Basic Management Strategy and Medium- to Long-term Outlook for “Sustainable Growth”

Earnings Targets(1) Aiming to surpass ¥300.0 billion in ordinary profit in the next mediumterm management plan For Fiscal 2023, aiming at record-high ordinary profit for the third consecutive year andrecord-high profit attributable to owners of parent for the eleventh consecutive yearSurpassing
 Medium- to long-term outlook is expected to be achievable earlier than forecast¥300 billion
set out in the Ninth Management Plan (announced in May 2022)
in next plan

(Billion yen)300300250200Achieve record ordinary profit for thethird consecutive year in Fiscal 2023

(Billion yen)
Revenue from Operations :Operating Income:Ordinary Profit:‘22939234
225‘23940241237’24 (F)
970
255
250

GlobalFinancial
Crisis150

100

COVID-19

OrdinaryProfit

50

Profit increase for 23 years out of 26 years
0'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31(予)
1st Plan
2nd
3rd
4th
5th
6th
7th
9th
10th
11th8th(Years ended/ending March 31)

Sumitomo Realty & Development Co., Ltd. (1)Basic Management Strategy and Medium- to Long-term Outlook for “Sustainable Growth”

Earnings Targets(2) Growth strategy by segment

Aiming to “surpass ¥300.0 billion in ordinary profit” with the comprehensive
strengths of the Group as a whole, while continuing to position officebuilding leasing business in Tokyo as our solid foundation*1 tsubo ≈ 3.3㎡

For office buildings, by steadily capturing the needs for increasing floor space which is becoming apparent as economic
activity normalizes, maintain and improve the profitability of existing buildings and continue on the trajectory of long-term
profit growth through operation of new buildings to be completed with gross floor area of over 700,000 tsubo*
Leasing• The “La Tour” premium leasing residences series has grown to a scale of 4,000 units. Continue to improve our brand value and further
extend our strong performance• In the hotel and event hall business, strive to restore the profitability to the pre-COVID-19 levels during the current fiscal year, and aimfor further growth in the next medium-term management plan and beyond with the contribution to earnings from the full-scale operationof Haneda Airport Garden with the flagship hotels

Maintain our policy of focusing on profit with controlling the pace of sales, rather than chasing volume of units or sales, andmaintain the high level of profit scale that we have achieved in previous medium-term management plans
Sales• More than 90% of the 3,000 units planned to be delivered in the current fiscal year were already sold, and sales activities including
those for the next fiscal year and beyond are making steady progress• Although rising construction costs continuously needs to be addressed, we have already secured the necessary amount of land for
condominiums to be delivered by the next medium-term management plan
• Promote development that contributes to decarbonization with the adoption of the “ZEH-M Oriented” as the standard specifications for
all condominiums we design from the Ninth Management Plan

Aim to achieve record-high profit by increasing orders through appealing to customers for high disaster prevention andenvironmental performance, while focusing on cost control and minimizing the impact of material price fluctuations
Construction

Brokerage“STEP”• In Japan, 90% of the over 50.0 million existing houses do not meet the latest energy-saving standards, posing a major challenge fordecarbonization-> In “Shinchiku Sokkurisan” remodeling, the percentage of orders for “high-insulation remodeling” has reached 30% at present (target of20% for the Ninth Management Plan)• In custom homes, launched the sale of “SUMICA” in 2022 with the latest ZEH (Zero Energy House) specifications as standard; it combines
the solar power generation service “SUMIFU × ENEKARI” and high thermal insulation specifications, and the ZEH ratio reached 80%(target of 60% for the Ninth Management Plan)

While the supply of new housing is on the decline, the existing housing market, which is being revitalized by an increase inhigh-quality stock, is expected to grow, and we will strive to expand our market share by strengthening Group collaborationand further pursuing customer-oriented services• Focus on spreading “STEP” brand, while operating Mansion Plaza brokerage offices nationwide which exclusively handle high-classcondominiums• STEP Auctions offering fairer and more transparent transactions has been well-accepted by many sellers• Promote efficiency by paperless operations and digital transformation (DX), including the discontinuation of distributing insert flyers andsending direct mail (DM) in consideration of protecting personal information
Sumitomo Realty & Development Co., Ltd. (2)Basic Management Strategy and Medium- to Long-term Outlook for “Sustainable Growth”

