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 1H ended September 30 for the 48th Fiscal Year (Fiscal Year ending March 2021)

We announced our financial results for the first half of the fiscal year ending 31 March, 2021 on November 13, 2020. Sales were 208.6 billion yen (-5.8% YoY) as a result of sluggish occupancy rates due to the impact of the spread of the COVID-19. Cost of sales and SG&A expenses were reduced by 17.3 billion yen YoY, yet operating loss was 12.6 billion yen (a reduced loss of 4.5 billion yen YoY) due to a decrease in rent revenues by stagnant occupancy rates. Although gains on sale of investment securities amounted to 4.0 billion yen, net loss was 17.5 billion yen (a reduced loss of 6.8 billion yen YoY) due to impairment losses of 3.7 billion yen mainly from the sale of real estate for lease, loss related repairs of 1.7 billion yen and special severance allowance of 2.4 billion yen related to the voluntary retirement program. As a result, net assets decreased by 18.7 billion yen, resulting in liabilities in excess of assets of 17.1 billion yen.

On the other hand, as announced on September 30, 2020, the Company decided to raise funds from the Fortress Group and completed the procedures and receipt of funds on November 2 as scheduled. Consequently the number of shares issued increased to 329,389 thousand shares and the amount of paid-in capital became 81,282.35 million yen. As of the end of the third quarter of the fiscal year ending March 2021, we expect to eliminate the negative net worth.

Progress of Construction Defects Problem

We have a plan of repairing 2,000 units from September till the end of December 2020, and have completed 1,088 units as of the end of October 2020.
Going forward, we continue to repair the units so that we can reduce the number of vacant rooms for which recruitment is suspended, and thereby recover the occupancy rates.

Business Strategy

We are making full use of IT to save operating cost in the leasing business. In October, we launched a full-fledged web-based customer service for individual customers including viewing the room and surroundings. As we are expanding our service of non-face-to-face key handover for all of our managed properties in the future, together with the web-based contract, customers can complete all procedures related to the rental agreement without visiting Leopalace leasing offices. In addition, Leo-sign, an electronic contract service for corporate customers, is available for the process from confirming estimates to concluding contracts. As teleworking becomes increasingly popular in the COVID-19 situation, the total number of Leo-sign contracts is rising in response to the growing demand from the customers for electronic contracts.

By steadily implementing the measures described above, we will strive to recover our business performance and work to regain the undermined trust of our stakeholders. We look forward to your continued understanding and support for our business in the future.

November 2020
Bunya Miyao, President and CEO

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