ANNUAL REPORT 2023
Year Ended March 31, 2023

- 1 -Contents
Page
Company Overview……………………………………………………………………………………………………

3

1

History………………………………………………………………………………………………………………

3

2

Overview of Business Activities……………………………………………………………………………………

5

3

Overview of Subsidiaries and Affiliates……………………………………………………………………………

6

4

Employee Data ……………………………………………………………………………………………………

6

Business Overview……………………………………………………………………………………………………

8

1

Management Policies, Operating Environment, and Issues to Address……………………………………………

8

2

Management’s Analysis of Financial Position, Operating Results, and Cash Flows………………………………

11

Financial Reporting …………………………………………………………………………………………………

17

Consolidated Financial Statements…………………………………………………………………………………

17

Part 1

Part 2

Part 3
1

Independent Auditor’s Report- 2 -Part 1 Company Overview
1. History
July 1947

The Company was established in July for the purpose of leasing stock exchange buildings in Tokyo, Osaka,
Nagoya, and other cities along with all other associated assets to a newly founded organization comprised ofstock exchanges and their operators following the dissolution of the previous owner, the Japan Securities
Exchange, pursuant to a law enacted in 1947 to decentralize stock exchanges in Japan.
Based in Tokyo, the Company set up a branch in Osaka and offices in six other cities.

May 1949

Listed on the Tokyo Stock Exchange, Osaka Securities Exchange (Currently Osaka Exchange), and Nagoya
Stock Exchange

July 1949

Listed on the Fukuoka Stock Exchange

July 1950

Listed on the Sapporo Securities Exchange

July 1958

Completed construction of the Fukuoka Shoken Building

March 1962

Completed construction of the Kyoto Shoken Building

March 1965

Completed construction of the Fukuoka Heiwa Building

April 1965

Commenced sales of residential land in the city of Nagareyama’s Heiwadai district

April 1969

Upgraded offices in Nagoya and Fukuoka to branches

May 1972

Completed construction of the Kabutocho Heiwa Building

March 1977

Commenced sales of houses in the city of Abiko’s Fusaheiwadai district

May 1980

Commenced sales of condominium units of the Sunny Park Heights Narita condominium complex

October 1984

Completed construction of the trading floor building (currently Arrows) in the Tokyo Stock Exchange

December 1984

Building complex
Established Heiwa Regional Service Co., Ltd. (currently Heiwa Real Estate Property Management Co., Ltd.)

February 1986

Completed construction of the Yokohama Heiwa Building

April 1987

Completed construction of the Osaka Heiwa Building

April 1988

Completed construction of the main building in the Tokyo Stock Exchange Building complex

October 1993

Completed construction of the Daimaru Kyoto Store West Kyodo Building

June 1994

Completed construction of the Daimaru Kyoto Store North Kyodo Building

April 2000

Acquired the Mita Heiwa Building

February 2001

Acquired the Uchisaiwaicho Heiwa Building

September 2002

Acquired the Dogin Building

March 2004

Completed construction of the Nagoya Heiwa Building

December 2004

Completed construction of the Osaka Securities Exchange Building

December 2005

Acquired the Isemachi Heiwa Building

March 2006

Acquired the Sapporo Ekimae Godo Building

August 2006

Opened the Sapporo Branch

June 2007

Acquired the Kayabacho 1-Chome Heiwa Building

August 2007

Completed construction of the Nagoya Stock Exchange Building

February 2008

Made Housing Service Co., Ltd., a consolidated subsidiary

March 2008

Completed Construction of the Hotel Brighton City Osaka Kitahama
Acquired the Tenjin Heiwa Building

May 2008

Acquired the Shin-Odori Building

October 2009

Made Canal Investment Trust Co., Ltd., (currently HEIWA REAL ESTATE Asset Management Co., Ltd.) a
consolidated subsidiary

February 2010

Completed construction of CentRise Sakae

October 2011

Completed construction of the Heiwa Real Estate Kitahama Building

January 2012

Completed construction of the Ichibancho Heiwa Building

January 2013

Made The Tokyo Shoken Building Incorporated a consolidated subsidiary

February 2015

Completed construction of the Kitahama 1-Chome Heiwa Building

March 2015

Completed construction of the Maruzen Nagoya Honten Building

December 2017

Acquired the Osaka Midosuji Building- 3 -March 2019
August 2021

Acquired the Sakae Sun City Building
Opened KABUTO ONE

April 2022

The Company’s shares were listed on the Prime Market of the Tokyo Stock Exchange and the Premier Marketof the Nagoya Stock Exchange following the respective market reorganizations of each exchange- 4 -2 Overview of Business Activities
The Heiwa Real Estate Group (hereafter, “the Group”) is comprised of Heiwa Real Estate Co., Ltd. (hereafter, “the Company”),
which files consolidated financial statements as the parent company, and its five consolidated subsidiaries. The main businessactivities conducted by the Group, the names of the companies engaged in these businesses, and the respective business activitiesof each of these companies are presented below.
The main business activities conducted by the Group are categorized according to its reportable business segments.
(1) Building BusinessHeiwa Real Estate Co., Ltd., The Tokyo Shoken Building Incorporated, and Tokyo Hibiya Hotel Corporation develop, lease,manage and sell stock exchange buildings, office buildings, commercial facilities, and residential buildings.
Heiwa Real Estate Property Management Co., Ltd., provides property management services.
(2) Asset Management BusinessHeiwa Real Estate Co., Ltd., and HEIWA REAL ESTATE Asset Management Co., Ltd., manage the properties of Heiwa Real
Estate REIT, Inc.
Housing Service Co., Ltd. provides real estate agency services.
The details above are shown in the following diagram.

