Strategic Portfolio Restructuring
April 8, 2016

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

© 2016 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

www.ichigo-office.co.jp/english

© 2016 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

This material is a summary of the following two releases detailing Ichigo Office REIT’s strategic portfoliorestructuring as described in its Growth Strategy Roadmap:“Acquisition of Five Office Assets,” April 8, 2016
“Earnings“Eiandd Di
Dividend
id d F
Forecastt R
Revisionsi iffor ththe O
Octobert b 2016 FiFiscall P
Periodi d anddEEarnings
iandd
Dividend Forecast for the April 2017 Fiscal Period,” April 8, 2016

© 2016 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

3

Ichigo Office REIT Growth Strategy Roadmap
StageⅠ/Ⅱ/Ⅲ/Ⅳ

Stage V

Multi-Asset REIT

Stage VI

Specialized Office REIT

2011/10

2015/10

2016/42017/4

2016/102017/10Grow Office Portfolio
Goals
Targetts

Dividend per Share

Lay Foundation for Sustainable
Dividend Growth

Enhance Profitabilityy

Accretivve Growth Cycle

Foundaation for Growth

Strengthen Forward Gro
owth Capabilitties

2,000 yen
JPY 230B
A (Stable)

1,706 yen (actual)

Total Assets

JPY 165.6 B (October 31, 2015)

Credit Rating

A- (Stable)■ Organic Growth Strategy■ Organic Growth Strategy

Achieve continuous NOI growth and strengthen
Ichigo Office brand・ Raise rents, especially in Central Tokyo wheresupply-demand balance is tight・ Increase rental-related income
・ Support branding and sense of Ichigo quality atassets, e.g., prominent Ichigo signage
・ Maintain highest standard of quality in servicing
tenants via Ichigo Property Management Standard

Drive growth with strong Ichigo Office brand and100 asset portfolio
・Increase competitiveness of Ichigo assets via
strong Ichigo brand・Develop original services for Ichigo tenants
・Drive higher rents within and outside of Tokyo・Maximum return on capex

Target: Increase rents by >2.0% p.a.

Action Plan

Stable Dividend Growth■ External Growth Strategy
Increase portfolio size and scale and be smart inportfolio restructuring
・Consider acquiring the 13 assets with preferential
acquisition rights
・ Sell assets with limited potential■ Financing Strategy
Improve credit rating & borrowing terms
・Improve credit rating from A- (Stable)
Improve borrowing terms (cost/tenor/diversity)
・Improve・Acquire bank commitment line
・Deploy negative goodwill to increase dividends
・Prepare to enter global REIT indices■ External Growth Strategy
Aim for asset size of JPY 230B
B d acquisition
i iti pipelinei li via
i didiversified
ifi d・Broadensourcing
・Use Ichigo sponsor support and diversified
funding capability to close quickly under deadline■ Financing Strategy
Improve credit rating and diversify funding・Achieve an A (Stable) credit rating
・ Consider issuance of REIT bonds and broadening
lender base・ Use financial strength and commitment line togrow acquisition capacity
・Further improve borrowing terms
Enter global REIT indices
・Enter© 2016 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

4

Strategic Portfolio Restructuring
4 Asset Sales

5 Asset Acquisitions

Sell Low-Upside
Low Upside Assets (Low Value-Add,Value Add,
High Maintenance Costs, Low Occupancy)
and Reinvest Proceeds

IIncrease NOI,NOI Dividend,
Di id d & P
Portfolio
tf li Q
Qualitylit
with Prime Location Assets

Sale Price
JPY 3.3B
Profits on Sale JPY 300M
1) Akita Sanno 21 Building (Akita)2) Ichigo Meieki Building (Nagoya)3) Ichigo Yokohama Nishiguchi (Yokohama)4) Ichigo Saga Building (Saga)

Annual NOI JPY 210M

Acquisition Price JPY 8.3B
Strategic
P tf li
Portfolio
Restructuring

1) Ichigo Shibuya East Building (CentralTokyo)
2) Ichigo Ningyocho Building (Central Tokyo)
3) Ichigo Nishi Honmachi Building (Osaka)4) Ichigo Hakata Building (Fukuoka)
5) Nishiki First Building (Nagoya)

Annual NOI JPY 470M(Notes) Profits on sale are calculated as the sales price minus expenses, less the book value as of the sale date. The NOI of the assets sold isthe annualized amount based on the results of October 2015 fiscal period. The NOI of the assets acquired is the NOI employed in the direct capitalization
calculation method in the appraisal report at acquisition.
© 2016 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

