1. First speaker: "Thank you everybody for waiting.

I'm Scott Callon, Chairman of Ichigo. I am joined today by Dan Morisaku, who is a senior member of our finance team and the Head of Global IR..."

-> Scott Callon (Chairman): 2. After Scott's presentation: "We have a question from Greg.

Thank you very much. We will open the mic."

-> Scott Callon (Chairman): 3. Greg speaks: "Can you hear me?"

-> Greg: 4. Scott: "Yes.

Thank you very much." -> Scott Callon (Chairman): 5.

Greg: "Thank you for your presentation Scott..." -> Greg: 6.

Scott answers the questions... -> Scott Callon (Chairman): "Greg, did I get your two questions?"

-> Scott Callon (Chairman): 7. Greg: "Yep.

Thank you very much. Yep."

-> Greg: 8. Scott: "Thanks.

We will bring it to a close if there are no more questions. Thank you very much..."

-> Scott Callon (Chairman): Let's double check if there's any other speaker. No operator spoke, Scott ran the call directly.

Let's ensure the rules: - Identify speakers: begin each speaking turn with speaker's name and role when stated. Scott Callon (Chairman):, Greg: - Plain text, one paragraph per speaker turn.

- No timestamps, no headers, no commentary, no markdown. - Verbatim transcription, numbers formatted properly ($10 billion yen, 25%, etc.)

. Thank you everybody for waiting.

I'm Scott Callon, Chairman of Ichigo. I am joined today by Dan Morisaku, who is a senior member of our finance team and the Head of Global IR.

Thank you so much, everybody, for joining us today. We're working off of the presentation in front of you, which is also on our website, FY fiscal year '26 February, ending next month, the Q3 corporate corporate presentation.

Let's go to it. I think the overview is that it's both a strong operating environment, but more importantly, what's happening in real estate in Japan is deeply in line with the core capabilities of our firm.

As we are a value-add investor. We, in principle, don't do development.

I'll talk a little bit about what we've done in logistics, and as we say internally, when people ask me, "Can we do development?" it's like, only if you don't take development risk.

What we did what we've done in logistics, we specialize in taking existing assets and preserving and improving real estate and existing assets and improving them because of inflation, construction inflation, and by this model is the right model for not only Japan, but for the rest of the world. Japan has classically done a lot of destructive redevelopment, which is economically and ecologically wasteful.

What's happened now is much of that uneconomic development has become even more uneconomic because of rising construction costs. We just have a mass of opportunity, much less competition from redevelopment, much better opportunity to to add value for our shareholders.

It's it's a very powerful operating environment for us. The results of kind of show up on a quarterly basis and will be coming at you going forward, but business profit year-to-date up 25%, EPS up 24%, cash EPS up 19.

We've got growth both in stock earnings, up 9%, and flow earnings up 31%. We will hit we are forecasting, and we will we will definitively hit record earnings this year, growth in net income, growth in EPS.

We think there's upside against EPS and the ROE numbers, in part because of buybacks. We did announce today that we're expanding, we're doubling our existing buyback to ¥10 billion.

That's both a reflection of the fact that we are enormously cash-generative, one; two, we are very sensitive to being capital efficient for our shareholders; and being cash cash-generative means you have the cash to reinvest in your business in any sort of way to drive EPS. You could actually buy assets, you can do non-asset activity, you can also buy back your shares.

We're capable of doing doing doing all of the above. We're also canceling about 7% of our shares outstanding, and again, that's just a reflection of we're taking in the shares and getting rid of them.

They will not be coming back into the market. This EPS growth is structural.

We acquired one hotel in in in in the period. It's in Osaka.

Again, it's an existing asset that we will improve, and two logistics assets in Q3. For the second consecutive year, the GD CDP, which is a major global environmental initiative, we're on the A List for climate change and water security.

There are 22,000 companies globally that are involved with CDP, and the number of companies, I should look this up so I don't so I give you the actual real number, the number of companies that qualify for a double A twice is is only 145. We're really in the top 1% of companies globally in terms of our environmental initiatives and execution.

There are a lot of pages in this presentation. I will go briefly and hope to hit on on key points without spending too much time, and I think I mostly already touched on this, we'll we'll jump to the next one.

Going by going going by segment, I think the important things as I will go through the segments on on the following pages is to point out we have a portfolio of businesses united by by a core commitment and core competency in taking existing assets and making them better. That activity and the value creation expresses itself across a number of segments, which can have volatility in them.

On a total basis, we've got business profit up 25%, that has a hotel business up 103%, Ichigo Owners up 87, and has sustainable real estate down 19%, and clean energy kind of flattish. You should expect to have volatility among the segments on a quarterly basis and sometimes on an annual basis.