平和不動産株式会社

Heiwa Real Estate Co., Ltd.

ビルディング事業

Building Business

アセットマネジメント事業

Asset Management Business

平和不動産プロパティマネジメント株式会社

Heiwa Real Estate Property Management Co., Ltd.

株式会社東京証券会館

The Tokyo Shoken Building Incorporated

東京日比谷ホテル株式会社

Tokyo Hibiya Hotel Corporation

平和不動産アセットマネジメント株式会社

HEIWA REAL ESTATE Asset Management Co. Ltd.

ハウジングサービス株式会社

Housing Service Co., Ltd.

- 5 -

3 Overview of Subsidiaries and Affiliates

Company nameLocation

Commonstock(millionsof yen)Main business activities2

The
Company’s votingrights andownership (%)

Related activities

Consolidated subsidiaries
Consigned to manage
the Company’s leased
buildings

Heiwa Real Estate
Property Management
Co., Ltd.1

Chuo-ku, Tokyo

134

Building Business

100.0

Rents offices from theCompany
Officers holdconcurrent positions

Housing Service Co., Ltd.

Chuo-ku, Osaka

95

Asset Management Business

Officers holdconcurrent positions

100.0

HEIWA REAL ESTATE

Rents offices from theAsset Management Co.,Ltd.

Chuo-ku, Tokyo

295

Asset Management BusinessCompany
Officers hold100.0

concurrent positions
Rents stores to the
The Tokyo Shoken
Building Incorporated

Chuo-ku, Tokyo

100

Building BusinessCompany
Officers hold100.0

concurrent positions
Tokyo Hibiya Hotel

Chiyoda-ku, Tokyo

Corporation

10

Building Business

Rents hotels from the

100.0

Company

1. The main business activities correspond to the business segment names.

4 Employee Data
(1) Employees of the Group(As of March 31, 2023)
Segment

Number of employees

Building Business

140

Asset Management Business

87

Group-wide non-segment

26

Total

253

(Notes) 1. Number of employees refers to full-time employees, excluding employees transferred to organizations outside the Groupand including personnel transferred to the Group from other organizations.
2. Group-wide non-segment refers to employees of administrative divisions.

- 6 -(2) Employees of the Company

Number of employees

Average age of employees

96

42.7

Average years of employment(As of March 31, 2023)
Average annual salary(thousands of yen)

14.9

Segment

10,877

Number of employees

Building Business

70

Asset Management Business－Group-wide non-segment

26

Total

96

(Notes) 1. Number of employees refers to full-time employees, excluding employees transferred to organizations outside the Company
and including personnel transferred to the Company from other organizations.
2. Average annual salary includes bonuses and additional wages.
3. Company-wide non-segment refers to employees of administrative divisions.
(3) Labor Unions
Employees of The Tokyo Shoken Building Incorporated, a consolidated subsidiary, have formed a labor union, and thiscompany and the labor union have been maintaining a constructive relationship. There are no matters deserving special
mention.
(4) Percentages of female employees holding management positions and male employees who have taken childcare leave
Reported by the Company
Percentage of female employees holding management

10.8%

positions (Note 1)
Percentage of male employees who have taken childcare

75.0%

leave (Note 2)(Notes) 1. The percentage of female employees holding management positions was calculated as of March 31, 2023, pursuant toprovisions in the Act on Promotion of Female Participation and Advancement in the Workplace (Act No. 64 of 2015), andin accordance with Paragraph 19-1-1 of the Ministry of Health, Labour and Welfare’s Ordinance on the Action Plans for
Business Owners (Ordinance No. 162 of 2015) based on this act.
2. The percentage of male employees who have taken childcare leave was calculated over the Company’s fiscal year, pursuant
to provisions in the Act on the Welfare of Workers Who Take Care of Children or Other Family Members Including Child
Care and Family Care Leave (Act No. 76 of 1991), and in accordance with Paragraph 71-4-1 of the Ministry of Health,Labour and Welfare’s ordinance on the enforcement of this act (Ordinance No. 25 of 1991).
3. Employees employed directly by the Company, including those seconded by the Company to other companies, were
included in calculations of the percentages of female employees holding management positions and male employees who
have taken childcare leave. Employees seconded by other companies to the Company were not included in thesecalculations.
4. The Company has not disclosed differences in the salaries of male and female employees during the fiscal year underreview, and therefore, not included such data in this report, pursuant to provisions in the Act on Promotion of Female
Participation and Advancement in the Workplace, and in accordance with Paragraph 19-1-1 of the Ministry of Health,Labour and Welfare’s Ordinance on the Action Plans for Business Owners based on this act.

