JINUSHI | 3252 (TSE Prime)
Strategy Advisors, Inc.
Keita Fujino

Company Report
April 9, 2024

JINUSHI’s Objective is to Be a Major
Stock Price and Volume
Landowner in Japan by Driving
Growth of Their REIT with the Supportof Both Investors and Tenants
JINUSHI (hereafter "the company") is the only real estate financial productmanufacturer in Japan that specializes in leased land and does not build its own
buildings but invests only in the land. The company concludes 20-50 year fixedterm land lease contracts with a wide variety of tenants and develops the land it
purchases as land with long-term stable cash flow based on the contracts. JINUSHI
Private REIT Investment Corporation ("JINUSHI REIT"), a private REIT operated bya subsidiary, holds these leased lands as a long-term stable landowner (“JINUSHI”
means landowner in Japanese) and provides investment opportunities toinstitutional investors such as pension funds and both life and non-life insurancecompanies. The company's JINUSHI Business has both the function of creatingleased land and the function of holding and managing leased land over the longterm as a "stable JINUSHI".
The founder and former president, Director Tetsuya Matsuoka, conceived of andestablished the JINUSHI Business of "investing only in land," which was consideredinsane within the real estate industry; with his inspiration based on his experienceof commercial facility’s development in the company he had worked for. With thelaunch of JINUSHI REIT's operations in 2017, the company has established abusiness model that aims to be a "major landowner in Japan" as JINUSHI REIT
grows.
The company's "corporate DNA" is its "pride in being a pioneer in the JINUSHI
Business". Based on this pride, the company's "track record for reliability," which it
has built up over the past 20 years since its founding and its "JINUSHI REIT " as astable landowner are its greatest resources that are difficult to be imitated and are
unrivaled by any other company.
The medium-term management plan announced at the same time as the company
changed its name in 2022, calls for net income of 7 billion yen and JINUSHI-REIT
assets of 300 billion yen in the FY12/2026. Moving forward, the company's
performance will be monitored based on its progress toward these targets.
The company's stock price has been slowly edging up since bottoming in 2020
when the new Corona pandemic began, but valuations have remained low over the
past five years. As both the recognition of the leased land market and thecompany’s presence as a pioneer in this field increase, its superiority should bereflected in its share price, accompanied by higher valuations.

Source: Strategy Advisors

Key Indicators
Stock Price (2024/4/5)

2,551

Year-to-Date High (2024/3/28)

2,563

Year-to-Date Low (2024/2/13)

2,102

52-week High (2024/3/28)

2,563

52-week Low (2023/8/20)

1,842

Number of Shares Issued (mn)18.2Market Capitalization (\bn)

35.8

EV (\bn)

75.7

Equity Ratio (FY12/2023, %)30.9

ROE (FY12/2023 Actual, %)15.1

PER (FY12/2024 CoE, Times)

8.4

PBR (FY12/2023 Actual, Times)

1.1

Yield (FY12/2024 CoE, %)3.3

Source: Strategy Advisors

Japanese GAAP - Consolidated
FY End

Sales

YoY

OP

YoY

RP

YoY

NP

YoY

EPS

DPS

(\ mn)(%)(\ mn)(%)(\ mn)(%)(\ mn)

(%)

(\)

(\)

FY12/2020

29,886

n.a.

2,420

n.a.

2,157

n.a.

1,644

n.a.

89.9

25.0

FY12/2021

56,177

n.a.

5,475

n.a.

5,002

n.a.

3,124

n.a.

170.9

50.0

FY12/2022

49,887

-11.2

6,411

17.1

5,943

18.8

3,641

16.5

199.2

55.0

FY12/2023

31,597

-36.7

6,154

-4.0

5,718

-3.8

4,709

29.3

267.8

55.0

FY12/2024 CoE
55,000
74.1
8,200
33.2
7,300
27.7
5,000
6.2
Note: Due to a change in fiscal year end, FY12/2020 is a 9-month period, so YoY comparisons for FY12/2020 and
FY12/2021 are not available. Source: Strategy Advisors, based on Company Data

304.1

85.0

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JINUSHI | 3252 (TSE Prime)

Table of Contents
1. Real Estate Financial Products Manufacturer that Has Established a Pioneer Position in Leased Land Market ... 4
2. JINUSHI's Background from President Nishira's Point of View ................................................................... 7
3. JINUSHIs' Business Strategies from the Perspective of Management Strategy Theory .................................11
1) Approach from Michael Porter's Positioning Theory...........................................................................112) Approach from Resource Based View (RBV) ....................................................................................123) JINUSHI’s Two Resources that are Highly Difficult to be Imitated .......................................................12
4) Organization to Realize Resources that are Highly Difficult to Imitate .................................................14
5) Approach from Philip Kotler's Strategy by Competitive Position ..........................................................16
6) Reasons Companies are Not Launching Homogenization Strategies ....................................................16
4. JINUSHI Business Specializing in Leased Land .......................................................................................17
1) Premise of JINUSHI Business: What is a Fixed-Term Land Lease? ......................................................172) JINUSHI Business Strengths ..........................................................................................................19
3) JINUSHI Business Process (4-Steps)...............................................................................................21
4) JINUSHI Business Profit Structure ..................................................................................................26
5. Japan's Only Privately Owned REIT Specializing in Leased Land "JINUSHI REIT" ........................................29
6. Current Performance Trends ...............................................................................................................35
7. Medium to Long-Term Outlook ............................................................................................................40
1) Favorable Environment Expected to Continue: Medium to Long-Term ................................................40
2) Medium-Term Management Plan for Aggressive Expansion Phase While Maintaining Discipline ..............42
8. Comparison with Other Companies in the Industry .................................................................................45
9. Stock Trends and Valuations ...............................................................................................................47
10. Risk Factors ......................................................................................................................................50
11. ESG Initiatives ...................................................................................................................................51

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JINUSHI | 3252 (TSE Prime)
Executive Summary
Japan's Only Real
Estate Financial
Products
Manufacturer
Specializing inLeased Land

JINUSHI is the only real estate financial product manufacturer in Japan that specializes
in leased land and invests only in the land, without constructing any buildings. It
concludes fixed-term land lease contracts of 20-50 years with a wide variety oftenants, developing the land it purchases as leased land (land with leasehold interest)
that provides long-term stable cash flow based on the contract and then sells it toinvestors. The company's main sales destination is JINUSHI Private REIT Investment
Corporation ("JINUSHI REIT"), Japan's only private REIT specializing in leased land
operated by a subsidiary, which plays the role of “Stable landowner" holding leased
land over the long term and provides investment opportunities to institutional
investors such as pension funds and life and non-life insurance companies. The
company's JINUSHI Business has both the function of creating leased land and thefunction of holding and managing leased land over the long term as a stablelandowner.

JINUSHI's
Background From
President Nishira's
Point of View

Hirofumi Nishira, the current Representative Director and President, is a founding
member of the company, having nurtured the company together with Tetsuya
Matsuoka, the Founder and Director. Mr. Matsuoka established the company (thenNippon Commercial Development Co., Ltd.) in 2000 after being involved in commercial
facility development projects at his previous company, Kanematsu Urban Development
Corporation. His experience with a failed project he was involved in at his previous
company led him to the idea of a "land-only investment" business model, which wasconsidered to be an unorthodox approach in the real estate industry. At the time of its
founding, the company struggled to gain the understanding of the real estate industry
and its lenders, but it built up a track record of developing leased land; and in 2017,
began managing JINUSHI REIT. By putting JINUSHI REIT on a growth trajectory, the
JINUSHI Business became an unrivaled business model as a dedicated lessor of land.
The company's "corporate DNA" is its "pride in being a pioneer in the JINUSHI
Business" and as long as this DNA continues to permeate and define the organization,
the company is expected to grow significantly. Since 2022, when the company’s namewas changed, key to its long-term growth is the pursuit of its policy of becoming a"major landowner in Japan" as JINUSHI REIT grows.

Porter Prize
Winning Company.
JINUSHIs’ Business
Strategies from the
Perspective of
Business Strategy
TheoryThe company was awarded the Porter Prize (www.porterprize.org) in 2023. Based on
Michael Porter’s positioning theory, the company is focusing on a concentrated
strategy of “handling leased land without any real estate development, which many
people in the real estate industry romanticize,” and a differentiated strategy of“offering client investors unparalleled long-term stable investment opportunities in theform of real estate financial products specializing in leased land“.

Imitating JINUSHI’s
Resources Difficult:Track Record &Reliability and“JINUSHI REIT”

The company’s resources that are highly difficult for other companies to imitate are "atrack record that guarantees reliability from investors" and the "JINUSHI REIT“ itself,that plays the role of a stable landowner with tremendous trust from tenants as along-term owner. The "track record" cannot be built overnight by other companies,
nor is it possible for them to catch up with the company. Moreover, if anothercompany were to start a REIT specializing in leased land like the "JINUSHI REIT," itwould be a second-best REIT and it is unlikely that it will be favored by investors.

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JINUSHI | 3252 (TSE Prime)
Based on these factors, we believe that the company's superiority can be maintained
over the long term.
JINUSHI Business

Concerning the JINUSHI Business process, the company is primarily responsible for"purchasing land", "leasing land to tenants" and "selling the leased land". About twothirds of the leased land that is sold is incorporated into the assets of JINUSHI REIT,
which is managed by JINUSHI Asset Management (a wholly owned subsidiary of thecompany) and is offered as a financial product that meets the needs of investors whowant to make long-term investments in stable assets. JINUSHI REIT, which began
operations in 2017, has increased its capital for eight consecutive years; and as ofJanuary 2024, its AUM had expanded to 221.6 billion yen, making it the seventh
largest in the industry.

Earnings and Stock
Price Outlook

The company has announced a medium-term management plan that calls for net
income of 7 billion yen and JINUSHI REIT’s AUM of about 300 billion yen in
FY12/2026. The company's performance will be monitored based on the level of thismedium-term management plan. For FY12/2024, the company plans to significantly
increase revenues, a level that should be achievable given the level of real estate forsale at the end of the previous fiscal year and the steady purchase of properties fromthe previous fiscal year.
The company's stock price bottomed out in 2020 when the new Corona pandemic
began and has since gradually moved up, albeit with some short-term ups and downs.
Valuations, on the other hand, have remained at one of the lowest levels in the past
five years. While confidence in the superiority of the company's business model isreflected in the company's name change in 2022, the challenge is that awareness ofthe company's superiority as a pioneer in the land and leased land market is not yethigh. In other words, there is a lot of room for improvement. Since the name change,
the company has been active in investor relations, has obtained new coverage frommajor securities firms and has seen its trading value rise. As awareness of thecompany grows, the superiority of its business and business model should be reflected
in its share price through higher valuations.

1. Real Estate Financial Products Manufacturer thatHas Established a Pioneer Position in Leased Land
MarketJINUSHI BusinessInspired by Failure

JINUSHI is Japan's only real estate financial products manufacturer specializing inleased land. Founded in 2000 by Tetsuya Matsuoka, who had been developing
commercial facilities for Kanematsu Urban Development Corporation, he conceived of
the JINUSHI Business specializing in leased land based on the failure of projects during
his time at Kanematsu.
Leased land refers to "land that is leased by a third party (tenant) who owns thebuilding”. Since rights of the owner and rights of user of the land are separate, theleased land has many restrictions and has been considered significantly less liquid thanordinary real estate.

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JINUSHI | 3252 (TSE Prime)
Even with the development of the legal aspects, specializing in leased land was still
considered insane in the real estate industry and was not easily accepted. At that time,financial institutions valued leased land at about half the price of vacant land.
Nevertheless, the company continued to focus on creating and expanding the leased
land market based on its belief that what is right will surely spread throughout theworld. After the Lehman’s collapse in 2008 and the Great East Japan Earthquake in2011, the long-term stability of the cash flow from owning leased land, a productcharacteristic that is resistant to natural pandemics and market volatility, came tolight, and transactions in leased land increased. In 2017, the company began
managing JINUSHI Private REIT Investment Corporation (JINUSHI REIT), which had
AUM of 221.6 billion yen as of January 10, 2024.
From 8,309 million yen in sales and 498 million yen in net income attributable toowners of parent (FY08/3 results) when the company listed on the Nagoya Stock
Exchange Centrex in November 2007; sales have increased 3.8 times and net income
attributable to owners of parent has increased 9.5 times over the past 15 years
through FY12/2023. The company's net sales and net income attributable to owners ofparent have increased 3.8 times and 9.5 times, respectively, over the past 15 years.
Figure1 . JINUSHIs' Net Sales and Net Income
20,00080,00018,00070,00016,00060,00014,00050,00012,00040,00010,000
8,000
6,000
4,000
2,000

30,000
4,709
20,000
3,177
3,641
2,685
3,124
10,000
1,958
1,645
0

6,437

197 498

3,606
1,864
245 317 394 318 667-10,000

0-2,000-20,000-917

Net Profit（¥ mn、LHS）

Sales（¥ mn、RHS）

Note: Due to a change in the fiscal year end, FY12/20 is a 9-month accounting period. Net
income is net income attributable to owners of parent.
Source: Strategy Advisors, based on Company Data

The company's management philosophy is to "play a role in protecting the assets ofpeople around the world by creating safe real estate financial products through the
JINUSHI Business.

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JINUSHI | 3252 (TSE Prime)
Policy of Aiming to
Become a "Major
Landowner inJapan," Expressedin New Company
Name

In January 2022, the company changed its name from "Nippon Commercial
Development" to its current name, "JINUSHI". Although "JINUSHI" was originally acommonly used term in Japan, the company decided to name the company after its
business model, convinced that an era would come when it would take on newmeaning and value. As a pioneer in the creation of the leased land market, which had
never been recognized as a market before due to its low liquidity and the fact that noone had ever attempted it as a business before, the company has made clear its policyof aiming to be a "major landowner in Japan" as JINUSHI REIT grows, under theslogan "Our Company Business is JINUSHI".

Practically a Single
Model of JINUSHI
Business

Although the company's business is divided into several segments, we will analyze on
the basis it is in fact, essentially a single JINUSHI Business model. The process of"managing investors' funds" through JINUSHI REIT, a private REIT specializing inleased land, is handled by JINUSHI Asset Management, a wholly owned subsidiary.

