Leopalace21 Corporation

https://www.leopalace21.co.jp/english/

トー ポレ合 統期月 3 年 3202

21
統 合レポ ー ト 2 0 2 3©Leopalace21 Corporation 2023
Printed in Japan21
12

統 合レポ ー ト 2 0 2 3
統 合レポ ー ト 2 0 2 3

株 式 会 社レオ パレス

TEL: +81-3-5350-0001 (Main Line)

株 式 会 社レオ パレス
株 式 会 社レオ パレス

1 2 スレパオレ

2-54-11 Honcho, Nakano-ku, Tokyo 164-8622, Japan

レオパレス21
レオパレス21

Leopalace21
統合レポート
統合レポートIntegrated Report 2023
2023年3月期

2023年3月期

For fiscal year ended March 31, 2023

Leopalace21 Aims To Realize Our Long-Term Vision by
Taking Action Every Day While Embracing Our Corporate Philosophy

Corporate
Philosophy

Creating New Value

Long-Term
VisionEnsure competitive advantage
in our business, with theprovision of rental housing associal infrastructure at its core,
and achieve sustainable growthalong with stakeholders

To Our Stakeholders

Bunya Miyao
President and CEO

We will strive to enhance corporate value
through a virtuous cycle of dialogue
Contents

Cover 2 Corporate Philosophy, Long-Term Vision
1 To Our Stakeholders
2

18

27

Cover Story
2 What is our Purpose, or raison d’être?
4 Our Journey in New Value Creation
6 Two Major Challenges to be Solved Through Business
Activities
8 Why can Leopalace21 create new value?
10 About Leopalace21’s Business Model
12 What are Leopalace21’s important issues,
or materiality items?
14 About the outlook of Leopalace21’s major financial
indicators
16 Leopalace21’s Value Creation Process
Management Message
18 Message from the President
23 Message from the Chief of the Corporate Management
Headquarters
Strategy
28 Competitive Advantage Strategy
28 Industry № 1 for Number of Single-person
Apartments under Management
30 Leasing Expertise
32 Special Feature: Competitive Advantage of
Our Apartments and Leasing Expertise
34 Property Owners & Tenants
36 Business Partners
38 Sustainability Strategy
38 Special Feature 1: Leopalace21’s Energy Strategy
40 Special Feature 2: Leopalace21’s DX Strategy
42 Special Feature 3: Leopalace21’s Human CapitalManagement
44 Human Resources
46 Well-being Management
47 Respect for Human Rights
48 Offer Rental Housing with Stable Operation
50 Business Strategy
50 Occupancy Rate Improvement Measures
54 Structural Reforms

55

68

Corporate Governance
56 Leopalace21’s Corporate Governance
57 Corporate Governance System
58 Strengthening Our Management Structure
61 Initiatives Aimed at Improving
Effectiveness62 Communication with Stakeholders
63 Risk Management
64 Compliance
66 Directors and Audit & Supervisory Board
Members
Data Section
68 Ten-Year Consolidated Financial Highlights
70 Financial Highlights
73 Non-Financial Highlights
74 Financial Section
128 Data Compilation
134 Corporate Profile

Since its founding, Leopalace21 has continued to provide new value through housing based on
its corporate philosophy of “creating new value.” This Integrated Report 2023 is designed toprovide institutional investors and analysts with an understanding of both financial information,such as management strategies, priority measures, and business overviews, and non-financial
information, such the strengths we have built up over our 50-year history. It has been 10 years
since we published our first integrated report in the form of combining annual report and CSR
report for the fiscal year ended March 31, 2014.
This Integrated Report 2023 was created with significant input from property owners, tenants,
companies that use our properties as corporate housing, and business partners who support ourbusiness on a daily basis. If you pay attention to the voices of our stakeholders, I am sure thatyou will be able to analyze the Company from an angle different from the one in the past.
Once again, I offer my deepest apologies to all our stakeholders for the serious distress andinconvenience caused by the problems that came to light in and after 2018, including
construction defects and the disposal processing procedure for discarded home appliances. I
deeply regret that these problems arose because the Company’s path had been based on amindset that prioritizes growth, and we had lacked a compliance perspective.
In light of this past history, at present, we are reviewing our compliance check framework andoptimizing various workflows while remaining constantly aware of the need to strengthen
corporate governance, which is our foundational management task. In conjunction with this, weare also revamping our management team. Going forward, we are determined to grow andstrengthen our financial base under a strong compliance and governance framework.
Constructive dialogue with stakeholders is the key to both strengthening our organization andgrowing our business.
I hope that this Integrated Report 2023 will serve as a catalyst for the dialogue.

Leopalace21 Integrated Report 2023

1

Cover Story

Cover Story

Our Purpose, or raison d’être is to create
new value and provide better living solutions
based on the theme of housing.

Go to P.4

Go to P.6

Leopalace21 Integrated Report 2023

Data Section

Our Journey in
New Value
Creation

Two Major
Challenges to be
Solved ThroughBusiness
Activities

Corporate Governance

Leopalace21 Integrated Report 2023

Leopalace21’s business model. In 1999, we started offering Monthly
Leopalace fit for temporary use, with furniture and home appliances andby expanding the well-equipped rental housing convenient to start living
right away to a scale of nationwide 560,000 units. We play a major rolein facilitating the relocation of single-person households from anecological perspective. Meanwhile, we offered a 30-year master leaseprogram to support the construction, management, and operation ofapartments. We also believe it is valuable that we have offered an
option of running an apartment business to property owners who areworried about how to handle asset succession and inheritance tax. In
recent years, types of people who need quality single-person
apartments, including international students from abroad, students who
leave their parents’ homes to attend college, and businesspeople
relocating alone are increasing, and we believe that meeting theseneeds is also a source of great social value.
We will continue to provide high-quality housing as the basis of safe
and secure living under a business model that benefits both tenants andproperty owners.

Strategy2

We have been striving to solve social challenges to date in the field ofrental and other forms of housing by providing innovative services thatmeet the needs of the times and create new social value, while
simultaneously achieving Leopalace21’s sustainable growth inexpanding economic value.
To elaborate on one part of our Purpose in detail based on the above,
we are a rare company that provides uniform rental housing acrossJapan. More specifically, we are managing and operating approximately
560,000 units of rental housing nationwide but primarily in the threemajor metropolitan areas, with single-person households as the main
target segment. There are approximately 20 million single-personhouseholds in society overall, and we are the only company providing
and managing good and homogenous quality housing which serves as
the foundation of a safe and secure life to this demographic segment,
both in large volume and throughout the country. We believe that thisfact makes our business a part of the social infrastructure, and this in
itself is of great value and significance.
Another part of our Purpose is that we offer apartments equippedwith furniture and home appliances, which is also the foundation ofManagement Message

What is our Purpose,or raison d’être?

3

Cover Story

Our Purpose

Our Journey in New Value Creation

Leopalace21 has pioneered a variety of industry first initiatives to provide new value to society
Cover Story

561,231 units

Changes in the number of units under management(Units)600,000
500,000
400,000
Management Message

300,000
200,000
100,000
0

1973

Challenge/
needs

1980

1990

Challenge/
needs

Challenge/
needs

Easy moving/use ascompany-leased housing

2010

2020

2022

(Fiscalyear-end)

Challenge/
needs

Want to enjoy internet
in my room

Convenient housing

Strategy

Want to run apartment
business without worry

2000

（戸）
600,000

500,000

Provided

400,000
value

1995

Established and launched anindustry-first master leaseprogram to pay rents for all units inapartments for up to 30 years

We were the first in the industry to introduce a master lease programin which the landowners ask Leopalace21 to construct apartments on
200,000
their land, and Leopalace21 leases the entire apartment building
from the landowner for sublease. The program has a mechanism
under which Leopalace21 handles the recruitment of tenants,
100,000
management of the apartments and all of the other related aspectsof the business for the apartments during the period of use. Providing
0
an integrated
service from construction of the rental apartments to
1973
1980
leasing and management makes it possible for the owners to utilize
their land without cumbersome management burden while retaining
ownership, and has become an effective means of stable asset
management over a long period of time.

1999

The mainstream of rental housing business has been traditionallybased on a medium-term contractual arrangement with a contract
period of about two years. The companies, however, have a variety ofneeds such as long-term business trips, assignment of employees toremote job locations away from their family, and employee housing.
The individuals also have needs such as a temporary residence
during relocation or a short-term house in cases of limited period ofstay. Our Monthly Leopalace equipped with furniture and home
1990
appliances is a product which meets these kinds of temporary use
needs, and currently has become quite popular.

2002
Providedvalue

Launched Internet broadband
business

In 1997 the Internet use rate for individuals was a mere 9.2%, but it
rapidly increased due to the widespread adoption of PCs forindividuals, the expansion of Internet shopping, growing popularity ofsmartphones, and other factors, to reach 92.9% in 2021. Leopalace21
launched the broadband business in 2002 before this rapid andextensive adoption of the Internet. Currently, we are providing
diverse services including the Internet connection, the CS channels,
and online shopping, among others, to support the Internet-based
2000
2010
lifestyle of our tenants.

2022
Providedvalue

Promote real estate techbusiness
Corporate Governance

300,000

Providedvalue

Launched the Monthly
Leopalace short-term rental
service, furnished with furnitureand home appliances

In anticipation of the digital transformation (DX) of society,Leopalace21 has been promoting the introduction of real estate techbusiness that combines real estate services with IT. This started with
our introduction of electronic contracts for individuals using tablet
devices in 2015, installation of cloud-based security cameras andsmart locks that enable tenants to unlock the front doors withsmartphones or other devices instead of door keys, each of thesewere examples of real estate tech into a variety of our operations
2020
2022 （年度）
which used to require face-to-face communication. Due to theintroduction of smart locks, we can handle almost all procedures
online, and will utilize these advanced DX initiatives in all aspects of
the rental contract conclusion, apartment management jobs, andothers.

Data Section

4

Leopalace21 Integrated Report 2023

Leopalace21 Integrated Report 2023

5

Cover Story

Our Purpose

Two Major Challenges to be Solved ThroughBusiness Activities
Cover Story

1. Provide housing for the increasing number of foreign nationals

2. Environmental initiatives (toward carbon neutrality)

Socialchallenge

Socialchallenge

The continuously increasing number offoreign national workers and international students

Management Message

Number of foreign national workers

CO₂ emissions from the household sector
have a large impact on overall CO₂ emissions

CO₂ emissions by sector in fiscal year 2021

(Thousand people)

2,000
Manufacturing
Construction

Wholesale and retail
Healthcare and welfare

Non-energy originated7.1%(75.8 million t-CO2)

1,823

Hospitality
Others

1,500

Energy conversion sector
7.9%(83.7 million t-CO2)

1,000Household sector
14.7%(156 million t-CO2)

1,064 million t-CO2*Fiscal year 2021 ﬁnal ﬁgures

Commercial and other sectors
17.9%(190 million t-CO2)

Transportation sector
17.4%(185 million t-CO2)

0

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

(Year)*Source: About Greenhouse Gas Emissions and Absorptions
by the Ministry of the Environment and National Institute for Environmental Studies*Status of reporting on the employment of foreign workers (as of October 31, 2022), Ministry of Health, Labour and Welfare

Support to foreign national customers covering everything from searching for an apartment
room to advising do’s and don’ts in daily life after they move in

Leopalace21 Integrated Report 2023

Restraining CO₂ emissions by providing apartments equipped with furnitureand home appliances

When starting living alone, in the case of unfurnished apartments, tenants are required to buy a complete set of furniture and appliances necessary
for daily life. On the other hand, when moving into one of our apartments equipped with furniture and home appliances, tenants are not required topurchase furniture and appliances, nor do they need to dispose of them later, and such apartments make it possible to reduce the number ofbelongings that have to be transported upon moving.
We looked into the environmental contribution of the above.* Based on the average number of years that tenants stay in our apartments as wellas the number of years before we have to buy replacement furniture and appliances, it is assumed that we can ensure that the reuse of furniture
and appliances is advantageous compared to the case in which the tenant purchases the furniture and appliances for about 57,000 contracts out of
the approximately 390,000 rental contracts per year (actual results for fiscal year 2022). Considering the CO₂ emissions due to the furniture andappliance manufacturing process and the CO₂ emissions due to the disposal process for about 57,000 apartments, and calculating the CO₂
emissions reduction due to the decreased number of things to transport while moving using
officially published values, we found that CO₂ emissions were reduced by 40,000 t-CO₂ for
Reduction in CO₂ emissions due tothe year. This is equivalent to the CO₂ emissions of 22,000 people based on a conversion toapartments equipped with furniture
the annual per capita CO₂ emissions for a household person. Going forward, we will continue
and home appliances
to contribute to solving the social challenge of restraining CO₂ emissions by providing
apartments equipped with furniture and home appliances.
*Based on research by the Company (Source: The GHG Emissions Data of Japan (FY1990-FY2021), Final Figures,
National Institute for Environmental Studies

40,434 t-CO

Data Section

Leopalace21 provides integrated support to foreign national customers who have anxieties about searching for apartment rooms, a process which
they are not familiar with in Japan. The support covers everything from searching for an apartment room to the things they may face when starting
daily life. Currently, foreign national customers account for just under 10% of all of the tenants, and people from China, Vietnam, and Englishspeaking countries account for about 40%, 40%, and 20%, respectively, of the foreign national customers. To respond to this, we have establishedthe International Front Center specialized in servicing foreign national customers and have staff on duty at all times in the center who can speak
Mandarin, Korean, and Vietnamese. Going forward, we expect an increase in thenumber of foreign workers and international students in Japan, and therefore wewill continue to employ reasonable number of foreign national employees toprepare customer-friendly atmosphere so that foreign national customers can relax
in looking for apartment rooms without worrying about communication.
Meanwhile, as support after moving in, we sometimes provide assistance evenin the cases that are not directly related to our company business if the customers
face a problem in public utilities necessary for daily life, such as turning on gas
when no one at the gas company can help in a foreign language. In this way, while
proceeding with our response to the unique needs of foreign national customers,
we play a part in solving the social challenge of providing housing to foreign
nationals.

Provided value

Corporate Governance

Provided value

6

CO2 emissions

Strategy

500

Industry sector
35.1%(373 million t-CO2)

2

Leopalace21 Integrated Report 2023

7

Cover Story

Cover Story

This is because we have capital with acompetitive advantage and we are constantly
working to upgrade this advantage.

model, we have built close partnerships with property owners andbusiness partners through trusted relationship over many years. With
respect to the tenants, we have provided a variety of industry-firstservices during the past approximately fifty years, including providing
apartments equipped with furniture and home appliances, Monthly
Leopalace, the broadband business, and others. The leasing businessexpertise we have built up in that process has also become a source ofideas which generate new services.
In recent years, as a result of changing our business portfolio tofocus primarily on the Leasing Business, our employee hiring activities
were more focused on mid-career hires. We hope such employees bringin experiences in other industries or other companies to increase thecorporate ability to create new innovations by utilizing their ideas, skills,
and knowledge.

Strategy

Leopalace21 possesses capital with a competitive advantage, such as
the sheer volume of approximately 560,000 units under management,
the accumulated leasing business expertise over around forty years,
capable staff members with flexible mindsets, and partnerships withproperty owners and business partners.
The number of units under management accounts for approximately
10% of some 5.4 million units for rent that have 29m² of floor space orless, which is equivalent to the Company’s majority of apartments
throughout Japan. This is the largest scale in Japan among privatecompanies. In addition to the advantages of this scale, we anticipate
strong demand for apartments for single persons in Japan which sufferfrom shrinking population. Since we mainly service single personhouseholds which accounts for our main business, we believe we cankeep our competitive advantage for years to come. Moreover, due to themaster lease program which serves as the foundation of our business

Management Message

Why can Leopalace21
create new value?

Corporate Governance

Apartments

Business
partners

Creating new
value

8

Leopalace21 Integrated Report 2023

Data Section

Property
owners andtenants

Leasingbusiness
expertise

Our people

Leopalace21 Integrated Report 2023

9

Cover Story

Cover Story

We have created a unique business modelthat combines the construction
and leasing of apartments.

regions where many single persons live and where many people aremoving into due to economic growth and other factors, namely theregions of Kanto, Kansai, and Chukyo. In addition to these, we arestrengthening initiatives to meet the needs of companies with a large
volume of demand at one time, in particular the needs of companyleased housing. We developed a distinctive business model as a leasing
business.
Moreover, in recent years we have strengthened our relationshipwith Village House, a rental housing management company, in order toutilize real estate agents, and tried to attract the foreign nationalmigrant workers, who are on the rise to solve labor shortages. The
Leasing Business is refining its unique business model as it specializes
in providing housing to single persons.

Apartment
construction
cost payment

Rent
payment

Master lease
rent payment

Individual Corporate
tenants
tenants

30-yearmasterlease

Corporate Governance

Tenantrecruitment
and apartment
management

StrategyWith real estate business expertise as its core competency, we havecreated a unique business model that combines apartment construction,leasing and management.
The Leasing Business is mainly engaged in leasing and managementof leased apartments and other properties through master leaseprogram and maintenance work of apartments and others, provision ofvarious leasing related services, broadband services, and construction
subcontracting of apartments. The tenants can choose from two typesof rental services: a leasing contract with a contract period of one year
or more and a monthly contract with a period of 30 days or more. The
characteristics of the sales activities of the Leasing Business is that ourapartments are mainly targeted to single persons, and therefore we arecarrying out an area intensive strategy which gives priority to theManagement Message

About Leopalace21’s
Business Model

Apartment
owners(landowners)

Data Section

Ownership
Tenancy

Apartments

10

Leopalace21 Integrated Report 2023

Leopalace21 Integrated Report 2023

11

Cover Story

Cover Story

In fiscal year 2022, we have revised the materiality while taking into
account the current Company and socio-economic conditions.
Specifically, we have identified the promotion of real estate techbusiness, which is a pillar of our sustainability management, as a newmateriality item, and determined the installation of smart locks as a KPI.
As a framework for identifying the materiality, we first identify
social challenges related to the Company, and then judge whether those
items represent opportunity or risk. The materiality items are sorted by

Step 2

Identify social challenges

Determine whether issue

related to the Company

represents opportunity or

businessrisk in fiscal year 2022

ESG category.
Managing construction defects problem was identified as one of themateriality items unique to the Company. In order to ensure theexecution of publicly announced construction defects elimination planand prevent similar issues from reoccurring, we designated two KPIs forthe materiality items under the purview of governance, and continue toaddress them as important issues.

Step 3Strategy

Step 1

Management Message

What are Leopalace21’s
important issues,
or materiality items?

Leopalace21 has identified
eight materiality items sorted
by ESG category.

Step 4

Sort the materiality items
by ESG category

Receive approval from
Sustainability Committee andreport to the Board of Directors

Corporate Governance

Eight materiality items

Leopalace21 Integrated Report 2023

Communication
with stakeholders

Promote real estatetech business

Maintain the effective
corporate governance system

Work-style reformand HR development

Strengthen compliance

Respect for human rights

Environmental initiatives

Leopalace21 Integrated Report 2023

Data Section

12

Offer rental housingwith stable operation

13

Cover Story

Cover Story
Management Message

About the outlook of
Leopalace21’s major
financial indicators

Due to our continuation of structural reforms
and the improvement of the balance sheet, among
other factors, the major financial indicators are
expected to attain a high level in fiscal year 2024.
EBITDA(JPY billion)

30.4

20.5
16.4
11.1

FY2022

FY2023 plan

Strategy

FY2021

FY2024 plan
(reference)*EBITDA = Operating profit + Depreciation

Due to the progress of the structural reforms and the successful results of our occupancy rate
improvement measures, we have seen a large improvement in earnings. For EBITDA, one of the major
financial indicators, we achieved JPY 16.4 billion in fiscal year 2022, an increase of JPY 5.3 billion year
on year. We will continue efforts to expand earnings, with the aim of achieving JPY 30.0 billion in fiscal
year 2024.
Corporate Governance

Equity ratio
(%)

28.6

17.7
14.5

0.7
FY2022

FY2023 plan

Data Section

FY2021

FY2024 plan
(reference)*Equity ratio = Shareholders’ equity ÷ Total assets (Liabilities + Net assets) × 100

Due to the large improvement of earnings, net income recovered to JPY 19.8 billion and as a result of
this and other factors the equity ratio has also recovered to 14.5%, which is 13.8 points up compared tothe end of fiscal year 2021. Going forward, we will continue aiming for strengthened financial position
while also implementing a flexible and agile shareholder return policy.

14

Leopalace21 Integrated Report 2023

Leopalace21 Integrated Report 2023

15

Cover Story

Leopalace21’s Value Creation Process
Long-term
visionINPUT

BUSINESS MODELOUTPUTOUTCOME

Cover Story

We aim to solve social challenges and create new value in the housing sector—particularly the rental housing sector—by
providing innovative services that meet the needs of the times, while simultaneously achieving sustainable growth (expansion of
economic value) for Leopalace21.

Management Message

Ensure competitive advantage
in our business, with theprovision of rental housing associal infrastructure at its
core, and achieve sustainablegrowth along withstakeholders

PurposeFinancial capitalSocialchallenges

Create new value and provide better living solutions
based on the theme of housing•Equity capital: JPY 24.1 billion•Interest-bearing debt: JPY 31.8
billion

Human capital
Employment issues

FY2022

Offer rental housingwith stable operation

Tenantrecruitment
and apartment
management

Apartment
construction
cost payment

Rent
payment

Master lease
rent payment

Promote real estatetech businessWork-style reformand HR development•Master lease program•Apartment management expertise

Individual Corporate
tenants
tenants

Apartment
owners(landowners)

30-yearmasterlease

Respect for humanrightsTighter checks on
corporate governance•Improvement of employee
engagement•Realization of a fulfilling
work environment•Active participation ofdiverse human resources

Offer rental housingwith stable operation

TenancySocial capital•No. of owners: approximately
26,700•No. of tenants: approximately
500,000•No. of business partners:
approximately 1,650•No. of leasing sales offices: 109•No. of units under management:
561,231•No. of rooms installed with smart
locks: approximately 150,000

Leopalace21 Integrated Report 2023

Apartments

Leopalace21’s strengths
Scale

Product appeal

Service capabilities

Tenant matchingcapabilities

Maintain theeffective corporate
governance system

Strengthen
compliance•Used as company-leased
housing by approximately
80% of listed companies•Lifestyle support for foreign
national workers andinternational students•Provision of housing for newhires and new students

Data Section

16

Strengthen humanresource baseCommunication withstakeholders
Ownership

Climate change: realizing
recycling and eco-friendly
society

84.66 %

Corporate GovernanceRising demand forconvenient living
conditions

Intellectual capitalOccupancy rate

Average for FY2022

Demographic trends

Innovations in digitaltechnology

406.4 billion

Improve corporate value•Operating profit: JPY 9.8
billion•Free cash flows: JPY 11.4
billion•EPS: JPY 60.22

Strategy•Consolidated No. of employees:
3,991•No. of sales personnel in Leasing
Business: 1,103

Sales

JPY
Corporate philosophy

Creating new value
Shrinking labor force
because of falling birthrate
and aging population

8 materiality
items

Environmental
initiatives

Leopalace21 Integrated Report 2023

17

Management Message

Message from the President

promote structural reforms and DX, and carry on
repairing construction defects

considered to be the 10th station.) The fact that our mainstay Leasing
Business was able to increase the occupancy rate by nearly 3.5
percentage points last year over a 12-month period is reallycommendable, however, our annual average occupancy rate has still not
yet reached 85.0%. Furthermore, we are still grappling with the problem
of construction defects, and last year there was an issue in relation to
Japan’s Act on Recycling of Specified Kinds of Home Appliances. We
are fully aware that we cannot let our guard down because we are stillin the midst of addressing a whole host of challenges.

Operating profit and equity ratio

（億
15

27.7
9.8
7.3

14.5

-5.3
-36.4
FY2018FY2019

5

0.7

-5

-29.1
FY2020Operating proﬁt (JPY billion)-40

FY2021

FY2022Equity ratio (%)

Occupancy Rates
Bunya Miyao
President and CEO

Establish a position as the brains behindthe company-leased housing strategy
Top-level sales activities
Involve senior management team in customer interaction for resolving
issues faced by the customer.
Reinforce sales organizational structure
Reorganized the sales teams mainly for Tokyo metropolitan area. 11
departments instead of 8 for increased customer interaction time.
Individual customer strategy
Encourage use of rooms by responding to specific requirements.

Data Section

Leopalace21 Integrated Report 2023

care—along with our efforts to establish relationships with local
companies in different regions across Japan, has helped us to establish
a position as the brains behind the company-leased housing strategy.
Corporate Governance18

We were able to maintain an earnings recovery in fiscal year 2022 firstand foremostly because the occupancy rate continues to improve. In
fact, the occupancy rate at the end of fiscal year 2022 had improved
3.73 points compared with the previous year to 88.83%, while theannual average occupancy rate had increased 3.44 points to 84.66%.
We had initially targeted an annual average of 85.05% for fiscal year
2022, so in that sense we almost got there, but 85.0% is still low
compared to our industry peers and not a level that we feel entirely
satisfied with. Nevertheless, in the context of an achievement over thecourse of one year, a 3.5% improvement can be considered quite
remarkable, and I applaud the hard work of all our employees.
This result can be attributed to the steady implementation of
measures in recent years aimed at establishing a position as the brains
behind the company-leased housing strategy, which I think has yieldedstrong results and helped us gain corporate customers.
With this goal in mind, we have continued to drive top-level sales
with the aim of presenting comprehensive solutions on a nationwide
level to address mainly the company-leased housing issues of clientcompanies. In addition, we have added more sales departments
primarily in the Tokyo metropolitan area and formulated and executed
strategies for each corporate customer in a bid to capture their detailed
needs and requirements. I also believe that having focused on six
specific industries in which demand for company-leased housing is wellentrenched—namely, staffing & outsourcing, construction,transportation, food & beverage, wholesale/retail, and nursing

10

1.7

0.7

Strategy

to strengthen profitability and stabilize financial base,In fiscal year 2022 we recorded net sales of JPY406.4 billion, operating
profit of JPY9.8 billion, and net income of JPY19.8 billion. This marks
the second-straight year of operating profitability, and we also managed
to keep net income in positive territory from last year.
The increase in net income also lifted our equity ratio to 14.5%.
Moreover, cash and deposits and EBITDA rose sharply to JPY53.5 billion
and JPY16.4 billion, respectively, which demonstrates that our financial
position is steadily improving. Also, since the start of fiscal year 2023
we have implemented recapitalization, which has allowed us toeliminate losses on retained earnings brought forward, which serves as
the source of dividends. We have established a system with which we
can return profits, including share buybacks and the resumption ofdividends, to shareholders at the earliest opportunity in a flexible andtimely manner. And now that fiscal year 2023 is underway, we recently
announced the acquisition of our treasury stock.
Whilst we have achieved profitability for two years in a row andmade progress on improving our financial situation, our operating profit
margin last fiscal year remained at 2.2%. Internally, there is a sharedrecognition that an operating profit margin of 5.0% or lower is still far
from our target.
Looking at this situation, if I were to liken our progress to theclimbing of a mountain, I would probably say that we have just reached
the sixth or seventh station. (In Japan, the summit of a mountain isManagement
Management Message
Message

Fiscal Year 2022 Review

Cover
Cover Story
Story

Implementing a three-pronged management policy

Extended Corporate Sales Department
Strengthen relationships with six industries: staffing & outsourcing,
construction, transportation, food & beverage, wholesale/retail, andnursing care
Regional Corporate Sales Department
Build strong relationships with local companies in each region

Leopalace21 Integrated Report 2023

19

Management Message

Message from the President

Looking back on our efforts to deal with the problem of construction
defects, up until fiscal year 2020 we had concentrated our managerial
resources on the Leasing Business in order to pull out of a crisis
situation. This meant we were only able to carry out work on roughly
3,000 to 4,000 units annually. Over the past two years however, ourearnings have been on track for a recovery and we have had moreresources available, so we have been able to increase the number of2Strengthen profitability and stabilize financial base
Increase shareholders’ equity by strengthening profitability, and consider improving shareholder return and capital efficiency

Annual average occupancy rate

FY-end occupancy rate

Operating profit

Net income

Equity ratio

87.20%

91.40%

JPY13.9bn

JPY7.4bn

17.7%

Promote structural reforms and DX
Continue with constant structural reforms and utilize digital technology to improvecustomer convenience and operational efficiency

Transfer or withdraw from
non-core/unprofitable businesses

Promote an effective HR
strategy

3

Carry on repairing construction defects
Continue to repair obvious construction defects to fix themby the end of December 2024
Reinforce the structure to achieve the repair planand utilize Company-wide available resources

Build up smart lockinstallations

Management
Management Message
Messagerepair works. In July last year we undertook a review of our progressgoals and we carried out repair works on approximately 6,000 units
from July 2022 through to March 2023. That said, I believe we still needto accelerate the pace of repair works in order to achieve the goal of
fixing all obvious defects by the end of 2024.
To repair some 26,900 units as forecasted in July this year, we willneed to fix more than 1,000 units per month, which is why we are
currently taking steps to augment our construction capabilities.
To be more specific, we are not only expanding the number ofcontractors that undertake the work, but ramping up our approach torepairing units currently occupied in addition to our hitherto focus onunits that had been vacated. Of the rooms subject to the investigation,some have been occupied by the same tenant for 10 years or more andfrom the outset there was little progress made on the investigation ofthese rooms, but with the repairs approaching the final stage, we willcontinue to steadily undertake repair work, as promised, whilst also
rebuilding our financial base. Our goal of repairing all obvious defects
by the end of 2024 therefore remains unchanged.

Cover
Cover Story
Story

1

Addressing Construction Defects

Strengthen governanceIn all of this, continuing to improve the occupancy rate is mostimportant if we are to strengthen profitability and stabilize financialbase. This fiscal year, in the Leasing Business we aim to achieve an
occupancy rate of 91.40% by the end of the term and an annual averageoccupancy rate of 87.20%. To reach these targets in occupancy rates,
we will deploy a number of measures. For example, we will expand
corporate contracts as part of our approach to being the brains behindthe company-leased housing strategy, increase individual customers

with the use of real estate agents and online channels, and drive an
increase in foreign national customers, including foreign workers on
corporate contracts and international students on individual contracts.
With these occupancy improvement measures we aim to generatestronger revenue and achieve operating profit of JPY13.9 billion and net
income of JPY7.4 billion. As a result, we are targeting an equity ratio of
17.7% as part of our aim to stabilize our financial base.

Promote structural reforms and DX

name. However, because we outsourced this entire operation to anothercompany and the activities were carried out under their name, we weredeemed to have not met our obligations as a retailer and consequently
received a recommendation notice from the Ministry of the Environment
and the Ministry of Economy, Trade and Industry for violating ourobligations under the Home Appliance Recycling Act. Specifically, wewere found to have not fulfilled our obligations as a retailer for a totalof 99,440 items across the four categories from April 2020 onwards.
In response to the recommendation notice, we have taken actions toaddress the situation, including monitoring the appliance collection
process as required by the recommendations. We are also setting up a
new scheme for the installation and disposal of appliances and we areconducting compliance checks on other aspects of our operations toensure comprehensive measures are in place to prevent a recurrence ofissues in a broader sense.

August 5, 2022
Announced our DX strategy

Corporate Governance

Even though I have already provided an explanation about the issue that
occurred in relation to the Act on Recycling of Specified Kinds of Home
Appliances, as president of the Company, I would like to once again
briefly discuss how this issue came about.
This law, which is also known as the Home Appliance Recycling Act,requires consumers to properly dispose of four types of used home
appliances—air conditioners, televisions, refrigerators, and washingmachines—and also share the costs of doing so by paying collection
and recycling fees. Retailers are required to take back the usedappliance from the consumer and deliver it to the manufacturer, who in
turn, must collect it from a designated collection point and recycle it.
The issue stemmed from the fact that we were not aware that we
had been classified as a retailer under this law in relation to rental
property owners. As a retailer, we were obligated to collect appliancesfrom rental property owners, that are the consumers discarding theitems, and hand them over to the manufacturers, all under our own

four strategic themes and three platforms. Then, in November, we wererecognized as a DX-certified Company based on the DX certification
system of the Ministry of Economy, Trade and Industry. We are
implementing DX, including the use of smart locks, web-based
contracts, and AI-powered voicebot, for contracts, inquiries, and othertasks of the Leasing Business. In addition to these initiatives, we are
exploring opportunities to seed new businesses by harnessing the vast
amounts of data we have accumulated internally.

StrategyHome Appliance Recycling Issue

Up until now we have been concentrating on our mainstay Leasing
Business with a view to improving profitability while also implementing
a selective concentration approach in order to reorganize our non-corebusinesses. As such, in the past fiscal year we divested the custombuilt wooden homes subsidiary Morizou and the overseas subsidiary
Woori & Leo PMC Co., Ltd., liquidated our Cambodian subsidiary, andsplit a part of the Elderly Care Business. As a result, the withdrawal
from the International Business that was previously part of our businessportfolio is almost done. We are downsizing non-core businesses not
closely related to the Leasing Business and, at the same time, focusing
on businesses that will be needed in society going forward and that are
related to the Leasing Business, such as the power generation businessat Leopalace Power and the environment business of Leopalace Green
Energy. In this way, we aim to establish a more selected andconcentrated business structure.
In connection with the structural reforms, we are pursuing a DX
strategy aimed at improving customer convenience and making ouroperations more efficient with the use of digital technology. The DX
strategy, which we announced in August last year, is underpinned by

November 1, 2022
Recognized as a DX-certified Company

Continue to promote DX with the aim ofbeing selected as a DX Stock by 2025

HR Strategy

Management Policy for Fiscal Year 2023
Our management policy for fiscal year 2023 consists of three pillars: (1)Strengthen profitability and stabilize financial base; (2) Promote
structural reforms and digital transformation (DX); and (3) Carry on
repairing construction defects. Last fiscal year, we focused on
implementing constant structural reforms, promoting sustainability, andmanaging construction defects. This change in approach reflects the20

Leopalace21 Integrated Report 2023

progress we have made on the structural reforms we need to undertakeand the fact that we are now in a position to be able to actually discussearnings and financial matters. It also owes to the ongoing digitalizationof society and the growing need for us to incorporate digital technology
into our operations.

growth. More specifically, for Diverse talents acquisition, we are aiming
to resume the hiring of new graduates and recruit personnel best suited
to the different ways of working in this new era, mainly by utilizing our
so-called come back rehiring system, a specialist worker scheme, andpart-time workers. As for Leadership and succession, our focus is on
encouraging sustainable growth in the careers of every single
employee.
The inclusion of Compliance and ethics in these six categories ofhuman capital management reflects our determination to never let aproblem like the construction defects happen again.

Leopalace21 Integrated Report 2023

Data Section

Strengthen profitability and stabilize financial base

We consider human resources to be an integral part of management
capital and the Company’s Board of Directors is currently spearheading
the development of a new human resources strategy. Leopalace 21’shuman capital management has been organized into six categories, andby publicly disclosing them, we have demonstrated our commitment toemphasizing their importance to employees and to people outside of theCompany.
The six categories are: (1) Well-being management; (2) Diversity &Inclusion; (3) Compliance and ethics; (4) Employee engagement; (5)Diverse talents acquisition; and (6) Leadership and succession. Of thesecategories, we believe the last two to be indispensable to future21

Management Message

Management Message

Message from the President

Message from the Chief of the Corporate
Management Headquarters
Cover
Cover Story
Story

Medium- to Long-Term Approacha business that is based on underlying leasing operations would
therefore be ideal. So why do we need a construction business? The
biggest reason is that many of our apartments will soon be over 30
years old and the time is approaching for them to be rebuilt. It is hard tomaintain the nationwide uniform quality that characterizes ourapartments unless the properties are designed and constructed by us. If
we are to continue drawing on the characteristics of our Leasing
Business, I believe it is essential that we resume construction activities
centering on the rebuilding of existing properties.
I should also mention that because we have long managed these
30-year-old properties, we have data on the kinds of tenants that lived
in them from the time they were newly constructed and stretching overthe last couple of decades. I believe that making new proposals basedon these data is not only within the scope of our expertise, but issomething we must carry out.
We need to start running on two wheels, leasing and construction,and envision the Company’s future, driven by the new environment andenergy businesses we are currently launching, as well as new
DX-powered businesses based on our data resources.

Steady progress on improving
profitability and strengthening
financial base

Management
Management Message
Message

Some people may think we are getting ahead of ourselves too soon, but
in my view, because we can now see a path to recovery in the Leasing
Business, the time has come for us to start thinking about our mediumand long-term direction in terms of what the Company should be aiming
to achieve after completing the process of fixing all obvious
construction defects by the end of December 2024.
I believe that as a starting point for the future direction of theCompany, we should first get everything back to normal. My idea of“normal” is having a balance between the leasing and construction
businesses. Our traditional business model involved the construction ofapartments and then managing and operating those apartments. In
other words, the Company was running on two wheels of leasing andconstruction. Over the past five years, we have undertaken hardly any
new construction projects, basically running on just one wheel, which is
why I think we need to once again become a company that operates
with two core businesses.
However, it is not our goal to return to a situation whereconstruction takes precedence over leasing, as was the case at one
point in time. I believe engaging in construction within the framework of

Shinji Takekura
Director, Executive Officer,
Chief of the Corporate Management
Headquarters

Strategy

In Conclusion
I believe everyone is starting to sense the acceleration in our earnings
recovery, highlighted by the two consecutive years of profitability andoperating cash flow turning positive for the first time in five years.

Even though we still expect to face challenges up ahead, I kindly ask
all of our stakeholders for their continued understanding and support.

In fiscal year 2022 we posted net sales of JPY406.4 billion, operating
profit of JPY9.8 billion, and net income of JPY19.8 billion. This strong
earnings recovery was primarily driven by the considerable improvementin our annual average occupancy rate. As a result, both operating profit
and net income have remained in the black for two years in a row.
The annual average occupancy rate, a key factor in our earnings
recovery, improved sharply, rising 3.44 percentage points year on year.
Despite some special factors, including a review of accounting
treatment for the cost of sales when certain home appliances are
installed, profit was boosted by a year-on-year reduction of JPY800
million in SG&A expenses. This mainly reflects the full benefits of the

Corporate GovernanceFiscal Year 2022 Review
drastic cost-cutting measures we implemented in fiscal year 2021. Also,
net income has further improved because we recorded deferred tax
assets for multiple years. As a result, the equity ratio has improved to14.5% as of the end of the fiscal year.
As part of efforts to improve our profit structure, we are concentrating
our resources on the Leasing Business and withdrawing from others. In
fiscal year 2022, we divested our equity stake in the equity method
affiliate Woori & Leo PMC Co., Ltd., sold the subsidiary Morizou, filed
an application for the closure of our Cambodian subsidiary, and split apart of the Elderly Care Business.

