HEART INTO THE CITY

Financial Results For the First Six Months （Ended May 31, 2017）
Tosei Corporation
Tokyo Stock Exchange, First Section Code：8923
Singapore Exchange, Mainboard Code：S2D

Ⅰ. Overview of Results for the First Six Months Ended May 31, 2017
－P. 2
Ⅱ. Tosei's View of the Business Development in FY2017－P.18

Ⅲ. Reference Materials for the first time visitors to Tosei－P.32＜Separate volume＞

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

Real Estate Market Conditions

Ⅰ ． Overview of Results for the First Six Months Ended May 31, 2017

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

2

FY2017 First Six Months / Full Year Forecasts - Highlights Revenue ¥26.3billion (down 14.0 % yr/yr), Operating profit ¥6.2 billion (down 18.7%yr/yr) and Profit for the period ¥3.9 billion (down 17.1% yr/yr).
 In the first six months ended 31 May, 2016 sales of two income-generating commercial facilities led the profit. For that reason, profit for the first six
months ended 31 May, 2017 decreased year on year. However, we have already reached 66% of the full year forecast due to the sales of incomegenerating offices in the revitalization business was favorable.
(¥ million)【 Revenue 】
1Q

2Q

3Q

4Q

70,000【Operating profit】(¥ million)

69,26810,00011,00060,00050,00049,81843,006(42,909)
10,67930,00026,360
5,284

9,279

9,000

456
1,148

11,682

1,570

5,000

771

11,525

13,527

14,6772015.11月期
FY20152016.11月期
FY20162017.11月期
FY2017（Forecast)
（予想）

4,127

25,80926,36025,9862016.11月期
FY20162017.11月期
FY2017（Forecast)（予想）

FY20152015.11月期＜ Segment Operating Profit＞ ※(¥ million)

10,000
Revitalization
Development
Rental8,000
Fund and Consulting
Property Management
Other
6,000
Internal Transactions

9,279

17,948

5,324
2,329

2,444

0
-10,000

3,574

694

4,005

341

2,144(Development)
3,010(Rental)
1,661(Fund)
2,212(PM)0-559-1,131-616

FY2015FY20162Q FY2017(Other)

FY20162016.11月期

FY20172017.11月期（Forecast)
（予想）

6,891

14.4%

12.0%

6,241

534
2,389
1,303
146

FY2015

5,547

5,000

168
636

4,000

3,674

-1,404

6,000

4,135

4,174

1,464

-2,000

ROE

7,000

2,000
0

【Profit for the period】

8,000

4,001

1,797

4,262

3,658

(¥ million)

12,000

6,605

10,000

3,914

0

4,000
13,138

2,198

2,190

4,800

20,000

5,857
3,326

572

2,000

3,828

2,365

＜ Segment Revenue＞

43,006(3,145)

1,980

2015.11月期
FY2015※※ We have abolished the Alternative Investment Business segment from thefiscal year ended November 30, 2016. For comparison, segment
information for the previous fiscal year (FY2015) are recalculated inaccordance with the new reportable segment classifications.

40,00030,0004,000

049,81850,000

2,413

2,185

1,000

0

60,000

1,298

3,548

2,000

10,00070,000

6,040
6,000

6,241

3,000

10,817(¥ million)(3,767)

6,891

6,000

247
963

8,000

4,000

17,12820,00010,000

7,000

8,484

9,001
8,450

10,0088,000

40,00015,380【Profit before Tax】(¥ million)

951
178

(O)

-17

FY2016

3,000

395

2,000

1,263

1,000

915

141
-1,8601,087(O)

134 (R)-692

1 (O) 0-219(D)（Forecast)
（予想）

13.7%

5,926

16%
14%
12%

(1,995)

10%

3,931

8%

1,431

6%

2,132

4%
2,611

2,500

1,390

FY2015FY2016FY20172015.11月期
2016.11月期
2017.11月期
2Q FY2017Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.
（Forecast)
（予想）

2%
0%

3

Overview of Consolidated Financial Results for Six Months Ended May 31, 2017(¥ million)

Six months
ended May 31,
2016【A】

Six months
ended May 31,
2017【B】

30,655%100.0

26,360%100.0-4,295%-14.0

18,90761.7

16,85864.0-2,048-10.8

11,748

38.3

9,501

36.0

-2,246-19.1

Selling, general and administrative expenses

3,983

13.0

3,402

12.9

-580

-14.6

Expenses related to property marketing activities

1,405

4.6

787

3.0

-617

-44.0

S elling, general and administrative expenses(net of expenses related to property marketing activities)

2,577

8.4

2,614

9.9

36

1.4

Other income

134

0.4

160

0.6

25

18.8

Other expenses

224

0.7

17

0.1

-207

-92.2

7,675

25.0

6,241

23.7

-1,433

-18.7

-434

-

-384

-

50

-11.6

7,240

23.6

5,857

22.2

-1,382

-19.1

2,496

-

1,925

-

-570

-22.9

Profit for the period

4,743

15.5

3,931

14.9

-812

-17.1

Comprehensive income for the period

4,728

15.4

3,938

14.9

-790

-16.7

EPS（\）

98.25-16.82-17.1

Revenue
Cost of revenue
Gross profit

Operating profit
Finance income/costs (net)Profit before tax
Income tax expense

81.43

yr/yr change【B】-【A】

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

4

Revitalization Business - First Six Months of FY2017  Whole buildings ：Sold 37 buildings, including income-generating offices and apartments. The number of buildings sold approximately
doubled that of the first half of the previous period. Sold the properties acquired in the previous fiscal year through M&A transaction inhigh profit ratios. (Sold 5 Properties in Nakano-ku, 2 Properties in Toshima-ku, etc. Total 9 properties)
 Restyling：Sold 22 units from 7 properties including “Hilltop Yokohama Negishi” and “Renai Kamakura Ueki” etc.

Revenue / Gross Profit Margin
Revenue (Restyling)
31.0％
Revenue (Whole buildings to REIT)(GrossprofitRevenue (Whole buildings to general customers)
margin13,06335.3%
35%
of First Six(¥ million)

14,000881

12,000Months)

29.9%

20.2％
(Gross profit margin
of FY2016 full year )10,00010,939
437

8,000
6,000

18.1%

4,000

2,000

2,360
300
2,060

0

Major Properties Sold

5,863
280

12,181

4,522 12.9%
263
5,343
1,486

24.3%
7,009
390

10,501
6,618

2,771

5.1%
240
1Q FY2016 2Q FY2016 3Q FY2016 4Q FY2016 1Q FY2017 2Q FY2017

1Ｑ

2Ｑ

30%
25%
20%

Nakano-ku
income-generating apartment

15%

1Ｑ

10%
5%
Shinagawa-ku
income-generating building

0%

FY2016FY2017Six Months Full year Six Months Full year (forcasts)
Revenue
15,42425,80917,94850,414Gross profit
4,329
5,214
5,566
10,646
Operating profit
3,627
4,001
4,800
8,414
No.of sales (Restyling)
39
57
22
46
No.of sales (whole buildings, others)
19
32
37
70

2Ｑ

(￥million)*The gross profit is net of Cost of Revenues including the following write-down
amounts under LCM: FY2016: -25 million yen

Toshima-ku
income-generating hotel

Urayasu-shi
income-generating apartment

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

5

Development Business - First Six Months of FY2017  Sold 50 detached houses in 17 projects (“THE Palms court Kashiwa Hatsuishi” and “THE Palms court Machida Tsurukawa” etc. ), andland lots.
 Operation profit decreased, affected by anticipatory development costs for 3 newly built condominiums which are scheduled for sale onnext fiscal year and beyond.

Major Properties Sold

Revenue / Gross Profit Margin(¥ million)
9,000

Offices / Commercial facilities
Detached houses / Land lots / Housing Construction
Gross profit margin (All）

8,724
51.8%

8,000

40.4％
(Gross profit margin
of FY2016 full year )

7,000
6,000
5,000

18.7％
(Gross profit marginof First Six Months)

7,488

50%
40%
30%

22.2%

4,000

19.7%

3,000

18.8％

1,372

1,000

1,235

1,372

19.1%

969

1,175

969

1,175

1,927
13.3%

Detached houses etc.

