Ichigo Inc. (2337) Earnings Call Transcript & Summary

Hi, everybody. My name is Scott Callon from Ichigo. I'm the Chairman here. Thank you so much for joining us today. I'm working off with a presentation that's in front of all of us FY '23 Q2 first half corporate presentation. I'm joined by Tet Fujita, who is our lead Independent Director and also by Dan Morisaku, who is a senior member of our finance organization and the Head of our Global IR. Thank you, everyone, for joining. We're really grateful for your time. So let's jump through it. I'll go to the first page, which is page 8, it has kind of the key items of the quarter. Look, it was a good quarter. We don't run the firm on a quarter-by-quarter basis. Everything you do over the long term, we build off of the success you have in the short and medium term, but it was -- it went -- first quarter was light. We had fully expected to get all of it back in this quarter, and that's exactly what happened. Look, it's an incredibly difficult time in the world right now as there's enormous geopolitical risk, of course, primary focus at this point in Europe. Gold interest rates have gone up very dramatically with inflation that's been -- have been experienced for decades. The yen has appreciated very substantially due to the interest rate gaps that emerged between the yen, which continues -- Japan continues to have kind of a very low inflation environment. DOJ -- it does not face the inflation risk that other Central banks are experiencing and give you some sense of that. I mean, top line inflation here is running at 3% in other countries running at 8%, 10%, 13%. Core inflation, it isn't called core, but it's really core inflation the way it is described in the rest of the world, which is inflation fresh foods and energy prices reach the most recent had a 1% handle on it. So the DOJ continued to focus on maintaining growth and frankly, hitting its long-desired 2% inflation target, which is still below quite everything that's happening in the world. So despite all that, we're fine. I mean the -- this is a business that is rooted in the economics of Japanese real estate and sustainable energy none of those -- the major -- it's a domestic business, the macro environment changes in terms of the geopolitical risk are not hitting us here in Japan. The global rate increases are not hitting us here in -- And where yen is not particularly relevant to where we run our business. So things are going -- are going actually very well. Second point is Japan reopened literally this week. So on the 11th, we threw open the doors finally to the world. So you can come to Japan, you should. It's fabulous, continues to be fabulous, because it's the same clean, friendly, delicious country that it was 2 years ago before we went into our COVID hiding period. And the end is literally [indiscernible] and we have not experienced any inflations really to speak of. So it's extraordinary affordable. It's a wonderful place and what can I say, you might consider coming. So the reopening of course, is very important to us for part of our business. We have about 1/4 of our assets, hotels pre-COVID that was a great business, in COVID it was a terrible business. We are reemerging from that. RevPAR, select revenue per available room, that is the definition on at the bottom page is up 85% year-on-year, so it's really a V-shape recovery. Having said that, we should be aware that we're still down very substantially from pre-COVID, still down nearly 37%. So -- and really what happened is COVID we were running at 100% at the bottom, we go down to literally 10% to 20%, we bounced up to around 60%. And so it's a way of saying that there's a lot more to come in terms of the recovery. Not only Japan reopened to the world on Tuesday of this week, it also began its go-to travel program. So all of us living here to the extent that we have 3 vaccinations, it's actually a condition of being in the program, and Japan is highly vaccinated. So that means that almost the entire country is going to be able to take care -- the inventions program, you get kind of like $40, $50, a nice subsidy to go use hotels. So Japan is open to the world, Japan is also and has direct subsidies to tourism which is, quite frankly, about helping all the people who are in the businesses have suffered devastation during the COVID period, but it's also kind of like Santa always saying hey kid, you can actually go out and enjoy yourself have 2 years of having robust kind of social distancing to try to protect the nation and we're already [ making minutes ]. So anyway, hotels are recovering, and that's fantastic for us. We have a robust cash generation, and it's funding both growth investments and share buybacks. We expect to buy about JPY 45 billion of assets this year. I used to use JPY 100 because it was convenient case with at JPY 100 to longer -- it's no longer, call it, $450 million actually where the yen is right now called about $300 million, that's up 50% year-on-year. We did $30 billion of acquisitions last year. We're doing -- we expect to do $45 billion this year. Share buybacks. We did $1.5 billion last year. We've announced $4.5 billion for this year, so that's a 3x year-on-year. This reflects a very robust recovery in our businesses and the stock price is banging around that JPY 300, we think it's enormous good value. So we have the ability to finance growth and ongoing buybacks, what we think is good value in terms of our stock. Turning to Page 9. It shows what's happening across kind of our earnings versus costs, our stock earnings. So