Shareholder
Composition
Centered on
Individuals

The company was listed on the Nagoya Stock Exchange Centrex in November 2007
and was listed on the First Section of the Tokyo Stock Exchange in December 2014 (atthe same time, the company was reassigned to the First Section of the Nagoya Stock
Exchange). As of the end of September 2014, just prior to its listing on the TSE First
Section, Mr. Matsuoka held 54.7% of the company's shares. Since then, he has
gradually reduced his shareholding and as of the end of December 2023, Mr. Matsuoka
held 17.55% of the company (after taking into account treasury stock; including the
5.56% held by Godo Kaisha Matsuoka, his shareholding was 23.12%). The percentageof shares held by financial institutions and foreigners remained at 13.54% and 4.10%,
respectively as of the end of December 2023, indicating that the shareholder
composition continues to be dominated by individuals, although the percentage is on a
gradual downward trend.
Figure 2. Shareholder Composition of JINUSHIClassification
Individuals And Others
Foreign Corporations, etc.
Financial Institutions
Other Corporations
Other (Financial Instruments Firms)
Tetsuya Matsuoka
Tetsuya Matsuoka (Including the Share Heldby Godo Kaisha Matsuoka)
Hirofumi NishiraShareholding Ratio
End of FY12/2022

End of FY12/2023

83.05%
4.81%
9.93%
1.27%
0.89%

74.30%
4.10%
13.53%
7.02%
1.00%

31.37%

17.55%-

23.12%

2.00%

2.23%

Note: Percentage of shares held is calculated based on the number of shares issued less thenumber of treasury shares.
Less-than-one-unit shares are included in "Other (Financial Instruments Dealers)”
Source: Strategy Advisors, based on Company Data

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JINUSHI | 3252 (TSE Prime)
2. JINUSHI's Background from President Nishira's
Point of View
Founder andCurrent President
Come from theSame Trading
Company-AffiliatedReal Estate Firm

Hirofumi Nishira was born in Nara Prefecture in 1974 and is 49 years old. His father
worked for a trading company, and whenever his father came back from businesstrips, he often heard stories about foreign countries. When he was a university
student, he was motivated by commercial facilities (shopping centers) and would visit
whenever he was abroad. However, more than anything else, it was his encounter
with Mr. Tetsuya Matsuoka, the company's founder, through an acquaintance when he
was a university student that greatly influenced his life. Mr. Nishira's first impression of
Mr. Matsuoka was that he was an "interesting big brother" who was different fromordinary people and as such he became interested in working with Mr. Matsuoka. This
led to Mr. Nishira joining Kanematsu Urban Development Corporation, where Mr.
Matsuoka was employed, in 1998 after graduating from university.
Kanematsu Urban Development, as the name suggests, is a group company ofKanematsu (8020 TSE Prime), a trading company that was originally focused on
condominium sales. Matsuoka, a native of Osaka Prefecture born in 1961, began
working on a project in 1995, ten years after he joined the company in 1986, todevelop and lease commercial facilities. The business involved building companyowned commercial facilities on leased land and leasing them to tenants.
Two things happened here.

Establishment of
Nippon Commercial
Development (now
JINUSHI)The first was the continuation of the "The winter of Japanese trading companies"
following the bursting of the bubble economy. 1990s performance of major trading
companies in Japan had deteriorated across the board due to over-investment, and
the Asian currency crisis of 1997 dealt them a further blow. Kanematsu was no
exception to the rule and in 1999, the company implemented structural reforms to
select and concentrate its businesses. As part of the restructuring, Kanematsu Urban
Development, the group's real estate division, was forced to downsize its business. Mr.
Matsuoka took this opportunity to go independent and established Nippon Commercial
Development (now JINUSHI) in April 2000. Mr. Nishira joined the company in October2000 (Kanematsu Urban Development had taken over the property managementbusiness) and Mr. Nishira remained with Kanematsu Urban Development to ensure asmooth transfer of operations between the company and Kanematsu Urban
Development, joining the latter company after the handover was completed.

Origins of theCurrent JINUSHI
Business

When Mr. Matsuoka became independent, the Kanematsu Group kindly entrusted him
with the projects of property management that were being handled by Kanematsu
Urban Development and he was able to continue to be involved with the company. As
an independent contractor, it was a great help to have jobs that can be immediately
booked as sales. One of these projects led to the concept of the current JINUSHI
Business.
The project was for a large shopping center in Shiga Prefecture. Mr. Matsuoka had
worked on this project when he was with Kanematsu Urban Development Corporation,
where he constructed a building on a leased 5,000 tsubo (16,500 square meters) plotof land and leased it to a major general merchandise store that owned the building

7

JINUSHI | 3252 (TSE Prime)with sales of 1 trillion yen at the time. However, due to the bank's disposal of badloans and the deflationary depression, the store fell into financial difficulties and had tocease operations. Because of its good location, the company managed to find apotential successor tenant, but it refused to budge, saying it could not enter thebuilding as it was. As a result of negotiations, the owner was forced to accept theburden of additional investment in building renovation and a reduction in tenant rent.
It was now apparent to the company that it was now exposed to all the risks ofbuilding ownership.
Buildings deteriorate over time to begin with. Also, buildings built exclusively for aparticular type of business or tenant lose value when the tenants or type of businessthat uses them changes, resulting in huge additional costs. Owning a building used byothers is such a terrible thing. Through this experience, Mr. Matsuoka came up with
the idea that he could have avoided this failure, if he had only leased the land withouta building in the first place. This was the moment when the current JINUSHI Business
was born.
The Frustrationof Not Being
UnderstoodThrough the failure of the supermarket project, the company became convinced thatits business model of minimizing real estate investment risk by specializing in leased
land was the right one. However, the business model of specializing in leased land was
not taken seriously at all in the real estate industry.
The reason was that it was considered "common sense that real estate is a set of bothbuilding and land" and "construction of buildings is a core romantic notion in the realestate industry". Banks would not provide loans unless the construction were includedin the land transaction or would only evaluate the value of leased land at about half of
its real value. Although a fixed-term leasehold system was in place to ensure that theleased land would be returned as vacant land, leased land was valued in the same way
as ordinary leasehold interest, which was overwhelmingly in favor of the lessee. In
addition, most owners of leased land were individual landowners or developers who
intended to develop the land and there was no market for the distribution of leased
land itself.
In his book, "What I Think is Normal in the Real Estate Business," Mr. Matsuoka states
the following.
As they talk endlessly about romance and get involved in buying and selling land andconstructing buildings, they lose touch with reality and the risk of real estate
investment goes up and up. As the risk rises, real estate investment often leads tobankruptcy. The result of a failed investment project can lead to unhappiness,
involving ordinary investors in REITs and the like."
It should be the right business not to make investors unhappy, but they don't
understand the advantages of the business model they believe in, which specializes inleased land. They even made fun of us. Such a frustrating time lasted for a while.

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JINUSHI | 3252 (TSE Prime)
The Lehman ShockProvided the Market
an Opportunity for
Understanding the
JINUSHI BusinessIn 2007, seven years after the company was established, it was listed on the Nagoya
Stock Exchange Centrex. At that time, the company began to think that in order tocreate a market for the leased land, which did not exist in the world, it would be
difficult to convey the message that the product was good if we were the only ones
saying it was good. We thought that it would be necessary to have other people
experience the advantages of owning leased land and that if they could experience theadvantages of owning it, they would realize that owning leased land is an investment
opportunity. Even so, understanding of the business model of specializing in leased
land was slow to develop. Then along came the post Lehman Shock recession in 2008.
As is typical, the company fell on hard times and was on the verge of depleting its
cash and cash equivalents. In order to get out of its predicament, the company neededsomeone to buy the properties it owned. The company's search led it to the asset
management companies that own well-known major companies in Japan. These asset
management companies hold real estate as a means of asset management, so theyknew firsthand the difficulties and risks involved in real estate investment andmanagement. When they noticed that the company's investment in leased land had
not experienced any tenant evictions or rent reductions and that it had been able tomaintain a stable cash flow even during the credit crunch in the financial industry, theysaid, "I see. I see. I see", investment in leased land is great.
Thus, the Lehman’s collapse provided an opportunity to foster understanding of thehigh level of safety of investment in leased land and to raise awareness of the leased
land-specific business model. Similarly, the Great East Japan Earthquake in 2011 also
provided an opportunity to show that compared to other real estate-related
investments, the JINUSHI Business is characterized by "long-term stability andresistance to market volatility and natural pandemics".

Establish a Business
Model "Aiming to
Become a Major
Landowner inJapan" With
Establishment of
JINUSHI REIT

The company subsequently built up a track record of developing JINUSHI Business andbegan selling leased land to J-REITs and others. In 2012, the company launched the
JINUSHI Fund, a private real estate fund for pension funds and in 2014, it joined
Kenedix Retail REIT Corporation (now KDX Realty Investment Corporation) as apipeline support company.
In addition to accumulating know-how and achievements, the company proceeded toobtain permits and licenses required for asset management and in April 2016, JINUSHI
Asset Management was established, with Mr. Nishira assuming the position of
President and Representative Director of JINUSHI Asset Management. Then in
September of the same year, JINUSHI Private REIT Investment Corporation (JINUSHI
REIT) was established and began operations in January 2017.
The first thing Mr. Nishira did when he took charge of JINUSHI REIT was to visit
approximately 300 credit unions, credit associations and other credit unions where hecould directly approach the decision makers in a few short months. He had a hard time
obtaining the consent of only about 10% of them to invest in JINUSHI REIT. After this,the company continued to deepen communication with investors and lenders andconveyed the attractiveness of leased land as an investment target. In other words,
this was a way to create a market for leased land as an investment opportunity, which

9

JINUSHI | 3252 (TSE Prime)
together as JINUSHI REIT grows, would lead to the company becoming a "major
landowner in Japan".
Company Name
Change andManagement
Succession

In January 2022, the company changed its name from "Nippon Commercial
Development" to "JINUSHI". The name change has two meanings: 1) the businessmodel that has been refined no longer fits the "commercial development" model in theold company name, and 2) the business model itself will be used as the company
name to increase recognition.
In the early years, most of the properties the company handled were commercial
facilities such as supermarkets and drugstores located near residential areas and otherland leased to businesses dealing with daily necessities. While the company willcontinue to expand its operations with the same type of businesses, it will adopt a
policy of aggressively approaching a variety of tenant industries, including businesses
that provide social infrastructure, such as hospices and nursing homes and this will nolonger fit within the scope of "commercial development".
Until now, the company has not actively communicated its JINUSHI Business to theoutside world. Land transactions themselves have been conducted for many years, andthe JINUSHI Business model itself is simple. This is because the company was wary of
being followed or imitated by other companies that had the capital to do so. However,as discussed below, the company became convinced that the JINUSHI Business had
established a competitive advantage based on resources that were highly difficult toimitate. The name change reflects the company's strong determination to expand its
market as a pioneer unrivaled by any other company and from this point on to expand
the JINUSHI Business more and more as it gains recognition.
In March 2022, Mr. Matsuoka, who had previously been President and Representative
Director, became Chairman and CEO, while Mr. Nishira was appointed President andRepresentative Director and COO. In March 2023, Mr. Matsuoka became a director
without representative rights and Mr. Nishira became president and CEO, with Mr.
Nishira assuming overall management responsibility. Thus, the management
succession is steadily progressing.
The Kanban system, a production management method developed by Toyota Motor
Corporation, became integrated into the English lexicon. Mr. Nishira's dream is to havethe model of specializing in leased land "JINUSHI", become just as accepted in English.

Corporate DNA

Companies have DNA. Corporate DNA is a unique set of values and management
philosophy that take root throughout the organization, and employees and thesevalues are often the source of a company's competitiveness. When a founder starts abusiness with passion and its products and services are widely accepted by the world,
the company begins to grow in earnest. And in the process of corporate growth, it isbelieved that the founder's passion evolves into the corporate DNA. In some cases, thefounder of the company may appear along the way and evolve the founding
philosophy or instill a new corporate culture. The core competence (the core capabilityof a company) is brought about by resources that are highly difficult to imitate, andthe DNA of a company is considered to be a powerful factor in shaping this. Just as a

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JINUSHI | 3252 (TSE Prime)
person can win by competing in his or her field of expertise, a company's formula for
victory is to develop its business within scope in its DNA.
The DNA of the
JINUSHI is "Being a
Pioneer in the
JINUSHI Business"

From the company's origins, it can be said that the company's "corporate DNA" is"Proud to be a pioneer in the JINUSHI Business". The company's experience with failed
projects in the past (at other organizations) has given it the assurance of thecorrectness of the JINUSHI Business; that by specializing in leased land, it can provide
real estate financial products based on the stable rents coming in from tenants and it
has established itself as a pioneer in the leased land business. This was achieved bychallenging the insanity of the real estate industry and steadily building up a trackrecord of success by persistently pursuing modest transactions that many in theindustry consider to be less glamorous. The importance of spinning the company's
DNA has been thoroughly enshrined in the company's Code of Conduct (www.jinushijp.com/company/vision), which states, among other things, that the company should"be an adult”.
The company intends to strengthen its position as a "major landowner in Japan" as
JINUSHI REIT grows. As long as the company's "pride in being a pioneer" continues topermeate the organization under President Nishira's leadership, we can expect
sustained growth for the company.

3. JINUSHIs' Business Strategies from the Perspectiveof Management Strategy Theory
JINUSHI is a "Porter
Prize" Winning
Company

The company received the Porter Prize in 2023, a historic award established in 2001
with the cooperation of Michael Porter, an authority on business administration known
as the leading authority on competitive strategy theory and which has been awarded
to leading companies in various industries. From here, we will discuss the company's
business strategy with reference to Michael Porter's management strategy theory, etc.