Data Section

Bunya Miyao
President and CEO
September 2023

22

Leopalace21 Integrated Report 2023

Leopalace21 Integrated Report 2023

23

Management Message

Message from the Chief of the Corporate Management Headquarters
Cover
Cover Story
Story

Progress of Management Policy
Acquisition of treasury stock

Cash flows from operating activities(JPY billion)

10.5

50 million shares(maximum)JPY10.0 billion(maximum)

July 6, 2023 toJanuary 5, 2024

-4.4

Human Capital
-40.8
-51.6
FY2018FY2019FY2020

FY2021

FY2022sustainable growth, but are also meant to help each and every
employee make the right decisions. This is not just about making
decisions based on compliance; the greater aim is to nurture employees
who, in their day-to-day decisions, regardless of their position in the
Company, consider how best to achieve results and can look back intime and say that their decisions were to the best of their ability andfree of self-interest. It’s not so simple and it is rather a challenge of thehighest order, however, I am sure that our employees can be truly proudof their company if it is a collective entity with such personnel.

Compliance
In dealing with the construction defects problem, we are pressing ahead
with the plan to have all obvious defects repaired by the end of
December 2024. At the same time, we are seeking to fundamentallytransform our corporate culture with a core focus on promoting
compliance as a preventive measure to ensure that such problems never
happen again.
Given that the commitment of the management team is most criticalto promoting compliance, the Compliance Committee, whose role is topromote compliance related to overall management, meets every monthin an effort to strengthen the Group’s compliance system. In addition tothis, we run compliance training sessions on an ongoing basis for bothofficers and employees. Along with our preventive measures, I get the
feeling that an awareness of the transformation in our corporate culture
is taking root.
The goal of our compliance promotion efforts is to achieve a selfpropelled compliance culture in which employees think and act on their

Leopalace21 Integrated Report 2023

Data Section

Business. We will steadily push ahead with these initiatives eventhough the timing and scale of each one will depend on our financial
situation.
In connection with this, we have decided to buy back 50 million
treasury shares, or up to JPY10.0 billion worth, which represents 15.2%
of issued stock. As a shareholder return strategy, paying dividends was
also an option. However, considering the time it takes to convene ashareholders’ meeting and the dilution associated with the exercise ofstock acquisition rights, we have decided to conduct a share buyback at
this time. I should also add that at the time of the resolution,
management felt that the share price did not reflect the true value of
the Company.
Another financial matter is that we are considering the repayment ofa loan that we took out in 2020, which is scheduled to mature in
November 2025. At the time, the loan carried an interest rate of 14.5%,
and because it will become eligible for early repayment from November
this year, there is a consensus among management to repay the loan at
the earliest opportunity. We are currently discussing our course ofaction, including the possibility of refinancing.

From my position as Chief of the Corporate Management Headquarters,
I believe that human capital initiatives are just as important as financial
ones for ensuring the Company’s sustainable growth.
We recently disclosed our basic approach to human capitalmanagement, along with concrete initiatives, in our securities report.
This demonstrates to stakeholders outside of the Company our stanceon human capital and also represents management’s commitment toemployees about how serious we are about implementing humancapital management.
In terms of specific initiatives, we have identified six categories,
including Leadership and succession, Diverse talents acquisition, andCompliance and ethics. And for each category, we have establishedtargets. We will aim to improve employee engagement with amanagement approach that emphasizes well-being and D&I by including
a compliance item as one of the six categories. At the same time, wehave placed a strong emphasis on boosting the motivation of younger
employees, and to achieve that, we incorporated leadershipdevelopment from non-managerial positions as a theme.
While the Company’s finances were largely affected by theconstruction defects problem, the mental well-being of our employees
was also significantly impacted. The various initiatives related to humancapital management that we have announced are not only measures for

Corporate Governance

Leopalace21 Integrated Report 2023

Acquisition period

Strategy

24

Total acquisition value-7.2

Financials for Medium- to Long-Term Growth
Our mainstay Leasing Business inherently operates on a cash flow
structure where receipts precede payments. Capital investments andthe like are not required under this business model. Accordingly, as longas we can maintain a certain occupancy rate and surpass the breakevenpoint, the system is designed to steadily increase our cash reserves,
providing that no extraordinary situations arise.
The improvement in occupancy rates and the structural reforms wehave executed thus far are proving fruitful and our financial position issteadily improving. In particular, our equity ratio has recovered from
0.7% in fiscal year 2021 to 14.5% in fiscal year 2022. At present, we
aim to lift the equity ratio to 30%. After that, we will turn our attention
to capital efficiency and endeavor to maximize ROE and ROIC whilst
taking into account a balance between shareholder returns and growthinvestments.
As for cash outflows going forward, we expect to (1) extend stableshareholder returns, (2) aggressively invest in rental housing with DX
solutions to attract tenants in order to reassure rental property owners,(3) invest in human resources such as hiring of new graduates,
reskilling, etc., and (4) develop an organizational framework in readinessfor the resumption of operations in the Construction Contracting

Matters resolved

Number of shares to be acquiredManagement
Management Message
MessageOur management policy for fiscal year 2023 has three themes: (1)Strengthen profitability and stabilize financial base; (2) Promote
structural reforms and digital transformation (DX); and (3) Carry on
repairing construction defects. Of these, we recognize thatstrengthening our profitability and stabilizing our financial base are theobjectives we must achieve by fiscal year 2024.
Improving occupancy rates is the biggest challenge to strengthening
profitability. The annual average occupancy rate in fiscal year 2022 was
84.66%. The sharp year-on-year improvement of 3.44 points is
attributable to the success of our concerted efforts in aiming to expand
the share of corporate contracts. For example, some administrative
department employees were also involved in leasing sales work during
busy periods. However, material unit prices, labor costs, utilities, andother expenses are increasing, and we have been forced to lower our
fiscal year 2024 earnings targets due to the inevitable increase in thecost of sales.
On the other hand, because we have continued to pursue structuralreforms, our cash flow has improved. Operating cash flow turned
positive in fiscal year 2022 for the first time in five years.

25

Management Message

Message from the Chief of the Corporate Management Headquarters

Our raison d’être, or purpose, is to create new value and provide better living solutions on the theme ofManagement Message

development of Guidelines on Customer Abuse of Employees in 2023.
In order to get an idea of how these initiatives have increased
employee awareness of compliance, every year we ask all employees tocomplete a compliance awareness survey. The results of the survey
have shown that the percentage of officers and employees answeringthat they are conscious of compliance increased from 83% in 2019 to
99% in 2023. This indicates that awareness of compliance has steadily
increased and that our corporate culture is changing.

Cover
Cover Story
Storyown, rather than merely following instructions. We have therefore
appointed compliance managers and coordinators in each business siteand clarified what tasks each of them is responsible for in anticipationof how to respond in the event that a problem has occurred, similar to
the time when a BCP is activated.
Other measures we have taken to continuously improve complianceinclude the announcement of a declaration to eliminate harassment in
2020, the establishment of rules to prevent harassment in 2021, and theStrategy
Strategy
housing, while also aiming to expand both social and economic value through our business.
To that end, we are implementing a competitive advantage strategy, a sustainability strategy, and abusiness strategy. In this section, we discuss these three strategies in detail.

In Conclusion
corporate value. To achieve this, many objectives naturally come intoplay. And they are directly linked to both corporate value and the shareprice.
On August 17 of this year on the occasion of the Company’s 50th
anniversary, we sent out the following message.
“Your first apartment: where it all begins.”

Strategy
Strategy

It is said that when a company experiences a significant event thatcauses substantial damage to its business, a true recovery will take atleast 10 years. The construction defects problem at Leopalace21 cameto light in 2018 and five years have now passed, so we only haveanother five years to the 10-year mark.
I have been thinking a lot lately about what we can set our sights on
and what we can do to achieve renewed growth within this timeframe.
Needless to say, during this period it will be important that we carry on
with sustained efforts to regain the capacity to generate revenue,
strengthen our financial base, and invest in growth, while producing
some results. However, of the many forms of evaluation, I would like to
set ourselves the goal of being ranked among the top companies thatnew graduates want to join, as we enhance employee satisfaction and

The company where one begins their career as a new employee isakin to such a room. Our work involves their lifetimes through ourbusiness operations, and we will keep these sentiments in mind andstrive to improve our corporate value as a Company needed in society,providing residential infrastructure in the shape of company housing. I
look forward to your ongoing support.

Corporate Governance

28 Competitive Advantage Strategy

38 Sustainability Strategy

28 Industry № 1 for Number of Single-person
Apartments Under Management

38 Special Feature 1: Leopalace21’s Energy Strategy

30 Leasing Expertise

42 Special Feature 3: Leopalace21’s Human CapitalManagement

40 Special Feature 2: Leopalace21’s DX Strategy

32 Special Feature: Competitive Advantage of Our
Apartments and Leasing Expertise

44 Human Resources

34 Property Owners & Tenants

46 Well-being Management

36 Business Partners

47 Respect for Human Rights
48 Offer Rental Housing with Stable Operation
Data Section

50

Business Strategy
50 Occupancy Rate Improvement Measures
54 Structural Reforms

26

Leopalace21 Integrated Report 2023

Leopalace21 Integrated Report 2023

27

Strategy

Competitive Advantage Strategy

Industry № 1 for Number of Single-person Apartments

under Management
Cover
Cover Story
Story

Maintaining competitive advantages in economies of scale,quality and tenant acquisition
Not only do we have an advantage of scale with the largest number of apartments for single-person households under management inJapan, but we have the quality advantage of being able to provide the market with uniform properties. In addition, our properties comewith furniture, appliances, and internet as standard equipment, which gives us a competitive edge in attracting tenants for short-termstays, such as people on business trips, or students that require housing for a fixed period.

3

Short term

Company

CompanyAB

16,785

18,41819,342

19,96020,254

20,233

19,94420,00014,457

15,00010,000
5,000

2005

2010

2015

0

2020
2025
2030
2035
2040 (year)
Forecast Forecast Forecast Forecast Forecast

Less than 25 years old
25–34 years old
65–74 years old
75 or older

35–64 years old

CompanyC

Characteristics

Family apartment

2

Our market share in the single-person apartment industry

Leopalace21
Approx. 560,000 units
Share: 10.3%

Equipped with furniture, appliances, and internet

95% of our properties come with furnitureand home appliances for the convenienceof tenants

Usually equippedwith furniture,appliances,and internet

5.4 million rental
housing units of
29m² or less

560,000 uniform properties throughout Japan
Reasons why customers choose us

Company-built standard properties throughout
Japan; uniform specifications eliminate
regional differences

Leopalace21 Integrated Report 2023

UniformlayoutWe have traditionally operated two core businesses: leasing andconstruction. We would build apartments with our own standardized
floor plan on land owned by landowners and then manage thoseapartments. As a result, many of the 560,000 apartments that wemanage nationwide have the same room specifications. For businesses
that operate all over Japan, having access to properties that are moreor less the same everywhere is a really important factor in ensuring
equal treatment of their employees.

1Single pointof contact

Owing to the fact that we can provide
housing anywhere in Japan, we can offer
a single point of contact for our corporate
customers, thereby reducing theiradministrative burden.

2Standardized
services acrossthe country

By maintaining consistent standards ofapartment grade, layout, and equipment
across all regions, we can reduce any
feelings of inequality among employees incompany-leased housing.

3

Reducedexpenses
Data Section

Specializing in 560,000
studio apartments
nationwide

28

（千世帯
25,000(1,000 households)

Corporate Governance

Characteristics

Leopalace21

Future estimates of households

Strategy
Strategy

According to the 2018 Housing and Land Survey conducted by theStatistics Bureau, Ministry of Internal Affairs and Communications,approximately 19 million households live in rental units in Japan. Of theroughly 19 million units, some 5.4 million of them are in rented houses
with floor space of no more than 29m², which is more or less the same
size as our mainstay apartments. We therefore estimate that we hold amarket share of about 10% in this category based on our number ofunits under management. While there are many companies providing
rental housing, considering that we alone provide the market withapproximately 560,000 units, we are considered to be the largest-scale
private landlord in Japan.
While other companies primarily engaged in the leasing businesstend to target families and employ a business model focused on longterm tenancy, we specialize in studio apartments for single people.
Another key aspect of our unique business model is that we have arelatively high proportion of properties located near train stations.

Room typeStudio apartment

Long term

5.4 million units of roughly the same size as
Leopalace21 offers; our market share isaround 10%

Our market positioning

Length of stay1

Largest-scale private landlordin Japan

Even though Japan’s population is declining after peaking out in 2008,
the number of single-person households is expected to increase in the
future. The number of households in our target demographic segment,
the single working age population (age 15 to 64), is projected to hoveraround 15–17 million for the next 20 years or so. We have identified
single-person households in urban areas in particular to be our main
customer segment, and we have endeavored to provide better facilities
to meet the needs of tenants and make it easier for them to sign aleasing contract. We have also catered to corporate demand forcompany housing and business trip lodgings by offering monthly
contracts.

Management Message

Characteristics

Increase in single-person households is supporting our business of specializing
in studio apartments

We alone can meet a significant amountof demand, which benefits our corporate
customers in the form of lower brokerage
fees and other expenses.

Leopalace21 Integrated Report 2023

29

Strategy

Competitive Advantage Strategy

Leasing Expertise
Cover
Cover Story
Story

Accumulating know-how in step with customer changes
and evolving technology
We have continued to accumulate expertise to keep abreast of changes in customer preferences and advancements in technology in orderto establish a competitive advantage in the Leasing Business. The services that we pioneered in the industry, such as electronic contracts
and multilanguage support, have greatly contributed to the building of our competitive advantage as a point of differentiation apart fromthe properties themselves.

1

Contracts

As part of our efforts to improve services with a view to digitaltransformation (DX), we have adopted real estate tech, which integrates
real estate with information technology.
We are actively pressing ahead with the use of electronic contracts
after first deploying Leo-sign, an electronic contract management
system for corporate clients in 2015. Following the establishment ofregulations related to real estate business, the use of electronic
contracts for lease agreements and the like have been possible since
May 2022, and as a result, roughly 40% of our corporate contracts havebeen switched to electronic format.

Multilanguage support

Streamlining at Contract Administration CenterWe currently continue to acquire foreign national tenants following theeasing of immigration restrictions by the Japanese government inMarch 2022 as a post-pandemic policy, which has resulted in an influxof foreigners coming to Japan. Accordingly, we are expanding ournumber of leasing sales offices that can provide tenant support services
in languages other than Japanese. In particular, our IFCs are staffedwith personnel ready to cater to the needs of foreign national customers
in the native languages ofmany of our tenants,
including Chinese,
Vietnamese, and English.

At our Contract Administration Center, we are centralizing contract
operations previously undertaken at each branch and endeavoring tominimize tasks and standardize quality and services across the board
with the use of RPA for electronic contracts. We have completed thecentralization of contract work for the Corporate Sales Department andwe aim to finish the same for all other contracts by the end of the year.
In the future, the Center will also handle administrative tasks other thancontracting in a bid to streamline the organization and boost
productivity.

Electronic contract management service for corporate customers

Chatbot, voicebot, and 24/7 support

Our Tenants Support Center operates 24 hours a day, seven days a weekand responds to a wide range of inquiries from tenants. Phone support
was the primary method of communication in the past, but we faced
operational challenges when experiencing a high volume of inquiries. To
address that problem, inFebruary 2023 we introduced an
AI-powered chatbot and voicebot
to improve our capacity toprovide quick support.

With the use of a chatbot, we can now provide fast and accurate
responses, linked to FAQs, as a way of handling the inquiries fed
through our website. For telephone inquiries about apartment keys or
plumbing, we utilize a voicebot to make operations more efficient andto strengthen our support system
during peak inquiry times. We
will continue to further enhance
the customer experience andmake every effort to reduce theburden on tenants and improve
convenience.

Tenants Support Center staff handlingtenant inquiries

Chatbot inquiry screen

Multilanguage support

Management centers across the country

We have established a dedicated support line for foreign national
tenants. As of March 2023, we have approximately 22,000 (individual
contracts only) foreign nationals living in our apartments, and we
receive around 40,000 inquiries annually, or roughly 3,500 per month on
average. We provide support to tenants in five languages: English,
Chinese, Korean, Portuguese,and Vietnamese. We provide
briefings during the move-in
process, as well as general
support on any issues that arise
during their tenancy to ensurethat their time in our apartments
is as comfortable as possible.

Under our property management system, we have 103 directly operated
management centers and four Tenants Support Centers throughout
Japan. The assignment of employees to these centers means we have athoroughgoing system in place that can respond swiftly to various
on-site tasks, including legally mandated inspections, fee management,
insurance procedures, disaster response, replacement of broken
furniture or appliances, and any
issues that may arise during thetenancy. In addition to the
management centers, we work
closely with partner companies
to provide tenants with a safe
and comfortable living
environment.

Foreign national employees responding toinquiries

Strength

3

Management center staff carrying out aninspection

Building management
Data Section

We have 109 directly managed sales offices, six International Front
Centers (IFCs) in Japan, and six directly managed sales offices overseas.
Our directly managed sales offices are located throughout Japan inregions where there is strong demand for housing, while for theincreasing number of foreign customers in Japan, our IFCs provide
multilanguage support and contract services. In addition, our directly
managed sales offices overseas can help customers find an apartment
before they arrive in Japan.
This network of sales offices
enables us to cover most of
our individual customers,
but in regions where we do
not have a presence, we
provide assistance totenants by working withfranchise stores or realestate agents.
One of our directly managed sales offices

Tenants Support Center

Corporate GovernanceElectronic contracts

Tenant management

Strategy
Strategy

Network

2

Management Message

Strength

Strength

Periodic building inspections
We conduct periodic building inspections to ensure the safety andsecurity of our rental properties. For the safety of tenants, we haveestablished a program to detect any building defects at the earliest
possible time by checking 100 items during each inspection.

Staff at one of our IFCs

Contract Administration Center staff hard at work30

Leopalace21 Integrated Report 2023

Building inspection in progress

Leopalace21 Integrated Report 2023

31

Strategy

Competitive Advantage Strategy
SpecialFeatureCompetitive Advantage of Our Apartments andLeasing Expertise
Cover
Cover Story
Story

Message from Chief of the Leasing Business Headquarters

Leveraging some 40 years of rental
expertise to remain the companyof choiceDirector and Managing Executive Officer
Chief of the Leasing Business Headquarters

1

32

Leopalace21 Integrated Report 2023

Television offering unique content through LEO-NET

Separate wash basin

Flexible contract options

We have long catered to the various needs of studio apartment tenants.
For example, we were the first in the industry to offer apartments
furnished with furniture and appliances with our Monthly Leopalace
series. One way of meeting customer needs is by offering different
contract types. While many rental properties typically have leases ofabout two years with the option of renewing, we offer flexible lease
options designed to accommodate tenant circumstances. For instance,
we offer lease agreements based on long-term tenancy of one year or
longer, as well as monthly contracts tailored to short-term stays. Ourleasing contracts offer tenants the advantages of no security deposit
and no brokerage fees, and for our monthly contracts, water and utilities
are included in the monthly rent, which makes our lease conditions
more favorable than those of our competitors. All of these factors haveenabled us to gain a competitive edge over our rivals.

Leasing
contract

Suitable for longNo security
term tenancy of deposit and noat least one year brokerage fees

Data Section

Microwave oven

Smart lock3

feature alongside furniture and appliances. Currently, approximately
95% of our properties under management are equipped with furnitureand home appliances. In this way, we have established a competitiveedge by always considering and proactively introducing the kinds ofservices required in apartments for single people.

Door can be unlocked with a smartphone or smart card

Corporate GovernanceEver since launching our Leopalace21 urban apartments in 1985, wehave been committed to meeting the needs of singles. In 1999 westarted offering Monthly Leopalace apartments furnished with furnitureand home appliances—a revolutionary idea at the time. Later, with thearrival of the internet, we added internet connectivity as a standard

We continue to install smart locks that let tenants unlock their front
door with the use of smartphones or similar devices instead of door
keys. Starting in June 2022, we have prioritized the installation of theselocks at apartments for which tenants were scheduled to move in, andover the two-year period through to May 2024, we plan to complete theinstallations at 440,000 of our rental properties, or roughly 80% ofapartments under management.
The introduction of smart locks not only eliminates the need forcustomers to visit our offices to pick up a key, but it also streamlines ourwork by minimizing key handover tasks. It helps reduce paper usage.
Given that we are pushing ahead with the online handling of contract
procedures for the rental properties under our management, we believe
this rollout of smart locks will enable us to conduct nearly allprocedures online.

Advantage

Furniture and appliances as standard equipment

Smart lock

Strategy
Strategy

Advantage

2

Management Message

Mayumi Hayashima

Since launching sale of Leopalace21 urban apartments in 1985, we have been at theforefront of introducing a wide range of services, including housing equipped with
furniture and home appliances, internet connectivity as a standard feature, and theinstallation of smart locks. Initially, the majority of our tenants were students, but overtime we expanded our customer base to a broader spectrum of society to meet theaccommodation needs of people working away from family and those who requiring
short-term stays. At the same time, we continued to accumulate a wealth ofknowledge related to rental housing.
Thereafter, corporate demand grew sharply mainly due to a decrease in companyowned housing, and corporate contracts now account for over 70% of our new leaseagreements, which total more than 300,000 per year. Corporate contracts require aplentiful number of available properties, a nationwide presence, and a uniform quality
at all properties across Japan. We hold a competitive advantage because we satisfy
all of these requirements.
We will continue to leverage the know-how we have accumulated in the apartment
business so that we remain the company of choice for tenants as the leading providerof single-person apartments.

Advantage

Monthly
contract

Suitable forshort-term
tenancy

No water/utility
payments
required

Leopalace21 Integrated Report 2023

33

Strategy

Competitive Advantage Strategy

Property Owners

Tenants

Comments
from aproperty
owner

Bringing comfort andpeace of mind to tenants
Sharing goals
with 26,700
property owners
throughout Japan

Supporting
property owners
at 65 branches
throughout Japan

Leopalace21 has always tried new things;
I look forward to the same approach to attract tenants
Ms. Yoko Ishihara

Customer’s Voicecollecting customer feedback

There are many benefits
for long-term tenants,
which is why I‘ve
continued to live here
for so long

Comments
fromtenants

Leopalace21 Integrated Report 2023

I have been living in my current Leopalace21 apartment since
the spring of 2011. It’s been more than 10 years already. Most
people may think that short-term tenants or students are themajority, but nowadays, I see people with a variety oflifestyles, and I think there are many people like me who have
lived for a long time.
There are many reasons why I continue to live here, andone of them is convenience. My current apartment is in a good
location, and there are also many advantages in terms of
in-room facilities, such as having furniture and appliances
already provided when you move in, and being able to use theinternet without troublesome contracts or installation work.
I also appreciate that it is just the right size for a single person
like me. If it’s too large, it is hard to clean, and if it’s too small,it feels cramped. I feel comfortable in a floor plan where what
I want is within easy reach, but I don’t feel cramped. Living
alone, it’s also very reassuring to have a service center just aphone call away when I need help. There are also advantages
in terms of cost. Typically,
the renewal fee is
equivalent to one month’s
rent, but Leopalace21’s
fees are cheaper. It’s anapartment building that’smore suitable for long-term
tenants than you might
expect.

I first learned about Leopalace21 through the internet. Later,
I was referred to one by a friend. I have a lot of friends who livein Leopalace21 apartments. There are two main reasons forchoosing Leopalace21.
First, the process of signing the contract is so smooth.
I signed the contract through a real estate agent who brokers
Leopalace21 properties, and the contract went very smoothly.
In particular, being able to communicate in Vietnamese wasvery helpful.
Other good points are the building security and the in-room
facilities. I was very happy that the furniture and home
appliances necessary for daily life were provided, and that thebuilding had good security. Also, the room is equipped withinternet, which I also use. I didn’t have to sign up for a separate
internet contract, which was very useful.
I’ve been living in my room for more than two years now.
I once had a problem with the electric stove in my room, but
I called the foreign language support center and they took careof it immediately. I would
recommend Leopalace21
apartments to my friends
because of the convenienceof being able to receive
support in Vietnamese fromthe time of signing thecontract and during
tenancy, and because thenecessary furniture andappliances are provided so
you can move in right away.

Leopalace21 Integrated Report 2023

Data Section

34

so I hope Leopalace21 will continue to create unique services,
whether for the young or for the elderly. There are many
owners who see their tenants on a daily basis, so I think it
would be interesting to ask the owners for their opinions.

Mr. HA VAN HIEU

Corporate GovernanceMy relationship with Leopalace21 dates back to the days when
the company was known as MDI. At the time, I wasapproached by someone who asked if I would be interested inbuilding apartments on the land that was used as a parking lot.
At first, I was looking around the residential building exhibit on
my own, and there were many companies I could have chosen
to entrust the project to. In the end, I shortlisted Leopalace21
and another major housing company. The other major housing
company offered a sense of stability, but I finally decided on
Leopalace21 because I felt that it was doing something new
and appealing. Since then, I’ve built more apartment buildings,
not only on land I owned but also on new land I purchased forthat purpose, and I currently own nine buildings. Apartment
management involves many complexities such as inheritancetax strategies, and the landlord is often the owner, but thisdoes not apply in my case. When I look for new pieces of landto build apartments on, I find it very reassuring that
Leopalace21 is able to propose a total solution, including a
specific plot of land, the land acquisition cost, and the rate of
return.
Some of the properties I currently own are in Osaka, which
is far away from my home. For these properties, I receive
reports with easy-to-understand images showing not only theiroccupancy status but also their daily maintenance. The factthat I can entrust this to Leopalace21 is another point ofreassurance. I get the sense that Leopalace21 not only offers
solutions to owners, but also introduces services to attract
tenants, such as internet access, changing wallpaper to suit
the tenant’s tastes, and adopting smart locks. I thinkcompetition for tenants will become even tougher in the future,It’s reassuring to know that I cansign a contract in my native
language and that foreign
language support is available
even after moving in.

Strategy
Strategy

Mr. Rokuro Nishida

Improving the
Conducting customer
quality of customer surveys and sharing
service at leasing
them throughout
sales offices
the Company

Management Message

In partnership with
26,700 property owners
throughout Japan

Cover
Cover Story
Story

Sharing goals
with property owners

35Strategy

Competitive Advantage Strategy

Business Partners
Cover
Cover Story
Story

Providing value through collaboration
with our business partners

Comments
from acleaning
partner

Quality comes first; We have built a system centered on our
employees, who perform a variety of daily tasks such as
small-scale repairs in addition to cleaning duties
Mr. Kotaro Miyake, Representative Director, Miyake Building Maintenance Co., Ltd.

Comments
from amaintenancepartnerNumber of housecleaning partners:
approx. 90

Number of property
maintenancepartners:
approx. 1,050

Because of Leopalace21’s maintenance forecast for six
months, we are able to handle tasks such as kitchen
replacements very quickly.
Mr. Shushi Fujikawa, Representative Director, Seiko Materia Co., Ltd.

Our main business is the sale and installation of interiormaterials such as kitchens and shoe cupboards for newly built
properties. We also carry out after-sales maintenance work
such as replacing kitchen cooktops and supplying materials forinterior finishing work that has already been installed. Our
network, including partner companies, covers all 47 prefecturesin Japan, and we have built a system that enables quick
turnaround time from order receipts to replacements.
Our relationship with Leopalace21 began in 2007 when we
took charge of replacing their cooktops. At first, we were
engaged in sales and installation, and later, we had theopportunity to undertake after-sales service related to minikitchens, and starting in 2009, we also started doing

maintenance work.
Our maintenance work for Leopalace 21 started withkitchens, and later expanded to a wide range of interior
finishing products, including fixtures and fittings, and storage,
As the scope of our responsibilities has expanded, we have had
more opportunities to talk with other service providers, and I
believe that sharing information with these service providers
has also led to the expansion of our maintenance work.
When the construction defects problem came to light in
2018, tenants would occasionally question us about theconstruction defects during our visits to replace their cooktops.
We had trouble in responding to these queries since it wasoutside of the scope of our responsibilities. Leopalace21,
however, assured us that it was steadily pressing ahead with
its efforts to resolve the defects problem, and we still have thesame close relationship as before.
Our company originally started as an interior design firm.
Today, we still do design work, and we are jointly developing
some products for Leopalace21. In the future, I hope to makeuse of the knowledge and experience we have gained throughour maintenance work to propose new home products, forexample the ones that are less likely to break.

Corporate Governance
Data Section

Leopalace21 Integrated Report 2023

we outsourced more and more work to subcontractors.
However, we decided that we cannot guarantee quality withthat approach, and in recent years we have increased thepercentage of work we handle in-house.
Currently, we have about 10 employees and about 40
part-time and temporary workers under our direct control,
which allows us to have as much direct feedback andcommunication as possible.
We recently received an award from Leopalace21 foroutstanding performance as a cleaning company. I would like to
use this as encouragement to further dedicate ourselves to thework going forward.

Number of cleaning
visit partners:
approx. 110

Strategy
Strategy

I think it was around 1988 that our company began providing
cleaning services. At that time, we were probably responsible
for fewer than ten properties.
At first, only my mother did the cleaning, but later, as thenumber of Leopalace21 properties increased in Fukuoka, myfather, who was doing another job, also came in to support us.
Meanwhile, we judged that this cleaning business had a good
future and decided to incorporate, and we have been inbusiness for over 30 years now.
To be honest, when the construction defects problem wasrevealed, it was a surprise.
Leopalace21 then explained the situation, and we also
made every effort to share as much information as we knew inorder to alleviate the concerns of our employees and part-timeand temporary workers. I know the construction defects
problem is a big one, but I was confident that the problem
would be resolved and things would return to normal, just as
we had overcome the 2008 global financial crisis.
At present, the number of properties that we have been
contracted to clean has increased, reaching approximately
4,000 rooms in Fukuoka Prefecture if you count it by room. The
actual work involves restoring the property to its original state
after the tenant vacates the property and cleaning the common
areas of the building four times a month. In addition to this, weare also contracted to provide tenant services, such as handlingproblems during tenancy, and we are able to handle routine
matters other than major repairs. For example, our staff
members share photos of problems found during cleaning, andthen go back to the site to fix them.
When it comes to outsourcing of operations, quality isimportant. In the past, when we had only a few staff members,

36

Number of business partners
involved in building andfacility construction:
approx. 400

Management Message

Working together withbusiness partners to early resolve
the construction defects problem
and maintain apartment quality

Leopalace21 Integrated Report 2023

37

Strategy

Sustainability Strategy
SpecialFeature 1

Leopalace21’s Energy Strategy

Director, Leopalace Green
Energy Corporation

Corporate GovernancePresident, Leopalace Green
Energy Corporation

Strategy
Strategy

Third Party Opinion
July 2023 has gone down as the hottest month on record, and the United Nations Secretary-General has issued an
emergency warning using the term “global boiling.” Companies are currently racking their brains trying to think ofways to achieve the high greenhouse gas reduction targets set for 2030 and 2050. Those with a high level ofenvironmental awareness are including greenhouse gas emissions from company-leased housing provided to
employees in Scope 3, and viewing them as subjects for reduction. The challenge is whether we can achieve net
zero greenhouse gas emissions while maintaining and improving our quality of life.
Other companies also provide electricity derived from renewable energy or electricity with non-fossil fuel energy
certificates, but the LGLP gas supply offered by Leopalace21 proposes a scheme that would eliminate greenhousegas emissions from rental housing as a whole, and is part of a service which I find to be highly unique.
There are only seven years left until 2030, the year by which most companies have set their medium- to longterm goals. For customers who are looking for a rental home in which to live until then, I believe that Leopalace21’s
rental apartments, which guarantee a supply of LGLP gas, are a strong choice for consideration.

Data Section

Leopalace21 Integrated Report 2023

360,000 t-CO₂ per year, which is equivalent to 25.7 million cedar trees,and by offsetting the energy use of gas and electricity by approximately
360,000 t-CO₂ per year via carbon offset, we can realize rental housingwith virtually zero CO₂ emissions.
In addition to supplying LGLP Gas, we will also introduce an LPWA
service that allows gas meters to be controlled remotely. The
introduction of this service will improve the convenience and safety ofenergy usage for tenants such as online application for starting gas use,
online billing, and 24-hour gas usage monitoring, while also providing
LGLP gas supply companies with improved operational efficiency. In thisway, we believe that we will be able to provide a service which isbeneficial to both our tenants and gas suppliers.

Our Leopalace Green LP Gas-related initiatives are based on Leopalace21’s strong intention to differentiate itself from other companies, so as to berecognized as a company of choice by society.
As part of these initiatives, we have decided on support of zero-carbon measures as an important method of differentiation. Specifically, theapproach we plan to work towards this zero-carbon goal is by providing environmentally friendly rental housing. For this reason, we decided to start
providing our own energy supply, and to sell carbon-neutral LP gas and electricity with non-fossil fuel energy certificates.
Next, we focused on improving convenience for tenants. The introduction of LGLP Gas comes as a set with the LPWA service, which enables us
to remotely control starting and stopping gas use and automatically detect gas leaks. Centralized monitoring using LPWA subsequently allows
tenants to apply, visualize usage fees, and receive the content of bills online.
Furthermore, we aim to make energy charges more accountable, and to work to ensure fairness in transactions. LP gas is an important energy
source that we make much use of in our daily lives, but consumers
have long pointed out issues with the opacity of charges andtransaction methods, and we hope to resolve these issues with ourservice.
One of the things which made our efforts here possible was ourpartnership with Astomos Group, a leader in the industry. The
Astomos Group is one of the world’s largest LP gas companies, andcapable of transporting gas from production sites and distribute it forsale in the domestic market. We aim to supply LGLP Gas to 400,000
units, which are equivalent to approximately 2% of roughly 20 million
households in Japan that are supplied with propane gas. Now thatthe introduction of clean energy is becoming an important point innational policy, we believe that our initiative can make a major
contribution to the transition to use of clean energy in Japan’s
Tetsu Otsuka
Ko Satohouseholds.

Management Message

Starting provision of Leopalace Green LP Gas, which has virtually zero CO₂emissions, and LPWA service to rental housing we manage

38

Message from Leopalace Green Energy management

Promoting the introduction of LGLP Gas as part of our efforts towork towards a zero-carbon society.

Leopalace Green Energy ProjectAs part of Leopalace21’s goal of contributing to global warming
countermeasures, improving convenience and safety for our tenants,
and promoting real estate tech business, we have begun to provide therental housing we manage with Leopalace Green LP Gas (LGLP Gas),
which has virtually zero CO₂ emissions, as well as providing an LPWA
service that allows remote control of gas meters when using LGLP Gas.
Going forward, we also plan to gradually begin supplying Leopalace
Green Electricity (LG Electricity), an essentially renewable energy sourcethat utilizes non-fossil fuel energy certificates (certifying the value of nocarbon dioxide emissions during power generation) as soon as
preparations are complete.
LGLP Gas offsets the greenhouse gases generated in the entire
value chain of LP gas, from production to consumption, includingtransportation, with carbon credits gained from environmental
conservation projects carried out by the producer across the world(carbon offset), and is designed to reduce emissions from LP gas usage
to virtually zero. Meanwhile, Leopalace Green Electricity is essentiallyrenewable electricity that has virtually zero carbon emissions due tocombination with non-fossil fuel energy certificates.
We aim to supply LGLP Gas to approximately 400,000 units by 2025.
By supplying both LGLP Gas and LG Electricity to 400,000 units in thisway, we can contribute to reducing CO₂ emissions by approximately

Cover
Cover Story
Story

In response to increased efforts to reduce greenhouse gas emissions at the corporate level, Leopalace21 is strengthening GX (green
transformation) initiatives for rental housing, such as promoting the introduction of LP gas and green electricity—which have virtually zeroCO₂ emissions—as part of its energy strategy.

Mr. Takashi Fukushima
Chief Executive, CPA,
Sustainability Accounting,Co., Ltd.

Leopalace21 Integrated Report 2023

39

Strategy

Sustainability Strategy
SpecialFeature 2

Leopalace21’s DX Strategy

DX Foundation and Strategic Themes

DX Strategic Themes
Strengthen customer contacts

Enhance value proposition

Sophisticate decision-making

Create new revenue model

DX Foundation
Digitization of processes

Training of personnel in promotion of DX• Expand the scope of agile development using low-code
development tools, differentiate it from core systems,
and increase productivity.

• Centrally manage data siloed from various types ofdata sources in order to ensure data freshness andaccuracy.

• Further promote the use of RPA including automationof processing at the Contract Administration Center,
which consolidates contract operations which used tobe performed at each leasing sales office nationwide.

• Promote standardization and visualization of data inorder to ascertain company-wide data and enablemultifaceted analysis.

• Provide all employees, employees in charge of IT, andemployees in charge of DX promotion with training toallow them to acquire knowledge and skills tailored totheir respective roles.
• Expand the scope of in-house business systemdevelopment, and build an organizational structure that
does not rely too heavily on external vendors.

Promoting DX in response to changes in circumstances,such as future advances in digital technology
and a decline in the working population.
To date, Leopalace21 has been promoting the incorporation of DX into its operations, through suchmethods as introducing electronic contract services, smart locks, and online contracts. In the future,
the business environment is expected to change significantly due to advances in digital technology
and a decline in the working population, leading us to feel that there is a greater need than ever topromote DX. As such, we have examined our past DX initiatives, and formulated a DX strategy thatdefines our vision, strategic themes, promotion structure, key initiatives, promotion indicators, andthe like.
The foundation of our DX strategy is a variety of data, such as transaction data we haveaccumulated over many years. By applying AI technology to this accumulated data, we believe wecan contribute not only to sales aspects—such as expanding the value we provide through suchmethods as strengthening our points of contact with customers and improving convenience for our
tenants—but also contribute to sophisticate management decision-making. Beyond that, we aim tocreate new revenue models by selling data externally and developing new businesses.
On the other hand, since housing is an indispensable social infrastructure for local communities,
we are also thinking about how we can contribute to communities through cooperating with local
governments in areas such as disaster prevention and regional development, using informationsuch as traffic volume, flow of people, and rainfall in areas where our apartments are located.