these are effectively fixed kind of baked in earnings run at about 200% over fixed expenses. On the right-hand side, you can see what's happening in the three different business segments: Sustainable Real Estate; SRE, Asset Management, Clean Energy. The Sustainable Real Estate business is really important. It's actually off year-on-year. That's mostly because of vacancies and Odaiba, our big office asset, which we're actually retenanting. And so that -- we expect that to rebound. It's -- over a multiyear period, it's taken a very big hit in terms of the earnings off of hotels. So we expect to see that rebounding. It's down 8% year-on-year. We thought it's going to be worse. We're actually outperforming the plan, and we see kind of a robust recovery. Asset Management is off, that's kind of one-off stuff. We expect to see growth in this going forward in Clean Energy. It's kind of being on solid because it -- it's just really about our ability to produce Clean Energy and bring in new plants online. Turning to the next page. We have started all in the disclosure. I'm not going to go into details on this. It's a way to try to give you more transparency on the value creation that we have in our Sustainable Real Estate. On the next page, Page 11. All-in OP, so operating profit is up about 50% year-on-year. Cash EPS is up 24%. Our accounting earnings vary substantially, under report total economic earnings or cash earnings or a much better proxy for that. And as you can see, our cash EPS is -- year-to-date in the first half at 1.7x our accounting EPS. It's a way of saying, if you take the bottom of the range for our forecast for this year and the data services to, so if you got a Bloomberg or Yahoo! Office REIT whatever in Japan. But by the way, Yahoo! in Japan is absolutely huge, more like kind of Yahoo! in the United States in 2003, but -- any way, if you got to Bloomberg, you go to Yahoo! you go to Quick, you go to any of these various data services. They'll show us using the EPS number of the page of 14 the bottom of the range and it puts us at 22x earning. We actually use cash EPS, which is actually a better indicator of the firm. And I'm not trying to position us. It'd be nice to kind of show the look at the EPS number, which is doubled year-on-year ago, wow, we've doubled. We have cash EPS is a much better proxy look at kind of plus 24%. It's where we are in terms of total return to the shareholders. But if you use the cash EPS number is in the middle of kind of somewhere in the middle of the range and you do the math we're actually at 30, we're actually 10x earnings. And that's why we say the shares are very undervalued relative to what we see and -- what we see in terms of forward activity and particularly with the reopening that is very positive for the business. Next page shows breakdown within the various segments, staying on all-in operating profit. Asset Management is down 12% year-on-year, that's one off makes to one-off increase because of some office asset sales. I'll talk later about the office rebuying assets, so that will come back. Hotel REIT is much smaller, but it's -- it kind of gives you some sense, and you can see on the right-hand side of the page, it's the Asset Management revenues on the Hotel REIT, up 40% year-on-year, and that kind of gives you some sense of what the rebound is looking like. Sustainable Real Estate is double year-on-year. That's primarily led by what's happening in the multi-asset part of the business. Ichigo Owner is going to book a lot of money revenues and earnings in Q3. So we'll report that -- those transactions that are closed, we'll report that in Q3. And in Clean Energy it's kind of bouncing around kind of is a little bit weather effect plus/minus 1%, but there's nothing happening there other than accounting just running for. Turning towards the business model and our sustainability focus. Page 14 shows what we look like. As you can see on the boxes to the immediate left of the forecast, you can see the first half. If you double the stock earnings, which is in the navy blue, that comes to about $15 billion. We don't expect to get to $15 billion. Actually, the second half, we have fewer earnings coming off of our Clean Energy business because we go into winter and you just have kind of less production in that business is significant enough, and it's a big driver of stock earnings for us. But anyway, we're well above what we're seeing in terms of the forecast on stock earnings. And we'll have a very productive Q3, and we expect to have a productive Q4 also and will drive our foreign rates pretty substantially towards -- through the end. Page 15 shows pro what's happening with the stock earnings. I'll go pretty quickly because this is a material we provide on an ongoing basis so you can track us. But it is a fundamental of the firm that we have as I pointed out on the previous page, both stock and for earnings, and we have a breakdown in some diversification across our stock earnings as you can see on this page. Page 16. One of the things that's important about our business is we effectively have embedded forward earnings. We have an earnings bank for future periods. Because what happens is we have -- and this is overwhelmingly in our Sustainable Real Estate business. We add value to our assets and that value is real. And the third-party appraisers will look at our assets, and they will assign unrealized gains. But from an accounting perspective, you don't show any value creation until you do an asset sale. So it's -- to be Ichigo, is that they'll be building all