EIGHTH MANAGEMENT PLAN (April 2019 to March 2022)

(Issued on May 16, 2019)

1. Performance targets

Achieve consecutive record results for the three-year period covered, with cumulative ordinary profit of ¥700 billion.

Achieve record results for the ninth consecutive fiscal year under the three management plans since the Sixth Management Plan by maintaining the pace of growth attained under the Seventh Management Plan with which substantial profit increase was achieved.

Three-year cumulative earnings targets
  • ・Revenue from operations　　¥3,100billion (+¥214.2billion, + 7%)
  • ・Operating income　　　　　　 ¥740billion (+¥126.8billion, +21%)
  • ・Ordinary profit　　　　　　　　¥700billion (+¥142.2billion, +25%)

(Reference) Comparison of Management Plan results (Years ended/ending March 31)

(Billions of yen)

Management Plan 5th Plan
2011-2013		 6th Plan
2014-2016		 7th Plan
2017-2019		 8th Plan
2020-2022
Revenue from operations 2,170.0
(+63.2)		 2,442.0
(+272.0)		 2,885.8
(+443.7)		 3,100.0
(+214.2)
Operating income 437.2
(+2.3)		 500.6
(+63.3)		 613.2
(+112.6)		 740.0
(+126.8)
Ordinary profit 329.1
(-10.0)		 418.0
(+88.8)		 557.8
(+139.8) 		700.0
(+142.2)

*Note: All figures are cumulative totals within the period of the plan.

2. Leasing asset investment plan (Non-current asset investment excluding sales assets, such as condominiums for sale)

Further investment in leasing office assets in central Tokyo, strengthening our earnings base.

1) Concrete development plan for over 800 thousand tsubo (one tsubo is roughly 3.3 m²) of gross floor area, mainly comprising redevelopment projects.
(Equivalent to over 50% of 1,520 thousand tsubo of gross floor area for leasing as of the end of the Seventh Management Plan)

The total investment will amount to ¥2,000 billion, expected to generate profits within six to seven years.

2) During the Eighth Management Plan, approximately 30%, or 230 thousand tsubo, of total gross floor area of the investment pipeline will be completed and brought to market.

Pace of development

(Tsubo)

Management Plan 5th Plan 6th Plan 7th Plan 8th Plan
Gross floor area 150,000 110,000 210,000 230,000

3) Of ¥2,000 billion, ¥600 billion is expected to be invested in the next three years.
Funding will be covered by expanding cash flows from the leasing business*. (No increase in interest-bearing debt expected.)

Capital investment and cash flows from the leasing business

(Billions of yen)

Management Plan 5th Plan 6th Plan 7th Plan 8th Plan
Capital investment (268.0) (422.3) (663.5) (600.0)
Cash flows from the
leasing business		 363.6 409.8 534.6 680.0
Interest-bearing debt 2,650.7 3,158.9 3,342.8 3,300.0

*Cash flows from the leasing business: Operating income of the leasing business + Depreciation and amortization

3. Performance targets and strategies by segment

Office building leasing in Tokyo to be the driving force of growth.

Performance targets by segment

(Billions of yen)

Management Plan 5th Plan 6th Plan 7th Plan 8th Plan
Leasing 843.0 886.2 1,073.1 1,200.0
Sales 670.0 773.1 957.2 950.0
Construction 500.0 589.3 634.7 720.0
Brokerage 146.8 177.2 207.7 220.0
Revenue from operations 2,170.0 2,442.0 2,885.8 3,100.0
Leasing 272.1 313.7 415.5 530.0
Sales 110.2 127.2 140.1 140.0
Construction 48.9 47.0 50.4 70.0
Brokerage 41.2 52.1 61.6 65.0
Operating income 437.2 500.6 613.2 740.0

<Strategies>

1) Leasing

Profit growth of the Seventh Management Plan, supported by the buoyant market environment, to be surpassed.

● Profitability of existing properties, which improved on the back of lower vacancy rates and higher rents, to be further strengthened.
● Earnings secured by full-year contribution from the properties completed in the Seventh Management Plan (210 thousand tsubo of gross floor area) and by starting operation of newly completed projects in the Eighth Management Plan (230 thousand tsubo of gross floor area).

2) Sales

High level of profit of the Seventh Management Plan to be maintained.

● Marketing speed adjustment, following profit-pursuing policy rather than volume-pursuing policy.
● The policy of securing prime sites without fail amid continuing intensified competition for land acquisition, to be maintained.
● The policy of pursuing as many projects as possible when such opportunities arise, to be maintained.

3) Construction

Remodeling (Shinchiku Sokkurisan): Growth track, recovered in the Seventh Management Plan following the sluggish period until the Sixth Management Plan, to be maintained.

Expansion in remodeling demand expected in a growing market, matching the Japanese government’s policy of accumulating high-quality residential property stock.

Custom Homes: Business base to be strengthened through improvement of construction systems and quality control.

Annual contract volume expanded to 3,000 units in the Seventh Management Plan. Business base to be reinforced for growth in the Ninth Management Plan onward.

4) Brokerage

Group collaboration to be strengthened, establishing the base for growth in the Ninth Management Plan onward.

Efficiency of the brokerage business to be further imporoved, with Sumitomo Real Estate Sales Co., Ltd. becoming a wholly owned subsidiary in the Seventh Management Plan.

4. Policy for shareholder returns

“Sustainable dividend increase” policy, in line with profit growth, to be maintained.

Cash flow allocation policy of prioritizing investment in office properties for lease, to be maintained.

Dividends and earnings per share

(Yen)

Management Plan 6th Plan 7th Plan
(Years ended March 31) 2014 2015 2016 2017 2018 2019
Dividends 20 21 22 24 27 30
Earnings per share 147 170 185 218 253 275

* The Company changed its accounting policy (revenue recognition standards of Sumitomo Real Estate Sales) from the beginning of the fiscal year ending March 31, 2020.
The figures provided for the fiscal year ended March 31, 2019 (7th Plan) are those after retrospective application.