Seiya Onoda

Strategy
Strategy

Centralization and visualization of data

Message from DX Promotion member

Management Message

We have set four DX strategic themes and provide new value to stakeholders by digitization of processes, centralization and visualization of data,
training of personnel in promotion of DX, and making full use of the vast amount of data and technology available within the Company. Through building
DX foundation underpinning the four DX strategic themes, we aim to achieve sustainable growth and increase our corporate value.

Cover
Cover Story
Story

Through the use of data and digital technology, we aim to strengthen our ability to connect with stakeholders, and, by rebuilding ourselves
into a company that continues to create new value, we contribute to the creation of a society that will help realize a better future. With
this vision for DX at the core of our plans, we have formulated a DX strategy, consisting of a promotion system, key initiatives, promotion
indicators, and the like. Following the decision of the Board of Directors, we are working on DX conversion as part of our management
matters.

Group Manager, DX Promotion Group,
Information Systems Department

Build a resilient digital infrastructure that quickly responds to changes in customer needs and the external environment,
based on the development of a data utilization environment.

DX Key Parameters
Maximize the value we provide by developing DX initiatives that meet current needs from our customers’ perspectives, such as implementing online
contracts, introducing smart locks, and making use of vast amounts of transaction data using AI technology. At the same time, we will promote moresophisticated management decision-making by analyzing the accumulated data.
Strategic Themes

Strengthen
custopmer
contacts

Create newrevenue model

40

Category

Promote online contracts• Create a scheme to digitize a series of rental contract procedure, and enable the contract to be completed withouta face-to-face meeting.
• Introduce digitization for fixed-term house lease contracts in accordance with revisions to the Act on Land andBuilding Leases.

Install smart locks• Gradually install a new type of smart lock to approximately 80% of units under management.
• Make it unnecessary to come to a leasing sales office in person for picking up keys for apartment viewing or at thetime of move-in.

Build integrated customer
management system• Introduce CRM, and create and manage customer-oriented business strategies and sales processes.
• Improve customer satisfaction by providing meticulous support and services.

Establish management
dashboard• Extract and visualize information necessary for management using a centralized data platform.
• Improve the accuracy of data-driven management with real-time tracking of KPIs.

Utilize AI technology• Aim to eliminate labor shortages and improve productivity by making full use of accumulated data and AI.
• Further consider plans to sell data externally and develop new businesses.

Leopalace21 Integrated Report 2023

Infrastructuredevelopment

Strategy
promotion

Initiatives

KPI

Target value

Target year forachievement

Remarks

Automation of operations
using RPA

Reduction of business time

73,000 hours

FY2024

Total annual reduction in business time

Promote further utilizationof cloud software

No. of cloud migration servers

180 servers

FY2024

Cumulative no. of cloud migration servers

Implementation of in-housesecurity training

Comprehension quiz average
score

+10%

FY2023Training comprehension quiz average score(rate of increase compared to FY2021)

Strengthening in-housesystem creation capability

No. of in-house IT engineers+15 people

FY2024

Number of employees in the Information
Systems Department (number increased
compared to FY2021)

Implementation of online
contracts

No. of online contracts

55,753
contracts

Actual values

Cumulative number of online rental contracts(as of the end of FY2021)

Installation of smart locks

No. of smart lock installations

440,000 units

FY2024

Cumulative number of smart lock installations(equivalent to approximately 80% ofmanaged apartments)

Utilization of AI technology

Amount of analysis data

100,000 pieces

FY2024

Cumulative total of data collected andlearnedLeopalace21 Integrated Report 2023

Data Section

Optimize digital marketing

Enhance value
proposition

Sophisticate
decisionmaking

As achievement indicators for DX promotion, we have established what quantitative effects are expected from the plan’s progress and the promotion of
the strategy. The DX Subcommittee of the IT Committee will manage DX conversion by periodically evaluating and reviewing the progress of the plan.

DX Key Initiatives• Start adding new media and begin complete renewal of our apartment-hunting site.
• Organize tracking and manage profitability of each category of media.

Corporate Governance

DX Key Initiatives

41

Strategy

Sustainability Strategy
SpecialFeature 3

Leopalace21 Human Capital Management
Leadership andSuccession

Cover
Cover Story
Story

We consider human resource development to be the most important theme for the continued growth of the Group, and in May 2023, it was
decided our new human capital management vision to be “Make the most of employees, Grow the business, and Bring real benefits tosociety.”
Furthermore, we also established an additional six themes: Leadership and Succession, Diverse Talent Acquisition, Employee
Engagement, Compliance and Ethics, Diversity & Inclusion, and Well-being Management. We intend to establish what sort of issues and
KPIs we need to resolve on our own in order to achieve the future goals we are aiming for, along with gradually enhancing the Company
capabilities.

Well-being
Management

Total employee participation time in education and training
FY2022

FY2023 (Target)

4,096 hours

9,000 hours

Rate of thorough examinations undergone
after periodic medical examination
FY2025 (Target)

27.1%

80.0%

Management Message

FY2022

Percentage of smokers

Diverse TalentAcquisition

FY2022

FY2024(Target)

31.9%

25.0%

Recruitment

Develop management
personnel who are critical
for the future of thecompany

Energize the work
environment with improved
wellness of employees

Leopalace21 Integrated Report 2023

Mid-career
recruitment

54

146

Well-being
Management

Make the most of
employees, Grow
the business, andBring real beneﬁts
to society

Employee
Engagement

Complianceand Ethics

Employee
Engagement

Diversity &Inclusion

Build a workplace inwhich diverse humanresources candemonstrate theirabilities

Establish an organizational
culture with high ethicalstandards incustomer-oriented
corporate activities

Rate of female managers
FY2022

FY2025 (Target)

No. of female
managers

35

50

Rate of female
managers

5.5%

7.8%

Rate of male employees taking childcare leave andother leave for childcare purposes

Indicators of employee engagement
FY2022

FY2023 (Target)

8.6%

9.0%

Turnover rate
FY2022

Target11.1%

Within 5 – 10%

Compliance andEthics

FY2022

FY2023 (Target)

No. of male
employees onchildcare leave

20—

Rate of childcare
leave usage

35.7%

Within 30 – 40%

FY2022

FY2023 (Target)

Regular employee

69.1%

70.6%

Non-regular
employee

63.6%

63.5%

Total

55.4%

55.5%

Gender wage gap

Strengthening of compliance
FY2022

FY2023 (Target)

No. of E-learning
sessions

10

9

Awareness rateof compliancehotlines

92.1%

No quantitative
target values set

Data Section42

50

Corporate Governance

Keep employees
excited and motivated
to contribute to thecompany performance—

Diversity & Inclusion(D&I)

Strategy
Strategy

Diverse TalentAcquisition

FY2023 (Target)(Note) Excluding recruitment at nursing care facilities, Azumi En, in the Elderly Care
Business

Leadership andSuccession

Acquire talentstrategically toshape our future

FY2022

New graduate
recruitment

Leopalace21 Integrated Report 2023

43

Strategy

Sustainability Strategy

Human Resources
Cover
Cover Story
Story

Leopalace21 is pursuing a human resources (HR) strategy that positions HR development as the most important issue to improve corporate
value and achieve sustainable growth over the medium to long term. We have therefore formulated a new HR vision and six themes withthe aim of further invigorating our employees and organizations and entrenching a corporate culture.

Message from a manager in charge of the HR strategy

Our approach to human resources

holding Human Capital Meeting, which was also held in May.
Starting in July, joined by executive officers, the name was changed
to People Meeting and the meeting is now held monthly to discussand decide on matters related to people. Going forward, we plan tocarry out many personnel strategies through this meeting, which will
stimulate the exchange and sharing of opinions.
Meanwhile, with regard to alignment with employees, starting
this fiscal year, the HR Department members are also participating in
the Town Meetings where the President engages with frontline
employees at each branch, thereby creating an opportunity to build
trust with employees. By expanding the communication channels thatwere previously lacking, we will be able to directly hear the voices ofmany employees.
Our HR measures will include a new engagement survey. Throughthis survey, we intend to incorporate feedback and ideas from
employees to shape an interactive personnel strategy that enhances
employee engagement.

The kind of human resources we seek

44

Leopalace21 Integrated Report 2023

The resumption of new hiring
As we explore various HR-related themes, a particularly important
issue for Leopalace21 at present is our employee age structure.
Because we stopped hiring new graduates five years ago, the numberof young people at the Company has declined, resulting in an
imbalance in the age structure. Restoring this balance is essential toachieving medium- to long-term growth. On the other hand, if wetake into account the investment cost, we could make the case forhiring mid-career professionals only. Accordingly, there had beenfrequent debates about this within the Company.
However, the reason we resumed hiring new graduates was not
simply to adjust the age structure, but also to give a sense of purpose
to hiring new employees. After we stopped hiring new graduates five
years ago, there was an increase in the number of employees with nosubordinates or juniors in the organization. There were few
opportunities for promotion, few junior employees to mentor, andRecruitment website

Training
We also fully resumed our leadership development and succession
planning this year. We designed a wide range of training programs tocover every job level and category.
Leadership training is conducted at all levels from manager todirector, with 360-degree feedback provided to each participant. This
feedback is the basis for analyzing numerical data and organizational
performance indicators to detect trends, identify issues, andre-incorporate them into training to solve organizational issues at an
early stage.
With regard to leadership development, this fiscal year weestablished a new Next-Generation Leaders Program to select nonmanagerial personnel who are expected to become future executives.
With regard to succession planning, we select the next executive
officers from all over the Company, as well as those who will follow
them in succession, to participate in an external lecture program tocultivate a perspective suitable for management.
Even though department heads make up only about 1% of
Leopalace21’s total workforce, those human resources fostered in theorganization demonstrate leadership that is deeply rooted in theculture of the organization and are best positioned to train the next
generation. We will aim to ensure that the sustainable growth ofindividuals is linked to the enhancement of our corporate value.

Leopalace21 Integrated Report 2023

Data Section

Group Manager, Planning Group, Human Resources andGeneral Affairs Department

After Leopalace21 announced its HR strategy to the outside worldand began implementing it, President Miyao stated the following:“We have shifted our thinking from people as a cost to people as
an investment. Going forward, we will promote increased
engagement under the belief that personal growth is a necessary partof training and of well-being management.” The employees listened
attentively and looked excited at first, but the atmosphere turned alittle tenser when he continued: “As the word investment suggests, I
expect a return. I want you to link your personal growth and skill
improvement to the increased value of the entire organization.” I feltthat just by conveying his words and ideas the President createdpositive motivation with a sense of tension, but in a good sense.
Of course, the promotion of an HR strategy is expected to bringpositive effects as well. In the future, we would like to demonstrate,
through quantitative assessment, results such as the impact on
profitability of promoting well-being management and enhancing
education and training, and how the creation of new ideas and lower
turnover through increased engagement impacts the performance ofthe entire organization.

Corporate GovernanceTakeru Sato

In determining the type of talent we seek, we set two axes: one
related to work and performance, and the other related to the ability
to build interpersonal relationships, and then proceeded to identify
the human resources we seek through interviews and discussions
with directors.
The key point that emerged from this process was the need tofoster a customer-oriented corporate culture. The results of collecting
diverse opinions from directors can be summarized as follows.
Leopalace21 is in a position to continue to create new value. We
have the foundation to grasp new needs and trends and promote theimprovement and proposal of services through the improvement of
the customer experience. The definition of the word “customer”
implies “other person.” Therefore, it is extremely important to foster
empathy with other people.
From this, we identified a basic employee requirement: being
aware of and incorporating the perspectives of colleagues, superiors,and subordinates in one’s activities. In the past, the Company as awhole was driven mainly by a top-down approach to achieving goals.
Of course, experiencing the success of achieving goals is extremely
important. However, such success needs to include aspects such as
the extent to which one thinks of others and has a sense of one’s

Promotion of the HR strategy:
leadership and results

Strategy
Strategy

In formulating a new HR strategy, the most important point isalignment between the HR Department and employees, and between
the HR Department and management. If these elements are notlinked, the HR Department’s efforts may not make sense toemployees, and the HR strategy may not produce effective resultsthat management expects. Rather than relying on unilateral measuresby the HR Department, I believe it will be most important to carefullycommunicate to employees our HR strategy that aligns withmanagement strategy.
To that end, the first step we took was to set up a forum fordiscussions with directors on specific HR development policies andidentifying and sharing HR strategies. In March this year, we beganconcerns that this was constraining growth across the organization.
Although we stopped hiring new graduates because of management
difficulties caused by the construction defects problem, we decided
to resume hiring new graduates as part of our efforts to overcome
these challenges and as a symbol of the revitalization of theorganization.

Management Message

I believe the most important thing is to carefully communicate toemployees an HR strategy that aligns with management strategy.

own purpose.
I think the biggest difference from the past is that it’s no longer
about progressing towards the goals set by the Company and thehuman resources we are looking for are those seeking change
towards something better and new because they’re not satisfied withthe status quo, and those who have a purpose for their own work thatinvolves thinking about others.

45

Strategy

Strategy

Sustainability Strategy

Sustainability Strategy
Refer to link for specific initiatives for well-being management.

取締役会

Well-being Management
報告

https://www.leopalace21.co.jp/english/sustainability/esg/
humancapital/health/index.html

委任･監督

Respect for Human Rights

報告

監督

We are constantly challenging
ourselves to “create new value.” In order to vigorously pursue improvements in productivity and attain
報告
サステナビリティ
環境保安
監査役会
sustainable corporate growth,
we strive 経営企画部
to maintain and improvethe mental and physical health of our employees, as well as achieve a
委員会
委員会
form of “well-being management” that brings vitality to the workplace through the fostering of active connections between employees,
サステナビリティ活動の推進･統括
and which realizes positive mutual relationships with stakeholders, including customers, business partners, and shareholders.
業務執行部門Issues and Policies

President and CEO himself serves as chief executive and promotes
well-being management. Positioning the Human Resources and General
Affairs Department as the well-being management driving force,
sharing and reporting with each department, Health Committee
報告 and指名
任命 measures while 監査役会
external organizations.
We will develop various
委員cooperation（各本部長・部門長）
deepeningwith them. 事務局（社長室ほか）

Our three priority issues are: Support related to health checkups,
Promotion of cessation of smoking, and Mental health support, and weare working on measures related to each of them based on thefollowing policies.

委員長 社長活動推進
Chief Executive of well-being management(President and CEO)

信越ポリマーグループ• Propose measures and report results at Sustainability
Committee and others.
• Policy and advice

サステナビリティ委員会
Well-being management driving force(Human Resources and General Aﬀairs
Department, industrial physician)Alignment

取締役会指示Manager
at each oﬃce

Medicalinstitution
External EAP
Healthinsurance
association

報告
Health Committee, Healthmanager, Health promoter
執行役員会
at each oﬃce
報告

指示

• Promoting initiatives

委員長 Employees
社長
指名（各本部長・部門長）
委員

報告

任命

監査役会

事務局
（社長室ほか）Certification as a Health and活動推進
Productivity Management
Organization
信越ポリマーグループ

1. With President and CEO as chief executive, the Human Resourcesand General Affairs Department, each office, and Health Committee
promote well-being management in cooperation with externalorganizations.
2. In addition to health checkups and stress checks, we will use internal
questionnaires to promote mental health from the prevention stage,
take measures against lifestyle-related diseases, and implement
measures to improve engagement.
3. Efforts to visualize the current status of health and the work
environment to employees so that they can think about it as theirown.
4. Promote work-style reforms and human resource development
measures that form the foundation for creating an environment
where everyone can work with peace of mind and grow.

Ministry of Economy, Trade and Industry and Nippon Kenko Kaigi, an assembly of health promotion
organizations jointly praise well-performing large and medium to small companies which support employees’
health management in accordance with addressing regional health issues and promoting health-related
measures. We have been praised for seven consecutive years since 2017.

The overall strategy regarding well-being management is as follows. Please visit our website for specific policies and numerical targets.
Change in consciousness andbehavior of employees

Health care measures[Personal health promotion support]• Enhanced support for health checkups• Holding walking events, etc.

Human Resources and Labor measures

Decrease in employeeswith high stress
Improving the rate of detailed examinations

報告[Improving health behavior indicators]• Exercise• Smoking• Drinking amount• Meals• Sleep• Mentality(Increase in consultation and selfcare)[Human resource development]• Implementing management training• Promotion of support for career development, etc.

In formulating our Human Rights Policy, which will represent the culmination of the individual statements listed above, we are preparing specificinitiatives in anticipation of the implementation of human rights due diligence, and plan to roll them out internally and externally as soon as they are
S
S
YEE
YEE
completed.
PLO
PLO
E
E
M
EM
E
IC within the Group but also with our business partners.
OIC
WeVwillsteadfastly promote these initiatives not
onlyVO

Declaration to eliminate harassment
In April 2020, in an effort to maintain a healthy work environment,
improve trust relationships in the workplace, and thereby achieve an
invigorated work environment with a pleasant atmosphere, the Group
formulated a basic policy for eliminating harassment and announced thedeclaration to eliminate harassment. In accordance with thisdeclaration, the Group implemented training aimed at preventing
harassment
as part of its compliance-related training. In addition, we
CE
VOaIharassment field survey targeting all officers and employees.
conduct
Since the declaration to eliminate harassment, harassment as apercentage of incident reports showed steady decline with a sudden
rise in in the fiscal year ended March 31, 2023. We analyzed that this isbecause the harassment prevention training deepened employees’interest in and understanding of harassment, which led to an increase in
the number of employees who realized that they could seek advice onmatters they previously thought they could not. To address this, as an
initiative to raise everyone’s awareness of harassment, we are asking
managers at a certain level and above to proactively join the declaration

to eliminate harassment by publishing their own versions of statementon the company-wide bulletin board.

Proportion of cases of harassmentin the whistleblowing system
136

124

FY2019FY2018
Number of cases reported

Leopalace21 Integrated Report 2023

34.4
24.5

90

77

FY2020
FY2022
FY2021
Proportion of harassment cases (%)

Declaration to eliminate harassment

We will not tolerate harassment
We will not overlook any acts of harassment
We will make serious efforts to eliminate acts of harassment

Employment of persons with disabilities
Management issues to be resolved
through well-being management

Increase employeeswith high engagement
Building a strong organizationand environment in order toimprove business performanceand corporate value

The Group believes that providing an environment for a broad range of
personnel from diverse backgrounds and with different values
contributes to the creation of new value, and greatly helps the Company
grow. We established a special subsidiary called Leopalace Smile inAugust 2009, which employs people with disabilities. We want toprovide a rewarding place to work for all people, and we do not stop
there by just meeting the statutory employment rate, but increase therate year by year.

Employment rate of persons with disabilities
(％)

2.00

2.04

2.05

2.14

2.17

2.23

2.26

2.33

2.73

2.77

（件）FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 （％）

（％）

40

3.0

120
80

46

102

14.3

160
Veriﬁcation of measures and reﬂection of employee opinions

33.8

29.0

％

• Creating new value• Achieve sustainable growth along withstakeholders as social infrastructure

Improve health level basedon health checkup results

Reduced performance loss
(presenteeism)[Promotion of work-style reforms]• Introduction of refreshment leave• Measures against long working hours, etc.

Initiatives to respect human rights:
2020: Declaration to eliminate harassment
2021: Rules to prevent harassment
2021: Rules on handling personal information of employees
2023: Guidelines on Customer Abuse of Employees

Data Section[Increasing engagement]• Conducting 1on1 interviews• Introduction of surveys, etc.

Social and corporate value

Improving health literacy rate

[Promotion of non-smoking measures]• Passive smoking measures• Individual consultation for smokers,
etc.
取締役会

指示health measures][Mentel• Line care training
執行役員会• Self-care training, etc.

Health-related
target indicatorStatement of respect for human rights:
2006: Established Corporate Ethics Charter
2019: Established CSR Procurement Guidelines

Corporate GovernanceInitiatives for Well-being Management

Our journey in respect for human rights

Strategy
Strategy• Feedback
サステナビリティ委員会

Policies

While keeping in mind our Purpose, which is to create new value and provide better living solutions based on the theme of housing, theGroup acts in a manner that respects the human rights of all people in our day-to-day business activities. Respect for human rights is thefoundation of our business activities, and we believe that protecting human rights is an important responsibility that companies must
fulfill.
To supplement and clarify this principle of respect for human rights, which we have already adopted as a materiality in accordance with
our Corporate Ethics Charter, CSR Procurement Guidelines, and Basic Policies on Sustainability, we are establishing a Leopalace21 Group
Human Rights Policy.

Management Message

Promoting System for Well-being Management

Cover
Cover Story
Story

執行役員会

136

124

33.8

29.0

102

34.4 30
24.5

77

90

14.3 Report 2023
Leopalace21 Integrated
10

40
0

0
19/3期

20/3期

21/3期

22/3期

23/3期

2.0

20

47

1.0

0

Strategy

Sustainability Strategy

Offer Rental Housing with Stable Operation
Cover
Cover Story
Story

We regard our Leasing Business, which provides rental housing, as a social infrastructure. With approximately 560,000 rental housing
units across Japan, we serve corporate customers as a company housing provider and provide rental housing for individuals and students
with stable operation. In addition to this, we have begun providing housing to personnel who are involved in disaster recovery efforts.

Established the Leopalace21 scholarship program for students

Approximately 80% of the listed companies in Japan have used Leopalace21 services

Approx.

300,000*Percentage of companies listed on domestic stock exchanges (averageof the past five years)

units

ability to provide housing anywhere in Japan; simpler operation througha single point of contact; standardized apartments in all regions in termsof grade, floor plan, and major equipment; and zero brokerage fees andother cost savings.
The wide range of industries and low level of reliance on any
particular companies ensures a safe and secure environment for theclient companies to use our services. On top of that, because theCompany is not affected by the business performance of particularindustries or companies, we can constantly secure a stable number ofcontracts.

Changes in corporate-occupied units
intensified efforts to acquire corporate contracts with an idea of
establishing our position as the brains behind the company-leased
housing strategy; strengthened sales to specific industries with serious
labor shortages such as transportation and construction; and promoted
thorough implementation of individual company-specific strategies. The
number of corporate-occupied units at the end of March 2023 was
296,301, the second highest level after the record high of 309,062 units
at the end of March 2018.

Changes in corporate-occupied units by industry(Units)228,708

246,272

262,577

277,261

293,823

309,062

280,643

272,566

266,814

280,810296,301

11,10815,541
28,82529,66337,82665,392
67,682FY2012FY2013

FY2014FY2015FY2016

Construction
Staﬃng and outsourcing
Service
Hospitality
Transportation48

Leopalace21 Integrated Report 2023

FY2017FY2018FY2019Wholesale and retail

FY2020

FY2021

Manufacturing

Other(2) Benefit-type
Scholarship

Provision of apartment
room free of charge up to
JPY 1.2 million/year

JPY 360,000 per year (JPY30,000 per month)

SupportperiodPeriod in school (maximum 6 years)

Beneficiary

New students to universities, junior colleges, or
vocational schools

Providing housing in the event of a disaster
Numerous natural disasters such as earthquakes and typhoons have hit
various parts of Japan in recent years and securing rooms for a
restoration team to stay in around the affected areas has become amajor issue in the restoration activities. With the goal of strengthening
business continuity planning, Leopalace21, which provides rental
housing throughout Japan, and Obayashi Corporation, which undertakes
recovery activities in disaster-stricken areas, have signed an agreementon the leasing of apartment in the event of a disaster.
Under the terms of this agreement, in the event of a large-scaledisaster, Leopalace21 will provide apartments under its management to
Obayashi Corporation employees and others involved in recovery andreconstruction activities. This applies to our apartments located all overJapan, with no specific area restrictions. In recent years, in addition toearthquakes, various natural disasters such as typhoons and heavy rains
have been increasing in Japan, and this agreement envisages

cooperation in all cases of Obayashi Corporation’s on-site response todisaster recovery, regardless of the scale of the disaster.
On this occasion, the agreement was signed with Obayashi
Corporation, but since it is conceivable that there could be disasterrecoveries involving other companies, we believe it makes good sense
to provide similar housing to other companies in the event of disaster.
Disaster recovery is an emergency for disaster victims and requires aprompt response. Until now, however, no solution has been presented tothe problem of housing for the personnel involved in the recovery. Since
Leopalace21 apartments are mainly for single-person households andare available nationwide, it is possible to move in immediately with justpersonal belongings, making our units ideally suited for urgent casessuch as disaster recovery. As a company with approximately 560,000
units under management across Japan, we hope to contribute todisaster recovery efforts by providing such housing to restoration team.

Data Section

40,264

Supportcontent(1) Use of a room of
Leopalace21 apartment
without paying rent

Corporate GovernanceWe categorize our customer base into three categories: corporate,individual, and student, and develop sales strategies that suit eachtarget. Of these, corporate users account for just under 60% of the total,
making it the largest customer segment. We have traditionally focusedon the manufacturing industry, but have diversified the portfolio ofindustries since the 2008 global financial crisis.
After that, there was a decline in corporate usage due to factors
such as the construction defects problem and the COVID-19 pandemic.
However, corporate usage has made a remarkable recovery since we<Outline of the program>

Strategy
Strategy

As part of the efforts to reduce assets that are not directly related to thebusiness, the companies have been phasing out company-leased
housing. As a consequence of phase-out, growing number ofcompanies have contracted with Leopalace21, which resulted inincreased corporate contracts. Currently, companies in all kinds ofindustries, including construction, temporary staffing and outsourcing,retail, and manufacturing, have contracts with us, and approximately
80% of listed companies in Japan have used Leopalace21 apartments.
Leopalace21 offers various advantages to the corporate customers.
Examples of such behind the wide use of our apartments include ourManagement Message

80

Approx.
%* of listed companies
have used units as dormitories andcompany residences

Units used bycorporate customers

Entering a university or vocational school is a new step in life forstudents, but the economic hurdles to higher education continue to risedue to the recent soaring tuition fees and the prolonged economic
stagnation. As a result, students have become increasingly dependent
on scholarships, and the long-term repayments after graduation has
become a major burden on students in their daily lives, which has
recently become a social issue in Japan.
Amid these difficult economic conditions for students, we haveestablished a new scholarship program for students who are joining
universities, junior colleges, and vocational schools in April 2025. It is
intended to support talented students who will lead the future and help
solve the social problem. Under this scholarship program, students canchoose either (1) use of a room of Leopalace21 apartment without
paying rent, or (2) receive a benefit-type scholarship. Applications will
open in October 2023, and payment will start in April 2025.
Applicants must be in the second year of high school who wish toenter a university, junior college, or vocational school. There are no
restrictions on nationality, household income, or intended field of study.

FY2022

Leopalace21 Integrated Report 2023

49

Strategy

Business Strategy

Occupancy Rate Improvement Measures
Leopalace21 is promoting measures to improve occupancy rates, including establishing a position as the brains behind the company-leased
housing strategy, expanding corporate customers in each area, strengthening relationships with real estate agents, and attracting more
foreign national customers. Through these measures, we aim to achieve an occupancy rate of over 90% at an early stage.

Strategy

1

Establish a position as the brains behind the company-leased housing
strategy for corporate customers

By taking advantage of the strengths that set us apart from thecompetitors, we aim to establish a position as the brains behind thecompany-leased housing strategy for corporate customers.
What do you mean by the brains behindthe company-leased housing strategy?

The benefits for our customers are absolute cost savings and increased operational
efficiency and productivity. Our business model, in which we act as the lender
ourselves, saves the customer money. In addition, our position as the brains behindthe company-leased housing strategy allows us to offer tailor-made products that areable to significantly reduce costs and increase productivity. For customers, using
Leopalace21 contributes to slimming down their BS/PL.
For Leopalace21, being the brains will increase our room usage share, whichleads directly to improved occupancy rates and more stable rental housing
management.

Naomichi MochidaDirector, Executive Officer
Deputy Chief of the Leasing Business Headquarters
General Manager, Corporate Sales Division50

Leopalace21 Integrated Report 2023

Simply arranging rooms is not enough to become the brains behind the companyleased housing strategy. Of course, we deal in company-leased housing, but I believe
it’s important to respond to the issues faced by the customers beyond company
housing by proposing solutions. Our goal is to become a partner and not just an
agent. I believe the most important point is to have the customer’s management
understand the value of using our Company, build a relationship of trust, and work
closely together. We also aim to be able to support the growth of our customers.

Feedback fromour corporate customer

As our group has grown, we have signed a growing
number of contracts for Leopalace21’s properties.
In addition to commuting method of obtaining a driver’s license, in which learners commute
from home to our driving school, Smart Driver School Shoei operates a training campprogram in which learners temporarily live in facilities we provide while they take lessons
continuously almost every day. While it takes almost three months to obtain a license in ourcommuter training program, it takes only two weeks in our training camp. Leopalace21 has
been a great help to us in securing the housing needed for our training camps.
Operating a training camp program requires the learners to stay for a certain period oftime, with the cost of accommodation added to their tuition fee. Properties like
Leopalace21’s, with no security deposit and no broker’s fee, cost less than other properties,
which allows us to lower our tuition fee, which is very advantageous in attracting learners.
Another reason I’m very grateful to Leopalace21 is that, because they own such a large
number of properties throughout Japan, there is very little chance of losing a sale because
there are no properties available to accommodate the driving learners.
Our relationship with Leopalace21 began in 2005, almost 20 years ago. When I joined
the company in 2001, the group had about 6 driving schools, but now we have expanded to
27 schools. As the number of our driving schools has increased, the number of rooms we
use has also increased dramatically, and we now rent just under 300 rooms.
We are still in a growth phase and expect our need for temporary housing to continue toincrease. Leopalace21 aims to be the brains behind the company-leased housing strategy,
and I am sure we will be consulting with them on many matters in the future. My request to
Leopalace21 at this time is to resume their construction business as soon as possible,
because we may open more schools in areas where there are currently no Leopalace21
apartments.

Mr. Takashi Yoshimura
Senior Managing Director
Smart Driver School Shoei Co., Ltd.

Data Section

What is the biggest key to becoming the brains
behind the company-leased housing strategy?

housing-related tasks that their general affairs departments had to deal
with before using Leopalace21.
Based on this strategy of establishing a position as the brains, weare proceeding with initiatives to achieve an occupancy rate of over
90% at an early stage. As a specific target for this fiscal year, we aim toincrease corporate contracts by approximately 9,000 rooms in addition
to our existing level. To achieve this target, we will proceed withinitiatives centered on strengthening relationships with clientcompanies through top-level sales led by the President and the General
Manager of the Corporate Sales Division; strengthening the salesorganizational structure by expanding the number of sales departments,
mainly in the Tokyo metropolitan area; and thoroughly implementing
individual customer strategies based on the characteristics and needsof individual customers.

Corporate GovernanceHow does being the brains behindthe company-leased housing strategy benefit
your customers and Leopalace21?

In corporate sales, we aim to raise the occupancy rate based on theconcept of being the brains behind the company-leased housing
strategy. The first step towards becoming the brains is to interview
potential customers about their issues related to company housing andthen provide comprehensive solutions to those issues. Regarding
solutions, we will promote the features and strengths of our businessmodel, including no security deposit and no brokerage fee;approximately 560,000 rooms spread across the major regions of Japan;
no difference in the quality of rooms due to standardization of property
specifications; and the property information network we have built.
I think that ultimately the brains behind company-leased housing
strategy come down to creating a state in which customers can enjoy
the same benefits as they owned the company housing themselves,
except that now they are free from the cumbersome company

Strategy
StrategyIt’s about being our customers’ partner for company-leased housing. To use a bankanalogy, we want to be like their main bank. In other words, we want to receive thefirst inquiries they make for all matters related to company housing. Our Corporate
Sales Division is a special organization that the competitors in the same industry do
not have and cannot replicate. Our staff in the Corporate Sales Dvision will complete
all arrangements related to our customers’ company housing in Japan, fromsearching for each apartment to signing a contract. As a result, our customers cometo realize that there’s no point in using anyone other than Leopalace21, and we build
a relationship of trust not as a rental housing agent but as their partner, which leads
to an increase in our room usage share.

Become a solution provider for our corporate customers’ company housing needs

Management Message

Interview with Naomichi Mochida, Director

Cover
Cover Story
Story

Company Housing Strategy

Leopalace21 Integrated Report 2023

51

Strategy

Business Strategy

Occupancy Rate Improvement Measures

Strategy

3Strengthen relationships with real estate agents for individual customers
Cover
Cover Story
Story

As part of our tenant acquisition efforts, we are strengthening our relationships with real estate agents with the expectation that they will be able toacquire tenants in areas that cannot be covered by directly managed sales offices.
Strategy

2

Area intensive strategy

Feedback fromour real estate agent

We are promoting an area intensive strategy that divides Japan into seven areas and aims to optimize sales in each area. Our area intensive strategy
also calls for focusing on acquiring corporate customers by forging close connections to each area. In addition, to increase the number of contracts, weare promoting sales activities targeting real estate agents and expanding partnership and collaboration with them.

The increased cooperation has helped us to achieve
results.

Targeting approximately 2,000 companies across Japan, we will
acquire corporate customers through sales activities that take into
account regional characteristics and by strengthening relationships
with real estate agents.
What is the current percentage
of corporate contracts?

What are the goals for this year?

What initiatives will you pursue
to achieve the goals?

Masato Fukase
Executive Officer, Property Management Division

Attract more foreign nationalcustomers

Foreign national customers are returning once again
as the COVID-19 pandemic subsides.
The proportion of foreign national customers had been on an upward
trend over the past decade due to labor shortages in Japan. The numberof foreign national customers temporarily declined due to the COVID-19
pandemic, however, is once again on the rise as the pandemic subsides
and immigration restrictions are eased. We are focusing on acquiring
foreign national customers as our next target after corporate customers.

Number of units used by foreign nationals (individual contracts)(Units)

25,00020,00015,00010,0005,000
0FY2017FY2018China
South Korea
Other Southeast Asia

52

Leopalace21 Integrated Report 2023

FY2019TaiwanOthers

FY2020ThailandFY2021
Vietnam

FY2022Messageby our IFC
manager

We handle contract procedures andpost-move-in follow-up for foreign
national tenants in English or theirnative languages.

International Front Center’s(IFC’s) basic work is to provide
suggestions for finding rooms
for foreign nationals and thenhandling contract proceduresand post-move-in follow-up.
Today, in addition to China,
Korea, and Vietnam, we have
Wang Peng（人）
an25,000
increasing number ofManager, IFC Tokyo
European and American
Branch 2
20,000
customers
and customers fromInternational Block (PM)the Philippines and other
15,000Southeast Asian countries. We serve these customers in
English
10,000 or in their native languages. Post-move-in follow-up
includes monthly rent remittance reminders, trash separation,
5,000
and
checking for any problems during the tenancy period. If
this is their first time living in Japan, we take the time to give0
detailed explanations,taking into
consideration
various
18/3期
19/3期
20/3期
21/3期
22/3期
23/3期
factorssuchasthe
tenant’s
lifestylehabitsinorder
toprevent■中国 ■韓国 ■台湾 ■タイ ■ベトナム ■その他東南アジア ■その他
culture shock. The property owners seem to appreciate IFC
because we are able to follow up on any problems that may
arise.

Leopalace21 Integrated Report 2023

53

Data Section

For the corporate customers we are targeting, the Property Management Division will
centrally manage goals, progress of initiatives, and so on, while individual sales
offices will concentrate their efforts on about 10 to 20 of these target customers
each to expand the number of rooms occupied.
Furthermore, we will strengthen our relationships mainly with real estate agents
who have sales capabilities across a wide area and those who are strong in areas
where we are struggling, in the hope that they can serve as intermediaries for not
only individual contracts but also corporate contracts.

4

Corporate Governance

Whereas the Corporate Sales Division mainly covers large companies across Japan,
we in the Property Management Division are working to win corporate contracts
targeting local companies in each region. For this year, we will select approximately
2,000 companies from our sales activities that we believe we can expand ourbusiness with, and then strengthen our follow-up and support in hopes of increasing
the number of corporate contracts by 30% over the previous fiscal year.

Strategy

Mr. Taku Egami
Director and General Manager
Town Group Public Relations Office
ManagerTown Housing Inc.

Strategy
Strategy

Looking at our current occupancy by contract type, corporate contracts account for
about 60% of occupants, and individual contracts account for about 40%. In terms ofthe number of contracts, about 70% are corporate contracts.
The Property Management Division, which covers all of Japan and is in charge ofboth corporate and individual customers in each region, has a policy of strengthening
corporate sales, which aligns with the overall policy of Leopalace21.

Management Message

We have been working with Leopalace21 for over ten years, but I think the number of deals has
increased rapidly in the last three years. Previously, our branch managers and Leopalace21
representatives worked together to bring about some successes at some branches, but there was no
momentum for a company-wide effort. I think the increase in the number of deals in the past three
years has been due largely to the formalization of the business alliances and the clear setting ofcommission fees for agents. As a result of this, we are now able to set goals as a company, and weare now in a position to strengthen cooperation, such as sharing our successes in one area withother areas.
However, even now that we have entered into a business partnership, there are areas where thenumber of contracts is high and areas where it is low. The areas where the numbers are good are
the areas where our company and Leopalace21 are collaborating well, so I hope that we can further
strengthen our cooperation in the future.
If I had a request for Leopalace21, it would be to promote smart locks. I’ve heard that smart locks
are currently in use in just over 100,000 units. In real estate properties, keeping or not keeping keys
is a big issue. In fact, there are cases where we are not able to actually make the referral because it
takes too long to hand over the keys. If you can speed up the spread of smart locks, I think it willlead to a further increase in the number of contracts.

Interview with Masato Fukase, Executive Officer

Strategy

Business Strategy

Structural Reforms
Cover
Cover Story
Story

To strengthen our profitability, we are promoting structural reforms, including a review of our business portfolio. We are basicallyreorganizing and downsizing businesses other than the Leasing Business to focus on the Leasing Business.

Corporate Governance

Structural Reforms of Non-Core Businesses
To focus management resources on the Leasing Business, we are proceeding with stock transfers and company liquidation for non-core businesses suchas sales of custom-built homes and overseas businesses. We also split off some elderly care facilities in the Elderly Care Business.