1) Approach from Michael Porter's Positioning Theory
JINUSHI Focuses on
Concentration and
Differentiation
Strategies

Michael Porter explains that in order to achieve success in an industry, it is necessary
to take a clear position. He argues that there are three basic strategies for taking a
specific position and building competitive advantage: (1) cost leadership strategy, (2)concentration strategy and (3) differentiation strategy; and that it is essential to steer
the company toward at least one of them. According to this positioning theory,
JINUSHI is focusing on (2) concentration strategy and (3) differentiation strategy.
(2) Concentration strategy is a strategy to gain competitive advantage byconcentrating business resources in a narrow, specific market (customer segment,
region, specific product, etc.). To gain competitive advantage, it is essential to makechoices that differ from those of competitors, in other words, trade-offs. As an
essential part of the strategy, it is also important to choose what not to do. The
company has chosen not to engage in any of the building and construction ownershipand distribution that most companies in the real estate industry deal with, or the real

11

JINUSHI | 3252 (TSE Prime)
estate development that many in the industry romanticize about and instead has
concentrated on dealing in leased land.
(3) The differentiation strategy is a strategy to gain an advantage over the competition
by offering unique added value that customers recognize, rather than low cost, whiletargeting a wide range of customers. It can also be described as a strategy to provide
value that other companies do not offer and that customers are willing to pay for. The
company's clients are investors in leased land that generate stable, long-term cash
flows with tenants. The company's JINUSHI REIT is the only real estate financial
product in Japan that specializes in leased land, providing a long-term, stable
investment opportunity that is unparalleled in Japan.

2) Approach from Resource Based View (RBV)
JINUSHI's Core
Competence is"SophisticatedIntegration of
Leased Land
Business & FundBusiness"

In contrast to Porter's positioning theory, there is also an approach called the"Resource-Based View (RBV)," which focuses on a company's own resources. Gary
Hamel and C.K. Prahalad focus on core competencies (a company's core capabilities
that provide unique value that other companies cannot imitate), while George Stokes,
Philip Evans, and Lawrence Schulman focus on capability (organizational capabilities
that span the entire value chain), respectively. In the case of JINUSHI, the corecompetence is the "sophisticated integration of the leased land business, which createsand holds land for long term, and the fund business, which provides investors withstable investment opportunities" and the capability is the "series of processes in the
JINUSHI Business, from procurement to management".
On the other hand, Jay Barney, a major proponent of RBV, discusses both corecompetence and capability as resources in a broad sense, and then advocates VRIO asa framework to check how strong the company's resources are. Burney lists "Economic
Value", "Rarity", "Imitability" and "Organization" as axes for evaluating the potential
for effective use of the company's resources. VRIO is an acronym for these four
evaluation axes and Bernie believes that resources that are difficult to be imitated andare backed by an "organization" will contribute to competitive advantage.

3) JINUSHI’s Two Resources that are Highly Difficult to be Imitated
Whether a resource is highly or lowly difficult to imitate is evaluated based on whether
imitation is impossible in the first place and whether attempts to imitate it would
require enormous costs. For the company, the resources that are highly difficult to beimitated are (1) track records that ensure investor confidence in real estate financial
products and (2) the existence of JINUSHI REIT, which play the role of a stablelandowner that enjoy tremendous trust from tenants as long-term stable owners.
These strong resources are the source of the company's competitive advantage, whichis "a sophisticated combination of the leased land business", which creates and holds
leased land for the long term and the fund business, which provides investors withstable investment opportunities.

12

JINUSHI | 3252 (TSE Prime)(1) Track Record to Ensure Investor Confidence in Real Estate
Financial Instruments
Track Record that
Ensures Credibility
with Investors

The company provides investors with financial products built on land with tenants andyield interest. The financial products offered by the company are low-risk, middlereturn financial instruments that have the characteristics of an alternative to corporate
bonds.
In particular, the company's development of "leased land" has far fewer variablefactors than other real estate investment products, giving it a high advantage as astable, long-term product. In addition, if other companies were to offer leased landthat competes head-to-head, they would not be able to distinguish themselves interms of building design or developer capabilities. The only way to offer investors afavorable yield would be to purchase land at a lower price than the company, or to
obtain higher rents from tenants than the company. In the end, they would have no
choice but to negotiate with the land seller or tenant on terms that are worse than thecompany's, making it difficult for them to compete favorably with the company. Even if
they could offer the exact same product, investors would prefer the company with thebetter track record. The company has a long-term track record, with over 20 years ofexperience in developing leased land and about eight years of experience managing
their JINUSHI REIT and as such investors are likely to prefer the JINUSHI's products.
Thus, if limited to financial products specializing in leased land, it would be difficult tofind a competing product with more favorable terms than the company. Furthermore,
the fact that the company continues to be in the form of a privately owned REIT,
which is not affected by capital market trends, is favorable to investors who aim forlong-term stable holdings, further enhancing its credibility.

(2) JINUSHI REIT that Plays the Role of the Stable Landowner with
Tremendous Trust from Long-Term Tenants
JINUSHI REIT;
Tremendous
Credibility with
Tenants

From the tenant's standpoint, it should not matter who is an owner of the land, aslong as the leasehold fee is the same. However, "who the lessor is" is a critical factor.
This is because tenants are concerned about the possibility of modification of contract
details such as leasehold fee or the possibility of losing an important base due to achange of lessor (eviction risk).
These fears felt by tenants cannot be dispelled simply by the high name value of thelessor. The more name value a company has, the more likely it is that the company
will change the terms of the lease in the future due to its ability to negotiate the price.
In addition, if a real estate developer becomes the lessor, the developer's main
business is "real estate development," so tenants always have the fear of "losing theirbase" due to redevelopment, etc.
The only thing that can dispel these tenants' concerns is a clear policy, such as "Whenthe contract expires, our first priority is to re-sign with the existing tenants" and past
performance such as "We have never been asked to change the terms," which assuresthat the policy is not false. The company's track record in dealing with leased land formore than 20 years since its establishment clearly shows that it has operated inaccordance with the policy, and "The company and the JINUSHI REIT do not say

13

JINUSHI | 3252 (TSE Prime)
anything noisy as a landowner as long as the land lease fee is well paid as per thecontract. They will continue to be a reliable and stable landowner. This has led to anincreased sense of security among tenants. The presence of the company as the
producer of the leased land and JINUSHI REIT as the long-term stable owner of theleased land has greatly helped to dispel tenants' concerns that they do not know who
an owner of the leased land is and to establish trust in the company, which othercompanies are unable to do.
When President Nishira took office as president, the first thing he did was visit tenants.
He explained that tenants are positioned as partners of the company and that thecompany's JINUSHI Business is beneficial to both tenants and investors, which seems
to have led to an increase in purchases.
These two resources cannot be built overnight by other companies, nor can they catchup to the company and the advantage backed by these highly difficult-to-imitate
resources will likely be maintained for a long time to come. Therefore, there is a highprobability that the business of creating leased land and the JINUSHI REIT, which
provide investors with stable investment opportunities, will interact with each otherand continue to achieve sustainable business growth.

4) Organization to Realize Resources that are Highly Difficult to Imitate
Creating an
Organization That
Attracts People
Who Find Insane
Business Models
Interesting is Also
Highly Difficult to
ImitateIf we define "goods," as those resources necessary for management, as being "land topurchase" and "money" is funds to invest in real estate financial products"; then we
can say that "goods" and "money" are situations brought about by the two highly
difficult-to-imitate resources listed above. However, they cannot be realized without"people" who execute a series of transactions.
The core of the company's human resources is the sales staff who execute alltransactions in the JINUSHI Business, from the purchase of land to its sale. However,as mentioned above, the company's business model of specializing in leased land isquite unusual in the real estate industry and it is difficult to attract people who areinterested in getting involved in the business. In fact, although the company recruits
new graduates, few apply for jobs with real estate companies and most applicants arethose who want to work in the investment management industry, trading companies,
or in sales. In response to this situation, the company carefully selects and hires
people who can relate to the business concept of "investing only in land," who find the
JINUSHI Business model interesting and who believe they can do "more things. This
selective selection also reflects the company's emphasis on indoctrination of its
corporate DNA.
It should be noted that about 40% of the 95 employees as of the end of FY12/2023
are believed to be responsible for sales, executing all transactions in the JINUSHI
Business process from the purchase of land to sales. As of the end of FY12/2023, thecompany's non-consolidated average annual salary was 17.18 million yen. According
to the article of Toyo Keizai（www.toyokeizai.net/articles/-/660328?page=2）, theaverage annual income of the company was 16.94 million yen, ranking fourth among
all listed companies. Compared to listed companies in the real estate finance sector,
the company's average salary is by far the highest, as other companies are in or

14

JINUSHI | 3252 (TSE Prime)around 10 million yen at the higher end of the spectrum. In addition, the startingsalary for new graduates is 500,000 yen per month (with an additional housing
subsidy of 100,000 yen), which is the highest among all listed companies according tosome surveys. This is not to say that high salaries are necessary to attract people tothe company, but rather that the company is profitable enough to generate a level ofannual income that can be considered favorable and the JINUSHI Business itself ishighly profitable enough to make this possible.
It is not easy to assemble a group of people on this scale who both find a businessmodel generally considered insane interesting, whilst still being very selective. This is
another factor that may further increase the difficulty of imitation.
Figure 3. Number of Employees (LHS) and Average Salary (RHS, \10k)

150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0

1,921

1,741

2,000
1,559

1,501

1,694

1,697

1,718

1,600

1,369
981

1,000

90

83
73

69
69

35

74

20

11

21

19

48

43

45

22

27

42

3/15

3/16
3/17
3/18
3/19
New Real Property
JINUSHI Financial Advisors
JINUSHI

3/20

33
22

11

16

9
27

37

95

1,400
1,200

74

19

27

1,800

21

1,000
800
600

58

60

400
200
0

12/20 12/21 12/22 12/23
JINUSHI USA
JINUSHI Asset Management
Salary（RHS, ¥10k）

Note: FY12/20 is a 9-month accounting period•

Average annual income is as Stand-Alone.

•

The sharp increase in the number of employees in FY03/2017 is largely due to theconsolidation of New Real Property and its subsidiaries.

Source: Strategy Advisors, based on Company Data

15

JINUSHI | 3252 (TSE Prime)
Figure 4. Comparison of Average Annual Salaries of Real Estate Finance
Companies with Listed Companies
Company Name

Code

Accounting
PeriodAverageAnnual Salary(¥100,000)

JINUSHI3252

FY12/2023

1,718

Samty

3244

FY11/2023

761

Sun Frontier Fudosan

8934

FY03/2023

720

Tosei

8923

FY11/2023

847

Hoosiers Holdings

3284

FY03/2023

611

Ichigo2337

FY02/2023

1,006

ES-CON Japan

8892

FY12/2022

685

Note: Non-consolidated amounts for each company
ES-CON Japan changed its fiscal year end to FY03/2024, so there are no figures for
FY12/2023.
Source: Prepared by Strategy Advisors based on each company's annual securities report

5) Approach from Philip Kotler's Strategy by Competitive Position
Other Companies
Would Adopt a
Strategy of
Homogenization

Philip Kotler proposes a "strategy by competitive position," which states that "thestrategy to be taken differs depending on the competitive position within the same
industry. Kotler states that there are four categories of competitive position within anindustry: leaders, challengers, followers and nichers, and that there are strategic
objectives for each competitive position.
In the real estate industry, the company, which specializes in leased land, is a nicher.
The strategy to be adopted by nichers is related to the "concentration strategy" ofPorter's positioning theory, which means it has to establish the number one position ina certain area and prevent competitors from entering the market. In contrast, it is also
important to consider what kind of strategy other companies will adopt. According toKotler's strategic theory, if a company's business model of specializing in leased land is
attractive and promising; other companies, not necessarily industry leaders, will adopt
a strategy of homogenization by imitating the company's business model.

6) Reasons Companies are Not Launching Homogenization Strategies
No Other Company
has Imitated theLeased Land
Specialization Skills

The company's business model can be said to be easy to imitated, as long as one has
the funds to do so. Existing real estate companies may find it easier to enter themarket because of their networks for purchasing land information and creditworthinessin transactions, but we have not found any companies that have entered the market
with the JINUSHI Business at the forefront. The following three factors may be
responsible for this.

16

JINUSHI | 3252 (TSE Prime)(1) Mindset in the Real Estate Industry
Most people in the real estate industry believe that the real estate business is about
creating buildings and towns, as exemplified by the phrase "work that will remain on
the map". Many people have the mindset that construction and area development are
the real thrill and romance of the real estate business. To those with this mindset,
specializing only in purchasing land and selling it with tenants does not seem to add
value. Some people seem to think that specializing in leased land is insane for a realestate business and such people in the industry do not want to specialize in dealing
with leased land in the first place.

(2) Cash Circulation Issues
In the real estate industry, it is said that the shorter the holding period for a property,
the better. Buying and holding a property increases the working capital required, as
funds "stick" to the property. Therefore, there is a strong tendency to favor brokerage,
where commissions are the source of revenue and sales of properties that are easy to
get off the ground. Small and medium-sized real estate companies, in particular, often
lack the financial resources to put properties to bed. The company has found JINUSHI
REIT to be a powerful sales destination, solving the problem of cash circulation and theability of JINUSHI-retailers to raise funds in addition is a strength of the company.

(3) Possibility of Being Perceived as Unbeatable in Terms of Discernment
In the purchasing decision stage, it is important to determine whether or not the land
can be sold at a price that is suitable from the perspective of the seller, and whether or
not the land can be converted to other uses in the event that the tenant who built thebuilding withdraws from the property. In the real estate business, such"connoisseurship" is backed up by the amount of experience one has gained in the
project. In addition to its more than 20 years of experience, the fact that the company
has JINUSHI REIT in its group, which are the buyers of its leased land, also contributes
to the company's enhanced discernment ability.
Based on the above factors, we believe that real estate companies in the same
industry will not initiate homogenization policies to challenge the company's "JINUSHI"
business.

4. JINUSHI Business Specializing in Leased Land
1) Premise of JINUSHI Business: What is a Fixed-Term Land Lease?
The Land and House
Lease Law Enacted
in 1992 is the Legal
Basis for JINUSHI
Business

The JINUSHI Business is business model that, by dealing only with land without
owning a building, eliminates the various risks associated with owning a building; andcreates leased land with stable income over a long period of time, selling the land as areal estate financial product. The basis for this business model is the leaseholdarrangement under the revised Act on Land and Building Leases that came into effectin August 1992.

