4.9%

+10

-0.1%

O-37 Ichigo Marunouchi Building

Four Major Cities

Nagoya

6,710

5,808

8,009.11

100.0%

7,700

4.3%

7,520

4.4%

+180

-0.1%

O-38 Ichigo Toyamaeki Nishi Building

Other Regional Cities Toyama City, Toyama

1,645

1,494

8,601.71

97.5%

1,730

6.0%

1,750

6.0%

-20

–

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

50

Portfolio Details (2)as of April 30, 2019
Asset
Type

OfficeNo.

Asset Name

Location

Area

Acquisition
Book Value
Price(JPY M)(JPY M)

LeasableArea(m2)

Occupancy

Apr 2019 Appraisal

Oct 2018 Appraisal

Value(JPY M)

Value(JPY M)

Cap rate

Cap rate

ChangeValue(JPY M)

Cap rate

O-39 Ichigo Mirai Shinkin Building

Other Regional Cities Oita City, Oita

1,158

1,153

3,551.46

95.4%

1,310

6.1%

1,280

6.1%

+30

–

O-42 Ichigo Takamatsu Building

Other Regional Cities Takamatsu City, Kagawa

3,010

2,357

6,329.33

97.3%

3,500

6.2%

3,440

6.3%

+60

-0.1%

O-46 Ichigo Kanda Nishikicho Building

Central Tokyo

2,130

2,004

2,523.09

100.0%

2,930

3.9%

2,930

3.9%

–

–

Chiyoda-ku, Tokyo

O-47 Ichigo Akihabara North Building

Central Tokyo

Chiyoda-ku, Tokyo

5,500

5,576

6,250.53

100.0%

6,970

4.5%

6,970

4.5%

–

–

O-48 Ichigo Sakaisuji Honmachi Building

Four Major Cities

Osaka

1,940

1,787

3,729.35

100.0%

2,320

4.6%

2,310

4.6%

+10

–

O-49 Ichigo Kanda Ogawamachi Building

Central Tokyo

Chiyoda-ku, Tokyo

2,210

2,195

2,295.57

100.0%

2,480

4.2%

2,460

4.2%

+20

–

O-50 Ichigo Hatchobori Building

Central Tokyo

Chuo-ku, Tokyo

1,905

1,814

2,697.36

100.0%

2,620

4.6%

2,530

4.6%

+90

–

O-51 Ebisu Green GlassCentral Tokyo

Shibuya-ku, Tokyo

5,900

5,832

3,159.27

100.0%

6,720

3.6%

6,710

3.6%

+10

–

O-52 Ichigo Omori Building

Central Tokyo

Shinagawa-ku, Tokyo

3,850

3,796

3,585.92

100.0%

4,230

4.4%

4,220

4.4%

+10

–

O-53 Ichigo Takadanobaba Building

Central Tokyo

Shinjuku-ku, Tokyo

1,580

1,586

1,606.92

100.0%

1,890

4.1%

1,890

4.1%

–

–

O-54 Ichigo Omiya Building

Tokyo Metro Area

Saitama City, Saitama

3,430

3,625

6,180.68

100.0%

4,020

5.2%

3,990

5.2%

+30

–

O-55 Ichigo Sagamihara Building

Tokyo Metro Area

Sagamihara City, Kanagawa

1,174

1,220

2,960.81

100.0%

1,250

5.4%

1,250

5.4%

–

–

O-56 Ichigo Ofuna Building

Tokyo Metro Area

Kamakura City, Kanagawa

2,000

1,945

2,364.71

100.0%

2,480

5.3%

2,410

5.4%

+70

-0.1%

O-57 Ichigo Sendai East Building

