Hi, everybody. I'm Scott Callon, Chairman of Ichigo . Thank you so much for joining today's presentation. I'm joined on my right by Dan Morisaku, who is a Senior Member of the Finance Team and the Global Head of IR . We're going off of the FY 2026-2 Q1 corporate presentation. Thank you so much, everyone, for joining us today. It's just a single quarter. If we're all lucky, I will speak shorter rather than longer today because it's just three months. The quarter itself was light. All-in OP and cash EPS, those are the two major KPIs you should be monitoring us for. We're down 20% and down 12% respectively. Nonetheless, things are very good. We're on track for record full-year earnings. You can see the progress better in our stock earnings that are up plus 12% year-on-year. We expect record stock earnings this year.
That's 26% progress versus the full-year forecast. Flow earnings were down 45% year-on-year. Nonetheless, we expect to have record earnings in the flow area, also on accelerated asset sales from Q2 onwards. Hotels continue to be very strong. All-in OP is up 47% year-on-year despite having two hotels closed for rebranding as THE KNOT, as you know, that is our boutique lifestyle hotel that will drive a significant increase in earnings at that hotel also. A lot of things in progress are going to be very positive. In clean energy, we're preparing battery storage entry. We expect to do that within the next year. We've got a share buyback of JPY 5 billion in progress right now. We completed about 60% of it. If we do the maximum amount of shares, it'll be 4% of shares outstanding. Again, headline is OP, all-in OP down 20%, cash EPS down 12%.
As you know, we drive cash earnings rather than accounting earnings. Our cash earnings are 1.6x accounting earnings. You can see on the right-hand side, we expect full-year OP, all-in OP to be up 14% and full-year cash EPS to be up 10%. That's not the forecast. Of course, our goal is always to beat the forecast. We have done some work that hopefully is useful for all of you to try to give better clarity on our various businesses. We have a variety of them. In fact, we have five operating segments. They have a joint underlying deliverable, which is a significant value add and sustainability. We think the two are interlinked. You do things as a business that's sustainable; you do things for a society that's sustainable. That is a durable source of value-add activity also.
Across the five different segments, very different outcomes in the first quarter. Asset management and hotel are both up about 50% year-on-year. Sale of real estate SREs down 29%. Ichigo owners almost delivered nothing, is down 99%. That is going to change very, very dramatically. A portfolio of businesses that offer diversification and earning streams, but tying to a core capability of Ichigo's ability to deliver value add on a sustainable basis over the long term and growing value for our shareholders, of course, and all stakeholders. From this quarter, we're trying to give you a very specific view on what's happening in all of our segments on an all-in OP basis. Here's what I'm not going to go through in a lot of detail, but this is meant to give you more transparency.
Not only do we have four segments, we also have diversity within those segments in terms of the activity. AM, we've got stock earnings up 11%, full earnings are up 151% because we had Ichigo office performance fees and also some private fund fees. Sustainable real estate SRE, that's down 29%. Stock earnings up 11%, flow earnings are down 45%. We expect to have a significant uplift from that on Q2 onwards. Hotels, there were no flow earnings in hotels last year in the same quarter. There are none in this quarter, but hotels are very, very, very strong. It's a combination of kind of inbound activity that's very strong and our continuing work to improve hotel services for our customers. It's working very, very well. Owners, again, that's a business.
I've said before, it arguably is one of our, if it's not our best business, then maybe one of our best businesses. It's a very high turnover. We buy brand new residential assets in prime locations. We hold them for less than a year. We have significant leasing capability. We lease them up and we on-sell them. That is primarily a flow business. Any kind of stock earnings is on rental income on assets we own that we get at zero occupancy and generally get up to 90% occupancy within kind of eight months. That's how good the assets are. That's how quickly you can lease them and then on-sell. It's overall only a flow business. We really did very little in the business in this quarter. We're going to do a lot during the year. We have visibility on that. It was down 99% on an OP basis.