2,000

18.1%

1,114
1,114

1,927

20%

THE Palms Court Kunitachi

THE Palms Court
Kamakura Shiromeguri

Comodo Casa Okura（Urban Home Corporation）

THE Palms court
Koshigaya Lake Town

10%

0%

0
1Q FY2016 2Q FY2016 3Q FY2016 4Q FY2016 1Q FY2017 2Q FY2017

FY2016FY2017Six Months Full year Six Months Full year (forcasts)
Revenue
10,097
13,1382,144
6,864
Gross profit
4,826
5,302
400
1,242
Operating profit
3,659
3,674
-219
-40
No.of sales (sale in lots)
53
119
50
146
No.of sales (whole buildings)
2
2(￥million)*The gross profit is net of Cost of Revenues including the following write-down
amounts under LCM: FY2016: -66.5 million yen
Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

6

Acquisitions in Revitalization and Development Businesses -Acquisition Amount and Inventories Total acquisition amount was ¥26.2 billion on a delivery basis (expected disposition values)
Revitalization Business： 27 Properties - 9 office properties, 15 condominium and 3 land lots Development Business：3 Properties - 1 newly-built hotel, 1 newly-built condominium, 1 detached house project  As of the end of May 2017, total acquisition amount progressed to about ¥35.2 billion on a contract basis.

Trends in Annual Acquisition Amounts

Breakdown of Inventories(delivery basis and expected revenues)(Trends in Expected Disposition Values)(¥ million)
70,00066,84260,000D

Development

D 2,808
D

R

Revitalization

6,956

FY2017 Forecast
80.0 billion

Commercial
facilities
Offices
Detached

housesD

50,00049,054D

3,723

Commercial
facilities
45,168
Offices

6,966

Detached
housesDD

40,000R

4,424

Others4,970

D 2,033
R 2,202
RR
30,000

9,093

9,576

IncomeGenerating
Aptbuildings

CondosR 1,765
R

Others21,321

Incomegenerating
Aptbuildings

OthersIncomegenerating
Aptbuildings

Contract basis progress
about ¥35.2billion.
(End of May 2017)35,21026,210
D
5,114

D 868
D

20,0007,544
24,848

Incomegenerating
offices

26,387

Incomegenerating
offices

27,36010,000

Incomegenerating
offices

FY2014FY20152015.11

FY20162016.11

Commercial
facilities
Offices
Detached

housesCondosR 255
RR
2014.11

Acquisition
progress(delivery basis,
expected
disposition values)
was about¥26.2billion.

(9,000)

R

R

R

6,631

Commercial
facilities
Offices
Detached
houses✓ Expanded the area and increased the size of properties✓ Actively acquire buildings with a low occupancy rate,
leveraging our expertise in value adding and leasing✓ Promoted real estate acquisitions through M&As

Others8,094

Income-generating
Apt buildings

4,336

Incomegenerating
offices

2Q FY20172017.11 （2Q累計）

Fujisawa-shi(income-generating building)(¥ million)

Sumida-ku building(Empty building)

As of the endof FY2015

As of the endof FY2016

As of the endof May 31,
2017

Office, Commercial
buildings

34,99837,82034,554

Hotel

2,336

4,151

12,004

Condo / Apt
buildings

23,497

39,57348,058

Detached houses

11,184

13,673

12,291Others

2,348

4,208

2,405

TOTAL

74,36599,428109,314

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

7

Rental Business - First Six Months of FY2017  Rental revenue from non-current assets increased to 41%
 Property acquisition exceeded and Tosei holds 79 properties, 10 properties increased from the end of the previous quarter.

Revenue / Gross Profit Margin
50.2％
47.5％
(Gross profit margin (Gross profit margin
of FY2016 full year ) of First Six Months)
Revenue (Current assets)(¥ million)

Revenue (Restyling)
Revenue (Non-current assets)
Gross profit margin
1,418
1,326

1,800
1,600
1,400
1,200

1,111

1,000

46.3%

800

552

600

Breakdown of Properties Held by Tosei

45.7%

57.2%
847

765

1,467

1,482

50.4%

891

49.0%

36

35

46.1%

813
892

33

200

519

524

536

1Q FY2016

2Q FY2016

3Q FY2016

542

50%
40%
30%

29

20%

400
638

605

0

10%
0%

(￥million)

Revenue
Gross profit
Operating profit

4Q FY2016

1Q FY2017

2Q FY2017

FY2016FY2017Six Months Full year Six Months Full year (forcasts)
2,438
5,324
3,010
6,083
1,121
2,670
1,430
3,036
1,003
2,389
1,303
2,714

*The revenue includes internal transactions.

Current assets ※1
Restyling
Non-current assets（No. ofbuildings)
70%

60%

30

39

1,527

Office and commercial buildings : 32
Apartments : 44
Other : 3

90
80
70
60
50
40
30
20
10
0

70
49

48

50

52

76

83

79
69

56
42

48

55
42

52

22

21

25

26

29

10

10

8

8

8

8

8

7

6

6

17

17

17

18

19

20

20

21

21

21

Feb.
2015

May
2015

Aug.
2015

Nov.
2015

Feb.
2016

May
2016

Aug.
2016

Nov.
2016

Feb.
2017

May
2017

*Includes income-generating properties only

＜ Increase and decrease fromthe end of the previous fiscal year ＞
New acquisition +17
Decrease by sale -22
Other
+1
Total
-4
Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

8

Fund and Consulting Business - First Six Months of FY2017  The balance of AUM increased to ¥499.1 billion, including ¥36.1 billiom held by Tosei Reit.
(The total AUM increased by ¥50.9 billion since the end of the previous fiscal year).
 With the increase in AUM, total asset management fees grew steadily, as well as brokerage charges and others.

Revenue / Gross Profit Margin
AM fee ※1
Disposition fee
Dividends(¥ million)

97.7%

1,200

95.4%

96.4%
91.3%

600

566
1
175

400

90.8％
(Gross profit
marginof First Six
Months)94.2％(Gross profit margin
of FY2016 full year )

800

5
141

524
20

642
24
272

200

(¥ million)

100%

184

499,133

500,000
448,18680%
400,000

782

139
37

41
25

235

238

300,607285,904

264,135
23,13040%

91,789311,335

60%

485
1

421,791

Private Funds AM
REIT AMCRE ※2300,000

180

75
13

1,176
90.6%

597

181

18
53

＜ Increase and decrease from the end of the previous
fiscal year ＞
・Private Funds AM： increase in ¥58.4 billion(Breakdown of a net increase・increase : ¥68.5 billion, ・decrease : ¥10.1 billion)
・CRE： decrease in ¥7.4 billion

Acquisition fee
Brokerage fee / Other ※1
Gross profit margin

87.1%
1,000

Balance of Assets Under Management

85,771
69,108124,084※1

36,17736,177

248,028

209,143
200,000

29,358116,623

170,115

16,61898,6795
126346,333
300,64320%

241,005

100,000

192,525

216,796※1

17,434

225,564

287,924

149,349

241

251

255

262

0

113,057

0%
1Q FY2016 2Q FY2016 3Q FY2016 4Q FY2016 1Q FY2017 2Q FY2017(￥million)

Revenue
Gross profit
Operating profit

FY2016FY2017Six Months Full year Six Months Full year (forcasts)
1,090
2,329
1,661
2,561
1,005
2,193
1,508
2,389
430
951
915
1,008

*The revenue includes internal transactions.

0Nov. 2009

Nov. 2010

Nov. 2011

Nov. 2012

Nov. 2013

Nov. 2014

Nov. 2015

Nov. 2016

May 2017※1 ¥45 billion was transferred from private funds AM to CRE at the end of November, 2016
after reviewing the management details. For comparison, revenue for the previous fiscal
year (FY2016) are recalculated.
※2 The purple portion indicates the assets under consulting agreements of CRE.
CRE is methods of investing in and managing corporate real estate efficiently to maximize
long-term enterprise value. By undertaking CRE, Tosei conducts comprehensive consulting
Copyright© 2017TOSEI CORPORATION, All Rights Reserved.
services from the viewsof real estate
professional.
9

Property Management Business - First Six Months of FY2017  The total number of properties under management increased to 634.
（スポーツクラブ運営事業等）
 In addition to service expansion, new property management contracts and maintenance of existing contracts contributed to the stable
income of business.

