This document is an English summary translation of a statement written initially in Japanese. The original Japanese should be considered the primary version. GLOBAL PROMINENCE 2019 Aiming for Global Growth and Advancement Third Medium-Term Management Plan (Fiscal Years ending March 31, 2018 March 31, 2020) April 28, 2017 First Section, Tokyo Stock Exchange Securities Code: 3258
Index 1. Review of Second Medium-Term Management Plan NEW DIMENSION 2017 2. Macroeconomic Environment P3 3. Vision of GLOBAL PROMINENCE 2019 P4 4. Basic Management Policy and Strategy P5 5. Numerical s P6 P2 6. Business Strategy 7. Strengthening the Business Foundation P7 P15 1
1. Review of Second Medium-Term Management Plan NEW DIMENSION 2017 1-1. Review of Second Medium-Term Management Plan NEW DIMENSION 2017 Numerical s Revenue from Operations Operating Income Ordinary Income Main numerical targets mostly achieved one year ahead of schedule Year ended Mar. 31, 2017 Results Second Medium-Term Management Plan Mar. 31, 2016 Numerical s* 1 Mar. 31, 2017 (Billions of Yen) Mar. 31, 2018 38.9 30.7 34.8 39.8 13.1 10.1 11.4 12.7 9.8 8.1 9.1 10.1 Net Income 6.2 5.0 5.6 6.2 *1: Announced on Mar. 13, 2015 Business s s in both Real Estate Business and Hotel Business mostly achieved one year ahead of schedule Real Estate Business Business s Own 100 Buildings Own 98 buildings* 2 NEW DIMENSION 2017 Review Hotel Business (Owned & Operated Hotels) 20 Hotels, 4,000 Rooms (in operation) 30 Hotels, 6,000 Rooms (including those in planning and development stage) 14 Hotels, 3,035 Rooms (in operation) 30 Hotels, 7,121 Rooms (including those in planning and development stage) *2: As of Apr. 30, 2017 (including buildings under acquisition contract and planned for acquisition) 2
2. Macroeconomic Environment 2-1. Macroeconomic Environment Global Financial & Economic Conditions Overall gradual economic growth overseas is continuing. Growth in the United States may accelerate however due to policies to increase employment by the new administration In Japan, with the support from fiscal and monetary policy, as well as other factors, gradual recovery should continue until around 2019 Growing uncertainty over economic policies of the new US administration and political developments in Europe warrant attention Business Environment (Office Buildings in Japan) Favorable demand environment continues; vacancy rates are low. Rents are also rising gradually For real estate conditions, gradual recovery continues in some markets, including central Tokyo (Office Buildings in the United States) Increase in office demand is gaining momentum based on aggressive policies to increase employment. Rents also are performing well Market conditions are dependent on the pace of interest rate rises and warrant attention (Hotels) Trend of increased new or expanded hotel capacity is growing stronger based on increased demand from visitors from abroad Japanese guest numbers are declining. Thus overall demand is easing and ADRs are weakening slightly 3
3. Vision of GLOBAL PROMINENCE 2019 3-1. Overview and Vision of Third Medium-Term Management Plan GLOBAL PROMINENCE 2019 Endeavor to be a company that grows and advances globally Grow via two pillars of the Real Estate Business and Hotel Business 200 billion in new investments* 1 Real Estate Business Own 120 buildings Hotel Business 45 hotels, 10,000 rooms* 2 In 3 Years Asset base of 800 billion Revenue from Operations Mar. 31, 2020 Vs. Year ended Mar. 31, 2017* 3 66.9 billion 1.7X Operating Income 20.9 billion 1.5X Ordinary Income 12.5 billion 1.2X Net Income 8.2 billion 1.2X *1: New investments: capital expenditure maintenance and renovation expenses *3: Vs year ended Mar. 31, 2017 results (new standard) *2: Including those in planning and development stage 4
4. Basic Management Policy and Strategy 4-1. Basic Management Policy and Strategy Endeavor to be a company that grows and advances globally Grow via two pillars of the Real Estate Business and Hotel Business Real Estate Business Offer high quality spaces that meet the diverse needs of clients - Japan : Continue investing in central Tokyo - US : Further actively expand with New York and Washington D.C. as bases Hotel Business Develop business hotels that meet the ever widening diverse needs of global customers - Develop the new UNIZO INN EXPRESS brand in addition to the current HOTEL UNIZO and UNIZO INN brands - Offer the convenience of outstanding locations and superior service to a global customer base 5
