Frequently asked questions about Leopalace21's business.

Leasing business

What is the occupancy rate plan?

All-building investigations have been almost completed in October, 2019. Since November 2019, we have been focusing on repair works and restart tenant recruitment with a target number of over 50 thousand available rooms between October, 2019 and March, 2020. We have resumed the recruitment for 39,609 rooms by the end of January, 2020, showing a good progress compared to the target. We will further strengthen the leasing business sales to achieve 85% occupancy rate at the end of March 2020 and try to realize an average rate of 85.87% for the FY21/3 and an average rate of 88.47% for the FY22/3.

What is the reserve for apartment vacancy loss?

The reserve for apartment vacancy loss is set according to the projected loss that could occur during a logical predictable period to prepare for the risk of increased vacancies.

The reserve for apartment vacancy loss is calculated based on the profitability of individual buildings, and is marked to market periodically. Therefore, when profit improves due to various reasons such as (1) recovery of occupancy rate, (2) earning additional revenue and (3) reduction of cost, reversal of the reserve account will push profits up in the Leasing business.

What is the plan for acquiring corporate tenants for the Leasing business and what have the results been so far?

In Japan, most company housing and dormitories, primarily owned by large blue-chip companies, are aging. However, in recent years, instead of rebuilding run-down company housing or making new acquisitions, companies have included cost-reduction as a factor in their management strategy and have thus been turning to outsourcing.

Traditionally, we would begin sales activities in response to inquiries from corporate clients. But from the fiscal year ended March 2011, we are intensifying "top sales" business styles, through corporate visits by executives, including the company president, in order to combine such needs with orders in the early stages. Also, we have increased the variety of industry types in order to diversify risk.

No. of Units Used by Industry Type

No. of Units Used by Industry Type

Why are you promoting Leopalace Partners? How many are opening right now?

Currently, in the Leasing business, we are implementing a "channel strategy" which reduces fixed costs and secures tenants through various channels. Leopalace Partners, which are the core of this strategy, will contribute to increase and stabilize occupancy rates by increasing avenues for tenant recruitment. Setting up franchise branches, which includes switching from a fixed to a variable cost structure, has also helped reduce SG&A expenses.

Upon strengthening Leopalace Partners, it is necessary to deepen the understanding towards our unique contract system and products. Concerning Leopalace Partners, we will aim for “quality over quantity”, and enhance education and training so that they can proceed with their sales activities.

Leasing Offices (Direct and Leopalace Partners)

Leasing Offices Development Plan NO.of Contracts by Leopalace Partners(2010)

How many apartment rooms are managed domestically?

575,780 rooms as of September 30, 2019.

Development business

What are the measures to secure profits for the Development business?

Based on the fundamental principle of the business that "apartment management exists only with the Leasing business," the Company has constructed apartments only in areas with high demand. The average occupancy rate of apartments under five years of age exceeds 90%. We will supply apartments based on this area strategy, but we are suspending new construction subcontracting operations because of construction defects issues recently.

What is the master leasing system?

The master leasing system is a system to support the apartment management of owners, from construction to management and operations, for a maximum of 30 years. The system involves rent payment to the owner, as well as management and repair to take the burden off the owner, contributing to a flow of steady income.

What is the risk of the master leasing system?

The biggest risk in lease housing management is vacancies. In our case, with the 30 year master leasing contract, a fixed rent is paid to the owners for a certain period regardless of the existence of vacancies. Therefore, our biggest possible risk is having more vacancies than expected during this period.

Providing apartment properties best suited to the area will be indispensable to minimizing such risk. In addition, we will keep implementing various measures such as the diversification of contract structures and enhancement of interior and exterior equipment.

In the Leasing business, as well as to raise occupancy rate, the appropriate adjustment of rental fees will also become an important matter to increase profitability.

What kind of sales activities are performed towards the property owners?

Our approach to new owners starts by identifying current land owners through viewing of registry documents and cadastral maps in the legal affairs bureau. This is of course a legitimate method for obtaining personal information.