Other Regional Cities Sendai

1,840

1,674

5,205.49

95.5%

2,100

5.6%

2,100

5.6%

–

–

O-58 Ichigo Kumamoto Building

Other Regional Cities Kumamoto City, Kumamoto

1,450

1,472

4,507.59

97.5%

1,580

6.0%

1,580

6.0%

–

–

O-59 Ichigo Jingumae Building

Central Tokyo

7,200

7,413

4,510.04

100.0%

8,050

3.4%

8,040

3.4%

+10

–
–

Shibuya-ku, Tokyo

O-60 Ichigo Shibuya Dogenzaka Building

Central Tokyo

Shibuya-ku, Tokyo

3,650

3,670

2,789.86

100.0%

5,140

3.5%

5,050

3.5%

+90

O-61 Ichigo Hiroo Building

Central Tokyo

Shibuya-ku, Tokyo

3,960

4,002

3,510.44

100.0%

4,580

3.9%

4,530

3.9%

+50

–

O-62 Ichigo Sasazuka Building

Central Tokyo

Shibuya-ku, Tokyo

4,780

4,895

6,425.29

100.0%

5,620

4.1%

5,290

4.1%

+330

–

O-63 Ichigo Nihonbashi East Building

Central Tokyo

Chuo-ku, Tokyo

4,700

4,547

4,216.97

100.0%

5,470

4.0%

5,470

4.0%

–

–

O-64 Ichigo Sakurabashi Building

Central Tokyo

Chuo-ku, Tokyo

2,500

2,576

2,971.22

100.0%

3,000

4.0%

2,880

4.0%

+120

–

O-65 Ichigo Shinkawa Building

Central Tokyo

Chuo-ku, Tokyo

2,360

2,387

2,312.03

100.0%

2,870

3.9%

2,790

3.9%

+80

–

O-66 Ichigo Kudan Building

Central Tokyo

Chiyoda-ku, Tokyo

3,190

3,218

3,090.65

100.0%

3,480

4.0%

3,480

4.0%

–

–

O-67 Ichigo Higashi Gotanda Building

Central Tokyo

Shinagawa-ku, Tokyo

3,660

3,661

4,548.10

100.0%

4,180

4.1%

4,280

4.1%

-100

–

O-68 Axior Mita

Central Tokyo

Minato-ku, Tokyo

1,800

1,752

2,369.82

100.0%

2,260

3.9%

2,190

4.0%

+70

-0.1%

O-69 Ichigo Higashi Ikebukuro Building

Tokyo Metro Area

Toshima-ku, Tokyo

4,570

4,614

4,472.00

100.0%

5,070

4.1%

5,270

4.1%

-200

–

O-70 Koriyama Big-i (Office Section)

Other Regional Cities Koriyama City, Fukushima

1,660

1,488

3,433.07

100.0%

2,110

5.1%

1,890

5.1%

+220

–

O-71 Ichigo Kawasaki Building

Tokyo Metro Area

Kawasaki City, Kanagawa

1,750

1,777

3,710.17

100.0%

2,130

4.3%

2,120

4.3%

+10

–

O-72 Ichigo Shibuya East Building

Central Tokyo

Shibuya-ku, Tokyo

1,350

1,351

1,041.36

100.0%

1,570

3.6%

1,530

3.6%

+40

–

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

51

Portfolio Details (3)as of April 30, 2019
Asset
Type

OfficeNo.

Asset Name

Area

Location

Acquisition
Book Value
Price(JPY M)(JPY M)

LeasableArea(m2)

Occupancy

Apr 2019 Appraisal

Oct 2018 Appraisal

Value(JPY M)

Value(JPY M)

Cap rate

Cap rate

ChangeValue(JPY M)