5. Numerical s 5-1. Numerical s (Numerical targets) Revenue from Operations Operating Income Ordinary Income Asset base of 800 billion -Invest 200 billion globally in new investments* over three years Revenue from operations to increase 1.7X to 66.9 billion in three years, operating income 1.5X to 20.9 billion, ordinary income 1.2X to 12.5 billion, net income 1.2X to 8.2 billion Year ended Mar. 31, 2017 Results (new standard) Mar. 31, 2018 Mar. 31, 2019 (Billions of Yen) Mar. 31, 2020 Vs. Year ended Mar. 31, 2017 Results (new standard) 39.5 51.6 60.8 66.9 1.7X 13.8 16.6 19.0 20.9 1.5X 10.4 11.0 12.0 12.5 1.2X Net Income 6.6 7.2 7.7 8.2 1.2X (Assumptions) 1. JPY interest rates : flat over 3 years 2. USD interest rates : +1.0% over 3 years 3. FX : flat at 110/$ over 3 years * New investments: capital expenditure maintenance and renovation expenses 4. Lower US corporate taxes not incorporated 6
6. Business Strategy 6-1. Real Estate Business (1) - Basic Policy, Numerical s Basic Policy Own 120 buildings, invest 161 billion in new investments* Revenue from operations of 49.4 billion, operating income of 18.2 billion in year ending Mar. 31, 2020 Japan Continue to invest in prime income-generating properties in central Tokyo Aim to continue to grow earnings via working with existing tenants, leasing vacancies, and lowering administrative costs to maximize earnings US Further actively expand in the United States with New York and Washington D.C. as bases Strengthen leasing to quickly raise occupancy, thoroughly maximize effective rents and lower costs to raise earnings Improve building management and new investment know-how Continue investing in prime income-generating properties, aim for 120 buildings Invest 161 billion over three years in new investments* Numerical s Year ended Mar. 31, 2017 Results (new standard) * New investments: capital expenditure maintenance and renovation expenses (Billions of Yen) Mar. 31, 2018 Mar. 31, 2019 Mar. 31, 2020 Vs. Year ended Mar. 31, 2017 Results (new standard) Revenue from Operations 30.3 41.1 46.1 49.4 +63% Operating Income 11.7 15.4 17.3 18.2 +55% Note: Figures for segment revenue from operations and operating income are before intersegment eliminations and adjustments 7
6. Business Strategy 6-1. Real Estate Business (2) - Action Plan (Japan) Invest in prime income-generating properties Continue to invest in prime income-generating properties in central Tokyo Maximize profitability of property portfolio (Existing tenants) Keep tenants and capture tenant needs in a timely manner to create profit opportunities Revise rents closely watching market conditions (New tenants) Lease vacant space quickly and bring vacancies as close to zero as possible Attract retail space tenants in accordance with property attributes (Efficiency improvements) Improve efficiency centered on lowering costs 8
6. Business Strategy 6-1. Real Estate Business (3) - Action Plan (US) Invest in prime income-generating properties Further actively expand in the United States with New York and Washington D.C. as bases Maximize profitability of property portfolio (Existing tenants) Start negotiations over renewals as early as possible and maximize focus on retention Ascertain and quickly meet tenants needs for changes in floor space (New tenants) Maximize focus on quickly filling vacancies 9
6. Business Strategy 6-2. Hotel Business (1) - Basic Policy, Numerical s 45 hotels (10,000 rooms) including those in planning & development, 30 hotels (7,000 rooms) in operation, invest 39.0 billion in new investments* Revenue from operations of 17.6 billion, operating income of 4.2 billion in year ending Mar. 31, 2020 Basic Policy Move from two-brand structure to three-brand and publicize the three brands thoroughly Focus even more on high-growth markets Continuously lower administrative costs taking cost pressure from staffing and other items into consideration Instruct a sense of Japanese hospitality in staff and transfuse that sense to each hotel Aim for 45 hotels (10,000 rooms) including those in planning & development, 30 hotels (7,000 rooms) in operation Invest 39.0 billion over three years in hotels * New investments: capital expenditure maintenance and renovation expenses Numerical s Revenue from Operations Operating Income Year ended Mar. 31, 2017 Results (new standard) Mar. 31, 2018 Mar. 31, 2019 Mar. 31, 2020 (Billions of Yen) Vs. Year ended Mar. 31, 2017 Results (new standard) 9.4 10.7 14.9 17.6 +87% 2.3 2.0 3.3 4.2 +76% Note: Figures for segment revenue from operations and operating income are before intersegment eliminations and adjustments 10
