Hi, everybody. I'm Scott Callon, Chairman of Ichigo. I'm joined by Dan Morisaku, who is a Senior Member of Finance Team and our Head of Global IR. I'll be working off of a presentation that's on our website, FY 2022, so the February 2022 Q1 Corporate Presentation. Somebody going to put that on the screen for me? It's a yes. All right. Let's get going. Let's jump forward. This is our first time doing a Zoom meeting. Hopefully, it's going to go well. All right. Let's start on page eight, FY 2022 Q1 summary. It actually was a pretty light quarter from an earnings perspective. From a business perspective, a very good quarter. We think Q2 will be a little light also. There's clearly a major change in the market environment that's going to be, we think, very productive for us from an earnings perspective. You'll see results primarily in the second half of this year. We continue to have a very slow hotel earnings recovery because of COVID. We are running at 30% of revenue, so down 70% relative to pre-COVID. In the quarter, we did primarily two logistics asset sales. The deal was completed. Gross profit margin on them, 34%. There has been no COVID impact on clean energy, which continues to grow very well. Stock earnings in that business. Those are our fixed earnings, up 18% year-on-year. We launched two new businesses. Well, in fact, one new business, which is Ichigo Owners. It's a GP LP structure, ownership business. It's an asset management business. I'll go into details on that later. PROPERA, which is our AI-based hotel revenue management system. In effect, a lot of that business is we began a full scale rollout of that with external sales promotion to clients. I'll go into some details on that later. The final thing we did is we accelerated our RE100 target by 15 years from 2040- 2025. Turning to page nine. This is, again, a slide we've given once before, and many of you have, so thank you for that. It's familiar. It's a durable and earnings model. We continue to run at earnings despite a very depressed earnings environment due to COVID at double our fixed expenses. You can see we're down year-on-year on our stock earnings and sustainable real estate. That's almost entirely hotels, which we expect to rebound as we come out of COVID. Asset management up year-on-year. Clean energy is up year-on-year. I'll go through more details there. Going to page 10. Again, a light quarter. None of these numbers kind of scream out, this is the rebound for Ichigo. But that is the reality that we think we are experiencing and will deliver to you going forward. The headline numbers, OP down 14%. Income down 29%. EPS down 27%. That's actually a reflection of our long-term interest rate hedges. We have fixed our interest rates. We think that's a great thing to do. We're very, very happy. Last year's Q1, we took about JPY 200 million of gains, a little bit over JPY 200 million, so about $2 million in gains on those hedges. This quarter, we took JPY 170 million of loss on those hedges. These are non-cash, but that's where that big swing is coming from. Page 11. Here's the segment details. Overall decrease in Ichigo hotel, base management fees and performance fees. It's actually relative to the pre-COVID more than anything else. Asset management is actually up, as you can see in the middle of the page, on an OP basis, so about 6% year-on-year. Sustainable real estate is down. The stock earnings is again overwhelmingly hotels, about JPY -3 billion or $30 million. Core earnings are also down year-on-year. We sometimes stack our earnings into different quarters depending on what transaction volume looks like. We don't think that's really material here. In clean energy, you can see 25% up year-on-year. We launched our first wind plant this year, so that in Yonezawa, Northern Japan, that is contributory. We brought a bunch of plants online last year, I think nine. We're getting a full year contribution from our solar plants as of end of this year. Page 12 gives you some details on COVID impacts. Hotels, office low, retail low is perhaps a little bit surprising for you. Let me go through that. On the office side, it's so clearly the case that there's been a differential impact on mid-sized offices versus large offices, which is to say we only have one large office in Odaiba. There's been more activity on part of big companies to move to remote and push that space. In a mid-sized office, which is every single other office asset that we own, we're seeing really no impact. Our tenants are saying we have had some vacancies, generally with companies with direct COVID impacts, heavy travel agencies or something like that. We re-lease the assets at a higher rate than they could contend. Truly there's been variable earnings effect there. Retail is actually similar, which is to say restaurants have been incredibly hard hit. Because we have a combination of some retailers which are obviously more sensitive, and the corona retailers that are sensitive to COVID in a negative way, and offset by retailers such as drugstores or supermarkets or slightly more suburban retail locations, which have done very well, the overall impact of retail is low. Residential has effectively no impact. Clean energy has no impact. Japan has done a very good job of defending incomes during COVID, and so there's really no change in tenants' ability to pay rent and tenants' desire to pay rent. COVID, if anything, is a positive driver of demand for residential real estate, both as tenants, as buyers, because if suddenly in your apartment, it feels really small. There really is no COVID effect there. In terms of forward earnings, meaning what's happening in the buy-sell market for these assets, there's been a significant impact on office, hotel, and retail. There's been no impact on residential logistics. For the reason I gave for residential, I mean, it's a driver demand and also because higher earnings stability. Logistics, similarly, higher earnings stability and the shift to work from home and the ongoing shift of transactions online, retail activity online, of course, is a driver of demand for logistics assets. Just to speak to office, hotel, and retail. The big issue over the past year has been a blowout in spreads between what buyers want to pay and what sellers want to sell at for office, hotel, and retail. For slightly different reasons. For hotel and retail, that's