Cap rate

O-73 Ichigo Ningyocho Building

Central Tokyo

Chuo-ku, Tokyo

1,450

1,482

1,769.09

100.0%

1,580

4.2%

1,570

4.2%

+10

–

O-74 Ichigo Nishi Honmachi Building

Four Major Cities

Osaka

2,190

2,143

6,152.00

100.0%

2,450

4.8%

2,380

4.8%

+70

–

O-75 Ichigo Hakata Building

Four Major Cities

Fukuoka

1,380

1,365

2,423.86

100.0%

1,500

4.9%

1,500

4.9%

–

–

O-76 Ichigo Nishiki First Building

Four Major Cities

Nagoya

2,000

1,976

3,324.70

100.0%

2,100

4.6%

2,100

4.6%

–

–

O-77 Ichigo Ikenohata Building

Tokyo Metro Area

Taito-ku, Tokyo

5,130

5,140

5,504.15

100.0%

5,390

4.3%

5,380

4.3%

+10

–

O-78 Ichigo Ikebukuro East Building

Tokyo Metro Area

Toshima-ku, Tokyo

3,010

2,985

3,118.69

100.0%

3,240

4.3%

3,240

4.3%

–

–

O-79 Ichigo Motoazabu Building

Central Tokyo

Minato-ku, Tokyo

1,890

1,905

1,329.96

100.0%

2,050

3.5%

2,020

3.6%

+30

-0.1%

O-80 Ichigo Otsuka Building

Tokyo Metro Area

Toshima-ku, Tokyo

2,740

2,728

3,679.70

100.0%

2,940

4.4%

2,940

4.4%

–

–

O-81 Ichigo Nagoya Building

Four Major Cities

Nagoya

3,420

3,483

4,930.30

100.0%

3,850

4.5%

3,740

4.5%

+110

–

O-82 Ichigo Fushimi Building

Four Major Cities

Nagoya

2,340

2,330

4,155.57

94.6%

2,450

4.7%

2,450

4.7%

–

–

O-83 Ichigo Nishiki Building

Four Major Cities

Nagoya

1,330

1,292

2,006.78

100.0%

1,430

4.6%

1,430

4.6%

–

–

O-84 Ichigo Minami Morimachi Building

Four Major Cities

Osaka

1,040

1,014

2,521.51

100.0%

1,140

4.6%

1,130

4.6%

+10

–

O-85 Ichigo Shibuya Udagawacho Building

Central Tokyo

Shibuya-ku, Tokyo

3,500

3,595

1,491.48

100.0%

4,060

3.4%

4,050

3.4%

+10

–

O-86 Win Gotanda Building

Central Tokyo

Shinagawa-ku, Tokyo

3,100

3,110

3,689.88

100.0%

3,280

4.2%

3,280

4.2%

–

–

O-87 Ichigo Hongo Building

Tokyo Metro Area

Bunkyo-ku, Tokyo

2,300

2,299

2,722.58

100.0%

2,390

4.4%

2,390

4.4%

–

–

O-88 Oimachi Center Building

Central Tokyo

Shinagawa-ku, Tokyo

1,680

1,699

2,751.08

100.0%

1,910

4.3%

1,900

4.3%

+10

–

O-89 Win Gotanda Building 2

Central Tokyo

Shinagawa-ku, Tokyo

3,300

3,308

3,433.16

100.0%

3,530

4.2%

3,490

4.2%

+40

–

O-90 MIF Building

Central Tokyo

Chiyoda-ku, Tokyo

2,200

2,207

1,690.33

100.0%

2,330

4.1%

2,320

4.1%

+10

–

O-91 Ichigo Uchi Honmachi Building

Four Major Cities

Osaka

1,900

1,994

3,004.07

90.7%

2,110

4.7%

2,000

4.7%

+110

–

O-92 Ichigo Minami Otsuka Building

Tokyo Metro Area

Toshima-ku, Tokyo

2,780

2,875

3,127.84

100.0%

3,080

4.0%

3,080

4.0%

–

–

O-93 Ichigo Nogizaka Building

Central Tokyo

Minato-ku, Tokyo

3,334

2,175.88

100.0%

3,580

3.4%

3,510

3.5%

+70

-0.1%

189,641 246,433.43

99.3%

222,015+2,537–

Subtotal - Office

3,315
191,987© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

219,478

52

Portfolio Details (4)as of April 30, 2019
Asset
Type

No.

Z-02

Other

Asset Name

Ichigo Fiesta Shibuya Building

Area

LocationCentral Tokyo

Shibuya-ku, Tokyo

Acquisition
Book Value
Price(JPY M)(JPY M)

1,970

Leasable
Area
(m 2)

1,960

1,185.85

Occupancy

100.0%

Apr 2019 Appraisal

Oct 2018 Appraisal

Value(JPY M)

Value(JPY M)

2,210

Cap rate

4.0%

2,210

Cap rate

4.0%

ChangeValue(JPY M)