Leopalace21•Transferred 100% of the shares ofMorizou Co., Ltd., which was aconsolidated subsidiary100%
transfer•Execution date: October 1, 2022
Transferee

Split off some elderly care facilities in the Elderly
Care Business
Leopalace21
22 elderly care facilities
including fee-based
home facilities

40 nursing carefacilities
Simple absorptiontype split

Azu Life Care
25 nursing carefacilities

40 nursing carefacilities•Transferred 40 nursing carefacilities to Azu Life Care Co., Ltd.,a consolidated subsidiary

Strengthening of governance is essential in order to achieve sustained growth and improve the medium- toManagement Message

Transfer of Morizou (sales of custom-built homes)

long-term corporate value. In this section, we introduce the specific initiatives for corporate governance,
for example the progress towards strengthening governance to date, and sustained improvement ofeffectiveness of the Board of Directors.

•The Company keeps the remaining
22 facilities and will aim to improve
profitability.
•Effective date: November 1, 2022

Transfer of Woori & Leo

Liquidation of subsidiaries in Cambodia

Leopalace21
Transfer ofall equity•Transfer agreement: August 8, 2022
Transferee

Started liquidation•Started liquidation procedures fortwo consolidated subsidiaries in
Cambodia

Strategy•Transferred all shares of Woori & Leo
PMC Co., Ltd., which was an equity
method affiliate

2 Cambodian
subsidiaries•Application for company closure:
August 12, 2022

Changes in Group Company Composition

End of May 2018
Leasing
Business

International
Business

End of March 2023

Leopalace Leasing
Corporation
Corporate housing agent

Plaza Guarantee Co., Ltd.
Rent guarantee

ASUKA SSI
Tenant household
contents insurance

Leopalace Power
Corporation
Power generation

Leopalace21 Business
Consulting (Shanghai)
Tenant recruitment

Woori & Leo PMC Co., Ltd.
Leasing management inSouth Korea

Leopalace21 (Thailand)CO., LTD.
Real estate brokerage
and referral in Thailand

LEOPALACE21 VIETNAM
CO., LTD.
Real estate brokerage andreferral in Vietnam

Leopalace21 (Cambodia)
Co., Ltd.
Real estate brokerage andreferral in Cambodia

LEOPALACE21
PHILIPPINES INC.
Real estate referralin the Philippines

PT. Leopalace
Duasatu Realty
Real estate businessin Indonesia

Leopalace21 Singapore
Pte. Ltd.
Investment consulting
business

Leopalace Leasing
Corporation
Corporate housing agent

Plaza Guarantee Co., Ltd.
Rent guarantee

ASUKA SSI
Tenant household
contents insurance

Leopalace Power
Corporation
Power generation

Leopalace21 Business
Consulting (Shanghai)
Tenant recruitment

Leopalace Green
Energy Corporation
Environment

Leasing
Business

Elderly Care
Business

Azu Life Care Co., Ltd.
Elderly Care Business

Hotel resorts
and otherbusinesses

Leopalace Guam
Corporation
Resort business

57 Corporate Governance System

International
Business

61 Initiatives Aimed at Improving EffectivenessLeopalace21 Singapore
Pte. Ltd.
Investment management

62 Communication with Stakeholders

Data Section

54

Morizou Co., Ltd.
Custom-built homes

56 Leopalace21’s Corporate Governance
58 Strengthening Our Management Structure

Enplas Corporation
Relocation management

Development
Business

Corporate
Corporate Governance
GovernanceRegarding Group companies, we are proceeding with the liquidation of Group companies related to non-core businesses such as the International
Business and the Development Business. Meanwhile, we have newly established Leopalace Green Energy Corporation, an environment-related company
associated to our Leasing Business.

63 Risk Management
Life Living Co., Ltd.
Property development

WING MATE CO., LTD.
Business travel
management

Leopalace21 Integrated Report 2023

Leopalace TrustLand trust and real estate
management trust

Leopalace Smile Co., Ltd.
Special subsidiary

Elderly Care
Business

Otherbusinesses

64 Compliance

Azu Life Care Co., Ltd.
Elderly Care Business

Leopalace Guam
Corporation
Resort business

66 Directors and Audit & Supervisory Board Members
Leopalace Smile Co., Ltd.
Special subsidiary

Leopalace21 Integrated Report 2023

55

Corporate GovernanceImprove the medium- to long-term corporate value

nin

er

General Shareholders’ Meeting
Management decision making
and supervision

then thesor yf u n c tio n s
g th
e de
ci s i o n s m a d e

eng
S tr

pe

su

ov

g

As of June 29, 2023

Appointment/
RemovalAppointment/
Removal
Accounting
Audit

Nomination andCompensation Committee
Corporate Management Council

In-house committees

Accounting Auditor

Board of Directors
Audit & Supervisory Board

10 Directors(Including 4 Outside Directors)
Audit

Appointment/
Removal/Supervision

E s t a b li s hCompli a n c e S y s t e m

Appointment/
Removal

4 Members(including 2 Outside Audit &Supervisory Board Members)

Auditing Department
Audit(internal audit)(internal controls)

Corporate
Corporate Governance
Governance

Strengthening
Cycle

them.
Specifically, the Board of Directors established the Nomination andCompensation Committee to confer about selection and remuneration of
directors, the Risk Management Committee to manage risks in thebusiness operation, the Compliance Committee to develop and manage
the legal compliance systems, the Personnel Committee to confer about
personnel utilization, the Sustainability Committee to promotesustainability initiatives, and the IT Committee to maintain the IT
environment.
In the business execution structure, Leopalace21 has put in place
four headquarters comprised of: the Leasing Business Headquarters
which manages the Company’s core leasing business; the Corporate
Management Headquarters which establishes and monitors the
management strategies, increases inter-divisional synergy and supportssmooth business operation; the Compliance Promotion Headquarters
which aims to develop and monitor our legal compliance systems; andthe Construction Defects Response Headquarters which manages
construction defects. We also see the enhancement of businessadministration audit functions as our critical management task, and will
try to reinforce the management monitoring function by setting the
Audit & Supervisory Board as a supervising body for directors’ businessexecution, and by setting the Auditing Department which is responsiblefor internal audit functions. With this structure in place to clarify
responsibilities and authorities, we aim to continuously enhance ourcorporate governance.

Corporate Governance System

r vi

Bu
ild
h
wi ea
th

d
an
te ingkmacef or sr ein t e m
I mpr ove andsyst r oli n t e r n al c o n

Corporate
GovernanceWe consider developing and strengthening corporate governance to bea key management issue. By strengthening corporate governance, we
are aiming to realize the corporate philosophy, achieve the management
plans, enhance the corporate value over the medium to long term, andachieve sustainable growth. In addition, to realize higher corporate
value for all stakeholders, we consider aiming for efficient, fair, andhighly transparent management to be the basic approach underpinningour corporate activities.
Based on this approach, the Company has the Board of Directors todecide important matters concerning business operations, such as thedecision of management plans, and resolutions set by the law,regulations, and the articles of incorporation. It also monitors thebusiness activities as well. This improves corporate value by responding
dynamically to changes in the business and management environment.
To achieve even faster decision making and smoother businessexecution, the Board of Directors has established the Corporate
Management Council and the Board of Executive Officers. The former
convenes to discuss important matters related to overall businessexecution prior to Board of Directors meetings, while the latter sharesinformation about Company management with the aim of strengthening
collaboration so that business execution proceeds smoothly.
Furthermore, the Board of Directors set up in-house committees todiscuss the major management challenges of the Company. The various
committees consider and offer recommendations on management
issues to the Board of Directors so the Board can thoroughly examine

StrategyEngagespeed in app
y der
cis op
ion

ria

ps
nshi
o
i
t
a
rel ldersyhlt kehos ta

Basic approach to Corporate GovernanceManagement Message

Realize the corporate philosophy, achieve the management plans

Cover
Cover Story
Story

Leopalace21’s distinctive corporate governance contributes to improvement of themedium- to long-term corporate value though the strengthening cycle

Corporate Governance System

Cooperating

Leopalace21’s Corporate Governance

Auditing
CouncilPresident and CEO

Compliance Committee
Board of Executive Officers

Skills of Directors
Decision-making capability

Execution supervision capability

Personnel Committee
Sustainability Committee
IT Committee

Leopalace21 Integrated Report 2023

Leasing Business Headquarters
Corporate Management Headquarters
Compliance Promotion Headquarters
Construction Defects Response Headquarters
Elderly Care Division
Architectural Engineering Division

Procurement Management Committee
Affiliate Directors Advisory Committee

56

Operating Headquarters and Divisions
Data Section

Execution

Risk Management Committee

Subsidiaries and affiliates

Leopalace21 Integrated Report 2023

57

Corporate Governance

Strengthening Our Management Structure
Cover
Cover Story
Story

Nomination and Compensation Committee

We have strengthened our corporate governance system in order toachieve the corporate philosophy, attain the management plan, improvethe medium- to long-term corporate value, and achieve sustained
growth. To apply external points of view to our management, we havebeen appointing outside Audit & Supervisory Board members for over 25
years, and outside directors since immediately after the global financial
crisis, which had a major effect on the management of the Company.
We subsequently increased the number of outside directors toconsiderably strengthen the supervisory function of the management.

Believing that strengthening of independence, objectivity, and accountability is particularly necessary regarding the nomination and remuneration of
directors and other upper management, we have established the Nomination and Compensation Committee with an independent outside director serving
as chairperson, and we are obtaining appropriate involvement and advice from the Committee. The Nomination and Compensation Committee consists offour independent outside directors, two non-executive directors and one internal director, and the fact that the independent outside directors account forthe majority of the members increases the Committee’s independence and objectivity.

We currently have four independent outside directors, making up over
one third of all directors. Based on our reflections on the construction
defects problem, we have also reshuffled our executive directors,
reducing their number to four from eight, five years ago, and as a result
their average age has also become nearly three years younger. In
addition, the Board of Directors has set up various committees and has
pursued timely inquiries in order to examine major management issues
faced by the Company.

Members

Chairperson: an independent outside director
Committee members: three independent outside directors, President and CEO, and two non-executive directors

Objective

To ensure the appropriateness of decisions related to officer candidates nomination and compensation
recommendations

Role

This Committee handles the nomination, removal as well as the compensation composition and levels for President andCEO, directors, Audit & Supervisory Board members, and executive officers considering the company businessperformance and other factors for objective deliberation. The Committee reports the results of such deliberation to theBoard of Directors.

Number of meetings heldin fiscal year 2022

8Management Message

Progress towards strengthening governance

Major Corporate Governance Initiatives
Outside Directors (persons)Outside Audit & Supervisory Board Members (persons)

3
1

1

1

1

1

2

3

5
6

3

5

4

4

3
3
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
3
3
3
2
2
2
2
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 (FY)
July 2006
1st meeting

Compliance Committee

Sustainability Committee (former CSR Committee)
Personnel Committee
IT Committee

The Committee discussed the appointment of directors, executive officers, and Audit & Supervisory Board members,
and deliberated on personnel, compensation, and evaluation systems for directors, Audit & Supervisory Board
members, and executive officers.

March 2016
1st meeting

Nomination and Compensation Committee

July 2021
1st meeting
March 2022
1st meeting

Affiliate Directors Advisory Committee
Procurement Management Committee

In the executive officer appointment process, the Committee got each of the new executive officer candidates to givepresentations, and finally appointed three new executive officers.
Main deliberation content

Members of each advisory bodyName

Board ofDirectors

President and CEO

Bunya Miyao

Director

Mayumi Hayashima

Director

Naomichi MochidaDirector

Shinji Takekura

Director

Akio Yamashita

Director

Jin Ryu

Outside Director

Akira Watanabe

Outside Director

Yutaka Nakamura

Outside Director

Takumi Shibata

Outside Director

Kan Ishii

Audit & Supervisory Board Member

Kenichiro Samejima(Notes 2)

Audit & Supervisory Board Member

Yoshitaka Murakami(Notes 2)

Outside Audit & Supervisory Board Member

Jiro Yoshino(Notes 2)

Outside Audit & Supervisory Board Member

Kazutaka Shimohigoshi(Notes 2)——

Affiliated companies—

Outside Experts and others—

Board of
Executive
Officers

Nomination andCompensation
Committee

Compliance
Committee

Risk
Management
Committee

Personnel
Committee

Sustainability
Committee

IT Committee

Board members’ compensation

10

2

6

4

1

2

2

5

3

12

5

2

2

Our basic policy regarding decisions on the amounts of remunerationand other compensation for Directors and the method for calculatingthem is to adopt a compensation system which contributes toimprovement of the Company performance and improvement ofcorporate value over a diverse range. The composition of remuneration
for the executive directors consists of two types: the basic performancebased annual compensation which fluctuates in accordance with therate of achievement of the targets in the annual management plans, andthe incentive bonus which is paid only if a shareholder dividend is paid.
The incentive bonus can be paid as monetary remuneration and non-monetary remuneration.
Regarding the composition of remuneration for non-executive
directors, we only pay a basic remuneration as a fixed remuneration inlight of their duties. When establishing the compensation system, weestablished a compensation table taking into consideration the level ofother companies, the Company’s business performance, and the level of
employee salaries and considering each director’s roles and theassociated risks, and ensured that the compensation would be decided
based on this table.

Data Section

Executive Officers
Employees

Corporate
Management
Council

Regarding the evaluation of directors and executive officers, the Committee has adopted a process under which a final
decision is made regarding the evaluation based on discussions of the self-reported evaluation content at theNomination and Compensation Committee, and there have been cases where self-reported evaluation results werechanged. Director and executive officer evaluations took place twice a year instead of once a year as they used to be,
so as to clarify the link to the Company performance. The Committee has deliberated cases for promotion and demotion
as and when required.

Corporate
Corporate Governance
GovernancePosition

Strategy

May 2008
1st meeting
July 2008
1st meeting
April 2009
1st meeting
February 2011
1st meeting

Risk Management Committee

4Notes 1. indicates a chairperson, while indicates a member.
2. All Audit & Supervisory Board members attend meetings of the Board of Directors, and they supervise the execution of business by the directors.

58

Leopalace21 Integrated Report 2023

Leopalace21 Integrated Report 2023

59

Initiatives Aimed at Improving Effectiveness
Cover
Cover Story
Story

Skills of officers

The Board of Directors
appointed directors satisfy multiple required territories. Particular focus
is given to knowledge of corporate management, structural reforms,
quality management, and compliance and risk management when
appointing outside directors. We expect that directors will be able toleverage these skills to make significant contributions to the Company’sefforts to continue structural reforms and strive to recover performanceand trust.

The Board of Directors focuses on both ensuring agile management andachieving comprehensive supervisory functions, and it currently consistsof ten directors, including four outside directors. To improve ourcorporate value, we believe it is important to appoint suitable directors
and determine their compensation, and we have incorporated

deliberation by the Nomination and Compensation Committee which ismade up of outside directors, into the determination process.
In addition to regular monthly meetings, the Board of Directors
flexibly convenes meetings as necessary to make importantmanagement decisions and monitor how business is being executed.

Internal directors

Management Message

The Board of Directors is aiming to strengthen our governance systemand to flexibly and promptly solve problems. We reviewed the skill setof the Board of Directors as necessary given the business environmentand other factors. Effective June 29, 2022, the Board consists of ten
directors in total, of which four are appointed as independent outside
directors, so that more than one-third are independent outside directors.
The Company requires its directors to have an extremely broad rangeof expertise, experience, and knowledge, and therefore many of theOutside directors

Skill set matrix
Attribute

Name

Title

Representative Director,
President and CEO
Chairperson of the Board of
Directors

Executive

FemaleDirector and Executive Officer

Executive

60

Male

Shinji Takekura

Director and Executive Officer

Executive

51

Male

Akio Yamashita

Director

Non-executive

61

Male

Director and Managing
Executive Officer

3

Naomichi Mochida

4

5

9

Yutaka Nakamura

Takumi Shibata

Kan Ishii

Director

Director

Director

Director

Non-executive

Non-executive

Non-executive

Non-executive

Non-executive

Note: Ages of each director are listed as of June 29, 2023

60

Leopalace21 Integrated Report 2023

MemberIndependent
outsideIndependent
outsideIndependent
outsideIndependent
outsideMemberMemberMemberMember

39

76

64

70

69

Finance

Male

Male

Male

Male

Male

After the end of fiscal year 2022, we evaluated the function and otherduties to be fulfilled by the Board of Directors, mainly to improve
management issues. The evaluation method was an individual
evaluation using a questionnaire targeting all directors and Audit &Supervisory Board members. The secretariat of the Board of Directors
reported the aggregated and analyzed results to the Board of Directors,
and discussions were held. As a result, for fiscal year 2022, we
confirmed that our Board of Directors and governance system generally
functioned effectively.
More specifically, based on the evaluation of the Board of Directors

for the previous fiscal year, we boosted the profitability of the Leasing
Business and strengthened the risk and crisis management system as
initiatives to make improvements related to management issues
identified in fiscal year 2022.
In the recent evaluation of the Board of Directors, the Board agreed
to implement the business plan as a top priority and to monitor the
progress of the below-mentioned initiatives, hold timely discussions andmake decisions including any necessary corrections: boosting the
profitability of the Leasing Business, strengthening the risk and crisis
management system, and eliminating the construction defects problem.

Priority issues during fiscal year 2022

Priority issues during fiscal year 2023

1. Formulate a medium-term management strategy

1. Boost the profitability of the Leasing Business2. Boost the profitability of the Leasing Business

2. Strengthen the risk and crisis management system

3. Strengthen the risk and crisis management system

3. Eliminate the construction defects problem

Positive points

Points to be improved• Achieve the fiscal year-end occupancy
rate plan through occupancy rate
improvement measures• Increase profitability through establishinga leasing profit plan for each region unit
and encouraging the competitive rivalries
between regions• Set rents and put cost control in placewith paying attention to the
profitability of the Leasing Business• Strengthen the risk and crisis
management system• Carry out the construction defects
repair works• Visualize the progress of construction
defects repair against the plan by region• Develop a system enabling identificationand control ascertainment and restraint ofpotential risks

Data Section

10

Akira Watanabe

Director

Sales andmarketing(Non-executive)

Corporate
Corporate Governance
Governance8

Jin RyuMember

Structuralreforms(Executive)

Strategy

50

Mayumi Hayashima

Corporate
management

Compliance
Qualityand riskmanagement
management

Evaluation of the effectiveness of the Board of Directors

Executive

2

MemberGenderMale

Bunya Miyao

7

Nomination
andIndependency
Age
Compensation
Committee

63

1

6

Execution ofbusiness

Skills particularly required by Leopalace21

Leopalace21 Integrated Report 2023

61

Corporate GovernanceRisk Management

To realize higher corporate value for all stakeholders, we consider aiming for efficient, fair, and highly transparent management to be thebasic approach underpinning our corporate activities. Based on this approach, we tackle the improvement of corporate value by stipulating
the relationships we are supposed to hold, and have communication with our stakeholders, including customers, business partners,
shareholders, investors, employees, and others.

The risk management system

Initiative

Class L member organization for property owners
Services provided by Class L
A full range of individual consultation
meetings (nationwide)

Property owner briefing sessions

Held as needed

Fiscal year 2022 results

Fiscal year 2022 results
Days held

2022/11 to 2023/3

Places held

127 places

No. of participants

506 groups consisting of
652 people

In order to grasp and manage Company-wide risks, the Group has put inplace a Risk Management Committee as an advisory body to the Boardof Directors. The President and CEO serves as chairperson of the Risk
Management Committee, the Chief of the Corporate Management
Headquarters and Chief of the Compliance Promotion Headquarters
serve as vice-chairperson, while other members of the Committee
comprise external experts such as lawyers. The Committee not only
monitors risk management status and provides improvement guidance,
but also works to mitigate or prevent risks from materializing.

Twice a year in principle
No. of days held

2022/12/4, 12/9, 12/17

No. of participants

1,743 groups consistingof 1,952 people

Risk management system diagram

Board of Directors
Inquiry

Risk Management Committee Chairperson: President and CEO

ReportReportConfirmation and improvement instructions, etc.

Risk Management Oﬃcer (vice-chairperson)

Current number of members

Online seminars

Publication of the newsletter

Twice a year in principle

Twice a year in princile

Fiscal year 2022 results
Days held

Main members: 25,268
Family members: 49,678
Total:
74,946<Session 1: About inheritance tax>
No. of participants: 31<Session 2: About the invoice and tax systemrevision>
No. of participants: 99

2022/9/28, 2023/2/7

Fiscal year 2022 results
January 2023 publication/
24,000 copies published

Confirmation and investigation instructions, etc.

Risk Management Committee secretariat
ReportChief of the Compliance Promotion Headquarters
Chief of the Corporate Management Headquarters
ReportConfirmation, investigation, etc.

ReportReportStrategy

as of 2023/4/1

Each department identifies, analyzes, and evaluates risks related to
the work it is in charge of, formulates risk response measures tomanage those risks, and reports the results to the Risk Management
Committee. The Risk Management Committee offers consultation andguidance to ensure that risk is appropriately controled by eachdepartment. Furthermore, the Chief of the Compliance Promotion
Headquarters reports on the status of risk management to the Board of
Directors on a quarterly basis.

Management Message

About Class L
Class L is a forum that develops the ties
between the property owners and theCompany; furthermore, it is also a place
which deepens exchanges among theproperty owners themselves. The officialname of Class L is Leopalace Exclusive
member’s. As a partner which supports theproperty owners in their respective life
stages, it provides a menu of services
which satisfies property owners and theirfamily members.

Cover
Cover Story
Story

Communication with Stakeholders

Confirmation and improvement instructions, etc.

Risk management manager
ReportConfirmation and improvement instructions, etc.

Risk management coordinator
ReportOﬃcers and employees

Business Partner Engagement

Held the outstanding cleaning partners award ceremony

Organized Risk Review Meetings
On the day of the award ceremony, in addition to the ceremony,
we organized a meeting for exchange of opinions and a model room
tour. We shared the event and the good examples of opinions in themeeting with the other cleaning partners across the country who
did not receive any award this time, in order to encourage them toimprove the quality.

We implemented Risk Review Meetings which are positioned as a
Subcommittee of the Risk Management Committee and carried out areorganization of the potential risks based on the current situation. In
the first meeting the Risk Management Committee members shared therisks and incidents they thought about and in the second meeting they
extracted the risks which became agenda items for the Risk
Management Committee.

Content:• Lectures by external instructors about current issues and how wewill tackle them going forward• Risk perception for each specific business environment, forexample competitors and suppliers (discussion format)• Identification of important risks and consideration of the directionof risk countermeasures

Participants: Risk Management Committee members
Dates held:
Session 1: June 19, 2023, Session 2: July 3, 2023

Data Section

We have introduced an evaluation system for our cleaning partners
and are trying to improve the quality of cleaning, in order to fulfil
the wish of apartment property owners to keep apartments in aclean condition over the long term and meet the need of tenants tolive in clean apartments.
We held the ceremony of Award Presentation for Outstanding
House Cleaning Partners to express our gratitude to the cleaning
partners who have contributed to improving customer satisfaction
by achieving outstanding results in two items in the evaluation
system: the user evaluation in which the tenants evaluate on afour-step scale the cleaning quality when they move in, and thenumber of complaints received by the call centers during thetenancy.
This was the first time we held this award ceremony. A total ofseven companies, three in the Eastern Japan block and four in theWestern Japan block, were selected and given award as
outstanding partners.

Corporate
Corporate Governance
GovernanceInitiative

Venue: the small meeting room on the first basement level at the
Head Office
We invited external instructors to give the lectures
Outstanding cleaning partners award ceremony

Risk Review Meeting

62

Leopalace21 Integrated Report 2023

Leopalace21 Integrated Report 2023

63

Corporate GovernanceCompliancetime in fiscal year 2022.
The important thing is for each and every one of the officers andemployees to understand compliance to be their own business and topractice compliance with a sense of ownership. We place priority on the
promotion of self-propelled compliance and have assigned a compliancemanager and compliance coordinator to each department. Each of them
carries out their duties to ensure the continuous penetration ofcompliance awareness from the management team to employees.

Compliance system diagram
Board of Directors•Consultationon compliancesystem

•Oﬀering of opinions•Status report•Reporting of important matters•Activity report•ReportCompliance Committee• Policy decision• Guidance, advice•Reporting of each
incident

Chief of the Compliance
Promotion Headquarters(CLO)
Auditing
Department•Auditreport•AuditrequestCompliance Promotion
Headquarters
Compliance Committee
secretariat•Investigation request
for reporting andconsultations•Guidance, advice•Reportingof results•Whistleblowing•Consultations•Questions•Improvement of internal system•Formulation and implementationof internal rules•Voluntary inspection

Changes in compliance awarenessWe are working on a drastic reform of our corporate culture as ameasure to prevent a recurrence of the construction defects problem. In
conjunction with this reform, we have been also conducting regularawareness surveys targeting all Group officers and employees. In theawareness survey conducted in 2023, 99% of the officers andemployees responded that the overall compliance awareness has

improved. Based on this result, we believe that the number of officers
and employees who are aware of compliance and taking some
initiatives in their operations has increased and that we have madesteady progress on reforming our corporate culture and raising thisawareness.

Corporate
Corporate Governance
Governance•AuditingEachdepartment

To entrench an enduring compliance-first policy within the organization, we are fundamentally reviewing the compliance system to rebuild it as a solid
framework. We constantly update the various compliance promotion measures, which include training aiming to strengthen the awareness improvement
and knowledge acquisition of each individual officer and employee and conducting a range of awareness surveys using questionnaires, by receiving
advice from a consulting company as well. We are making our initiatives more effective by incorporating not only internal points of view but also third
party points of view.

External Hotline

Consulters andwhistleblowers

Compliance manager
and Compliance

In order to regain the social trust, we established May 29 every year as
Change Day 5.29 to remind ourselves that each of the officers andemployees in Leopalace21 Group should play an integral role in therestoration challenge, and to pledge to make continued emphasis on
preventing the recurrence of construction defects.
May 29 is related to the construction defects problem because onthat day in 2018 we released the “Notice Concerning Construction
Deficiencies of Apartment Parting Walls (six series)” and disclosed theother construction defects which we subsequently discovered during thecourse of all-building investigations, and on that day in 2019 weannounced the “Notice Concerning Causes and Measures to Prevent
Recurrence of Construction Defects” based on the final report andrecommendations by the External Investigation Committee.
By establishing a specific day related to the construction defects
problem in this way as Change Day 5.29, we intend to raise theawareness of all the officers and employees in the Group so that they
can newly prepare themselves to take measures against recurrence.

External compliance diagnosis•Risk report

In-House Hotline•Reporting ofincidents•Protection ofwhistleblowers
and consulters

Change Day

The Group implements compliance training that utilizes E-learning in aneffort to boost the compliance awareness of all its officers andemployees. We are also working on strengthening the awareness
improvement and knowledge acquisition of each individual officer andemployee. In the training, we implement group training and E-learningfor understanding the basic concepts of compliance and also based onthemes adapted to the needs of this era; for example, harassment
prevention, or the handling of personal information. We are also
regularly and continuously working for further improvement of ourcompliance and ethics. For example we disclose information as neededin response to amendments to laws and other changes.
In fiscal year 2022 we implemented E-learning related to complianceten times, and in fiscal year 2023 we plan to implement E-learning onthemes such as harassment prevention nine times.

Risk Management
Committee

Reporting andconsultation service•Reporting of
violations andaccidents•Status investigation•Improvement guidance coordinator•Training implementation•Veriﬁcation and reportingof the total amount ofpotential risks

Training, E-learning

Strategy

We have put in place a Compliance Committee as an advisory body to
the Board of Directors with an outside director serving as thechairperson. The Compliance Committee meets 12 times a year, and is
working to strengthen the compliance system of the Group. In particular,
it is working on a drastic reform of our corporate culture prompted by
the construction defects problem and, regarding our measures toprevent recurrence, even after it completed the initial plan it has
implemented continuous initiatives so that the memories of the problem
never fade away over time.
We have put in place the Compliance Promotion Headquarters as abody for the promotion of daily compliance. This Promotion
Headquarters plans and formulates measures pertaining to compliancepromotion, and in addition verifies the legal compliance of new
businesses, new services, and new products in the Group.
We are also building systems for realizing the promotion of selfpropelled compliance, under which a compliance manager is appointed
to each department and affiliate to actively implement measures related
to compliance in the business execution. After building these systems in
the current fiscal year, we received a third-party evaluation to identify
issues for upgrading compliance. Going forward we will aim to upgrade
our compliance for continuous improvement.

Compliance initiatives

Management Message

Compliance promotion system

Cover
Cover Story
Story

Ever since the construction defects problem came to light, Leopalace21
has established and executed measures to prevent recurrence,
repeatedly held meetings of the Compliance Committee and conductedcompliance training, among other measures, and continued activities tofirmly make a culture of compliance awareness take root inside theCompany. Going forward, we will aim to upgrade our compliancefurther, based on the key concept of advancing to the next stage ineliminating construction defects. As the first step in that process, we
implemented an external diagnosis concerning compliance for the first

Compliance consulting service
July 2019

To handle cases where legal violations or similar acts by officers andemployees are discovered, the Group has established a whistleblowing
system, or compliance hotline service, to deal with the associatedconsultation. Three contact points were set up: for in-house, theCompliance Committee secretariat, for outside of the company, a law
firm, and any Audit & Supervisory Board members apart from the said

64

Whistleblowing system(Compliance hotline)
Reporting,consultation,etc.

Leopalace21 Integrated Report 2023

Run by: Compliance Promotion
Department(Compliance Committee secretariat)

Compliance Committee
Chairperson: an outside director
Committee members:
in-house committee members,
legal advisors, and outsidecommittee members

Report2023
Not conscious ofwhat is required

Not conscious ofwhat is required

1%

17%

Conscious ofwhat is required

Conscious ofwhat is required

83 %

99 %

Data Section

Business divisions,departments, andsubsidiaries andaffiliates

two. We have also established a business partners hotline to handle
cases involving business partners who do continuous business. In
addition, we have established a Compliance Mailbox so that we canpromptly respond to any incidents that may occur by receiving a wide
variety of information and consultations from Company officers andemployees and having a system to discover potential risks.

Board ofDirectors

Leopalace21 Integrated Report 2023

65

Corporate GovernanceDirectors and Audit & Supervisory Board Members

Executive

Executive
Director and Managing Executive Officer
Chief of the Leasing Business Headquarters

Executive

Executive

Director and Executive Officer,
Deputy Chief of the Leasing Business
Headquarters, General Manager of the Corporate
Sales Division

Director and Executive Officer,
Chief of the Corporate Management
Headquarters,
Chief of the Compliance Promotion Headquarters,
Chief Legal Officer (CLO)

Mayumi Hayashima

Naomichi Mochida

Shinji Takekura

Apr 1983 Joined Nakamichi Leasing Co., Ltd.
Jun 1990 Joined Leopalace21 Corporation
Sep 2000 Deputy Manager of the Financial
Department
Jul 2008 General Manager of the Resort Business
Headquarters
Jul 2010 General Manager of the Corporate
Planning Department
Jul 2012 Administrative Officer
Apr 2013 Executive Officer
Jun 2016 Director and Executive Officer
May 2017 Representative in charge of the Corporate
Planning Department and Public Relations
Department
Apr 2018 Director and Managing Executive Officer,
Representative in charge of Corporate
Planning and Investor Relations
May 2019 President and CEO (current)
Jun 2019 Chief of the Business Operation
Headquarters
May 2022 Chief of the Construction Defects
Response Headquarters (current)

Apr 1996 Joined Leopalace21 Corporation
Apr 2009 Deputy Department Manager of theEastern Japan Corporate Sales
Department, Leasing Sales Section 3,
Leasing Business Division
Jul 2010 Department Manager of the Corporate
Sales Department, Eastern Japan Section
2, Leasing Business Division
Apr 2014 Department Manager of the Corporate
Business Promotion Department
Apr 2015 Administrative Officer
Apr 2018 Executive Officer
Jun 2019 Director and Executive Officer, Chief of theCompliance Management Headquarters,
Chief Legal Officer (CLO)
Jun 2020 Chief of the Compliance Promotion
Headquarters, Chief Legal Officer (CLO)
Jul 2020 Chief of the Management Headquarters
May 2021 Deputy Chief of the Corporate
Management Headquarters
May 2022 Director and Managing Executive Officer(current)
Chief of the Leasing Business
Headquarters (current)

Apr 1985 Joined The Mitsui Bank, Limited (nowSumitomo Mitsui Banking Corporation)
Jun 2007 Joined Leopalace21 Corporation
Director, General Manager of the
Corporate Planning Department
Apr 2009 Director and Executive Officer
Department Manager of the 3rd Sales
Department, Leasing Business Division
Department Manager of the Broadband
Service Promotion Department
Apr 2010 Head of the Related Businesses
Controlling DivisionJun 2010 Executive Officer
May 2011 Head of the Corporate Sales Management
Division
Apr 2013 Deputy General Manager of the Leasing
Business Division
Apr 2014 Managing Executive Officer
Jul 2015 Deputy General Manager of theConstruction Contracting Business
Division
Jun 2020 Representative Director of Leopalace
Leasing Corporation
May 2021 Administrative Officer and Department
Manager of the Corporate Sale Planning
Department
May 2022 Executive Officer, Deputy Chief of the
Leasing Business Headquarters (current)
General Manager of the Corporate Sales
Division (current)
Jun 2022 Director and Executive Officer (current)

Apr 1996 Joined Leopalace21 Corporation
Apr 2014 Department Manager of the 1st
Construction Contracting Business
Department, West Japan Region
May 2018 Department Manager of the 3rdConstruction Contracting Business
Department, East Japan Region
Jun 2020 Department Manager of the 2nd WealthManagement Department, East Japan
Region, and responsible for the Emergency
Response Project for Construction Defects
Problem
Oct 2020 Senior Department Manager of the
Corporate Planning Department
Apr 2021 Executive Officer
May 2022 Chief of the Corporate Management
Headquarters (current)
Chief of the Compliance Promotion
Headquarters, Chief Legal Officer (CLO)(current)
Jun 2022 Director and Executive Officer (current)

Akio Yamashita

Jin RyuApr 1984 Joined Japan Development Bank (nowDevelopment Bank of Japan Inc.)Jan 2006 Joined Morgan Stanley Securities Co., Ltd.
(now Morgan Stanley MUFG Securities
Co., Ltd.)Jun 2008 Joined Fortress Investment Group (Japan)
GK, Managing Director (current)
Mar 2013 Representative in Japan, Fortress
Investment Group (Japan) GK (current)
Jun 2021 Outside Director, Leopalace21 Corporation
Jan 2022 Director, PJC Investments (current)
Director, Accordia Golf Co., Ltd. (current)
Jun 2022 Director, Leopalace21 Corporation (current)
Sep 2023 Director, Sogo & Seibu Co., Ltd. (current)

Apr 2010 Joined Morgan Stanley MUFG Securities
Co., Ltd.
Apr 2011 Joined RBS Securities Japan Ltd.
May 2012 Joined Fortress Investment Group (Japan)GK
Apr 2020 Director, FHK Company (current)
Dec 2020 Managing Director, Fortress Investment
Group (Japan) GK (current)
Jun 2021 Outside Director, Leopalace21 Corporation
Jan 2022 Director, PJC Investments (current)
Director, Accordia Golf Co., Ltd. (current)
Jun 2022 Director, Leopalace21 Corporation (current)
Sep 2023 Representative Director, Sogo & Seibu
Co., Ltd. (current)

Leopalace21 Integrated Report 2023

Non-executive

Non-executive

Outside Director

Outside Director

Akira Watanabe

Yutaka Nakamura

Takumi Shibata

Kan Ishii

Apr 1973 Registered as an attorney at law
Nov 2006 External Statutory Auditor, FASTRETAILING CO., LTD.
Jun 2007 Outside Director, MAEDA CORPORATION
Outside Audit & Supervisory Board
Member, KADOKAWA GROUP HOLDINGS,
INC. (now KADOKAWA CORPORATION)
Apr 2010 Outside Director, MS&AD Insurance Group
Holdings, Inc.
Mar 2013 Outside Director, DUNLOP SPORTS CO.,LTD.
Oct 2015 Director, ASIA PILE HOLDINGSCORPORATION (current)
Sep 2018 Partner, Comm & Path Law Office (current)
Jun 2019 Outside Director, MAEDA ROAD
CONSTRUCTION Co., Ltd. (current)
Jul 2020 Outside Director, Leopalace21 Corporation(current)
Jun 2022 Outside Director, KADOKAWACORPORATION

Apr 1981 Joined National Housing Materials Co.,
Ltd. (now Panasonic Homes Co., Ltd.)Oct 2002 Manager of Quality & Environmental
Promotion Department, Panasonic Homes
Co., Ltd.
Oct 2006 Manager of Quality, Environment & IT
Department, Panasonic Homes Co., Ltd.
Apr 2011 Councilor and Manager of Corporate
Quality & Environmental Division,
Panasonic Homes Co., Ltd.
Apr 2012 Senior Councilor and Manager ofCorporate Quality & Environmental
Division, Panasonic Homes Co., Ltd.
Apr 2018 Senior Principal for Quality & Customer
Satisfaction, Panasonic Homes Co., Ltd.
Mar 2019 Retired from Panasonic Homes Co., Ltd.
Feb 2020 Outside Director, Leopalace21 Corporation(current)

Apr 1976 Joined Nomura Securities Co., Ltd.
Jul 1997 Managing Director, Nomura Internationalplc.
Jul 1998 Director, Nomura Securities Co., Ltd.
Apr 2000 Managing Director, Nomura Europe
Holdings plc.
Apr 2005 President and CEO, Nomura AssetManagement Co., Ltd.
Jul 2007 Deputy President and COO, Nomura
Holdings, Inc.
Jul 2013 Executive Chairman, Nikko AssetManagement Co., Ltd.
Jan 2014 President and COO, Nikko AssetManagement Co., Ltd.
Jun 2020 Representative Director, Fiducia, Inc.
(current)
Jun 2022 Outside Director, Leopalace21 Corporation(current)
Jul 2022 Outside Director, Nano Summit Co., Ltd.
(current)
May 2023 Chairman and Representative Director,
Terra Foods Corporation (current)
Outside Director, Sees Co.,Ltd. (current)
Jun 2023 Outside Director, PJC Investments (current)
Outside Director, Accordia Golf Co., Ltd.
(current)

Apr 1977 Joined Japan Development Bank (nowDevelopment Bank of Japan Inc.)
Oct 2008 Managing Executive Officer, Development
Bank of Japan Inc.
Jan 2010 Trustee Representative, Japan Airlines
Co., Ltd.
Aug 2011 Representative Director President,
FUKUOKA JISHO CO., LTD.
Jun 2017 Outside Director, NIPPON PISTON RING
CO., LTD.
Apr 2018 Visiting Professor, The Graduate School of
Project Design
Jun 2018 Director, The Nishinippon Shimbun
Apr 2019 Specially Appointed Professor, The
Graduate School of Project Design(current)
Jun 2021 Advisor, TERRACE MILE, Inc. (current)
Jun 2022 Outside Director, Leopalace21 Corporation(current)
Representative Director, PJC Investments(current)
Representative Director, President andCEO, Accordia Golf Co., Ltd.(current)

Audit & Supervisory Board Members (As of September 1, 2023)

Full-time Outside Audit & Supervisory Board
MemberFull-time Audit & Supervisory Board Member

Audit & Supervisory Board Member

Outside Audit & Supervisory Board Member

Jiro Yoshino

Kenichiro Samejima

Yoshitaka Murakami

Kazutaka Shimohigoshi

Apr 1978 Joined The Dai-Tokyo Fire & Marine
Insurance Co., Ltd. (now Aioi Nissay Dowa
Insurance Co., Ltd.)Apr 2011 Executive Officer, Aioi Nissay Dowa
Insurance Co., Ltd.
Apr 2012 Managing Executive Officer, Aioi Nissay
Dowa Insurance Co., Ltd.
Executive Officer, MS&AD InsuranceGroup Holdings, Inc.
Jun 2013 Full-time Audit & Supervisory Board
Member, MS&AD Insurance Group
Holdings, Inc.
Jun 2017 Outside Full-time Audit & Supervisory
Board Member, Leopalace21 Corporation(current)

Apr 1984 Joined Nikkei House Co., Ltd.
Feb 1986 Joined Leopalace21 Corporation
Apr 1999 Department Manager of the StoreManagement Department, Leopalace
World Shinjuku, Leasing Business Division
Oct 1999 Department Manager of the Planning
Department, Head Office, Leasing
Business Division
Apr 2009 Executive Officer and Department
Manager of the Operations Department,
Leasing BusinessFeb 2010 Department Manager of the Planning andOperations Department, Leasing Business
Division
Apr 2012 Department Manager of the Information
Systems Department
Jul 2012 Administrative Officer
Apr 2014 Executive Officer
Jul 2019 Management Headquarters, in charge ofInformation Systems
Jun 2020 Administrative Officer and Head of Audit& Supervisory Board Members Office
Jul 2020 Full-time Audit & Supervisory Board
Member (current)

Apr 1972 Joined Ministry of FinanceJun 1983 Consul at Consulate-General of Japan inHong Kong
Feb 1987 Director, Banking Bureau, Ministry of
FinanceJul 1998 Large Enterprise Examination and Criminal
Investigation Deputy Commissioner,
National Tax Agency
Jun 2000 Taxation Deputy Commissioner, National
Tax Agency
Jun 2003 First Deputy Commissioner, National Tax
AgencyOct 2005 Senior Executive Officer, East Nippon
Expressway Company Limited
Jun 2011 Full-time Audit & Supervisory Board
Member, Credit Saison Co., Ltd.
Jun 2019 Outside Director, Leopalace21 Corporation
Jul 2020 Audit & Supervisory Board Member,
Leopalace21 Corporation (current)

Oct 1979 Joined Asahi Auditing Firm (now KPMG
AZSA LLC)
Aug 1983 Registered as a Certified Public
Accountant
Jul 1985 Joined Nihon Keieikeikaku Co., Ltd. (nowAlma Co.,Ltd.)
Sep 1992 Managing Director, Pendel Management
Institute (current)
Head of Shimohigoshi Certified Public
Accountant Office (current)
Jun 1993 Registered as a Certified Public Tax
Accountant
Jan 2007 Representative Partner, Pendel Certified
Public Tax Accountant Firm
Jun 2009 Auditor, Fourteenforty Research Institute,
Inc. (now FFRI Security, Inc.)
Aug 2015 Representative Director, JP Consultants
Group Co., Ltd.(current)
Jun 2016 Director and Audit Committee Member,
FFRI, Inc. (now FFRI Security, Inc.)Jun 2023 Outside Audit & Supervisory Board
Member, Leopalace21 Corporation(current)

Leopalace21 Integrated Report 2023

Data Section

Director

Non-executive
Outside Director

Corporate
Corporate Governance
GovernanceNon-executive

Director

Non-executive
Outside Director

Strategy

Bunya Miyao

Non-executive

66

Outside Directors (As of September 1, 2023)

Management Message

Representative Director, President and CEO
Chief of the Construction Defects Response
Headquarters

Cover
Cover Story
Story

Internal Directors (As of September 1, 2023)

67

Data Section

Ten-Year Consolidated Financial Highlights

The period from fiscal year 2014 to fiscal year 2016 was a period of
renewed growth following the collapse of Lehman Brothers, and theCompany promoted diversification of its business.