because there have been immediate negative impacts that are just massive in the hotel space. Worries about retail, both right now with assets that are suffering, but going forward, what's going to happen with online. Office, similarly, what's going to happen going forward from a work from home perspective. As you probably know, Japanese leases tend to be very short, typically two years. In the office market, for example, people are worried that tenants are going to pull back a bunch of space inside office. We already have enough information at this point. It's been over a year they've been in COVID. It's almost a year and a half. 70% of leases have come up for renewal, and they're getting renewed. The result of expectation, we're going to break out of this horrible deep COVID period and go into something that we all hope will be COVID, but a normalized environment. The robust ongoing leasing activity and operating performance office assets has meant we have hotel, retail, and office now market emerging for transactions. We expect it's quite possible that we'll do some significant transactions, one or more significant transactions in any of those assets or across all those assets in the second half. Let me turn to page 14 and go quickly through our business model. This is our standard disclosure. You can see that we do generate significantly higher both of stock and FAD earnings than our costs. In the first quarter, we came in at JPY 4 billion for stock earnings. Our forecast for both the bottom of the range and the top of the range is JPY 14.4 billion over four years. We're coming in about 10% higher on stock earnings. We think it's very likely we'll certainly beat or be in the forecast on flow earnings, and it's quite possible we come in above the high-end forecast, depending on what happens in the market and any driver that surprises. That still means we have a ways to go to what pre-COVID looked like, which was fiscal year 2020/2022, as you can see on the page. It's manifestly the case that we're beginning to experience post-COVID rebound, which is going to take it back to more normalized earnings. Page 15 shows the embedded forward earnings in the business and the balance sheet. We have significant unrealized gains that exceed our accounting. Our economic earnings exceed our accounting earnings. We have unrealized gains that are going to affect future periods. Page 16 shows you how, in fact, we have third-party appraisers saying that the assets are worth x. In general, we do somewhere between 2 and 3x of actual realized earnings. The appraisers have told you on the last page that we have about JPY 63 billion, so $600 million rounded down to the dollar in unrealized gains, and the balance sheet is probably 2 - 3x that in terms of our actual realized gains. Page 17. This is a business that generates significant cash. We run the business in that way. In order to do so, we take as much as possible tax shields such as depreciation, accelerated depreciation. It means our stated earnings, our stated EPS, are lower than the actual cash that's generated. That's a good thing for all of us. It means we generate cash that is not subject to tax, and we can use it to invest in the business and/or buy back our stock when it's cheap. That is the hallmark of the business. Page 18 gives some sense how we finance the business outside of the equity in it. Japan continues to be, and for us, certainly an amazing place to be a borrower. We're financing all-in at 90 basis points for debt that is about 10 years. Hasn't been really any significant change. We continue to see all the strength and durability of our business and as a category for financial institutions. Page 20 gives you acquisition and sales activity. It was a light quarter. Primarily, we bought a residential that was an Ichigo Owners business, and we sold two listed assets that we had gone through and done all the value add that we needed to do. It's a worthy question as to whether or not we hold those as listed assets or sell them. There's both a strong desire and ongoing robust demand for listed assets. That's a reason to hold them. It's also the case that demand has gone through the roof as buyers have pushed the real estate spending out of hotel, retail, office into logistics and residential because it feels safer. We thought we could get, and we did get a very good price. On that basis, we took the very good price for those listed assets. For Ichigo Owners, no sales during the 1st quarter. I would expect to see significant transaction out of here. Page 21 gives you some sense of where we've taken the Ichigo Owners business. Again, this is a business we set up from zero on March 1, 2017. We now have four years of track record that continues to go very, very well. This is, I would think, a really good business. Very high turnover. Average hold as of end of last year was nine months. Even during COVID, just robust demand and the ability to execute. There's some pushing out of, I think the average hold was maybe seven months. It's pushed to nine months. It's very hard for us to get transactions done during the COVID period. Anyway, as you can see on the page, in the first year, if you add buys and sells, we did JPY 8 billion of transactions. The second year, we did about JPY 25 billion. The third year, we did JPY 37 billion. The fourth year, this last year, we did JPY 56 billion. This is a business growing very fast. We fully expect to get to be about JPY 90 billion-JPY 100 billion pretty quickly. There's a lot more upside growth in this business. Because we're taking a gross profit, typically somewhere between what we targeted for about 10%, we're generally delivering something that looks more like 13%, 14%, 15%. Because we use some debt to structure the business and because the hold is so short, this has very powerful 30%, 40%, 50% carry economics to the business. The growth is very, very positive. Page 22 shows something new we're doing in the business. I've just described the existing business, which is on the top of the page. You take whole assets. This is all Tokyo prime located, brand new residential assets. Makes it very easy for us to hold on the balance sheet because these are outstanding assets that anybody would want their own. It substantially de-risks the business. We generate full earnings on gains of sale to institutional investors and/or sometimes