Cap rate

–

–

Z-09

Konami Sports Club Izumi Fuchu

Other Regional Cities Izumi City, Osaka

1,210

1,083

3,733.68

100.0%

1,440

5.7%

1,440

5.7%

–

–

Z-10

Ichigo Shibuya Bunkamura Dori Building

Central Tokyo

Shibuya-ku, Tokyo

2,400

2,462

778.77100.0%

3,220

3.2%

3,220

3.2%

–

–

Z-11

Twicere Yokohama Isogo (Retail Section)

Tokyo Metro Area

Yokohama

1,620

1,509

2,717.77

100.0%

1,880

5.2%

1,880

5.2%

–

–

Z-12

Lions Square Kawaguchi

Tokyo Metro Area

Kawaguchi City, Saitama

2,430

2,370

7,788.09

100.0%

2,520

4.5%

2,710

4.5%

-190

–

Z-14

Ichigo Kamata Building

Tokyo Metro Area

Ota-ku, Tokyo

4.6%

1,520

4.6%

–

–

1,400

1,444

2,124.68

100.0%

1,520

Subtotal - Other

11,03010,83018,328.84

100.0%

12,79012,980- 190

Total (85 Assets)

203,017200,472 264,762.27

99.3%

234,805

232,458+2,347

Reference: Asset Acquired in the October 2019 Period
Asset
Type

No.

OfficeO-94 Ichigo Hakata East Building

Asset Name

Area

Four Major Cities

Location

Fukuoka

85 Assets Held on April 30, 2019 + New Acquisition 1 Asset - Sale 1 Asset = Total 85 Assets

Acquisition
Price(JPY M)

AcquisitionDate

2,250 May 31, 2019
203,297

LeasableArea(m2)

Appraisal at Acquisition
Occupancy

Value(JPY M)

2,918.31

98.1%

2,480

266,494.73

99.3%

235,075

Cap rate

4.4%

Leasable Area and Occupancy are provisionally calculated using data of assets held as of April 30, 2019 and assets acquired in
the October 2019 period.
© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

53

Appendix: About Ichigo Office© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

54

Specialized Office REIT
Specialized Office REIT Focusing on Mid-Size Offices, an Asset Class that
Offers Both Return Stability and Upside Potential
 Mid-size office characteristics‒ Stable cashflows supporting earnings‒ Upside earnings potential in economic upturns‒ Value-add potential due to relatively inefficient market

 Portfolio focused on Tokyo Metropolitan Area
 Driving accretive growth via value-add capex and hands-on asset management© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

55

Portfolio: 96% Office, 79% Tokyo Metropolitan Area
as of May 31, 2019
No. of Assets
Total Acquisition PriceAppraisal Value
Leasable Area
Occupancy

85 Assets
JPY 203.3B
JPY 235.08B
266,494m2
99.3%

By Asset Type

Other
4%

Map Key
Location
Acquisition Price (JPY B)% of Portfolio

Tokyo
Metro
Area
160.1
79%

Sendai1.8
1%Nagoya20.5
10%
Fukuoka
3.6
2%

Office96%

By Size<JPY 1B
3%

Kansai
8.2
4%

JPY 1B-2B
27%
Other
8.9
4%

>JPY 3B50%
JPY 2B-3B
21%© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

56

Highly Diversified Tenant Mix
as of April 30, 2019

Tenants by Industry

Total Number of Tenants: 920(based on No. of tenants)
Education2%
Construction
3%
Real Estate
4%

Share of Top 10 Tenants
12.2% of Leased Area
14.2% of Rental Income

Other
6%

Restaurant/
Hotel
4%

Service28%

Top 10 Tenants (by Building & Leased Area)

Finance
5%

Asset Name

Manufacturing
14%
Retail19%
IT
15%* Service: Primarily advertising, consulting, HR, accounting, legal,
beauty-related, and public entities.