The Number of Properties Under Management

Revenue / Gross Profit Margin
Repair works, commissions and fees

PM・BM fees(¥ million)

1,200

1,106

Gross profit margin29.4％(Gross profit marginof First Six Months)

27.2％(Gross profit margin
of FY2016 full year )

1,076

1,115

1,096

357

320

966

1,000
856

375

322
224

800

176

600

27.9%

26.2%

28.2%

28.9%

30.1%

26.8%

Condo/Apt management

50%

Office building management (Office, Commercial facility, School, Hotel, Nursery, etc.)
634
594
40% 600
547
546
544
522
511
511
471
249
500
219
30%
196
193
203
216
199
203
400
180

20% 300
400
680

731

741

754

757

776

200

10%

200

291

312

308

306

343

351

351

375

385

100

0

0%
1Q FY2016 2Q FY2016 3Q FY2016 4Q FY2016 1Q FY2017 2Q FY2017(￥million)

Revenue
Gross profit
Operating profit

FY2016FY2017Six Months Full year Six Months Full year (forcasts)
1,962
4,005
2,212
4,316
529
1,090
652
1,197
70
141
134
191

0
Nov. 2009 Nov. 2010 Nov. 2011 Nov. 2012 Nov. 2013 Nov. 2014 Nov. 2015 Nov. 2016 Mar . 2017

【Example of Properties Under Management 】

Condominium

OfficeCommercial facility*The revenue includes internal transactions.

Copyright
All Rights
Reserved.
School© 2017 TOSEI CORPORATION,
Hotel
Nurseryschool10

Summary of Balance Sheet (Consolidated)Ⅰ. –Assets-(¥ million)

End ofNov. 2016
Total Assets
Cash and cash
equivalents
Inventories(properties)
Investment properties/ PPE
Other assets

Decrease Increase

End ofFeb. 2017

Decrease

Increase

End of
May 2017

121,276-561

120,715+2,650123,366

21,640-110

21,529+1,40422,9346 months YTD
Decrease

Increase+2,089A+1,29367,298-7,864+7,27366,707-6,260+8,16568,613-14,124+15,439

25,324-111+167

25,380-88+35

25,327

-200

+202

7,012

+84

7,097

-606

6,491

-521

A： Change in inventory• Inventory increased by ¥1.3 billion from the previous year-end as purchase of properties and construction costs,
etc. exceeded sales.
（\ million）
1Q FY2017
2Q FY2017
Total
Increase Acquisitions+6,143+7,017+13,160
Factor Construction / Value-added etc.
+1,130+1,148+2,278Decrease Dispositions-7,864-6,260-14,124
Total-7,864 +7,273-6,260 +8,165-14,124+15,439

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

11Summary of Balance Sheet (Consolidated)Ⅱ.

-Liabilities/Equity(¥ million)

End ofNov. 2016

Decrease Increase

End ofFeb. 2017

Decrease

Increase

End of
May 2017

6 months YTD
Decrease

Increase

Total Liabilities /Equity

121,276-561

120,715+2,650123,366

Total Liabilities

80,266-2,03878,227+1,23079,457

Borrowings

70,159-10,178+9,42969,411-10,492+10,982

69,901-20,670 +20,412

Current borrowings

9,387-4,625+1,445

6,207-3,088+4,525

7,644-7,714Non-current borrowings

60,772-5,552+7,984

63,204-7,403+6,45762,257-12,956 +14,441

Other Liabilities

10,106-1,290

8,816

+740

+2,089

A

9,556

-808

+5,971-550

BEquity41,010+1,47742,487+1,42043,908+2,898Equity Ratio (%)

33.8

+1.4

35.2

+0.4

35.6

+1.8

Net D/E Ratio

1.18

-0.06

1.13

-0.06

1.07

-0.11

B： Change in Equity

A： Change in borrowings（\ million）

Increase New Borrowings
Factor Non‐Current → Current Portion
Current
Decrease Repayments upon Disposition
Factor Others repayments （refin / maturity, etc.)
Increase New Borrowings
Factor Others（refinace,etc.)
Non‐
Repayments upon Disposition
Current Decrease
Others repayments （refin / maturity, etc.)
FactorNon‐Current→Current Portion
Total

1Q FY2017
2Q FY2017
Total
+215
+1,211+1,426+1,229+3,314+4,544-1,730-566-2,297-2,894-2,522-5,416+5,481+4,606+10,087+2,503+1,851+4,354-4,255-4,025-8,280-67-64-131-1,229-3,314-4,544-10,178 +9,429 -10,492 +10,982 -20,670 +20,412

・Total equity increased by¥3.9 billion from the end of
the previous fiscal year, inconsequence of the increase
in retained earnings ( up ¥2.8
billion) and dividend
payments (down ¥1.0 billion).

•¥11.5 billion of new borrowings incurred to finance acquisition of 30 properties (book value ¥13.2 billion).
•The repayment of borrowings by sales was ¥10.5 billion.
•They resulted in decrease of debt balance by ¥0.2 billion from the end of the previous fiscal year. Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

12

Inventories (Breakdown)
Balance of Inventories
As of May 31, 2017

68,613(92properties)

Total Expected
Disposition Value

109,314

Breakdown of Inventories(¥ million)

Inventories

Total【Ａ】+【Ｂ】

Property type

Expected disposition values

Total
expected
disposition
value

Revitalization

No. ofproperties

Development

No. ofproperties

Office, Commercial buildings

24,387

22

1,738

3

26,126

31,631

2,923

34,554

Hotel

2,755

1

3,140

2

5,895

4,539

7,465

12,004

Condo/Apt buildings

21,557

44

6,423

3

27,98026,93621,121

48,058

-

-

7,149

14

7,149

-

12,291

12,291

Other

1,461

3

-

-

1,461

2,405

-

2,405

TOTAL

50,16070

18,452

22

68,61365,512

Detached houses

Revitalization Development

43,801 109,314

・The expected disposition values above are based on Tosei’s estimate of revenue corresponding to the properties currently in the inventories. These are calculated using information available
as of May 31, 2017. Actual amounts may be vary significantly from the estimates, due to various factors.
・The inventories above represent carrying amount as of May 31, 2017 and may increase due to such factors as value-up investments and construction costs.
・The condominium buildings and detached houses are counted as each project being one property .

Property type (Expected Disposition Value)

Area (Expected Disposition Value)

Property Size(Expected Disposition Value)

Note: Detached houses and condominiums are classified by one unit’s price.
Others2%
Detached houses Office, Commercial
11%
buildings
32%

Condo/Apt buildings
44%

Hotel
11%

Chiba Saitama
6%
7%
Kanagawa
18%
Tokyo (except
the Tokyo's 23
wards)
23%

The 23
wards ofTokyo
46%

More than¥2 billion
36%
Between ¥1and ¥2billion14%

Less than ¥100
million33%
Between ¥100
Between ¥0.5 and ¥500
and ¥1
millionbillion6%
12%

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

13

Inventories (Expected Disposition Values) Inventories (expected disposition values) totaled ¥109.3 billion as of May 31, 2017
 Condo/Apt buildings ratio is the highest by type.

(¥ million)

As of theend of
FY2008

As of theend of
FY2009As of theend of
FY2010

As of theend of
FY2011

As of theend of
FY2012As of theend of
FY2013As of theend of
FY2014As of theend of
FY2015

As of theend of
FY2016

As of theend of
May 31,
2017

60,48731,264

22,251

15,206

18,595

18,497

27,18534,99837,82034,554

―

―

―

―

―

―

―

2,336

4,151

12,004

Condo /
Apt
buildings

14,327

12,84430,58926,62723,47622,70913,881

23,497

39,57348,058

Detached
houses

―

―

558

3,727

7,701

13,225

15,247

11,184

13,673

12,291Others

1,672

479

220

1,021

354

393

4,243

2,348

4,208

2,405

TOTAL

76,48744,58853,62046,581

50,12754,82560,55774,36599,428109,314

Office,Commercial
buildings

Hotel

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

14

Summary of Cash Flow Statements (Consolidated)(¥ million)

Six months
Six months
ended May 31, ended May 31,
2017【 B】
2016【A】※1

yr/yr Change【 B】 -【A】

2,497

3,367

7,240

5,857

-1,382

154

190

35

-8,185-1,182

7,002-79-2,366-2,287-5,455

535

5,991

-15

-6

9

Increase / Decrease in investment properties-1,650

-193

1,457

Other, net-3,789734

4,524-1,739-11,906

11,422-234-11,657

Cash dividends paid

-771

-1,060-289

Interest expenses paid

-481

-442

39

-3

-1

1

Increase / Decrease in cash and cash equivalents

3,840

1,293

-2,547

Cash and cash equivalent at beginning of period

18,791

21,640

2,849

-4

0

4

22,62722,934306

Cash flows from / used in operating activities
Profit before tax
Depreciation expense
Increase / Decrease in inventories
Other, net
Cash flows from/used in investing activities
Increase / Decrease in PPECash flows from/used in financing activities
Increase / Decrease in borrowings

Other, net

Effect of exchange rate change on cash and cash equivalents
Cash and cash equivalent at end of period-870

10,166※2

Cash Flows from Operating
Activities *1

Cash flow from operating
activities was ¥2.4 billion
increase, due mainly to ¥5.8
billion increase in profit before
tax, ¥1.1 billion due to increase
in investment properties and¥2.1 billion decrease due toIncome taxes paid.