we do sell this as part of our private fund business. We'll get full earnings on the gains on sale, and we'll get ongoing management fees as us serving as a GP to a private fund. The brand new activity, which we started as of May 1, is we've begun a GP, what we call a co-ownership business to our clients. It's a GP LP structure. As you know, our asset management business currently has our two public REITs plus our public infrastructure fund, the solar power producer. We also have a private fund business, which is on this page. This structure is an LP GP structure, is a partnership structure. It goes under a different regulatory regime, which is a lighter and lower cost regulatory regime. What it is, it enables to offer small investments to go after a brand new market. Typically, on the order of, minimum investment size is about JPY 1 million, about $10,000. We're starting slightly larger than that right now in terms of the first asset we're going to market with. It does enable you to serve the needs of investors in the real estate category in a brand new, different way. The market, as we have on the bottom of the page, is very large. It is our ambition to grow this business to be similar to the size of our existing asset management business. That would imply to JPY 100 billion, JPY +1 billion worth of assets under management. It's something we've just begun, but we think it's an exciting and important growth opportunity. Our deliverable in this, as is everything we do in Japanese sustainable real estate, is to offer a very high-quality product as a fiduciary that is deeply trustworthy. Unfortunately, in real estate, that's not always the case. This is a business that's the single largest industry on the planet. There are a lot of actors who are attracted to it, who are not strong fiduciaries, if you put it that way. You can see from the growth of our Ichigo Owners business, this is an area where we think we provide a social good. Giving investors an opportunity to invest in high-quality, durable return out of real estate. That's so important to Japan because interest rates have effectively been at zero for years, for decades. This is very important for people who invest in the future. Turning to page 23. We continue to provide our support through Ichigo REIT and Ichigo Green. Worth noting on the page is the plan of renewable energy for Ichigo Office. We made a decision to transition to renewable energy across all the assets. We had some partially owned assets that we don't fully have control over, that we were unable to make the cut over. A more negotiated process, Ichigo Office is going to be almost entirely renewable energy powered portfolio within the next one year. Let me turn to page 24. We'll talk about what's going on in clean energy. We actually changed the bar graphs on this page, which used to be speaking to MW of power generation. We still have that data on the bottom of the page. We also removed Ichigo Green, which is, as you can see, 29.4 MW on it. For those of you who are familiar with our materials, there used to be a green bar running along the bottom that had 29 MW on it. We just taken that out and we show them here purely the activity that's on balance sheet for this company. Then we show the total CapEx. The reason why we made the switch is because all megawatts aren't created equally. You do then have the question of utilization rate. Solar runs at about, if you put up a solar plant, it runs during the day. There is a conversion ratio in terms of its efficiency. Utilization of solar is about 15%. We now have a brand-new wind plant that is at 50%, so it's three times higher. We are planning and expect to do something significant in fully local green biomass where the utilization is 90%. If you show megawatts on the page, there's just dramatically different economics and productivity from it. We made the switch to reflect an ongoing diversification of our mix. We continue to expect to do a lot going forward in solar. We have additions and are beginning work. Hopefully we'll do a lot in local green biomass. We certainly like to do more with renewables. Page 25 gives you some sense of the wind at our back from Japanese energy policy. It is so clearly the case that the Japanese government is moving. It's currently under review for revision, the 2030 target and 2050 target. Even with the current target, which may be pushed out to 2050, there is just an overwhelming demand for renewable energy. We are not going to solve the problems of climate change by continuing to burn fossil fuels. The Japanese government understands that. There is extraordinary ambition to source more energy in a renewable way without sacrificing. As one of Japan's major solar power producers, we compete and work mainly in wind and green biomass. There is so much more we think we can do. There's so much more that we think we should do on behalf of society, and certainly because economics is a very powerful lever for shareholders. This continues to be an area with even, arguably, a very conservative politically Japanese administration has made a significant policy commitment to doing more with renewables, which we think will be an ongoing support for activity in this area. Page 26, we provide some details on PROPERA. That's, again, our AI-based hotel revenue optimization system. We have been using this in our existing hotels and driving increases in revenues on the order of 23%, which is a very powerful system. We have begun, I'll talk about it on the next page, new activity in terms of selling this externally. What we have here is just some sense for you of where we expect to take PROPERA over the near term. Our five-year target is to take it to 2,000 hotels. It would be a 10% market share of Japanese hotels supplying site controllers, which effectively, an efficient API to allow hotels to link their reservation management systems into online travel agencies. That's the target, 10% market share of site controllers in Japan over the next five years. Page 27 gives you some sense of how we're trying to get there. One of the things we've done is not quite a freemium model because we ask for money even for the Lite version. We have been marketing full PROPERA and realized that there's an opportunity just to build for a customer count and build kind of customer understanding of a product and also get more data from it. We have