Earnings Targets(3) Impact of rising interest rates on earnings is expected to be negligible
 Continue the conservative financing policy with a higher ratio of fixed interest rates
focusing on long-term debt, and strive to minimize the impact of rising interest rates
in the future
Ensuring financial soundness and stability

Conservative finance focusing on long-term debt

Fixed interest rate ratio
of interest-bearing debt

Over 80%

Shareholders’equity ratio

At the end of Fiscal 2022
Long-term debt ratio

: 95%

28%

Fixed interest rate ratio: 86%

Debt ratings
by JCR and R&I

AA-＜Trend of Debt Ratings＞

AAAA

★ AA-

AAA+

A+

A

A

A-A-

JCR

BBB+
BBB

BBB+
BBB

R&I

BBBBB+'99'01* Year ended March 31'03'05'07BBBBB+
'09

'11

'13

'15

'17

'19

'21

'23

Sumitomo Realty & Development Co., Ltd. (3)Basic Management Strategy and Medium- to Long-term Outlook for “Sustainable Growth”

Earnings Targets(3) Impact of rising interest rates on earnings is expected to be negligible

 Target of ordinary profit exceeding ¥300.0 billion in the next medium-term management plan
incorporates the assumption of a 0.5% rise in market interest rates
 Annual refinancing amount is ¥300 to ¥400 billion, approx. 10% of total interest-bearing debt of3.9 trillion yen, and if the market interest rates were to rise by 0.5%, the increase in interest
payments would be about ¥2.0 billion each year

Only a 0.5% impact on current leasing revenue of ¥400.0 billion= Well within the range of absorption
Rising interest rates simulation (next 5 years)
Repayment amount(refinancing)(Billion yen)

2024

2025

2026

2027

2028

294.1

383.8

345.9

440.6

302.4

18.0

18.0

18.5

19.5

――

+0.5

+1.0

19.0

21.0

23.0

26.0

+1.0

+2.0

+2.0

+3.0

* Year ending March 31

If interest rates remain at current levels...
Interest amount

18.0

YoY change
If interest rates increase by 0.5% ...
Interest amount

18.0

YoY change*Long-term debt and bonds*Interest-bearing debt as ¥3.9 trillion as of March 31, 2023

Sumitomo Realty & Development Co., Ltd. (4)Basic Management Strategy and Medium- to Long-term Outlook for “Sustainable Growth”

Profit Distribution Policy(1) Policy to return the fruits of sustainable growth to employees first,
implementing a total of 7% wage increase in the previous fiscal year
✔ Salary increase based on ability and performance
SalaryIncrease▶ Highly diverse workforce with career hires accounting for 90%▶ Evaluate solely on ability (job responsibilities) and performance ineach of the job categories, and implement pay raises that arecommensurate with the growth of individual employees

Lump-sumpayment 1:
Specialallowance

Lump-sumpayment 2:
Renewing
record profit✔ A special allowance as a daily living support(uniformly ¥100,000)

Fiscal 2022
Wage increase
rate of 7%▶ Taking into consideration the rapid rise in prices, especially for
utilities, for all 10,000 Group employees*Including two lump-sum
payments for a total of¥2.3 billion✔ Lump-sum payment at the end of the fiscal year inconjunction with the renewal of record profit(uniformly ¥100,000)▶ Given to all Group employees, instead of only to those at Sumitomo
Realty & Development as in the past, to share the joy of the good
performance with the entire Group

Continue to make human capital investments in our employees
as the driving force of our sustainable growth

Sumitomo Realty & Development Co., Ltd. (5)Basic Management Strategy and Medium- to Long-term Outlook for “Sustainable Growth”

Profit Distribution Policy(2) Double the dividend within 7 years to ¥100 per share, and continue
sustainable dividend increase in line with profit growth Increased the pace of dividend increase from ¥5 to ¥7 per share per year as the outlook has
improved (announced in November 2022)
 Raise it to “¥100 per share per year” within seven years, doubling the current ¥52
 In Fiscal 2023, plan to increase the dividend for the 10th consecutive year to ¥59 per share

