HEIWA REAL ESTATE CO.,LTD.

Business Details

The Group's core segment. The Company, Tokyo Stock Exchange Building Co., Ltd., Tokyo Hibiya Hotel Co., Ltd., and Tokyo Nihonbashi Kabutocho Hotel Co., Ltd. develop, lease, manage, and sell stock exchanges, offices, commercial facilities, residences, and other properties, while Heiwa Real Estate Property Management Co., Ltd. handles property management. The majority of net sales consists of leasing revenue, with property sales revenue serving as a variable factor. The vacancy rate at the end of the fiscal year under review was 2.27% (excluding suspensions of leasing related to redevelopment, etc.).

Recent Overview

Property sales revenue surged 74.8% year on year, and segment net sales grew 21.7% to ¥46,236 million

In the Building Business for FY2026 (ending March 2026), property sales revenue expanded significantly to ¥15,675 million (up ¥6,710 million year on year) due to an increase in sales of real estate for sale. Leasing revenue was also solid at ¥28,932 million (up 5.1% year on year), supported by rent increases and revenue contributions from Caption by Hyatt Kabutocho Tokyo and Mercure Tokyo Hibiya, which opened during the fiscal year under review. Segment profit was ¥14,657 million (up 12.7% year on year). The vacancy rate at the end of the fiscal year remained low at 2.27%. For FY2027 (ending March 2027), the Company expects property sales revenue of ¥26,400 million (up 68.4% year on year) and plans net sales of ¥58,900 million.

Key Products

Growth Drivers

• Internal growth in leasing revenue driven by continued expansion demand and rising average rent trends in the Tokyo central office market (leasing revenue plan of ¥30,900 million for FY2027, ending March 2027)
• Expansion of hotel revenue through full-year revenue contribution from Caption by Hyatt Kabutocho Tokyo (opened in FY2026, ending March 2026) and Mercure Tokyo Hibiya
• Substantial expansion of property sales revenue (plan of ¥26,400 million for FY2027, ending March 2027) backed by the buildup of real estate for sale (period-end balance of ¥55,822 million, up ¥26,001 million year on year)
• Enrichment of the sales pipeline through transfers from fixed assets to real estate for sale (¥25,116 million in the fiscal year under review)
• Expansion of the future revenue base through steady progress of the Sapporo redevelopment project (the largest in the Company's history)
• Stable accumulation of leasing revenue through maintaining a low vacancy rate of 2.27% and continued rent increases

Risks

• Increase in interest expense due to rising interest rates (interest expense of ¥2,510 million in the fiscal year under review, up ¥619 million year on year) and increase in interest-bearing debt (¥272,683 million, up ¥18,610 million year on year)
• Risk of fluctuation in property sales revenue (the significant increase in the fiscal year under review may include temporary factors)
• Risk of prolonged redevelopment projects and increased costs (expenditure on acquisition of property, plant and equipment of ¥20,777 million; construction in progress of ¥33,616 million)
• Risk of rising vacancy rates and falling rents due to deterioration in the leasing office market
• Risk of financial leverage remaining at elevated levels, with a net D/E ratio of 1.9x and a debt repayment period of 18.4 years
• Temporary decrease in leasing revenue due to redevelopment-related leasing suspensions, etc.