6. Business Strategy 6-2. Hotel Business (2) - New Brand Development Develop new brand in hotel business In addition to the current HOTEL UNIZO and UNIZO INN brands, the Group will develop the new UNIZO INN Express brand. With this the Group develop business hotels that meet the ever widening diverse needs of customers New UNIZO INN Express brand Economy business hotels that offer high value to prices with strategically selected features HOTEL UNIZO - High-grade business hotels that offer not only convenience and functionality but also a high level of comfort UNIZO INN - Standard business hotels that offer both comfort and high value to prices 11
6. Business Strategy 6-2. Hotel Business (3) - UNIZO Group s Hotels Expansion from two-brand structure to three-brand, accelerate nationwide development HOTEL UNIZO Name Location Opened Rooms UNIZO INN Name Location Opened Rooms 1 HOTEL UNIZO Ginza-itchome Chuo Ward, Tokyo Jan. 2015 305 2 HOTEL UNIZO Ginza-nanachome Chuo Ward, Tokyo June 2016 224 3 HOTEL UNIZO Shimbashi Minato Ward, Tokyo Oct. 1978 (Rebuilt Dec. 2001) 4 HOTEL UNIZO Shibuya Shibuya Ward, Tokyo May 2010 186 5 HOTEL UNIZO Kyoto Shijo Karasuma Shimogyo Ward, Kyoto Oct. 2014 281 6 HOTEL UNIZO Osaka Yodoyabashi Chuo Ward, Osaka Apr. 2009 333 7 HOTEL UNIZO Fukuoka Tenjin Chuo Ward, Fukuoka Oct. 2007 159 8 HOTEL UNIZO Osaka Shinsaibashi Chuo Ward, Osaka Winter 2017-18* 1 186* 1 9 HOTEL UNIZO Osaka Umeda Kita Ward, Osaka Spring 2018* 1 220* 1 10 HOTEL UNIZO Fukuoka Hakataekimae* 2 Hakata Ward, Fukuoka Autumn 2018* 1 217* 1 11 HOTEL UNIZO Yokohamaeki-West Exit* 2 Nishi Ward, Yokohama Autumn 2018* 1 156* 1 12 HOTEL UNIIZO Nagoyaekimae* 2,3 Nakamura Ward, Nagoya Summer 2019* 1 203* 1 : Planned hotels (as of Apr. 30, 2017) *1 Opening period and number of rooms subject to change *2 Provisional name *3 Under acquisition contact and planned for acquisition 233 1 UNIZO INN Sapporo Chuo Ward, Sapporo Jan. 2016 224 2 UNIZO INN Sendai Aoba Ward, Sendai Dec. 1973 250 3 UNIZO INN Asakusa Taito Ward, Tokyo July 1992 121 4 UNIZO INN Hatchobori Chuo Ward, Tokyo UNIZO INN Express 1 UNIZO INN Express Morioka Name Location Opening Rooms Moriokaeki-Nishi Dori, Morioka July 2003 Renamed July 2016 5 UNIZO INN Nagoya Sakae Naka Ward, Nagoya May 2014 252 6 UNIZO INN Nagoya Sakae Higashi Naka Ward, Nagoya Feb. 1983 148 7 UNIZO INN Hiroshima Naka Ward, Hiroshima Sept. 1985 171 8 UNIZO INN Kyoto Kawaramachi Shijo Nakagyo Ward, Kyoto July 2017* 1 242* 1 9 UNIZO INN Kandaeki-West Chiyoda Ward, Tokyo Aug. 2017* 1 219* 1 10 UNIZO INN Kanazawa Hyakumangoku Dori Oyamamachi, Kanazawa Autumn 2017* 1 220* 1 11 UNIZO INN Kobe Sannomiya Chuo Ward, Kobe Winter 2017-18* 1 199* 1 12 UNIZO INN Shin-Osaka Yodogawa Ward, Osaka Spring 2018* 1 225* 1 13 UNIZO INN Osaka Kitahama* 2 Chuo Ward, Osaka Autumn 2019* 1 291* 1 : Planned hotels (as of Apr. 30, 2017) 148 Spring 2018* 1 259* 1 2 UNIZO INN Express Kanazawaekimae* 2,3 Horikawa Shinmachi, Kanazawa 3 UNIZO INN Express Hakodate* 2 Wakamatsucho, Hakodate 4 UNIZO INN Express Kagoshima* 2 Higashi Sengokucho, Kagoshima Spring 2019* 1 392* 1 Summer 2019* 1 277* 1 Summer 2019* 1 293* 1 5 UNIZO INN Express Osaka Minami Honmachi* 2 Chuo Ward, Osaka Spring 2021* 1 487* 1 : Planned hotels (as of Apr. 30, 2017) 12
Reference (2) 2. UNIZO Group s Hotels (Map) *1 *1 Opening period and number of rooms subject to change *2 Under acquisition contact and planned for acquisition *2 *2 13
6. Business Strategy 6-2. Hotel Business (4) - Action Plan Focus even more on high-growth markets Expand routes to attract visitors from abroad Expand corporate sales to office tenants and others Expand bookings coming via in-house channel with new smartphone user site Publicize the three brands thoroughly and develop staff Publicize the three brands through a variety of media Implement training program that emphasizes hospitality Strengthen language training Continuously develop new hotels Actively develop hotels in cities the Group has yet to enter, and additional hotels in cities the Group currently operates in Hire staff and implement training considering regional characteristics of new hotel locations Launch sales and marketing for new hotels to bring high occupancy at an early stage 14
7. Strengthening the Business Foundation 7-1 Strengthening the Business Foundation Secure and develop staff that will support the growth and advancement of the UNIZO Group Continue new graduate recruitment, focus on securing superior staff that will support business expansion Recruit mid-career staff with specialized skills and competiveness quickly when needed Strengthen and develop staff to support global expansion Further strengthen risk management system Further raise awareness of the UNIZO Group 15