17

JINUSHI | 3252 (TSE Prime)
Under Act on Land and Building Leases, land lease rights are classified into two types:
ordinary land leasehold rights and fixed term land leasehold rights. Fixed termleasehold rights are those in which the leasehold relationship ends along with the initial
contract term and cannot be renewed thereafter. There are three types of fixed termleasehold rights: (1) general fixed term land leasehold rights, (2) fixed term landleasehold for business purposes and (3) land leasehold right with special provisions forbuilding transfers.
Many of the projects handled by the company are based on (2) fixed term landleasehold right for business purposes, which are set up primarily for owning buildings
for business purposes and are the premise of the JINUSHI Business. On the other
hand, when the company deals with tenants for residential purposes, e.g., nursing
homes, it deals based on (1) general fixed term land leasehold right, but by adding a
special provisions that the leasehold term will not be extended due to contract renewal
or building reconstruction, and that the right to demand purchase of the building will
not be exercised, the company can set up the land leasehold right in the same way as
when using fixed term land leasehold right for business purposes. However, by adding
provisions not to extend the duration of the leasehold rights, to renew the contract,
nor to request for the purchase of the building, the lease is set up in the same way as
when using a fixed term commercial leasehold right.
Figure 5. Types of Land Leaseholds
Leasehold
Fixed Term Land
Leasehold Right
General Fixed Term
Land Leasehold
Right(Article 22 Of theLaw)
Fixed Term Land
Leasehold Right for
Business Purposes(Article 23 Of theLaw)
Land Leasehold
Right with Special
Provisions for
Building Transfer(Article 24, Law)
Ordinary Land
Leasehold Rights

Duration

Purpose Of Use

Morethan 50years

No limitation of
use

More
than 10years butless than
50 years

Only businessbuildings are
eligible(residentialbuildings are noteligible)

Contracting Method・Must be in writing by means of anauthentic instrument, such as anotarized deed・May include the following threecovenants:[1] no renewal of the contract,[2] no extension of the duration of
the contract,[3] no request for the purchase of
the buildingMorethan 30years

No limitation ofuse

・A covenant that the building on
the land will be transferred to thelessor for a reasonable price after
30 years・Oral is also acceptable

More
than 30years

No limitation ofuse

・No restrictions
・Oral is acceptable

18

JINUSHI | 3252 (TSE Prime)
Leasehold
Fixed Term Land
Leasehold Rights
General Fixed
Term Land
Leasehold Right(Article 22 Of theLaw)
Fixed Term Land
Leasehold for
Rights for
Business Purposes(Article 23 Of theLaw)
Land Leasehold
Rights with
Special Provisions
for Building
Transfer(Article 24, Law)

Ordinary Land
Leasehold Rights

Termination Of
Land Lease
Relationship

Building at the End of the Contract

Due to expirationof term

In principle, the lessee shall demolish thebuilding and return the land.

Due to transferof building

One of the following[1] The building is purchased by the JINUSHI[2] The building is not vacated, and the land isreturned[3] The tenant or tenants may continue to live inthe building as tenants be made[1]Statutory
renewal is
granted[2]Good cause isrequired torefuse renewal

One of the following[1] There is a right to purchase the building[2] If the right to purchase is exercised, thebuilding will remain intact and the landsurrendered[3] The tenancy relationship continues.

Source: Ministry of Land, Infrastructure, Transport and Tourism website

2) JINUSHI Business Strengths
3 Characteristics
of JINUSHI’s
BusinessThree characteristics of JINUSHI Business' real estate financial products obtained by
specializing in leased land are: (1) no additional investment is required, (2) long-term
stable earnings can be expected and (3) asset values are unlikely to decline.

(1) No Additional Investment is Required
Since the investment is in the land only, the construction and ownership costs of thebuilding on the land are borne by the tenants. Therefore, no additional investment isrequired for building maintenance, repairs or renovations. This is an advantage evenduring the current inflationary period and is not affected by rising construction andrepair costs.

(2) Long-Term Stable Earnings Can be Expected
Since the contract terms are long, ranging from 20 to 50 years, and the buildings are
funded by the tenants, the risk of tenants moving out is low and stable earnings canbe expected over the long term. In fact, in a total of 362 development projects todate, there has not been a single case of a tenant vacating the property and only one

19

JINUSHI | 3252 (TSE Prime)case of a reduction in leasehold fees occurred during the period of the new Corona
pandemic, which was only for a limited time.

(3) Property Values are Unlikely to Decline
At the end of the contract, tenants are obligated to return the property as cleared landand since the property is returned as cleared land with high liquidity, the asset value isunlikely to decline. Unlike buildings, land does not deteriorate over time, so if land
prices rise due to inflation, this will result in an increase in unrealized capital gains(capital gains on sales will increase).
Less Volatile Than
Real Estate
Investments
Involving Buildings

In comparison to real estate investments that include buildings, by specializing inleased land, the JINUSHI Business is designed to be a real estate investment thateliminates the various variables that come with buildings. The only risk that must be
considered in the JINUSHI Business as in a regular real estate investment is interest
rate risk.
Figure 6. Differences from Normal Real Estate Investments in
Terms of Variables
Possible
Variables

Normal Real Estate Investment(Building + Land)

JINUSHI Business(Land Only)

Leasing Income

Income fluctuates due to rent
fluctuation risk and vacancy risk.

No risk of rent fluctuation orvacancy, andincome will not fluctuate over thelong term.

Leasing Cost

・Daily expenses include thefollowing:
Sales promotion and advertisingexpenses Leasing Cleaning
expensesUtilities Insurance premiums
Security expenses Repair
expenses
・Depreciation expenses are
incurred ・Property
taxes are incurred

Non-Operating
Expenses

Interest rate risk.

Other Expenses

Additional costs for renewal andrenovation.
Additional capital investment may
be required.
Need to pay for response to apandemic

Most of the expenses on the left
are unnecessary.
The
increase in taxes is
added to the rent
based on the property tax-linked
clause.
(Property tax-linked provisions)Interest rate risk.

No additional costs or additional
capital investment required

Source: Company Data with additions by Strategy Advisors

20

JINUSHI | 3252 (TSE Prime)3) JINUSHI Business Process (4-Steps)
The JINUSHI business is a model for increasing real estate holdings while maintaining
a continuous turnover of funds by taking the following four steps: (1) buying(purchasing) land, (2) leasing land, (3) selling the land being leased and (4) managing
investors' funds.

(1) Buying (Purchasing) Land
ReducedProcurement Risk

The key to buying land is to reduce purchase risk. Therefore, in principle, land isacquired after a specific tenant has been decided upon. In this case, the land must be
highly convertible and in demand over the long term, so that even if a tenant moves
out, it is easy to find another tenant or to resell the land to a third party. In addition,
since the project is intended to be sold as a real estate financial product, the company
also emphasizes that the project has a high possibility of securing a yield that issuitable from the buyer's perspective.
In most cases, land purchases are negotiated, but the company acquires land
information through a variety of means, including from financial institutions andbrokerage firms, from tenants, and from residential developers who propose joint
development projects. The company has its own method for obtaining informationfrom tenants and this is proof of the good relationships it has built with tenants over
the years. The company also acquires land only from clients who own both land andbuildings, and off-balances the land only, providing value as a solution to the issues
faced by landowners.

21

JINUSHI | 3252 (TSE Prime)
Figure 7. Purchases
58,800 60,060
83

60,00050,00040,00030,00060

38,38835,50080
70

46,00041,99543,493

90

50
37

40

28,192
20,40020,00016,000

40

33

30

24

20

10,00010

00FY 3/20

FY12/20

FY12/21

FY12/22

FY12/23

Purchases（Contract base）（¥ mn、LHS）
Real Estate Held for Sale（¥ mn、LHS）
Number of contracts（RHS）
Note: Due to a change in the fiscal year end, FY12/20 is a 9-month accounting period.
Source: Strategy Advisors, based on Company Data

(2) Leasing Land
Reduced Risk ofCancellation

The company will enter into a long-term fixed-term land lease agreement with thetenant for a period of 20 to 50 years. This means that the company owns only the land
and the building is constructed and owned at the tenant's expense. Therefore, thecompany does not need to make additional investments in building maintenance andrepairs.
In principle, the contract with tenants does not allow for mid-term cancellation of thecontract for a period of 10 years or longer, thus further reducing the risk ofcancellation. In addition, the leasehold contract in principle does not allow tenants torequest a revision of the land lease fee during the contract period, thus increasing thepossibility of securing stable income. Furthermore, since the contract is based on a
fixed-term business-use leasehold, there is no right to demand the purchase of thebuilding at the end of the contract, which means that the contract obligates thecompany to return the vacant land, making it difficult for the asset value to decline.

22

JINUSHI | 3252 (TSE Prime)
On the other side of the equation, tenants also benefit greatly from leasing land fromthe JINUSHI, as they can reduce initial costs when opening new stores. In addition, as
mentioned above, tenants can off-balance their land holdings and continue to operate
in the same location, thereby improving their financial position and efficiency. Thus,
the number of tenants using the company's JINUSHI Business structure has increased
to 125 as of FY12/2023.

Figure 8. Number of Tenants (Companies)
140
125
120

101
94

100
86
80
60

40
20
0
FY12/20

FY12/21

FY12/22

FY12/23

Source: Strategy Advisors, based on Company Data

In terms of the number of companies, the top tenants are supermarkets, which
account for 24 of the 125 tenants as of FY12/2023, then followed by drugstores, cardealerships, restaurants, home centers, catering stores and funeral homes. In
addition, the company is currently seeking to expand its tenant base to include
businesses that serve social infrastructure, such as hospices, nursing homes, family
funerals, schools, nurseries, hospitals, medical checkup centers and finally logistics anddata centers.

23

JINUSHI | 3252 (TSE Prime)
Figure 9. Tenant Diversity (two or more industries)

Tenant Categories

Supermarkets

Number ofCompanies
24

Ratio

19.2%

Main Tenants（No. of
Properties）
Kohnan Shoji Co., Ltd.（34）,
LIFE Corporation (21)Sugi Holdings Co., Ltd. (18),

Drugstores

11

8.8%

WELCIA YAKKYOKU CO., LTD.
(13), CHUBU YAKUHIN CO.,LTD. (11)Automobile dealers

11〃

Toyota Usec, Big Motor

Restaurants

10

8.0%

Kura sushi

Home improvement stores

8

6.4%

Kohnan PRO, Super Viva Home

Funeral halls

7〃

Large electronics stores

6

4.8%

Hotels54.0%

Factories, Warehouses

4

3.2%

Hospitals, Medical Centers

4〃

Schools, Nursery schools

4〃

Fitness clubs

3

2.4%

Bridal facilities

3〃

Discount Stores

3〃

Logistics, Data centers

2

1.6%

Service stations

2〃

Housing exhibition

2〃

Hospice facilities2〃

K's Denki, Josin, Yamada Denki

Note: Tenants with more than 10 stores are listed in the "Major Tenants" section.
Source: Strategy Advisors, based on Company Data

In this way, the company has been relentlessly buying land and renting it out totenants. As a result, as of the end of December 2023, the company had developed 362
projects totaling approximately 466.4 billion yen. Although many of the top tenantindustries in the development track record are in the retail industry, evensupermarkets, the most common type of tenant, account for less than 30% of thetotal. In terms of region, about 85% of the company's development projects are in theTokyo, Nagoya, and Osaka areas, but there is no concentration of development in any
one area.

24

JINUSHI | 3252 (TSE Prime)
Figure 10. Tenants - Diversification of Industries

Supermarkets

26.9%

Home improvement stores

19.7%

Drugstores

9.3%

Automobile dealers

9.1%

Hotels6.1%

Large electronics stores

4.6%

Bridal facilities

1.9%

Commercial Complexes

1.9%

Shopping malls

1.9%

Funeral halls

1.8%

Automobile exhibition

1.5%

Discount Stores

1.4%

Restaurants

1.4%

Schools, Nursery schools

1.3%

Hospitals, Medical Centers

1.3%

Hospice facilities

1.2%

Factories

0.9%

Logistics

0.8%

Others

7.0%
0%

5%

10%

15%

20%

25%

30%

Source: Strategy Advisors, based on Company Data

Figure 11. Tenants - Diversification of Areas

Tokyo Area

44.6%

Osaka Area

27.7%

Nagoya Area

12.2%

Kyushu

3.9%

U.S.

0.8%

Others

10.7%
0%

10%

20%

30%

40%

50%

Source: Strategy Advisors, based on Company Data

25

JINUSHI | 3252 (TSE Prime)
Sales of properties by JINUSHI and group companies where the buyer is a third party
designated by JINUSHI Asset Management (usually JINUSHI REIT, but not always)
always has preferential negotiation rights.

(3) Selling the Land Being Leased
Approximately
2/3rds of
Properties
Developed Were
Sold to JINUSHI
REIT

After the above steps (1) and (2) are completed to create a real estate financial
instrument that generates long-term stable cash flows, it is sold to funds such as
JINUSHI REIT and other investors.
The percentage of sales by JINUSHI REIT and group companies (sponsor pipeline
support ratio) is 65.6%. Of these, 30.8% were directly incorporated into JINUSHI REIT
and 34.8% were sold through bridge schemes. A bridge scheme is a "sale of properties
by JINUSHI and group companies where the buyer is a third party designated by
JINUSHI Asset Management (usually JINUSHI REIT, but not always) " and it grants
preferential negotiation rights for acquisition to a third party designated by JINUSHIs
asset management (in effect, presumably the JINUSHI REIT).
Leasing companies such as SMFL Mirai Partners, a wholly owned subsidiary of
Sumitomo Mitsui Finance and Leasing and M.L. Estate, a wholly owned subsidiary ofMizuho Lease, stand in between. In addition, the company sets the approximate timefrom land purchase to sale at 1 to 1.5 years, emphasizing the turnover of funds.

(4) Managing Investors Funds
JINUSHI-Retailer
REIT Operations

JINUSHI REIT, managed by wholly owned subsidiary JINUSHI Asset Management, isthe only private REIT in Japan that specializes in land with leasehold interest. This is
described in detail in a new chapter, "JINUSHI REIT".