- 7 -Part 2 Business Overview
1. Management Policies, Operating Environment, and Issues to Address
Details of the Group’s management policies, operating environment, and issues to address are as follows.
Forward-looking statements in this report were based on judgements made as of March 31, 2023.
Management Policies, Operating Environment, and Issues to Address
The Japanese economy is expected to pick up gradually due to various measures implemented by the government, but the impact of
global inflation and monetary tightening on economic conditions around the world will need to be closely monitored going forward.
Management will also need to continue paying close attention to various factors affecting the Group’s operating environment,
including interest rate fluctuations and the impact of the growing shift to telecommuting and other changing workplace practices on
the office building leasing market.
In view of these circumstances, the Group will strive to increase its corporate value under its medium-term management plan,
Challenge & Progress, which was announced on April 30, 2020. Specifically, it will continue revitalizing Tokyo’s Nihonbashi
Kabutocho and Kayabacho districts, proceed with redevelopment projects in the city of Sapporo, and take steps to realize external
growth in its Building Business and Asset Management Business segments.
The Heiwa Real Estate Group’s Vision
As a group of companies that contribute to the revitalization of districts, the Heiwa Real Estate Group will work to raise its value andhelp build a sustainable society by engaging with stakeholders to raise their satisfaction and providing solutions to environmental
problems and issues facing society.
Building a sustainable society as a group of companies that contribute to the revitalization of districts
Through its efforts to revitalize Tokyo’s Nihonbashi Kabutocho and Kayabacho districts, redevelop areas of Sapporo, and manage
real estate assets, the Group will help build a more sustainable society and maintain safe and secure districts that are environmentallyfriendly and prepared for disasters.
Increasing shareholder value as a listed real estate company
The Company will aim to increase shareholder value by generating returns for shareholders and raising capital efficiency, making
maximum use of the sources of the Group’s value while adding value to its real estate properties.
Challenge & Progress medium-term management plan spanning from fiscal 2020 to fiscal 2023
During the three-year period of the plan, the Company will continue revitalizing Tokyo’s Nihonbashi Kabutocho and Kayabacho
districts, redevelop commercial areas in Sapporo, and shift to a business model designed to create added value through external andinternal growth. At the same time, it will take on challenges and promote progress as a company that contributes to the revitalizationof districts through sustainability initiatives that offer solutions to issues facing society today.
Strategies for each business from fiscal 2020 to fiscal 2023
(1) Redevelopment Business
1) Revitalization of Tokyo’s Nihonbashi Kabutocho and Kayabacho districts
With a view to create sustainable and diverse urban areas, the Company will work to foster prosperity in the Nihonbashi
Kabutocho and Kayabacho districts it is redeveloping and contribute to the Tokyo Metropolitan Government’s vision to makeTokyo a “global financial city” through urban redevelopment projects. Towards these ends, the Company has completed the
KABUTO ONE building and the Kitoki building and has commenced construction of the Caption by Hyatt Kabutocho Tokyo.
2) Redevelopment of commercial areas in Sapporo
The Company will promote full-fledged redevelopment of commercial areas in Sapporo through its participation in a city-led
project to redevelop Sapporo Station’s South Exit area (surrounding the Sapporo Ekimae Godo Building) and carry out theredevelopment of Sapporo’s Odorinishi district (surrounding the Dogin Building and Shin-Odori Building).
(2) Building Business
1) Pursuit of external and internal growth
The Company will acquire new properties for lease as a means to expand its portfolio, and generate earnings from the sale ofreal estate in the process of replacing portfolio properties. It also aims to increase the profitability of the portfolio by increasing
rent amounts based on trends in the office building leasing market.
2) Sustainable building management focusing on improving environmental performance and disaster preparedness
The Company will enhance the environmental performance and disaster preparedness of its buildings through investment infacilities and solutions-oriented building management with a view to reduce CO2 emissions over the long term.

- 8 -3) Earnings from the sale of portfolio properties
The Company will work to secure earnings by selling revenue-generating properties, maximizing the value of those properties
through real estate development, lease-ups, renovations, and other initiatives, and by developing residential properties for its HF
Residence series.
(3) Asset Management Business
1) Expansion of asset management revenues
The Company will aim to increase the Group’s revenues from asset management fees by facilitating the growth of Heiwa Real
Estate REIT, Inc.
(4) Corporate Management
1) Capital policy focused on capital costs and capital efficiency
The Company works to lower capital costs and improve capital efficiency as a matter of policy, and has set targets for key
performance indicators (KPIs) to achieve those goals. Specifically, it is targeting return on equity (ROE) of 6% or higher and aconsolidated total shareholder return ratio of around 70% between fiscal 2020 and 2023, and a consolidated dividend payout
ratio of around 50% by fiscal 2023.
2) Measures for strengthening corporate governance
The Company has been further strengthening its corporate governance by establishing several relevant committees, including anominating committee, designing organizations to facilitate agile management, having most of its Board of Directors comprisedof external directors, and reducing cross-shareholdings. It will also strive to ensure strict compliance by raising awareness ofcompliance-related issues among officers and employees.
3) Sustainable management practices
The Company aims to contribute to the growth and sustainability of society by providing relevant solutions through its businessactivities and implementing measures to help achieve the UN Sustainable Development Goals. To more effectively executesustainable management, the Company, led by its Sustainability Committee, implements a PDCA cycle to monitor sustainabilityrelated activities, including environmental initiatives related to climate change, and has related matters of importance reported
to the Board of Directors. In addition, the Company is taking steps to improve the health of employees, facilitate better internal
communication, and make its organizations more dynamic with the goal of enhancing its corporate value.
Numerical targets(1) KPIs
The Company has set a target for ROE as a means to control capital costs, and maintains a sufficient level of internal reserves
for shareholder returns based on current investment returns in the real estate market.