Leased Area

Industry

2

(m )

Share

1

Ichigo Akihabara North Building

Manufacturing

6,250

2.4%

2

Lions Square Kawaguchi

Supermarket

4,263

1.7%

3

Ichigo Sasazuka Building

Telecommunication

3,827

1.5%

4

Konami Sports Club Izumi Fuchu

Sports Club

3,733

1.4%

5

Ebisu Green Glass

Telecommunication

2,863

1.1%

6

Ichigo Ikebukuro East Building

Service

2,427

0.9%

7

Ichigo Hiroo Building

Retail

2,417

0.9%

8

Ichigo Jingumae Building

Telecommunication

2,146

0.8%

9

Ichigo Toyamaeki Nishi Building /Ichigo Takamatsu Building

Manufacturing

1,846

0.7%

10

Ichigo Kamata Building

Retail

1,820

0.7%

31,597

12.2%

Total

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

57

Growth via Serving Tenants & Shareholders

Total Assets (JPY B)

Dividend (JPY)
2,255

1,904

1,494

1,537

1,541

1,547

1,706

1,740

165.6

162.7

191.0

1,603

1,387

1,923
189.8

1,930
196.9

1,964

192.5

2,014
199.9

203.0

1,219
1,031*

107.9

104.8

106.1

104.3

112.3

114.3

114.0

123.3

October
October
April
October
April
October
April
October
April
October
October
April
April
October
April
April
2015
2011
2012
2012
2013
2013
2014
2014
2016
2016
2017
2018
2019
2018
2015
2017
(71 Assets) (67 Assets) (67 Assets) (66 Assets) (68 Assets) (71 Assets) (70 Assets) (65 Assets) (77 Assets) (73 Assets) (85 Assets) (82 Assets) (85 Assets) (82 Assets) (85 Assets) (85 Assets)
EventsMergerComprehensive
Refinancing

AccretivePO

AccretivePO

AccretivePO

Accretive
PO

Strategic
Restructuring

Transition to
Pure Office
REIT

Accretive
PO

Strategic
Restructuring

Bond
Issuance

Strategic
Restructuring
Bond
Issuance

JCR Credit
Rating A

Bond
Issuance
Strategic
Restructuring

JCR Credit
Rating ADeCollateralizationof All Loans* October 2011 dividend adjusted to reflect 7:1 stock split on November 1, 2011

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

58

Acquisition-Driven Growth− Total Asset Acquisitions: JPY 144.9B− 56.9% via Sponsor Support (JPY 82.5B)
Cumulative Total
JPY 144.9B

Acquisitions and Sales Since October 2013 (Cumulative, JPY B)■ Acquisition from Sponsor■ Sale to Sponsor■ Acquisition from Third Party■ Sale to Third Party

56.3

62.4
(43.1%)

67.6

74.7

80.2

82.5
(56.9%)

19.3

19.3

23.8

23.8

26.2

7.9

12.3

12.3

18.3

~ Oct 2017~ Oct 2018

54.4

50.9
50.9

4.3
Acquisitions
Sales

8.6
0.8

38.4

12.4
7.4

Oct 2013~ Oct 2014

Jun 2013
Initial Public
Offering(Post-merger)

Dec 2013
Public Offering~ Oct 2015

~ Oct 201621.9
~ Oct 2019
(Forecast)Dec 2018
Apr&May 2018
Nov 2016
Apr&May 2016
Dec 2014
Public Offering
Public Offering Acquisition from Acquisition&Sale Acquisition&Sale
Third Party
Acquisition&Sale Acquisition&Sale
May 2019
Sep 2018
Apr&May 2017 Acquisition from Acquisition&Sale
May 2015
Third Party
Acquisition&Sale
Public Offering
Sept 2015
Transition to
Pure Office REIT

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

59

Tailored Ichigo Tenant Services & Hospitality
Tailored Tenant Services to Increase Tenant Satisfaction− Tenant services focus on increasing tenant safety and comfort via Ichigo
Property Management Standard− Conduct regular tenant satisfaction surveys to reflect feedback in tenant
services
August 2018 Survey Overview
Respondents

Tenant General
Affairs Personnel

No. ofDistributed
Surveys913

No. ofAssets84

No. ofResponses

638 (69.9%)

Overall Satisfaction – Building Quality & Functionality

Satisfied
18%

Somewhat Satisfied
55%

Somewhat
Dissatisfied 10%

Dissatisfied
2%
Tenant Feedback(Plumbing, HVAC,
Elevator Improvements)