these earnings into the future. Page 17 shows actually that those estimates by the third party appraisers of what our embedded unrealized gains are which is small. Year-to-date, we've done 1.7x. So we've transacted at a 70% higher profitability, then the abradable value the third-party appraisers, which in Generally, as you see on the page, we're doing about 2x or more based on what our pipeline had right now. We think we'll get to 2x also this year. So this 1 mix will go up. At the current moment, based on transactions that are expected to grow to 2.1x. Next page shows cash generation. We're not about accounting earnings. We're about delivering maximum cash out of the business on behalf of shareholders. In general, as you can see, we also generated economic operating cash flow of about twice or net income. Page 19 goes to the point I made earlier on the extraordinary instability. And I think the right would be chaos and global kind of interest rate markets and it's completely well to us. We are funding at 89 basis points last year. We're pending on 89 basis points now. Continue to borrow as much as we need. And so our borrowings at 89 basis points for 10-year loans -- it continues to be an extraordinary wonderful place to be a borrower in Japan, and we're taking advantage of that on behalf of all of you, our shareholders. I would point out that -- there is one probably new driver of demand for Japanese real estate that comes based on this difference. So for years, Japan was the one place in the world where you could borrow at 100 basis points and buy assets at 500 basis points. And so you would just get a 400 basis point-carat and not doing anything. I mean this as long as your asset didn't erode in value and didn't have the absolute plunge in your NOI, you would win. And so Japan was an extraordinary powerful value market. And during the period that went through of kind of global kind of 0-ish interest rates, Japan lost its uniqueness because like, well, I mean, it's not quite the same as Japan, but you could borrow new asset for 300 basis points and fund assets at cap rates of 300 to 400 basis points. And so you could get a positive here in the United States. In the last 6 months, that is completely disappeared. You are finding at 300 basis points for a 300 basis cap rate asset. Suddenly, you're now planning at 700 and you're deeply underwater. And the cap rate may have gone up a little bit but not enough. So what's happened is, globally, Japan has once again become a unique source of safety and stability and the returns available for real estate assets. So Japan has just reopened. We expect -- and we're seeing this that there is going to be a fairly substantial increase in demand for Japanese assets. There's one element that is distinct what I describe you, that is also driving asset demand -- real estate asset demand from global investors and that's people taking a view on yen and the yen is at like 145. We think that's really good value and buying capital real estate for that reason. But that's a completely separate phenomenon the one that I just described, this is kind of structural and everywhere. Real estate has gotten really, really hard all over the world except for Japan. I mean it continues to be an extraordinary place to be in real estate investment. Page 20 shows ongoing progress on our part in kind of being who we are. We care about the world and every choice we make about trying to move the world forward. And so we are increasingly recognized it's being best-in-class in terms of our ESG principles, in terms of our ESG activities. And that -- it's a good thing. Financial institutions increasingly care about that and it gives us access to capital and preferred terms. Next page, 21, speaks directly to one of the essential elements of our sustainability focus. We are robustly climate positive. We have through our sustainable energy business, which is solar energy and wind energy, we generate 2.5x the CO2 reduction under our emissions. As you can see on the right-hand side of the bar graph you have in front of you, the light blue is our CO2 emissions, we expect those would go down fairly substantially as we increase the current kind of our office and our real estate activity to renewable energy sources. Page 22 shows our progress on that. At this point, 60% across the group has been [indiscernible] to renewable energy. To give you breakdown on that, I'm going to say it's 21%. And I think it's a number. I think 21% to 22%, it's the cut over for ICH, and in this company, Ichigo, which we call internally ICH. 100% which is Office REIT has cut over and 33% Ichigo Hotel has been cut over. So this is something that is going to happen and it's going to accelerate over the next few years. This is a large. I mean, global client -- climate change is real. The impacts on people all over the world are real, actions being taken by us and everybody across the world, including, I'm sure you on the call, are really going to make a difference for the future. Turning to more details on what's happened in terms of core business. Page 24 shows our buy and sell activity. I kind of already [indiscernible] on that, the things are strong. We are increasing acquisitions to reflect our ability to sell with strength at very high prices. You can see the gross profit margin for the first half was 29% for sale price, perhaps more relevant telling you kind of what that outlook on about activity, it's GBM is 41% against book bearing. Next page shows Ichigo owner activity over a multiyear period, that is a business, which as you