Profit targets

Capital efficiency

Earnings per share

Minimum ¥200 by fiscal 2023

Consolidated
operating income

Minimum ¥12 billion* by fiscal 2023

ROE

Minimum 6% from fiscal 2020 to 2023

Consolidated total
shareholder return
Shareholder returns

Around 70% from fiscal 2020 to 2023
Around 50% by fiscal 2023

ratio
Consolidated
dividend payout ratio(Note) In addition to the targets above, the Company is aiming for a net debt-to-equity ratio, an indicator of financial
soundness, of 1.8 or lower.
* Breakdown of the consolidated operating income target by business segment
・Building Business: ¥11.8 billion
・Asset Management Business: ¥1.8 billion
・Intercompany eliminations and other adjustments: —¥1.6 billion- 9 -(2) Investment Plan for Fiscal 2020 to 2023
Business

Redevelopment
Business

Investment amount
Approx. ¥32 billion
Breakdown:
Approx. ¥22 billion for redevelopment projects in Tokyo’s Nihonbashi
Kabutocho and Kayabacho districts
Approx. ¥10 billion for redevelopment projects in Sapporo

Building BusinessApprox. ¥60 billion for property acquisitions
Approx. ¥20 billion in returns from replacing portfolio properties
Approx. ¥34 billion in returns from selling currently owned properties

The targeted and planned amounts for the KPIs and investment plans, above, are as of the time this report was submitted. The
Company makes no guarantee that these targets and plans will be achieved, and results could differ substantially. These targets
and investment plans may be revised in the future due to changes in the operating environment or other factors.

- 10 -

2 Management’s Analysis of Financial Position, Operating Results, and Cash Flows(1) Overview of financial results
An overview of the Group’s consolidated financial position, operating results, and cash flows (hereafter, “financial results”) in
the fiscal year under review is presented as follows.
1) Financial position and operating results
In fiscal 2022, ended March 31, 2023, the Japanese economy showed signs of a moderate recovery following various measures
implemented by the government for co-existing with COVID-19. Nevertheless, volatility and risks in financial and capital
markets, economic downturns in other countries, and rising prices of commodities caused by the prolonged conflict in Ukraine
will need to be closely monitored going forward.
Against this backdrop, conditions in Japan’s real estate industry were mixed. In the office building leasing market, vacancy
rates increased as occupants tended to reduce their office spaces amid changing workplace practices, such as the growing shift
to telecommuting. In the real estate investment market, however, strong interest in Japanese real estate among investors remained
stable despite expectations for financing conditions to be impacted by interest rates hikes going forward.
In that operating environment, the Company’s consolidated revenue and income declined, for the most part, compared withthe previous fiscal year. Operating revenue totaled ¥44,522 million, a decrease of ¥13,295 million (23.0%). Operating income
was ¥10,784 million, a decrease of ¥1,830 million (14.5%), and ordinary income came to ¥9,647 million, a decrease of ¥1,925
million (16.6%). On the other hand, net income attributable to owners of parent increased by ¥432 million (5.0%) to ¥9,137
million.
Consolidated financial results by business segment are as follows.
Consolidated Financial Results by Segment
Fiscal 2021
Segment(Millions of yen)
Difference

Fiscal 2022

Operatingrevenue

OperatingincomeOperatingrevenue

OperatingincomeOperatingrevenue

OperatingincomeBuilding Business

54,433

12,39940,848

10,572(13,585)(1,827)

Asset Management Business

3,384

1,977

3,674

2,071

289

93

—

(1,762)—(1,859)—(97)

57,818

12,61544,522

10,784(13,295)(1,830)Adjustments
Total

Operating revenue from major tenants and their percentage of total operating revenue in fiscal 2021 and 2022 are as follows.
TenantGinza Project Inc. (special purpose
company)
Heiwa Real Estate REIT, Inc.

Fiscal 2021
Operating revenue
Percentage of total(millions of yen)operating revenue

Fiscal 2022
Operating revenue
Percentage of total(millions of yen)operating revenue

18,00031.1——

11,43019.8

13,36530.0(Note) Only tenants that account for 10% or more of total operating revenue are reported as major tenants.
(1) Building BusinessIn the Building Business segment, although KABUTO ONE (Chuo-ku, Tokyo) contributed to leasing revenue following its
opening in the previous fiscal year, leasing revenue as a whole decreased ¥980 million (3.8%) year on year to ¥25,130 million,
mainly because some building tenants moved out and prior contributions from penalties for tenant contract cancellations wereabsent in the period under review. Revenue from sales and acquisitions of properties fell by ¥12,705 million (47.5%) to ¥14,065
million, largely due to decreased sales of inventories. These results combined with other revenues in this segment brought total
operating revenue to ¥40,848 million, a decrease of ¥13,585 million (25.0%) year on year. Segment operating income totaled¥10,572 million, down ¥1,827 million (14.7%) compared with the same period of the previous fiscal year.
As of March 31, 2023, the vacancy rate of buildings leased by the Heiwa Real Estate Group (excluding buildings for whichleases have been suspended due to redevelopment) was 4.53%.

