Message from the President

Leopalace21 facilitates win-win solutions for tenants and property owners

On behalf of Leopalace21, I would like to take this opportunity to convey my gratitude to our shareholders and investors for their continued support.

The value we provide will also continually change in response to the times

Leopalace21 builds housing on land where demand is high, and then leases this property. In this way, we facilitate win-win solutions for tenants and property owners: we offer land-owners an effective, worry-free way to use their assets and provide tenants with convenient and comfortable housing.As ours is a business of resolving issues in society, the value we provide will continually evolve in response to changes in people's lives, society, and the times.

Medium-term management plan "Creative Evolution 2020" (April 2017 - March 2020)

We have announced the medium-term management plan "Creative Evolution 2020" in May 2017, with a basic policy to "support continuous growth of core businesses in ways that further increase corporate value while constructing a base for growth areas." In the core businesses, we will continue to concentrate apartment construction in the three major metropolitan areas, as well as diversify our construction lineup to include properties other than apartments. We will also concentrate our efforts in the Elderly Care Business and International Business, which are less exposed to the shrinking domestic population, and aim to be in the black in the next three years. Asset holdings will be reviewed with a view to enhancing asset and capital efficiency.

We will set the fiscal year ending March 2019, the second year of our medium-term management plan, as "the year to begin human resources and organization development." We will build the foundation to cultivate human resources with strong entrepreneurial spirits, along with an organization structure which will be able to implement reformation of our businesses.

Concerning profit distribution to shareholders, we have a basic policy of proactive dividend payment and flexible share buybacks. For the fiscal year ended March 31, 2018, a share buyback of 8.0 billion yen and a dividend payment of 22 yen per share has been accomplished, resulting in a dividend ratio of 37.9% and total payout ratio of 92.3%. However, in consideration of the revisions of earnings forecasts announced on February 7, 2019, the Company has decided to forgo dividends for the fiscal year ending March 31, 2019.

We sincerely apologize for the distress and trouble we have caused to our stakeholders.

Measures against construction deficiencies

On April 27 and May 29, 2018, we announced that parting walls of certain apartments constructed by Leopalace21 had the possibility of being in violation of the Building Standard Law. We announced that we will investigate all buildings and repair those with defects. During the course of the investigations, we confirmed additional construction defects related to discrepancies of insulation materials in walls and ceiling construction that may be in violation of the Building Standard Law. These defects are separate from the parting wall defects previously announced.

We sincerely apologize to our tenants, apartment owners, and all our stakeholders for the trouble caused by construction defects. In the wake of these newly confirmed defects, we intend to reiterate our commitment to resolving this issue through efforts of all officers and employees. At this time, in light of management responsibilities, a portion of director remuneration will be returned. We are marshaling our corporate forces to conduct investigations and repairs, and will make every effort to restore trust as soon as possible.

I would like to request the continued support and encouragement of all our stakeholders.

February 2019
Eisei Miyama
President and CEO



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