4) JINUSHI Business Profit Structure
Revenues are
Classified into FlowBusiness & StockBusiness

The company's revenues can be categorized into flow business revenues and stockbusiness revenues. Given the large difference in gross profit margins between the two,
it is preferable to compare their earnings impact in terms of gross profit. 73.7% ofgross profit in FY12/2023 was from flow business, while 26.3% was from stockbusiness. Since a large proportion of flow business revenue comes from the sale ofleased land, earnings will fluctuate significantly depending on trends in the sale ofleased land.
Flow business revenues consist of real estate sales revenues and brokeragecommissions on real estate sales. Revenue from real estate sales is the majority and ishighly variable, depending on the status of land sales and the profitability of individual
projects that are sold. However, the financial products developed by the company arehighly competitive and buyer demand is strong, so there appears to be little concernthat the company will not be able to sell the properties.

26

JINUSHI | 3252 (TSE Prime)
The company's stock business revenues consist of rental income derived from realestate for sale, asset management income, long-term rental income and other income
sources (property management, subleasing, and operation and administration). The
company has adopted a policy of building up this business from stable revenue
sources, with approximately 26% of gross profit coming from the stock business. Overthe long term, the company aims to improve earnings stability and stock pricevariation by covering fixed costs with stable stock revenues.

Figure 12. Gross Profit by Business Type
10,857

11,00010,00010,499

90%

9,263

9,100

100%

9,000

80%

8,000

70%

7,000
6,000
5,000

8,469
7,032

5,019

22.7%

3,874
22.8%

50%

7,753

22.0%

26.3%

16.3%
2,068

0
FY 3/20

1,144

1,509

FY12/20

FY12/21

30%
20%

2,000
1,000

60%

40%

4,000
3,000

7,732

2,388

2,766

FY12/22

FY12/23

10%0%Flow Business（¥ mn, LHS）

Stock Business（¥ mn, LHS）

Composition of Stock Business（RHS）
Note: Due to a change in the fiscal year end, FY12/20 is a 9-month accounting period.
Source: Strategy Advisors, based on Company Data

27

JINUSHI | 3252 (TSE Prime)

Figure 13. Gross Profit (Flow Business Revenue)
10,000

100%

9,000
8,000

90%

8,469
7,753

7,732

7,032

80%

7,000

70%

6,000

60%

5,000

50%
3,874

4,000

40%
27.2%

3,000
2,000

9.8%

13.6%

14.3%

18.0%

30%
20%

1,000

10%

0

0%
FY 3/20

FY12/20

FY12/21

Gross Profit（¥ mn, LHS）

FY12/22

FY12/23

Gross Profit Margin（RHS）

Note: Due to a change in the fiscal year end, FY12/20 is a 9-month accounting period.
Source: Strategy Advisors, based on Company Data

28

JINUSHI | 3252 (TSE Prime)
Figure 14. Gross Profit (Stock Business) by Revenue Type
4,000

100%
82.0%

86.2%

86.1%

2,766

3,000
2,388
2,068
2,000

335

1,509

1,144
1,000

1,648

272

66

179
894

80%

60%

768

880

40%

47
528
1,570

1,307

20%

815

0

0%
FY 3/20

FY12/20

FY12/21

FY12/22

FY12/23

Others（¥ mn, LHS）
Long-term leasing（¥ mn, LHS）
Asset manegement（¥ mn, LHS）
Real estate leasing for saleAsset（¥ mn, LHS）
Gross Profit Margin（RHS）
Note: Due to a change in the fiscal year end, FY12/20 is a 9-month accounting period.
Source: Strategy Advisors, based on Company Data

5. Japan's Only Privately Owned REIT Specializing inLeased Land "JINUSHI REIT"
JINUSHI REIT with
Low-Risk and
Low-Volatility

JINUSHI REIT, managed by wholly owned subsidiary JINUSHI Asset Management, isthe only REIT in Japan specializing in leased land. The product concept is based on an
LTV level of approximately 20-40%, with an emphasis on financial stability and a
distribution yield of approximately 3.5% per annum. As for the track record, since thestart of operations, the fund has operated at an LTV level of about 30% and a
distribution yield of about 4.0% per annum, and as of January 10, 2024, after the 8thoffering, both the LTV and distribution yield have remained at these levels. As of thesame date, the fixed loan ratio was 100% and the average remaining loan term was
5.3 years.
Thus, while being an equity investment, it is characterized by low risk and low volatility
and is positioned between yen-denominated bonds such as corporate bonds andconventional private REITs, a product characteristic not found in conventional financial
products.
In order to avoid the risk of capital market fluctuations, the company does not intend
to list the JINUSHI REIT and intends to continue managing it solely as a private REIT.
By doing so, the company will maintain a high affinity with the long-term stable

29

JINUSHI | 3252 (TSE Prime)
JINUSHI Business. Since the company does not intend to list it, the unit price will be
determined by the appraisal value at the end of the fiscal period.

Figure 15. Position of JINUSHI REIT in Terms of Merchantability

Source: Strategy Advisors, based on Company Data

JINUSHI REIT
Portfolio with High
Concentration in
3 Retail Sectors

As of January 10, 2024, after the completion of the 8th capital increase, the number ofproperties under management is 154 and 76.0% of the portfolio by tenant by industry
is derived from the three tenant industries: supermarkets (31.2%), home
improvement stores (27.4%) and drugstores (17.4%). Compared to the historical totalof 55.9% for the top three industries, the portfolio is highly concentrated in the top
three industries.

30

JINUSHI | 3252 (TSE Prime)

Figure 16. Portfolio of JINUSHI REIT: Composition by Tenant Industry
and Region

31

JINUSHI | 3252 (TSE Prime)

Source: Strategy Advisors, based on Company Data

Expanding Asset
Size by Increasing
Capital Every Year
Since the Start ofOperations in 2017

Since no other private REITs specializing in leased land exist, JINUSHI REIT has been
accepted by investors as a financial product offering unique investment opportunities
and has expanded assets under management since it began operations in 2017.

32

JINUSHI | 3252 (TSE Prime)
Figure 17. JINUSHI REIT (Private REIT for leased land) AUM Growth

Source: Strategy Advisors, based on Company Data

Distribution of
Investors in
JINUSHI REIT

As of January 10, 2024, the top investors in JINUSHI REIT were operating companies,
etc. (36.2% of the total), Shinkin Banks and Credit Unions (26.9%) and Central
Financial Corporations (22.3%). This stands in contrast to the investor composition of
the 54 other private REITs as of December 31, 2023, which are characterized bydomination by business corporations with pension funds hold a smaller percentage.
At present, JINUSHI Asset Management is focusing on increasing the percentage ofpension funds and central financial corporations. Given the product characteristics ofland with leasehold interest that generates long-term stable cash flows, thepercentage of these investors is expected to increase in the future.

33

JINUSHI | 3252 (TSE Prime)
Figure 18. Investors in JINUSHI REIT Compared to Other Private REITs
Private REITs(54 Investment Corporations)(As Of December 31, 2023)

JINUSHI REIT(As Of January 10, 2024)
Investor

Ratio

Investor

Ratio

Central Financial
Institutions

22.3%

Central Financial
Institutions

29.0%

Regional Banks

7.0%

Regional Banks

33.5%

Shinkin Banks & Credit
Unions26.9%

Operating Companies

36.2%

Operating Companies

16.8%

Pension Funds

7.3%

Pension Funds

20.7%

JINUSHI

0.3%

Source: Prepared by Strategy Advisors based on Company Data and the Association for Real
Estate Securitization's "Private REIT Quarterly.

34

JINUSHI | 3252 (TSE Prime)
6. Current Performance Trends
FY12/2023:
Significant Decline
in Revenues.
Net Income Higher
than Initially
Expectations

The company's performance in FY12/2023 was notable for a significant decline insales. Sales fell 36.7% YoY to 31,597 million yen, but operating profit declined only
4.0% YoY to 6,154 million yen and net income attributable to owners of the parent
company rose 29.3% YoY to 4,709 million yen.

FY12/2023 Sales
Expected to Decline
vs. Initial Plan

The company's plan at the beginning of the current term was for sales of 42.0 billion
yen (-15.8% YoY), operating profit of 6.3 billion yen (-1.7% YoY) and net income
attributable to owners of parent of 4.2 billion yen (+15.3% YoY). At the beginning of
the term, the company had planned for lower sales and operating profit because thebalance of real estate for sale at the beginning of FY12/2023 started 32.9% lower thanat the beginning of the previous period, due to fewer purchases in the previous period.
Nevertheless, the company had planned an increase in net income attributable toowners of parent because it had factored in an extraordinary gain from the sale of
fixed assets. According to the company, the extraordinary gains were expected todrive growth in net income for the period and thus the company apparently curbed thevolume of sales of its leased land.

Company Plan
Revision for
FY12/2023

At the time of the Q2 FY12/2023 results announcement, the company revised its
forecasts for sales from 42.0 billion yen to 32.0 billion yen (-35.9% YoY), operating
profit from 6.3 billion yen to 6.0 billion yen (-6.4% YoY), and net income attributableto owners of parent company from 4.2 billion yen to 4.4 billion yen (+20.8% YoY),
from 4.2 billion yen to 4.4 billion yen. The company has decided to reschedule the saleof some projects it had planned to sell in FY12/2023 to FY12/2024 or later, as it now
expects to secure the level of profits in the initial company plan, thanks to the sale oflarge-scale projects, higher-than-expected profit margins on sold projects; and anincrease in rental income from real estate for sale due to steady growth inprocurement. This was the reason for the significant reduction in the sales plan.

Net Income
Exceeded Upwardly
Revised Plans Due
to Strong
Procurement &Extraordinary Gains

Purchases continued to progress steadily in the second half, reaching 58.8 billion yen
in FY12/2023 or 2.86 times that of the previous period, and the balance of real estate
for sale at the end of FY12/2023 was 60.0 billion yen or 2.13 times that of the end of
the previous period. Net income attributable to owners of parent also exceeded thecompany's upwardly revised forecast due to an improvement in the overall profit
margin, despite a decrease in sales and an extraordinary gain of 1,489 million yen
from the sale of fixed assets that had been factored in from the beginning of the fiscal
year.

35

JINUSHI | 3252 (TSE Prime)
Figure 19. Sales and Profit Trends
FY12/23

FY12/24
CoE

49,88731,59755,000-11.2%-36.7%

74.1%

6,411
16.5%

6,154
-4.0%

8,200
33.2%

9.7%

12.9%

19.5%

14.9%

3,124

3,641

4,709

5,000

n.a.

n.a.

16.5%

29.3%

6.2%

5.5%

5.6%

7.3%

14.9%

9.1%

(\ mn)

FY12/20

FY12/21Sales

29,88656,177

YoY

n.a.

n.a.

Operating Profit
YoY

2,420
n.a.

5,475
n.a.

OPM

8.1%
1,644

Net Income Attributable to
Owners Of Parent
YoY
Net Profit Margin

FY12/22

Note: Due to a change in the fiscal year end, FY12/20 is a 9-month accounting period, so
there are no YoY comparisons for FY12/20 and FY12/21.
Source: Strategy Advisors, based on Company Data

Plan to Increase
Sales and Profits in
FY12/2024

For FY12/2024, the company projects sales of 55.0 billion yen (+74.1% YoY),
operating profit of 8.2 billion yen (+33.2% YoY) and net income attributable to parentof 5.0 billion yen (+6.2% YoY).
As shown in Figure 7, the balance of real estate for sale at the beginning of FY12/2024
is expected to increase 113.0% from the beginning of the previous period; and thestrong purchasing conditions of the previous period are expected to continue in
FY12/2024, resulting in a significant increase in revenue. On the other hand, the grossprofit margin is expected to decline from the previous year due to the absence ofproperties purchased around 2018 that correspond to high-margin, large-scale sales
transactions, which occurred in the previous year and operating profit margins for
FY12/2024 are projected to decline 4.6 percentage points YoY to 14.9%. Furthermore,
the company expects to lose the extraordinary gain from the sale of fixed assets in theprevious year, but still expects to secure an increase in net income attributable toparent, driven by a significant increase in sales. Even considering the above factors,
the company's profit margins prior to FY12/2023 will continue to be high.
From here, we will examine the certainty of a significant increase in sales, which willbe the focus of the FY12/2024 results. Strategy Advisors believes that 55.0 billion yen
in sales for FY12/2024 is well within reach.
The company's revenues are mainly derived from flow income from sales of leased
land. Therefore, we calculated the ratio of inputs to outputs (here called the "turnoverratio") by using the sum of the amount of real estate for sale at the end of theprevious period and the purchase amount (on a recorded basis) for the current period
as inputs and the cost of sales for the current period as outputs. The turnover ratio isaffected by the length of time between the purchase of land and its sale. It isestimated to be around 55% in FY12/2021 and FY12/2022 for normal periods,
although it is lower in FY12/2023, when some properties were delayed in sales(FY12/2020 is a reference value due to a 9-month accounting period).

36

JINUSHI | 3252 (TSE Prime)

Assuming a conservative cost of sales ratio of 83.5%, which is as bad as FY12/2021,
and a purchase cost of 25.0 billion yen, which is as low as FY12/2022, against thecompany's planned sales of 55.0 billion yen for FY12/2024, the turnover ratio for
FY12/2024 is calculated to be 54.0%, which is set to be the norm for the timeframe.
The fact that the turnover ratio is at normal period levels, even using the poor figures
for cost of sales and purchases over the last few years, suggests that sales are also
likely to be conservative enough to be achievable.
However, in order to achieve the operating income of 8.2 billion yen in the company'splan, sales must exceed the level of for the term, which is a conservative condition, or
the cost of sales ratio must be reduced. In order to achieve the company's forecasted
operating income of 8,200 million yen, either sales must exceed the level of Sim,
which was conservatively estimated or the cost of sales ratio must be reduced. Given
the recent favorable procurement situation, we believe that the company's forecast of
8,200 million yen in operating income is achievable.

Figure 20. Turnover Ratio Trends and Verification of FY12/2024(\ mn)

03/20

12/20

12/21

12/22

12/23

12/24
CoE

12/24
Sim

Sales
Cost Of Sales
Cost To Sales Ratio

74,18765,08787.7%

29,88624,86883.2%

56,177
46,914
83.5%

49,88739,03078.2%

31,59721,09866.8%

55,000n.a.
n.a.

