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.

We recently announced the financial results of our 45th term ended March 31, 2018, recording a year-on-year increase in net sales and operating profit of 2.0% and 0.1%. However, net income decreased 27.4% year-on-year. Net sales and operating income did not meet forecasts partly due to the Development Business, whereas net income exceeded forecasts by tax effects related to the sales of our apartments.

In the Leasing Business, due in part to the company capturing corporate dormitory demand which increased as employment rates improved, the average occupancy rate was 90.59% (+2.06p year-on-year). Tenants from overseas are increasing year by year and about 6.5% our tenants are foreign tenants as of the end of March 2018. We will continue to expand tenant services such as the introduction of IoT in our apartments and furnishing smart station devices equipped with AI speakers to our new apartments, aiming for stable profits led by occupancy improvement and differentiation of apartments.

In the Development Business, we concentrated orders in metropolitan areas such as Tokyo, and orders received (including real estate development sales) reached 87.6 billion yen (-5.6% year-on-year). Although orders did not meet forecasts because of the rough battles against competitors in the metropolitan areas, real estate development business exceeded for forecasts drastically, supported by real estate specified joint enterprise products and our subsidiary Life Living Co., Ltd. We had been mainly constructing low and middle-rise apartments; however, we will expand our construction variations and product line-up such as elderly care facilities and commercial facilities and real estate developments.

Leopalace Trust Co., Ltd. ("Leopalace Trust"), established to support the asset succession of customers and strengthen consulting services, has acquired the "investment-based trust company" license from the Financial Services Agency in May and will start sale commencement in July 2018. By mainly handling land trusts and real estate management trusts, Leopalace Trust will be able to respond to requests for diverse asset succession and asset formation on a one-stop basis to our 28,000 apartment owners.

We will set the fiscal year ending March 2019, the second year of our medium-term management plan, as "the first year to be 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. In addition, "Health Care Promotion Office" has been newly established under the CEO in order to further accelerate our health care management. We are continuing to create pleasant working environment and improving productivity as well as promote ESG management including our solar power business and strengthening our corporate governance.

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

May 2018
Eisei Miyama
President and CEO

President and CEO Eisei Miyama
President and CEO Eisei Miyama

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