Clean energy, relatively straightforward. In fact, one of the things that's missing here is it's really not an OP business. The cash earnings on this are very, very large. You can see the depreciation on this business is very substantial. That, of course, creates a, these are genuinely, this is genuine cash to the firm and our shareholders that we deploy either on growth investments or, as I say, we're doing as a version of growth investments to drive EPS. We're doing a buyback right now. Again, I'm going to go faster from here. This is material we provide on an ongoing basis. We think it's really important to have transparency, to have ongoing disclosure to you on the same topics you can monitor as well. I'm going to go a little bit faster from here.
It's very important to us that we have ongoing structural profitability, meaning that our stock earnings overwhelmingly cover our fixed expenses. You know, we don't need to do anything on the flow side and we'll be profitable. The good news is we have a very durable and diverse set of flow earning streams that are also very valuable, but our stock earnings are overwhelmingly higher than fixed expenses in the first quarter at 206%. Stock earnings ratio was 75%. It was light for flow in the quarter. We would expect that to be more like 50% over the full year. Again, focused on cash earnings with a hybrid model has kind of a durable foundation, stock earnings plus, again, very significant durability in our flow earnings. This is how the earning streams break up across stock earnings and they're diversified across multiple segments.
Ichigo Owners is primarily a full-income business, so it shows up in very small, but you've got significant deliverable of cash to us over hotel, sustainable real estate, asset management, and clean energy. We have very durable long-term borrowings and a strong financial base. As you can see, we run with over 90% long-term borrowings and have consistently done that for effectively forever. What that generates for us is an average borrowing period of about nine years. The current remaining loan maturity is about six years. You can see a way to have interest rate has gone up. You know, interest rates have gone up in Japan. We experienced that also. 36 basis point increase. From this quarter, we've given you, because we have hedges and we came to decide we should probably show you the actual experienced average interest rate that we have.
We've switched and we've modified the data over time to show you what our actual effective interest rate is right now. That's post-hedge. You should know right now 57% of our borrowings have a fixed interest rate and 43% are floating. I think probably we would have a preference to increase the fixed borrowings to more than that, but at the moment it's at 57%. We are selective acquisitions and sales. You can see we had net acquisitions of about JPY 13 billion, so about $90 million or such. This is primarily in the owners segment. Again, that's a really high turnover business. We continue to need to feed that engine. I probably should have mentioned, it continues to be a seller's market. There is extraordinary demand for real estate. Prices are going up. Prices are going up because replacement cost is going up.
We're saying that construction costs are going up. The assets we have on our balance sheet continue to increase the amount of unrealized gains on them. Ichigo Owners, which tends to be kind of a less than 24-month construction period where we agree with the developer they're going to build to spec for us at a fixed price. We don't take any development or construction risk on it. They have to deliver to our spec at the quality and the time that we agreed to in the contract. We take control of the asset and we will again lease it up and sell it in under a year. This is pricing that reflects kind of pricing from 24 months ago. We have pretty short duration cycle risks, but we do take cycle risks and we're aware of that.
What it means is any owners asset that we're getting today on two-year ago pricing has significant embedded gains in it. At this point, real estate pricing is going up kind of gold order magnitude, but construction costs are going up probably at 10% per annum. Something like that would be on the construction side. Depends on what land value is, but all-in prices are going up probably high single digits to low double digits on an annual basis at this point. Here's what this looks like in terms of the total over time. As you can see, we're pretty balanced in buying and selling across our businesses over the long term. In the first quarter, we did a whole bunch of acquisitions, including executed contracts. We expect to do significant selling over the year. We do not expect to grow our balance sheet.
In fact, we think we'll shrink our balance sheet this year in a very profitable way. We have a nice pipeline of good assets at good prices that we're going to create value for our shareholders over the next couple of years. One of the things that we've done in terms of trying to innovate to accommodate tenants, and this is something a little bit perhaps harder to understand outside of Japan because we're addressing a fairly distinctive Japanese phenomenon, we're building out more ready-to-move-in offices. That means we're providing tenants with already fully fitted-out offices. The tenant value to that is it's incredibly expensive in Japan. You come into offices in Japan, they are skeletons. The owners do not take any of the expense of fitting out the office, which can be very high.