know, or for those of you who have sold this a long time and many of have we're grateful team for that is super kind of prime brand-new residential real estate focused in Tokyo, great locations. There's a little bit of stuff out of -- outside of Tokyo, but also in super prime locations because Japan has done such a good job of defending wage incomes and incomes across the board during COVID, residentials continue to [indiscernible] here. And it's a bond that actually offers a return of the kind of 20 basis points on the tenured JDP. So there is extraordinary demand for residential real estate, and that's what Ichigo specializes in, and it continues to be a business that we target at least a 10% gross margin on a whole period of generally so it looks like 7 to 8 months when you include the ability to borrow an 80% LTV against the ROE numbers, even at a 10% margin, and we're talking kind of like something like 15%. In actuality, we're generating margins that look like the mid-teens GPM. So it's a business that both is an extraordinarily positive business for us, one. Two, those gross margins are actually lower than much of what our competitors were providing better value to investors. And three, that probably explains why there's just an extraordinary amount of demand for the assets that we're generating in this business. Next page shows some of the diode implications of what we're doing for owners. One way of thinking about it is your ability to buy well is directly linked to be able to sell well. We thought this business originally is primarily going to be -- we're going to serve kind of after individuals and corporations and turned out that actually there was this huge demand from institutional investors, which will have kind of take kind of 15 residential assets at a $10 million and [ buy $1 billion ] -- $150 million portfolio was something very attractive to institutions. So that became the bulk of our activity. We continue to do some direct sales activity to cash-rich corporations and individuals, and the ability to broaden out and have a [indiscernible] and stronger kind of set of channels for selling out of this business is important for us. So we started a new co-ownership business, meaning by co-ownership, we mean kind of small lot you can now kind of $10,000 a shot, kind of real estate that gives you direct ownership, unlike a REIT, you can get the tax advantages from the ownership, the same thing that we do with the way we run our business and we have the tax shield from depreciation activity. So building out the sales channel for that is to us. We announced recently a brokerage relationship with Madison Networks to do that. But it's a way of saying we are -- we continue to build out not only our kind of core capability in acquiring real estate. We buy super prime residential empty and we lease it ourselves, and we do it really quickly. And we can do it really quickly. We've got -- we buy assets area than this business moved out really, really well and can underwrite really well and then the ability to sell this and also to channels is an important and interesting to us. So you'll see more developments in terms of our channels as we go forward. But this is something that's a real growth driver for us. Turning to Page 27, to give you some sense of something we're doing that is primarily on ESG topics, but it also has direct implications for us growing kind of our brand and also a potential new source of income for us. We've started -- we've actually taken full of a public prior partnership in New Cosco, right next to Tokyo, we've taken an old owned by the city of that they were going to tear down and turn into 100 apartments or something like that. Our suggestion was, and this is what we do, our Sustainable Real Estate business, we are violent against the idea we should just be tearing down all buildings. It is profoundly bad for the world. It's wasteful of resources, it's wasteful of money. At the core of our business is we take existing assets and reposition them and we make some -- into something. So that was the idea. It was an old warehouse that was going to be torn down, no other stuff do that. Let's keep it, let's kep its essential [ in terms of ] integrity as that kind of an asset in turning something new. So we are repositioning it. When I said it was a warehouse, they had time to kind of wholesale kind of retail going on in there and turning into something that's actually brand new and really interesting. We are targeting 1 million visitors the year for this month. And the next page shows kind of what existing on it. It is focused on local food and agriculture, runs up into kind of Tokyo. We think it's really exciting, really interesting. It helps kind of develop another kind of business model for us. So we have been -- or were asset owners we're asset managers, the business model this one, in this case, is effectively a content kind of provider, border, a master lease operator for a public entity because of land and the asset to gene to be owned by the city [indiscernible]. Page 29 shows our three public vehicles, Ichigo Office REIT, Ichigo Hotel REIT and Ichigo Green restructure fund, which are half particularly, Hotel REIT has suffered during the COVID period, as you can imagine, even have said that, it's running a dividend yield of over 2% in a country where kind of the bonds effective being nothing. So it tells you how robust the performance of dates been just in the downturn. Next page describes kind of activity we're doing to support acquisitions by both the Office and the Hotel REIT. We do