The core capability expresses across the segments, and we try to be smart about deploying deploying our capability in in the areas that are going to be most profitable. Volatility within the segments and robust stability and growth from diversification and the growth in these individual businesses.

On the asset management side, I think the only thing really pointing out worth pointing out here is we had a full-year forecast of down 31%. One of the things you should know is that we have stock earnings, which tend to be relatively stable in this business because of stock earnings.

We also have primarily performance fees that come off of our listed REITs. We are not the decision makers for those REITs.

They have independent boards. They are run for the REIT shareholders.

They're run tenaciously for the REIT shareholders. We're not able at the beginning of the year to say Ichigo Office is going to do this and this and this and so let's price it into or let's put it into our forecast because that would be totally wrong.

We do not make the decision on that. The REIT makes the decision on it.

What that means is, year after year, we show up, and yet, we run the REITs really, really hard, and we do monetize the value that's created, and we do as Ichigo Inc., 2337, get the performance fees on those monetizations, but we can't put that into our forecast. It would just be wrong.

It's not the right governance, it's not the right approach. This is a reminder to you that every year we will we will undoubtedly crush our forecast.

Year-to-date, we're already hit the full-year number. We will beat the full-year number very substantially.

I think the one the one thing to point out on this on sustainable real estate is one, we we we flow earnings are down 39%, and we do have asset sales moving around from quarter to quarter. We expect to do a bunch in the Q4, so we would and and so we will do well in the segment on a full-year basis.

The other thing to point out is that the biggest driver, the increase in stock earnings, which is up 15% year-to-date, is we've we've done an enormous job in kind of repositioning and growing value at our single biggest asset, which is a a a massive former headquarters building for Sojitz on Tokyo Bay. The NOI returns from that are very, very powerful.

In hotels, I think really the only thing to point out is is is kind of two things. One, this is a very productive business.

Two, and and I'll talk about it a little bit later, there there does you do get impact sometimes from activity. For example, the current kind of Japanese-Chinese geopolitical tension has pushed down a number of Chinese tourists coming to Japan.

It's not particularly impactful on us because we don't tend to target that segment. This is this is a powerful growth driver for us, and one that we're also all need to understand together as more potential earnings volatility to it, and which is why we're careful in not overgrowing the business, one, and two, making sure we do things such as growing out the knot series, which is our boutique, Ichigo's own branded boutique hotel, which is an enormous enormously powerful offer that has very high returns on capital.

Ichigo Owners up very large year-to-date. I don't think we're going to this also increasingly It started as a business 9 years ago that that targeted kind of single asset sales, primarily targeted cash-rich corporations and and individuals.

At this point, it's become much more a bigger-lot business, where instead of selling one asset for $5 million, you're selling kind of 25 assets together for $150 million. It has more kind of activity moving around depending on on what quarter we do the asset sale on this one, but it's a business that continues to grow.

Clean energy, power production up a little bit year-on-year, some increase in operating costs, basically flat year-on-year. I've already kind of touched on on we're going to expect record returns, we'll go forward.

Page 17, as we are very, very focused on being structurally profitable, and we deliver that for you. We're a company with now 25-year operating history.

We went through the financial crisis, we went through COVID. It's really important for us to be able to allow our shareholders know that we are, as I say, structurally profitable.

We have a massive amount of of of stock earnings, which overwhelmingly are higher than our fixed expenses, and that's how we continue to deliver that for all of you. On the right-hand side, it shows how stock earnings and flow earnings break out.

As you can see, I think the most important takeaway here is that Ichigo Owners is primarily a flow business, and the and and the other one's kind of tend to be more balanced. We think it's important to have ongoing disclosure, on a quarter-to-quarter basis.

We're not something that kind of like, oh, this is going well, we'll put it in, now we're going to take it out. This is kind of ongoing disclosure.

I won't I won't go into detail. Page 18, page 19, page 20, which shows, we are we are long-term borrowers; page 21, which shows what's happening with our borrowing activity.

We have it's in it's in the footnote, but we have 61% of our our borrowing cost fixed through hedges. That's been helpful given the increase in interest rates.

I would point out that a difference between 1% and 1.43%, which is what the average interest rate is has gone up over the last 2 years, seems big, but guys, it's only 43 basis points. It really is not material.

It's far more material as to how we're deploying the capital. It's far more material, and I've made this point before, that that we now and as I've talked about how the operating environment is so in tune with what we're doing, how construction costs, inflation, and we are we are long that as a firm.