introduced something we call PROPERA Lite, which is price trends visualization only. It does end recommendations to hotel operators. Again, we have an optimization algorithm for hotels. It's incredibly sophisticated. Having told the hotels how they should price their rooms, 365 days and 24 hours a day. However, Light does not give them the ability to have automated optimization. Once we tell them what to do in the Light version, they have to figure out how they're going to implement that in their reservation system, which is an incredibly manual process. Anyway, it does give an opportunity for hotel operators to get the advice from PROPERA and to begin doing some relatively primitive optimization of the pricing. For that, we ask for JPY 24,000, so about $200 a month per hotel. The goal is, again, to take this, including Light, to 2,000 hotels within five years, and then drive earnings by shifting our customers from Light to PROPERA over time. PROPERA, the full version of this, we ask for 1% of revenues. To give you some sense of economics, if you get to a market share of 2,000 hotels, and everyone is sitting on Light, that'll be about JPY 600 million, so $6 million, kind of a subscription model revenue system. If people are all sitting on the full version, if they're using the full version and using the sample earnings model of a typical hotel on the bottom right of the page, that'll be JPY 4 billion. $40 million. That's what we think is a conservative view of where we can get to with PROPERA over the next five years, somewhere between an ongoing revenue of $6 million and $4 million. If we can do more than that, we will certainly do more than that. We think this is really interesting. I'm sorry, I didn't talk about the second part of this, which is that we're tightly integrating with the site controllers to allow users to get onto our system easily. We will have access to 16,000 hotels, 80% of all Japanese hotels. We're effectively at that right now. We think we will keep that this year. Page 28. As I mentioned earlier, we're accelerating our RE100 target by 15 years, 2024 to 2025. RE100 is just a commitment to have 100% renewable electricity across all of your operations. We do that by 2025. Page 29 shows where we are today. Here I probably need to explain to you that the RE100 does not kind of envision self-production of renewable energy. The truth of the matter is we're already net zero carbon today. We more than get to the RE100 target. We don't need to wait another four years. We are there today. Our total power plant production, CO2 reductions, is about double our CO2 emissions. We are net zero carbon. We are a positive contributor in the global fight against climate change today. What that means is that the target of going to RE100, so because we are by the RE100 initiative, the way it counts things, if we're selling our renewable energy to our customers, they don't count it as part of our renewable energy contribution. What we're effectively telling you is we're going to do both. We are going to continue to grow our own renewable energy production. We are likely to sell all of it externally, but we're also going to buy in because we've run the math on it, and it's certainly very doable to buy in renewable energy. Despite what I said earlier, a gap that is going to grow significantly over time. Currently, there's barely any premium to renewable energy, so we can make the shift with contracts that we think are good for the world and good for our tenants who believe in working for the world. Page 30 shows our buyback activity. We've done buyback five years in a row. We did one earlier this year for JPY 1.5 billion, so it's half of what we've done in previous years. We would expect to have ongoing buyback activity given the cash generation and what we think is a beautiful share price. Finally, page 31, just a reminder that we are a J.League sponsor so Japan's soccer league or football league, to use the global word for this sport. This is something that has kind of had curtail activity given that we've been operating under COVID. We do have a shareholder program where we give tickets to our shareholders to go to every J.League club and every J.League game, and that's something that we will continue to do going forward. That is the prepared presentation. We're going to now begin the question and answer session. If you are online in Zoom, you ask a question by raising your hand. Maybe you're more sophisticated on this than we are. We're assigning on this. Apologies if we have any challenges in getting this done with you. When it's your turn, you can unmute yourself via the prompts, and then you can go forward. If you are on the phone, you press star then nine. If you want to join a question, you press star then nine again. Once you turn to speak, you press star then six. Hopefully we're all going to get through this together. You can also ask questions via chat. Three ways to get into the call. You either go through the Zoom app or browser, and you raise your hand and we get going that way. You can do it via phone or you can do it via chat if you're online. Why don't I take the first question or input or any question from anybody? The line is open, as it were. The app, the browser, the line, and the chat session are all available to you. Again, thank you for your time today. The first question we have. Hi. Go ahead. Yeah, this is Greg at Point72. Can you hear me? Hey, Greg. Thanks for joining. Of course. Yeah, thanks very much. My first question is on the asset sale. Yeah. As you know, Scott, the office business has been pretty much unscathed by COVID, and obviously everybody has noticed that your REIT is now back above NAV. I guess, obviously you cannot comment on asset sales, but my question is more, it seems to be easier to sell office, but you haven't sold anything in Q1. Would you still be looking to sell potentially in the rest of the year, or do you have a balance issue in your portfolio where you prefer to keep office and sell other assets so that you don't deplete, and sell what you can sell as opposed to what you would like to sell? Would be my first question. Both statements are correct, Greg. Yes, we expect to sell offices this year. We run, hopefully what our shareholders and investors would think is a pretty robust and rigorous process. We have a sale process, which invites everybody in order