It's particularly high if you don't have economies of scale or you're, you know, whatever you are. You're an AI startup and you're negotiating with contractors and it's not kind of what you do. We bring our pricing power, our scale, our professionalism to it. By the way, you move into office, you have to fit it out, and then when you exit, you have to take it back to its skeleton state. It's very, very expensive to go into a new office. As a result, if you can use your economies of scale, and it's not just economies of scale, we're saving our tenants time for the move-in, we're saving our tenants cost for the move-in, we're saving them kind of their brain power. You're an AI startup, you don't necessarily want to spend kind of hundreds of hours figuring out how you're going to fit out an office.
We do all these things, it's very valuable for the tenants, and across the 25 ready-to-move-in offices that we've deployed at 10 assets at this point, the average rent increase has been 60%. The economics are very, very powerful because the economics are very powerful for our tenants. What's interesting is we're not alone in doing this, but it appears to be the case we're very good at doing this. We have approximately 100% office occupancy at our ready-to-move-in offices. We've done some work on benchmarking. A number of our peers have tried this and their occupancy is only about 50%. We are close to tenants. It's something we've always been very, very good at. Probably as another comment that's worth knowing, most owners like ourselves do not try to talk to tenants.
They don't want to talk to tenants because in Japan, you know, tenants are important and they're customers. If your customer says they want something, then it's kind of awkward to say, no, you can't do that, or yeah, you want an air conditioning upgrade, we need to charge you a higher rent for that. What happens is that Japanese office owners, real estate firms, avoid talking to their tenants. We do not. We're very distinctive. We actively spend time with our tenants. We want to know what their needs are, what we can fix. It does mean we're ready to have conversations like, we want to have, you know, this fixed or that fixed or that improved.
We take complaints, we deal with complaints, and it's possibly that on that basis, we have a much richer set of information about what tenant needs are because we actually are talking to tenants on a daily basis. We're very good at this. It has super powerful economics and it's a business that we're expanding. The next page is an example of a brand new asset. We've done this. You've got a before-after, was on the previous page also. This is near Tokyo University. We're accommodating a whole bunch of startups coming out of the university itself. In this case, the increase in rent was not 60% but 80%. Tradepia Odaiba , an asset which was great until it was utterly terrible during COVID, has become great again. It's the biggest office asset we own. It's on the water.
Tokyo Bay Waterfront was where the Olympics were supposed to be until COVID occurred, and the Olympics were then postponed for a year and no one could really attend. We got this massive exit from the space. We had been leasing primarily to large IT firms, and occupancy literally halved. We've battled our way back. The way we've battled back is by building a super tenant community-oriented building. The theme we've used is Tokyo Bay Village. We've set up a cafe. We have events, you know, meet the neighbors events. You can see everybody kind of eating together on our dime, as they say. These are all the tenants gathering together. We've set up a farm on site. Tenants can farm there. They can bring their families. We put in a gallery. It is a very community-oriented look. Modern office buildings can be lonely and cold.
We've done something that is really very powerful. This is not only at Tradepia Odaiba . We have other assets which we've turned into village assets. It's a very powerful approach to solving for tenants' desire for community and support. In many cases, you know, businesses. At this point, I told you this, the building was primarily a large IT tenant building. It's increasingly a startup building. The startups are interacting with each other. We've created an ecosystem that's supportive. It is, you know, this is, things go wrong. Things go wrong in the world. You need to be prepared for it. You need to take action with respect to it. It has been a major and highly successful repositioning of this asset and is developing and is providing, you know, very, very powerful economics for our shareholders. Again, hotels are doing super well.
