Message from the President

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

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.

Financial results of the nine months ended December 31, 2018

We recently announced the financial results for the nine months ended December 31, 2018, recording net sales of 376.3 billion yen (-2.4% year-on-year), operating profit of 6.5 billion yen (-65.3% year-on-year), and net loss of 43.9 billion yen as a result of the recording of extraordinary losses related to repairs and impairment losses (loss on sales of our apartment properties), as well as deterioration of our business results caused by the parting wall deficiencies

In the Leasing Business, both occupancy rates and profits decreased because we suspended recruitment of new tenants into buildings subject to top-priority investigations which impacts tenant matching. Occupancy rate at the end of the subject quarter dropped to 85.26% (down 4.18 points from the end of the same period of the previous year) and the average occupancy rate for the period was 89.42% (down 0.59 points year-on-year). We will work together as a company in conducting investigations and repairs, and make effort to resume the renting of units as soon as possible. Also, we will continue to expand tenant services such as the introduction of IoT in our apartments, aiming to increase competitiveness of our products.
In the Development Business, although we concentrated orders in metropolitan areas such as Tokyo, orders decreased under the negative environment surrounding the apartment construction industry. Orders received (including real estate development sales) reached 53.0 billion yen (-4.4% year-on-year).

New initiatives have been started as our "next move". As we announced on October 29, 2018, we have resolved to sell 120 apartment buildings to a fund in this fiscal year. We are aiming to regrow the Development Business by constructing new schemes of selling assets to the fund. In the Leasing Business, we plan a full-scale entry into the "minpaku (private lodging)" business. Initially, we will utilize company-owned apartments in the "minpaku" business, and will expand to other properties as a measure to utilize vacant and old properties. In the International Business, which we aim to expand in the long-term, we plan to invest 100 billion yen in real estate development in the ASEAN region in the next 10 years.

As our return to shareholders, we have repurchased 8.3 million shares (3.28% of our outstanding shares) and retired 7.8 million shares in October. 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.

Leopalace21 would like to request the continued support and encouragement of all our stakeholders.

February 2019
Eisei Miyama
President and CEO

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FY March 2018 3Q



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    March 31,2019
    End of FY 2018 (April 1, 2018 to March 31, 2019)



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