As of March 31, 2023, the Heiwa Real Estate Group was pursuing a number of initiatives for tackling the various challenges and issues described below.
Management Policies, Operating Environment, and Issues to be Resolved
The Japanese economy is expected to pick up due to various measures implemented by the government, but the impact of global inflation and monetary tightening on economic conditions around the world will need to be closely monitored going forward. Management will also need to continue paying close attention to various factors affecting the Groupʼs operating environment, including interest rate fluctuations and the impact of the growing shift to telecommuting and other changing workplace practices on the office building leasing market.
In view of these circumstances, the Group will strive to increase its corporate value under its medium-term management plan, Challenge & Progress, which was announced on April 30, 2020. Specifically, it will continue revitalizing Tokyoʼs Nihonbashi Kabutocho and Kayabacho districts, proceed with redevelopment projects in the city of Sapporo, and take steps to realize external growth in its Building Business and Asset Management Business segments.
Vision for the Heiwa Real Estate Group
As a “company that contributes to revitalizing districts,” the Group strives to help our society become more sustainable while also improving corporate value, by increasing satisfaction through interactive communication with stakeholders and providing solutions to environmental and social issues.
Making society sustainable as a company that contributes to revitalizing districts
The Company will help our society become more sustainable and promote the revitalization of safe and secure districts, taking into account environmental- and disaster-preparedness, through initiatives such as the revitalization of Nihonbashi Kabutocho and Kayabacho, the Sapporo redevelopment, and asset management.
Improving shareholder value as a listed real-estate company
The Company will improve shareholder value through shareholder returns and greater capital efficiency, by maximizing the use of the Group's corporate value and creating/realizing added value in real estate.
Positioning of the Medium-term Management Plan, Challenge & Progress (Fiscal 2020–Fiscal 2023)
The new plan is positioned as a period for tackling the challenge of, and making progress in, the vision of becoming a company that contributes to revitalizing districts, by helping to make our society better positioned to address the social issue of sustainability, as well as refocusing our business model on added-value creation through external and internal growth, commercialization of the Sapporo redevelopment, and revitalization of Nihonbashi Kabutocho and Kayabacho.
Business Strategy (Fiscal 2020–Fiscal 2023)
Redevelopment Business
- Nihonbashi Kabutocho and Kayabacho revitalization
We will make progress in revitalizing diverse and sustainable districts through initiatives to create prosperity across the entire target district and to support the “Global Financial City: Tokyo” vision, as well as actual district redevelopment, including the opening for business of KABUTO ONE, the completion of works at KITOKI and the commercialization of Kabutocho 12 Projects (tentative name). - Progress in commercializing Sapporo redevelopment
The Company will make real progress in the Sapporo redevelopment, through participation in the district redevelopment of the Sapporo Station South Exit North 4 West 3 zone (area around the Sapporo Ekimae Godo Bldg.), as well as aiming to commercialize urban redevelopment projects in the Odori Nishi 4-chome south area (around the Dogin Bldg. and the Shin Odori Bldg).
Building Business
- Pursuing external and internal growth
We will generate earnings from the sale of properties during the process of renewing the portfolio, while building up our portfolio through the acquisition of new lease assets. We also intend to improve portfolio profitability by raising leasing rates based on trends in the office leasing market. - Sustainable building operations to improve environmental specifications and disaster preparedness
We are guided by our long-term vision to reduce CO2 emissions through investment in building facilities and operations to help address social issues like disaster preparedness and environmental concerns. - Generating earnings from inventory sales
We aim to maximize value through development, lease up, and renewal projects, with the goal of generating earnings from the sale of profitable assets and further development of the HF Residence series.
Asset Management Business
- Growing asset management earnings
We aim to grow Heiwa Real Estate Group earnings, including asset management fees, by supporting growth of HEIWA REAL ESTATE REIT, Inc.
Corporate activities
- Promotion of capital policy that takes into account capital costs and capital efficiency
To promote capital policy that takes into account capital costs and capital efficiency, we have set the following targets as KPIs for the period from fiscal 2020 to fiscal 2023: at least 6% ROE and around 70% consolidated total return ratio (consolidated dividend payout ratio around 50% by fiscal 2023). - Strengthening corporate governance
We will work to further strengthen our corporate governance, including transition to a company with nomination committee, etc., with a Board of Directors structure in which a majority of members are external directors, and a reduction in cross-shareholdings. We will also promote initiatives for improved compliance such as enhancing awareness of compliance matters among our officers and employees. - Practicing sustainable management
Centered on the Sustainability Committee, we will step up the effectiveness of sustainability management by monitoring the Plan-Do-Check-Act (PDCA) cycle related to our sustainability measures including environmental measures targeting issues such as climate change and by preparing reports etc. for the Board of Directors concerning important matters, in order to achieve a sustainable society and growth, and to resolve social issues and work towards SDGs through our corporate activities. We also aim to increase corporate value by making our organization more dynamic through promotions to improve the health of employees and internal communication.
Numerical Targets
KPIs
We will set internal reserves (shareholder returns) in light of the level of investment return at current real estate market prices, having set a return on equity (ROE) target recognizing capital costs.
| Profit targets | Earnings per share | At least ¥200 (Fiscal 2023) |
| Consolidated operating income | At least ¥12 billion*1 (Fiscal 2023) | |
| Capital efficiency | ROE | At least 6%*2 (Fiscal 2020–fiscal 2023) |
| Shareholder return | Consolidated total return ratio | Approx. 70% (Fiscal 2020–fiscal 2023) (Consolidated dividend payout ratio approx. 50% by fiscal 2023) |
(Reference) Financial soundness: Net debt-to-equity ratio of 1.8 times or less
*1 Breakdown of consolidated operating income Building Business: ¥11.8 billion;
Asset Management Business: ¥1.8 billion;
Corporate/elimination, etc.: –¥1.6 billion
*2 We target ROE of at least 5% in fiscal 2020 in light of the impact of the new coronavirus pandemic.
Investment plan (fiscal 2020–fiscal 2023)
| Business | Investment amount |
|---|---|
| Redevelopment Business | Approx. ¥32 billion Breakdown: Nihonbashi Kabutocho and Kayabacho: Approx. ¥22 billion Sapporo: Approx. ¥10 billion |
| Building Business Asset Management Business |
Acquisitions: Approx. ¥60 billion Returns from portfolio renewal: Approx. ¥20 billion Returns from existing inventory sales: Approx. ¥34 billion |
The KPIs and investment plans described above are all targets or planned figures at this stage, and we make no guarantee as to their realization. The actual figures may vary significantly from these targets and plans. These KPIs and investment plans may be revised as needed, due to changes in the business climate and other factors. Please refer to the Business-related Risks for more information on the main risk factors that could affect these KPIs and investment plans.