[Major Measures and Major Events](JPY million) (USD thousand)

FY2013

FY2014FY2015FY2016*Creative Evolution 2020

Fundamental restructuring of business strategy

Performance slowed in fiscal year 2018, due
to the revelation of construction defects
problem.

The COVID-19 began to spread in fiscal year 2020, and the Company’sbusiness once again slumped; at the end of fiscal year 2020, the Company
recorded excessive liabilities under TSE standards, but it eliminated theexcessive liabilities in fiscal year 2021.

FY2017FY2018FY2019FY2020

FY2022

FY2021

483,247

511,513

520,488

530,840

505,223

433,553

408,959

398,366

406,449

Leasing Business

388,562

399,375

410,641

416,594435,537

426,388388,939

391,964

383,043

391,438

Development Business

63,13561,312

74,16074,566

76,58758,99223,806–––

Elderly Care Business

10,171

10,608

10,798

11,536

12,807

13,922

14,62014,524

14,258

13,941

Hotel, Resort & Other Businesses
Cost of sales

9,013

11,95015,913

17,791

5,908

5,919

6,186

2,469

1,064

1,069

401,510

407,433

422,604

427,820434,762

428,988408,112387,872

352,289

353,163
43,406

Selling, general and administrative expenses

55,90660,992

67,82369,76973,147

68,844

61,91550,26944,302

Operating profit (loss)

13,467

14,822

21,08522,89822,9307,390(36,473)(29,182)

1,774

9,879

Leasing Business

15,364

20,59022,84822,45926,062

14,987(20,828)(19,385)

7,719

16,887Development Business

2,951

211

3,340

5,051

3,663

(995)

(5,181)–––

Elderly Care Business

(610)

(606)

(1,354)(1,650)(1,596)

(846)

(559)

(720)

(789)

(1,208)

Hotel, Resort & Other Businesses(981)(1,257)

(360)

664

(846)

(1,346)(1,000)(1,551)(1,668)(2,706)

Adjustments(3,256)(4,116)(3,388)(3,626)(4,353)(4,407)(8,903)(7,524)(3,486)(3,092)

EBITDA

19,46022,55830,70032,23534,656

20,336(24,316)(18,766)

11,127

16,449Recurring profit (loss)

11,36813,483

19,90922,35522,354

7,063(36,341)(34,170)(2,151)

6,526

Net income (loss)

15,73015,175

19,631

20,401

14,819(68,662)(80,224)(23,680)

11,854

19,810Total assets

288,165

308,882

327,609337,828

337,257

291,790

196,953

161,708

145,430

166,548

Net assets

103,354

124,928

144,865

158,870

159,438

81,338

1,589

3,277

11,03432,922

Interest-bearing debt

37,22744,48750,82449,91853,82948,04736,13735,40933,04531,849Cash and deposits balance

74,76775,221

88,043

104,432

106,543

84,53660,501

54,86345,52353,560

10,545

Management Message

470,883

Net sales

Cover
Cover Story
Story

EXPANDING VALUE[Progress of the Medium-Term Management Plan]

At fiscal year-end: (JPY million)

Strategy

Cash flows: (JPY million)
15,584

15,715

22,10427,50427,338(7,212)(51,639)(40,816)(4,460)Cash flows from investing activities(6,929)(17,550)(11,087)(8,653)(2,336)

7,379

39,533

11,829886

906

Cash flows from financing activities

8,848

1,747

1,374

(14,048)(18,354)(15,181)(12,048)

23,571(5,886)(2,819)

Free cash flows (FCF)

8,654(1,834)

11,017

18,85025,001

167(12,106)(28,986)(3,574)

11,452

Net assets

393.05475.17550.94603.76630.84331.87

5.34(25.83)

3.25

73.29

Net income (loss)

69.38

57.73

74.68

77.61

58.02

(278.58)(328.77)(84.88)

36.04

60.22

–

–

10.00

22.00

22.00

–

–

–

–

–

Corporate GovernanceCash flows from operating activities

Amounts per share: (JPY)

Cash dividend
Index:

548,912554,948

561,961

568,739

570,672

574,798

575,798

573,673

567,314561,231

Average annual occupancy rate (%)

84.58

86.57

87.95

88.53

90.59

88.34

80.78

78.89

81.22

84.66

Construction contracting orders received (JPY million)

81,13987,39586,43987,13975,90564,495

7,814

5,927

2,792

394

Equity ratio (%)

35.9

40.4

44.2

47.0

47.2

27.7

0.7

(5.3)

0.7

14.5

Return on equity (ROE) (%)

19.7

13.3

14.6

13.4

9.3

(57.2)(195.1)

–

–

157.3

Return on assets (ROA) (%)

4.1

4.5

6.3

6.7

6.6

2.2

(14.9)(19.1)(1.4)

4.2

Dividend payout ratio (%)

–

–

13.4

28.3

37.9

–

–

–

–

–

6,758

7,339

7,846

7,695

7,690

7,600

7,043

5,082

4,356

3,991

Units under management

Number of employees

22.6

22.2

31.7

31.2

51.3

55.7

55.0

87.3

67.0

79.5

Rate of paid leave usage (%)

31.7

33.0

70.1

72.2

74.1

76.8

84.3

90.5

81.7

81.2

Rate of workforce turnover (%)

11.3

9.1

8.0

7.1

8.1

8.6

13.1

30.7

16.0

11.1

Data
Data Section
SectionAcquisition rate of childcare leave (%)*With changes in accounting policies at subsidiaries in the Leasing Business, consolidated accounts reported in the past have been retroactively revised, and historical data for past fiscal years shown here reflects these
retroactive revisions(Notes)1. EBITDA = Operating profit + depreciation
2. In this report, net income attributable to shareholders of the parent is stated as net income.
3. Return on equity (ROE) = Net income/average ownership equity during the fiscal year x 100
4. Return on assets (ROA) = Recurring profit/average total assets during the fiscal year x 100
5. Regarding the Hotels, Resort & Other Businesses, we added the results of the Hotels & Resort Business to the results of Others for the period from fiscal year 2010 to fiscal year 2015, and then we changed thesegments in fiscal year 2017, so we retroactively changed the figures for fiscal year 2017 to the new segment (Hotels, Resort & Other Businesses).
6. Development Business was integrated to Leasing Business from fiscal year 2020.

68

Leopalace21 Integrated Report 2023

Leopalace21 Integrated Report 2023

69

Data Section

Financial Highlights

JPY

Cover
Cover Story
Story

Equity ratio

Net sales

406.4 billion

14.5 ％

Up 2.0 % y/y

Up 13.8 points from the end of the previous year（％）

(JPY billion)

483.2

470.8

511.5

520.4

530.8

40.4

505.2

47.0

47.2

35.9
408.9

398.3

406.4

Management Message

433.5

44.2

27.7
14.5
0.7

0.7
-5.3

FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

As with net sales, the equity ratio of the Company in recent years peaked at 47.2% in fiscal year 2017. However, it began dropping due todeclining business earnings and stood at a negative 5.3% at the end of fiscal year 2020. Thereafter, we have been further strengthening
financial base while regaining earnings. Equity ratio in fiscal year 2022 has recovered to 14.5%.

Operating profit (loss)

Cash and deposits balanceJPY

9.8 billion

JPY

Up 456.7％ y/y

Up 17.7 % from the end of the previous year
Corporate Governance(JPY billion)

53.5 billion

Strategy

The Company shifted to a business model centered on the Leasing Business after the collapse of Lehman Brothers. Net sales trended upwards
until peaking in fiscal year 2017. Thereafter, profits continued to fall due to declining occupancy rates resulting from the construction defects
problem revealed in 2018. However, our sales strategies targeting corporate contracts, the progress of response to the construction defects
problem, and other measures have been recovering the occupancy rates. As of fiscal year 2022, the Company has increased profit for the firsttime in five fiscal years.

(JPY billion)

21.0
13.4

22.8

104.4

22.9

106.5

88.0

14.8

74.7

84.5

75.2

845
60.5

9.8
7.3

54.8

53.5
45.5

1.7

FY2013

FY2014FY2015FY2016FY2017FY2018

-36.4

-29.1

FY2019FY2020

FY2021

FY202270

Leopalace21 Integrated Report 2023

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022
Data
Data Section
SectionThe shift to a business model centered on the Leasing Business in the fiscal year 2011 continually increased profit. However, the construction
defects problem revealed in the fiscal year 2019 and the effects of the COVID-19 pandemic from the fiscal year 2020 resulted in operating
losses for two consecutive fiscal years. The success of thorough cost reductions brought the Company back to profitability in the fiscal year
2021 for the first time in three fiscal years. This fiscal year is the second consecutive fiscal year generating positive operating profit.

FY2013The balance of cash and deposits continued to increase until the end of March 2018 due to increases in operating cash flows. However, it had
been trending downwards since fiscal year 2018 mainly due to negative operating cash flows. The Company increased the balance of cash anddeposits in fiscal year 2022 for the first time in five fiscal years primarily by improving occupancy rates and controlling cost.

Leopalace21 Integrated Report 2023

71

Data Section

Non-Financial Highlights

No. of employees on childcare leave

157.3 ％

79.5 ％（%）

Cover
Cover Story
Story

ROE

Up 12.5 points y/y

（%）

157.3

87.3
79.5

19.7

13.3

14.6

13.4

9.3

FY2015FY2016FY2017FY201931.2-195.1FY2014FY201851.3-57.2

FY201355.0

FY2018

Management Message

67.0
55.7

FY2019FY2020

FY2021

FY20222.0

1.9

FY2013

FY2014

1.5
FY2015FY2016FY2017

FY2020

FY2021

FY2022

We have been promoting work-style reforms led by the government of Japan that include raising awareness and changing the work styles ofboth men and women. We have been working to improve our working environment by giving due consideration to achieving work-life balanceby reducing overtime work, increasing the percentage of people taking paid leave, and by creating a framework that makes it easier to takechildcare leave. As a result, we had a high 79.5% childcare leave acquisition rate in fiscal year 2022.

EBITDA (Operating profit + depreciation)

Rate of workforce turnoverJPY

16.4 billion

11.1 ％Up 47.8 % y/y

Down 4.9 points y/y（%）

Corporate Governance(JPY billion)

Strategy

ROE hovered around 10% from fiscal year 2014, as a result of steadily expanding earnings primarily in the Leasing Business. ROE fell into aslump due to a dramatic decrease in profit from fiscal year 2018 as a result of construction defects. The Company has a positive ROE as of the
fiscal year 2022 thanks to a recovery in business performance, including two consecutive fiscal years of positive operating profit.

34.6
30.7

32.2

30.7

22.5

20.3

19.4

16.4
16.0

11.1
11.3

FY2013

FY2014FY2015FY2016FY2017FY2018

-24.3

-18.7

FY2019FY2020

FY2021

FY202272

Leopalace21 Integrated Report 2023

9.1

8.0

7.1

8.1

8.6

FY2014FY2015FY2016FY2017FY2018FY201911.1

FY2020

FY2021

FY2022
Data
Data Section
Section

EBITDA, the sum of operating profit and depreciation, had been on an increasing trend up until fiscal year 2017, due to increased operating
profit and active capital investments in new businesses. EBITDA in fiscal years 2019 and 2020 were negative mainly due to a decrease inoperating profit in fiscal year 2018. EBITDA turned to positive because of positive operating profit in fiscal year 2021 for the first time in two
fiscal years and has stayed positive for the second consecutive years this fiscal year.

FY2013

13.1

The Company considers human resources as an important management capital, and as such we have established an employee training systemand other measures that allow all employees to demonstrate their own diverse individuality and abilities. In addition, we are underway inbuilding a more comfortable work-friendly environment in order to tackle the issue of long working hours, an issue that is particular to thisindustry. The turnover rate temporarily increased in fiscal year 2020 due to implementing the voluntary retirement, but the rate dropped greatly
in the next fiscal year. As of fiscal year 2022, the turnover rate fell below where it was in fiscal year 2019.

Leopalace21 Integrated Report 2023

73

Financial Section

Management’s Discussion and Analysis
Operating Profit by Segment
JPY million
FY 2021

FY 2022

ChangeLeasing Business

7,719

16,8879,167

Elderly Care Business(789)(1,208)(418)

Other Businesses(1,668)(2,706)(1,038)Adjustments(3,486)(3,092)

394

Total

1,774

9,879

8,104

Change in Operating Profit

3. Analysis of Consolidated Financial Position

2. Analysis of Business Results

Net Sales by Segment
JPY million
FY 2022

Change383,043

391,438

8,394

Elderly Care Business

14,258

13,941(317)

Other Businesses

1,064

1,069

5

398,366

406,449

8,082

Total

74

Leopalace21 Integrated Report 2023

Forward-looking statements in the discussion below are based on
judgments by the Company as of the time of preparing this integrated
report.
(1) Management Policies
The Group sets the management policies for fiscal year 2023 consistingof the three components to strengthen its governance: Strengthen
profitability and stabilize financial base, promote structural reform andDX, and carry on repairing construction defects.
Strengthen profitability and stabilize financial baseby improving occupancy rate
We aim to increase ownership equity by strengthening profitability, andconsider improving shareholder returns and capital efficiency by refining
the occupancy rate boosting measures exercised since FY2022 toachieve the occupancy rate plan.

Data
Data Section
Section(2) Earnings
Operating profit was JPY 9,879 million, an increase of 456.7% year on
year, due to the reduction of cost of sales and SG&A expenses.
Recurring profit was JPY 6,526 million, which was compared with JPY(2,151) million for the previous fiscal year, mainly due to interest
payment of JPY 4,370 million.
Net income attributable to shareholders of the parent was JPY
19,810 million, an increase of 67.1% year on year, caused by therecording of income taxes-deferred (profit) of JPY 18,538 million due tobuildup of deferred tax assets despite the recording of loss related to
repairs of JPY 2,544 million due to soaring material prices and anincrease in the ratio of subcontracted repair work to eliminate obvious
defects by the end of 2024.

4. Management Policies, Key Issues to Address,
and Business Environment

Corporate Governance

FY 2021

Leasing Business(3) Segment Information
Leasing BusinessIn the Leasing Business, the Company aims at stable occupancy rateand higher profitability by implementing various measures: providing
abundant value-added services such as web-based integrated services
which allows a customer complete all steps from searching anapartment to signing a rental contract without the need of face-to-facemeeting; promotion of the transition to smart apartments which enables
electrical appliances and door locks to be operated by smartphone;further developing corporate customers; working with real estateagents; adopting sales strategies catering for the customer and region
specific requirements; and unit rent increase.
The occupancy rate at the end of March 2023 was 88.83% (up 3.73
points from the end of the previous fiscal year) with average occupancy
rate of 84.66% (up 3.44 points year on year). The demand recovery forapartment rooms mainly from corporate customers due to the slowdown
impact of COVID-19 pandemic and various occupancy rate boostingmeasures produced positive results. The number of units undermanagement at the end of March 2023 was 561 thousand (down 6,000
from the end of the previous fiscal year). The number of direct leasing
sales offices at the end of March 2023 was 109 (no change from theend of the previous fiscal year).
As a result, net sales came to JPY 391,438 million, up 2.2% year on
year due to the higher unit rent and improved occupancy rates.
Operating profit was increased to JPY 16,887 million, up 118.8% year
on year, mainly due to the effect of increased profitability resulting fromsuccessful contractual adjustment of master-lease rent with theapartment owners.

(1) Position of Assets, Liabilities, and Net assets
Assets at the end of March 31, 2023 increased by JPY 21,117 million
from the end of the previous fiscal year to JPY 166,548 million. This was
mainly attributable to an increase of JPY 8,037 million in cash anddeposits, and JPY 18,556 million in deferred tax assets, despite areduction of JPY 937 million in machinery equipment and vehicles (net),
reduction of JPY 2,209 in others (net) in property, plant, and equipment,
and increase of JPY 1,635 million in allowance for doubtful accounts.
Total liabilities decreased by JPY 770 million from the end of theprevious fiscal year to JPY 133,625 million. This was mainly attributed
to the decrease of following items; JPY 852 million in accrued income
taxes, JPY 1,583 million in provision for fulfillment of guarantees, JPY
503 million in provision for losses related to repairs, and decrease of
JPY 2,042 million in provision for apartment vacancy loss, despite
increase of JPY 2,699 million in accounts payable – other and increaseof JPY 1,648 million in advances received and long-term advances
received.
Net assets were JPY 32,922 million, an increase of JPY 21,888
million from the end of the previous fiscal year. This was mainly due toan increase of JPY 3,371 million in foreign currency translation
adjustments and the recording of JPY 19,810 million in net income
attributable to shareholders of the parent, on the other hand, decreasein non-controlling interests of JPY 1,086 million was recorded due topayment of treasury stock purchase price and dividend payment tonon-controlling shareholders of a consolidated subsidiary. The equity
ratio improved by 13.8 points from the end of the previous fiscal year to
14.5%.

Strategy(1) Net Sales
Net sales for the consolidated fiscal year 2022 amounted to JPY
406,449 million (up 2.0% year on year). The increase was mainly causedby the higher unit rents and improved occupancy rates.

Other Businesses
Net sales of the Other Businesses including resort facilities in Guamand others, were JPY 1,069 million (up 0.5% year on year due to weaker
JPY) and operating loss was JPY 2,706 million (an increased loss of JPY
1,038 million year on year) mainly due to continuous a significant
decline in occupancy rates in Guam.

(2) Cash Flow Position
Cash flows from operating activities was a net inflow of JPY 10,545
million, which was compared with a net outflow of JPY 4,460 million in
the previous fiscal year. This was mainly due to a recording of JPY 2,847
million in income before taxes and other adjustments, JPY 6,570 million
in depreciation, JPY 2,544 million in loss related to repairs, and increaseof JPY 1,680 million in advances received, whereas JPY 2,042 million
for the reduction of provision for apartment vacancy loss, JPY 4,371
million in interest paid, and JPY 3,337 million in payment related to
repairs were recorded.
Cash flows from investing activities were a net inflow of JPY 906
million, an increase of JPY 20 million in net inflow year on year. Thiswas mainly due to proceeds from collection of loans receivable of JPY
700 million and proceeds from withdrawal of time deposits (net) of JPY
800 million, while there was an outflow of JPY 711 million from sales ofinvestments in subsidiaries resulting from change in scope of
consolidation.
Cash flows from financing activities were a net outflow of JPY 2,819
million, a decrease of JPY 3,067 million in net outflow year on year. Thiswas mainly due to JPY 741 million of expenditure in repayment offinance lease obligations, JPY 990 million of expenditure in payment forpurchased treasury stock by a consolidated subsidiary, and JPY 972
million of expenditure in payment of dividends to a non-controllingshareholder.
As a result, cash and cash equivalents at the end of the fiscal year
ended March 2023 became JPY 52,860 million, increased by JPY 8,837
million from the end of the previous fiscal year.

Management Message

While restrictions on activities associated with the COVID-19 pandemic
have eased and economic activities have normalized, the outlook for theJapan’s economy remained uncertain due to soaring energy prices andraw material prices and other factors.
The new housing starts of leased units increased for two years in arow (up 5.0% year on year). In order to secure a stable occupancy rates
in the rental housing market where the number of vacant houses
continues to rise due to declining population, falling birthrate and aging
population, the Company believes it is important to focus on serving still
growing single-person households, to implement sales strategies thatmatch regional and customer characteristics, to maintain and enhancethe value of apartments through proper maintenance, and to provide
highly convenient tenant services through the promotion of DX
solutions.
Under these circumstances, Leopalace21 Group (the “Group”) has
been continuing structural reforms which was disclosed in June 2020,
concentrating management resources on the core Leasing Business andthoroughly reviewing and reducing all costs, the Group has worked tostabilize the financial base and continuously improve profitability.

Elderly Care Business
The Company has been cutting the operational cost by continuous
efficiency improvement for the Elderly Care Business. Net sales during
fiscal year 2022 were JPY 13,941 million (down 2.2% year on year), andoperating loss was JPY 1,208 million (an increased loss of JPY 418
million year on year) due to a decrease in the number of users for
elderly care services concerning about the infection risk of COVID-19.
The number of facilities was 87 as of the end of fiscal year 2022.

Cover
Cover Story
Story

1. Operating Environment

Leopalace21 Integrated Report 2023

75

(i) Transfer or withdraw from non-core unprofitable businesses
We have made stable progress in transferring or withdrawing from
non-core and unprofitable business since fiscal year 2020 and willcontinue to progress the transfer and liquidation of subsidiaries
related to the International Business.

76

Leopalace21 Integrated Report 2023

Data
Data Section
Section(ii) Work out an effective human resources strategy
We disclosed the human capital management in June 2023 in orderto enhance corporate value and achieve sustainable growth over the
medium to long term. The six themes for promoting human resources
strategies were elected, with the aim of further revitalizing theindividuals and the organization, and of establishing the supporting
corporate culture.

Corporate Governance

Promote structural reform and DX
We continue constant structural reforms and utilize digital technology to
improve customer convenience and operational efficiency.

(2) Key Issues to Address(i) Structural reforms
The Group has been continuing structural reforms which wasdisclosed in June 2020, concentrating management resources on thecore Leasing Business and thoroughly reviewing and reducing all
costs, the Group has worked to stabilize the financial base andcontinuously improve profitability.
Leopalace21 (Thailand) CO., LTD. was excluded from the scope of
consolidation in the first quarter of the current consolidated fiscal
year due to its decreased importance, but its liquidation wascompleted in the fourth quarter of the current consolidated fiscal
year and it is no longer a specified subsidiary of the Company.
In the second quarter of the consolidated fiscal year, Morizo Co.,
Ltd. was excluded from the scope of consolidation due to the sale ofall shares of Morizo, which had been a specified subsidiary. The
Company also implemented an absorption-type company split inwhich the rights and obligations relating to 40 facilities, excluding
22 fee-based nursing homes, of the Elderly Care Business is
succeeded to by the Company’s wholly owned subsidiary, Azu Life
Care, Inc.
In the fourth quarter of the current consolidated fiscal year,
LEOPALACE PHILIPPINES INC. was excluded from the scope of
consolidation due to the sale of all shares of LEOPALACEPHILIPPINES INC. which was a specified subsidiary of the Company.

(3) Business Environment
Regarding population trends, a factor affecting the businessenvironment as a mid to long-term point of view, the total number ofhouseholds in Japan is expected to decline after the peak of 2023 but
the number of single-person households tends to decline at a smaller
rate than the number of family households, which will be directly
affected by the declining birthrate, aging population, and population
decline. Therefore, we expect that there will be a certain level ofdemand for the apartments we supply for single-person households, andthat a rapid downtrend will not occur. Net domestic migration to thethree major metro regions (inflows exceed outflows) will continue.
Although the new housing starts of leased units increased for thesecond consecutive year (up 5.0% year on year), the number of vacanthouses continues to increase in the rental housing market.
Under these circumstances, we need to turnaround the business byacquiring the additional corporate demand for providing their employeeswith company-provided housing or dormitories. We will keep realizing
our purpose as a provider of social infrastructure for housing amounting
to 560,000 managed units.

Strategy(iii) Strengthen ownership equity
We aim to strengthen ownership equity by improving profitability
and move toward shareholder returns such as dividend resumption
and share buybacks.

Carry on repairing construction defects
In response to the problem of construction defects that have occurred in
the Company’s constructed apartments, we will make steady progress inrepairing the construction defects while working to restore the financial
foundation with the aim of completely eliminating obvious defects by
2024. We have completed the repairs for about 60,700 units by the endof August 2023 and continue another 5,500 units by the end of
December 2023 to eliminate all obvious defects by the end of 2024.
Moreover, keeping recurrence prevention at the top ofmanagement’s priorities, we are continuing initiatives to avoid similar
incidents taking place by concentrating on the following policies:
Fundamental Reform of the Corporate Culture, Restructuring of the
System for Compliance and Risk Management, and Revision of theConstruction Business Framework. In addition to providing progressstatus reports on repair work, we present the information on the
Company’s website.
https://www.leopalace21.co.jp/info/en/(ii) The administrative recommendation
The Group received the administrative recommendation regarding
improper disposal procedure for home appliances in the Leasing
Business by the Ministry of the Environment dated March 23, 2023.
We deeply apologize to our shareholders, business partners, and allother stakeholders for any concern and inconvenience caused by thismatter. We began a new processing procedure for discarded home
appliances to ensure proper operation, as well as to prevent
recurrence and strengthen and enhance the compliance system.
We remain committed to make further efforts in improving
efficiency, strengthening management structure and implementing
sales initiatives in order to further enhance the corporate value.

Management Message(ii) Controlling cost Structure
Although we have been cutting costs drastically since theconstruction defect problem, we have started to focus on optimizing
costs to actively invest in property maintenance, system for DX
promotion, and human resource, which are necessary for sustainablegrowth.

(iii) Steadily build up smart lock installation
We began installing smart locks in managed apartments in June
2022 and have exceeded 150,000 units by September 2023, theindustry’s largest number of units installed by a single company. We
remain committed to utilizing digital technology and pursuing further
innovations in the business, in order to contribute to an ideal society
where everyone can enjoy a high quality of life and to provide a
housing platform with safe and comfortable life in rented
apartments.

Cover
Cover Story
Story(i) Increasing occupancy rate at March-end to 91.40%
We aim to achieve our targets by implementing strategies forincreasing occupancy rate for each of the following definedcustomer categories:
Corporate customers:
Deploy top sales representation, boost
sales structure, and implement
strategies tailored to the individualcompany to increase market share andincrease the room usage balance.
Individual customers:
Strengthen sales to real estate agents.
Foreign national customers: Expand business by working withstaffing agencies for foreign nationals
and support agencies.
Capture demand from foreign national
students by utilizing IFCs and reinforce
relationship with real estate agents,
companies that support foreign
national human resources and service
providers which cater for students’needs.

Leopalace21 Integrated Report 2023

77

Financial Section

Consolidated Balance Sheet
Leopalace21 Corporation and consolidated subsidiaries

2023

Notes

USD thousand (Note 1)

2023

2022

ASSETS

USD thousand (Note 1)

2023

2022

2023

7

2,549

2,552

19,091Notes

LIABILITIES AND NET ASSETS

Current assets:

Current liabilities:
53,56045,523401,115

Accounts payable

Trade receivables

7

8,121

8,618

60,822

Accounts payable for completed projects

7

34

427

258

Accounts receivable for completed projects

7

432

443

3,240

Current portion of long-term debt

13

59

53

443

3, 13

273

693

159
3

775

Securities
Real estate for sale3, 7, 8, 13

Payment for construction in progress
Raw materials and supplies

Lease obligations

7, 13

1,155

1,992

8,655

2,049

Accounts payable – other

7, 12

12,673

9,123

94,911213

1,192

Accrued income taxes

451

1,304

3,383

405

5,809

Advances received

3, 12

34,13431,733

255,632
1,081

200

Prepaid expenses

1,320

1,634

9,887

Customer advances for projects in progress

Other accounts receivable

710

730

5,318

Provision for warranty obligations on completed projects

Others

4,425

3,954

33,142

Provision for fulfillment of guarantees

Allowance for doubtful accounts

3, 7, 12

Total current assets

Buildings and structures

3, 13, 16, 17, 18

Net
3, 10, 13, 16, 17

Accumulated depreciation
Net
Land
Leased assets

3, 12

Others

3,860

3,732

28,911

Total current liabilities

61,72459,542462,252

30,35930,429227,358

60,82956,173455,548

Non-current liabilities:(37,321)(312,018)

Long-term debt

7, 13
7, 13

275

569

2,063

3

6,399

7,151

47,923

19,16518,852

143,530

Lease obligations

21,071

20,794

157,801

Long-term advances received(14,474)(13,260)(108,400)

Lease/guarantee deposits received

7,548

7,382

56,531

6,596

7,534

49,401

Provision for losses related to repairs

11,53016,14586,34731,22031,269233,808

Deferred tax liabilities

12

13

11

98

3, 10, 24

21,921

26,461

164,168

Provision for apartment vacancy loss

3, 12

3,590

1,414

26,886

Liability for retirement benefit

3, 14

11,578Construction in progress

119

92

893

16,96018,483127,016(14,243)(13,557)(106,671)

9,714

9,525

72,749Others

2,470

2,222

185,504

Total non-current liabilities

71,901

74,854

538,464

Total liabilities

133,625

134,396

1,000,717

15, 23, 28, 32

100

100

748

32

136,240

136,345

1,020,296(116,006)(135,749)(868,764)

(205)

(302)

(1,540)20,128392

150,740

(97)

(39)

(731)

Net assets

Net

2,716

4,926

20,344

Shareholders’ equity:

Total property, plant and equipment

61,36464,652459,557

Common stock:
Authorized: 500,000,000 shares in 2023 and 2022
Issued: 329,389,515 shares in 2023 and 2022

Intangible fixed assets:
Goodwill3, 26

Others13, 18

Total intangible fixed assets

6

Capital surplus

2,612

3,130

19,563

2,612

3,136

19,563

Investments and other assets:
40,321Retained earnings
Treasury stock: 335,221 shares in 2023 and493,610 shares in 2022

23, 32

Total shareholders’ equity

5,384

5,180

7

510

1,126

3,825

Accumulated other comprehensive income:

7, 11

249

267

1,866

Net unrealized gains (losses) on other securities

7, 8, 13

422

577

3,167

Foreign currency translation adjustments

3

4,117

746

30,83625,152

6,596

188,368

Remeasurements of defined benefit plans

14

(32)

(31)

(247)

5,877

4,647

44,0183,986

675

29,8583, 7, 12

(1,778)(914)(13,318)

Share subscription rights

284

357

2,132

35,81917,480268,249

Non-controlling interests

8,522

9,608

63,825

Total accumulated other comprehensive income

Total non-current assets

99,79685,269747,370

Total net assets

32,922

11,034

246,556

Total assets

166,548

145,430

1,247,273

Total liabilities and net assets

166,548

145,430

1,247,273

The accompanying notes are an integral part of these statements.

Leopalace21 Integrated Report 2023

Data
Data Section
Section3
3, 12

OthersCorporate Governance

10, 16, 18

Accumulated depreciation

Total investments and other assets

4,218(41,663)(152,590)

Allowance for doubtful accounts

45,3303

Provision for apartment vacancy loss (short-term)

1,976Long-term prepaid expenses

1,941

Provision for losses related to repairs (short-term)(24,485)

Deferred tax assets

6,053(22,674)
499,903

1,546

Long-term loans

4,520(2,255)(20,375)

Bad debts

2,187

10, 13, 16, 17

Accumulated depreciation

Investment securities

603

60,161Net
Others31

3, 12Strategy

Machinery, equipment, and vehicles

7(3,027)3, 10, 16, 17, 18, 26

Accumulated depreciation

268

4

66,752

Non-current assets:
Property, plant and equipment:

144
3

Management Message

3, 6, 7, 13

Cash and deposits

78

JPY million

Cover
Cover Story
Story

JPY million

The accompanying notes are an integral part of these statements.

Leopalace21 Integrated Report 2023

79

Financial Section

Financial Section

Consolidated Statement of Income

Consolidated Statement of Comprehensive Income

Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2023 and 2022

Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2023 and 2022

31

26

45
3,754
44
181
830
2,544
153

31

2,847
702
(17,835)(18,538)
20,682872
19,810

69
9,693
1,444
2,956
4,401
12,650795
11,854

2023

2022

2023

20,682

12,650154,893

(58)

(38)

(439)

Other comprehensive income (loss)
Net unrealized gains (losses) on other securities
Foreign currency translation adjustments

3

3,377

2,623

25,296

Remeasurements of defined benefit plans

14

(1)

111

(11)

(3)

1

(26)

Total

3,314

2,697

24,818Comprehensive income (loss)

23,996

15,348

179,712Comprehensive income (loss) attributable to shareholders of theparent23,121

14,550173,159

875

798

6,553

Share of other comprehensive income of entities accounted for using equity
methodComprehensive income (loss) attributable to non-controllinginterests
The accompanying notes are an integral part of these statements.