to make sure we can get the best price. That takes a little bit of time. We think there will be activity in the second half of the year. Secondly, we do pay attention to the mix of our portfolio. It's very diversified. At this point, it's about a 1/4 retail, a 1/4 office, a 1/4 hotel, and about a 1/5 residential. We're not going to sell office all down to nothing, unless of course there's an amazing price. Everything on the balance sheet is for sale. The reality is we expect to do transactions across all of those asset classes. We expect to be doing residential sales, office sales, hotel sales, retail sales. The market is reopening. It is manifestly the case. Now, things could happen between now and the timing that we are looking towards. With the degree of normalization that has occurred, there is an ability to transact at levels that we think make sense. And that was not the case for the last year. Understood. The hotels, have you seen a narrowing of the spread between buyer's price and seller's price? Is that coming down a bit? Yes. That's because... It's a really interesting question as to how Delta and the other variants could affect things. The vaccination progress has been robust enough. It appears to be the case that potential hotel buyers are taking the view that even if we have particularly difficult COVID variants out there's going to be a vaccine solution. The desire for really big discounts that we didn't think necessarily reflected normalized earning power for hotels has gone away. There's been a closing of spreads in the hotel space also. Understood. Thank you. One more question, if I may, is regarding PROPERA. Yeah. You've given us five-year targets, which is very useful. Yeah. When I look at the market share, obviously, outsider looking in, I have the impression that it's an ambitious market share. At the same token, you usually express targets so that you can beat them. Yeah. I'm intrigued, what did this 10% represent, and do you already have fairly good leads that would make the business take off on year one, so to speak? Thank you. Actually the targets on page 26, the previous page. Thank you. That's a worthy question. We do tend to be conservative, and we put out targets that we can beat. In this case, the reality is that ourselves internally. To give you some sense of this, we have 46 external customers right now. That's it, right? We think we're going to take that to 44. Effective, that's an exponential growth rate. We get that. The revenue results are so powerful for our customers. For ourselves internally and our customers. This is very straightforward. The return on investment, the uplift in returns for those people using PROPERA is so powerful, that we think there is a major market opportunity. 10% to that extent, it'll be interesting. It's an interesting issue because we're either going to succeed or we're not. If we succeed, we're probably going to be well more than 2,000 hotels. The issue, the reason why we introduced PROPERA Light, that's on page 27, is we're introducing basically very sophisticated technology, cutting-edge technology in a business. If you go to page 27. That in an industry that, the Japanese hospitality industry is unlike the restaurant industry. I've said it before, where the Japanese restaurants are absolute world-class. The hospitality industry isn't necessarily cutting edge. You have serious degrees of conservatism. It's not going to get people to try. We show people all the data, our data. With the multi-year track record, but it proved to be a very tough sale process. It's like, okay, fine, let's just make it a lot cheaper for people to participate in PROPERA and see the results. Yeah, we think these targets are credible. The big issue, as I said earlier, is it's going to be different economics with PROPERA Light and PROPERA full version. It's effectively a 6.7-fold difference. Migrating to the full version of PROPERA is, of course, going to be an important element of this. Yeah, we think this is doable. We think we've probably been insufficiently transparent about what our ambition has been. You'll see, we're likely to offer some more disclosure on what we think we can do, for example, in the owner's business too. Ichigo is in a little bit of a place where we don't talk about what our goals are, and we say, now we've achieved this. It's hard to value the future if we don't give people guidance on where we think we're going to take the firm. You can continue to count on us to be conservative, but yes, we do think there is a big opportunity here. Understood. Thank you very much. We have someone else. Richard, you can go ahead. Hi, Scott. Thanks for this. Just one question on the business on slide 15, where you show that last year, the appraisal-based, or the value-based unrealized gains grew by more than 10%, basically accelerating from the growth in the previous years. Yeah. Given basically the impact on office and retail space and on hotels, so how did you achieve this, and could you put some extra color on this? Yeah, just to be very, very clear, these are third-party appraisals. This is not Ichigo saying what these things are. Yeah. There was the continued reboosting of NOI coming out of the assets. We did do a markdown, there was a little bit of That we had taken out these appraisals on our own. We actually haircut what the third-party appraisers said our assets were worth in FY 2022, the appraisers went back and looked at it, we went back and looked at it given the post-COVID. We're still out of COVID, given the pending rebound, we moved that. That was, I can't remember, automatic. It was more optimistic that year. The reality is the assets continue outside of hotels, which are clearly in a very different space, continue to perform very well, they are very appraisal and recognized well. Maybe another question on office. You mentioned that the impact of this pandemic on life-size offices is different from the midsize. Could you specify this a little bit more? Do you see that companies are really changing the model they operate and with the satellite offices? Do you see the demand coming through and/or other confirmation of this? We've had some uptick in vacancy in our midsize offices, but it's almost entirely been COVID-related. I think I've talked about this before, but roughly, the kind of offices we have is central city location. Typically, the