55,00045,92583.5%

38,83524,461

51,146

24,84552,739n.a.

25,00043,49338,387

41,99528,19260,060n.a.

39,135

n.a.

36.6%

52.4%

58.4%

26.1%

n.a.

54.0%

Purchases (Recorded
Basis)
Balance Of Real Estate
Held for Sale
Turnover Rate

Note: Due to a change in the fiscal year end, FY12/20 is a 9-month accounting period, so
there are no year-on-year comparisons for FY12/20 and FY12/21.
Source: Strategy Advisors, based on company data

37

JINUSHI | 3252 (TSE Prime)
Figure 21. Semiannual/Quarterly Performance Trends(\ mn)
Income Statement
Net Sales
Cost Of Sales
Gross Profit
Gross Profit Margin
SG&A Expenses
SG&A To Sales Ratio
Operating Profit
Operating Profit Margin
Non-Operating Income andExpensesFinancial Balance
Equity In Earnings (Losses) Of
Affiliates
Other

12/22
H1

H2

12/23
H1

H2

27,06921,104
5,964
22.0%
2,215
8.2%
3,749
13.8%

22,81817,925
4,893
21.4%
2,231
9.8%
2,662
11.7%

10,373
7,579
2,793
26.9%
2,100
20.2%
693
6.7%

21,224
13,518
7,706
36.3%
2,244
10.6%
5,461
25.7%

157

-625

17

-453

-276

-305

-177

-217

173

-181

40

0

260

-139

154

-236

Recurring Profit
Recurring Profit Margin

3,906
14.4%

2,037
8.9%

711
6.9%

5,007
23.6%

Extraordinary Income/Loss
Pretax Profit
Total Income Taxes(Corporate Tax Rate)
Net Profit Attributable to
Owners of Parent
Net Profit Margin

-197
3,709
1,138
30.7%

-1,134903-172-19.0%

1,207
1,918
700
36.5%

242
5,250
1,730
33.0%

2,569

1,072

1,193

3,516

9.5%

4.7%

11.5%

16.6%

(\ mn)

12/22
Q1

Q2

Q3

19,661
15,121
4,540
23.1%
1,249
6.4%
3,290
16.7%

7,408
5,984
1,424
19.2%
966
13.0%
459
6.2%

-54

Income Statement
Net Sales
Cost Of Sales
Gross Profit
Gross Profit Margin
SG&A Expenses
SG&A To Sales Ratio
Operating Profit
Operating Profit Margin
Non-Operating Income andExpensesFinancial Balance
Equity In Earnings (Losses) of
Affiliates
Other

Q4

12/23
Q1

Q2

Q3

Q4

2,701
1,829
872
32.3%
935
34.6%
-64
-2.4%

20,117
16,096
4,021
20.0%
1,296
6.4%
2,726
13.6%

8,130
6,117
2,012
24.7%
1,098
13.5%
914
11.2%

2,243
1,462
781
34.8%
1,002
44.7%
-221
-9.9%

14,837
8,416
6,421
43.3%
1,072
7.2%
5,349
36.1%

6,387
5,102
1,285
20.1%
1,172
18.3%
112
1.8%

211

-136

-489

-36

53

-70

-383

-126

-150

-149

-156

-72

-105

-126

-91

170

3

-137

-44

40

0

0

0

-98

358

150

-289

-4

158

56

-292

Recurring Profit
Recurring Profit Margin

3,236
16.5%

670
9.0%

-199
-7.4%

2,236
11.1%

879
10.8%

-168
-7.5%

5,277
35.6%

-270
-4.2%

Extraordinary Income/Loss
Pretax Profit
Total Income Taxes

-140
3,095
1,008

-57
614
130

-1,053-1,253
-34

-81
2,156
-138

1,207
2,086
712

0
-168
-11

-40
5,238
1,751

282
12
-21

38

JINUSHI | 3252 (TSE Prime)(Corporate Tax Rate)
Net Profit Attributable to Ownersof Parent
Net Profit Margin

32.6%

21.2%

n.a.

n.a.

34.1%

n.a.

33.4%

n.a.

2,086

483

-1,220

2,292

1,350

-157

3,485

31

10.6%

6.5%

-45.2%

11.4%

16.6%

-7.0%

23.5%

0.5%

Source: Strategy Advisors, based on Company Data

39

JINUSHI | 3252 (TSE Prime)
7. Medium to Long-Term Outlook
1) Favorable Environment Expected to Continue: Medium to Long-Term
The environment surrounding the company's JINUSHI Business is expected to remainfavorable.
The Volume ofLeased Land is
Expected to Expand
to 16 Trillion Yen by
2030

From the supply-side perspective, the distribution volume of leased land is expected to
expand. According to a survey by the Japan Real Estate Institute, the size of theleased land market on a cumulative value basis is estimated to be 5.47 trillion yen asof 2021. It is expected to expand to 9.95 trillion yen in 2026 and 16.06 trillion yen in
2030.

Approximately 10%
of Store Openings
are Based on the
Principle of Leasing
Land and Owning
Buildings

According to the XYMAX Real Estate Research Institute's "Survey 2022 on Commercial
Store Exits and Entries," the most common policy for owning or leasing real estate
when opening a store was "Building lease (rented) in principle" at 43%, followed by"No particular policy" at 30%. Only 10% of the respondents chose "In principle, own
the leased land and building. It is possible that the advantages of owning land andbuildings have not been fully communicated to those who have a policy of renting
buildings in principle, but there is room for the percentage of those who own land andbuildings to increase, depending on future efforts.

Figure 22. Contracts in Place for Commercial Store Openings
Contract Type

Both Land and Buildings
Ownership In Principle
Leased Land andBuilding Owned by The
Company in Principle
Building Lease(Tenancy) In Principle
Nothing In Particular
Other
Contract TypeWhole

By Number Of Stores (Stores)
Less than10

Up to 50

12%

26%

12%

0%

3%

0%

10%

13%

11%

13%

0%

7%

43%

23%

41%

58%

71%

63%

30%
4%

36%
2%

34%
3%

22%
7%

23%
3%

20%
10%

Whole

Up to
200

More
than 200

By Store Area (Tsubo)
Less than
50

Both Land and Buildings
Ownership In Principle
Leased Land andBuilding Owned by The
Company in Principle

Up to
100

Up to
150

Up to
500

Up to
1,000

More
than
1,000

12%

1%

6%

14%

30%

31%

10%

4%

4%

17%

19%

14%

40

JINUSHI | 3252 (TSE Prime)
Building Lease(Tenancy) In Principle
Nothing In Particular
Other

43%

72%

62%

23%

5%

28%

30%
4%

14%
9%

27%
1%

43%
3%

44%
2%

28%
0%

Source: XYMAX Real Estate Research Institute, "Survey on Commercial Store Exits and Entries
2022.

J-REIT and Privately
Owned REIT
Markets to Expand

From the perspective of the demand side, which seeks leased land as a real estate
financial product, the market for J-REITs and privately owned REITs is expected to
expand first. According to data from the Association for Real Estate Securitization, thetotal value of REIT assets (based on acquisition price) at the end of December 2023
was 28.7 trillion yen (22.7 trillion yen for J-REITs and 5.9 trillion yen for privately
owned REITs), with 6,287 properties (4,697 for J-REITs and 1,590 for privately owned
REITs). Based on the end of December 2017, when the management of J-REITs
began, the total assets and number of properties have expanded at an annualizedpace of 7.2% and 6.9%, respectively, over the six years to the end of December 2023,
while the total assets and number of properties of private REITs have expanded at apace of 16.1% and 17.8%; respectively, over the same period, with the private REITs'
expansion at a faster pace. However, during the same period, the total assets ofprivately owned REITs expanded at a pace of 16.1% and the number of properties
expanded at a pace of 17.8%. The presence of privately owned REITs as investment
targets is increasing.
The "Survey on Privately Owned Real Estate Funds" conducted by the Association forReal Estate Securitization since 2003 has published data on the breakdown of realestate held by privately owned REITs. Until now, leased land has been classified
according to the primary purpose of the building constructed on the land, but startingwith the July 2023 survey, a new category of "leased land " has been established. Thisis evidence of the growing presence of leased land in REITs' investment portfolio.
According to the July 2023 survey, 10% of the properties under management and 4%of the assets under management were allocated to leased land.

41

JINUSHI | 3252 (TSE Prime)
Figure 23. Size of REITs (J-REITs + Privately Owned REITs)
12/2017

12/2018

12/2019

12/2020

12/2021

12/2022

12/2023

189,692

208,603

224,843

241,936

256,048

268,637

287,593

24,398165,294

28,826
179,777

33,578191,265

39,056
202,880

43,658212,390

49,906
218,731

59,660227,933

82

89

95

98

100

105

112

23
59

28
61

31
64

36
62

39
61

44
61

54
58

4,206
595
3,611

4,613
713
3,900

4,958
833
4,125

5,278
987
4,291

5,579
1,150
4,429

5,873
1,323
4,550

6,287
1,590
4,697

12.9%

13.8%

14.9%

16.1%

17.1%

18.6%

20.7%

14.1%

15.5%

16.8%

18.7%

20.6%

22.5%

25.3%

Total Assets (\ bn) *Based on
Acquisition Price
Privately Owned REIT
J-REIT
Number Of
Corporations(companies)
Privately Owned REITs
J-REIT
Number Of Properties (Properties)
Privately Owned REIT
J-REIT
Percentage of AUM Managed by
Privately owned REITs
Percentage of Properties Managed
by Privately Owned REITs

Source: Prepared by Strategy Advisors based on the Association for Real Estate Securitization's "Private REIT Quarterly.

2) Medium-Term Management Plan for Aggressive Expansion Phase
While Maintaining Discipline
Company Name
Change Signals
Aggressive
Expansion

In February 2022, the company announced its medium-term management plan ending
in FY12/2026. As indicated by the company name change implemented at the sametime, the company has positioned this as a phase to raise awareness of the JINUSHI
Business and aggressively expand it. The company is eyeing an asset scale of 300
billion yen for JINUSHI REIT.
Figure 24. Med-Term Management Plan
Financials

Net Sales (\bn)
Net Profit (\bn)
JINUSHI REIT
AUM (\bn)

FY12/2021

FY12/2023

FY12/2024
CoE

FY12/2026
Mid-Term
Plan

AnnualAverage
Growth
Rate

56.1
3.1

31.5
4.7

55
5

100
7

12.2%
17.5%

151.5

221.6

n.a.

Approx. 300

14.6%

ROE

11.9%

15.3%

n.a.

Equity Ratio

32.2%

31.0%

n.a.

Approx.
13%
30% ormore

Note: Average annual growth rate is the average growth rate from the FY12/2021. AUM of
JINUSHI REIT is the amount after the capital increase in the month following the end of the
fiscal year.
Source: Strategy Advisors, based on Company Data

42

JINUSHI | 3252 (TSE Prime)
Growth Strategy
Based on Expansionof Both the JINUSHI
Business & Growthof JINUSHI REIT

The company has drawn up a growth strategy based on both the expansion of the
JINUSHI Business and the growth of JINUSH REIT. With regard to the expansion of the
JINUSHI Business, the company is pursuing three measures: (1) diversification oftenant business sectors, (2) expansion of operations to more areas and (3) using offbalance-sheet schemes for land.
(1) Diversification of tenant business sectors is reflected in the removal of "Commercial
Development" from the company name when the company changed its name, which
represented the JINUSHI Business targets all types of tenant business sectors. Of the
83 contracts purchased in FY12/11 with a total value of 58.8 billion yen, 44 were forsocial infrastructure tenants (13.2 billion yen per contract) and the company has
already begun acquiring tenants for hospice facilities, nursing homes and funeral halls.
Of the 83 contracts and 58.8 billion yen purchased in FY12/2023, 44 were for tenants
that play a role in social infrastructure, accounting for 13.2 billion yen. This represents
53% of the total number of contracts and 22% of the total value of contracts
purchased.
Figure 25. Percentage of Deals for Social Infrastructure Tenants in
Procurement: by Number of Contracts
100

53.0%

60%

90

83

50%

80

40%
27.3%

70

39

60

20%

10.8%

50
40

0.0%

30

24

37

10

24

0

0
FY12/20

10%

33

0%
33

20

30%

24

44

-10%
-20%

4

9

-30%

FY12/21
FY12/22
FY12/23
Necessities（LHS）
Infrastructure（LHS）
Diversification of Infrastructure（RHS）

Source: Strategy Advisors, based on Company Data43

JINUSHI | 3252 (TSE Prime)
Figure 26. Percentage of Social Infrastructure Tenant Deals in Procurement:
Based on Purchase Price30%
80,000

19.6%

22.4%
20%

70,00058,80060,0007.4%

50,00046,000

0.0%

10%

0%

40,00045,50030,00020,00010,0000

16,00042,500-20%

16,40016,0000FY12/20-10%

20,40013,200

3,400

4,000

FY12/21

FY12/22-30%
FY12/23

Necessities（¥ mn, LHS）
Infrastructure（¥ mn, LHS）
Diversification of Infrastructure（RHS）
Source: Prepared by Strategy Advisors(2) With respect to the expansion of operations to more areas, with the establishmentof the Kyushu branch in December 2022, the company now has a five-base structurewith four bases in Japan and one in the United States. In addition, the company
relocated its headquarters from Osaka to Tokyo in July 2023. The company has
worked on projects in 197 municipalities (cities/wards/towns/villages), but there arestill 1,062 municipalities where it has not yet reached. When limited to cities withpopulations of 200,000 or more and government-designated cities, there are 134 cities
with a track record and 156 ones without a track record, indicating that there is still
considerable room for regional expansion.
(3) The company's proposals of off-balance-sheet schemes for land are in line with the
TSE's request for "Management Conscious of Capital Costs and Stock Prices”. The
company's off-balance-sheet proposal for land is an approach for owners who alreadyown land and buildings and is an effective proposal for tenants who need to improve
capital efficiency and financial strength. This is a new growth area for the company.
While a similar approach in the real estate industry is the sale and leaseback of landand buildings, the company proposes off-balancing the land only. The advantages ofthis approach are that the company does not have to perform due diligence on theland and it can operate the property with a high degree of freedom since it cancontinue to own the building. Given that this scheme offers the same benefits as asale-and-leaseback (capital efficiency improvement and financial strength

44

JINUSHI | 3252 (TSE Prime)
improvement) and the considering advantages mentioned above, it is likely to become
increasingly popular in the future. One of the disadvantages of using this scheme isthat tenants are exposed to the risk of eviction at the time of redevelopment and therisk of higher leasehold fees at the expiration of the contract if the right of land istransferred to another company. However, the company's "JINUSHI REIT" as a stableowner of leased land not only compensates for these disadvantages but are also
strengths that other companies cannot imitate.
Strategy Advisors believes that, given the expansion of the leased land market, it isquite possible for JINUSHI REIT to reach the targeted AUM of about 300 billion yen in
FY12/2026, and if it continues to increase the number of purchases to that end, thecompany’s target of sales and net income will also be within reach. However, it should
be noted that sales of high-margin properties, as seen in FY12/2023, may alter thetiming of sales of other properties, which could result in a swing in sales.