JPY million

USD thousand (Note 1)

2023

2022

2023

(58)

(38)

(439)

(58)

(38)

(439)

(58)

(38)

(439)

3,377

2,623

25,296

3,377

2,623

25,296

3,377

2,623

25,296

Amount accrued in the fiscal year

(42)

57

(320)

Rearrangements and adjustments

23

53

177

111

(142)

Notes

Net unrealized gains (losses) on other securities
Amount accrued in the fiscal year
Rearrangements and adjustments
Amount before tax effects adjustments
Tax effects
Net unrealized gains (losses) on other securities
Foreign currency translation adjustments
Amount accrued in the fiscal year

3

Amount before tax effects adjustments
Tax effects
Foreign currency translation adjustments
Remeasurements of defined benefit plans

28,119
336
1,358
6,220
19,055
1,149

Amount before tax effects adjustments(19)

Tax effects

17

Remeasurements of defined benefit plans

(1)

130
111

(11)

Share of other comprehensive income of entities accounted for using
equity method
Amount accrued in the fiscal year
Total

(3)

1

(26)

3,314

2,697

24,818

Data
Data Section
Section

3

45
118

Notes

Net income (loss)

USD thousand (Note 1)

Rearrangements and adjustments
1,441
48,879563
220
342

11,959234

JPY million

Corporate Governance

242
354
4,754
4,474
162
117
2,151
12,080120
02023
3,043,880
2,931,463
112,416
2,644,824
2,517,278
127,545
399,056
325,069
20,031
17,8306,887
2,176
125,344
8,329
15,497
7,226
32,41389,331
73,986
9,067
1,701
542
972
2,896
107
116
2,730
34,17432,733Strategy

192
6,526
75
29

USD thousand (Note 1)

2022
398,366
383,043
15,322352,289
336,339
15,95046,07744,302
2,718
2,328
2,202
302
14,960
1,263
2,517
2,079
4,530
11,399
1,774
827
34
65
129
1

Management Message

Net sales
Sales from Leasing Business
Sales from Other Businesses
Cost of sales
Cost of sales from Leasing Business
Cost of sales from Other Businesses
Gross profit
Selling, general and administrative expenses
Advertising expenses
Sales commission expense
Transfer to allowance for bad debt
Directors’ bonuses
Salary and bonuses
Retirement benefit cost
Rent expense
Depreciation and amortization
Taxes and public charges
OthersOperating profit (loss)
Non-operating income
Interest income
Dividend income
Gains on valuation of investment securities
Foreign exchange gains
Share of profit of entities accounted for using equity method
Employment adjustment subsidy
OthersNon-operating expenses
Interest expenses
Share of loss of entities accounted for using equity method
OthersRecurring profit (loss)
Extraordinary income
Gain on sale of property, plant and equipment
Gain on sale of investment securities
Gain on liquidation of subsidiaries
Reversal of provision for losses related to repairs
Extraordinary losses
Loss on sale of property, plant and equipment
Loss on retirement of property, plant and equipment
Impairment loss
Loss related to repairs
Loss on sale of shares in subsidiaries
Loss on closure of offices
Income (loss) before income taxes
Income taxes
Current
Deferred
Net income (loss)
Net income (loss) attributable to non-controlling interests
Net income (loss) attributable to shareholders of the parent

2023
406,449
391,438
15,011
353,163
336,132
17,03153,28543,406
2,674
2,380
919
290
16,737
1,112
2,069
965
4,328
11,928
9,879
1,210
227
72
129
386
14
15
364
4,563
4,370

Cover
Cover Story
Story

JPY million
Notes

21,322
5,264(133,570)(138,835)
154,893
6,531
148,361

The accompanying notes are an integral part of these statements.

80

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81

Financial Section

Financial Section

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2023 and 2022

Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2023 and 2022

CapitalsurplusRetainedearnings

Treasurystock

81,282

55,174(142,586)(344)(4,963)81,282

55,174(81,182)

81,182(147,550)(0)(1,877)(142)(2,019)388

Noncontrollinginterests

Total net
assets11,383

3,277(4,963)(344)(11,438)(4,963)(0)(1,877)(142)(2,019)388

11,383(1,686)

2023

2022

2023

Income (loss) before income taxes

2,847

9,693

21,322

Depreciation and amortization

6,570

9,352

49,203

118

6,220

Notes

Impairment loss

10, 21, 26(10)

11,854
41

(53)
(1)

(81,182)
100

81,170136,345

11,800(135,749)

41
(302)

11,854

Increase (decrease) in allowance for doubtful accounts(11,959)
2,544

136,345(135,749)

(302)

3

7

53

84

2,355

635

30

30

Increase (decrease) in liability for retirement benefits

3

201

(14)

1,512

(53)

Increase (decrease) in provision for apartment vacancy loss

3

(2,042)(6,629)(15,298)(1)(1)

11,830
392

(38)

2,623

111

2,695

(30)

(1,774)

890

(38)
(39)

2,623
746

111
(31)

2,695
675

(30)
357

(1,774)
9,608

12,721
11,034

Interest and dividend income

(299)

(100)

(2,243)

Interest expense

4,370

4,474

32,733(386)(1)(2,896)

(14)

162

(107)

Foreign exchange loss (gain)

392

(39)

746

(31)

675

357

9,608

11,0343

Equity in losses (earnings) of affiliated companies using equity method
Loss (gain) on sale of property, plant and equipment
18

Loss (gain) on valuation of investment securities

15

(120)

115

181

45

1,358

(129)

(129)

(972)

Loss (gain) on sale of investment securities

(0)
153

Loss (gain) on sale of shares in subsidiaries
(0)
97

(24)
(67)
(80)

19,81019,810

(0)
72

(0)
72

(67)

(67)

(80)

(80)

Loss (gain) on liquidation of subsidiaries(45)

Decrease (increase) in accounts receivable

498

Decrease (increase) in real estate for sale in process
Decrease (increase) in payment for construction in progress
Decrease (increase) in long-term prepaid expenses
Increase (decrease) in accounts payable

100

(105)
136,240

19,743(116,006)

97
(205)

748

748

Capitalsurplus1,021,085

Retainedearnings(1,016,624)

1,021,085 (1,016,624)

Treasurystock(2,268)(2,268)

2,940

3,731

508

2

3,805

24

25

183

327

535

2,456

873

(1,029)

6,538

(58)

3,371

(1)

3,311

(72)

(1,086)

2,152

Increase (decrease) in customer advances for projects in progress

191

(272)

1,436

(58)
(97)

3,371
4,117

(1)
(32)

3,311
3,986

(72)
284

(1,086)
8,522

21,87732,922

Increase (decrease) in advances received

1,680(2,188)

12,587

Increase (decrease) in guarantee deposits received

246

701

1,842

USD thousand (Note 1)
Accumulated other comprehensive income
Total
Share
Net unrealized
Foreign
Remeasurements accumulated subscription
Total
gains (losses)
currencyof defined
othershareholders’rightson othertranslation
benefit plans comprehensive
equitysecurities
adjustments
income

2,940

(342)
(523)

(292)

(292)

5,588

5,588

(235)

(235)

5,060

5,060

2,676

2,676

Noncontrollinginterests

Total net
assetsIncrease (decrease) in accrued consumption taxes

88

121

666

Others181(2,023)

1,359

19,5092,603

146,106

298

105

2,233

Interest paid

(4,371)(4,455)(32,737)

Payment related to repairs paid

(3,337)(2,172)(24,994)

SubtotalInterest and dividends received

71,96071,96082,63882,638

Income taxes paid

(1,553)(541)(11,633)

Net cash provided by operating activities

10,545(4,460)78,975

Corporate GovernanceCommonstock

19,735
20,1283

1,149
Strategy

19,81019,055

7(53)

Loss on retirement of property, plant and equipment
100

830

Reversal of provision for losses related to repairs
Amortization of goodwill

11,854

USD thousand (Note 1)

Cash flows from operating activities:

Loss related to repairs

Shareholders’ equity

The accompanying notes are an integral part of these statements.

148,361
(183)

728

(501)

(605)

748

(788)
1,020,296

147,859(868,764)

728(1,540)148,361545

148,361
(0)
545

(501)

(501)

(605)

(605)

147,799
150,740

(439)
(439)
(731)

25,24825,24830,836

(11)
(11)
(247)

24,797
24,79729,858

(543)
(543)
2,132

(8,135)(8,135)63,825

Data
Data Section
SectionBalance as of March 31, 2022
Cumulative effect due to changein accounting policy
Balance at the previous year-end
reflecting the change inaccounting policy
Issuance of new shares
Capital reduction
Net income (loss) attributable
to shareholders of the parent
Disposal of treasury stock
Acquisition of treasury stock
Change in the scope of
consolidation
Change in share of parent fromtransactions with noncontrolling interests
Net change of items other thanshareholders’ equity
Total change during period
Balance as of March 31, 2023

(6,474)

JPY million

Management Message

Balance as of March 31, 2021
Cumulative effect due to changein accounting policy
Balance at the previous year-end
reflecting the change inaccounting policy
Issuance of new shares
Capital reduction
Net income (loss) attributable
to shareholders of the parent
Disposal of treasury stock
Change in the scope of
consolidation
Change in share of parent fromtransactions with
non-controlling interests
Net change of items other thanshareholders’ equity
Total change during period
Balance as of March 31, 2022
Cumulative effect due to changein accounting policy
Balance at the previous year-end
reflecting the change inaccounting policy
Issuance of new shares
Capital reduction
Net income (loss) attributable
to shareholders of the parent
Acquisition of treasury stock
Disposal of treasury stock
Change in the scope of
consolidation
Change in share of parent fromtransactions with
non-controlling interests
Net change of items other thanshareholders’ equity
Total change during period
Balance as of March 31, 2023

Commonstock

JPY million
Accumulated other comprehensive income
Total
Share
Net unrealized
Foreign
Remeasurements accumulated Subscription
Total
gains (losses)
currencyof defined
othershareholders’rightson othertranslation
benefit plans comprehensive
equitysecurities
adjustments
incomeCover
Cover Story
Story

Shareholders’ equity

16,118
163,917
246,556

The accompanying notes are an integral part of these statements.

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83

Financial Section

Notes to Consolidated Financial Statements
Leopalace21 Corporation and consolidated subsidiaries
For the years ended March 31, 2023 and 2022

2023

Notes

USD thousand (Note 1)

2022

2023

Cash flows from investing activities:
Payment for purchase of property, plant and equipment

(377)

(705)

(2,825)

Proceeds from sale of property, plant and equipment

513

1,458

3,842

(233)

(781)

(1,747)

(229)

(313)

(1,715)

Proceeds from sale of investment securities

182

1,180

1,366

Payments for purchase of stock of subsidiaries and associated companies

(5)

(37)

Proceeds for sale of stock of subsidiaries and associated companies

225

1,687

Proceeds from liquidation of subsidiaries

63

473

Payments for sale of shares in subsidiaries resulting in change in scope of
consolidation(711)(5,329)Payment for loans

(24)

(31)

Proceeds from collection of loans

700

73

Payments for deposit of time deposits(700)

Proceeds from withdrawal of time deposits

1,500

(182)
5,245
(5,242)

17

11,233

(10)

18

886

6,788

Repayment of long-term debt

(115)

(75)

(864)

Repayment of finance lease obligations(741)(3,239)(5,554)

Payment for acquisition of treasury stock(0)(1,400)(7,414)

Net cash provided by (used in) investing activities
Cash flows from financing activities:(990)

Payment for purchase of treasury stock by a consolidated subsidiary

2. Going Concern Assumption

Payment for acquisition of shares in subsidiaries not resulting in change inscope of consolidation(0)

Payment of dividends to non-controlling shareholders
Proceeds from exercise of stock options
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents

There are no issues applicable to the going concern assumption.

(972)(1,171)(7,280)001(2,819)(5,886)(21,112)

318

220

2,388

8,951

(9,240)67,04044,02353,346329,689

(114)

(82)

(857)

52,86044,023395,873

Decrease in cash and cash equivalents on exclusion from consolidation
Cash and cash equivalents at end of year
The accompanying notes are an integral part of these statements.

6

3. Summary of Significant Accounting Policies(1) Consolidation
Names of significant subsidiaries (13 in total)
Leopalace Leasing Corporation
Plaza Guarantee Co., Ltd.
Leopalace Power Corporation
Leopalace Energy Corporation
ASUKA SSI
Leopalace21 Business Consulting (Shanghai) Co., Ltd.
Leopalace21 Singapore Pte. Ltd.
Azu Life Care Co., Ltd.
Leopalace Guam Corporation
Leopalace Smile Co., Ltd.

84

Leopalace21 Integrated Report 2023

(3) Inventories
Real estate for sale and real estate for sale in process are primarily
stated at cost (presented in net book value less write-down when
profitability declines) determined by the specific identification method.
Costs on construction contracts in progress are primarily stated atcost determined by the specific identification method.
Raw materials and supplies are primarily stated at cost (presented in
net book value less write-down when profitability declines) determinedby the last purchase price method.

Leopalace21 Integrated Report 2023

Data
Data Section
SectionMorizou Co., Ltd and LEOPALACE21 PHILIPPINES INC. have been
excluded from the scope of consolidation in the consolidated fiscal year
ended March 2023 because the Company transferred all the shares of
its holding.
Leopalace (Thailand) CO., LTD. has been excluded from the scope of
consolidation in the consolidated fiscal year ended March 2023 because
it was liquidated.
Leopalace21 (Cambodia) Co., Ltd. has been excluded from the scopeof consolidation in the consolidated fiscal year ended March 2023 dueto the decrease in materiality.

(2) Cash and deposits or cash equivalents
For the purpose of the statement of cash flows, the Company considers
all highly liquid investments with insignificant risk of change in value
and maturities of generally three months or less as cash and deposits.
These include cash on hand, demand deposits at banks and highly liquid
short-term investments with negligible risk of fluctuation in value andmaturities of less than three months. Cash equivalents, on the other
hand, is defined as those including maturities of greater than threemonths.

Corporate Governance

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year

Strategy2906

Others

The accompanying consolidated financial statements of Leopalace21
Corporation (“the Company”) have been prepared in accordance withthe provisions of Financial Instruments and Exchange Act of Japan, its
related accounting regulations and in conformity with accounting
principles generally accepted in Japan, which are different in certain
respects, as to application and disclosure requirements fromInternational Financial Reporting Standards.
The accompanying consolidated financial statements have beenreformatted and translated into English (with certain expandeddisclosure) from the consolidated financial statements of the Company
prepared in accordance with accounting principles generally accepted inJapan and filed with the Financial Services Agency as required by the
Financial Instruments and Exchange Act of Japan.
The translation of the Japanese yen amounts into U.S. dollars is
prepared solely for the convenience of readers outside Japan, using theprevailing exchange rate at March 31, 2023, which was JPY 133.53 to
USD 1.00. Such translation should not be construed as a representationthat the Japanese yen amounts have been, could have been, or could in
the future be, converted into U.S. dollars at this or any other rate ofexchange. Certain amounts in the previous year’s financial statements
have been reclassified to conform to the current fiscal year’s
presentation.
Figures are rounded down to the nearest JPY 1,000,000 or USD
1,000.

The accompanying consolidated financial statements as of March
31, 2023 include the accounts of the Company and its 13 (18 as ofMarch 31, 2022) subsidiaries and three associated companies Ancora
Residential Fund LP, PT TEGUH BINA KARYA, and Leopalace Green
Energy Corporation in equity method (together, “the Companies”).
The Company established Leopalace Green Energy Corporation in
the fiscal year ended March 2023. The Company holds the shares in it
and include it in the companies where the Company applies the equity
method for consolidation. The Company transferred all of its shares in
Woori & Leo PMC Co., Ltd. and Learn JP Corp. in the fiscal year ended
March 2023 and excluded them in the companies where the Company
applies the equity method for consolidation.
For companies accounted for by the equity method of which fiscal
year closing dates are different from the consolidated balance sheet
date, the respective financial statements of the companies were used
for consolidation.
The Company holds the shares in TRUMAN HOLDINGS LIMITED andfive other companies but did not include them in the companies where
the Company applies the equity method for consolidation. The total
assets, sales, net income (loss) and retained earnings both on an equity
method basis and other items do not make material impact on the
consolidated financial statements.
The balance sheet dates of Leopalace Guam Corporation and otherfive subsidiaries are all the same, being December 31. For the
consolidated entities whose fiscal year ends different from that of theCompany but within 3 months, their financial results are used in the
preparation of consolidated financial statements. When significant
transactions occur to those subsidiaries between their fiscal year ends
and the Company’s fiscal year end, those transactions are necessarily
adjusted to consolidate.

Management Message

Payment for purchase of intangible assets
Payment for purchase of investment securities

1. Basis of Presenting Consolidated Financial
Statements

Cover
Cover Story
Story

JPY million85

(8) Long-term prepaid expenses
Long-term prepaid expenses are amortized evenly over a period mainly
from 5 to 7 years for master lease rent and 5 years for non-deductible
consumption taxes on non-current assets

86

Leopalace21 Integrated Report 2023

JPY million

Provision for losses related
repairs (current liabilities)

USD thousand

2023

2022

2023

6,053

1,941

45,330(i) The amount stated in the fiscal year ended March 2023 and 2022
JPY million

2023

2022

USD thousand

2023

Provision for losses related
repairs (non-current liabilities)

11,53016,14586,347

Provision for apartment vacancy
loss (current liabilities)

Total

17,58318,086

131,678

Provision for apartment vacancy
loss (non-current liabilities)

3,590

1,414

26,886

Total

3,590

5,632

26,886(ii) Accounting estimates per item
The Company established the Emergency Headquarters forConstruction Defects and carried out all-building investigations
related to the announcement of parting wall defects in the attics inApril 2018 and other defects in May 2018, in February and May
2019. The Company has been repairing the defects which wereidentified at the investigations to make them to comply with therelated laws and regulations.
The Company provided the provision for losses related to repairs
based on the assumed amount in accordance with the actual defects
rate to be prepared for possible repair expenses and associatedexpenses for the apartment buildings constructed by the Company.
The Company has built the provision provided for repairing all thesignificant defects that the Company has recognized and there
would not be any further expenses which may incur in the future.

4,218(ii) Accounting estimates per item
To prepare for possible vacancy losses from the bulk leasing
contracts in the Leasing Business, provision for vacancy losses isprovided for the amount of losses expected to occur within areasonably estimable period, based on rents rented for eachindividual leased property and the expected future occupancy rate.
The specific calculation method started from identifying
apartments with the potential for future losses. The Company
compared the sum of revenues, which consists of rent income fromthe tenants and ancillary service income for each apartment
multiplied by the average projected future occupancy rate for theremaining period of the fixed-rent term of the master lease
contracts, and the sum of expenses, which consists of master lease
rent and leasing management costs. Then the Company multiplied
the negative balance for apartments for which sum of expenses(15) Provision for fulfillment of guarantees
In order to reserve for losses due to its rent obligation guarantees
business, the Company’s consolidated subsidiary, Plaza Guarantee Co.,
Ltd., records the amount of loss expected based on the rate of pastguarantee fulfillments.
(16) Revenues and costs of construction contracts
In recognizing construction revenues and costs of constructions inprocess, the percentage-of-completion method is applied to suchcontracts in which the outcome of the construction activity is deemedcertain by the end of the fiscal year, while the completed contract
method is applied to other constructions. Progress rate of construction
is estimated based on the method of the ratio of actual cost incurred tototal estimated cost.
(17) Advances received
With respect to advances received, such as rent, the Company reports
the portion corresponding to more than a year in “long-term advances
received” under “non-current liabilities,” and the portion corresponding
to a year or less in “advances received” under “current liabilities.” This
allows the Company to more clearly present the characteristics andactual transactions of the Company’s leasing business.
(18) Amortization method and period of goodwill
The Company has adopted a policy whereby goodwill is amortized on astraight-line basis over the period in which the economic benefits are
expected to be realized. However, if the amount is negligible, it isamortized at once when it is recognized.
(19) Income taxes
Income taxes comprise corporate, inhabitant and enterprise taxes.
The asset and liability approach is used to recognize deferred tax
assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts of assets andliabilities for financial reporting purposes and the amounts used forincome tax purposes.

Data
Data Section
Section(9) Stock issue expenses
Stock issue expenses are charged to funding costs when incurred.

(i) The amount stated in the fiscal year ended March 2023 and 2022

(13) Provision for apartment vacancy loss
Provision for vacancy loss on apartment units managed under master
lease agreements is calculated according to the projected loss that
could incur during a reasonably estimable period to prepare for the riskof increasing vacancies. It is based on estimated losses resulting fromcurrent rental income and expected future occupancy rates for eachrental property managed by the Leasing Business Division of theCompany and included in the cost of sale of the Leasing Business
Division.

(14) Provision for warranty obligations on completed projects
Provision for warranty obligations on completed projects is accrued toreserve for execution of warranty obligations under non-conformance
liability in the future. It is calculated using the percentage of the past
execution of warranty obligations on the completed projects.

Corporate Governance(7) Intangible fixed asset
Software for internal use is amortized on a straight-line basis over theestimated useful life of 5 years.

(12) Provision for losses related to repairs
In order to reserve for the losses related to repairs, an estimatedamount of provision is recorded based on the defect rate, etc.

The Company has been striving to calculate more reasonable andhighly accurate provision regarding repair costs and incidental costs
per unit considering some of the estimates presented by external
contractors and the change in the estimated unit price resulting fromdecreased rate of in-house repairs; and impact of reviewing therepair schedule.
In case of changes in conditions and assumptions based on
which the estimate was prepared, provision for losses related to
repairs may be changed in the consolidated financial statements forthe fiscal year ending March 2024.

exceeds sum of revenues by the number of months remaining in the
fixed-rent term of the master lease contracts.
The Company made projected future occupancy rate considering
the apartment’s surrounding conditions and room demand.
In case of changes in conditions and assumptions based on
which the estimate was prepared, provision for apartment vacancy
loss may be changed in the consolidated financial statements for the
fiscal year ending March 2024.

Strategy(6) Property, plant and equipment (except for leased assets)
Property, plant and equipment for rent of the Company and domestic
consolidated subsidiaries are stated at cost. Depreciation is computed
generally on the straight-line basis. The useful lives are principally from22 to 47 years for buildings and structures for rent.
Property, plant and equipment other than above of the Company anddomestic consolidated subsidiaries are stated at cost. Depreciation iscomputed generally by the declining-balance method. However,buildings (excluding facilities attached to buildings) obtained on or after
April 1, 1998, and facilities attached to buildings and structures
obtained on or after April 1, 2016, are depreciated by the straight-line
method. The useful lives are principally from 15 to 50 years for buildings
and structures, 17 years for machinery, equipment and vehicles, and 5
to 10 years for tools, furniture and fixtures.
Property, plant and equipment of the consolidated overseas
subsidiaries are depreciated by the straight-line method based on thelocal GAAP. The useful lives are principally from 20 to 40 years forbuildings and structures and from 3 to 5 years for tools, furniture andfixtures.

(11) Liability for retirement benefit
In conjunction with the calculation of retirement benefit obligations, themethod for attributing projected retirement benefits for the period up to
the current fiscal end is based on a straight-line basis.
Actuarial gains/losses, which are prorated according to the straightline method over a specified period (5 years) within the averageremaining service years of employees at the time of accrual, areamortized starting from the next fiscal year of the respective accruals.
Unrecognized actuarial gains/losses are posted after tax effects, as the
cumulative amount of adjustments attributed to accumulated othercomprehensive income in the net assets. Certain consolidated
subsidiaries have adopted a simplified method of calculation withliability for retirement benefits and retirement benefits expense. Under
this simplified method, retirement benefit obligation is deemed to beequal to the amount which would be required to pay if all eligible
employees voluntarily retire at the end of the fiscal year.

The Company employed the following methods.
a. Repair expenses
Sort out the repairs by the types of defects and repair method
and calculate the number of defective rooms based on thedefective rate as a result of the all-building investigations, whichis then multiplied by the actual unit cost or estimated unit cost.
b. Relocation expenses
Calculate the number of rooms which the Company manages,
which is then multiplied by the actual unit cost for relocation.

Management Message(5) Derivative financial instruments and hedge accounting
Accounting principles are fair value method. But there is no derivativetransaction with/without hedge accounting during the fiscal year ended
March 2023 and 2022.

(10) Allowance for doubtful accounts
The Companies maintain an allowance for doubtful accounts to reservefor potentially uncollectible receivables. A provision for general doubtfulreceivables is provided by applying a certain reserve percentage of thereceivables based on experience from past transactions. A specificallowance is recorded for the estimated amount to be uncollectible
based on the customers’ financial condition or other pertinent factors.

Cover
Cover Story
Story(4) Securities
Held-to-maturity debt securities are stated at amortized cost (straightline method).
Other securities with available fair values are stated at fair value atthe end of the fiscal year of each consolidated company. Other
securities without available fair values are stated at cost by the movingaverage method.
Unrealized gains or losses on these securities are reported, net ofincome taxes, as a separate component of net assets. Cost of securities
sold is computed using the moving-average method.
Investments in silent partnership are reported in the equity method,
based on the latest financial statements available as at the closing
dates stipulated by the respective partnership contracts.

(20) Leased assets
Leased assets are depreciated by the straight-line method over thelease-term of respective assets as their useful lives with no residual
value.

Leopalace21 Integrated Report 2023

87

(23) Interest capitalization
Leopalace Guam Corporation, a consolidated subsidiary, of whichinterest paid on borrowing for real estate development business for thedevelopment period capitalized it into acquisition cost of property, plantand equipment.
Capitalized interests included in carrying value of property, plant andequipment were JPY 385 million (USD 2,889 thousand) as of March 31,
2023.

Leopalace21 Integrated Report 2023

USD thousand

4. Changes in Accounting Policies

March 31, 2023

2023

2022

2023

(1) Application of Guidance on Accounting Standard for
Fair Value Measurement
The Company has adopted “Guidance on Accounting Standard for Fair
Value Measurement” (ASBJ Guidance No. 31, June 17, 2021,
hereinafter the “Guidance on Accounting Standard for Fair Value
Measurement”) from the beginning of the fiscal year ended March
2023, and has applied prospectively the new accounting policy
prescribed in the Accounting Standard for Fair Value Measurement inaccordance with the transitional treatment stipulated in Paragraph 27-2of the Guidance on Accounting Standard for Fair Value Measurement.
This change has no impact on the consolidated financial statements.

Receivables arising fromcontracts with customers(beginning balance)

8,618

7,930

64,541

Receivables arising fromcontracts with customers(ending balance)

8,121

8,618

60,822Contract assets (beginningbalance)

443

524

3,318

Contract assets (endingbalance)

432

443

3,240

Contract liabilities (beginningbalance)

39,153

41,613

293,217

Contract liabilities (endingbalance)

40,67839,153

304,637

5. Accounting Standard for Revenue Recognition(1) Information on the breakdown of revenues from contracts
with customers
Information on the breakdown of revenues from contracts withcustomers is presented in Notes (27. Segment Information).
(2) Basis for understanding revenue from contracts withcustomers
The Group recognizes revenue from contracts with customers based on
the following five-step approach.
Step 1: Identify the contracts with customers.
Step 2: Identify the performance obligations in the contracts.
Step 3: Calculate the transaction prices.
Step 4: Allocate the transaction prices to the performance obligations in
the contracts.
Step 5: Recognize revenue when the obligation is satisfied.
Information that provides a basis for understanding revenues andexpenses is presented in Notes (Basis of Presenting Consolidated
Financial Statements) 3. Summary of Significant Accounting Policies(25) Accounting Standard for Revenue Recognition (Basis for recording
significant revenues and expenses.)

USD thousand

2023

2022

2023

Equal or less than one year

302,235

289,104

2,263,429

More than one year

133,798

133,860

1,002,010

Total

436,034

422,965

3,265,440(Note) The table shows the remaining performance obligations
related to rent income, ancillary service income andmaintenance presented in Notes 26. Segment Information(3) Information Regarding Sales, Profits (Losses), Assets,
Liabilities, and other Items by Reportable Segment.

6. Cash and Cash Equivalents

In the consolidated financial statements, credits arising fromcontracts with customers are recorded in accounts receivable,
contract assets are recorded in accounts receivable for completed
projects; contract liabilities are recorded in advances received,
customer advances for projects in progress, and long-term advances
received.
Contract assets consist primarily of unbilled accounts receivable
related to revenues recognized based on the measurement of thestage of completion of construction contracts. Contract liabilities
consist primarily of rents for which performance obligations have notbeen satisfied as of the end of the fiscal year.
The amount of revenue recognized in the fiscal year ended
March 2022 that was included in the contract liability at the
beginning balance was JPY 32,509 million.
Contract liabilities decreased by JPY 2,460 million in the fiscal
year ended March 2022. This was mainly due to an increase in the
beginning balance as a result of the application of the revenue
recognition accounting standard, while there was a reversal of the
beginning balance due to the revenue recognition.
The amount of revenue recognized in the fiscal year ended
March 2023 that was included in the contract liability balance at the
beginning of the period was JPY 30,929 million (USD 231,629
thousand). In addition, contract liabilities increased by JPY 1,525
million (USD 11,420 thousand) in the fiscal year ended March 2023,
mainly due to an increase in advances received such as rent as aresult of higher occupancy rates in the Leasing Business.

(1) A reconciliation between cash and cash equivalents in the
consolidated balance sheet and consolidated statement ofcash flows are as follows:
JPY million

USD thousand

2023

2022

2023

Cash and deposits in the
consolidated balance sheet

53,56045,523401,115

Time deposits with original
maturities of more than threemonths(700)(1,500)(5,242)

Cash and cash equivalents inthe consolidated statement ofcash flows

52,86044,023395,873

7. Financial Instruments(1) The financial instruments and related disclosures(a) Policy for financial instruments
The Companies are mainly involved in raising funds (mostly bankborrowing and corporate bond issuance) needed for planned capital
investments excluding special cases. Temporary excess funds areinvested in highly secured financial assets, and short-term working
capital is raised by borrowing from the bank.
(b) Nature and extent of risks arising from financial instruments
Operating receivables and loans outstanding are exposed to credit
risk.
Foreign currency denominated debts and credits originated inconjunction with overseas business development are exposed to
exchange rate risk.
Securities and investment securities are mainly held-to-maturity
securities and shares of the companies with which the Company has
a business or capital alliance, and those securities are exposed tomarket risk and credit risk associated with the issuers.
Almost all electronically recorded obligations, accounts payable,accounts payable for completed projects which are operating
liabilities, and account payable-other are scheduled to be paid
within one year.

Leopalace21 Integrated Report 2023

Data
Data Section
Section88

JPY million

JPY million

March 31, 2023

Corporate Governance(25) Accounting Standard for Revenue Recognition
The Company has adopted the Accounting Standard for Revenue
Recognition (ASBJ Statement No. 29, issued on March 31, 2020,
hereinafter the "Accounting Standard for Revenue Recognition") andrelated Guidance. The Company recognizes revenues at the amount
expected to be received in exchange for the promised goods or services
when control of the promised goods or services is transferred to thecustomer.
The following is a summary of the main performance obligations in
the Company's and its consolidated subsidiaries' primary businesses
relating to the revenues from contracts with customers and a point intime or a period of time at or over which such performance obligations
are satisfied (a point in time or a period of time at or over whichrevenues are recognized).
In the Leasing Business, the Company primarily leases and manages
apartments. For these transactions, the performance obligation isdeemed to be performed when the contractual conditions are satisfied,and revenue is recognized at that time. Accordingly, key money, rent
discounts, monthly contract fees, and various service fees, etc., arerecognized as revenue on a pro-rata basis over the average period of
occupancy.

(a) Balance of contractual assets and liabilities(b) Transaction price allocated to remaining performanceobligations
The aggregate transaction price allocated to the remaining
performance obligations and the period over which revenue is
expected to be recognized are as follows.

Strategy(24) Earnings per share
Basic earnings per share of common stock is computed by net income
available to common shareholders divided by the weighted-average
number of common stock outstanding for the period.
Diluted earnings per share of common stock reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were converted or exercised into common stock or resulted in theissuance of common stock.

(3) Information about the relationship between contractual
obligations with customers and cash flows from suchcontracts, and the amount and timing of revenue expected tobe recognized in the fiscal year ended March 2024 or laterfrom contracts with customers that exist at the end of the
fiscal year ended March 2023

Management Message(22) Foreign currency financial statements
The assets and liabilities of consolidated overseas subsidiaries aretranslated into Japanese yen at the spot exchange rates as of eachbalance sheet date, and income and expenses are translated at the
average exchange rates of the fiscal year. Foreign currency translation
adjustments resulting from the translation of assets, liabilities and net
assets are reclassified into foreign currency translation adjustments andnon-controlling interests.

In addition, for LEONET video subscription fees the Company
recognizes revenue at the net amount received from customers lessamounts paid to suppliers. The Company considers that it is dealing
with a third-party service provider as an agent and it is the Company's
performance obligation to arrange for such service to be provided.
The consideration for transactions related to the Leasing Business isreceived in accordance with the terms of the contract and generally
prior to the satisfaction of performance obligations, and the amount ofconsideration does not include a significant financial component.

Cover
Cover Story
Story(21) Foreign currency transactions
All monetary receivables and payables denominated in foreign
currencies are translated into Japanese yen at the spot exchange rates
as of each balance sheet date. The foreign exchange gains and losses
from translation are recognized in the consolidated statement ofincome.

89

JPY million

Unlisted stocks

1,695

Shares in unconsolidated subsidiaries and affiliates

1,653

Investment in anonymous association

119

Total

3,468

(iii) Allowance for doubtful accounts provided individually for long-termloans and fixed operating claims is deducted.
(iv) As of March 31, 2023, long-term debt due within one year of JPY 59
million are included in long-term debt.

March 31, 2023

Carrying value

Fair value

Difference(1) Investment securities

1,915

1,915

(0)

(2) Long-term loans

510

Difference

14,347(0)(2) Long-term loans

3,825

Allowance for doubtful
accounts *(iii)

(842)

Net

2,983

3,141

157

(3) Bad debts

1,866

Allowance for doubtful
accounts *(iii)(1,866)

Net
17,331

17,488156(1) Long-term debt *(iv)227,802

221,575(6,226)(2) Lease obligations

10,71910,79879

238,521232,373(6,147)

Total

Total

Carrying value

Fair value

Difference(1) Securities and investment
securities

2,179

2,180

0

(2) Long-term loans

1,126

March 31, 2023

USD thousand

Unlisted stocks

12,697

Shares in unconsolidated subsidiaries and affiliates

12,382(iii) Allowance for doubtful accounts provided individually for long-termloans and fixed operating claims is deducted.
(iv) As of March 31, 2023, long-term debt due within one year of USD
443 thousand million are included in long-term debt.

(3) The scheduled redemption amounts of monetary claims and investment securities with maturity subsequent to fiscal year end
JPY million

(140)

Net

985

Cash and deposits

53,560(3) Bad debts

267

Trade receivables and accounts receivable for completed projects

8,121

(267)

Investment securities

March 31, 2023
908

(77)

Due within 1 year

Held-to-maturity debt securities (Government bonds)

Net
3,165

3,089

(76)

(1) Long-term debt *(iv)30,48329,682(800)(2) Lease obligations

2,562

2,575

12

33,04532,257

(787)

Total

25,973

Total

Allowance for doubtful
accounts *(iii)

Allowance for doubtful
accounts *(iii)893

Investment in anonymous association*Notes:(i) Cash is not stated, and deposits, accounts receivable, accounts
payable, accounts payable for completed projects and accounts
payable-other are not stated because they are settled in a shortperiod of time and their fair value approximates their book value.
(ii) The following financial instruments are not included in “(1)Securities and investment securities” because they do not havemarket prices. The carrying amounts of such financial instruments on
the consolidated balance sheets are as follows.

Due after 1 year
through 5 years

Due after 5 years
through 10 years

100

200

Due after 10 years

Other securities with maturities
36(1) Government bonds

824(2) Bonds (Corporate bonds)

852(3) Others
Long-term loans

19

50

8

249

Bad debts
Total

432

61,701

186

208

2,358

Due after 1 year
through 5 years

Due after 5 years
through 10 years

Due after 10 years

100

200

JPY million

March 31, 2022

Due within 1 year

Allowance for doubtful
accounts *(iii)

(112)

Net

398

(3) Bad debts

249

March 31, 2022

JPY million

Allowance for doubtful
accounts *(iii)(249)

Unlisted stocks

1,694

Held-to-maturity debt securities (Government bonds)

Shares in unconsolidated subsidiaries and affiliates

1,394

Other securities with maturities

Investment in anonymous association

111(1) Government bonds

Total

3,201

(2) Bonds (Corporate bonds)

824(3) Others

857

419

20

2,314

2,335

20

(1) Long-term debt *(iv)30,41829,586(831)(2) Lease obligations

1,431

1,441

10

31,84931,028

(820)

Total

Total

*Notes:(i) Cash is not stated, and deposits, accounts receivable, accounts
payable, accounts payable for completed projects and accounts

Leopalace21 Integrated Report 2023(iii) Allowance for doubtful accounts provided individually for long-termloans and fixed operating claims is deducted.
(iv) As of March 31, 2022, long-term debt due within one year of JPY 53
million are included in long-term debt.

Cash and deposits

45,523

Trade receivables and accounts receivable for completed projects

8,618

Securities and investment securities

Long-term loans

200

36

18

644

21

441
267

Bad debts
Total

Data
Data Section
SectionNet

90

Fair value

14,347

Corporate Governance

JPY million

Carrying value

JPY million

March 31, 2022

Total

(2) Fair value of financial instruments
The carrying value on the consolidated balance sheet and fair value offinancial instruments as of March 31, 2023 and 2022 as well as thedifferences between these values are described below. The table does
not include the financial instruments whose market prices do not exist.

March 31, 2023
(1) Investment securities*Notes:(i) Cash is not stated, and deposits, accounts receivable, accounts
payable, accounts payable for completed projects and accounts
payable-other are not stated because they are settled in a shortperiod of time and their fair value approximates their book value.
(ii) The following financial instruments are not included in “(1)Investment securities” because they do not have market prices. The
carrying amounts of such financial instruments on the consolidatedbalance sheets are as follows.

Strategy(d) Supplementary explanations on fair value of financial
instruments
Fair value of financial instruments whose quoted market price is notavailable is calculated based on a fluctuating factor, and the value
might differ if different assumptions are used.

March 31, 2023

USD thousand

Management Message(c) Risk management for financial instruments
Credit risk management for operating receivables and loans
outstanding follows the “Receivables management rules”. Whileeach business division manages the extension of credit to its
customers, and each division is also organized for early detection
and loss reduction of accounts where collection is doubtful due toworsening credit or similar problems.
Regarding securities and investment securities, the Company
periodically investigates and understands the share price and thefinancial condition of the share issuing organization. In addition, foritems other than held-to-maturity securities, the Company considers
the relationship with the trading partner companies and constantly
re-evaluates its holdings.
Trade payables and debts are exposed to liquidity risk, but thisrisk is monitored by various means such as the preparation of amonthly financial plan by each company in the Companies.

payable-other are not stated because they are settled in a shortperiod of time and their fair value approximates their book value.
(ii) The following financial instruments are not included in “(1)Investment securities” because they do not have market prices. The
carrying amounts of such financial instruments on the consolidatedbalance sheets are as follows.

Cover
Cover Story
Story

Loans payable are mainly for the purpose of raising funds
necessary for the repair works, and lease obligations related tofinance lease transactions are mainly for investment in facilities,
and the longest repayment date is 4 years and 9 months subsequent
to the fiscal year end.
As of end of the year ended March 2023, there was no balanceof derivative transactions.