first floor is going to be retail, because you can get twice the rent for first-floor retail relative to the floors two through 10 through, two through 20, whatever. We have had some vacancies in the first-floor retail tenants. We've also had a little bit of vacancy from less international travel, things like that. It was so clearly COVID and back. When we did the vacancy and we re-saw the first-floor retailer, we've been able to find, as I said earlier, about retail, so we've been able to find replacements like drugstores and other retailers doing really well. That's not been a problem. The office tenants, we've been able to find office tenants. The net effect of a COVID-linked vacancy has been an increase in NOI, that we're re-leasing the spaces at higher rents than the previous tenants. It is just remarkable, a story about the robustness of these small and medium-sized assets that serve overwhelmingly small and medium-sized companies. To be clear, sometimes people worry about SMEs and credit kind of capability. In Japan, this is incredible. Of course, we do credit risk management, but incredibly robust tenants that pay the rents. No big move to remote on the part of SMEs in Japan. That's just been very durable. Now, the one exception to this is the one big asset we have, which is Odaiba, where we were going into COVID, we were going to re-tenant the place. We actually expected to have 30% vacancy, so it was going to go down 70. COVID occurred, and we got an additional 25% notices from big firms and/or IT firms that actually proved to be big IT firms that decided to go more remote. Odaiba's gone down to 45% occupancy at this point. What's happening there, so that's a completely different outcome than is happening with our small and midsize offices. Again, this is a former headquarters building of a major Japanese corporation. It's a big asset. Big companies are in it. Yet, even in the case of Odaiba, we're re-leasing it at rents that are at or above our business plan. We'll take a year to do that. It's going to cost us probably JPY 3 million-JPY 4 million of rent this year. That is still noticeably a very different outcome than it is with our small and midsize assets, which are kind of the bulk of what we do. Yeah, things are fine. Not only fine, again, we continue to re-et vacancies. If we get vacancies, even in COVID, we get enough rent come in. It has always been our belief, and this is why we bought all of these small and midsize offices, that it's an underpriced, incredibly powerful durable asset that people seem to like big buildings, and they don't seem to understand that big buildings tend to have more powerful tenants who are more aggressive, turned out, to go to work. Moment in the COVID environment as perhaps a one-off, you're better off with the durability of earnings with small mid office. Okay. A final question. You mentioned earlier that this quarter and the next quarter are a bit light, but that there are some big changes, underlying changes happening, of which the results will be seen from the second half year onwards. What do you mean by that, and could you add a bit more light on these big changes that are happening? Did I misunderstand it? Thank you. I should probably just explain it for you. Sorry, Richard. Thanks for asking the question. Give you a chance to clarify. By light, this is not exactly a quarter to go, wow, what a great quarter. Typical for us. As I said earlier, our accounting earnings are below our economic earnings. In this case, it's a little bit more, we've got a bunch of things in the pipeline that we're either not going to deliver on. You're just seeing some moving around within the year where earnings show up. The second element as to why and what has changed is, we think we will see some coming back. Stock earnings kind of hotels likely towards the end of the year as interest rates continue, we don't really need tons of global travel to have that happen. Japan just needs to go back to a more normalized environment, and that probably happens. Most importantly, it's the floor earnings. If you look at page 14, which shows JPY 7.7 billion in floor earnings in the bottom of the range and JPY 12.1 billion at the top of the range. We'll see what happens. We feel very comfortable that we're going to be within that range and possibly go through the top because of a turnaround in the ability to sell what we think are very good assets in a market that's less strong. Okay, thanks. Thank you. Think about someone else. I'm getting a note. Oh, no. It's a question via chat from Will. I'm going to read it out loud. Last time you mentioned the office asset in Odaiba had two large IT tenants vacant. Any comment on re-leasing effort? Yeah, we're re-leasing. We think we'll kind of fill it back up within the next year. Just as a reminder, this is an asset which was smack in the middle of the Olympics venue. It's just really tragic. People get all excited about the Olympics, which is, including the Paralympics, is only a two-month event, so we never quite understood how people were getting really excited about, wow, this is going to be fabulous for real estate. It's just a two-month event. You can lease your hotels for two months for three to five times the normal rate, but it's only two months. The initial hope was that we're going to get all this activity in the area, and people were going to be excited, and it was going to kind of build more value and status and prestige for the area. That unfortunately is not going to happen. Now, having said that, Odaiba is located 15 to 20 minutes from the city center, depending on multiple city centers, but from western and eastern parts of the city center. This is a very high-quality asset with super high-grade specs that we're leasing for JPY 16,000, JPY 17,000 per tsubo. To give you some sense of that's probably half to a third of what you get in more city center for equivalent kind of asset. It's a very good value, is one thing that is just super powerful. The vacancies that have gone up, to be clear, the reason why big buildings have been impacted, you see three things. You see very expensive space being sent back. You see space held by big companies being sent back. You're seeing space held by IT companies being sent back. In the case of Odaiba, we've had the second and the third, but not the first. I mean, it's just really good value. One. Two, the