Briefing Material for the Consolidated Financial Results for the Six Months Ended September 30, 2024

Nov 29, 2024 at 6:39 AM UTC · Issued by Heiwa Real Estate Co., Ltd.

November 19, 2024

Contents

Highlights During the Six Months Ended September 30, 2024	・・・P. 3
Consolidated Financial Results for the Six Months Ended September 30,	・・・P. 5
2024 and Forecast of Consolidated Financial Results for the Fiscal Year
Ending March 31, 2025
Progress Review of Medium-term Management Plan	・・・P. 12
"WAY 2040 Stage 1" (FY2024 to FY2026)
Heiwa Real Estate Group Purpose, Long-term Vision,	・・・P. 27
and Medium-term Management Plan
"WAY 2040 Stage 1" (FY2024 to FY2026)
Reference	・・・P. 45

© HEIWA REAL ESTATE Co., Ltd.	2

Highlights During the Six Months Ended September 30, 2024

During the period under review, net sales and operating profit decreased year on year mainly because, in the previous fiscal year, 99% of the annual forecast on gains on sales of properties was recorded during the first six months. During the first six months of the current fiscal year, the gains on sales of properties accounted for about 18% of the annual forecast, which is in line with the plan; therefore, Heiwa Real Estate Co., Ltd. (the "Company") determined it is making steady progress toward the final forecast amount.
As part of its efforts to realize its long-term vision "WAY 2040," the Company concluded a capital and business alliance agreement with Taisei Corporation, and a collaborative agreement with Taisei Corporation and Mitsubishi Estate Co., Ltd., related to the capital and business alliance.
In August 2024, the Japan Credit Rating Agency assigned the Company rating of "A-" (up from "BBB+"), with a "stable" outlook.
In August 2024, the Company established an association for the Odori- nishi 4 South, Type 1 District Redevelopment Project, and decided to open Park Hyatt-a Luxury Hotel Brand.
In October 2024, an urban planning proposal was submitted for Nihonbashi Kayabacho 1-Chome 6 District Development Plan (provisional name).

Comparison of results and forecasts

for gains on sales of properties

Fiscal year ended	Fiscal year ending
March 31, 2024	March 31, 2025

Percentage of result to quarterly forecast

100%

108%

100%

Forecast

Result

Forecast

Result

© HEIWA REAL ESTATE Co., Ltd.	4

Consolidated Financial Results for the Six Months Ended September 30, 2024 and Forecast of Consolidated Financial Results for the Fiscal Year Ending March 31, 2025

Consolidated Financial Results for the Six Months Ended September 30, 2024

Results were in line with the Company's forecast for the full fiscal year.
Net sales, operating profit, and ordinary profit were down compared with the same period of the previous fiscal year, mainly due to decreased sales of properties in the Building Business.
Profit attributable to owners of parent also decreased compared with the same period of the previous fiscal year due to the reason described above as well as decreased sell-offs of investment securities, which reflected lower amounts of cross-shareholdings.

			Six months ended	Six months ended			Full-year forecast	Progress against
					for the fiscal year
	(Millions of yen)	September 30,	September 30,	Year on year	Year on year (%)	full-year forecast*
	ending March 31,
			2023	2024			(%)
					2025*

	Net sales	28,191	18,761	(9,429)	(33.4)	41,600	45.1

		Building Business	26,375	17,007	(9,367)	(35.5)	37,600	45.2

		Asset Management Business	1,816	1,753	(62)	(3.4)	4,000	43.8

	Operating profit	9,254	5,254	(4,000)	(43.2)	12,300	42.7

		Building Business	9,228	5,293	(3,934)	(42.6)	12,100	43.8

		Asset Management Business	1,027	1,016	(11)	(1.1)	2,200	46.2

		Intersegment eliminations	(1,001)	(1,056)	(54)	-	(2,000)	-

	Ordinary profit	8,574	4,581	(3,993)	(46.6)	10,700	42.8

	Extraordinary income	1,197	-	(1,197)	(100.0)	-	-

	Extraordinary losses	11	8	(2)	(24.3)	-	-

	Profit attributable to owners of parent	6,659	3,431	(3,227)	(48.5)	8,500	40.4

	Earnings per share (EPS) (Yen)	186.07	100.37	(85.70)	(46.1)	251.56	39.9

* Announced on April 30, 2024

							© HEIWA REAL ESTATE Co., Ltd.	6

Consolidated Financial Results by Segment for the Six Months Ended September 30, 2024

Year-on-year differences in segment results

Building Business

		Six months	Six months

(Millions of yen)	ended	ended	Year on year	Year on year	Main reasons for year-on-year differences in results
September 30,	September 30,	(%)