think there's going to be growth in both of these REITs and that growth will be positive for the REIT shareholders, and we expect to be positive. Ultimately, the sponsoring REITs, we do earn asset management expect come off of the REIT. So for a fully positive to all of us as shareholders and the family also. Page 31 shows activity in the Clean Energy business, which is slowing down in our classic kind of FIT -- FIT and tariffs part of the business. As you can see, we expect to have -- we'll bring three new plants online this year, two of them are already online. So it's really kind of what's more interesting, we have a little bit of a pipeline we can see in the royal blue on the upper right side, within our kind of the FIT and tariffs care business in solar and wind. We have kind of a couple of things that are going on, we fully intend to grow this. I mean, look, both the -- what's gone so horribly wrong in the world with the Russian invasion of Ukraine is obviously, it's a humanitarian disaster and a crime and it's also something that has impacted everybody involved with the kind of transmission mechanism of kind of enormous increases in energy costs and strategic and security linked to the resin energy. So doing everything we can to move off of fossil fuels to move off of imported fuels and to move of reliance on DIC DR regimes is clearly very important for the world, and that includes you be. So everything we're doing here is important. We have two kind of major initiatives, one we've talked about before. We have a green biomass initiative and so Ichigo Green, which is -- we can go to this indication to there are always a biomass that are emphatically not green. We will not do that. So anyway, this is generally green and local biomass that we expect to -- we have 5 or 6 plants in the pipeline, it's -- probably in the next kind of year, we'll begin activity in this area. Total investment will be something about 15% relative to the existing kind of set of assets we have. So about 15% growth in term is what we see as kind of an immediate kind of short-term runway on that, and we would expect to do more in time -- and then the -- but that's not bad right now. We see that as a great opportunity. And actually bigger than that is moving into non-FIT, so non-FIT is where solar. Our current target is, as you can see on the page, we have 143 megawatts of current operating plants. Our target is to do -- and it's all under the FIT regime current targets do about 100 megawatts. It's our shorter-term midterm targets you go anyway. We'd like to do a lot more than that. But anyway, and above, we're going to go for 100, it seems like a round number and big enough to be interesting. And with respect to about 40 megawatts is visible at this point in the pipeline that we expect to deliver meaning kind of the conversations are well underway with providers of land for us to operate on that one and provide -- and this will be solar. And the next big element of it is solar power has become enormous competitive globally and encrypt. So we don't need to rely on the government program to have highly competitive solar power prices and it doesn't require us to have the current kind of high levels of for it didn't be competitive. So this is a business. So the phrase is used is good paring where renewable energy becomes able to stand on its own feet without any help from the government, we have to ship that point, and that's a good thing. So we expect to build a fairly large solar business that will have many of the characteristics of the FIT business, meaning that we expect, in many cases, and long-term contracts with purchasers who want to own solar and with the security of solar. One of the things that is increasingly the case is a recognition of the extraordinary volatility and then the energy prices as linked to geopolitical risk. And so the though that sand is not going to change based on what's happening in Europe or Taiwan for that is actually the matter is actually really important to a lot of us. Next page shows activity in terms of share buybacks, this is the sixth year in a row that we bought back stock and said earlier this year with we're executing 3x what we did last year. And finally, Page 33 is a reminder that we have a JV shareholder program, which is pretty innovative in the way we're trying to take advantage of. So we're sponsor for the daily. We've actually put in place two consulting contracts with JV teams. We think there's going to be an opportunity to do things that are interesting in this space in terms of content, the effective use of real estate, but -- and the branding kind of value is very significant. If you watch the daily games on TV, on a very regular basis, you see this huge use Ichigo kind of banner show up, which is great. But there's brand value there is ongoing commercial value to the business. And the other thing is generally, we have some sponsors that you get all these takes as you're a sponsor and kind of people give tickets away to, I don't know if their boys or I don't know relatives, but in our case, we think these tickets belongs to our shareholders. So we have a program where we're giving away our tickets to shareholders, not only at this company, but of our REITs and our [indiscernible]. Thank you for your patient listening. I know I spoke quickly there's a lot to talk about. I kind of double the onward. My apologies for that. I'm trying to speak English better. and now ready for question and answer my comments here and all of that. We're grateful to have you on the call of us. Let's see.