8. Comparison with Other Companies in the Industry
No Competition in
the DedicatedLeased Land
Business

Although there are competing firms in the transaction of individual leased land deals,
there are no other firms that specialize in leased land transactions, so there are no
direct competitors in terms of business model. For this reason, real estate financecompanies were used for the purposes of comparison.

Comparison with
Real Estate Finance
Companies

Companies that originate income-producing real estate properties and sell them toinvestors are considered real estate finance companies and those that own affiliated
REITs are considered for comparison. The listed companies included Samty (3244 TSE
Prime), Sun Frontier Fudosan (8934 TSE Prime), Tosei (8923 TSE Prime), FUJAS
Holdings (3284 TSE Prime), Ichigo (2337 TSE Prime) and ES-CON Japan (8892 TSE
Prime). (8892 TSE Prime).
In terms of profitability, the company's return on sales in FY12/2023 was 14.9%,
higher than other companies, but its ROE was only 15.3%, lower than othercompanies except Ichigo. Excluding the impact of debt holdings, the company's ROIC
is in the middle of the range, suggesting that the company's profitability is average.
The company's beta is 0.928 over the five-year weekly period (0.353 over the twoyear weekly period). Assuming a risk-free rate of 0.6% and a stock market excess
return of 6%, the cost of equity capital is 6.2%, and the excess return on ROE is
calculated to be 8.9%.

Safety Indicators
Worsened YoY, But
are Generally on
Par with Other
Companies

The company's safety indicators as of the end of FY12/2023 were equity ratio of
30.9%, net D/E ratio of 1.26x, and DCR of 164.9%; as of the end of FY12/2022, theequity ratio was 42.8%, net D/E ratio of 0.45% and DCR of 92.3%; all of which are
numerically worse than the previous year. The deterioration in these figures are due toa significant increase in purchases in FY12/2023 and an increase in real estate for saleand interest-bearing debt due to a delay in planned land sales; but even with thedeterioration, the company is still generally on par with its competitors. There are no
particular problems with the company's safety and it can be judged to be undercontrol.

45

JINUSHI | 3252 (TSE Prime)

Figure 27. Comparison with Other Real Estate Finance Companies
Code

Main Target
Real Estate

JINUSHI

3252

leased land

Samty

3244

MansionHotelsSamty Residential Investment Corporation

Sun Frontier Fudosan

8934

OfficeFrontier Real Estate Investment Corporation

Tosei

8923

OfficeCommercial

Tosei REIT Investment Corporation

Hoosiers Holdings

3284

Residence

Hoosiers PRIVATE REIT, Inc.(P)Ichigo2337

ES-CON Japan

8892

Company Name

Code
Company Name

OfficeHotelsRetailResidences
Lifestyle

Keiretsu REIT(P) means “Private REIT”
JINUSHI REIT (P)Ichigo Office REIT Investment Corporation
ESCON JAPAN REIT Investment Corporation

Net
D/E Ratio(times)DCR

Net Worth
Ratio
(%)

(%)

JINUSHI

3252

1.26

163.9

30.9

Samty

3244

2.09

205.7

25.5

Sun Frontier Fudosan

8934

0.16

89.2

52.9

Tosei

8923

1.30

120.5

33.4

Hoosiers Holdings

3284

1.32

153.5

23.6

Ichigo

2337

1.48

85.9

30.7

ES-CON Japan

8892

2.08

179.6

25.0

Note: Net income is net income attributable to owners of parent
Note: Sales and net income growth rates are CAGRs over the past 5 years; JINUSHIs have a 9-month FY12/2020, so CAGRs
over the past 4.75 years.
Note: Due to a change in the fiscal year end, figures for ES-CON Japan for the FY12/2022 are used.
Source: Prepared by Strategy Advisors

46

JINUSHI | 3252 (TSE Prime)
9. Stock Trends and Valuations
To see how the company's stock price has changed over the years, Figure 28 shows
an index of the stock prices of major real estate finance companies and the TOPIX(Tokyo Stock Exchange Stock Price Index) when the stock price at the end of 2019is set at 100.
During the New
Corona Disaster, theCompany Showed it isMore Resistant to
Decline Than Peers

In 2020, when the Corona pandemic began, the stock market as a whole fell
sharply and the share prices of all real estate finance companies underperformed
TOPIX, but JINUSHI's share price remained on par with the TOPIX. This is evidence
that the company is at least more resilient than other real estate finance companies
in times of market turmoil.

Recent Under
Performance vs TOPIX

During the stock price recovery phase after 2021, there was a phase in which thecompany's stock price outperformed TOPIX sometime after the company's namechange in 2022. However, since 2023, the company has generally been TOPIXdominant. In addition, the company has not overshot TOPIX, especially whencompared to other real estate finance companies.

Low PER & PBR

This is also reflected in valuations: only Sun Frontier Fudosan is lower in both PER
and PBR and it is not more expensive than other companies. In addition, both thecurrent PER and PBR have remained low over the past five years since 2018.
Figure 28. Stock Price Trends: Real Estate Finance Companies（December 31, 2019＝100）
160
140
120
100
80
60
40
20
0
2020

2021

2022

2023

2024

JINUSHISamty

Sun Frontier

Tosei

Hoosiers

IchigoES-CON

TOPIX

Source: Prepared by Strategy Advisors

47

JINUSHI | 3252 (TSE Prime)
Figure 29. PER Trends(Times)

18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
2018

2019

2020

2021

2022

2023

2024

Source: Prepared by Strategy Advisors

Figure 30. P/B Ratio Trends(Times)
2.0

1.5

1.0

0.5

0.0
2018

2019

2020

2021

2022

2023

2024

Source: Prepared by Strategy Advisors

48

JINUSHI | 3252 (TSE Prime)
Figure 31. Comparison of Valuations with Peers
Code

Acct
PeriodCompany Name

Stock
PricesMarketCap

Company
Forecast(24/4/5)(\ mn)JINUSHISamty
Sun Frontier Fudosan
Tosei
Hoosiers Holdings
IchigoES-CON Japan

3252
3244
8934
8923
3284
2337
8892

23/12
23/11
23/03
23/11
23/03
23/02
22/12*

2,551
2,783
1,910
2,411
1,081
429
996

PER

41,945
129,641
92,736116,637
38,431
191,793
94,944(Times)
8.4
11.4
8.0
10.4
8.0
19.4
-

PBR
Most
RecentResults(Times)
1.3
1.2
1.1
1.4
1.1
1.9
1.4

Dividend
Yield
Company
Forecast
(%)
3.3
3.2
2.9
3.0
5.1
1.9
-

ROE
Most
RecentResults
(%)
15.1
17.1
19.1
16.5
22.7
11.7
11.3

Note: Due to a change in its fiscal year-end, ES-CON Japan will have a 15-month FY03/2024. PER and dividend yield using
company forecasts were not applied.
Source: Prepared by Strategy Advisors

49

JINUSHI | 3252 (TSE Prime)
Market Environment
Becoming MoreFavorable for
Performance to be
Reflected in Stock
Prices. Valuations areat the Lowest Levels
in 5 years.

The Japanese stock market is continuing to experience strong liquidity since 2023 ,
especially in large-cap stocks popular with foreign buyers, resulting in the Nikkei
Stock Average reaching a new all-time high on February 22, 2024. Many believe that
this will be followed by a shift to an earnings focused market, which is more likely toreflect corporate performance.

Share Price to Rise as
Awareness Improves

In terms of performance, the company will likely make progress toward its mediumterm management plan, which calls for net income of 7 billion yen and for the
JINUSHI REIT AUM of about 300 billion yen in the FY12/2026.

Even if the real estate finance sector does not see a massive inflow of funds, thestock price is likely to react more honestly if the company's performance is strong.
The company's current valuations of 7.2x PER and 1.1x PBR remain at low levels
since the end of 2019, just before the start of the new Corona pandemic and further
declines in valuations from these levels are likely to be limited.

The company's stock price has gradually trended up, albeit with some short-term ups
and downs, since bottoming out in 2020 when the new Corona pandemic began.
Valuations, on the other hand, have remained at one of the lowest levels of the past
five years and are undervalued. As we have seen, the company has gained
confidence in its JINUSHI Business model, leading to a name change in 2022. The
company's current goal is to make widely known the attractiveness of the leased landmarket as an investment target and its superiority as a pioneer in the leased landmarket. This means that there is still a lot of room for the company to improve its
recognition and as awareness gradually spreads, the superiority of its business andbusiness model should be reflected in its share price through higher valuations.
Dividend Increase is
Expected to Raise theDividend Payout
Ratio to 28%

The company plans to pay an estimated dividend of 85.0 yen per share (interim 42.5
yen, year-end 42.5 yen) for FY12/2024. This is a significant increase of 30.0 yen
from the 55.0 yen per share (year-end dividend only) in the previous fiscal year andis the result of the company's change to a policy of returning profits to shareholders
in the form of cash dividends, rather than the shareholder special benefit program it
had offered until FY12/2023. The dividend payout ratio is expected to be 28.0% in
FY12/2024, compared to 20.5% in FY12/2023. The company has decided to pay aninterim dividend from this fiscal year in order to increase the liquidity of its stock.

10.

Risk Factors

At this point, there are no major risks to watch in terms of business execution or
performance, but the following three risks can be identified that may prevent thecompany from performing as expected.
In the short term, it is conceivable that tenants' willingness to open new stores could
decline sharply. In fact, the main reason for the lack of growth in both number andvalue of purchases in FY12/2022 was that the retail industry as a whole, which is thecompany's main tenant industry, was in a restrained store opening mode due to the
supply chain disruption caused by the outbreak of war in Ukraine and rising concerns
over rising prices. Changes in the willingness to open new stores affected thecompany's purchasing conditions within a relatively short period of time. It is

50

JINUSHI | 3252 (TSE Prime)
important to pay attention to the retail industry's willingness to open new stores andto macro trends (price hikes, currency fluctuations, etc.) related to this willingness.
Since the company's earnings are largely derived from flow services derived fromland sales, changes in the plan for land sales could cause actual earnings to deviatesignificantly from the company's plan. This can be caused by changes in theenvironment on the tenant side, as mentioned above, or as seen in FY12/2023, by
shifting the sales schedule for properties, which can cause sales to fall far short of thecompany's plan. Although the company places the highest priority on net income
trends in its income statement, the share price could react in the short-term
depending on how the financial results come out.
In the medium to long term, it is conceivable that competition for procurement may
intensify. In this regard, it is recognized that competition is still occurring at present
on an individual property basis. The company believes that it is unlikely that it will be
unable to purchase properties due to these factors, as the majority of purchases are
made through relative transactions and there are few properties for bidding that areprone to price competition. Rather, the expansion of the market for leased land dueto the increased participation of players could be more conducive to growth over the
medium to long term.
In the JINUSHI Business, as in other real estate investments, interest rate risk isunavoidable. Rising interest rates have both advantages and disadvantages, since
they work negatively on the financing side, but positively on the asset side due torising real estate prices. In light of the high turnover rate of the JINUSHI Business,the company borrows at variable rates, but with an awareness of the cyclicality of
the real estate market itself, it borrows for longer than eight years in principle, andrepays the debt in advance when the projects are sold. In principle, J-REITs take out
long-term fixed-rate loans, but their loan-to-value (LTV) ratios are lower than thoseof other REITs at around 30% and their sensitivity to interest rates is presumably
low. Since the company has a well-developed financial strategy, there is little
problem if interest rates move slowly, but it is important to be careful if interest rates
fluctuate rapidly in a short period of time.

11.

ESG Initiatives

The company's overall business is generally performing well and there are no major
issues from the perspective of growth strategy. However, from the perspective ofEnvironmental, Social and Governance (ESG), which investors have recently been
paying a great deal of attention to, there is still room for improvement. The following
are the main issues.
Corporate
Governance Structure

As a group, the company has 17 JINUSHIs and consolidated subsidiaries. As of
December 31, 2023, Tetsuya Matsuoka, Founder and Director, was the largest
shareholder, holding 17.55% (23.12% when adding the 5.56% held by Godo Kaisha
Matsuoka). The company has an audit committee system, with an independent"Nomination and Compensation Committee" under the Board of Directors, whose
main members are independent outside directors.