Cash Flows used in Financing
Activities*2
Cash flow from financing
activities was ¥1.7 billion
decrease, due primarily to ¥0.2
billion net decrease inborrowings, ¥1.0 billion
decrease of cash dividends paid.

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

15

Overview of Segment Results (Consolidated) I.

Revenue and Cost of Revenue(¥ million)

RevenueSix months ended
May 31, 2016 【 A】

Six months ended
May 31, 2017【B】

%

TOTAL
Revitalization
Development
RentalFund and Consulting
Property Management
Other
Internal Transactions

Cost of revenue

30,655
15,424
10,097
2,438
1,090
1,962
202
-559

100.0
50.3
32.9
8.0
3.6
6.4
0.7
-

Six months ended
May 31, 2016 【 A】%

26,36017,948
2,144
3,010
1,661
2,212
0
-616

Revitalization
Development
RentalFund and Consulting
Property Management
Other
Internal Transactions

18,907
11,094
5,270
1,316
84
1,433
202
-495

61.7
71.9
52.2
54.0
7.8
73.0
100.4
-

100.0
68.1
8.1
11.4
6.3
8.4
-

Six months ended
May 31, 2017【B】

%

TOTAL

yr/yr change【B】 -【A】%-4,295
2,524-7,952
571
571
249
-202
-57

yr/yr change【B】 -【A】%

16,85812,382
1,744
1,579
152
1,559
-0
-558

64.0
69.0
81.3
52.5
9.2
70.5
-

-14.0
16.4
-78.8
23.5
52.4
12.7
-100.0-%-2,0481,287-3,526
262
67
126
-203
-63

-10.8
11.6
-66.9
19.9
79.6
8.8
-100.3-Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

16

Overview of Segment Results (Consolidated) II.

Gross Profit and Operating Profit(¥ million)

Gross profit

Six months ended
May 31, 2016 【 A】

Six months ended
May 31, 2017【B】

%

TOTAL
Revitalization
Development
RentalFund and Consulting
Property Management
Other
Internal Transactions

Operating profit

11,748
4,329
4,826
1,121
1,005
529
0
-63

38.3
28.1
47.8
46.0
92.2
27.0
-0.4
-

Six months ended
May 31, 2016 【 A】

%

9,501
5,566
400
1,430
1,508
652
0
-58

Six months ended
May 31, 2017【B】

%

TOTAL
Revitalization
Development
RentalFund and Consulting
Property Management
Other
Corporate expenses, etc.

7,675
3,627
3,659
1,003
430
70
-23
-1,091

25.0
23.5
36.2
41.1
39.5
3.6
-11.8
-

36.0
31.0
18.7
47.5
90.8
29.5
-

yr/yr change【B】 -【A】

資料編%-2,246
1,236-4,426
309
503
122
1
5

yr/yr change【B】 -【A】

%

6,241
4,800
-219
1,303
915
134
1
-692

23.7
26.7
-10.2
43.3
55.1
6.1
-

-19.1
28.6
-91.7
27.6
50.1
23.2
-181.6-%-1,433
1,172-3,879
300
484
64
24
398

-18.7
32.3
-106.0
29.9
112.6
91.4
-104.3-Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

17

Ⅱ. Business Development in FY2017

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

18

Forecast for FY2017 - Revenue/Profit Summary Revenue

Operating Profit(¥ million)

Profit before Tax(¥ million)(¥ million)

80,00070,00060,000

Revitalization
不動産流動化事業
Development
不動産開発事業
Rental
不動産賃貸事業69,268(Forecast )9,279

10,000Fund and Consulting
不動産ﾌｧﾝﾄﾞ・ｺﾝｻﾙﾃｨﾝｸﾞ事業
Property Management
不動産管理事業
Other
その他

8,000

Internal Transactions
内部取引

4,000

8,450

10,008

6,040
6,000
4,663

5,560

4,000
5,857
6,241

49,81849,9810
FY2014 FY2015

2014.1150,41440,0002015.11

FY20162016.1125,986

6,864

0-10,000

上半期

Dividends

17,948

12.0%

5,547

16%

5,926

9.2%

4,135

10%
8%

2,874
5,324

6,083

958

2,444

2,329

2,561

3,459

3,574

4,005

1,078

341

4,316

694

-582

-559

-1,131

2014.11
FY20142015.11
FY20152016.11
FY2016

Dividend

14%

13.7%

4,000

6,605

4,262

Dividends(¥ )(Forecast ) 12%

13,1384,210

FY2016FY20172016.11 2Q2017.11

26,360
6,000

6,112

FY20152015.11

EPS

14.4%

20,000FY20142014.112017.11上半期(¥ million)

34,743

10,0002Q FY2017

Profit for the year

25,80930,000

2,000

2,000
0

43,006

9,001

8,000

6,891

6,000

50,000(Forecast )10,00012,000-971

2017.11
FY2017（予想）(Forecast)

2,144
3,010
1,661

6%

2,000

3,931

2%

2,212
-616

2017.112Q
FY2017
上半期

4%

0

0%

FY2014FY20172014.11 FY2015
2015.11 FY2016
2016.11 2Q
2017.11

上半期

FY2014FY2015FY2016FY2017(Forecast )Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

19Full Year Forecasts for FY2017
FY2015FY2016 [A]FY2017 [B]

％

％

％

Revenue
Revitalization
Development
RentalFund and Consulting
Property Management
Alternative Investment
Internal Transactions
Gross profit
Revitalization
Development
RentalFund and Consulting
Property Management
Alternative Investment
Internal Transactions
Selling, general and administrative expenses,etc
Expenses related to property marketing activities (A)Selling, general and administrative expenses (B)(net of expenses related to property marketing activities)

Operating profit
Revitalization
Development
RentalFund and Consulting
Property Management
Alternative Investment
Corporate expenses, etc.
Finace income/costs(net)Profit before tax
Income tax expenses
Profit for the year

yr/yr change [B]－[A]

43,00625,986
6,605
4,262
2,444
3,574
694
-559
11,915
5,192
1,364
1,995
2,353
980
117
-88
5,099
1,063

100.0
60.4
15.4
9.9
5.7
8.3
1.6
27.7
20.0
20.7
46.8
96.3
27.4
16.9
11.9
2.5

49,81825,80913,138
5,324
2,329
4,005
341
-1,131
16,349
5,214
5,302
2,670
2,193
1,090
14
-136
7,021
1,806

100.0
51.8
26.4
10.7
4.7
8.0
0.7
32.8
20.2
40.4
50.2
94.2
27.2
4.3
14.1
3.6

69,26850,414
6,864
6,083
2,561
4,316
0
-971
18,314
10,646
1,242
3,036
2,389
1,197
-111 -86
8,305
2,303

100.0
72.8
9.9
8.8
3.7
6.2
0.0
26.4
21.1
18.1
49.9
93.3
27.7

4,035

9.4

5,214

10.5

6,891
4,174
534
1,797
1,464
146
178
-1,404
-851
6,040
1,904
4,135

16.0
16.1
8.1
42.2
59.9
4.1
25.7
14.0
9.6

9,279
4,001
3,674
2,389
951
141
-17
-1,860
-829
8,450
2,902
5,547

18.6
15.5
28.0
44.9
40.8
3.5
-5.2
17.0
11.1

※The orange portion shows gross profit margin and operating profit margin

12.0
3.3

19,45024,604-6,274
759
231
310
-341
160
1,964
5,431
-4,059
365
195
106
-126
50
1,283
496

39.0
95.3
-47.8
14.3
9.9
7.7
-100.0
12.0
104.2
-76.6
13.7
8.9
9.8
-865.6
18.3
27.5

6,001

8.7

786

15.1

10,008
8,414
-40
2,714
1,008
191
-116 -2,163-1,006
9,001
3,074
5,926

14.4
16.7
-0.6
44.6
39.4
4.4

728
4,412
-3,714
324
56
50
-98
-302
-176
551
172
379

7.8
110.3
-101.1
13.6
6.0
35.4
550.4
6.5
6.8

13.0
8.6

(¥ million, %)％Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

20

Assessment of business environment➢➢

Despite concerns regarding the overheating and peaking of the investment market, overall real estate transactions remain active andthe current condition of the market is strong.
No sign of falling is evident at present against a backdrop of good financing environment, and prices are expected to remain high.