Greg? Have you raised your hand?

Can you hear me, Scott?

Yes.

Yes. My question would be on the a follow-up on the hotel business. So as you mentioned that about 25% of the portfolio is in hotels. My understanding was that you were looking for the situation to improve to perhaps sell some of those hotels. I've seen that at the same time, you actually bought two hotels. Can you maybe develop a little bit on that the portfolio rebalance, what's the plan and any particular kind of fine-tuning on that?

Yes. So one of the things that we are increasingly doing is we're looking hard at how we grow our asset management business. So one, without putting -- kind of point, but it's not necessarily the case that when we take a very explicitly in the case of offices and hotels under our balance sheet that we expect in this data. So -- so that is kind of -- and look, we think the asset management business is an important business. I mean Japan can't fund the future with higher returns. And so there is significant social back for being an asset manager who is truly fiduciary in terms of the operation and the success that deliver to shareholders. We think we have a very strong track record. We are the only -- actually both Ichigo REIT and Ichigo Hotel REIT are the only two REITs in Japan that only performance-based -- performance-based fee income, we think it creates strong alignment. And so -- and again, Japan has not escaped from its 0 interest rate period. And so this is huge demand for a return that we think going back to the point I made earlier we can offer manifestly in offices. And we think in hotels, we just had to go on hibernation because of COVID. We're not prudent to do doing much there. So -- what's happening with our hotel portfolio is we are kind of -- actually describe this. I mean noncore assets, noncore assets are going to go out the door. Things that are interesting to us potentially in terms of value-add in a sustainable real estate business and exit into a REIT or a third-party investor are interesting to us. But yes, it is an ongoing kind of view the problem with hotels. I mean the advantage hotels is the cap rates have pushed up really, really hard. And so increasingly, if you want to buy a good asset, that's an office asset or a residential asset, the cap rate looks something like a 3. It could even go down in the 2s. Hotels provide some opportunity and harder to manage, meaning their operating assets, there's ability for us to add value. And you can get a cap rate on that looks normalized, it can be a 5% or 6%. So recognizing that COVID has not completely come to an end. And when I say that specifically, I mean because 20% to 30% of tourists in have been coming from China and they're not coming at this point. So really to get full normalization of the Japanese tourism market, we need to see a reopening of China also. Well, we think they're interesting opportunities. But there's -- we capture ourselves at 25% of our portfolio in hotels for a reason because hotels reprice daily, that fundamental kind of risk outlook on hotels, despite our ability to make greater good money there has not changed. So what you're seeing is a little bit of portfolio repositioning, we think we're strengthening the portfolio. We're going to generate -- we're going to do two hotel sales this year. They will both be profitable and we'll fully expect to do profit multi sales into the future and it could well and also including to our Hotel REIT. Greg, did I answer your question?

Yes. And then a separate point, if I could ask an update on the Tradepia building and how that's going for the vacancy?

