Message from the President

We would like to express our sincere gratitude to our shareholders and investors for your continued support.

We deeply apologize to all our stakeholders, including tenants and property owners, for causing anxiety and inconvenience due to construction defects in the properties we built and for subsequent disappointing financial results and share prices.

Financial Results for Q1 ended June 30 for the 48th Fiscal Year (Fiscal Year ending March 2021)

We announced Q1 financial results for the fiscal year ending March 2021.
Net sales were 103.9 billion yen (-8.2% year on year) and operating loss was 6.8 billion yen (an increase of 2.5 billion yen of loss year on year) due to the reduced income from the operations arising from the construction defects problem. As a result of recording 3.7 billion yen in impairment loss, 1.9 billion yen in loss related to repairs, and 2.4 billion yen in special severance allowance, net loss was 14.1 billion yen (an increase of 8.3 billion yen of loss year on year). As a consequence of the reduction of 13.4 billion yen in net assets, we recorded excessive liabilities for 11.8 billion yen.

Under these circumstances, we recognized the immediate need for reinforcing the financial position and determined to employ following financing methods.

Issuance of New Shares through Third Party Allotment and Issuance of Stock Acquisition Rights in connection with the Loan with Stock Acquisition Rights, and Issuance of Preferred Stock by Consolidated Subsidiary

We announced on June 5, 2020 the implementation of structural reforms based on strategic review results for "Drastic Business Strategies Reconstruction" centered on a policy of transferring or withdrawing from non-core and unprofitable businesses and offering a voluntary retirement. While we have been implementing the respective measures, in our efforts to accelerate the improvement of financial strength, we determined to exercise the capital policy which comprises three elements; financing 12 billion yen by issuance of new shares through third party allotment, 30 billion yen by issuance of stock acquisition rights in connection with the loan with stock acquisition rights, and 15 billion yen by issuance of preferred stock by Leopalace Power Corporation, a consolidated subsidiary. We will finance 57 billion yen in total to resolve the excessive liabilities and reinforcing the financial position through the equity capital improvement which is necessary to meet the essential funding requirements, such as payment of repair work expenses related to construction defects including parting walls identified in the properties constructed by us and existing borrowings and redemption of bonds.

Business Strategies for 48th Fiscal Year

As we disclosed earlier the strategies for 48th fiscal year (Fiscal Year ending in March, 2021), we put the Leasing Business as the core business and aim to increase the occupancy rates and improve profitability by reinforcing the workforce for corporate sales, strengthening the measures to attract foreign national tenants and senior tenants as well as improving operational efficiency by IT. We have sold Hotel Leopalace Nagoya, properties for lease and investment securities in line with the strategies to raise efficiency of assets and equity capital. Going forward we will strive to recover the business performance through exercising the above-mentioned capital policy and surely implementing the business strategies so that we should be able to restore the trust by all the stakeholders.

We look forward to your continued understanding and support of our business in the future.

October 2020
Bunya Miyao, President and CEO

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