You can see the RevPAR is up 27% year- on- year. We took two relatively low, as I said earlier, RevPAR hotels out of circulation, one in Utsunomiya north of Tokyo and one in Tenjin in Fukuoka southwest of, I mean, on the island of Kyushu. On a same store sale basis, RevPAR is up more like a little bit over 20% year- on- year rather than + 27%. Again, a very strong income and growth story for our hotels. Owners continue to be a super robust business. We, you know, again, fairly consistently in terms of the buy-sell activity across the board, we expect to do about JPY 52 billion of both match kind of buys and sells, roughly. We'll see where we end up during the year. Super nice business. In order to sell assets, we need to buy them.
You need to kind of have the engine kicking in on this and it's going quite well. Some volatility, more volatility than other businesses because it's primarily a flow business. We had a drop-off last year. Some of our assets got pushed into this year. We were expecting to do more residential security token sales. We didn't as the market froze a little bit during last fall. Things are coming roaring back. It'll be a good year for Ichigo Owners. Speaking to that point, we expected to do more in the security token space. These are on the blockchain, so the digital real estate assets, but they are, it's not crypto. They're backed by, okay, wait a minute, stablecoins are backed by things, hopefully. Anyway, these are highly secured real estate assets put on, put in, tokenized and put on the blockchain. It's a growth business.
There was some concern post the U.S. elections last fall and some slowdown in this activity and it's coming roaring back. You know, inflation is real. The shift out of Japanese deposits by Japanese households and corporations. Bank deposits and cash equivalents is real. Very, very big demand for our assets. We did not, as you saw, we chose not to sell a couple of months ago when the market weakened because we thought there would be an opportunity like this. Rising construction costs mean that we have kind of the wind in our back in terms of value creation through the whole period. We expect to do significant activity in this space this year. AM is growing on various growth drivers. We think the three major areas for us in terms of AM growth would be our public REITs, private funds, and the security tokens.
We think the public REITs continue to be undervalued for where they could be. We do not necessarily see much AM growth there, although we will see where the market kind of takes them. There is, we think, significant private fund activity, possibly even bridge funds from the public REITs. We expect to see activity and growth in the securitized token area this year. We are going to do more in clean energy. The brand new activity is in battery storage. This is incredibly exciting. There is an opportunity to deploy significant amounts of capital at very, very high NOIs. At this point, double-digit NOIs and very fast payback periods. We will start with our very first one next year. The next page, let's go to the next page. We talk about what the opportunity is. You are building out more volatile power generation sources.
As you know, right now, there is arguably too much solar in Japan. The grid cannot accommodate it. You are constantly told, can you shut your, I mean, I say constantly, it happens kind of on average a couple of days a year for your solar power plants. Can you shut your plant for the moment because we cannot take the energy? Battery storage is going to solve that. Battery storage prices have come in so quickly that there are now powerful economics to deploying them in Japan. We think what we are seeing at this point is we are going from solar excess to probably a solar shortage very, very quickly. That also provides an opportunity for us to do more activity in both solar and wind going forward. On the shareholder return side, as I said earlier, we are doing a buyback right now.
We believe that this is compelling value to buy our shares at the current share price and would expect to have continued activity going forward. Next page shows a dividend. We can do buybacks. The business is super cash generative. We can do buybacks. We can pay a nice growing dividend. We can invest for the future. We can do all those things. We expect to grow our dividend very substantial over time. As you can see, during the COVID period, we stayed, you know, for a while in Japan. We stayed unchanged for a while. We're back to growing our dividend on a double-digit basis annually. We have a daily shareholder program. If you're a shareholder, you can go to daily games, which is fun. On the environmental side, this is something we care a lot about.
It's worth pointing out that we were named on CDP to be a double A-list company. Of the 25,000 companies in the world to participate in CDP, only 70 made the cut. Ichigo is literally in the top 0.3% of all companies based on CDP rankings for our environmental activity. We are at this point 100% renewable energy. In the next two slides, we show how we are climate positive in a very, very powerful way. Those are my prepared remarks. Thank you, everybody, for joining. I'm happy to take any questions or comments from anybody. Yes, thanks so much for joining.