Policy, Industry Conditions, etc.
•

CommonFactors••

GDP is on a recovery track, but slow growth is expected tocontinue.
A moderate increase in land prices continues.
Construction costs remain in the high range.

Offices••

The office vacancy rate remains low
Rents continue to rise slowly•

Mortgage interest rates are at a record low level. A tax
break applies.
MLIT（Ministry of Land, Infrastructure, Transport andTourism） is promoting used house distribution.
The construction of rental homes used as inheritance tax
shields is increasing.
Year 2022 issue (large supply of housing land due to theconversion of productive green land into housing land)•

Housing•••

Hotels••Funds

CommonFactors
PrivatePlacement
J-REIT

Loan
Environment•

The increase in foreign visitors to Japan continues, and thenumber topped 24 million (up 22% year on year).
The government passed the Residential Accommodation
Business Bill. scheduled for enforcement next spring.
The cap rate fell below the 2007 level due to property prices
remaining on an upward trend.
Some companies in the market began using caution toproperty prices due to the perceived overheating andpeaking.

•

The market for private placement funds and private
placement REITs is growing.

•

The Tokyo Stock Exchange REIT Index is weak due to a
global increase in interest rates.

••

Demand and Supply Trends••

Future demand will slow down due to a lower birthrate and an aging
and declining population.
The trend of the population flow into Tokyo and the return to central
Tokyo continues.

••

Demand from companies for offices is strong.
The future large supply of large offices in Tokyo’s 23 wards is
expected to remain at the past average level.

•

New condos: The contracts rate fell due to steep rise in price anddecrease of new supply.
Used condos: The number of sales is at a record high due to theperception of good value for the price.
Detached houses: Strong demand continues•••

The future new supply (Tokyo) is expected to exceed 30% of current
stock. Still concerns over guest room shortages remain towards 2030.

••

The yield gap remains high.
Against a backdrop of good financing environment investors desire toacquire property remains strong
Investor confidence continues to be strong.

•••

Property acquisitions generally remain at the same level as the same
period of the previous year.
Properties meeting investment criteria are in short supply.

Bank loans for the real estate industry exceeded 70 trillion yen to hit a record high.
Concerns over excess rental apartment supply as a result of a sharp increase in lending for the rental home business of individuals(apartment loans) caused the Financial Services Agency and Bank of Japan to step upCopyrighttheir monitoring.
© 2017 TOSEI CORPORATION, All Rights Reserved.

21

Assessment of external business environment and basic strategy
Business
environment- In the real estate market, demand fluctuates depending on economic conditions and the trends of financial economy -Under the current situation, it is hard to imagine that the market will be entirely disrupted as is seen in afinancial crisis.
That said, the current real estate business environment may go through an adjustment stage as
prices remain high.
Basic strategy

Aim to achieve sustainable growth with a business structure that can flexibly address changes, while
maintaining a business base that remains unaffected by fluctuations in the real estate market.

Priority measures
Growth opportunities

Aim to achieve sustainable growth by leveraging value recreation and development capabilities, which are our strengths.

(i) Flexible and agile portfolio management to respond to changes in demand in the market.
(ii) Proactively expand the supply of small-scale properties* for which demand is stable and we canleverage our strengths.
（ Small-scale properties: 0.1 billion yen or higher and lower than one billion yen ）(iii) Focus efforts on the acquisition of medium- to large-scale properties* as well for which demand isstrong among funds and investors in both Japan and abroad.
(Medium-scale properties: one billion yen or higher and lower than three billion yen
Large-scale properties: three billion yen or higher）

Preparation foradjustment stages

Establish a “sound and stable management base” and a “business structure that does not rely on real estate price increases.”(iv) Raise the stable earnings ratio (from 40% to 50%) of the Group in preparation for market downturns.
Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

22

Forecasts for FY2017 second half -Segment Overview➢➢➢

The real estate investment market remains active, and demand from investors and companies for property acquisition will be high.
Promote the sale of large to medium-sized properties in the second half of the fiscal year after the completion of renewal constructions,leasing, etc.
Also focus on acquisitions for properties to sale in next fiscal year and beyond that are somewhat behind.
【① Revitalization Business 】(￥million / %)FY2017 (Full year)
Forecasts

FY2017 (First half)％

Results％

FY2017 (Second half)

progress

Forecasts％

69,268100.0%

26,360100.0%

38.1%

42,908100.0%

Revitalization

50,414

17,948

6,864

Rental

6,083

Fund and Consulting

2,561

Property Management

4,316

68.1%
8.1%
11.4%
6.3%
8.4%
0.0%
-2.3%
36.0%
31.0%
18.7%
47.5%
90.8%
29.5%
9.4%
23.7%
26.7%
-10.2%
43.3%
55.1%
6.1%
112.3%
22.2%
14.9%

35.6% ① 32,465

Development

72.8%
9.9%
8.8%
3.7%
6.2%
0.0%
-1.4%
26.4%
21.1%
18.1%
49.9%
93.3%
27.7%
8.9%
14.4%
16.7%
-0.6%
44.6%
39.4%
4.4%
222.8%
13.0%
8.6%

75.7%
11.0%
7.2%
2.1%
4.9%
0.0%
-0.8%
20.5%
15.6%
17.8%
52.2%
97.9%
25.9%
7.6%
8.8%
11.1%
3.8%
45.9%
10.3%
2.7%
415.3%
7.3%
4.6%

Revenue0

Others-971

Internal Transactions

18,314Gross profit
Revitalization

10,646Development

1,242

Rental

3,036

Fund and Consulting

2,389

Property Management

1,197

Others-111-86Internal Transactions
Operating profit

10,008

Revitalization

8,414

Development-40

Rental

2,714

Fund and Consulting

1,008

Property Management

191
-116

OthersCorporate expenses, etc.

-2,163

Profit before tax

9,001

Profit for the year

5,926

2,144
3,010
1,661
2,212
0
-616
9,501
5,566
400
1,430
1,508
652
0
-58
6,241
4,800
-219
1,303
915
134
1
-692
5,857
3,931

31.2% ② 4,719
49.5%

3,073

64.9%

899

51.3%

2,103

0.0%

0

63.4%

-354

51.9%

8,812

52.3%
32.2%

① 5,079
② 842

47.1%

1,605

63.1%

880

54.5%

544
-112

67.4%

-27

62.4%

3,766

57.0%

3,613

547.5%

179

48.0%

1,411

90.8%

93

70.2%

56

-0.9%

-117

32.0%

-1,470

65.1%

3,144

66.3%

1,995

※The orange portion shows gross profit margin and operating profit margin✓ Sales in the first half of FY2017 were strong, including 37 units
largely of small properties.
✓ Acquisition so far has been 21.2 billion yen out of the scheduled
47.0 billion yen* (expected disposition value and including
contracted, undelivered properties)( Plan for the second half )➢ The property supply for Tosei Reit based on the sponsorshipagreement is included.
➢ For general customers, focus on large to medium-sizedproperties valued at over one billion yen while continuing tosell small size properties.
➢ Improve acquisitions.
➢ Revitalize and lease acquired properties and commercialize
them at an early stage to prepare for the next year.
【② Development Business】✓ Sales of detached houses (including housing constructions andlands lots) in the first half of FY2017 were below the plannedlevel, in which 55 units were sold out of 159 units planned forthe full year (detached house : 50/146, housing constructions
and lands lots : 5/13.)✓ All 37 units in the Yutenji condominium scheduled for delivery
in the next year were sold in one year.
✓ Acquisition so far has been 13.9 billion yen out of the scheduled
28.0 billion yen* (expected disposition value and including
contracted, undelivered properties)( Plan for the second half )➢ Focus on the sale of detached houses, and aim for the sellout of
the Yutenji condominium before its completion.
➢ Promote building development (8 projects have been acquired).
➢ Focus on acquisition.
【Rental / Fund and Consulting /Property Management Business】➢ Continue to focus on increasing numbers of properties undermanagement and AUM, and utilization of rental units.
Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

23

Initiatives in FY2017 second half (Acquisition)
Strengthening Acquisition➢ Increase the amount of acquisition while carefully selecting assets to invest.
(increase the amount of property information, accelerate examinations and consideration and improve negotiation power.) Purchase target Acquisition Strategies

Annual Acquisition Amounts➢ Aim for a step-by-step expansion keeping cash positions and equity(delivery basis, expected disposition values)

ratios in mind.
➢ Examine flexibly by collect wide-ranging information without
limiting property types.