- 11 -

Breakdown of operating revenue(Millions of yen)
Fiscal 2021

Classification

Fiscal 2022

Area (m2)

Area (m2)AmountLeased land area 3,380.75
Leasing revenue

Leased land area 3,380.75
26,111

Leased floor space
425,431.57

Revenue from sales ofproperties
Other
Total

Amount25,130

Leased floor space
434,916.94—

26,770—14,065

—

1,552

—

1,652

—

54,433—40,848(2) Asset Management BusinessIn the Asset Management Business segment, asset management revenue totaled ¥2,482 million, an increase of ¥290 million(13.2%), while brokerage commissions amounted to ¥1,191 million, in line with the amount in the previous fiscal year. As aresult, segment operating revenue came to ¥3,674 million, an increase of ¥289 million (8.6%). Segment operating income
amounted to ¥2,071 million, an increase of ¥93 million (4.7%) year on year.
Breakdown of operating revenue
Classification(Millions of yen)
Fiscal 2021

Fiscal 2022

Difference

Asset management revenue

2,192

2,482

290

Brokerage commissions

1,191

1,191

(0)

3,384

3,674

289

Total

2) Cash flows
As of March 31, 2023, cash and cash equivalents amounted to ¥25,807 million, a decrease of ¥2,303 million compared with
March 31, 2022.
Fiscal 2022 consolidated results for each category of cash flows and main factors underlying the results are as follows.
Cash flows from operating activities
Net cash provided by operating activities totaled ¥23,952 million, compared with ¥34,189 million in the previous fiscal year.
Major inflows included income before income taxes of ¥13,260 million and a decrease in inventories of ¥11,012 million.
Cash flows from investing activities
Net cash used in investing activities amounted to ¥40,250 million, compared with ¥20,705 million in the previous fiscal year.
Major outflows included ¥38,239 million for the purchase of tangible fixed assets and ¥2,374 million for the purchase ofintangible fixed assets.
Cash flows from financing activities
Net cash provided by financing activities amounted to ¥13,994 million, compared with net cash used totaling ¥15,490 million in
the previous fiscal year. This was mainly due to inflows of ¥29,860 million in proceeds from long-term loans payable and ¥7,790
million in proceeds from issuance of bonds. Major outflows included ¥13,472 million for the repayment of long-term loans
payable, ¥4,368 million for the redemption of bonds, ¥2,704 million for the purchase of treasury shares, and ¥3,761 million forthe payment of dividends.

- 12 -

(Reference) Results for cash flow-related indicators
Indicator

March 31, 2019

March 31, 2020

March 31, 2021

March 31, 2022

March 31, 2023

Equity-assets ratio

32.5%

31.6%

31.1%

31.7%

30.0%

Market cap-to-assets ratio

24.6%

31.2%

33.7%

38.4%

34.0%

Debt repayment period (years)

—

6.5

26.0

6.0

9.5

Interest coverage ratio (times)

—

22.8

6.2

24.2

16.2

Net debt-to-equity ratio

1.6

1.5

1.6

1.5

1.7

(Notes) 1. The following formulas for calculating the indicators shown above are based on consolidated financial results.
Equity-to-assets ratio = shareholders’ equity ÷ total assets
Market cap-to-assets ratio = market capitalization ÷ total assets
Debt repayment period = interest-bearing liabilities ÷ net cash provided by operating activities
Interest coverage ratio = net cash provided by operating activities ÷ interest expenses
Net debt-to-equity ratio = (interest-bearing liabilities – cash and deposits + marketable securities) ÷ net assets
2. Interest-bearing liabilities are comprised of short-term loans payable, current portion of bonds, current portion of longterm loans, bonds, long-term loans payable, and long-term accounts payable, as stated in the consolidated balance sheets.
Interest expenses used for the calculations are recorded in the consolidated statements of income.
3. Net cash provided by operating activities used for the calculations are recorded in the consolidated statements of cash
flows.
4. No figures were recorded for the debt repayment period and the interest coverage ratio as of March 31, 2019, because cash
flows from operating activities were negative in the fiscal year ended March 31, 2019.
3) Production, orders, and operating revenues
Results related to production, orders, and operating revenues for each segment are presented above in Part 2 Business Overview,
2. Management’s Analysis of Financial Position, Operating Results, and Cash Flows, (1) Overview of financial results, 1)
financial position and operating results.

- 13 -

(2) Management’s analysis of business results and issues for consideration
Management’s recognition and analysis of the Group’s financial results as well as issues for consideration are presented below.
Forward-looking statements in this report were based on judgements made as of March 31, 2023.
1) Recognition and analysis of financial position and operating results, and issues for consideration
The Group is striving to increase its corporate value based on the business strategies of its medium-term management plan,
Challenge & Progress, which was announced on April 30, 2020. Specifically, it is carrying out redevelopment projects and taking
steps to realize external growth in its Building Business and Asset Management Business. In the fiscal year under review, theGroup has striven to realize external growth through the acquisitions of the Higashi-Yaesu City Building (Chuo-ku, Tokyo),
Daiei Building (Nagoya, Aichi), and Addit Sakura-dori building (Nagoya, Aichi), and worked towards internal growth byincreasing rent amounts in leasing agreements. Among consolidated financial results, operating income decreased by ¥1,830
million to ¥10,784 million, mainly because of tenants moving out and a year-on-year decrease in the amount of penalties fortenant contract cancellations recorded in the Building Business segment. Net income attributable to owners of parent increasedby ¥432 million to ¥9,137 million, which mainly reflected the contribution from the sell-off of investment securities, specificallycross-shareholdings.
Major factors that could have a significant impact on the Group’s operating results include trends in the domestic economy
and real estate market, particularly the office building leasing market and real estate investment market.
Total assets, total liabilities, and net assets as of March 31, 2022, and March 31, 2023 were as follows:(Millions of yen)March 31, 2022

March 31, 2023

Difference

Total assets

376,210398,333

22,123

Total liabilities

256,931

279,009

22,078

Net assets

119,278

119,324

45

Interest-bearing liabilities

206,236

226,895

20,659(Note) Interest-bearing liabilities are comprised of short-term loans payable, current portion of bonds, current portion of long-term loans,bonds, long-term loans payable, and long-term accounts payable.