5Strategic Restructuring Objectives
Increase NOI and Dividend Increase NOI with High-Quality
High Quality Acquisitions using Proceeds from Asset Sales and LowLow
Cost Debt (Low LTV = Additional Borrowing Capacity) Reduce Cost of Debt by Paying Down Higher-Cost Existing Debt with the Proceeds fromAsset Sales, while Funding New Acquisitions with Lower-Cost Debt
 Revise Up October 2016 Dividend (+90 yen vs. Initial Forecast)

Increase Portfolio Qualityy Sold Low-Upside Assets
 Acquired High-Quality Prime Location Assets via Ichigo’s Sponsor Support

Generate Capital Gains on Low-Upside Asset Sales into Strong Market
 Sell Low-Upside Assets into a Strong Market and Generate JPY 300M in Capital Gains
 Retain Capital Gains in Dividend Reserve and Deploy against Future Dividends© 2016 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

6

Increased NOI and Portfolio Quality
Pre- Acquisition
Number of Assets

Asset
Sales

Asset
Acquisitions

Post- Acquisition

774578Acquisition Price (billion yen)

165.6

2.9

8.3

171.0

Office Ratio

85.5%69.5%

100.0%

86.5%

9.1

0.2

0.5

9.4

Average Post-Depreciation NOI Yield2

4.5%

5.1%

4.8%

4.5%

Average Occupancy3

96.0%

93.8%

96.8%

96.2%

Number of Tenants 37255072

747

Unrealized Gains (billion yen)4+8.4

0+0.3

+8.7

Annual NOI (billion yen)1

1 Pre-Acquisition NOI yield annualizes the actual NOI for the October 2015 fiscal period (except for assets acquired within the fiscal period, which use the NOI

from the Direct Capitalization Method (DCM) appraisal at acquisition). Asset Acquisitions NOI yield uses the NOI in the DCM appraisal value at acquisition.
2 Average Post-Depreciation NOI Yield is calculated as the total NOI of the five assets at acquisition minus actual depreciation during the October 2015 fiscal

period converted to annual amount divided by the total acquisition price. Asset Acquisitions Post-Depreciation NOI Yield is a provisional calculation by the asset
management company. Using provisional data that reflects the in-hand tenant lease termination notice at Akita Sanno 21 Building, which brings that building’s
occupancy to below 50%, the Asset Sales Post-Depreciation NOI Yield is 3.5%.
3 Average Occupancy and Number of Tenants is as of December 31, 2015 for Pre-Acquisition and Asset Sales, and as of February 29, 2016 for Asset

Acquisitions and Post
Post-Acquisition.
Acquisition
4 Pre-Acquisition and Asset Sales Unrealized Gains are calculated using the appraisal value and period-end book value of the October 2015 fiscal period. Asset

Acquisitions Unrealized Gains are calculated based on the appraisal value at acquisition and the expected acquisition price.
© 2016 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

7

11 Consecutive Periods of Dividend Growth – No. 1 vs. All J-REITs
Further Dividend Growth throughout
Forecast Period

PreAcquisition

PostAcquisition

1,850

1,537

1,541

1,547

1,494

April
2013

October
2013

April
2014

October
2014

1,603

1,706

1,720

1,760

(+90)

April
2015

October
2015

April
2016

October
2016
InitialForecast

October
2016
Revised
Forecast(yen)1,860(New))
(N

1,387
1,219
899*

979*

1,031*

737*

April
2010

October
2010

April
2011

October
2011

April
2012

October
2012

April
2017
(New)

Note: 11 consecutive periods of dividend growth through Oct. 2015 period, adjusted to reflect stock split on November 1, 2011
© 2016 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

8

Acquisition: Ichigo Shibuya East Building（O-72）
Asset Overview
Acquisition Price

1,350 mm yen

Appraisal Value
Val e

1 450 mm yen
1,450

NOI yield

4.6%

Asset TypeOfficeLocation

1 Chome, Higashi, Shibuya-ku, Tokyo

Leasable Area

1,041.36 m2Structure

RC 6FConstruction DateOctober, 1985

Occupancy

100.0%Location and Features
This mid-size office building is a 9-minute walk from
Shibuya Station, which is serviced by a large number ofrailways such as the JR Line.
The standard floor area is 58 tsubo (190 m2). The
building has specifications suited for the demands of thetypical tenant, such as individual air conditioning systems
for each floor and raised access flooring.
gA convenience store occupies the first floor, and theother floors are occupied by tenants in thetelecommunications industry.