Then we perform sales activities in steps starting by building connections through questionnaires using sales promotion tools and through invitation to various events held in different areas, and contacting potential customers who show interest.

There are many cases where we receive repeat orders from existing owners and where existing owners introduce us to different owners. Therefore we have implemented a customer inquiry center in branches nationwide to develop a close relationship with our owners, and owner gatherings are held every 6 months to exchange information.

Furthermore, we pay our most careful attention to the management of our customers' personal information. Promotional posters are posted in all our sales branches to enhance employee awareness, and an agreement for treatment of personal information is signed apart from the contract and a copy is stored by both the land owner and Leopalace21.

treatment of personal information

Business as a whole

Why put so much effort into the strategies to enhance property values?

It can be boiled down to two reasons.

The first reason is the intensification of competition in the leasing market. According to the data from Housing and Land Survey in 2013 (Statistics Bureau of Ministry of Internal Affairs and Communications), the ratio of vacant homes in the total number of leasing households in Japan (vacancy rates) rose from 18.8% in 2003 to 20.0% in 2013, and the vacancy rates are continually rising. In this environment, where choices abound for customers looking for a unit to rent, it is extremely important to raise the value and competiveness of properties so as to be selected by tenants, thus making it possible to increase revenues in the Leasing business.

The second reason is to move forward with improvements in the earnings structure of the Leasing business, despite the tough business environment. The many services related to the broad-based Leasing business are undeveloped territory that is full of great potential. We believe that developing rent policies in accordance with rising rent prices and property values will lead to a realistic and attainable rise in revenues.

Please explain your "strategies to enhance property values" in more detail.

In order to get a head start in offering equipment that should be included in apartments of the future, we are currently moving forward with the installment of solar power systems and apartment security systems. In addition, we are making effor to IoT for our apartments.

Solar power systems can reduce both power consumption by the housing unit and the burden on the environment. In addition, any surplus electricity can be sold, and many landowners are proactive in their installment. Starting February 2013, we have begun the "Roof Mega-solar Project" (a special purpose company rents rooftops from apartment owners and installs solar power system), and already achieved the plan to install solar power systems on 7,000 buildings (100 MW).

The inclusion of apartment security systems is expected to cover the needs of corporate housing and dorms, as well as increase the occupancy rate of women. It has already been installed in 311,982 units as of the end of September 2019, an installment rate of 54.2%.

Please tell me about the resort facility in Guam.

Leopalace Resort is a composite sports resort facility located in the Yona hills area near the center of the island. The resort area covers almost 1% of the entire island of Guam with 5.2 million square meters.On-site facilities include a hotel, condominiums, a spa, not to mention the Pan-Pacific Sports Center. This center is a world class sporting complex that draws not just tourists, our apartment owners, and corporate clients but also professional athletes who come here either as part of a team camp or just for their own personal training.

Moreover, resort facilities and hotels are used on trips by shareholders, tenants, and owners, as well as welfare facilities by corporate clients, and will promote sales against clients in the core businesses (leasing and development).

Related information

How does the declining birth rate and aging society affect company performance?

With declining birth rates and an aging society, the population of our main customers, the young generation, will decrease. However, according to the Population Census (Ministry of Internal Affairs and Communications) and Population Statistics (National Institute of Population and Social Security Research), percentage of one-person households, our main target, are predicted to continually increase, and we expect demand for our leasing units to remain strong.

Specifically, one-person households in the "35 to 64 age group" and "above 65 age group" are expected to increase. Therefore we believe it is important to cultivate corporate demand and develop the elderly care business to answer to new customer needs.

Please tell me about the International Business.

In addition to introducing apartments to foreign students and workers coming to Japan, we support Japanese companies who are looking to expand overseas through our World Business Support services, provide brokerage and introduction services for overseas properties, operate serviced apartments and offices, as well as utilize international personnel.
As of October 1, 2016, we operate in 16 locations in the ASEAN region.

What is your policy on profit distribution to shareholders?

Distribution of profit to shareholders is an important management issue. However, in consideration of recent performance, we regrettably decided not to pay dividends in the fiscal year ended March 2019.

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FY March 2020

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