Total assets
As of March 31, 2023, total assets amounted to ¥398,333 million, an increase of ¥22,123 million compared with March 31, 2022.
Among the factors underlying this result, tangible fixed assets rose by ¥30,147 million, largely due to the acquisitions of theHigashi-Yaesu City Building (Chuo-ku, Tokyo), Daiei Building (Nagoya, Aichi), and Addit Sakura-dori building (Nagoya,
Aichi). These and other items more than offset a decrease in real estate for sale of ¥5,469 million and a decrease in investment
securities of ¥4,433 million.
In the consolidated balance sheets, the combined balance of leased property and real estate of which a portion was leased was¥308,650 million as of March 31, 2023, an increase of ¥31,936 million compared with April 1, 2022, and, as of those respective
dates, had a market value of ¥420,185 million, an increase of ¥31,204 million.
Total liabilities
As of March 31, 2023, total liabilities amounted to ¥279,009 million, an increase of ¥22,078 million compared with March 31,
2022. This mainly reflected an increase in interest-bearing liabilities of ¥20,659 million.
As of March 31, 2023, the balance of interest-bearing liabilities was ¥226,895 million, and the net debt-to-equity ratio stoodat 1.7. The Company has set a net debt-to-equity ratio target of 1.8 in its medium-term management plan, Challenge & Progress,
and will aim to keep the ratio within this range.
Net assets
As of March 31, 2023, net assets stood at ¥119,324 million, an increase of ¥45 million compared with March 31, 2022. This
mainly reflected an increase in retained earnings of ¥6,040 million, which more than offset the Company's purchase of treasury
shares totaling ¥2,691 million, a decrease of unrealized gain on securities amounting to ¥2,624 million, and a decline in- 14 -

revaluation reserve for land of ¥678 million.
The Company implemented concrete measures to raise capital efficiency and return stable profits to shareholders, including
an acquisition of 646,100 of its treasury shares in the fiscal year under review.
The Company’s recognition and analysis of its financial position and operating results by business segment along with related
issues for consideration are as follows.
Analysis of financial position
As of March 31, 2023, Building Business segment assets amounted to ¥337,439 million, an increase of ¥27,350 million comparedwith the previous year. This mainly reflected an increase in tangible fixed assets resulting from the acquisitions of the HigashiYaesu City Building (Chuo-ku, Tokyo), Daiei Building (Nagoya, Aichi), and Addit Sakura-dori building (Nagoya, Aichi), in
spite of a decrease in real estate for sale following sell-offs of properties. Asset Management Business segment assets totaled¥25,264 million, up ¥409 million compared with the previous year. This was largely due to an increase in the market value ofinvestment units of Heiwa Real Estate REIT, Inc., held by the Company.
Segment assets(Millions of yen)March 31, 2022

March 31, 2023

Difference

Building Business

310,089

337,439

27,350Asset Management Business

24,85425,264409

Adjustments

41,26535,629(5,636)

Amount in consolidated financial statements

376,210398,333

22,123

Analysis of operating results
Operating results for each segment are presented above in Part 2 Business Overview, 2. Management’s Analysis of Financial
Position, Operating Results, and Cash Flows, (1) Overview of financial results, 1) Financial position and operating results.
2) Analysis of cash flows, issues for consideration, and sourcing and liquidity of funds
An analysis of cash flows in the fiscal year under review is presented above in Part 2 Business Overview, 2. Management’s
Analysis of Financial Position, Operating Results, and Cash Flows, (1) Overview of financial results, 2) Cash flows.
The Group’s sources of funds include cash inflows from its business activities, loans from financial institutions, and bonds
issued by the Company. The funds it secures are allocated in a manner that ensures a sound balance between working capital,
shareholder returns, internal reserves needed for maintaining stable operations, and investment for future growth, such asredevelopment and building businesses. The Group’s working capital is mainly used to pay expenses for the operation of businessassets, operating expenses, including selling, general and administrative expenses, and non-operating expenses, such as interest
expenses.
As a basic policy, the Company maintains an appropriate level of discipline when financing and procuring funds, using thenet debt-to-equity ratio as an indicator of financial discipline. As of March 31, 2023, interest-bearing liabilities, which include
loans and corporate bonds, stood at ¥226,895 million, net interest-bearing liabilities, which exclude marketable securities andcash and deposits from interest-bearing liabilities, amounted to ¥198,987 million, and the net debt-to-equity ratio came to 1.7.
The Company will return profits to shareholders based on the assumption that its businesses, particularly the redevelopment
and building businesses, will operate stably over the long term, and sufficient internal reserves for raising shareholder value will
be secured. As a basic policy, the Company will aim for a consolidated total shareholder return ratio of 70% from fiscal 2020 to2023, taking into account returns on business investments while focusing on capital cost and capital efficiency. In accordancewith this policy, the Company paid dividends totaling ¥3,740 million for fiscal 2022 and acquired a total of ¥2,499 million intreasury shares during the same year. As a result, the consolidated total shareholder return ratio stood at 68.3%.
3) Significant Accounting Policies and Estimates
The Group prepares its consolidated financial statements in accordance with accounting standards generally accepted in Japan.
When preparing these statements, accounting estimates are made based on reasonable standard.
More details are presented in Part 3 Financial Reporting, Consolidated Financial Statements, 6. Notes to Consolidated- 15 -

