REAL GATE INC.

Business Details

The company renovates aged buildings (built 20–40 years ago, with total floor space of around 500 tsubo) located mainly in Shibuya, Minato, and Meguro wards, and offers them as Flexible Workplace (Small Office / Shared Office) space. It combines five models — PM Contract, ML Contract, design and construction, and property holding & sales (capital gain) — to build a revenue structure based on stock-type income (ML rent and PM fees) supplemented by flow-type income (design and construction, sales). The company's main customer base is startup demand in the Shibuya area, and it maintains high occupancy rates and a rising rent trend.

Recent Overview

Although revenue declined 11.2% year on year, profit margin improvement led to substantial increases at every profit level

In the first half of FY2026 (ending September 2026) (October 2025 to March 2026), revenue decreased to ¥5,673 million (down 11.2% year on year), but gross profit expanded to ¥1,422 million (up 27.7% year on year) due to a reduction in cost of sales. Operating profit rose to ¥1,044 million (up 33.4% year on year) and interim net income rose to ¥594 million (up 24.4% year on year), with substantial increases at every profit level. In the first quarter, the sale of "THE MOCK-UP" was completed, with flow-type income contributing to results. On the acquisition side, settlement was completed for four newly purchased properties and contracts were concluded for two master lease properties, exceeding the pace planned. In February 2026, a joint venture was established with Hulic Co., Ltd., and JV projects have begun. As a subsequent event, on April 6, 2026, the company resolved to acquire a property in Ginza, Chuo-ku, Tokyo (a 15% co-ownership interest in trust beneficiary rights) and concluded a sales and purchase agreement (scheduled delivery: early July 2026). The full-year earnings forecast remains unchanged at revenue of ¥10,500 million and operating profit of ¥1,470 million. Interest expense increased from ¥68 million in the same period of the prior year to ¥126 million, reflecting the continued increase in financing costs associated with the expansion of borrowings.

Key Products

Growth Drivers

• Robust office demand from startup companies in the Shibuya area, along with continued high occupancy rates and a rising rent trend
• Growing need to utilize existing buildings due to soaring construction costs and rising interest rates making new development more difficult (a structural tailwind for redeveloping aged buildings)
• Expansion of flow-type income through the sale of properties held for sale (capital gain model)
• Expansion of the number and area of operated properties through aggressive property acquisition (four new settlements and two ML contracts concluded in H1 FY2026 ending September 2026; annual acquisition target raised to 12 properties)
• Diversification of new property acquisition channels through JV projects via the joint venture established with Hulic Co., Ltd. (February 2026)
• Expansion of investment opportunities through collaboration with external partners, such as the co-investment with HistoRy LLC (Ginza property)
• Business expansion through new business development, including hotel business initiatives

Risks

• Increased borrowing costs due to rising interest rates (borrowings outstanding as of end of March 2026: short-term ¥1,490 million + current portion of long-term debt ¥1,609 million + long-term ¥14,356 million; interest expense up 83% year on year to ¥126 million)
• Risk of declining property occupancy rates (deterioration in earnings due to economic downturn, tenant departures, and increased vacancies)
• Rising procurement and renovation costs due to soaring construction costs (impact of naphtha and other construction material shortages caused by instability in the Middle East)
• Intensifying competition to acquire quality properties (increasing difficulty in acquiring properties in central Tokyo)
• Risk of timing and price fluctuations in the sale of properties held for sale (timing mismatches and volatility in flow-type income)
• Liquidity risk from the decline in cash and cash equivalents (¥551 million at end of March 2026, down ¥396 million from ¥947 million at the end of the prior fiscal year)
• Macroeconomic risks including uncertainty in U.S. foreign policy, instability in overseas conditions, and continued yen depreciation