		2023	2024
Net sales	26,375	17,007	(9,367)	(35.5)	● Leasing revenue
The increase in leasing revenue mainly reflected contributions from the Mercure Tokyo Hibiya, which
						opened in the previous fiscal year, and the ORSUS Shin-Osaka and ORSUS Togoshiginza, which
	Leasing revenue	13,025	13,637	+611	+4.7	were built and acquired in the previous fiscal year, as well as decrease in vacant building space and
	raising leasing amounts.
						• Operations of the Mercure Tokyo Hibiya, etc. contributed about ¥0.8 billion to leasing revenue.
	Revenue from sales of properties	12,705	2,665	(10,040)	(79.0)	• Increased periodic revenues from acquired and newly built properties, etc. contributed about ¥0.2
	billion to leasing revenue.
						• Decrease in vacant space along with increases in leasing amounts, etc. contributed about ¥0.3 billion
	Other	644	705	+61	+9.5	to leasing revenue.
	* The vacancy rate for the Group as a whole was 2.49% as of September 30, 2024.
						• Departures of tenants from buildings scheduled for demolition due to redevelopment projects, etc.
Operating profit	9,228	5,293	(3,934)	(42.6)	reduced leasing revenue by about ¥0.5 billion.
• Reduced periodic revenues resulting from sales of properties, etc. reduced leasing revenue by about
						¥0.2 billion.
	Gains on sales of properties	4,736	828	(3,908)	(82.5)	● Revenue from sales of properties
	The decrease in sales of properties reflected a decrease in sales of inventories. (Osaka Kitahama
						Office and Sapporo Office 2 were sold during the period under review.)

Asset Management Business

(Millions of yen)

Six months	Six months
ended	ended
September 30,	September 30,
2023	2024

Year on year

(%)

Main reasons for year-on-year differences in results

Net sales	1,816	1,753	(62)	(3.4)

	Asset management revenue	1,292	1,361	+68	+5.3

	Brokerage commissions	523	392	(131)	(25.1)

Operating profit	1,027	1,016	(11)	(1.1)

Despite the increase in asset management revenue, the Asset Management Business saw a decrease in revenue due to lower brokerage commissions.

© HEIWA REAL ESTATE Co., Ltd.	7

Consolidated Balance Sheet as of September 30, 2024

The Company's repurchase of 2.4 million shares resulted in lower amounts of cash and deposits, securities, and shareholders' equity. Total assets, liabilities, and net assets each decreased, reflecting a reduction of interest-bearing liabilities.

(Millions of yen)	As of March	Six months

ended September	Year on year	Main reasons for year-on-year differences in results
		31, 2024	30, 2024


Total assets	405,979	390,141	(15,837)
	Current assets	53,257	37,205	(16,051)	 Cash and deposits/Securities
	Cash and deposits / Securities	28,421	14,539	(13,882)	The decreases in cash and deposits as well as securities were mainly
	due to the Company's repurchase of 2.4 million shares.
	Inventories (including operating investments in capital)	21,766	19,802	(1,963)	 Inventories
					The decrease in inventories mainly resulted from the sell-off of Osaka
	Other current assets
	3,069	2,863	(206)	Kitahama Office and Sapporo Office 2.
	Non-current assets	352,341	352,583	+242	 Property, plant and equipment
	Property, plant and equipment	275,522	277,051	+1,529	The increase in property, plant and equipment was mainly due to
	outlays for construction and renovation work.
	Intangible assets	31,320	31,326	+6	 Investments and other assets
					The decrease in investments and other assets mainly resulted from
	Investments and other assets
	45,498	44,204	(1,293)	the decline in fair value of investment securities.
	Deferred assets	381	352	(28)
Total liabilities and net assets	405,979	390,141	(15,837)
	Liabilities	280,334	275,233	(5,100)	 Interest-bearing liabilities
	Interest-bearing liabilities	231,323	228,619	(2,703)	The net debt-to-equity ratio is 1.9 as of September 30, 2024.
	 Other liabilities
	Other liabilities	49,010	46,613	(2,396)	The decrease in other liabilities was mainly the result of lower
	amounts of accrued consumption taxes and income taxes payable.

	Net assets	125,645	114,908	(10,737)
	Shareholders' equity	92,235	82,733	(9,502)	 Shareholders' equity
	Valuation difference on available-for-sale securities	17,339	16,090	(1,248)
	The decrease in shareholders' equity was mainly due to the
					Company's repurchase of 2.4 million shares.
	Deferred gains or losses on hedges	(6)	7	+13

	Revaluation reserve for land	16,076	16,076	-

* Interest-bearing liabilities comprised short-term borrowings, current portion of bonds payable, current portion of long-term borrowings, certain other current liabilities, bonds payable, long-term borrowings, and long-term accounts payable - other.

