Medium-term Management Plan

Background and Positioning

At the Board of Directors’ meeting held on March 29, 2024, a decision was made to formulate the Heiwa Real Estate Group Purpose, “Enriching everyone’s future with Bazukuri that draws people in,” and the Long-term Vision “WAY 2040” as roadmaps toward the future. In the new medium-term management plan, WAY 2040 Stage 1 (FY2024–FY2026), we have positioned this period as the initial sprint toward dynamic growth. This involves establishing the Nihonbashi Kabutocho and Kayabacho district brand, undertaking our largest-ever redevelopment projects, located in Sapporo, and venturing into new business domains to realize our vision, characterized by the slogan: Pursue perpetual dynamic growth to become the Bazukuri Company.

Key Strategies of the Plan to Realize Our Vision

Expand redevelopment business: Deploy Bazukuri endeavors that draw people in throughout Japan

Establish the Nihonbashi Kabutocho and Kayabacho district brand

The introduction of new features through the opening of Caption by Hyatt Kabutocho Tokyo, the first of this series in Tokyo, will generate synergies among different aspects and services within the city, enhancing overall urban functionality. Further, we will implement diverse Bazukuri endeavors that draw people in and entrench our Nihonbashi Kabutocho and Kayabacho district brand. This will be achieved primarily through the expansion of FinGATE, a platform supporting the establishment and growth of entrepreneurs and startups, as well as the attraction and operation of unique commercial establishments that bring vibrancy both on weekdays and weekends, and cutting-edge urban sustainability initiatives.

Advance our largest-ever redevelopment projects, located in Sapporo

We will steadily advance toward the completion in 2028 of our largest-ever redevelopment projects —the Odori-nishi 4 South, Type 1 District Redevelopment Project and the Sapporo Station South Exit North 4 West 3, Type 1 District Redevelopment Project (provisional names)—as part of our Bazukuri endeavors in Sapporo that draw people in. Through this, we aim to help boost the competitiveness of the city.

Expand redevelopment projects nationwide

To enhance our presence as a Bazukuri Company, we will drive the implementation of redevelopment projects centered around our assets in major cities throughout Japan.

Cultivate profit growth while enhancing capital efficiency: Expand leasing business, promote reinvestment by realizing gains from property sales, and diversify into new business areas

Develop a business model for creating added value in the Building Business

We will realize gains from property sales by renewing our portfolio and sustainably develop our business model focused on creating added value.

Expand revenue in the Asset Management Business

We will strive to increase asset management fees by supporting the growth of HEIWA REAL ESTATE REIT, Inc. and to enhance Group earnings with high capital efficiency through stable growth in brokerage business.

Venture into new business domains to realize our vision

To achieve the dynamic growth emphasized in our Long-term Vision, we will strengthen our hotel business and explore opportunities for expansion into new business domains, primarily through M&A.

Boost social value: Promote sustainability initiatives

Implement sustainability management

We, as a Bazukuri Company, will contribute to realizing a sustainable society by addressing environmental and social issues, including achieving net-zero greenhouse gas (GHG) emissions, while encouraging interactive communication with all stakeholders.

Promote the creation of sustainable districts

We will enhance the competitiveness of our asset portfolio by addressing social issues such as environmental friendliness and boosting disaster preparedness. This will be achieved through building development and operation as well as facility investment, and continuing efforts to reduce GHG emissions, among other initiatives.

Strengthen business foundations: Maximize human capital for accelerated growth

Implement management with an awareness of the cost of shareholders’ equity and stock price

We set a return on equity (ROE) target for FY2024 to FY2026 of at least 7%, exceeding the cost of shareholders’ equity. For shareholder returns from FY2024 to FY2026, we aim to maintain a consolidated dividend payout ratio of 50% in consideration of the cost of shareholders’ equity, capital efficiency, and other factors. We will also flexibly implement share buybacks, taking into account aspects such as stock price, investment plans, and financial condition.

Maximize human capital

As part of our Long-term Vision, we will promote human capital management to drive dynamic growth. This involves cultivating human resources capable of realizing our Purpose through career development, as well as individuals proficient in digital transformation (DX). Additionally, we will create an organization that promotes and maximizes diversity, while fostering comfortable and vibrant workplaces through health and productivity management, among other measures.

Further strengthen corporate governance

We will bolster corporate governance mainly by enhancing the functions of the Board of Directors and reducing cross-shareholdings.

Quantitative Targets

Financial and non-financial key performance indicators (KPIs)

Capital allocation (FY2024– FY2026)

Medium-Term Management Plan “WAY 2040 Stage 1” (FY 2024 - 2026)

Entire Document of New Medium-Term Management Plan, “WAY 2040 Stage 1”