FY2017¥80.0 billion
Forecast
FY2015¥45.1 billion

FY2016¥66.8 billion

Contract basis
progress was
about ¥26.2 bn.
(End of May 2017)➢ Acquire excellent properties aggressively with a high revitalization←¥35.2 bn.
includingcontracted,
undelivered
properties.

potential such as low operation, vacant buildings or age-related
deterioration, leveraging our revitalization capacity.
➢ Implement efficient acquisitions using a range of methods such as

M&A.

➢ Flexibly take suburban properties (along the railways in the Tokyo metropolitan commuting area) into consideration.
The prices of offices in central Tokyo are increasing and the cap rate is falling.
While focusing on small to medium-sized properties in central Tokyo, also acquire high income-generating properties near
suburban train stations by assessing their liquidity and profitability.
Examples of properties to be purchased during second half
Breakdown of inventories by area
( Expected disposition values )Tokyo
23 wards
東京23区

Outskirts
of Tokyo
Kanagawa
東京都下
神奈川
千葉Chiba
埼玉 Saitama
その他others

2 0 1 7.2Q

46%

23%

18%

7% 6%

2 0 1 6.4Q

48%

19%

14%

10% 7%

2 0 1 6.2Q

53%

13%

19%

10% 4%

Hachioji-shi income-generating
commercial facility

Tamagawa-gakuen incomegenerating apt building

Seiseki-sakuragaoka incomegenerating office building

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

24Initiatives in FY2017 second half (Revitalization business)
Sales[ Sales plan for the second half ] Small-scale; 22 properties, large to mid-scale ;11 properties[ Sold during the first half ] Small-scale; 33 properties, large to mid-scale ; 4 properties
Trends in inventory volume by property size

➢ Small-scale properties below one billion yen
Wealthy individuals•(Total of revitalization and development business,
Expected disposition values )Smaller companies

High fluidity and demanded widely by wealthy individuals, general companies, etc.
⇒Collect wide-ranging property information and carry out acquisition and sale in thesecond half of FY2017 as well.

109,31499,428➢ Medium to large-scale properties over one billion yen
Medium to large-sized corporates•

86,097

Private funds, Reit
74,365

1億円未満
37,293

17,616

34,571

13,093

3,239
14,716

Kinshicho incomeKameido office building
generating office building(Empty building)

15,116

Properties overtwo billion yen

1～10億円[Medium to large-scale properties] Properties for sale in 2nd half

Supporting Tosei Reit’s growth38,97629,930

While the property acquisition market is highly competitive, the demand from funds andinvestors is high.
⇒Took time to increase property value by raising profitability, etc. and completed
revitalization. Start the sale of revitalized properties in the second half of FY2017 andalso focus on acquisition while paying attention to the portfolio balance.

Machida-shi incomegenerating apt building(¥ million)

18,882
21,432

Properties
10～20億円
hundred million
to one billion yen

16,57730,45021,78019,1332 0 1 5.4Q

2 0 1 6.2Q

Properties
one billion to twobillion yen

2 0 1 6.4Q

36,341

Properties less than
100 million yen(detachedhouses,
20億円以上condominiums andsuch)

2 0 1 7.2Q

資産規模推移Scale of assets（百万円）(¥ million)• Scale of assets is 36.1 billion yen.
• Tosei provides full support for property sourcing
and leasing, aiming for the early achievement ofan asset size of 50 billion yen.
2015.42015.102016.42016.102017.4

Properties with preferential negotiation rights
Copyright © 2017 TOSEIAll Rights Reserved.
(AsCORPORATION,
of July 5, 2017）25

Initiatives in FY2017 second half (Revitalization business)
Promote Added Value Creation Strategy
Promote the business model of creating added value as our strength
in preparation for an adjustment phase when an rise in property
prices cannot be expected.

Create added value properties by using real estate solutions not
only limited to repair and restoration.

Revitalized building

Aging building✓

Create value using the items in our original VALUE UP 32
survey (Design, energy saving performance, Security andfunctions of facilities, etc.)✓

Constantly place emphasis on the balance between costeffectiveness and design(excessive investment is not necessary for revitalization.)

Regenerating value,
using Tosei’s expertise
Improving the functionsof facilities, safety
performance, energy
saving performance, andimproving profitability
through leasing activities

Competitiveness is lost,
and the occupancy rate
and rents have fallen.

Profitability has improved.
The value of the realestate has increased.

Two techniques for increasing value
Revitalization(hardware)

X
Revitalization(utilization)

Increase the appeal of buildings through the repair and restoration of appearance,
facilities, etc. that exploit property characteristics.

“In-house Value Up Lab” fornew design research and product planning

Propose new ways of using property and provide solutions to improve profitability suchas reducing expenses and recover occupancy rate .
Our strength is the ability to assess market needs and take sufficient time to meet theseneeds.
➢

Add company housing and dormitories to the range of revitalization.
••➢

Turn the idle properties of companies that are no longer needed into incomegenerating properties.
Develop the optimal plan according to property characteristics.

Increase the number of low-utilization or vacant buildings handling••Turn properties into highly profitable properties by inviting good tenants andreducing expenses.
Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.
Match customers in need of property for themselves to use through major renewal.

26

(Reference) Revitalization (utilization) case 1
Conversion of company housing to rental condos
HOUSE Kita-Kashiwa Apartment

グロブナーAcquisition date:Mar.2015/retained property
Location: Kashiwa-shi, Chiba
Completion: No.1,2 1992 (25 years old)
No.3 2008 (8 years old)
Rent room:2LDK~3LDK 149 units

Renovated andleasing now• Acquired three former company housing buildings as totally vacant properties.
• Completed renovations in 2008. Excellent property with a range of facilities.
⇒Converted to rental condos with common areas offering lifestyle-enhancing facilities
using expansive spaces to make them even more appealing.
⇒Added car, motorcycle, and bicycle parking spaces to convert from single-person use
to family use. Replaced water tanks and water pipes to accommodate family needs.
Key Points

Replaced some residential units to add value to theunits, ensuring that they can better serve families withsmall children, which are the target tenants.
Built new facilities including a children’s playroom
and study room to enhance the common areas.
Organized a project team run by female employees toincorporate a women’s perspective.
The team creates detailed plans for concepts, functions,and specifications.

Residential spaceChildren’s playroom(with playground equipment, breastfeeding room, diaper-change area, andparent/child bathrooms)

Party room(with a kitchen, large TV, and wooden deck)

Study room
(café-like interior)

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

27

(Reference) Revitalization (utilization) case 2

Renovated andfull occupancy

Conversion from an employee dormitory to a concept condo
T-Rhythmic Soka Apartment

グロブナーAcquisition: Feb.2016 / retained property
Location: Soka-shi, Saitama
Completion: 1994 (23 yeas old)
Rent room:1R~3LDK 52units• Acquired a former employee dormitory as a completely vacant building.
• While the building has facilities that are unique to a dormitory, such as a cafeteria, shared
laundry, and shared bathroom, the residential units are simple with no features.
⇒Incorporated a new concept into the property and made it into a musician-friendly,soundproof condo where tenants can enjoy playing musical instruments to make it
more competitive and achieve full occupancy at an early stage.
Key Points• Soundproof single-room residential units to target a wide range of age
groups.
• Converted the laundry and bathrooms in the common area to a storage
space to increase both tenant convenience and profitability.
Soundproof facilities(from all directions,
including walls, doors,
floors, ceilings, andcorridors)• Added value to the entrance

Key Points(used marble tiles to add a luxurious feel to the entrance, installed
decorative tiles in the rooms, and repaired the postboxes and elevator area)• Converted aformer cafeteria toa party room thatcan be used freely.

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

28

(Reference) Revitalization (utilization) case 3
Conversion from an employee dormitory to a shared house
Aoba-ku “share house” project

Under
renovation

Conversion to a hotel

Consideringchange of use

北柏

Ueno Tosei Building II• Acquired a former Completion : end of July 北柏• Acquired as a completely
women’s dormitory as a (scheduled)vacant office building
Acquisition: Feb.2017/ retained property
completely vacant building.
Location: Taito-ku,Tokyo⇒Considering a change of use• No toilet, bath, cooking
to a hotel
Completion:2005
(12
years
old
at
time
of
stove, nor installation
sale)
space for them inindividual residential units
Floor area :4,464.26㎡(1,350 tsubo)⇒Considering conversion
to a Shared residence
Key Points

Key Points• Excellent location that is a three-minute walk from Ueno
Station. Serves the needs of both tourism and businesses inan area where further growth in demand can be expected.
Considering a change of use from offices to a business hotel.