Neither
Satisfied nor
Dissatisfied
16%

Overall Satisfaction – Tenant Services
Satisfied33%

Somewhat Satisfied
48%

Neither
Satisfied nor
Dissatisfied
14%

Dissatisfied
1%

Somewhat
Dissatisfied 4%© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

60

Ichigo Branding: Safety, Quality, Design, Tenant Service
Improve the safety, quality, and design of assets via Ichigo’s
architectural and engineering capabilities to support high tenantsatisfaction© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

61

Japanese Mid-Size Office Investment Attractiveness (1)Rich Pool of REITable Assets
 90%+ of Japanese real estate = mid-size High liquidity

Breakdown of Buildings in Japan by Floor Area (m²)
< 500

2,000 to 5,000

1,000 to 2,000

5,000 to 10,000>10,000

Mid-Size Real Estate：94%

Broad and Deep Tenant Base
 95% of all companies have 50 employees or less
 Diverse sectors & industries

500 to 1,000

43%

25%

15%

10
%

4%
3%

Source: Ministry of Land, Infrastructure, Transportation andTourism (2013)

Largely Untapped by Professional Management
 High ownership by individuals and “passive owner” corporations

results in inadequate building maintenance Lacking professional building and management specifications
Breakdown of Companies by Number of Employees

Abundant Opportunities for Large-Scale Improvements Increase safety via seismic reinforcement
 Increase tenant satisfaction via value-add capex<5

6 to 20

21 to 50

> 51

% of Companies Suited to Mid-Size Assets：95%
64%

24%

7
5%
%

Source: Small and Medium Enterprise Agency (2017)

Significant Value-Add Potential© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

62

Japanese Mid-Size Office Investment Attractiveness (2)Mid-Size Office Rents More Stable than Larger-Size Office Rents
Office Rent Trends in 5 Central Tokyo Wards (Chiyoda, Chuo, Minato, Shinjuku & Shibuya Wards)
JPY per Tsubo (3.3m2)

60,00050,00040,000

Grade A

30,000

Grade A-

20,000

Grade B
10,000

0
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Source: CBRE
Grade A refers to buildings in the 5 central wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku, and Shibuya) built no more than 11 years ago (therefore meetingcurrent seismic resistance requirements), with leasable area of 21,450 square meters and total floor area of 33,000 square meters.
Grade A- and Grade B refers to buildings located in any of the 23 wards in Tokyo with leasable area of 14,850 square meters and total floor area of 23,100 square
meters and leasable area of 660 square meters and total floor area of 6,600 to 23,100 square meters, respectively, and meeting current seismic resistancerequirements.
© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

63

Reference: AM Fee Structure
AM Fee Structure with High Shareholder Alignment
AM Fee I

Total Assets x 0.25%
a. Recurring Cash Flow Basis

AM Fee II(a + b)

Period-End Recurring Cash Flow x 2.0%
b. Total Dividend Basis
Each Fiscal Period’s Dividend x 2.0%

Asset Acquisition Fee

Acquisition Price x 0.5% (0.25% if acquiring from related party)

Asset Sale Fee

Sale Price x 0.5% (0.25% if selling to related party)
a. If Cash Flow per Share (CF per Share) Increased During the Previous Six Consecutive
Periods Including the Period When the Fee is Calculated

Performance Fee(a or b)(CF per Share of Current Period – CF per Share of Previous Period) x Total Number of
Shares Issued and Outstanding x 30%
b. If CF per Share is Above the Simple Average of CF per Share of the Latest Six Periods(CF per Share of Current Period – Simple Average of CF per Share of the Latest Six
Consecutive Periods) x Total Number of Shares Issued and Outstanding x 30%

Merger Fee

Valuation of Real Estate or Real Estate Bonds Succeeded Upon Merger x 0.5%

* CF per Share = Recurring Profit/Loss in Income Statement + Depreciation + Accrued Asset Depreciation + Gain on Sale of Assets+ Valuation Profit/Loss (Excluding Extraordinary Profit/Loss) divided by shares outstanding
Please refer to “Fees Paid to the Asset Management Company (Articles of Incorporation Article 38 and Attachments)”
in Ichigo Office’s Annual Report (Japanese only) for details.