54,360

744

257

2,389

Leopalace21 Integrated Report 2023

91

Due within 1 year

March 31, 2023

Due after 1 year
through 5 years

Due after 5 years
through 10 years

JPY million

Due after 10 years

March 31, 2023

Cash and deposits

401,115

Investment securities

Trade receivables and accounts receivable for completed projects

60,822Other securities

Investment securities

Government bonds, municipal bonds, etc.
748

Held-to-maturity debt securities (Government bonds)

1,497

6,172

(3) Others

6,382
144

Long-term loans

376

63

Bad debts
462,082

Total

1,394

1,561

March 31, 2022

1,866

Securities and investment securities

17,662Other securities
Government bonds, municipal bonds, etc.

JPY million
Due after
2 through 3 years

Due after
3 through 4 years

Due after
4 through 5 years

Long-term debt

59

80

30,080107

90

Lease obligations

1,155

235

31

5

2

Total

1,215

316

30,112113

92

Due after 5 years

778

800

800

1,579

1,615

Level 1

Level 2

Level 3

35

Total

35

Credits (corporate bonds)

806

806

Others

836

836

35

1,642

1,678

Level 1

Level 2Total

USD thousand

March 31, 2023

Level 3Total

Strategy

Due within 1 year

Due after
1 through 2 years

35
778

35

Total

JPY million

3,241(4) Scheduled repayment amounts of long-term debt and lease obligations subsequent to fiscal year end are as follows:

Level 3

Management Message

Total

Level 235

Others269(2) Bonds (Corporate bonds)

March 31, 2023

Level 1Credits (corporate bonds)

Other securities with maturities(1) Government bonds

Cover
Cover Story
Story(a) Financial instruments carried on the consolidated balance sheet at fair value

USD thousand

Investment securities
Other securities

JPY million

March 31, 2022
Long-term debt

Government bonds, municipal bonds, etc.

Due within 1 year

Due after
1 through 2 years

Due after
2 through 3 years

Due after
3 through 4 years

Due after
4 through 5 years

Due after 5 years

53

62

73

30,084

97

111

Lease obligations

1,992

465

77

26

0

Total

2,046

528

150

30,11097

268

Others
Total

268
5,829

Credits (corporate bonds)
268

5,829

5,997

5,997

11,826

12,095111(b) Financial instruments other than those recorded on the consolidated balance sheets at fair value

Due after
1 through 2 years

Due after
2 through 3 years

Due after
3 through 4 years

Due after
4 through 5 years

Long-term debt

443

605

225,274803

675

Held-to-maturity securities (Government bonds)

Lease obligations

8,655

1,763

238

44

15

Long-term loans

Total

9,099

2,369

225,512

848

690

Total

Due after 5 years

Leopalace21 Integrated Report 2023

Level 1

Level 2

Level 3

Total

Investment securities
300

300
419

419

419

720

Long-term debt

29,586

29,586

Lease obligations

1,441

1,441

Total

31,02831,028300

JPY million

March 31, 2022

Level 1

Level 2

Level 3

Total

Data
Data Section
Section(5) Matters concerning the breakdown of the fair value of financial instruments by level
The fair value of financial instruments is classified into the following
When multiple inputs that have a significant impact on thethree levels based on the observability and materiality of the inputs
calculation of fair value are used, fair value is classified to the level
used to calculate fair value.
with the lowest hierarchy in the calculation of fair value among theLevel 1 fair value: Fair value calculated based on quoted market prices
levels to which each of those inputs belongs.
for assets or liabilities for which such fair value iscalculated in an active market among the inputs used
to calculate observable fair value.
Level 2 fair value: Fair value calculated using inputs other than Level 1
inputs to the calculation of observable fair value
among the inputs used to calculate observable fairvalue.
Level 3 fair value: Fair value calculated using inputs related to thecalculation of unobservable fair value

92

March 31, 2023

Due within 1 year

March 31, 2023

Corporate Governance

JPY million

USD thousand

Securities and investment securities
Held-to-maturity securities (Government bonds)

502

502
908

908

908

1,410

Long-term debt

29,682

29,682

Lease obligations

2,575

2,575

Total

32,25732,257Long-term loans
Total

502

Leopalace21 Integrated Report 2023

93

March 31, 2023

Level 1

Level 2

JPY million
Level 3

Total

2,252

2,252
3,141

3,141

5,393

Long-term debt

221,575

221,575

Lease obligations

10,798

10,798

Total

232,373

232,373

Note:
Explanation of valuation methods used in the fair value measurement
and on inputs related to the fair value measurement;
Securities and investment securities
Government bonds are valued using quoted market prices. Since
government bonds are traded in active markets, their fair value isclassified as Level 1 fair value. On the other hand, bonds (corporate
bonds) and other (subordinated beneficiary rights) held by the Company
are classified as Level 2 fair value because they are traded infrequently
in the market and are not considered quoted prices in an active market.

Fair value

Difference

2,252

300

301

1

300

301

1

Long-term loans
The fair values of long-term loans are categorized by period for eachcredit risk under credit management. They are calculated using thediscounted present value method based on the interest rate obtained byadding a credit spread to the future cash flows and an appropriate index
such as the yield of government bonds. They are classified as Level 2
fair value.

200

200

(0)

Subtotal

200

200

(0)

Total

501

502

0

Securities whose fair value exceeds the consolidatedbalance sheet amount:
Government bonds
Corporate bonds
OthersSubtotal

Management Message

3,141

Long-term loans
Total

Consolidated balance
sheet amountMarch 31, 2022

Investment securities
Held-to-maturity securities (Government bonds)

Cover
Cover Story
Story

USD thousand

Securities whose fair value does not exceed the consolidatedbalance sheet amount:
Government bonds
Corporate bonds
Others

USD thousand
Consolidated balance
sheet amount

Fair value

Difference

749

756

7

749

756

7

1,503

1,496

(7)

Subtotal

1,503

1,496

(7)

Total

2,252

2,252

March 31, 2023
Securities whose fair value exceeds the consolidatedbalance sheet amount:
Government bonds

StrategyLong-term debt and lease obligations
The fair values of these items are determined using the discounted
present value method based on the sum of the principal and interest,
plus an interest rate that takes into account the remaining term of thedebt and credit risk. They are classified as Level 2 fair value.

Corporate bonds

8. Securities(1) On March 31, 2023 and 2022, information with respect to held-to-maturity debt securities for which market prices are available issummarized as follows:
JPY million

March 31, 2023

Consolidated balance
sheet amount

Fair value

Difference

Subtotal
Securities whose fair value does not exceed the consolidatedbalance sheet amount:
Government bonds
Corporate bonds

Securities whose fair value exceeds the consolidatedbalance sheet amount:

Others100

100

0Corporate bonds

Corporate Governance

Government bonds

OthersOthersSubtotal

100

100

0

200

199

(0)

Securities whose fair value does not exceed the consolidatedbalance sheet amount:
Government bonds
Corporate bonds
OthersSubtotal

200

199

(0)

Total

300

300

(0)
Data
Data Section
Section94

Leopalace21 Integrated Report 2023

Leopalace21 Integrated Report 2023

95

USD thousand
JPY million

March 31, 2023

Consolidated balance
sheet amountMarch 31, 2023
Acquisition cost

Difference

Securities whose consolidated balance sheet amount exceeds
their acquisition cost:

Consolidated balance
sheet amount

Acquisition cost

Difference

268

271

(3)

Securities whose consolidated balance sheet amount exceeds
their acquisition cost:
Bonds:
Government bonds

Government bonds

Corporate bonds

Corporate bonds

OthersOthersOthersSubtotal

Subtotal

Securities whose consolidated balance sheet amount does not exceed
their acquisition cost:

Securities whose consolidated balance sheet amount does not exceed
their acquisition cost:

Bonds:

Bonds:

Government bonds

35

36

(0)

Corporate bonds

778

824

(45)

Corporate bonds

5,829

6,172

(343)

Others

800

852

(51)

Others

5,997

6,382

(385)

Subtotal

1,615

1,712

(97)

Others

Total

1,615

1,712

(97)

Subtotal

12,095

12,826

(731)

Total

12,095

12,826

(731)

Note:
March 31, 2023
Unlisted shares of USD 12,697 thousand, shares in unconsolidated
subsidiary and associates of USD 12,382 thousand, and investments insilent partnership of USD 893 thousand, are not included in the othersecurities given above, because their market prices are not available.
The Company acquired the unlisted bonds (subordinate corporate bonds)

Strategy

and the subordinate beneficiary rights to loans and accounts receivablein trust, as a result of the securitization of non-recourse apartment loansthat financial institutions had loaned to clients as funds for paying
construction charges to the Company.

Government bonds

Management Message

Bonds:

Note:
March 31, 2023
Unlisted shares of JPY 1,695 million, shares in unconsolidated
subsidiary and associates of JPY 1,653 million, and investments insilent partnership of JPY 119 million, are not included in the othersecurities given above, because their market prices are not available.
The Company acquired the unlisted bonds (subordinate corporate bonds)

Cover
Cover Story
Story(2) Investment securities classified as other securities as of March 31, 2023 and 2022 are as follows:

and the subordinate beneficiary rights to loans and accounts receivablein trust, as a result of the securitization of non-recourse apartment loansthat financial institutions had loaned to clients as funds for paying
construction charges to the Company.

JPY million

March 31, 2022

Consolidated balance
sheet amount

Acquisition cost

Difference

Securities whose consolidated balance sheet amount exceeds
their acquisition cost:

Corporate Governance(3) Proceeds from sales of other securities and gain or loss on these sales for the years ended March 31, 2023 and 2022
are summarized as follows:
For the year ended March 31, 2023
None

Bonds:
Government bonds

For the year ended March 31, 2022

Corporate bonds

JPY million

OthersMarch 31, 2022

Subtotal

Stock

Securities whose consolidated balance sheet amount does not exceed
their acquisition cost:

0

60

0

OthersGovernment bonds

35

36

(0)

Corporate bonds

806

824

(17)

Others

836

857

(20)

Subtotal

1,678

1,717

(39)

Total

1,678

1,717

(39)

Leopalace21 Integrated Report 2023

60

Loss on sale in total

Total(4) Investment in non-consolidated subsidiaries and associates included in investment securities of the consolidated balance sheet
is as follows:
JPY million

Investment securities (stocks)

and the subordinate beneficiary rights to loans and accounts receivablein trust, as a result of the securitization of non-recourse apartment loansthat financial institutions had loaned to clients as funds for paying
construction charges to the Company.
.

Of which, investment in joint venture

Data
Data Section
Section96

Gain on sale in total

Bonds:

Bonds:

Note:
March 31, 2022
Unlisted shares of JPY 1,694 million, shares in unconsolidated
subsidiary and associates of JPY 1,394 million, and investments insilent partnership of JPY 111 million, are not included in the othersecurities given above, because their market prices are not available.
The Company acquired the unlisted bonds (subordinate corporate bonds)

Proceeds from sale

USD thousand

2023

2022

2023

1,653

1,394

12,3825

94

37

Leopalace21 Integrated Report 2023

97

CoverCover Story
Story

9. Derivative Transactions

March 31, 2022

(1) Derivative transaction not subjected to the application ofhedge accounting
For the year ended March 31, 2023
None(2) Derivative transaction subjected to the application ofhedge accounting
For the year ended March 31, 2023
None

Impairment loss
PurposeCategory

JPY million

Business-use assets and shared assets

Buildings and structures
Machinery, equipment and vehicles

For the year ended March 31, 2022
None

Location

For the year ended March 31, 2022
None

105

Morizou Co. Ltd.
(Toda City, Saitama Prefecture)0

Leased assets

0

Others (non-current assets)

0
7

Others (intangible fixed assets)

10. Main Properties(1) Breakdown of major property, plant and equipment
JPY million

Others (intangible fixed assets)

USD thousand

2023

2022

2023

Residential properties for rent

2,357

3,266

17,654

Head office and branches

23,60723,887

176,793

Leopalace Resort Manenggon Hills Guam

21,761

20,331

162,971

Leopalace Power (solar power systems)

6,107

6,932

45,737(2) Due to acceptance of national subsidies, the following reduction entry amount is deducted from the acquisition cost of relevant assets:
JPY million

USD thousand

2022

2023

Machinery, equipment, and vehicles

155

155

1,161

Tools, instruments, and fixtures (other in non-current assets)

44

44

336

(3) The Companies recognize impairment loss on the following asset groups for the years ended March 31, 2023 and 2022:
March 31, 2023

118

Total

The Companies recognized each property in domestic rental assets as aunit, and group the overseas assets by managerial accounting
segmentation. In addition, assets owned by some consolidated
subsidiaries are grouped on a company basis.
For the domestic business, which has been in a continuous operating

3

loss, the book values of business-use assets and shared assets werereduced to the recoverable amount, and the amount of the reduction
was recorded as impairment loss.
The recoverable amount of business-use assets and shared assets ismeasured according to the net selling price based on the value in use.

11. Bad Debts
Bad debts are claims as stipulated under Article 32, Paragraph 1, and Item 10 of the Regulation concerning Financial Statements. Bad debts on March 31,
2023 and 2022 consist of the following:
JPY million

USD thousand

2023

2022

2023

Bad debts

70

70

529

Others

178

196

1,336

Total

249

267

1,866

Strategy2023

Elderly Care Business Division(located in Fujimi City, Saitama Prefecture
and other places)

Management Message

Shared assets

Impairment loss
PurposeResort facilities

Category

Location
USD thousand

297

2,229

143

1,077

Machinery, equipment and vehicles

432

Others (non-current assets)

1

12

Buildings and structures

Territory of Guam, USA

Land

Property for lease (apartment)

Land

Nagoya City, Aichi Prefecture

63

477

Property for lease (condominium)

Buildings and structures

Kisarazu City, Chiba Prefecture

23

176

292

2,193

2

19

830

6,220

Land
Shared asset

Others (non-current assets)

Total

98

Leopalace21 Integrated Report 2023

an impairment loss. The recoverable amount of the resort facilities was
based on the appraisal value by a real estate appraiser, and therecoverable amount of the business assets was measured based on the
net realizable value.
For business in Japan that have continuously posted operating
losses, the book value of shared assets was reduced to the recoverable
amount, and the amount of the reduction was recorded as an
impairment loss. The recoverable amount of the shared assets wasmeasured by the net realizable value based on the use value.

Data
Data Section
Section

The Companies recognized each property in domestic rental assets as aunit, and group the overseas assets by managerial accounting
segmentation. In addition, assets owned by some consolidated
subsidiaries are grouped on a company basis.
In the consolidated fiscal year ended March 2023, the book value ofthe resort facilities, the business assets (one apartment building) whose
profitability significantly declined, and the business assets (onecondominium building) that was decided to be sold, was reduced to therecoverable amount, and the amount of such reduction was recorded asElderly Care Business Division(Kasukabe City, Saitama Prefecture,and other places)

Corporate Governance

JPY million

Leopalace21 Integrated Report 2023

99

CoverCover Story
Story

12. Income Taxes

JPY million(1) Significant components of deferred tax assets and liabilities as of March 31, 2023 and 2022 are as follows:
JPY million

2023

USD thousand

2023

2022

Deferred tax assets:

March 31, 2022

Due within 1 year

Due after
1 through 2 years

Due after
2 through 3 years

Due after
3 through 4 years

Due after
4 through 5 years

Due after 5 years

Total

Tax loss carryforwards *(iii)

677

844

1,158

826

1,416

54,95559,879Valuation allowance

(677)

(844)

(1,158)

(826)

(842)

(53,916)(58,266)

573

1,039

60,491

59,879453,016

Deferred tax asset

Impairment loss

7,121

6,072

53,335

Provision for losses related to repairs

6,081

6,256

45,547Retirement benefit liability

3,352

3,286

25,104

Allowance for doubtful accounts

1,464

877

10,964*Notes:(iii) Tax loss carryforwards are calculated by multiplying the statutory tax
rate.
(iv) Deferred tax assets of JPY 1,612 million are recorded for tax loss
carryforwards of JPY 59,879 million (the amount multiplied by theProvision for apartment vacancy loss

1,241

1,948

9,299

Advances received

856

833

Accrued bonuses

622

1,612 *(iv)statutory tax rate).The Company does not recognize a valuation
allowance for such tax loss carryforwards to the extent that it isdeemed recoverable based on projected future taxable income.

6,413

USD thousand

4,664

Due within 1 year

Due after
1 through 2 Years

Due after
2 through 3 years

Due after
3 through 4 years

Due after 4 through5 years

Due after 5 years

Total

Elimination of unrealized gain

366

408

2,747

March 31, 2023

Advances from customers

304

258

2,279

Tax loss carryforwards *(v)

7,059

9,716

6,648

6,497

3,967

419,128453,016

Provision for fulfillment of guarantees

208

756

1,564

Valuation allowance(7,059)(9,716)(6,648)(6,497)(3,967)(333,131)(367,019)

147

168

1,108

Excess amortization on software

131

190

982

Asset retirement obligations

111

115

834

*Notes:(v) Tax loss carryforwards are calculated by multiplying the statutory tax
rate.
(vi) Deferred tax assets of USD 85,996 thousand dollars are recorded fortax loss carryforwards of USD 453,016 thousand (the amount

85,99685,996 *(vi)multiplied by the statutory tax rate).The Company does not recognize
a valuation allowance for such tax loss carryforwards to the extent
that it is deemed recoverable based on projected future taxable
income.

Others

2,078

1,955

15,566

Sub total

84,581

83,008633,429

Valuation allowance for tax loss carryforwards *(ii)(49,008)(58,266)(367,019)

Valuation allowance for deductible temporary differences(10,418)(18,142)(78,021)

Less: valuation allowance *(i)(59,426)(76,408)(445,041)(2) Reconciliation of the differences between the normal effective statutory tax rate and the actual effective tax rate for the year
ended March 31, 2023 and 2022:

Total deferred tax assets

25,155

6,599

188,387

March 31, 2022
Effective statutory tax rate (Adjustment)

34.6%

34.6%

(15)

(14)

(118)

Impact of decrease in valuation allowances(550.3)(65.1)

Impact of exchange rate fluctuations on overseas consolidated subsidiaries(109.8)Fixed asset retirement expenses
Total deferred tax liabilities
Net deferred tax assets

(14)

(118)

6,584

188,269

assets and deferred tax liabilities in the fiscal year ended March 2022,
has been reclassified as “others” in the fiscal year ended March 2023.
*Notes:(i) The valuation allowance decreased by JPY 16,982 million (USD
127,180). The decrease is mainly due to a change in the Company’sclassification of entities for determining the recoverability ofdeferred tax assets.
(ii) Loss carryforwards for tax purposes and deferred tax assets carriedforward by due date.

2022

Difference in tax rates between consolidated subsidiaries

(5.1)

(2.8)

Entertainment expenses and other items not permanently deductible for income tax purposes

(0.6)

0.6

Equalization of residential taxes

5.5

1.7

Others(0.7)

0.5(626.4)(30.5)

Effective tax rate after application of tax effect accounting

Corporate Governance(Changes in presentation method)
Accounts payable - other in deferred tax assets, which was presented
as a separate item in the breakdown of deferred tax assets and deferred
tax liabilities in the fiscal year ended March 2022, are included in“others” in the fiscal year ended March 2023 because it became
immaterial in terms of amount. To reflect this change in presentation,
the notes related to tax effect accounting for the fiscal year ended
March 2022 have been reclassified.
As a result, JPY 55 million in accounts payable - other, which waspresented as deferred tax assets in the breakdown of deferred tax(15)
25,1392023

Strategy

Deposits received

Deferred tax asset

Deferred tax liabilities:

Management Message

Loss carried forward for tax purposes *(ii)(3) The amount stated in the fiscal year ended March 2023
JPY million

Deferred tax assets

USD thousand

2023

2022

2023

25,152

6,596

188,368

JPY million
Due after
1 through 2 years

Due after
2 through 3 years

Due after
3 through 4 years

Due after
4 through 5 years

Due after 5 years

Total

Tax loss carryforwards *(i)

942

1,297

887

867

529

55,96660,491

Valuation allowance(942)(1,297)

(887)

(867)

(529)

(44,482)(49,008)

11,483

11,483 *(ii)Deferred tax asset*Notes:(i) Tax loss carryforwards are calculated by multiplying the statutory tax
rate.
(ii) Deferred tax assets of JPY 11,483 million are recorded for tax loss
carryforwards of JPY 60,491 million (the amount multiplied by the100

Leopalace21 Integrated Report 2023

Data
Data Section
SectionDue within 1 year

March 31, 2023

statutory tax rate).The Company does not recognize a valuation
allowance for such tax loss carryforwards to the extent that it isdeemed recoverable based on projected future taxable income.

Leopalace21 Integrated Report 2023

101

(3) Assets pledged as collateral for short-term borrowings and long-term debt on March 31, 2023 and 2022 are as follows:
JPY million

2023

USD thousand

2022

2023

Cash and deposits

86

2

650

Real estate for sale

38

38

285

Others (current assets)

275

244

2,060

Buildings and structures

4,321

4,813

32,360

0

1

6

Land

24,13724,988

180,767

Others (intangible fixed assets)

1,096

1,052

8,210

Investment securities

2,231

2,261

16,713

Machinery, equipment, and vehicles

Others (investments and other assets)
Total

107

103

804

32,29533,604

241,860(4) Liabilities with collateral at March 31, 2023 and 2022 are as follows:
JPY million

2023(1) Short-term borrowings, long-term debt and lease obligations on March 31, 2023 and 2022 consist of the following:
JPY million

2022

2023

Current portion of long-term debt, with average interest rate of 9.90%

59

53

443

Current portion of lease obligations, with average interest rate of 2.74%

1,155

1,992

8,655

Long-term debt, due 2024 to 2027, with average interest rate of 14.45%

30,35930,429227,358

Long-term lease obligations, due 2024 to 2027, with average interest rate of 2.48%
Total

275

569

2,063

31,84933,045

238,521(2) The amounts of long-term debt and lease obligations (excluding their current portion) scheduled for repayment in five years fromfiscal year ended March 31, 2023 are as follows:(JPY million)
Due after 1 through 2 years

Due after 2 through 3 years

Due after 3 c 4 years

Due after 4 through 5 years

Long-term debt

80

30,080107

90

Lease obligations

235

31

5

2

(USD thousand)Due after 1 through 2 years

Due after 2 through 3 years

Due after 3 through 4 years

Due after 4 through 5 years

Long-term debt

605

225,274803

675

Lease obligations

1,763

238

44

15

Leopalace21 Integrated Report 2023

53

443

30,429227,358

Total

30,41830,483

227,802

Note:
Within the assets pledged as collateral, cash and deposits, others(current assets) and JPY 35 million (USD 268 thousand) in investment

securities are pledged as collateral to customers and other borrowing
parties and there are no liabilities with collateral.

(5) Securities and investment securities which have been deposited with the Legal Affairs Bureau on March 31, 2023 and 2022
are as follows:
JPY million

USD thousand

2023

2022

2023

Deposit for housing construction warranty

771

726

5,774

Advanced payment certificate in accordance with Payment Services Act

332

332

2,486

Deposit for operation stipulated in Building Lots and Buildings Transaction
Business Act

70

70

524

Deposit for business security under the Insurance Business Act

200

200

1,503

Deposit for housing defect warranty

105

214

792

Others2

14. Retirement Benefit Plans(1) Outline of retirement benefit plans
The Companies have an unfunded defined benefit pension plan and adefined contribution pension plan to provide for employees’ retirement
benefits. The defined benefit plan is a lump-sum retirement distribution
plan and the amounts of retirement benefits are provided mainly basedon accumulated points in reference to job level and length of service.
Also, retirement allowances may be paid with a premium for retired
employees.

Certain consolidated subsidiaries have adopted a simplified method
in calculating the liability for retirement benefits and retirement benefit
liabilities expense. Since the amount is immaterial, it is included infollowing notes based on the general rule.
Data
Data Section
Section102

59
30,359Corporate Governanceconsolidated balance sheet in the amount before deducting the interest
portion from total lease liabilities for certain consolidated subsidiaries,
and that such lease obligations are not included in the calculation of theaverage interest rate.

2023

Strategy2023

USD thousand

2022

Long-term debt

Current portion of long-term debt
USD thousand

Management Message

tax losses in previous fiscal years and in the fiscal year ended March
2023. Accordingly, deferred tax assets are recognized based on theestimated amount of taxable income before addition and deduction of
temporary differences for a reasonably estimable period of time, after
confirming the classification of companies in accordance with the
Guidance on Recoverability of Deferred Tax Assets (ASBJ Guidance No.
26).
Estimates of taxable income are based on future business plans, thekey assumptions being the number of rental contracts and contract unit
prices, which are estimated based on the assumption that the Company
can maintain a certain number of contracts and unit prices as the age ofthe managed properties increases.
Since the recoverability of deferred tax assets depends on estimatesof future taxable income, any change in the conditions or assumptions
on which these estimates are based may have a material effect on theamount of deferred tax assets in the consolidated financial statements
for the fiscal year ending March 2024.

13. Short-term Borrowings and Long-term Debt

Note:
The average interest rates above are calculated in weighted average interms of the fiscal year-end balance of the borrowings and debts.
Please note, however, that the current portion of lease obligations andlease obligations (net of the current portion) are recorded in the

Cover
Cover Story
Story(4) Information on significant accounting estimates for identified items
Deferred tax assets of JPY 22,061 million (USD 165,215 thousand) arerecorded for schedulable deductible temporary differences and tax loss
carryforwards, based on the Company’s estimate of taxable income
considering its future earning capacity to determine the recoverability ofsuch assets.
The Company’s business structure is now stable and profitable as aresult of continued drastic structural reforms, including an improvementin occupancy rates and reductions in fixed costs through the contractualadjustment of master-lease rent, which resulted in taxable income
before deducting tax loss carryforwards.
Although the Company has incurred material tax losses in previous
fiscal years, based on the stabilization of its earnings structure, theCompany has recognized deferred tax assets based on the estimatedamount of taxable income before additions and deductions of temporary
differences in future years, taking into consideration the causes of suchmaterial tax losses, its business plan, the progress in achieving its
business plan in previous fiscal years, and changes in taxable income or

Leopalace21 Integrated Report 2023

103

JPY million

USD thousand

2023

2022

2023

Beginning balance of retirement benefit obligations

9,525

9,650

71,336

Service cost

881

983

6,603

30

39

231

Actuarial gains and losses accrued

(42)

(56)

320

Retirement benefits paid

(730)

(1,092)(5,474)

Others(35)(1) Stock option expenses recorded relating to stock options:None(2) Gain recorded relating to unused and expired share subscription rights
None(3) Outline of stock options and activities are as follows:(a) Outline of stock options:2016 Stock Option

(267)

9,714

9,525

72,749(b) List of adjustments between the closing balances of retirement benefit obligations and pension assets and the liabilities and assets
related to the retirement benefit posted in the consolidated balance sheet are as follows:
JPY million

USD thousand

2023

2022

2023

Unfunded retirement benefit obligations

9,714

9,525

72,749Net amount of the liabilities and assets posted in the consolidated balance sheet

9,714

9,525

72,749Liability for retirement benefit

9,714

9,525

72,749Net amount of the liabilities and assets posted in the consolidated balance sheet

9,714

9,525

72,7492017 Stock Option

2018 Stock Option

Title and number of grantees

8 Directors (excluding outside
Directors) and 12 executive officersof Leopalace21 Corporation

8 Directors (excluding outside
Directors) and 15 executive officersof Leopalace21 Corporation, and 9
Directors of subsidiaries

8 Directors (excluding outside
Directors) and 16 executive officersof Leopalace21 Corporation, and 15
Directors of subsidiaries

Type and number of stock options*

Common stock: 252,700 shares

Common stock: 282,800 shares

Common stock: 348,000 shares

Grant dateAugust 18, 2016

September 14, 2017

September 14, 2018

Vesting conditions

Not applicable vesting conditions are specified

Vesting period

Not applicable period of service is specified

Exercise period

From August 19, 2016 to August 18,
2046

From September 15, 2017 to
September 14, 2047

Management Message

Interest cost

Closing balance of retirement benefit obligations

Cover
Cover Story
Story

15. Stock Options(2) Defined benefit pension plan(a) List of adjustments between the balances of retirement benefit obligations at the beginning and end of year are as follows:

From September 15, 2018 toSeptember 14, 2048

Note:
Reported by converting to the number of shares

JPY million

Strategy(b) Stock option transactions:
Number of stock options as of the fiscal year ended March 31, 2023 is reported by converting to the number of shares.

(c) Retirement benefit expenses and breakdown amounts are as follows:
USD thousand

Number of stock options:

2023

2022

2023

Service cost

881

983

6,603

Interest cost

30

39

231

Non-vested (number of shares)

Amortization of actuarial gain or loss

23

53

177

Previous fiscal year-end

Retirement benefit expenses related to the defined benefit plan

936

1,077

7,012

Granted2016 Stock Option

2017 Stock Option

2018 Stock Option

90,80099,700118,700

45,60052,20060,60045,20047,50058,1002016 Stock Option

2017 Stock Option

2018 Stock Option

1

1

1

Average stock price at exercise

282

282

282

Fair value at the grant date

547

528

332

Forfeited
Vested

JPY million

USD thousand

Outstanding
Vested (number of shares)

2023

2022

2023

Actuarial gains/losses

19

(111)

142

Previous fiscal year-end

Total

19

(111)

142

VestedExercised(e) Cumulative items posted as the remeasurements of defined benefit plans (before tax effects) are as follows:
JPY million

Forfeited
USD thousand

2023

2022

2023

Unrecognized actuarial gains/losses

50

31

377

Total

50

31

377

Outstanding

Price information (JPY):(f) Main calculation basis for actuarial assumptions are as follows (shown as weighted average):
2023

2022

0.03 – 0.64%

0.03 – 0.64%(3) Defined contribution pension plan
The necessary contribution amount for the defined contribution plan was JPY 357 million (USD 2,674 thousand) and JPY 368 million for the years ended
March 31, 2023 and 2022, respectively.

104

Leopalace21 Integrated Report 2023

Data
Data Section
SectionExercise price

Discount rate

Corporate Governance(d) Items posted as the remeasurements of defined benefit plans (before tax effects) are as follows:(4) Estimate method of fair value of stock options:None

Leopalace21 Integrated Report 2023

105

CoverCover Story
Story(5) Estimate method of the number of stock options vested:
Due to the difficulty in rationally estimating the actual number of stock options that will be forfeited in the future, the actual number of forfeited stock
options is adopted in the estimate.

March 31, 2023
JPY million
Balance as of April 1, 2022

Increase/(Decrease)

Balance as of March 31, 2023

Fair value as of March 31, 2023

6,920

(838)

6,082

8,811

16. Gain on Sale of Property, Plant and Equipment
Gain on sale of non-current assets for the years ended March 31, 2023 and 2022 are as follows:
JPY million

USD thousand

March 31, 2022
JPY million

2022

2023

Buildings and structures

27

82

209

Balance as of April 1, 2021

Increase/(Decrease)

Balance as of March 31, 2022

Fair value as of March 31, 2022

Machinery, equipment, and vehicles

1

9

8,092

(1,171)

6,920

9,754

Balance as of April 1, 2022

Increase/(Decrease)

Balance as of March 31, 2023

Fair value as of March 31, 2023

51,828(6,276)45,551

65,988Land

34

Others (Property, plant and equipment)

0

3

1

Total

29

120

220

March 31, 2023
USD thousand

17. Loss on Sale of Property, Plant and Equipment
Loss on sale of non-current assets for the years ended March 31, 2023 and 2022 are as follows:
JPY million

2023
Buildings and structures

Management Message

2023

USD thousand

2022

27

2023
205

2

19

Land

14

111

Total

44

336

501 million (USD 3,754 thousand) and JPY 1,178 million, andimpairment losses of JPY 394 million (USD 2,956 thousand) and JPY- million, respectively.
(iii) Fair values as of the end of the fiscal years are calculated by theCompany mainly based on “Real-estate appraisal standards”.

22. Asset Retirement Obligations

Strategy

Machinery, equipment, and vehicles

Note:(i) Book values recorded on the consolidated balance sheets are theamount after deducting accumulated depreciation and accumulated
impairment loss from acquisition cost.
(ii) For the years ended March 31, 2023 and 2022, the main decreases
are due to the sale of rental properties and rental buildings of JPY

Disclosure is omitted due to immateriality in the consolidated financial statements.

18. Loss on Retirement of Non-current Assets

23. Supplemental Information to the Statement of Changes in Equity

Loss on disposal of non-current assets for the years ended March 31, 2023 and 2022 are as follows:
JPY million

USD thousand

2022

2023

Buildings and structures

155

37

1,167

Others (Property, plant and equipment)

19

8

147

Others (Intangible fixed asset)

5

0

43

181

45

1,358

Total

19. Loss Related to Repairs
For the year ended March 2023, repair costs and incidental expenses are incurred as repair works to the defect properties constructed by the Company.
For the year ended March 2022
None

SharesType of shares

Increase

April 1, 2022

Shares issued Common stock *(i)329,389,515

Total

329,389,515

Decrease

March 31, 2023

329,389,515
329,389,515

Treasury stock Common stock *(ii)493,6101

158,400

335,211

Total

493,6101

158,400

335,211

Notes:(i) The increase of 1 share in the number of treasury stock of common
stock is due to the purchase of fractional unit shares.

Corporate Governance2023(1) Main changes in equity for the year ended March 31, 2023
(a) Shares issued and treasury stocks for the year ended March 31, 2023 are as follows:(ii) A decrease of 158,400 shares in treasury stock is due to exercise ofsubscription rights to shares.

(b) Stock acquisition rights (SAR) and treasury share acquisition rights for the year ended March 31, 2023 are as follows:

20. Reversal of Provision for Losses Related To Repairs
Type

For the fiscal year ended March 2023
Noneowners to change repairing methods; due to a decrease in the number
of apartment buildings because of reviewed defects judgment criteria
and demolition agreements with property owners.

106

Leopalace21 Integrated Report 2023

March 31, 2023

JPY million

USD thousand

159,748,700

159,748,700

215

1,615

–

69

517

159,748,700

159,748,700

284

2,132

Increase

Decrease(c) Matters concerning dividends for the year ended March 31, 2023 are as follows:
None

21. Rental Properties
The Companies possesses rental apartments in major cities and regions
throughout Japan. Some subsidiaries possess rental residences andrental buildings. For the years ended March 31, 2023 and 2022, income
arising from these rental properties are JPY 516 million (USD 3,865
thousand) and JPY 504 million, and impairment losses are JPY 394

April 1, 2022

Common stock

SARs as stock option
Total

Outstanding as of March 31, 2023

Data
Data Section
SectionFor the fiscal year ended March 2022, it was due to a reduction in unit
repair cost as a result of efforts to place batched orders, use in-housemanpower resources for repair works, and agreements with property

5th series SAR*

Number of shares issued upon exercise of SARs

Class of shares issued
upon exercise of SARs

million (USD 2,956 thousand) and JPY - million, respectively.
Furthermore, the changes in book value of rental properties during
the years ended March 31, 2023 and 2022, and the fair value as ofMarch 31, 2023 and 2022 and increase (decrease) during the period are
as follows:

There are no dividends with record dates in the consolidated fiscal year ended March 2023 but with effective dates in the following fiscal year.

Leopalace21 Integrated Report 2023

107

USD thousand

March 31, 2023

Future lease payments

Prepaid lease payments

Differences

Due within one year

1,642,832(1,635,898)

1,306(1,306)

1,641,526(1,634,592)

Due after one year

658,260(647,825)

838
(838)

657,422(646,986)

2,301,093(2,283,723)

2,144(2,144)

2,298,948(2,281,579)

SharesType of shares

Increase

April 1, 2021

Decrease

March 31, 2022

Shares issued Common stock

329,389,515

329,389,515

Total
Treasury stock Common stock*329,389,515

329,389,515

Total

Cover
Cover Story
Story(2) Main changes in equity for the year ended March 31, 2022(a) Shares issued and treasury stocks for the year ended March 31, 2022 are as follows:

68,000493,610

Total

561,61068,000493,610

Note:
Future minimum lease payments fixed under master lease agreements in leasing business are shown in parentheses.

Notes:
A decrease of 68 thousand shares in treasury stock is due to exercise of subscription rights to shares.

Management Message

561,61025. Guarantee Obligations(b) Stock acquisition rights (SAR) and treasury share acquisition rights for the year ended March 31, 2022 are as follows:
Type

April 1, 2021

5th series SAR*

Common stock

Increase

159,748,700

Decrease

March 31, 2022

JPY million

159,748,700

215
141

SARs as stock option
Total

159,748,700

159,748,700

JPY million

Outstanding as ofMarch 31, 2022

Number of shares issued upon exercise of SARs

Class of shares issued
upon exercise of SARs

Guaranteed obligations as of March 31, 2023 and 2022 are as follows:
USD thousand

2023

2022

2023

Guarantee obligations to financial institutions for customers
who have a home mortgage

240

392

1,801

Total

240

392

1,801

357

26. Segment Information(c) Matters concerning dividends for the year ended March 31, 2022 are as follows:
None

24. Leased assets(1) Finance lease transactions
The Company primarily leases furniture and electronic appliances to apartments in their leasing business. Leased assets are depreciated in the straightline method over the lease-term of respective assets.
(2) Operating lease transactions
Future minimum lease payments related to non-cancelable operating leases subsequent to March 31, 2023 and 2022 are as follows:
March 31, 2023

Future lease payments

Prepaid lease payments

Differences

Due within one year

219,367(218,441)

174
(174)

219,192(218,267)

Due after one year

87,897(86,504)

111
(111)

87,785(86,392)

Total

307,264(304,945)

286
(286)

306,978(304,659)

Corporate Governance

JPY million(2) Calculation Method for Sales, Profits or Losses, Assets,
Liabilities, and other Items by Reportable Segment
The accounting methods for reportable segments are in accordance toaccounting policies adopted in the preparation of consolidated financial
statements. The reportable segment profits (or losses) represent
operating profits (or losses). Inter-segment sales and transfers are
based on prevailing market prices.

Strategy

There were no dividends with record dates in the consolidated fiscal year ended March 2022 but with effective dates in the following fiscal year.