© HEIWA REAL ESTATE Co., Ltd.	8

Key Performance Indicators

					Share price
(Yen)
7,000										5,497	5,774
6,000							5,030	5,287	5,405
					4,673
5,000
				4,120					4,080
		3,456	3,669			3,455	3,955	3,785
4,000		3,022
2,581		2,630	2,820	2,837
	2,377	2,445
3,000	2,313						3,511
2,155				3,190	3,270	3,334
2,000							2,799
				2,050	2,131
1,000	1,648	1,688	1,400	1,574

0

FYE	FYE	FYE	FYE	FYE	FYE	FYE	FYE	FYE	FYE	FYE
Mar./14	Mar./15	Mar./16	Mar./17	Mar./18	Mar./19	Mar./20	Mar./21	Mar./22	Mar./23	Mar./24

EPS, ROE, and ROA

(Yen)
280.0												236.7	254.3	236.1	10.0%
240.0											189.8	8.0%
									6.5%
200.0								5.8%
									7.7%
		4.7%	4.7%	5.2%			7.3%	6.9%	6.0%
160.0				158.7184.8

3.4%			132.6	6.3%
120.0	2.9%		113.2						4.0%

			110.5
80.0
72.7
	62.5 2.8%	3.3%	3.2%	2.9%	3.2%	3.1%	3.3%	2.8%	3.2%	2.0%
40.0	2.6%

0.0	2.8%													0.0%

FYE	FYE	FYE	FYE	FYE	FYE	FYE	FYE	FYE	FYE	FYE
Mar./14	Mar./15	Mar./16	Mar./17	Mar./18	Mar./19	Mar./20	Mar./21	Mar./22	Mar./23	Mar./24

Stock price		Book-value per share (BPS)		Net asset value (NAV) per share		EPS		ROE		ROA

Market value of assets for leasing and other purposes

(Billions of yen)
500
											376.8	388.9	420.1	421.2

400								339.5	363.5
						316.3			111.5
	268.7	286.4	289.6		112.4	112.2	116.7

300	244.2	85.6	103.3	119.4
41.7	62.0	70.3
	26.4
200

217.8	227.0	224.4	219.2	230.6	236.2	244.0	264.4	276.7	308.6	304.4
100


0
FYE	FYE	FYE		FYE	FYE			FYE	FYE	FYE	FYE	FYE	FYE

	Mar./14	Mar./15	Mar./16	Mar./17	Mar./18		Mar./19 Mar./20 Mar./21 Mar./22 Mar./23 Mar./24
						Book value			Unrealized gains

Indicators of financial discipline

(Times)
2.5					34.9% 32.5% 31.6% 31.1%					40.0%
	29.0%	31.0% 32.3% 33.3%	31.7%	30.0%	30.9%	29.5%
2.0										30.0%
												1.9
1.5	1.7	1.6	1.5			1.6		1.6		1.7	1.6		20.0%
		1.4		1.5	1.5
			1.4


1.0	FYE	FYE	FYE	FYE	FYE	FYE	FYE	FYE	FYE	FYE	FYE	FYE	10.0%

	Mar./14	Mar./15	Mar./16	Mar./17	Mar./18	Mar./19	Mar./20	Mar./21	Mar./22	Mar./23	Mar./24	Sept./24

Net Debt Equity Ratio		Equity Ratio

* Net asset value per share is calculated as (net assets + after-tax unrealized gains on assets for leasing and other purposes)/number of outstanding shares excluding treasury shares

© HEIWA REAL ESTATE Co., Ltd.	9

Forecast of Consolidated Financial Results for the Fiscal Year Ending March 31, 2025

Net sales are forecast to decrease year on year, mainly as a result of lower sales of inventories in the Building Business.
Operating profit and ordinary profit are forecast to decrease year on year, mainly due to lower gains on sales of properties.
Profit attributable to owners of parent is forecast to increase year on year because the amount of income taxes will be adjusted downward as a result of deferred tax assets.

(Millions of yen)	Fiscal year ended	Fiscal year ending	Year on year	Year on year (%)

March 31, 2024	March 31, 2025 (Forecast)*


Net sales	44,433	41,600	(2,833)	(6.4)

	Building Business	40,544	37,600	(2,944)	(7.3)

	Asset Management Business	3,888	4,000	+111	+2.9

Operating profit	13,022	12,300	(722)	(5.5)

	Building Business	12,639	12,100	(539)	(4.3)

	Asset Management Business	2,197	2,200	+2	+0.1

	Intersegment eliminations	(1,814)	(2,000)	(185)	-

Ordinary profit	11,463	10,700	(763)	(6.7)

Profit attributable to owners of parent	8,450	8,500	+49	+0.6

EPS (Yen)	236.13	251.56	+15.43	+6.5

* Announced on April 30, 2024

					© HEIWA REAL ESTATE Co., Ltd.	10

Company analysis