DoubleMarch 2023
¥52

Profit350(Billion yen)

Within 7 years Dividends(yen)¥100 dividend
105
100
100300

90250

75

59200

45150Dividends
100500Continue
to increase
年７円増配
dividend継続by¥7 per year

30206'03'05'07* Year ended / ending March 31'09'11'13'15'17'19'21

45
30
15

Dividend increased for
10 consecutive terms

Profit60

52'23

0'25
'27'29'31'33
Sumitomo Realty & Development Co., Ltd. (6)Basic Management Strategy and Medium- to Long-term Outlook for “Sustainable Growth”

Investments for Growth(1) Steady progress in investment in leasing office assets with gross floor area ofover 700,000 tsubo* in central Tokyo, mainly comprising redevelopment *1 tsubo ≈ 3.3㎡
 Strive to further expand our earnings base and increase corporate value by completing and putting
the development projects into operation with gross floor area of over 700,000 tsubo
 Maintain our policy of taking advantage of opportunities that arise for new properties (securing¥300.0 billion for investments in new projects for the three years of Ninth Management Plan)
Redevelopment projects underway in
Ikebukuro, Yaesu, Tsukiji, Roppongi, andother locations in central Tokyo(Billion yen)

220
200

Additional
700 thousand tsuboand more★

¥172.0 billion

180(March 2024 forecast)

160

Gross floor area (owned)(right scale)

120

1,200
1,000

Redevelopment projects completed in Fiscal 2022
- Sumitomo Fudosan Tokyo Mita Garden Tower- Sumitomo Fudosan Shinjuku First Tower¥33.0 billion(March 1997)

40

800
600
400

Operating income from leasing business

20
0

1,800

1,400

100

60

2,000

1,600

14080

(Thousand tsubo)
2,200'97'00* Year ended / ending March 31'03'06'09'12'15'18

200'21'24(F)

0Sumitomo Realty & Development Co., Ltd. (7)Basic Management Strategy and Medium- to Long-term Outlook for “Sustainable Growth”

Investments for Growth(2) Investment of ¥500.0 billion in India, aiming to increase profits by ¥30.0 billion
 Developing two office buildings in Bandra Kurla Complex (BKC), which is the new city center of Mumbai,
the largest economic city of India
 In the next medium-term management plan, aim to surpass ¥300.0 billion in domestic ordinary profit, and*1 1 INR = 1.7 JPY, *2 1 tsubo ≈ 3.3㎡
generate 10% of that amount, or ¥30.0 billion, from overseas business• Make full-fledged overseas
expansion in India with our “Tokyooffice building leasing business”
model• Aim for higher investment efficiency
than in Tokyo, considering overseas
risk premiums such as interest rates
and exchange rates• Aim to complete construction of bothproperties during the next mediumterm management plan

Project #1Location

Project #2

Bandra East, Mumbai, Maharashtra State

Site acquisition

July 2019

November 2022

Acquisition value
Yen equivalent*1

22.38 billion INR
38.0 billion JPY

20.67 billion INR
35.1 billion JPY

Type of ownershipLand lease rights for 80 yrs

Land lease rights for 80 yrs

Site area

12,486 sqm (approx. 3,780 tsubo*2)

11,885 sqm (approx. 3,595 tsubo)

Building scale

Gross floor area of approx.
40,000 tsubo

Gross floor area of approx.
40,000 tsubo

Building use

Leasing office building

Leasing office building

Project#1

BKC

Pakistan

Delhi

Nepal

8-min walk

Project#2

Project#1

7-min walk

National Stock
Exchange ofIndia

India

World
Convention
CenterMumbai

Project#2

Maharashtra State

Sri Lanka

Sumitomo Realty & Development Co., Ltd. (8)Basic Management Strategy and Medium- to Long-term Outlook for “Sustainable Growth”

Governance(1) Ensuring diversity of the Board of Directors
 The number of Outside Directors will be increased from the current two to three,accounting for one-third of the Board of Directors
 Appointing one female Director, resulting in a total of two female officers for one Director
and one Corporate Auditor(Planned to be effective from June 29, 2023)
Number ofDirectors:

Number of
Corporate Auditors:

Current

New

Inside223

Outside22(1)(of which, female)