© 2016 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

9Acquisition: Ichigo Ningyocho Building（O-73）
Asset Overview
Acquisition Price

1,450 mm yen

Appraisal Value

1 530 mm yen
1,530

NOI yield

5.2%

Asset TypeOffice

Location

1 Chome, Nihonbashi-horidomecho,
Chuo-ku, Tokyo

Leasable Area

1,769.09 m2

Structure

SRC 11F

Construction DateMarch 1984

Occupancy

100.0%

Location and Features
This mid-size office building is a 4-minute walk from
Ningyocho Station on the Toei Asakusa Line and theTokyo Metro Hibiya Line, and Kodenmacho Station onthe Tokyo Metro Hibiya Line.
The standard floor area of this building is 60 tsubo (190m2), with individual air conditioning systems and raised
access flooring
flooring, making it a competitive offering in thearea.

© 2016 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

10Acquisition: Ichigo Nishi Honmachi Building（O-74）
Asset Overview
Acquisition Price

2,190 mm yen

Appraisal Value

2 290 mm yen
2,290

NOI yield

6.2%

Asset TypeOffice

Location

2 Chome, Awaza, Nishi-ku, Osaka

Leasable Area

6,151.98 m2Structure

SRC 14F

Construction Date

October 1990Occupancy

94.1%

Location and Features
This mid-size office building situated on Chuo Odori
B lBoulevardd iis a 44-minutei t walklk ffrom AAwaza StStation
ti on thethOsaka Municipal Subway Chuo Line and Sennichimae
Line.
Each floor has a standard floor plate of 162 tsubo (530m2) which is sub-divisible to suit the needs of tenants.
The common areas in the building
g were renovated inFebruary 2014.

© 2016 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

11Acquisition: Ichigo Hakata Building（O-75）
Asset Overview
Acquisition Price

1,380 mm yen

Appraisal Value

1 410 mm yen
1,410

NOI yield

6.1%

Asset TypeOffice

Location

Gioncho, Hakata-ku, Fukuoka

Leasable Area

2,423.86 m2

Structure

SRC B1F/9F

Construction DateApril 1989

Occupancy

100.0%

Location and Features
This mid-size office building is conveniently located withinwalkingg distance from Tenjin
j and Central Hakata and is
only a one-minute walk from Gion Station of the Fukuoka
City Subway Kuko Line.
The building has an aluminum curtain wall façade. With astandard floor area of 88 tsubo (290 m2) and ceilings thatare 2.5 meters high, the building has high competitivenessin the area thanks to its individual air conditioning systems
and mechanical parking garage accommodating up to 36
cars.

© 2016 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

12Acquisition: Nishiki First Building（O-76）
Asset Overview
Acquisition Price

2,000 mm yen

Appraisal Value

2 050 mm yen
2,050

NOI yield

5.8%

Asset TypeOfficeLocation

1 Chome, Nishiki, Naka-ku, Nagoya,
Aichi PrefectureLeasable Area

3,324.54 m2

Structure

SRC B1F/7F

Construction Date

October 1984

Occupancy

100.0%

Location and Features
This mid-size office building is a 6-minute walk fromFushimi Station on the Nagoya City Subway Tsurumai
Line and Higashiyama Line.
The standard floor plate is 180 tsubo (594 m2) offering a
relatively large space for tenants seeking office space inthe Fushimi area. The building is competitive from aleasing perspective, with 2.5 meters high ceilings,
individuald dua a
air coconditioningd t o g foro ttheeoofficece spaces, raiseda sed
access flooring, and frequently-refreshed common areas.
A subsidiary of a TSE First Section-listed
telecommunications company is currently the single
tenant renting the whole building.

© 2016 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

13

MEMO

© 2016 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

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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.
These materials may contain forward-looking statements regarding the intent, belief or current expectations of management ofIchigo Office REIT 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 subjects 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 REIT and Ichigo Real Estate Investment Advisors Co.,
Ltd. (IRE) with the belief 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 orretraction without prior notice.
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 REIT and IRE.

Ichigo Office REIT IR Desk
TEL：03-3502-4891 FAX：03-3502-4894
i ffi @i hi
ir_office@ichigo.gr.jp
jwww.ichigo-office.co.jp/english
Ichigog is Japan’s
pfirst zero-carbon listed real estate company.
p y We are takingg
responsibility for our environmental footprint by offsetting our carbon emissions
and investing in low-carbon technologies such as solar energy.

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