51

JINUSHI | 3252 (TSE Prime)
Of the six directors, four are independent outside directors, and all outside directors
are members of the Audit Committee. According to Principle 4-8 of the Corporate
Governance Code, companies listed on the prime market are required to appoint amajority of independent outside directors and the company satisfies this principle.
The Nomination and Compensation Committee also has 80% (4 out of 5)
independent outside directors.
Figure 32. Skill Matrix of JINUSHI Directors
Name

Hirofumi

Tetsuya

HiroyukiKensuke

Aya

Tomonori(Titles Omitted)

NishiraMatsuoka

Nishimura

Shiwa

Ozasa

Ishiwata

OutsideOutsideOutsideOutsideDirector

Director

Director

Rep
Director

Board

Director(Part-(Part-(Part-

Position

President

Member(Full-Time)

Time)

Time)

Time)

Gender

Male

Male

Male

Male

Female

Male

◎

○

○

○

◎

○

○

○

Members
Audit andSupervisory
Committee
Nominating andCompensation○

Committee
Skills Matrix
Corporate
Management
Sales andMarketing

●

●

●

●

Finance and●●●Accounting●

Legal,
Compliance and

●

●

●

●

Audit
Sustainability●●

Overseas

●

●

●
●

●

●

Source: Company Data52

JINUSHI | 3252 (TSE Prime)
However, the ratio of female directors is only 1 out of 6 (16.7% of the total). Until
the previous fiscal year, there had been no female directors, but from March 2024,
Fumi Ozasa, who has extensive experience and achievements in corporate
management, was appointed as an outside director, bringing the number of female
directors to one.
In response to the government's "Women's Version of the Framework Policy," theTSE amended its listing rules to require prime market listed companies to (1) strive
to appoint at least one female board member by 2025, (2) aim to increase thepercentage of female board members to 30% or more by 2030 and (3) recommend
the development of an action plan to achieve these goals. Regarding therecommendation in the 3rd point above, the formulation of an action plan to achievethese goals; although this is a recommendation, we expect it could become strongly
enforced through the exercise of voting rights by institutional investors.
In order to achieve (2), it will be necessary to appoint one more female director. It is
expected that the company will achieve a 30% ratio of female directors as soon as
possible in order to enhance its reputation among investors.
Sustainability
Initiatives

The company has identified material issues related to sustainability and discloses its
approach to sustainability.
JINUSHI Business, the company's unique real estate investment approach that does
not invest in buildings but only in land, is a real estate investment model that is
resistant to natural pandemics and market volatility and emits very little greenhousegases and industrial waste. Therefore, in its ESG policy, JINUSHI aims to contributeto the realization of a sustainable society.
JINUSHI will expand its business by (1) purchasing land with low risk of natural
pandemics such as landslides and flooding, (2) reducing GHG emissions fromconstruction and demolition by tenants by concluding long-term contracts, (3)enhancing its ability to respond to changes in the environment by diversifying tenant
types and expanding its business areas and (4) promoting off-balancing of land in
existing land and building projects (i.e. promoting long-term use of buildings bytenants).
The company established the ESG Promotion Committee in October 2021, which ischaired by the President and CEO and submits reports to the Board of Directors. The
ESG policy was formulated along with the medium-term management plan ofFebruary 2022 and an ESG roadmap was formulated in the medium-term
management plan.

53

JINUSHI | 3252 (TSE Prime)
Figure 33. ESG Roadmap

Source: Company Data

In August 2022, the company announced its endorsement of the recommendations of
the TCFD (Task Force on Climate-related Financial Disclosures) regarding theenvironment and has been disclosing information based on the recommendations on
its website. The company is considering transition risks and physicalrisks/opportunities as of 2030 and 2050.
The scenario analysis employed both the "1.5°C scenario," which is based on theachievement of the Paris Agreement and the realization of decarbonization and the"4°C scenario," which is a case in which climate change measures do not progress
sufficiently and natural pandemics become more severe. The company aims tocontribute to the realization of a carbon-neutral society in 2050 by encouraging its
tenants to install environmentally friendly facilities and to make their own emissions
carbon neutral as a measure based on the scenario analysis.
The goals regarding climate change are (1) to remain carbon neutral (own emissions:
Scope 1, 2) (2030 target, 2050 target) and (2) 100% incorporation of ESG clauses in
fixed-term leasehold agreements with tenants.
In February 2023, the company became the first listed real estate company in Japanto achieve carbon neutrality (for its own emissions). The business model withextremely low CO2 emissions contributed to the achievement of carbon neutrality.
In addition to its own achievements, the company is accelerating collaboration withtenants and encouraging the installation of environmentally friendly facilities by
incorporating ESG clauses into contract documents. As of the end of 2023, 100
environmentally friendly facilities had been installed based on ESG clauses (solar
power generation: 47, EV charging facilities: 29, wall and rooftop greening: 24).

54

JINUSHI | 3252 (TSE Prime)
Concerning ESG, with regard to the wider society, the company aims to achieve winwin relationships with stakeholders. Specifically, the company provides (1) real estate
financial products through the JINUSHI Private REIT Investment Corporation(investors), (2) diverse human resources and training (employees) and (3)contributions to local communities through tenant store opening strategies (local
communities). Other activities include supporting sports through contracts with tennis
players and cultural support through sponsorship of symphony orchestras, etc.
Figure 34. JINUSHI Sustainability Initiatives

Source: Company Data

55

JINUSHI | 3252 (TSE Prime)
Figure 35. Consolidated Statements of Income(\ mn)

3/18

3/19

3/20

12/20

12/21

12/22

12/23

31,26024,402
6,858
21.9%
3,174
3,684
11.8%

39,834
31,662
8,172
20.5%
3,725
4,447
11.2%

74,18765,087
9,100
12.3%
3,856
5,244
7.1%

29,88624,868
5,019
16.8%
2,599
2,420
8.1%

56,177
46,914
9,263
16.5%
3,788
5,475
9.7%

49,88739,03010,857
21.8%
4,446
6,411
12.9%

31,59721,098
10,499
33.2%
4,344
6,154
19.5%

Non-Operating Income
Interest and Dividend Income
Equity in Earnings of Affiliates
Profit on Currency Exchange
Other

229
27
30
n.a.
172

703
27
303
88
285

403
12
166
79
146

637
7
130
n.a.
500

285
5
n.a.
138
142

435
17
n.a.
296
122

227
15
40
84
88

Non-Operating Expenses
Interest Expense and DiscountEquity in Losses of Affiliates
Foreign Exchange Loss
Financing Costs
Other

869
542
n.a.
127
178
22

822
613
n.a.
n.a.
167
42

1,049
729
n.a.
n.a.
272
48

900
392
n.a.
377
120
11

758
457
83
n.a.
212
6

903
598
8
n.a.
267
30

663
445
n.a.
n.a.
186
32

Recurring Profit
Recurring Profit Margin

3,044
9.7%

4,327
10.9%

4,599
6.2%

2,157
7.2%

5,002
8.9%

5,943
11.9%

5,718
18.1%

Extraordinary Income
Extraordinary Loss

n.a.
70

333
829

130
102

n.a.
n.a.

n.a.
73

n.a.
1,331

1,489
40

Net Sales
Cost of Sales
Gross Profit
Gross Profit Margin Ratio
SG&A Expenses
Operating Profit
Operating Profit Margin

Pretax Profit

12/24
CoE
55,000

8,200
14.9%

7,300
13.3%

2,974

3,831

4,628

2,157

4,927

4,612

7,168

Corporate, Inhabitant andEnterprise Taxes

992

1,312

1,538

612

4,006

1,423

2,268

Income Taxes-Deferred

-30

-165

-87

-100

-2,203-456

162

Total Income Taxes(Corporate Tax Rate)
Net Profit Attributable to Ownersof Parent
Net Profit Margin

962
32.3%

1,146
29.9%

1,451
31.4%

512
23.7%

1,803
36.6%

967
21.0%

2,430
33.9%

1,958

2,684

3,177

1,644

3,124

3,641

4,709

6.3%

6.7%

4.3%

5.5%

5.6%

7.3%

14.9%

9.1%

EPS (\)

109.61149.30174.5989.94

170.90199.16267.76304.09

72

338

197

2,954

14,142

500

723

159

166

116

72

148

148

206

2,118
118.6
10.4%
4.8%
7.5%
55.00

2,850
159.5
12.8%
4.2%
5.9%
55.00

3,293
182.5
14.0%
4.6%
6.5%
55.00

1,716
93.8
6.8%
2.8%
4.4%
25.00

3,272
178.9
11.9%
5.0%
7.2%
50.00

3,789
207.2
12.4%
7.5%
10.3%
55.00

4,915
268.8
15.1%
4.6%
6.2%
55.00

17.0

17.0

18.0

18.0

18.0

18.0

17.0

17.8

18.0

18.2

18.2

18.2

18.2

16.4

Investment in Tangible andIntangible Fixed Assets
Depreciation and Amortization of
Goodwill
Cash Flow
CFPS (\)
ROE
ROIC (Capital Invested)
ROIC (Business Assets)
Dividend (\)
Average Number of Shares
During the Period (mn shares)
Number of Shares at End of
Period (mn shares)

5,000

85.00

56

JINUSHI | 3252 (TSE Prime)
Note: Due to a change in the fiscal year end, FY12/20 is a 9-month accounting period.
Source: Strategy Advisors, based on Company Data

57

JINUSHI | 3252 (TSE Prime)
Figure 36. Consolidated Balance Sheets(\ mn)

3/18

3/19

3/20

12/20

12/21

12/22

12/23

Current Assets
Cash and Deposits
Accounts Receivable
Inventories
Other

56,577
14,522
194
41,049812

90,02018,85799
69,5161548

66,886
21,851
147
43,4931395

60,07420,897
198
38,387592

60,002
17,264205
41,995538

52,85023,140273
28,192
1245

84,01923,092
330
60,060537

Fixed Assets
Property, Plant and Equipment
Land
Intangible Fixed Assets
Investments and Other
Investments in Securities
Allowance for Doubtful Accounts
Other
Total Assets

10,677187
4
12
10,477
2,424
-361
8,414
67,251

9,577
455
4
9
9,112
1,520
-213
7,805
99,597

8,169
522
4
14
7,633
300
-89
7,422
75,054

11,146
3,436
2,884
55
7,654
293
-89
7,450
71,22026,335
17,48816,994
225
8,621
581
-88
8,128
86,337

19,302
16,803
16,066
116
2,382
319
-88
2,151
72,153

17,462
14,85913,971
49
2,553
343
-84
2,294
101,482

Current Liabilities
Trade Debt
Accounts Payable and Accrued
Expenses
Interest-Bearing Debt
Short-Term Debt
Current Portion of L-Term Debt
Accrued Income Taxes
Deferred Tax Liabilities
Other

9,131
140

11,876
102

7,854
225

5,400
187

13,999
112

4,583
103

7,483
110

848

501

443

459

581

754

451

4,107
3,329
778
1,061
96
2,879

8,505
4,968
3,537
919
136
1,713

3,890
1,099
2,791
1,523
98
1,675

2,863
797
2,066
5
112
1,774

7,061
1,126
5,935
3,753
126
2,366

1,875
n.a.
1,875
232
182
1,437

2,359
1,473
886
2,202
210
2,151

Fixed Liabilities
Interest-Bearing Debt
Allowance for Retirement
Benefits/Payroll
Deferred Tax Liabilities
Other

37,81936,956

66,10965,25843,33042,67440,97940,43744,55542,74936,61035,28862,49660,414

69

43

n.a.

n.a.

n.a.

n.a.

n.a.

516
278

539
269

448
208

234
308

1,000
806

398
924

587
1,495

Net Assets
Capital Stock
Capital & Surplus
Retained Earnings
Treasury Stock
Accumulated Other Comprehensive
IncomeSubscription Warrant
Noncontrolling Interest
Total Assets

20,30420,3047,201
13,1080

21,611
21,611
7,410
14,8110

23,87023,8707,707
16,996
0

24,841
24,841
7,707
17,6350

27,781
27,781
7,705
20,302030,96030,906
7,705
23,030031,501
31,365
7,705
26,733-3,499

-30

-629

-832

-500

-227

169

424

25
n.a.
67,25120
n.a.
99,597n.a.
n.a.
75,054n.a.
n.a.
71,220n.a.
n.a.
86,337n.a.
54
72,153n.a.
136
101,482

Interest-Bearing Debt
Capital Adequacy Ratio
D/E Ratio

41,06330.2%
2.02

73,76321.7%
3.41

46,56431.8%
1.95

43,30034.9%
1.74

49,81032.2%
1.79

37,16342.8%
1.20

62,77330.9%
2.00

Note: Due to a change in the fiscal year end, FY12/20 is a 9-month accounting period.
Source: Strategy Advisors, based on Company Data58

JINUSHI | 3252 (TSE Prime)

Figure 37. Consolidated Statements of Cash Flows(\ mn)Cash Flows from Operating
Activities
Income before Income Taxes
Depreciation and Amortization
Equity in Earnings (Losses) of
Affiliated Companies
Working Capital
Income Taxes Paid
Other
Total Amount
Cash Flows from Investing
Activities
Purchases of Property, Plant andEquipment
Payments for Acquisition of
Intangible Assets
Other
Total Amount
Cash Flows from Financing
Activities
Net Increase (Decrease) in ShortTerm Loans Payable
Net Increase (Decrease) in LongTerm Debt
Issuance of Shares
Payments for Purchase of Treasury
Stock
Dividends Paid
Other
Total Amount
Effect of Exchange Rate Changes on
Cash
Cash Increase/Decrease
Cash Beginning Balance
Cash Ending Balance

3/18

3/19

3/20

12/20

12/21

12/22

12/23

2,974
160

3,831
166

4,628
116

2,157
72

4,927
148

4,612
148

7,168
206

292

5

93

-3

378

6,669

-59

-9,644-1,041
1,619-28,770-1,410-1,84326,022
-949
-229

2,504
-2,090
930

5,277
-377
1,020

13,387-5,426603-32,210373-690-5,640-28,021

29,681

3,570

11,37319,993-25,212

-38

-324

-144

-56

-13,373

-379

3,487

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

192

317

1,305

-43

-4,140

223

205

154

-7

1,161

-99

-17,513

-156

3,691

2,789

1,639

-3,869

-302

329

-930

1,440

4,779

31,665-23,232-3,1162,521-12,128

24,160

3
n.a.

204
n.a.

290

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

-3,499-1,018
-140

-982
-14

-992
-17

-1,004
-20

-458
-29

-913
-4

-1,00516

6,413

32,512-27,820-4,442

2,363-13,975

21,112

7

-136

-28

18

57

99

16

934
13,575
14,5094,348
14,50918,8572,994
18,857
21,851-953
21,851
20,897-3,71820,897
17,1785,960
17,17823,140-392
23,14022,747

Note: Due to a change in the fiscal year end, FY12/20 is a 9-month accounting period.
Source: Strategy Advisors, based on Company Data

59