Financial Statements, Note 2 Significant Accounting Policies.
Accounting estimates are necessary for the impairment of fixed assets and valuation of real estate for sale, in particular.
Information concerning the impact of uncertainty inherent in such estimates and assumptions as well as changes therein on
operating results is presented in Part 3 Financial Reporting, Consolidated Financial Statements, 6. Notes to Consolidated
Financial Statements, Note 3 Significant Accounting Estimates.

Additional information
1. Building Business
Breakdown of operating revenue, segment income, and depreciation
Fiscal 2021
Classification
Operating Segment income
Depreciation
revenue(loss)(Millions of yen)
Operatingrevenue

Fiscal 2022
Segment income(loss)

Depreciation

Leasing revenue

26,111

10,083

5,344

25,130

7,549

5,600

Revenue from sales ofproperties

26,7702,511—

14,065

3,140

—

Other

1,552

(195)

4

1,652

(118)

4

54,433

12,3995,349

40,848

10,572

5,605

Total

(Note) Leasing revenue includes sales and expenses associated with the operations of restaurants. These operations contributed ¥117
million to operating revenue, reduced segment incomed by ¥130 million, and accounted for ¥37 million in depreciation in fiscal
2021, and contributed ¥381 million to operating revenue, reduced segment incomed by ¥130 million, and accounted for ¥47
million in depreciation in fiscal 2022.
2. Asset Management Business
Breakdown of operating revenue, segment income, and depreciation
Fiscal 2021
Classification
OperatingSegment
Depreciation
revenueincome(Millions of yen)
Operatingrevenue

Fiscal 2022
Segment
incomeDepreciation

Asset management revenue

2,192

1,606

8

2,482

1,828

10

Brokerage commissions

1,191

371

7

1,191

242

4

3,384

1,977

16

3,674

2,071

14

Total

- 16 -

Part 3 Financial Reporting
Consolidated Financial Statements
1. Consolidated Balance Sheets(Millions of yen)
Fiscal 2021
(As of March 31, 2022)
AssetsCurrent assets
Cash and deposits (Note 13)
Accounts receivable–trade (Notes 7, 13 and 21)
Marketable securities (Notes 13 and 14)
Real estate for sale (Note 7)
Real estate for sale in process (Note 7)
Operating investment (Notes 13 and 14)
Other
Allowance for doubtful accounts
Total current assets
Fixed assets
Tangible fixed assets
Buildings and structures (Note 7)
Accumulated depreciation
Buildings and structures, net (Note 7)
Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles, net(Note 7)
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net (Note 7)
Land (Note 7)
Construction in progress (Note 7)
Total tangible fixed assets
Intangible fixed assets
Leasehold rights (Note 7)
Other (Notes 7, 21 and 25)
Total intangible fixed assets
Investments and other assets
Investment securities (Notes 7, 13 and 14)
Deferred tax assets (Note 18)
Other
Total investments and other assets
Total fixed assets
Deferred assets
Bond-issuing cost
Total deferred assets
Total assets- 17 -

Fiscal 2022
(As of March 31, 2023)

23,211
1,809
5,014
19,623
251
1,624
2,038
(25)
53,54820,908
1,967
6,999
14,153
298
1,027
1,300
(24)
46,630172,795(89,847)
82,9472,279(1,787)

179,609(93,392)
86,2172,359(1,878)

492

480

2,087
(1,527)560
163,6241,754
249,379

2,234(1,626)607
190,497
1,723
279,526

28,560251
28,81130,464193
30,65839,066156
5,079
44,301
322,492

34,632
226
6,345
41,204351,388169
169
376,210314
314
398,333

(Millions of yen)
Fiscal 2021
(As of March 31, 2022)
Liabilities
Current liabilities
Accounts payable–trade (Note 13)
Current portion of bonds payable (Notes 13 and 25)
Short-term loans payable (Notes 13 and 25)
Current portion of long-term loans
Income taxes payable (Note 18)
Accrued consumption taxes
Accrued bonuses for directors
Accrued bonuses
Other (Notes 7, 21 and 25)
Total current liabilities
Long-term liabilities
Bonds payable (Notes 13 and 25)
Long-term loans payable (Notes 13, 15 and 25)
Long-term accounts payable (Notes 13 and 25)
Leasehold and guarantee deposits received (Note13)
Deferred tax liabilities (Note 18)
Deferred tax liabilities for land revaluation (Note7)
Provision for share-based remuneration
Retirement benefit liability (Note 16)
Asset retirement obligations (Note 19)
Total long-term liabilities
Total liabilities
Net assets
Shareholders’ equity
Common stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Unrealized gain on securities
Revaluation reserve for land (Note 7)
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets- 18 -

Fiscal 2022
(As of March 31, 2023)