Thank you for the presentation. Just had a quick question on Ichigo Owners. Obviously, you bought a lot of assets in Q1 and you have more in the pipeline by the look of it, looking at kind of contracted properties. Yes. On the sale side, was the lack of sale just a technical reason, or simply a function of timing or your current inventory?
Customer timing. We adjust for the customer. We tend to do, when we started the business, it was a small lot. We thought we were going to primarily be serving cash-rich corporations and high net worth, and we were going to be doing, you know, selling JPY 1 billion at a time or JPY 500 million at a time. What, $3 million- $7 million sorts of transactions. It turned out that we had, first, the rise of institutional buyers who were like, we really, really would like to have a $100 million super nice Ichigo kind of quality prime residential portfolio in Tokyo. By the way, these are Tokyo assets. After that, we came to start doing transactions that are more like $100 million, $150 million. We've had the emergence of the securitized tokens, which also tend to be $100 million sorts of plus transactions.
Now it's become more of a business about a very large institutional buyer or, in the case of the tokens, a very large securities firm saying we want to do a big transaction with you in July. July is not in Q1, so it ends up in Q2. That's what's going on.
Yeah, okay, that's what I was thinking about. Okay, great. Thank you.
Thanks. Oh, Greg, you're back. Yes, Greg, thank you so much. You're always welcome.
Yeah, just to follow up on the traditional, I guess we're back to 92%. Is it as good as we, is it as good as it gets, or do we think there is a bit more, a bit more upside there?
No, it's going higher at this point. Japanese organizations tend to be relatively conservative in telling that, telling I'm the Chairman and telling me what they expect to deliver. The guys on the Tradepia team think this goes to 95% this year. That suggests that's probably a bottom. This is going higher. It's a really attractive asset. It offers, as I say, this community orientation. It's become its own little kind of ecosystem and destination for startups. On the Tokyo Bay area, as you know, the views are absolutely fantastic. This is going up. We're not done at 92%.
Are we kind of thinking for the new tenant that we're signing up, is it like no free rent and things like that at the moment? Is it getting tighter?
Yeah, I mean, it still can easily be the case. You give a little bit of free rent, but of course we try to shrink that as much as possible, and you get it back on the ongoing kind of high kind of ongoing rents. This is an asset that we think is something that is getting, that is because it is demonstrating its incredibly strong competitiveness, is something that we think we move, we move off the balance sheet. It's either going to be a straight sale. We have had some conversations about potential buyers taking it and having us continue to manage the asset because of the success we've had with this tenant building and community building.
I know I'm going to a different point from when I just asked Greg, but this is something that it's important for our shareholders to know that we think we are going to move up. We're going to end up moving off the balance sheet probably in the next 24 months.
You guys give out free lunches, but you don't give out free rent. Okay.
To be clear, we are still giving out a little bit of free rent, but look, you don't have to do as much. This is all about creating great value for the tenants. If there's in the market, it's like, you know, we get six months of free rent over there. It's like, okay, well, your assets are better. Okay, we'll have it three months, but it's kind of harder to do zero. In return, you can raise the rent. To be clear, we're raising rents Tradepia Odaiba because we can. We're running out of space. We have significant tenant demand. At the end of the day, this is not a power play. This is about creating extraordinary levels of value for tenants. Because we're doing so, we can command higher rents, overwhelmingly higher rents, higher occupancy, and higher rents than anybody, any other building nearby.
Understood. Thank you.
Thanks. All right, I'll go back to where I started. Like Q1, nothing to write home about, as they say in American English. There's a lot coming over the course of the year. We expect to have record earnings across the firm, across both the stock and flow parts of the business. This is our job to deliver that for all of you, and we will do so. Thank you very much, everybody, for joining us across the world. We're really grateful for you. Thanks.