Meaning, as construction costs go up, when you're a classic developer model, you can't make the pricing work anymore. You can't put up assets without kind of increasing rents, literally 30, 40, 50%.

We are a very CapEx light, very capital efficient, very light construction, and therefore, very long construction inflation because it damages our competitors in a way it doesn't impact us. The fact of the matter is that because generalized inflation has gone up, we're seeing a raise rise in interest rates, which is a a incredibly minor negative for us, but more fundamentally, there's been an increase in construction costs, which is running 2 to 3 times the generalized inflation rate, which is incredibly important for our business and the social contribution we make because we want to have good assets in Japan at the lowest possible price, and that's the core deliverable and capability of the firm.

Just to turn to kind of what buy-sell activity looks like. I think the broad the the information is is probably most readily seen on the table in the bottom.

We've been slight net sellers of retailer of retail. We bought some logistics assets, which we'll talk about in some detail.

We've we've picked up some hotels, which again, this is this is part of these are going to go into primarily Ichigo brands. We have a high-end boutique brand called THE KNOT.

We have also a kind of value-for-money brand called HOTEL THE Vista, both have been powerful successes. Increasingly, we're we're going with our own brands.

Again, that's a way to deliver higher returns without using capital. Year-to-date, we've been net sellers for at Ichigo Owners, which is brand-new, prime primarily Tokyo prime residential.

That's how it breaks out. We'll go to the next page, you don't have to listen to me endlessly.

We have we we brought online three new logistics centers. These were all development projects.

To go back to the point that I said earlier, our rule is if you're going to do development, you can't take development risk. This was this was this was build-to-suit with a a buyer signing the master lease with us on the day that we decided to buy that we agreed to buy the asset.

To be clear, we we we are not in the business of taking development risk. These are all assets that have come online, and we knew the costs upfront, we knew the economics going forward.

It's an opportunity for us to do something in in an interesting sector. As e-commerce is continuing to grow everywhere in the world.

It's growing in Japan, which has lower penetration. Both This is both kind of classic warehouse and cold storage, both of which are growing well.

These are these are assets that, are very valuable. Over time, what happens is, since we we we agreed on on them and began construction previous to the current construction inflation, we've we've got them at prices that are lower relative to current market pricing.

What's happening with construction inflation is getting worse rather than better. We expect that we would generate even higher returns going forward.

I talked about a little bit of hotels earlier. You can see that our RevPAR, revenue per available room, is up 18% year-on-year.

A little bit of a slowdown in in in November, December, and January because we do have a some amount, small amount of Chinese inbound exposure, but not particularly material. For the most part, the the result of of the slowdown there is that we're having a substitution effect of non-Chinese travelers.

It means that we thought RevPAR is going to go up more, and it's not, but really not any material impact on on us. Owners, again, I this is kind of just an update of our of our of the classic material we provide.

We we're actually really, really good at this point. We have been doing residential for now 9 9 years now.

This is, if you can call it kind of a a fabless model. We don't do the construction ourselves.

We design with the developers the kind of prime real estate prime residential, and this is multifamily residential that we want. They build it to our spec.

They take all all the risk on the construction. We then lease it up using our own leasing capabilities.

It's an extraordinary kind of rich and advantage kind of understanding of the market, and you deliver just super powerful economics to our shareholders. Average hold is less than a year, and and and, the IRRs are kind of and ROEs are uncountably high, which is a nice thing.

I'm sorry, go ahead. We'll go to the next slide.

We it's an interesting question on this forecast, though. One of the things that's a that's a good thing is we have pricing power.

We've expanded the number of channels that we have. It's a very strong market with, as I said, very high demand for our product, which is you take existing real estate and you improve it.

We don't know if we're going to hit the forecast on Owners this year in part because we're trying to figure out it's we have buyers, and it's like is it going to are we going to complete in the fourth quarter or are we going to complete in the first quarter of of of of next year. We'll see what happens with that.

As a as as a broad statement, we're we know we're going to hit this year's numbers and beat them. We'll see.

If we end up doing this in the fourth quarter, we'll beat them by more. If we end up doing in the first quarter, we'll just have a running start to next year.

It's one of the things that it's important to us, and as our shareholders, investors, I think it should be important to you. We do not We're not in the business, and I've seen a lot of Japanese companies where they have this thing is like, we need to hit the numbers for the fourth quarter, and therefore, this is not the best pricing, but we're going to have to sell.

We do not do that. We make sure we have six ways to get to yes, and we'll choose which one is the most optimal.

In the case of Owners, we have transactions that are going to occur. We don't know if they close in the fourth quarter, we or they close in the first quarter.

We have absolutely no rush to close in the fourth quarter if there are better economics available in the first quarter next year. We'll see what happens.