thing that's interesting is as you see more work from home and the businesses will suddenly be more desirable of having local space, of course. There's been a little bit of migration of work activity in general towards home, but it means, and this is out closer to Chiba, where the Disneyland and third airport is. It actually has been a little bit of, for reasons that are clear to me of, if we don't need city center space, we don't use much. Again, to be clear, this is 15 to 20 minutes from city center, but we're very much massively within commute distance and all that sort of thing. It's a secondary office market that we thought was going to grow more. It doesn't necessarily look like it's going to grow more, we'll find out together. Ability to lease it is robust and we're just leasing it up. You should expect to see us back to where we ware about a year from now. Happy to take more questions via chat or app or browser or the phone. We'll have another question. Okay. We'll have another question. You mentioned office logistics and residential asset sales. Now how about renewable asset sales potential? Thank you. Ari is now reading your questions. This is better than me. Yeah. Well, we've gone through this before. To be clear, we don't have this thing where it's like we're never going to sell an asset. We work for you. If an asset is sellable at a price that we think is a really good price, we'll sell it. Having said that, there's nothing right now where there's any interesting question as to why. We probably should do some more work on this, but at this point there's nothing that this asset is priced below where it should be. If anything, our view is, as I said earlier, that there's massive, particularly because of changes in Japanese energy policy. Those reflect overall demand for renewable energy. Private companies, for example, are feeling pressure. Japan has a huge manufacturing base. It sells to the world. It sells to companies that increasingly want to source via renewable power, renewable energy. They're asking their suppliers to use renewable energy. When you run the math, we can't figure out where the supply comes from to meet this demand. Which is a way of saying that we think it's quite possible. As I said earlier, there's not a particular premium for renewable energy right now. It depends on the region, but across Japan, on average, there's only a small premium for renewable power. We think it's possible that that premium could go very substantially because if it doesn't go up, it's impossible to meet Japan's national energy goals. It's a way of saying we could get a significant push again on some version of FIT for subsidizing renewable energy via the government. Right now, as you know, the infrastructure funds only have a 20-year non-tax period. We could get that generated, becomes really renewable. REITs have a permanent non-taxable period. The Japanese infrastructure market only gave 20 years. Again, that would be a reason for the infrastructure funds to be able to purchase at higher prices. We think that is very possibly the subject of Japanese government positive policy change. Anyway, at the moment, we see no rush to monetize our energy assets. Now, it's probably worth pointing out that on page 15, those are only our unrealized gains on real estate. It doesn't show unrealized gains on our renewable energy portfolio, which we think are very substantial. I probably have to duck and cover on what the number is. Certainly, JPY 30 billion, possibly JPY 30 billion. Not small numbers is what we think those numbers look like. There is a lot of value there. If and when we choose to monetize them through an asset sale, that will be a valuable driver for them. We're happy to take more questions. Hi. Hi. Who's it? This is Garrett from Trouble House Capital. How are you? Thanks for calling in. Absolutely. Thank you. Just another question on the green energy business. Yeah. In the past, you've talked about cap rates on these development assets of 8%, 9%, 10%, 11%. Yeah. Can you help put that into context? In the value add real estate business, the cap rates discussed are more like 4%-5%. Why is it the case that the cap rates in the green energy business, which as you mentioned, has these tailwinds and has guaranteed pricing for 20 years through the FIT, why are those cap rates so much higher? Part of the answer is that's a pre-depreciation cap rate. We actually think there's a market mispricing. If people think that your asset is only good during the FIT period. In other words, depreciation is roughly about half, right? If you think that there's no terminal value to your solar plant after 20 years, then it means that your renewable energy asset is also generating about half cap rate. We think that is manifestly wrong. It's interesting because there's a difference in pricing between global solar assets, which do see value beyond FIT periods, and Japan, which seems to put no value at all. We run the numbers on this. What happens after 20 years is you do need to do, this is a very small degree, and you probably know this, but depreciation over time, less than 1% a year of the ability of solar panels to produce. You do need to do some changes in what they call, and forgive me, they're called power conditioners in Japanese. I can't remember what they're called in English, but the equipment, it's not the solar panels. You need to take those panels that convert them to electricity. You need to do some conversion. We run the numbers on that, and we fully expect to be a sub-10 JPY per kW power producer, which would make us well below 10 once the FIT period ends, which would mean that these are going to be very profitable energy assets. Again, if there's a premium for renewable energy, then it would be even bigger than that. Yeah, our view is it is actually a mispricing. Okay. Yeah, because it certainly seems out of line compared to how these kinds of assets are viewed in the United States. Exactly right. Okay. Another question on PROPERA. Longer term, if it's successful, can you talk about the cost structure a little bit? One specific question is there any kind of revenue share with Fujitsu? No. Those are our economics. Yeah, it's got the classic platform, kind of exponential economics to it. We put $2 million into developing the system. We've continued to operate it, but the ongoing IT requirements are