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.

We almost completed all-building investigations as at the end of October 2019 and since then we have been working on repair works and resuming the tenant recruitment.
As of the end of May 2020, the percentage of buildings subject to priority investigation for which we began repair works stood at 83.4% and for which we completed 13.1%.
However, we determined to our regret to temporarily reduce the scale of repair works and organizational setup to tackle the construction defects from July 2020, as it is essential to recover our business performance as a prerequisite to surely deal with the problem. We will update the repair timeline when the prerequisite is satisfied, but there is no change in our policy of resolving the construction defects problem as our paramount concern.
Going forward, we will strive to restore the trust by making steady progress toward resolving the problem with curtailed scale and organizational setup.

Financial Results for the 47th Fiscal Year (Fiscal Year Ended March 2020)

We announced full-year results for the 47th fiscal years (fiscal year ended March 2020).
Net sales were 433.5 billion yen (-14.2% y-o-y) and operating loss was 36.4 billion yen (compared with operating income of 7.3 billion yen in the previous fiscal year) with the poor business revenue stemmed from the construction defects.
Net loss of 80.2 billion yen (down by 11.5 billion yen from the previous year) resulted in deficit for two consecutive years, because of factors such as the provision of reserve for losses related to repairs and the like of 24.3 billion yen, the impairment loss of 7.6 billion yen, and 21.4 billion yen for the adjustment of corporate taxes due to the reversal of deferred tax assets.

In Leasing Business, the occupancy rates continued depressed as a result of the suspended tenant recruitment because of priority investigation and the spread of COVID-19. Consequently, the occupancy rate at the end of March 2020 was 83.07% (down by 1.26 points from the end of the previous fiscal year) and the average occupancy rate during the fiscal year was 80.78% (down by 7.56 points year-on-year).
In Q4 (January-March), the occupancy rates improved by 4.16 points, which was the third highest in the last 10 years, but did not reach the target at the end of March. We will continue to use IoT to make our properties smarter where tenants can control home appliances and door lock remotely with smartphones.

Drastic Business Strategies Reconstruction and Financial Plans for 48th Fiscal Year onward (Fiscal Year ending March 2021 onward)

We announced structural reforms on June 5, 2020 based on the drastic business strategies reconstruction including transfer and withdrawal from non-core unprofitable businesses and a voluntary retirement program. We will shift from a strategy that focuses on business diversification to a strategy that focuses on strengthening the profitability of Leasing Business as a core business through selective concentration.
In the mainstay Leasing Business, we will utilize IT to boost sales efficiency as well as increase the number of corporate sales staff and focus to attract more foreign national tenants and senior tenants, so as to improve the occupancy rates and profitability.
At the same time, in other businesses, we will sell assets such as Hotel Leopalace Nagoya and Guam Resort Hotel.
By implementing these structural reforms and enhancing the profitability of our core Leasing Business, we plan to restore operating income to 11.3 billion yen, net income to 9.9 billion yen for the fiscal year ending March 2022, and operating income to 23.5 billion yen and net income to 19.1 billion yen for the fiscal years ending March 2023, a level of income before the confirmation of construction defects problem.

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

June 2020
Bunya Miyao, President and CEO

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