We've we launched a private residential fund. As we acquired a a asset management company last year, and it's focusing on private funds.

To again, to grow business in part growing our sales channels and our capability to exploit sales channels. There's a market for private funds that we wanted to do more in.

The That's a good news. We did not, however, do a new security token launch this year.

That's kind of worth thinking about kind of the positives in that and the negatives. To start with the positive, it's because we didn't need to.

We had other places to to to sell our product. We chose to make to sell it via different channels.

The negative, though, and maybe I shouldn't call it a negative, it's kind of an area that we should think about what we want to do about it. It's in part because, we we we at this point, we're putting Every time we do a security token, we sell that out instantly.

There's huge investor demand. We are placing these via Japanese securities firms.

What's happened over the last year was we had kind of a bunch of stuff happening in the world, and securities firms are very capital market sensitive. They're like, "Well, we think you want we want kind of we want lower pricing on this."

It's like, "No." We can sell the these assets, these improved Ichigo assets to like 5,000 other buyers, we're not going to give you a lower price.

What do you want to do? It's like, "Oh, okay.

I guess we still want to do it, but let's let's look at kind of the market environment. Oh, it feels a little risky right now.

Can we do this in 3 months? Can we do this in 6 months?"

We're constantly generating new products. We can do those things.

It does raise the question as to whether or not we should have our own, put it on the blockchain directly ourselves. This is a very robust product.

It's an extraordinarily powerful offer. We're and I've said this before, forgive me for repeating myself, this is effectively the REIT product being put on the blockchain.

Because REITs in the same sort of thing, private REIT to public REIT, we run assets really, really hard for the shareholders. In this case, we're running assets really, really hard and and and securitizing them on the blockchain.

It is a different sales channel, and has kind of skews as a whole bunch of new buyers in it. It tends to skew younger, and and kind of our our REIT buyers kind of skew older.

We like the category quite a bit, and I have ambitions to do more here. We haven't we haven't delivered against our ambitions this year, we have to be thoughtful about, do we kind of run forward, and are we going to can we get this done with with the securities firms as our brokers or do we want to do something more substantial ourselves?

Stay tuned. We'll we'll work on that.

It says, "AM Growth on Diverse Growth Drivers." Actually, the growth didn't happen this year because we were expecting to do stuff more in in security token space.

We didn't. We we we had some stuff come to expiry.

I pointed out that last quarter that we actually offered, ended up delivering double the return, which we had marketed to our investors in our first security token, so that was a fabulous success. As I tell you, the the the our our offer sells out instantly.

We really do like the blockchain opportunity. We want to do more there, and that's why I say we're going to we're going to think about, how how we will achieve that.

In terms of the clean energy business, we're shifting our attention, and we've talked about this before, to battery storage. We think it's a really interesting opportunity.

We've got some things that were going on there. There is a need which Japan's very substantial clean energy growth in the clean energy mix and volatility around that from primarily from solar to do something with batteries because battery pricing has come down so much.

It is now at this point economic for us to to do things in the space, and we expect to grow that business. We are buying back our shares.

We think they are we're currently trading at about 11 times earnings, and that's accounting earnings. As our cash earnings are are substantially above that, 30% above that.

We're trading sub-10 PE with a business that is really powerful, with an operating environment that I've told you there's been a structural change, and appears structural. It's it's showing durability at this point, with the continuing decline in construction labor force.

That that's what points to the structural nature of of cost inflation in in construction, which is a a very, very strong driver for our business because it it damages kind of the classic Japanese development model, which is the primary amount of real estate construction in Japan. It's really, really good for us.

It is an opportunity for us to massively grow our market share. Anyway, we don't think that's being reflected in the current share price, and so we're buying with a bucket.

We we doubled our buyback. We're canceling shares as I said earlier because it's not coming back in the market.

This is permanent growth in EPS. We we we grew our dividend.

You can expect us to continue to grow grow our dividend going forward. We still have a J.League shareholder program, which a number of firsts in that, and we're just going to keep on running forward.

I talked about our activity on environmental side, and it's important. Climate change is real.

Companies like ourselves should be responsible to it, do something about it, and and and we are. That shows up most obviously in our activity around renewable energy, we've completed renewable energy transition.

100% of what of the energy we use is now renewable. We actually have CO2 reduction through our production activities that is 8 times greater than CO2 emissions, and this is probably the best measure of us as a climate-positive company.

The final thing worth pointing out is that we we we bought as a as an experiment, we don't we don't play with our shareholders' money. We actually expect to do something powerful here.

We bought a a J3 club 2 years ago. We have we have been promoted in just 2 years to J2.