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

64

Ichigo Office’s Sponsor: Ichigo (2337)
Core Businesses: Asset Management, Sustainable Real Estate, Clean Energy‒‒‒‒

Manages Ichigo Office (8975), Ichigo Hotel (3463), and Ichigo Green (9282)
TSE First Section, JPX-Nikkei 400 Member
Deeply committed to CSR and Sustainability
Japan’s first zero-carbon listed real estate company
Key Ichigo Subsidiaries

IchigoThe word “Ichigo” comes from the ancient Japanese
proverb, Ichigo Ichie, literally meaning “One lifetime,
one encounter.” The phrase was first used by a 16th
century master of the tea ceremony, Sen no Rikyu.
He called upon his disciples to give total focus andsincerity to each act of the tea ceremony for every
guest, because that particular moment will only exist
once and must be fully lived and realized.
Ichigo embraces the Ichigo Ichie philosophy ofsincerity and service, and works to build strong longterm relationships to support the success of ourclients, shareholders, and all stakeholders.

Hiromi Miyake(Weightlifting)

Ichigo Investment Advisors

Asset manager of Ichigo Office (8975), Ichigo Hotel (3463), and Ichigo
Green (9282)

Ichigo Estate

Real estate value-add

Ichigo ECO Energy

Clean energy business focusing on utility-scale solar power production,
making purposeful use of idle land nationwide

Ichigo Owners

Real estate investment services

Ichigo Land Shinchiku

Real estate value-add

Ichigo Real Estate Services Fukuoka

Real estate business centered on Fukuoka

Ichigo Marché

Operates Matsudo Nanbu wholesale market in Chiba Prefecture

Miyako City

Operates Miyako City shopping mall in Miyazaki Prefecture

CentroNew real estate-related businesses

Storage Plus

High-grade self storage

Ichigo Animation

Planning, production, distribution, and international sales of Japanese
animation content, and value-add of related real estate assets

Hakata Hotels

Development, operation, lease, and management of hotels, retail facilities,
and restaurants, and provision of related consulting services(TSE First Section 2337)

Ichigo Preserves andImproves Real Estate©J.LEAGUE© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

65

Sponsor/Asset Manager/REIT Relationship

Sponsor

Ichigo (TSE First Section 2337)
100% Subsidiary

Sponsor Support
Value-Add Capabilities

Asset Manager

Ichigo Investment Advisors

Financial Support(Asset Warehousing)

Asset Management

TSE-Listed
Investment
Corporations

Ichigo Office(8975)

 Specializes in mid-size offices

Ichigo Hotel(3463)

 Specializes in hotels

Ichigo Green(9282) Solar power YieldCo

 Focused on the Tokyo Metropolitan Area
 85 assets, JPY 203.2B (as of May 31, 2019) Listed in November 2015 22 hotels, JPY 52.9B (as of May 31, 2019) Listed in December 2016 15 solar plants, JPY 11.4B (as of May 31, 2019)© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

66

Share Price (November 1, 2011 to April 30, 2019)
Trading Volume

Ichigo Office(JPY)120,000

Post-Merger High (closing): JPY 106,200 (Mar 29, 2019)
Post-Merger Low (closing): JPY 25,310 (Nov 22, 2011)
April 2019 Period Average Daily Volume: 3,452 shares

TSE REIT Index(Shares Traded)