(1)

(1)

Current

NewInside

76

Outside2(of which, female)(0)

List of New Directors and Corporate Auditors

Corporate Auditors

Directors
KenichiOnodera
Kojun
NishimaMasato
Kobayashi
Yoshiyuki
Odai
Hiroshi
Kato
Hisatoshi
Katayama
Yozo
IzuharaNobumasa
Kemori
ChiyonoTeradaDirector - Chairman of theBoard
Representative Director President
Representative Director Deputy President
Representative Director Deputy President
Director - Senior Managing
Executive Officer
Director - Senior Managing
Executive Officer

MaleMaleMaleMale

Yoshifumi
Nakamura
Toshikazu
TanakaTakashi
Sakai
Naoko
Hasegawa

Full-time Corporate
AuditorMale

Full-time Corporate
AuditorMale

Outside Corporate Auditor

OutsideIndependentMale

Outside Corporate Auditor

OutsideIndependentFemale

MaleMaleOutside Director

OutsideIndependent

Male

Outside Director

OutsideIndependent

Male

Outside Director

OutsideIndependent

FemaleSumitomo Realty & Development Co., Ltd. (9)Basic Management Strategy and Medium- to Long-term Outlook for “Sustainable Growth”

Governance(2) Considering abolishing “advance warning takeover defense measures against
malicious takeover action”

 In light of trends in the review of corporate takeover rules by the Ministry of Economy, Trade andIndustry and the Financial Services Agency, consider abolishing the “advance warning takeover
defense measures against malicious takeover action” that we have introduced“Problems in the legal system” that necessitate our takeover defense measurese.g. Being taken all of a sudden by a malicious acquirer who rapidly purchases shares in the market,
and the takeover being consummated without sufficient time for consideration or an appropriate
decision-making process at the General Meeting of Shareholders, posing a risk of damage tocorporate value and the interests of other shareholders

Progress in "review of corporate takeover rules," expected to possibly resolve the problems
Discussions on ensuring the fairness and transparency of acquisition procedures
METI: Reviewing the guidelines for takeovers at the “Fair Acquisition Study Group”
FSA: Reviewing the tender offer system and considering to tighten the large shareholding reporting rule

If the problems are solved in light of trends in these system revisions,abolish the "advance warning takeover defense measures"
Sumitomo Realty & Development Co., Ltd. (10)Basic Management Strategy and Medium- to Long-term Outlook for “Sustainable Growth”

Governance(3) Progress in reducing strategic shareholdings
 In Fiscal 2022, sold issues with book value of approximately ¥7.0 billion, and the ratio of
the book value of shares to shareholders’ equity declined to 16.6%
 Continuously, proceed to sell shares that are deemed to have lost their significance tocontinue holding

Book value ofshares(Billion yen)

Shareholders’equity(Billion yen)

Ratio
(%)

6th Plan

7th Plan

8th Plan(March 31,2016)(March 31,2019)(March 31,2022)

Results

190.3

255.5

271.9

269.0

821.0

1,099.3

1,479.2

1,618.9

23.2

23.2

18.4

16.6

March 31,2023

Fiscal 2030

Target

10% orless

Sumitomo Realty & Development Co., Ltd. (11)Basic Management Strategy and Medium- to Long-term Outlook for “Sustainable Growth”

Capital Efficiency(1) Achieved ROE of 9.4%, well above the cost of capital In Fiscal 2022, ROE was 9.4%, achieving high capital efficiency on par with the preceding year The shareholders’ equity ratio has improved every year, and R&I upgraded our credit rating toAA- in February 2023

Maintain ROE that exceeds the cost of capital, while balancing financial
stability with enhanced profitability
2019

2020

2021

2022

2023

ROE

11.2

11.3

10.1

9.6

9.4

Profit130.1141.0

141.4

150.5

161.9

Shareholders’equity(Billion yen)

1,202.1

1,295.0

1,503.0

1,634.0

1,799.4

Shareholders’equity ratio
(%)

23.4

24.4

26.5

28.1

28.3

R&I rating

AA+A+A+AA-(%)(Billion yen)

* Year ended March 31

Profitability

Stability

Sumitomo Realty & Development Co., Ltd. (12)