Acquisition:Mar.2017/
retained property
Location: Yokohama-shi, Kanagawa
Completion: 1988 (30 year old)
Floor area: 1,078.16㎡（326 tsubo）
Rent room: 1R 40units• Renovated the entrance, existing lounge, and shared kitchen asa shared house targeting people in their 20s and 30s and turned
it into a gathering space for people to enjoy.
• Installed individual mailboxes and home delivery boxes toimprove functionality.

Image of the common space(utilizing a natural style of design
popular among women in their 20s)

Image of changing use to a hotel
Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

29

Initiatives in FY2017 second half (Development Business)
Sales of detached houses

Sales of condominiums• Sales target for FY2017 is 159 units (146 detached houses, 13 housing constructions➢ THE Palms YUTENJI Master Placeand lands lots). Continue to focus on selling houses in the second half.
• Aim for the sellout of the Yutenji• Aim to reduce construction expenses and increase the quality of The Palms
condominium before its completion.
Court series, Tosei's detached house brand, by establishing Tosei's own
construction management system.

THE Palms court KunitachiFirst property with Tosei’s own construction management system（THE Palms court Kamakura-shiromeguri）

THE Palms YUTENJI Master Place
Location: Setagaya-ku, Tokyo Total units: 89units

Implement new whole building development ( products for next fiscal year and beyond )➢Development of condominiums, hotels and commercial facilities are underway.

Projects in progress
3 projects
Condominiums
Commercial
facilities

Hotels（Location;Yutenji, Chofushi, Sagamihara-shi )3 projects（Location;Minamiaoyama,
Nerima,Hon-chiba）

2 projects（Location; Kanda,Ueno）

THE Palms Chofu (tentative name) 162 units
Minami aoyama Commercial facility
Scheduled to be completed in September 2018
Scheduled to be completed in November 2017TOSEI HOTEL COCONE
Scheduled to be completed in November 2017
Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.
*The photos are conceptual images and may subject to change.

30Trends in Dividends

Trends in Dividends

FY2011FY2012FY2013

FY2014FY2016(Forecast)

FY2015FY2017(Forecast)

Annual Dividends
Per Share(¥)* 5.00* 6.00

8.00

12.00

16.00

22.00

25.00

Payout ratio(%)

30.4

18.7

18.6

20.2

18.7

19.1

20.4

*The Company split its shares by 100 for 1, effective July 1, 2013. The dividends per share are restatements in line with the stock splits from the FY2011.

Current Share Price
[1]

[2]

[1]÷[2]

RealMarket Capitalization

Net Book Value

PBR

PBR ※

(As of June 30, 2017)(As of May 31, 2016)¥38.5billion¥43.9billion

Stock PriceBook Value Per Share(Same as above)(Same as above)¥798.00¥909.37(As of June 30, 2017)

PER(Forecast)※In the case of taking ¥15.23
billion unrealized gains on
investment propertyes (as of
Nov.30,2016) into account

0.88

0.65

6.50

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

31

Ⅲ. Reference Materials for the first time visitors to Tosei

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

32

Group Overview As of May 31, 2017
Company name

AddressTOSEI CORPORATION Board of Directors

4-2-3 Toranomon, Minato-ku, Tokyo Audit & Supervisory Board

constituted by 5 directors(including 2 Independent directors)

Corporate
governancesystemconstituted by 4 members(2 full time, 2 part time auditors.
All from outside the Company
and independent audit & supervisory )Date establishedFebruary 2, 1950

Paid-in capital¥6,421,392 thousand Organizational form

Representative

Seiichiro Yamaguchi, President and CEO

 Nominating and

Fiscal year-end

November 30

Tosei Community Co., Ltd.
Tosei Asset Advisors, Inc.
Tosei Revival Investment Co., Ltd.
Tosei Singapore Pte. Ltd.
Urban Home Corporation
Tosei Hotel Management Co., Ltd.

Company with Audit &Supervisory Board Members

Employees

162 (Non-consolidated) 384 (Consolidated)

Stock listing

Tokyo Stock Exchange, First Section (8923)
Singapore Exchange, Mainboard (S2D)

Compensation Advisory Committee

Mainaffiliatedcompanies

Total outstanding shares

48,284,000 shares
Number of shareholders

Share status

5,971
Shareholder composition
・Individuals/Other
・Foreign companies
・Other companies
・Financial institutions
・Securities companies

40.08%
35.47%
12.79%
9.37%
2.28%（19,353,617）（17,125,693）（6,175,300）（4,526,200）（1,103,190）

Investment
Trust
Management
Company

Tosei Reit Investment Corporation(3451) ※※The investment corporation, whose assets aremanaged by Tosei Asset Advisors, Inc. , a whollyowned subsidiary of Tosei Corporation

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

33

34

History of Tosei Corporation
1950: Established Yukari Kogyo Co., Ltd, the predecessor of Tosei Corporation
1983: Tosei Building Co., Ltd.
1994: Mr. Seiichiro Yamaguchi assumed the role of President and CEO.
Revenues(¥ billion)

70
65
60
55
50
45
40
35
30
25
20
15
10
5
0

Changed its name to current“Tosei Corporation”

Registered for
Financial Instruments Business Registration; Type II
Investment Management Business; Investment
Advisor and Agency Business
Introduced commercial building
Brand T’s BRIGHTIA

Relocated its head office
to Toranomon

Acquired 100%
ownership ofUrban Home.*6

Tosei Reit Investment
Corporation Listing

EstablishingTosei HotelManagement※5

Listed on Singapore
Exchange

Listed on Tokyo Stock
Exchange Second
SectionLaunched
Established TRI.*1
Acquired 100% ownership of TC.*2

Launched
Revitalization businessConducted
real estate M&A
through LBO

Restylingbusiness

Established
Tosei
Singapore*4

Established TAA*3

Began developing office andcommercial buildings

Listed on
Tokyo Stock
Exchange,
First Section

Registered for Real Estate
Investment Consulting
Changed its name to

Listed on
JASDAQ“Tosei Fudosan”
Begandeveloping
condominiums

Began developing
detached houses

Set up private
placement fund1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
（Forecast）

Notes:
1. TRI: Tosei Revival Investment Co., Ltd.
2. TC: Tosei Community Co., Ltd.
3. TAA: Tosei Asset Advisors, Inc. (Name changed from Tosei REIT Advisors, Inc. in April 2008)
4. Tosei Singapore: Tosei Singapore Pte. Ltd.
5．Tosei Hotel Management Co., Ltd.
6. Urban Home Corporation

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

34

The Tosei Group's Mission

The Tosei Group's Mission
Create new value andinspiration*4 in all aspects of real estate*3
as a global-minded*1 group of
seasoned professionals*2.

*1 Global-minded✓✓*2 Professional✓✓✓*3 All aspects of real estate✓✓✓*4 New value and inspiration✓✓✓

Dually listed on the Singapore Stock Exchange. Efforts are being to attract inbound investments for Japan and promote outboundinvestments.
Adopted the International Financial Reporting Standards (IFRS). Disclosure documents are disclosed in both Japanese and English.
Have comprehensive knowledge of transactions conducted in the greater Tokyo area with our business focused on the area. Have agood grasp of area characteristics, rental needs, investor needs, investors’ trading trends, and expected yields, among other matters.
Offer optimal plans for revitalization and development for clients by leveraging skills and expertise that we have cultivated over years.
Have an internal organization that functions as a first-class architect office.
Broad product range (office buildings, commercial facilities, hotels, condominiums, detached houses)
Broad customer base (real estate funds, REITs, general business corporations, wealthy individuals, end users)）
Diverse means of acquisitions (trust beneficiary rights, real estate M&A, real-estate collateralized loans)
Improve profitability through the revitalization of aged properties from both tangible and intangible perspectives. Create added-value
in existing real estate.
Provide residential and office environments that are eco-friendly, secure, safe, and sophisticated.
Contribute to the creation of a sustainable society through business (reginal vitalization, community development, measures to deal
Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.
with an aging and diversifying society)35

Business Overview
 Tosei operates its business mainly in grater Tokyo area as a comprehensive real estate company.
 The mutually complementary relations through the five businesses enables flexible portfolio management to cope withmarket condition changes.