Public Offering
JPY 83,167
Dec 3, 2014

50,000Public Offering
JPY 89,212
May 1, 2015

* as of April 30, 2019
100,000

80,000Public Offering
JPY 62,595
May 27, 2013

40,000Public Offering
JPY 79,365
May 23, 2016

Public Offering
JPY 60,157
Dec 3, 2013

30,00060,000MergerJPY 33,500 (closing)Nov 1, 2011

20,00040,00010,00020,000

0

0
2011

2012

2013

2014

2015

2016

2017

2018

2019

Source: Bloomberg© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

67

Shareholder Composition
as of April 30, 2019

Major Shareholders

Shareholdings by Shareholder Type

1 Ichigo Trust Pte. Ltd.

Share

344,190

22.5%

2

The Master Trust Bank of Japan,
Trust Account

256,060

16.7%

3

Japan Trustee Services Bank, Ltd.,
Trust Account

188,956

12.3%

4 NOMURA BANK (LUXEMBOURG) S.A.

75,1904.9%

5 Morgan Stanley MUFG Securities Co., Ltd.

68,218

4.5%

Nomura Trust & Banking Co., Ltd.
Investment Trust Account46,185

3.0%

Trust & Custody Service Bank, Ltd.,
Securities Investment Trust Account45,645

3.0%

8 GOLDMAN SACHS INTERNATIONAL

31,2332.0%

BNYM SANV FOR BNYM FOR BNY GCM
9
CLIENT ACCOUNTS M LSCB RD

25,3001.7%

19,1531.2%

1,100,130

71.8%

6

7

10

STATE STREET BANK AND TRUST COMPANY
505012
Total

Foreign Corporations & Individuals

Non-Financial Domestic Corporations

Domestic Financial Institutions

Domestic Individuals

708,413 shares(46.2%)

750,247 shares(49.0%)

18,307 shares(1.2%)

15,866 shares(1.0%)

641,107 shares(41.8%)

714,073 shares(46.6%)
14,342 shares(0.9%)

632,161 shares(41.3%)

690,632 shares(45.1%)

164,460 shares(10.7%)

134,013 shares(8.7%)

113,240 shares(7.4%)

Apr 30, 2018
(1,532,287 shares)

Oct 31, 2018
(1,532,287 shares) *Apr 30, 2019
(1,532,287 shares)**No. ofSharesName* Number of Shares Outstanding

Shareholders by Shareholder Type

Domestic Individuals
Domestic Financial Institutions
City banks, trust banks
Regional banks
Other (including securities companies)
Non-Financial Domestic Corporations
Foreign Corporations & Individuals
Total© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

Apr 30, 2019
Apr 30, 2018
Oct 31, 2018
Shareholders Shareholders Shareholders Share
16,532
14,262
12,652
96.6%
60
55
62
0.5%
10
10
10
0.1%
8
9
10
0.1%
42
36
42
0.3%
247
214
193
1.5%
155
174
184
1.4%
16,994
14,705
13,091100.0%

68

Ichigo Office Overview
Investment Corporation

as of April 30, 2019

Name

Ichigo Office REIT Investment Corporation

Securities Code8975

Address

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

Executive Director

Yoshihiro Takatsuka

Portfolio Assets

85 Assets

Portfolio Value

JPY 203B (based on acquisition price)

Fiscal Periods (Semi-Annual)November – April; May – OctoberAsset Management Company
Name

Ichigo Investment Advisors Co., Ltd.

President

Hiroshi Iwai

Registration & Membership

Financial Instruments Dealer License (Investment Management Services,
Investment Advisory & Agency Services, and Type II Financial Instruments
Services): Minister of Finance, Kanto Financial Bureau #318

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

69

MEMO

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

70

Disclaimer
These materials are for informational purposes only, and do not constitute or form a part of, and should not be construed as, anoffer to sell or a solicitation of an offer to buy any securities of Ichigo Office REIT Investment Corporation (“Ichigo Office”).
These materials may contain forward-looking statements regarding the intent, belief or current expectations of management of
Ichigo Office with respect to financial condition and future results of operations. These statements are based on certain
assumptions founded on currently available information. Accordingly, such statements are subject to risks, uncertainties andassumptions and there is no assurance as to actual financial conditions or results of operations. Actual results may vary fromthose indicated in the forward-looking statements. Accordingly, please refrain from solely relying on these statements.
These materials have been created by the management of Ichigo Office and Ichigo Investment Advisors Co., Ltd. (IIA) with thebelief that the information contained is accurate. However, there is no assurance given as to the accuracy, certainty, validity or
fairness of any such information. Please note that the content of these materials is subject to revision or retraction without priornotice.
This document is a translation. If there is any discrepancy between the Japanese version and the English translation, theJapanese version shall prevail. No copying or reproduction of these materials or part of these materials is allowed withoutobtaining prior consent from Ichigo Office and IIA.

Ichigo Office REIT IR Desk
TEL：03-3502-4891
IR_Office@ichigo.gr.jp
www.ichigo-office.co.jp/english
Ichigo is Japan’s first zero-carbon listed real estate company. We are taking
responsibility for our environmental footprint by offsetting our carbon emissions
and investing in low-carbon technologies such as solar energy.

© Ichigo Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

71