That that is that that is that is an extraordinary positive and powerful outcome. As it it generates, more look, this this is a this will not be a major driver of our profitability, but it has, some significant branding value, and and and we're trying to do more.

Just so Miyazaki, which is a southern southernmost prefecture on Honshu on the main island of Japan, we have a significant amount of business activity there. We think there are some, they're they're major branding, community-level branding opportunities that are powerful that will drive more economics for us.

We're seeing if we can take this this we're not quite Red Bull at this point, but taking this to be a national brand as a very community-oriented soccer club that is known as an Ichigo club, we'll do more there. The bottom line is, you can run a soccer club, you should win, and we're doing quite well.

We go to the J2. We'll see, we have our own dreams, Welcome to Wrexham, if we can get something get to J1.

That's that's that's what we're aspiring to. That's what I have.

Thank you very much for your patient listening, and I'm happy to take any and all questions and comments. We have We have a question from Greg.

Thank you very much. We will We will open the mic.

Can you hear me?

Yes. Thank you very much.

Thank you for your presentation, Scott. I have a couple of questions.

One is you've briefly highlighted the hotel situation with regard to China. Can you maybe go a little bit more granular in terms of if you are seeing more of a deterioration vis-a-vis kind of end of November, early December, perhaps?

Or do you feel that on the ground, the situation is fairly stable as we head into Chinese New Year in the middle of February? Will be my first question.

The second question would be indirectly related to the cancellation of treasury shares. I guess this means that in terms of potential domestic M&A opportunity, maybe there is not something that is immediately palatable to the firm.

By the same token, as with rising costs and cost of sourcing assets, scale is becoming more and more important as we've seen with the example of Itochu. It's actually different business model, but obviously Itochu tying up with JRE's own residential to help them kind of redevelop some sites along railway stations, etc., for resi.

As you highlighted, Scott, given that you guys have built a good brand, and you have a fabulous business model, is there a way to kind of scale more with a partnership with another firm that perhaps has some asset, but doesn't necessarily have the marketing know-how, so that Ichigo can kind of go into the next scale of its development, to speak? Thank you.

Yeah. Thank you, Greg.

Two questions. The one on the Chinese tourism, it fell off immediately after the kind of the tension emerged between China and Japan on Prime Minister Takaichi's comments about Taiwan.

It fell off, and it's stayed where it is. There's no deterioration, but also no improvement.

We would expect Chinese New Year to be down relative to last year. It's basically not going to be material for us.

It is not a significant part of our inbound business. To answer your question, it's stable, not deteriorating.

In terms of the treasury share cancellation, I think the message there is you mentioned M&A. If we buy something, and look, one has to be very, very careful about M&A and the post-merger integration issues and overpaying and all that sort of thing.

I would express us being much more interested in driving growth organically than through acquisitions. If we ever to buy something, we're not going to use our shares when they're cheap.

It's probably worth pointing out that our ability to borrow well, now base rates have gone up, but our ability to borrow well is the best it's ever been. We have all of the major megabanks coming to us and wanting to support more activity on our part.

We're very strong credit. We deliver on what we need to do.

We've been around now for 25 years. If we were to do anything, we can use cash.

We can use debt. We wouldn't want to use shares.

Your idea about combining in some sort of way in order to work with an asset-rich Japanese company where we could deploy our real estate expertise, is a great one. Yes.

That is something that is an ongoing conversation we have internally, and with potential partners on that. If we could do something along those lines, we would because there's no question we have this set of capabilities that are just far more relevant than even 3 years ago because of construction cost inflation.

Companies who had classically like, "Okay, we have an old set of buildings. We're going to go find a general contractor and kind of have them do this for us," that doesn't work anymore.

The desire to work with Ichigo among kind of asset-rich companies has gone up, and our desire to take advantage of our set of capabilities. I think, and this is what you're pointing to, is it's not only that there is an economic return opportunity and a social contribution opportunity, if we partner with somebody big and powerful, there's going to be likely a significant reputation brand and probably multiple expansion, and possibly even more credit support, although as I just pointed out, we're able to borrow really, really well at this point.

That would be powerful. Like that idea a lot, and it's something that you need to find a partner, and you need to make sure you're aligned with the partner and all that sort of thing.

One has to be cautious, but one that we can deliver on that. It's something if we could deliver on, we certainly would like to.

Greg, did I get your two questions?

Yep. Thank you very much, yeah.

Thanks. We will bring it to a close if there are no more questions.

Okay. Thank you very much.

We're done. Thank you, everybody.

It's truly an honor and a privilege to work for all of you. Have a great morning, afternoon, and evening.

Take care.