5 Businesses

Real estate transaction business● Revitalization BusinessIn our Revitalization Business, Tosei acquires existing office buildings
and condominiums, and resells them as revitalized real estate after
improving their equipment and designs, installing eco-friendly facilities
and undertaking other renovation work.
Project period: a half year to a year
● Development BusinessIn our Development Business, Tosei acquires land for development, anddevelops and sells new office buildings, condominiums, residential
houses, commercial buildings, hotels and other buildings, taking into
account the needs and characteristics of the area.
Tosei also has an in-house, first-class architect office obsessed withquality planning and design skills and fully utilizes these in"manufacturing.“
Project period: one to two years

Stable business● Rental BusinessIn our Rental Business, Tosei generates steady income by leasing officebuildings, condominiums, and other properties owned by the Group, mainly inTokyo. As of May 31, 2017, Tosei hold 79 income-generating properties.
● Fund and Consulting BusinessIn our Fund Business, Tosei is engaged in the asset management of properties
owned by real estate funds and Tosei Reit, as well as acquiring and selling
properties to meet the needs of a wide variety of investors, and offering
advisory services to companies.
As of May 31, 2017, the balance of assets under management totaled
around ¥500 billion● Property Management BusinessIn our Property Management Business, Tosei undertakes general property
management operations, such as management, cleaning and renovation work
including fire protection inspection on condominiums and office buildings
through Tosei Community Co., Ltd. As of May 31, 2017, the number ofproperties managed by the Company was 634. (Office ,Hotel, School and
Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.
36
Others: 385, Residential ：249.)

Products
 The flagship real estate inventory is typically small to (and) medium-sized properties where high transaction volume is expected.
 Providing a variety of products targeting a broad range of customers from institutional investors to end-users.

Revitalization Business’(renovated properties) product lineup

Office Building

Commercial Property/
HotelIncome Generating
Apartment

Development Business’(new properties) product lineup

Large Office Building

Office Building

Rental Apartment

Condominium

Commercial Property

Revitalization (value-added) cases
Office Buildings

removedFacility improvement(asbestos removal)

Condominium

Illegal structure
removalEntrance improvement,
Introduction of security system

After

Hotel
(under construction)

BeforeCourtyard improvement

House
Copyright © 2017 TOSEI CORPORATION,Detached
All Rights Reserved.

37

Summary of Properties Sold – Property Size / Revenue Less than \100 million(¥ million）

Between \100 and \1,000 million

Between \1 and \ 3 billion

Over than \3 billion

50,00043,80845,00040,85440,00038,5093,373

35,00033,091

32,591
24,6144,088

30,00027,44526,517

10,102

11,016

16,86225,0008,401
19,49320,0008,525
14,867

15,00010,00010,998

8,513

6,294

11,805

1,221
FY2005

FY2006

4,969

3,543

20,015
6,372

12,6698,877

9,852
10,7097,264

12,086

9,456

8,213
2,571

5,422

10,850

1,076

2,418
12,910

0

6,218

6,251

7,351

17,34817,297

1,718
2,119

8,407
5,000

3,530

4,388

12,237

19,831

1,895

1,594

2,818

FY2007

FY2008FY2009FY2010FY2005

FY2006

12,997
7,949

7,388

6,789
2,933

FY2011FY2012FY2013

FY2014FY2015FY20162Q
FY2017FY2010FY2011FY2012FY2013

FY2014FY2015FY2016

0
4
9
18
31

0
1
8
24
33

2
1
9
31
43

1
10
23
26
60

1
7
19
25
52

2
6
24
42
74

No. of projects
FY2007

FY2008FY2009Over than \3 billion
0
0
1
2
2
Between \1 and \3 billion
5
6
6
4
2
Between \100 and \1,000 million
16
22
16
31
23
Less than \100 million
2
3
3
6
4
Total
23
31
26
43
31
* The condominiums, detached houses and Restyling are counted as each project being one property* The condominiums and detached houses are classified by one unit’s price.

1
4
15
7
27

2Q
FY2017
0
4
30
25
59

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

38

CSR Activities
Based on its corporate philosophy, Tosei strives to respond to the expectations of society by strengthening its business foundations tomaintain a sound growth, taking initiatives to reduce the environmental burdens, and carrying out all other necessary corporate
activities. By continually taking these actions, Tosei will fulfill its corporate social responsibility, aspiring to become a company thatis even more trusted by society.
Main activities for reinforcement of the
management base to maintain sound business➢Corporate Governance System
Our company by responding promptly and accurately to changes
in the operating environment to maintain sound business activities
for all other stakeholders to achieve sound growth.
Three Important Items in Corporate Governance.
Compliance

We place compliance at the top of our agenda andraise awareness of it from top management to all
employees of the Group companies

Risk
Management

Assuming every possible risk, we prepare andpractice responses for daily risk and emergency
conditions.

Information
Disclosure

We practice disclosure appropriately and on a timely
basis to all stakeholders including shareholders.

Contribution to the local communities➢Initiatives Through Business Activities
Changes in the social environment have created issues such as adeclining birthrate and aging population, diversifying lifestyles, andnatural disasters. The Tosei Group addresses those issues through
Revitalization business and Real estate development business.
・ Creation of Comfortable Residences
・ Development of Secure Towns
・ Creation of Comfortable Work Environment➢Support for Disaster-Stricken Areas
Continuing voluntary activities to support areas
affected by the Great East Japan Earthquake .

Painting rusted playgroundequipment at nursery center

Eco-Friendly Activities by Employees➢Environmental awareness-raising activities
The project team, which consists of members selected from eachdepartment, plays the leading role in internal eco-friendly activities.

Compliance training

Expand the IR information available
on our website (disclosure)

Rooftop gardening

room- temperatureParticipation in cleaning

Copyright ©managing2017 TOSEI CORPORATION, All activities
Rights Reserved.

39

CSR Activities
Since 2009, the Tosei Group has been striving to reduce the burden on the global environment bypromoting human and eco friendly corporate activities under the Tosei Eco Declaration.
Eco-friendly building Revitalization and Development

Tosei Group Eco Declaration
Eco Declaration
In order to achieve our slogan "Heart into the City", the Tosei
Group declares its intention to promote corporate activities that arefriendly to people and the environment and to work to reduceburdens on the environment, while keeping true to our philosophy"To create new value and inspiration in all aspects of real estate."

Eco-Mission (Action Policy)
In accordance with "Tosei Group Eco Declaration", we promote
activities related to the three missions.
Mission 1 We will enhance the system to promote environmental practiceMission 2 We will comply with environmental laws and regulations andprovide environmental training
Mission 3 We will inform our activities to stakeholders

Promoting Greening
Since 2006, Tosei Group has been proactive in promoting greeningof the properties it owns. A cumulative total of 74 buildings with anarea of approx. 3,670m2 have been greened to date (as of November
30, 2016). We not only green newly built buildings but also actively
green pre-owned offices and condominiums as well.

Wall greening

Rooftop greening

When planning new properties (new development and value-up), in
accordance with the characteristics of the properties, the Tosei Groupexamines which products from more than 40 items of its uniqueenvironmental product list (LED, energy-saving glasses) are to be
adopted, and selects environmental products from the perspective ofenergy and resources saving, and many other viewpoints.
greening rooftops, rooftop gardening, garden terrace
Energy saving glasses, sashes➢ Energy-saving gas-fired water heater➢ Use recycled materials➢ Renting bicycles, car sharing➢ Water-saving toilets➢➢

Three office buildings developed by
Tosei have obtained the A rank
certification of the Comprehensive
Assessment System for Built
Environment Efficiency (CASBEE).
➢ CASBEE certified buildings
・ Heiwajima Tosei Building・ Kamata Tosei Building
・ Toranomon Tosei Building

Heiwajima Tosei Building

Eco-friendly condominium
THE Palms Tukishima
Introducing solar power generating
system and rooftop gardening
Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.

40

Please visit our website.

For Contact:
Accounting
Department
経営企画部
TEL：03-3435-2864
Tel：+813-3435-2865
FAX：03-3435-2866
URL : http://www.toseicorp.co.jp
Fax：+81 3-3435-2866
URL : https://www.toseicorp.co.jp/english/

DISCLAIMER
Except for historical facts, all plans, forecasts, strategies and other information contained herein are forward-looking statements. Forward-looking statements
include but are not limited to descriptions of future events and performance containing words such as or similar to “believe,” “expect,” “plan,” “strategy,”“anticipate,” “forecast,” and “estimate,” and are based on judgments derived from the information available to the Company at the time of publication. Various
factors could cause results to differ materially from any projections presented herein. The Company reserves the right to maintain or change its projections
regardless of any new information, conditions or changes in performance. These materials are for informational purposes only, and should not be construed as arecommendation to invest in the Company.

41

Copyright © 2017 TOSEI CORPORATION, All Rights Reserved.