(1) Overview of Reportable Segments
The Company’s reportable segments are the components for which
separate financial information is available, and whose operating results
are reviewed regularly by the board of directors in order to determine
allocation of resources and assess segment performance.
The Company comprises three segments, the Leasing Business, theElderly Care Business and the Other Businesses.
The Leasing Business operations comprise the leasing andmanagement of apartment rooms and other properties, repair works,
broadband internet service, rent obligation guarantee, company
residence agency business, solar power generation business, andsmall-amount short-term insurance business, real estate brokerage andothers.
The Elderly Care Business operates elderly care facilities. The Other
Businesses operate resort facilities in Guam and others.

JPY million
Future lease payments

Prepaid lease payments

Differences

Due within one year

216,521(216,396)

332
(332)

216,189(216,064)

Due after one year

88,810(88,701)

282
(282)

88,528(88,419)

Total

305,332(305,098)

614
(614)

304,718(304,484)

Leopalace21 Integrated Report 2023

Data
Data Section
Section108

March 31, 2022

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109

USD thousand
Reportable segments

JPY million
March 31, 2023

Reportable segments
March 31, 2023

Leasing
Business

Elderly Care
Business

Other
Businesses

Segment total

Adjustments *(i)Consolidated
total *(ii)Sales

Leasing
Business

Elderly Care
Business

Other
Businesses

Segment total

Adjustments *(i)Consolidated
total *(ii)Sales
Rent income

2,242,899

2,242,899

2,242,899

Ancillary service income

335,224

335,224

335,224

299,494

299,494

299,494

Maintenance

267,812

267,812

267,812

Ancillary service income

44,762

44,762

44,762

Rental guarantee

32,16732,16732,167

Maintenance

35,76135,76135,761Company housing agency fee

6,270

6,270

6,270

Rental guarantee

4,295

4,295

4,295

Roof lease solar power generation

20,34920,34920,349Company housing agency fee

837

837

837

Construction subcontracting

9,155

9,155

9,155

Roof lease solar power generation

2,717

2,717

2,717

Other

2,857

104,404

8,012

115,274

115,274

Construction subcontracting

1,222

1,222

1,222

Sales from contracts with customer

2,916,736

104,404

8,012

3,029,153

3,029,153

Other

381

13,941

1,069

15,392

15,392

Furniture insurance

14,726

14,726

14,726

389,471

13,941

1,069

404,482

404,482

Other sales

14,726

14,726

14,726

Furniture insurance

1,966

1,966

1,966

Sales to customers

Other sales

1,966

1,966

1,966

Inter-segment sales and transfers

Sales to customers
Inter-segment sales and transfers

391,438

13,94151

1,069

406,449

263

314

(314)

406,449

2,931,463

104,404

382

8,012

3,043,880

1,975

2,358

3,043,880(2,358)

Total

2,931,846

104,404

9,987

3,046,238(2,358)3,043,880

Segment profit (loss)

126,466(9,051)(20,269)

97,145(23,158)

73,986

Segment assets

423,583

30,985

170,401

624,970

622,302

1,247,273

391,489

13,941

1,333

406,764(314)

406,449

Segment profit (loss)

16,887(1,208)(2,706)

12,971(3,092)

9,879

Other items

Segment assets

56,561

4,137

22,75383,452

83,096

166,548

Depreciation

34,393254

9,447

44,095

5,107

49,203

Depreciation

4,592

34

1,261

5,888

681

6,570

Increase in property, plant and equipment,
and intangible fixed assets

12,262

164

184

12,611

462

13,074

Increase in property, plant and equipment,
and intangible fixed assets

1,637

21

24

1,684

61

1,745

Notes:(i) Breakdown of adjustments is as follows:
Segment profit (loss)

JPY million

JPY million

Reportable segments
March 31, 2022

Leasing
Business

Elderly Care
Business

Other
Businesses

Segment total

Adjustments *(i)2023Inter-segment eliminations Corporate expenses*

201(3,293)153(3,639)1,505(24,664)

291,430

291,430

Total(3,092)(3,486)(23,158)

Ancillary service income

40,82740,82740,827

Maintenance

35,31535,31535,315

Rental guarantee

4,559

4,559

4,559

Company housing agency fee

788

788

788

Roof lease solar power generation

2,775

2,775

2,775

Construction subcontracting

3,145

3,145

3,145

Other

456

14,2581,064

15,77915,779379,299

14,258

1,064

394,621394,621

3,744

3,744

Sales from contracts with customer
Furniture insurance
Other sales
Inter-segment sales and transfers
Total

3,744
383,043

14,25876
383,120

14,258

3,744

3,744

1,064

398,366

398,366

249

326

(326)

1,314

398,692(326)

398,366

Segment profit (loss)

7,719

(789)

(1,668)5,261(3,486)

1,774

Segment assets

63,393

3,261

21,36988,02457,406

145,430

Depreciation

6,480

32

1,087

7,600

1,752

9,352

Increase in property, plant and equipment,
and intangible fixed assets

1,596

5

22

1,624

513

2,137

*Corporate expenses consist mainly of general administrative expenses for administrative departments that are not part of reportable segments.
Segment assets
JPY million

Surplus operating funds, long-term investment funds and assets not belonging
to any reportable segments

USD thousand

2023

2022

2023

83,096

57,406622,302

Increase in non-current assets and intangible assets
JPY million

Capital expenditures which do not belonging to any reportable segments

USD thousand

2023

2022

2023

61

513

462

Data
Data Section
Section

Sales to customers

3,744

Corporate Governance

2022

Sales
291,430

USD thousand

2023

Consolidated
total *(ii)Rent income

Strategy

Total

Other items

Management Message

Rent income

Sales from contracts with customer

Cover
Cover Story
Story(3) Information Regarding Sales, Profits (Losses), Assets, Liabilities, and other Items by Reportable Segment for the years ended
March 31, 2023 and 2022 are as follows:(ii) Segment profit (loss) is adjusted to operating profit (loss) on the consolidated statement of income.

Other items

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CoverCover Story
Story

Related information
1. Products and services
Information concerning products and services is omitted, since similar information is reported in “26. Segment Information”.

Information concerning goodwill amortization and unamortized balance by reportable segments
March 31, 2023
JPY million

2. Geographic area
(1) Sales
Information concerning sales by geographic area is omitted, since more than 90% of sales reported in the consolidated statement of income are
generated in Japan.

Leasing Business

Elderly Care Business

Other Businesses

Adjustments

7

Goodwill amortization

Consolidated total

7

Balance

March 31, 2022
(2) Plant, property, and equipment
March 31, 2023

Leasing Business
JPY million

Japan

Trust territory of U.S.A. Guam

Other

Total

39,572

21,76130

61,364

Elderly Care Business

Other Businesses

Adjustments

Management Message

JPY million
Consolidated total

Goodwill amortization

7

7

Balance66March 31, 2023
March 31, 2022

USD thousand
JPY million

Leasing Business

Elderly Care BusinessJapan

Trust territory of U.S.A. Guam

Other

Total

Goodwill amortization

44,212

20,331

108

64,652

Balance

Information concerning gain on negative goodwill by reportable segments
For the years ended March 31, 2023 and 2022.
None

March 31, 2023
USD thousand
Trust territory of U.S.A. Guam

Other

Total

296,359

162,971225

459,557

Adjustments

53

27. Revenues from Contracts with Customers

3. Major customers
Information concerning sales to major customers is omitted, since no sales to any particular customer exceed 10% of sales reported in the
consolidated statement of income.

Revenues are not separately presented for revenues derived from contracts with customers and other revenues.
The amount of revenue from contracts with customers is presented in “26. Segment information (3) Information Regarding Sales, Profits (Losses),
Assets, Liabilities, and other Items by Reportable Segment”.

28. Amounts per ShareInformation concerning impairment loss on non-current assets by reportable segments
March 31, 2023

The following tables set forth the net assets and net income per share of common stock for the years ended March 31, 2023 and 2022.
JPY

Impairment loss

Elderly Care Business

Other Businesses

380

2

447

Adjustments

Consolidated total

830

March 31, 2022
JPY million

Impairment loss

Leasing Business

Elderly Care Business

115

3

Other Businesses

Adjustments

Consolidated total

2023

2022

2023

Net assets

73.29

3.25

0.549

Net income (loss) attributable to shareholders of the parent

60.22

36.04

0.451

Diluted net income per share

48.20

32.23

0.361

Notes:
Basis of computation of basic and diluted net income per share for the year ended March 31, 2023 and 2022 are as follows:
JPY million

118

USD thousand

2023

2022

2023

19,81011,854

148,361

Net income (loss) per share

March 31, 2023
USD thousand

Net income (loss) attributable to shareholders of the parent
Amount not attributable to common stock

Leasing Business

Elderly Care Business

Other Businesses

2,848

19

3,352

Adjustments

Consolidated total

6,220

Net income (loss) attributable to common stock

19,81011,854

148,361

Basic weighted-average shares during the year (Thousands of shares)

328,995

328,8882,463

82,01438,927614

Data
Data Section
SectionImpairment loss

USD

Corporate Governance

JPY million
Leasing Business

Consolidated total

Strategy

Japan

Other Businesses

53

Diluted net income per share
Adjustments of net income (loss) attributable to shareholders of the parent
The number of increase in common stock (Thousands of shares)
Dilutive securities without dilutive effects and excluded from calculation ofdiluted net income per share.

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31. Other

For the year ended March 31, 2023
Transactions with officers and/or their close relatives of the Company’s important subsidiaries.

The following tables set forth quarterly information for the year ended March 31, 2023.

Attribute

Director

Name

Business or position

Masamichi Soma (1)Director of a
subsidiary

Percentage of shareownership (%)

Cumulative period
Transaction amount

Relation

Business
JPY million

Lease of land andbuilding (2)Leasing ofapartments

14

USD thousand

105

Notes:(i) Mr. Masamichi Soma is a Director of Azu Life Care Co., Ltd., a Company’s consolidated subsidiary.
(ii) The price for the lease of land and building is based on the same terms and conditions as those applied to other parties that are not related to theCompany.
For the year ended March 31, 2022
None

Second quarter

Third quarter

Full-year

101,406

202,460

303,517406,449

Income (loss) before income taxes (JPY million)

2,235

5,113

7,341

2,847

1,630

3,691

5,548

19,810Net income (loss) per share (JPY)

4.96

11.22

16.87

60.22

First quarter

Second quarter

Third quarter

Full-year

4.96

6.26

5.65

43.34

First quarter

Second quarter

Third quarter

Full-year

3,043,880

Net income (loss) per share (JPY)
Cumulative period

Net sales (USD thousand)

759,432

1,516,220

2,273,028

Income (loss) before income taxes (USD thousand)

16,73938,29754,982

21,322

Net income (loss) attributable to shareholders of the parent (USD thousand)

12,20827,64441,554

148,361

Net income (loss) per share (USD)

0.037

0.084

0.126

0.451

Accounting period

Net income (loss) per share (USD)

First quarter

Second quarter

Third quarter

Full-year

0.037

0.047

0.042

0.325

Management Message

USD thousand

First quarter

Net income (loss) attributable to shareholders of the parent (JPY million)

Accounting period

Balance
Account
JPY million

Net sales (JPY million)

Cover
Cover Story
Story

29. Related Party Transactions

30. Business Combinations(2) Details of Capital Reserve Reduction
Capital reserve of JPY 51,235,265,165 (USD 383,698 thousand) will be reduced by JPY 41,235,265,165 (USD 308,808 thousand) and the sameamount will be transferred to other capital surplus and the amount of capital reserve after the reduction will be JPY 10,000,000,000*, inaccordance with Article 448, Paragraph 1 of the Companies Act.
*If the stock acquisition rights issued by the Company are exercised by the effective date, the amount of capital reserve increased by such
exercise will not be subject to reduction, and the amount of capital reserve after the reduction may not be the said amount.
(3) Details of Appropriation of Other Capital Surplus
Subject to the condition that the capital reserve reduction in item 2 above becomes effective, JPY 106,847,975,571 (USD 800,179 thousand) ofother capital surplus after the transfer in accordance with item 2 above will be reduced and transferred to retained earnings carried forward tocompensate for the deficit, pursuant to Article 452 of the Companies Act. As a result, the amount of retained earnings carried forward after thetransfer will be JPY 0.
(a) Accounting Item and Amount of Surplus To Be Reduced
Other capital surplus
JPY 106,847,975,571 (USD 800,179 thousand)(b) Accounting Item and Amount of Surplus To Be Increased
Retained earnings carried forward JPY 106,847,975,571 (USD 800,179 thousand)

Data
Data Section
Section

2. Summary of accounting procedures performed
The transaction was accounted for as a transaction under common control in accordance with the Accounting Standard for Business Combinations
and the Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures.

(1) Purpose of Capital Reserve Reduction and Appropriation of Other Capital Surplus
The Company has come to record a deficit of JPY 106,847,975,571 (USD 800,179 thousand) in retained earnings carried forward at the end of the
fiscal year ended March 31, 2023.
The Company therefore intends to eliminate the deficit in retained earnings carried forward by reducing the amount of capital reserve andappropriating other capital surplus as described below, as well as to realize a flexible and agile capital policy going forward and prepare itself toresume dividend payments as soon as possible.

Corporate Governance1. Outline of transaction(1) Name and description of the subject business
Name: Elderly Care Business
Description: Nursing care business(2) Date of business combination
November 1, 2022
(3) Method of the company split
The Company was the splitting company and Azu Life Care was the succeeding company in the company split.
(4) Name of the combined company
Azu Life Care Co., Ltd.
(5) Other matters related to outline of transaction(i) In the environment surrounding the nursing care industry, the number of people requiring nursing care is increasing due to the super aging
society, and the related market is expanding. On the other hand, combined with the increase in the number of facilities and the difficulty inrecruiting caregivers, competition among companies in the industry is intensifying. In this environment, the purpose of this transfer is toestablish a flexible organizational structure to provide better services to customers in a timely manner by integrating businesses andaccelerating decision-making.
(ii) Details of allocation of shares in the company split
Since the company split was conducted between the Company and its wholly owned subsidiary, no shares or other consideration wereallocated upon the company split.

32. Subsequent Events
1. A resolution of Capital Reserve Reduction and Appropriation of Other Capital Surplus was passed at the Company’s 50th Ordinary General
Shareholders’ Meeting held on June 29, 2023.

Strategy

Business Combination under common control
The Company resolved at a meeting of its Board of Directors held on August 26, 2022 to implement a company split in which the rights and obligations
relating to 40 facilities, excluding 22 fee-based nursing homes, of the Company’s Elderly Care Business. The rights and obligations relating to 40 facilities
were succeeded to by the Company’s wholly owned subsidiary, Azu Life Care, Co., Ltd. by means of an absorption-type company split.

(4) Schedule for Capital Reserve Reduction and Appropriation of Other Capital Surplus(a) May 12, 2023 Date of approval at the Board of Directors(b) June 26, 2023 Final date for creditors to file objections(c) June 29, 2023 Date of resolution at the Ordinary General Shareholders’ Meeting(d) June 29, 2023 Effective date114

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CoverCover Story
Story(5) Outlook
These transactions are accounting transfers within the net assets section, and consequently, the Company’s net assets will remain unchanged andwill not affect business results.
2. The Board of Directors resolution on matters relating to the acquisition of treasury stock at a meeting held on July 5, 2023, in accordance with the
Articles of Incorporation pursuant to Article 165, Paragraph (2) of the Companies Act, and pursuant to Article 156 as applied pursuant to Article 165,
Paragraph (3) of the said Act.

Management Message(1) Reasons for acquisition of the treasury stock
The Company has recognized the return of profits to shareholders as an important management issue and has worked on structural reforms andcapital efficiency. The Company has improved its equity ratio to 14.5% at the end of the fiscal year ended March 31, 2023, by strengthening its
profitability of the Leasing Business in particular, and by optimizing its cost structure, in line with its policy of stabilizing its financial base for thesaid fiscal year. The Company has been considering shareholder returns in light of its financial strength including liquidity on hand as well as thestatus of its equity capital, and has now decided to acquire its treasury stock, taking into consideration the recent undervalued stock price level.

Common Stock of the Company
8,036,000 shares
JPY 2,436,434,200
July 6 ,2023 to July 31, 2023

August(a) Type of shares acquired(b) Number of shares acquired(c) Total amount of shares acquired(d) Period of acquisition (on a basis of contract conclusion)Common Stock of the Company
3,417,200 shares
JPY 1,030,060,600
August 1, 2023 to August 31, 2023

September(a) Type of shares acquired(b) Number of shares acquired(c) Total amount of shares acquired(d) Period of acquisition (on a basis of contract conclusion)Common Stock of the Company
0 shares
JPY 0
September 1, 2023 to September 30, 2023

Corporate Governance(3) Results for July, August and September, 2023
July(a) Type of shares acquired(b) Number of shares acquired(c) Total amount of shares acquired(d) Period of acquisition (on a basis of contract conclusion)

Strategy(2) Details of matters relating to the acquisition(a) Type of shares to be acquired
Common stock of the Company(b) Total number of shares to be acquired
50,000,000 shares (maximum)*(15.2% of total number of shares outstanding excluding treasury stock)(c) Total amount of shares to be acquired
JPY 10,000,000,000 (maximum)*(d) Period of acquisition
July 6, 2023 to January 5, 2024(e) Method of acquisition
Purchases on the Tokyo Stock Exchange(i) Purchases through Off-Auction Own Share Repurchase Trading System (ToSTNeT-3)(ii) Purchases based on discretionary trading agreement for share repurchases*The Company understands a certain institutional investor is prepared to sell its holdings in common stock of the Company.

Data
Data Section
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Management Message

Strategy

Corporate Governance

Data
Data Section
Section119
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Strategy

Corporate Governance

Data
Data Section
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Strategy

Corporate Governance

Data
Data Section
Section123
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Strategy

Corporate Governance

Data
Data Section
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Strategy

Corporate Governance

Data
Data Section
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Data Section

Data Compilation
Cover
Cover Story
Story

Social Key Performance Indicators
The Company engages in sustainable management initiatives under the leadership of the Sustainability Committee, which is chaired by the
Sustainability Officer, in collaboration with departments and Group companies. The Sustainability Committee reports on the progress of initiatives
in line with the five themes of the Basic Sustainability Action Policy based on the quantitative targets set by each department and Group company,and moves initiatives to the next phase of the PDCA cycle. For fiscal year 2021, we updated the materiality issues identified for the previous fiscal
year considering the current socioeconomic climate as well as the Company’s own business conditions, and set KPIs for each materiality. Key topics
and KPIs are periodically reported to the Board of Directors, thereby conducting sustainability activities.

FY2020

FY2021

FY2022

Outside directors

6

5

4

Female directors

1

1

1

170

160

179

Directors’ compensation (JPY million)

56

Directors (excluding outside directors)

60

16

18

18

Outside directors and ASB members

97

82

65

4,356

3,991

No. of employees

4,172

3,589

2,804

No. of temporary hires

1,241

1,233

1,209

Average cumulative years of service

10 years, 6 months

40 years, 3 months
11 years, 6 months

13 years, 4 months

90.2% of employees with disabilities (annual average rate)

2.33%

2.73%

2.77%

No. of mandatory retirees that have been rehired

16

15

12

No. of foreign national employees

171

144

116

No. of foreign national managers

16

13

11

No. of people newly employed

142

108

107

No. of managers

1,061

815

764

% of female managers

5.8%

6.5%

5.5%

No. of employees using support
for obtaining qualifications
No. of employees using support
system for obtaining specified
qualifications
No. of employees in program
for language skills
improvement
No. of employees awarded an
incentive payment for obtaining
Takken qualification

FY2021

FY2022

Total number of working hours per month

160.3

165.3

166.8

Overtime work hours per month

11.4

11.3

13.2

No. of employees with reduced working hours

216

228

231

No. of employees on childcare leave

149

191

117

Acquisition rate of childcare leave

87.3%

67.0%

79.5%

Rate of paid leave usage

90.5%

81.7%

81.2%

Rate of workforce turnover (%)

30.7%

16.0%

11.1%

FY2020

FY2021

FY2022

Assistant Manager

160

146

144

Manager

55

46

35

Department Manager

1

1

0

Director and Executive officer

1

1

2

170

179

FY2022636

180

Rental property manager

397

General insurance solicitor(basic course/fire insurance course)

472

Architect (first-class, second-class)242

Building construction management engineer(1st Grade, 2nd Grade)
Certified skilled worker of financial planning(1st Grade, 2nd Grade)148

Land surveyor, Assistant land surveyor

18

Care worker

695

Care support specialist

148

Home-visit care worker (1st Grade, 2nd Grade)

289

69

78

79

6

7

8

95

94

95

Community Contributions
No. of cleanup campaign
participants
Of which, in vicinity ofexisting properties
Of which, in vicinity of
construction sites
Total sum of donations(JPY thousand)No. joining observation
tours and OTJ training at
Leopalace SmileFY2020

FY2021

FY2022

1,002

0

0

0

0

0

1,002

0

0

1,998

1,073

726

0

76

23

Labor Safety and Health
FY2020

FY2021

FY2022

No. of labor accidents

46

33

36

Accidents requiring time
off work
Accidents not requiring
time off work

19

14

15

27

19

21

Stakeholder Communication Initiatives
No. of property owner
briefing sessions
Dialogue with institutional
investors (number ofcompanies)(People)Real estate broker

FY2020

FY2021

FY2022

87

0

89

95

103

122

212

Efforts to Reduce Environmental Impact
FY2020

FY2021

FY2022*

Scope 1 CO₂ emissions (t-CO₂)

3,474

3,285

3,134

Scope 2 CO₂ emissions (t-CO₂)

8,089

7,232

9,039

Scope 3 CO₂ emissions (t-CO₂)

693,388748,745

540,558

5,850

83

122

9,621

5,041

2,068

2,063

1,916

2,141

–

–

353

–

–

784

1,665

1,334

1,013

1,203

967

1,009

672,987

739,403

533,067

Category 1(purchased materials)
Category 2(capital goods)
Category 3(electricity-related)
Category 4,9(upstream/downstream
logistics)
Category 5(waste)Category 6(business travel)
Category 7(employee commuting)
Category 13(electricity and gas use bytenants in rental housing)

Data
Data Section
SectionComposition of Female Leaders and Managers

FY2021

Certified Employees (as of March 2023)

Corporate Governance

FY2020

Leopalace21 Integrated Report 2023

103.1

40 years, 11 months

Work-Life Balance (on a non-consolidated basis)

128

107.9

Strategy

FY2022

5,082

39 years, 0 months

No. of employees with disabilities (annual average)

FY2020No. of employees (on a consolidated basis)

Average age

FY2022

Support for Employees Seeking to Obtain Qualifications

Employee Composition (on a non-consolidated basis)
FY2021

FY2021

96

Audit & Supervisory Board members (excluding outside ASB members)

FY2020

FY2020Management Message

GovernanceDiversity (Consolidated (excluding Guam), Non-consolidated basis but with Leopalace Smile for employees with disabilities)*The calculation method for some of the results has changed for FY2022.

Leopalace21 Integrated Report 2023

129

CoverCover Story
Story

Leasing Business Data
Units Under Management
FY2020

FY2021

FY2022

Hokkaido

13,55013,39013,209

Tohoku35,32735,09934,878Kita-Kanto

40,43740,26039,959

Tokyo metro area

170,320

167,446

164,392

Hokuriku-Koshin’etsu

39,94339,79339,593Chubu

87,75687,03086,275

Kinki

80,85979,796

79,123

Chugoku

39,39039,01038,700Shikoku

14,736

14,714

14,644

Kyushu-Okinawa

51,35550,77650,458

Total

573,673

567,314561,231

Fiscal Year-End Occupancy Rates by Region

239

206

204

Of which, Leopalace Centers

139

109

109

Of which, Leopalace Partners(franchisees)

100

97

95

No. of leasing sales personnel

1,047

1,064

1,103

(%)

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

FY2013

83.32

83.67

83.69

83.50

83.84

84.28

84.23

84.31

84.12

85.61

86.92

87.47

FY2014

86.00

86.03

85.96

85.63

85.78

86.33

86.14

86.10

85.69

87.24

88.65

89.29

FY2015

87.88

87.61

87.59

87.32

87.26

87.70

87.26

87.14

86.89

88.38

89.80

90.53

FY2016

88.97

88.55

88.60

87.95

87.78

88.31

87.50

87.41

86.97

88.41

90.18

91.66

FY2017

90.51

90.28

90.55

89.75

89.88

90.21

89.73

89.69

89.44

90.83

92.43

93.72

FY2018

92.82

92.76

92.10

90.45

89.41

88.40

87.24

86.38

85.26

85.38

85.57

84.33

FY2021

FY2022

Hokkaido

69.8

77.9

83.0

Tohoku

83.0

85.1

87.9

FY2019

82.35

81.95

81.40

80.67

80.21

80.07

79.49

79.21

78.91

80.19

81.82

83.07

Kita-Kanto

77.3

82.0

87.1

FY2020

81.40

79.91

79.43

78.56

78.18

78.09

77.46

77.09

77.07

78.16

79.60

81.72

Tokyo metro area

81.8

85.3

91.2

FY2021

80.65

80.32

80.91

80.59

80.53

81.13

80.70

80.58

80.45

81.14

82.62

85.10

Hokuriku-Koshin’etsu

80.6

83.1

88.0

FY2022

84.44

83.88

84.26

83.55

83.33

84.00

83.80

83.91

84.08

85.23

86.61

88.83

Chubu

80.3

84.8

85.8

*Occupancy rate = The number of contracted units (excluding the ones for which the settlement procedure is completed following the contract termination) divided by number of units undermanagement.

Kinki

81.8

85.4

89.5

Chugoku

86.5

88.0

88.6

Shikoku

82.6

84.4

82.7

Kyushu-Okinawa

86.5

88.3

91.3

78.9

FY2020
Units

Units

Rates of monthly contracts have been declining recent
years, while the proportion of more stable leasing contracts
is increasing in general contracts without a fixed contract
period increasing from 85.8% in FY2013 to 94.5% in
FY2022.

84.7

81.2

FY2022

FY2021%

Ratio of General Contracts and Monthly
Contracts Over 10 Years

Units

%

%

(%)

General contracts

Monthly contracts

FY201385.8

14.2

FY201488.4

11.6

FY201589.8

10.2

FY201690.0

10.0

FY201791.1

8.9

FY201894.1

5.9

FY201993.2

6.8

266,81456.9 280,811

58.2 296,301

59.4

Of which, foreign
nationals (%)

14,211

5.3

5.2

19,813

6.7

FY2020

93.9

6.1

Individuals

164,44135.1 167,380

34.7 165,168

33.1

FY2021

93.6

6.4

FY202294.5

5.5

Of which, foreign
nationals (%)

9,132

5.6

9,758

5.8

11,562

7.0

Students

37,5488.0

34,597

7.2

37,090

7.4

Of which, foreign
nationals (%)

12,171

32.4

9,013

26.1

10,977

29.6

Total

468,803100.0 482,788

100.0 498,559

100.0

Leopalace21 Integrated Report 2023

Data
Data Section
SectionCorporate

14,624

Corporate Governance

Leopalace21 Integrated Report 2023

No. of leasing sales offices

FY2020Occupied Units by Contract Type130

FY2022Monthly Occupancy Rates for the Past 10 Years

(%)

Total

We have stepped up sales to corporate customers whoare expected to generate stable, long-term earnings.
These ramp-up sales efforts have resulted in a yearly
increase of occupied units over 5% through our measure
to establish a position as the brains behind the companyleased housing strategy that targets the corporate
customers that make up 60% of the customer base. As aresult, the number of occupied units for corporate
contracts at the end of FY2022 was 296,301 units.
However, units contracted by individuals declined for the
first time in three fiscal years while those by students
increased for the first time in five fiscal years.

FY2021Strategy

The year-end occupancy rates rose after hitting bottom in
FY2020, and has continued to rise for two consecutive
fiscal years as of FY2022. By region, the occupancy rates
are also increasing throughout Japan, except in Shikoku.

The Leasing Business aims to make sales more efficient.
We have reduced the number of directly managed sales
offices in inefficient areas as well as transitioned to a sales
structure that utilizes real estate agents. As the Leasing
Business reaches one milestone in this transition, we arestrengthening recruitment of staff at sales offices lacking
sales personnel, which has increased for two consecutive
years to reach 1,103 employees at the end of FY2022.

FY2020Management Message

The number of units under management forms the income
foundation for the Leasing Business, and at the end of
FY2022, that number stood at a marginal decrease of561,231, marking three consecutive fiscal years of
decline. Regionally, Hokkaido and the Tokyo metro area
had the largest decline among the national decline in thenumber of units under management.

(Units)Number of Leasing Sales Offices and Sales
Personnel

131

CoverCover Story
Story

Elderly Care Business Data
(Facilities)

Number of Facilities
The Company has been developing the Elderly Care
Business as a business segment to better support Japan’s
aging population. At the end of March 2023, we had atotal of 87 facilities, a number unchanged since FY2018.

FY2021

FY202221

21

21

Day-care services,
Short-stays

64

64

64

Group homes

2

2

2

Total

87

87

87

With concentration of population in urban centers,
the number of vacant homes, particularly in rural
areas, is increasing. According to the 2018 Housing
and Land Survey of Japan, the number of vacantapartments for rent or sale stands at 4.6 million, orroughly one in every five houses are vacant. The
situation is becoming a grave social issue.

1988

1993

1998

2003

2008

2013

2018

Number of vacanthouses for rent orsale (thousand units)

2,336

2,619

3,520

3,978

4,476

4,600

4,604

Houses for rent
(thousand units)

14,015 15,691 16,730 17,166 17,770 18,519 19,064

Ratio of vacanthouses (%)

14.3

14.3

17.4

18.8

20.1

19.9

19.5
Management Message

FY2020Fee-based nursing
homes

Number of Vacant Homes in Japan

Source: Housing and Land Survey (2018), the Ministry of Internal Affairs and Communications*Ratio of vacant houses = number of vacant houses for rent / (number of vacant houses for rent
+ houses for rent)(Utilization rate, %)Utilization Rate
The Elderly Care Business runs fee-based nursing homes,
group homes, short-stays, and day-care services. The
utilization rate at fee-based nursing homes, group homes,
and short-stay facilities remains high at roughly 90%.

FY2020

FY2021

FY2022

67.1

65.9

62.5

Day-care services
Short-stays

92.1

91.1

87.5

Fee-based nursing
homes & group homes

93.0

89.4

84.9

(Ten thousand people)

Projected Future Population of Japan

External Environment
FY2021

FY2022

303

331

347

Of which, under 30m²

53

50

49

Other

509

535

513

Total

812

866

861

Source: Housing starts statistics, the Ministry of Land,
Infrastructure, Transport, and Tourism(Thousand households)

Number of Households
The declining birth rate and aging populationof Japan is expected to result in decreased
household numbers from 2025. However, thenumber of single-person households is
expected to continue to increase until 2030.

2020

2025

2030

2035

2040

2015

Single-person households

16,785

18,41819,342

19,96020,254

20,233

19,944

Of which, under age 25

2,060

2,021

2,009

1,879

1,781

1,681

1,584

Of which, age 25–34

2,999

2,987

2,830

2,795

2,705

2,558

2,429

Of which, age 35–64

6,745

7,157

7,479

7,774

7,809

7,577

6,968

Of which, age 65 or older

4,980

6,253

7,025

7,512

7,959

8,418

8,963

Married couple

10,26910,758

11,101

11,203

11,138

10,96010,715

Married couple withchild(ren)14,474

14,342

14,134

13,693

13,11812,465

11,824Single parent withchild(ren)

4,535

4,770

5,020

5,137

5,141

5,074

4,924

(projection) (projection) (projection) (projection) (projection)

Other

5,779

5,044

4,510

4,123

3,833

3,583

3,350

Total

51,84253,332

54,107

54,11653,48452,31550,757

2040

1,680

1,595

1,503

1,407

1,321

1,246

1,194

Age 15–64

8,103

7,735

7,509

7,170

6,875

6,494

5,978

Age 65–74

1,517

1,752

1,742

1,497

1,428

1,522

1,681

Age 75 or older

1,407

1,627

1,860

2,180

2,288

2,260

2,239

Unknown
Total

98
12,806 12,709 12,615 12,254 11,913 11,522 11,092
11.0

12.8

14.7

17.8

19.2

19.6

20.2

Source: Annual Report on the Ageing Society 2022, Cabinet Office

Number of Foreign Nationals NewlyEntering JapanThe number of students, workers, and other foreign
nationals newly entering Japan fell dramatically in2020 and 2021 due to the effects of the COVID-19
pandemic, but these numbers are recovering as
constraints under the pandemic have eased. We
expect to see the number of foreign nationals
newly entering Japan continue to increase in the
future.

2018

2019

2020

2021

2022

International
students

124,269

121,637

49,748

11,651

167,128

Foreign workers

293,089

359,847

130,21238,034

301,878

Total

417,358

481,484

179,960

49,685

469,006*Based on the statistics on the changes in the number of foreign nationals newly entering Japan nationality/
region and by status of residence released by the Immigration Services Agency of Japan

Data
Data Section
Section

2010

2035

(projection) (projection) (projection) (projection) (projection)

Corporate Governance

FY2020Rental housing

2030

Age 0–14(Thousand units)

New housing starts in FY2022 decreased 0.6% year-on-year. Construction ofrental units increased for two consecutive fiscal years to 347,427 units, a
5.0% increase year-on-year. Meanwhile, the number of units under 30 square
meters (mainly for single occupancy) stood at 49,109 units, a 0.8% decreaseyear-on-year, marking two consecutive fiscal years of decline.

2025

2015

Proportion age 75 orolder (%)

Number of New Housing Starts

2020

2010

Strategy

The population of Japan peaked in 2008 and has
been declining ever since. The population is
expected to fall down to 121.11 million in 2030,
and go below 120 million mark in 2033. Meanwhile
the elderly population aged 65 or over is expected
to increase until 2043, meaning that the proportionof people over the age of 65 is also gradually
increasing.

Source: Household projections for Japan (2019), the National Institute of Population and Social Security Research132

Leopalace21 Integrated Report 2023

Leopalace21 Integrated Report 2023

133

Data Section

Corporate Profile

Leopalace21 Corporation

Head Office:2-54-11 Honcho, Nakano-ku, Tokyo 164-8622
TEL: +81-3-5350-0001 (Main phone number)

Established:

August 17, 1973

Common stock:

JPY 100 million

Operations:

Construction, leasing and sales of apartments,
condominiums, and residential housing;development and operation of resort facilities;
broadband business; and elderly care business,
etc.

Number of Employees:

3,991 (consolidated basis)
2,804 (non-consolidated basis)

Number of Apartment Rooms under Management and Domestic Leasing Sales Offices by Region

Directors

Total number of managed rooms

President and CEO
Director
Director
Director
Director
Director
Director (Outside)
Director (Outside)
Director (Outside)
Director (Outside)

Audit & Supervisory
Board Members

Bunya Miyao
Mayumi Hayashima
Naomichi Mochida
Shinji Takekura
Akio Yamashita
Jin Ryu
Akira Watanabe
Yutaka Nakamura
Takumi Shibata
Kan Ishii(As of March 31, 2023)

Total number of directly managed
sales oﬃces

103 offices
Total number of franchised
sales oﬃces

5,927

95 offices

Okinawa

Full-time Audit & Supervisory Board Member (Outside)
Jiro Yoshino
Full-time Audit & Supervisory Board Member
Kenichiro Samejima
Audit & Supervisory Board Member
Yoshitaka Murakami
Audit & Supervisory Board Member (Outside)
Kazutaka Shimohigoshi

Hokkaido

79,123

Tohoku17
39,959Strategy

84,507Kita-Kanto

14

44,531

3
6

Kinki

Chugoku

Percentage of Outstanding Shares

5934,878

6
9

12

9
7

Number of Shares (thousands of shares)

2
5

13,209Hokuriku-Koshin’etsu

Major Shareholders (Top 10) (As of March 31, 2023)

1 Chidori Godo Kaisha

3
139,59338,700Shareholder Name (honorific titles are omitted)

Number of franchised sales oﬃces
Number of directly managed sales oﬃces

Number of managed rooms

561,231 units

Management Message

Company Name:

Members of the Board and Audit & Supervisory
Board Members (As of June 29, 2023)

Cover
Cover Story
Story

Corporate Data (As of March 31, 2023)

9

25.68

Kyushu164,39226

86,275

2 UH Partners 2, Inc.

50,581

15.37

3 The Master Trust Bank of Japan, Ltd. (Trust Account)

21,197

6.44

4 MSIP CLIENT SECURITIES

16,591

5.04

5 HIKARI TSUSHIN, INC.

8,606

2.61

6 Stockholding Association for Leopalace21’s Apartment Owners

6,706

2.03

7 Stockholding Association for Leopalace21’s Business Connection

5,702

1.73

8 GOLDMAN SACHS INTERNATIONAL

4,374

1.32

Share Price and Trading Volume (As of March 31, 2023)

9 STATE STREET BANK AND TRUST COMPANY 505103

4,102

1.24

Share Price

Trading Volume

1.11

(JPY)
400

(Thousand shares)
160,000

300

120,000

200

80,000100

40,000

3,682

Shareholder Composition (As of March 31, 2023)

750,000,000

Securities companies

Treasury stock

Number of shares outstanding:329,389,515

2.25%

0.10%

Number of shareholders:

47,232

Listing:

Prime Market of the Tokyo Stock
Exchange

Administrator of shareholder registry: Sumitomo Mitsui Trust Bank,
LimitedBusiness
corporations andother legal entities

8.33%

Tokyo metro area

Individuals andothers

23.61%

44.99%
Financial institutions

Chubu

Data
Data Section
SectionNumber of shares authorized:

23

13

Shikoku

Notes: 1. Of the shares held by The Master Trust Bank of Japan, Ltd. (Trust Account) as of March 31, 2023, those held in trust accounts as part of trust bank operations were 6,002 thousand
shares.
2. The above percentage of outstanding shares is calculated excluding treasury stock.

Corporate Data (As of March 31, 2023)

3
414,644

Corporate Governance

10 BNYMS ANV RE BNYMIL RE LF ODEY OPUS FUND

12

0

0
2022
Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2023
Jan

Feb

Mar

Foreigncorporations

20.72%*Percentage figures have been adjusted.

134

Leopalace21 Integrated Report 2023

Leopalace21 Integrated Report 2023

135