de minimis unless we want to bring in new functionality that we think we can monetize. It's a very small team. We're going to have to put people into a certain amount of client service, but it's a very straightforward system, and it's an automated system. Client service is a little bit. It's fully automated. It's just like, here's how you set it up. Congratulations, you're about to make more money from your hotel. Yeah, the numbers that I said between JPY 600 million-JPY 4 billion, call it, again, out of U.S. dollars, $6 million-$49 million a year. Almost all of that just drops to the bottom line as a P. We like the business a lot. Of course, we want to do more of it. More would be not only taking more market share, but adding capabilities. I've talked about this on previous calls. Currently we're focused on hotels, but this is a dynamic pricing algorithm, so you can take it to other assets. You can take it to karaoke, you can take it to stadiums, you can take it to museums, concert halls. You can take it to retail. Clearly already the airlines have figured this out, and sophisticated hotel operators have figured this out. This is a very low cost, very high-quality product. With machine learning and a huge database, It's Greg's question earlier, why do we think we can do this and get this kind of share is because we think we have the best product in the market. Having more data to feed the AI and the machine learning, we think increasingly give us ability to deliver more economics to our hotel customers. Okay, great. Yeah, I think the strategy of getting as many customers as possible rather than prioritizing near-term cash flows makes a tremendous amount of sense. Thank you, and best of luck. Yeah. Exactly. Yeah, it's interesting. It took us a while to get there. We're classically a huge cash-on-cash return real estate, then we did energy, again, clean energy. It took us a while, my apologies, to kind of get to, wait a minute, we should just go for growth. We should get this thing out there. A little bit internally, just to take you inside the curtain of like, what? The whole point of this thing is for it to be fully automated and for people to make tons of money. Why would you want to break a system and give them something that doesn't do this for them? The answer was, in order to give tenants the ability to test in a way that kind of asks less economics in remote compliance. Yeah, we're excited. We think this is the right way to go, and sorry. As usual, I wish I could figure this stuff out quicker. I'm sorry it took us a while to get there, but we think this is a big opportunity. Anything else? We're open again for any questions and/or input. Yeah. Hi, this is Greg again. Can you hear me? Yeah. Thank you. Just a quick follow-up, and actually a contrary question to Will's question. I was going to ask if you would accelerate the investment in renewable, and whether you would also consider investing from your funds, especially in the secondary markets, and any thoughts on the trajectory there. Thank you Yeah. We do have ambitions to do more. There will be three potential drivers of our renewable energy business. One is clearly the solar. It's the most competitive. People talk about, for example, wind, kind of offshore wind. It's just so expensive. It has that advantage of being able to be sized, but it's just literally our calculations are about seven times more expensive than solar. Solar is a super competitive asset. To the extent we can get advances in battery technology that will help it become a base energy asset also. Solar is an area we have significant capability and doing more work on. The second one, as I said, is local and green biomass, which has limits in terms of the size. We're doing kind of local forest, and we're going to prevent forests in Gunma, which is why this is truly green as opposed to kind of doing chips in the Southeast United States and sending them across the world, which we do not think traditional biomass is absolutely green. Solar is a really obvious one. Green biomass, we've done a lot of work on and are making progress on. We hope to be able to introduce that in the beginning of the next kind of 12 to 24 months to our portfolio. The third one that's a little bit of a variable is onshore wind, where we have more coming. We'd like to do a lot more, as I said, because of the utilization rate is higher than wind. Wind has the ability to deliver kind of a lot more, kind of some mass. That is not necessarily the case with solar, given the limited amount of land that's available for continued solar activity here. There, it depends quite a bit on government policy and what they're going to do on the grid, because the problem you have with wind right now is the grid is not kind of strong enough and not smart enough necessarily to accommodate it. We do need some help over the next five to 10 years on that for us to be able to do a lot more in wind. If possible, wind is far more competitive, onshore wind is far more competitive than offshore wind. Probably more expensive than solar, but you're going to run out of solar opportunities. Something maybe that's more like a 2.0x-2.5x to solar as opposed to offshore, which is 7.0x. Those are the three drivers. We do have a pipeline for onshore wind. We will do more there, we expect. We will do more in solar. We expect we'll do more in biomass. The key question is how much more can we do? We're going to try to do absolutely as much as we can. Would you consider a solar rooftop, or are you doing just normal plants? Yeah. The problem with rooftop is you do need a sales channel for it. Yeah. We're trying to be thoughtful about everything, and that includes rooftop. It is a different business model. You do need to have the ability to service or do small scale and get it up there, and potentially service depending on the business model. Yes, that is something worth calling out and we're thinking about. Yes. Thank you. Thank you. Currently, there is no one in the queue. We've gone over an hour. Sorry about that. I guess we should probably take a... Someone just popped up. Are we done? Unless there's anything else, I think we're going to bring this to a close. Thank you, everybody. We really appreciate your time. I appreciate the opportunity to work for you. I know it's a very hard time in the world, so everyone take care and be safe. Have a good day.