I'm trying to be super direct if that's okay. And so hopefully stream in the room. So diamonds going particularly well. which is going to say, vacancy at this point, it's about 55% -- I'm sorry, occupancy is about 55%. So Odaiba is this -- it's our single big asset. It's the only large office we own our experience with it has given us kind of every reason to understand why it is that we, for the most part, do not get state in loan. And we bought it at a very good price. And it continue to keep valuable, and this is going to be a way forward, but the office experience that we've had in large office has been terrifying. I mean, this massive vacancy big exits had a very high kind of IT elements in its tenant composition when went into COVID, we thought that was great because I think companies are very profitable and they're growing. And then COVID happens and on that the companies are like, actually, we don't need to in the space, and we're giving it back to you. So data and kind of all this kind of -- it's interesting, but small and medium companies have largely held their real estate office rules today imports because of competing for talent. Is it short of the talent, being able to be able to probably more space for employee has been important to them and not the big companies, which, I guess, are branded happen to be for data same way ending them back much anyway. So Odaiba from being with fast and performing assets similar to our hotel portfolio to being a tailoring asset due to COVID. And then leasing it back up, we thought we're going to get to 80% occupancy this year. I think at this point, it's probably unrealistic looks more like 70%. And our small and medium kind of portfolio, which is every other asset that we own in office is running at kind of like 95% occupancy. I mean it's just completely [indiscernible]. So that's being tough I mentioned on our Q1 call that we're taking a very hard look at how we're repositioning the things we can do that and we actually got a Board meeting and we talked about it because I think we need to do something new and different. And doing different is good for the world. And I think we can do something down difference that's good for our shareholders also. But Odaiba is the one kind of lead point in everything we're doing. I mean everything else is kind of firing on all cylinder in a rare now. We're happy to take any questions? I did get a question in advance. So someone that could be on the call, so let me address that. And the question was, the [ correlation ] infrastructure fund, there was So that is a peer. It's a solar power illicit funds peer to Ichigo Green, either with TOB by sponsor on September 28. The TOB runs to about a 10% premium to the existing share price. At the time, the TOB runs to November 11, I think it is -- and the question was, what do you think of the price? And what do you think of the -- kind of what's in the kind of the -- effectively the TOB offering memorandum or a sponsor says, we really need to do this because we're at risk of going kind of negative return in this business meaning that costs are going to be higher than our earnings. And there was also a commentary about our kind of restrictions on solar power purchasing within the FIT regime. So the [ feed and ] tariff regime could be very negative for the infrastructure front. And therefore, we think it makes sense for us to take this spread. So look, we're in a mission of TOB. So for not make comments on, this is a fantastic TOB. I mean the share prices are trading, it's trading kind of right around a little bit under the TOB price, which suggests that the arbitrage activity going on. At this point, no one has shown up and said is retail pricing in more for it. So I hope the question will allow me to kind of leave that one as it is. I mean it seems to be trading fairly normally. With respect to these kind of the classic kind of memorandum things partly drafted by lowers actually flows and partly they can make shareholders that they could sell it. We've got all of the issues we would expect to kind of us going negative earnings and restrictions on Power put we quite honestly don't see that, and then we'll go directly on that topic. We don't see it. We have a very large -- we have our own Ichigo Green instructor fund. We have a very large solar power business. I don't see it at all. So it's interesting target? I mean -- and it actually very specifically, this whole thing about power restriction, if you produce too much lower power, and the grid can't take it, then the government has a right to say we can't take the power and so you have to turn off to solar power. And literally, the number of instances of that has halved in the last couple of years because the EPCOs, the electric power companies have introduced kind of more flexible and smarter grid mechanisms. So -- and it should be -- and I couldn't accommodate kind of really turn off power for an hour or 2 hours, you have to turn it off for a day. And so the number of tower restricted power actions has launched. I just talked earlier about kind of this very robust demand for renewable power. The grid is getting smarter in Japan. So we actually don't -- would not share with you that was implicit and explicit in the TOB material saying we think there's a problem and we need to take this private. Now there's one thing that is one [indiscernible] on these listed infrastructure funds, which is why I don't call them REITs because I'm actually not red. So REITs have kind of permanent tax-free status and kind of pass through the income without having paid over tax -- the infrastructure funds were started in Japan with only 20-year tax-free. And I don't know we're 10 years to do this at this point. So that tax-free window is getting shorter year-after-year [indiscernible] element of kind of the infrastructure fund as a vehicle completely separate from whether solar or wind makes sense in Japan because they do make sense in Japan, that's a completely separate kind of issue that I'm sure the sponsor was thinking through when they decide they want to take this product. That was a question that came in advance. So I'm happy to -- now that I've answered that, happy to go to all of you who are on the phone on the web as it were, in any and all questions. I'm going to leave it there. Unless there's anything for anybody else. Before I -- it's -- you're all busy. It's a the world. And that's then from any else we'll bring this to a close. Again, thank you very much all of you for your time for grateful. So it's been time with you on us, it's excess be difficult to ask questions on a forum like this. And it's very common for us to take questions for you offline, and we welcome them. So thank you very much for your time today, this evening, this morning, wherever you are in the world and per week to work for all of you. Take care.