3,367
4,327
3,800
13,077
3,300
96
118
250
2,372
30,710

5,727
3,648
3,800
15,727
2,618
642
134
256
1,988
34,54323,889157,143
4,000

27,989170,880
4,850

22,514

23,524

10,170

8,849

7,613

7,314

101
119
669
226,221
256,931

147
234
676
244,466
279,009

21,492
19,72050,258(7,306)
84,165

21,492
19,72056,298(9,997)87,51318,06817,045
35,113
119,278
376,210

15,443
16,366
31,810
119,324
398,333

2. Consolidated Statements of Income(Millions of yen)
Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)
Operating revenue (Notes 8, 21 and 22)
Operating costs (Note 8)
Gross profit
Selling, general and administrative expenses
Salaries and allowances
Provision of accrued bonuses for directors
Provision of accrued bonuses
Provision for share-based remuneration
Retirement benefit costs
Commission fee
Other
Total selling, general and administrative expenses
Operating income (Note 22)
Non-operating income
Interest income
Dividends earned
Miscellaneous non-operating income
Total non-operating income
Non-operating expenses
Interest expenses
Amortization of bond issuance cost
Miscellaneous non-operating expenses
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of fixed assets (Note 8)
Gain on sales of investment securities
Gain on sale of businesses (Note 8)
Subsidy income
Total extraordinary income
Extraordinary losses
Loss on disposal of fixed assets (Note 8)
Loss on building reconstruction (Note 8)
Impairment loss es (Notes 8 and 22)
Loss on tax purpose reduction entry of fixed assets
Total extraordinary losses
Income before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes (Note 18)
Net income
Net income attributable to owners of parent- 19 -

Fiscal 2022
(From April 1, 2022 toMarch 31, 2023)

57,81840,126
17,691

44,522
28,242
16,279

1,547
121
169
53
88
725
2,371
5,076
12,615

1,578
141
170
66
124
838
2,575
5,495
10,784

5
534
45
585

6
539
30
575

1,414
56
158
1,628
11,572

1,480
56
175
1,713
9,647

344
761
—
—
1,106

—
3,543
240
44
3,827

49
82
2
—
133
12,544
4,113
(274)
3,839
8,705
8,705

61
—
108
44
214
13,260
4,655
(532)
4,123
9,137
9,137

3. Consolidated Statements of Comprehensive Income(Millions of yen)
Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)
Net income
Other comprehensive income (Note 9)
Unrealized gain on securities
Revaluation reserve for land
Total other comprehensive income
Comprehensive income (Note 9)Comprehensive income attributable to:
Owners of parent- 20 -

Fiscal 2022
(From April 1, 2022 toMarch 31, 2023)

8,705

9,137

(2,119)49(2,069)6,635(2,624)—(2,624)
6,512

6,635

6,512

4. Consolidated Statements of Changes in Net Assets
Fiscal 2021 (From April 1, 2021 to March 31, 2022)(Millions of yen)
Shareholders’ equity
Common stock
Balance at the beginning of theperiodCapital surplus

21,492Retained earnings

19,720Total shareholders’equityTreasury shares

44,740(4,496)81,457

Change during the period
Distribution of surplus(3,189)(3,189)Net income attributable toowners of parent

8,705

8,705

2

2

Changes in scope of
consolidation
Acquisition of treasury shares
Disposal of treasury shares(2,810)(2,810)000Reversal of revaluation reserve
for land——Net changes of items otherthan shareholders’ equity
Total change during the period

—

0

5,517

(2,810)2,708

Balance at the end of the period

21,492

19,72050,258(7,306)

84,165

Accumulated other comprehensive income

Balance at the beginning of theperiodUnrealized gain on
securities

Revaluation reserve forland

Total accumulated
other comprehensive
income20,187

16,99537,182

Total net assets

118,639

Change during the period
Distribution of surplus(3,189)Net income attributable toowners of parent

8,705

Changes in scope of
consolidation2

Acquisition of treasury shares(2,810)

Disposal of treasury shares

0

Reversal of revaluation reserve
for land—Net changes of items otherthan shareholders’ equity(2,119)49(2,069)(2,069)Total change during the period(2,119)49(2,069)638

Balance at the end of the period

18,06817,045

35,113

119,278- 21 -

Fiscal 2022 (From April 1, 2022 to March 31, 2023)(Millions of yen)
Shareholders’ equity
Common stock
Balance at the beginning of theperiodCapital surplus

21,492Retained earnings

19,72050,258

Total shareholders’equityTreasury shares(7,306)

84,165

Change during the period
Distribution of surplus(3,775)(3,775)

Net income attributable toowners of parent

9,137

9,137

—

—

Changes in scope of
consolidation
Acquisition of treasury shares
Disposal of treasury shares(2,708)(2,708)17

170

Reversal of revaluation reserve
for land678

678

Net changes of items otherthan shareholders’ equity
Total change during the period

—

0

6,040

(2,691)

3,348

Balance at the end of the period

21,492

19,72056,298(9,997)87,513

Accumulated other comprehensive income

Balance at the beginning of theperiodUnrealized gain on
securities

Revaluation reserve forland

Total accumulated
other comprehensive
income18,06817,045

35,113

Total net assets

119,278

Change during the period
Distribution of surplus(3,775)

Net income attributable toowners of parent

9,137

Changes in scope of
consolidation—

Acquisition of treasury shares(2,708)

Disposal of treasury shares

17

Reversal of revaluation reserve
for land678

Net changes of items otherthan shareholders’ equity(2,624)(678)(3,303)(3,303)

Total change during the period(2,624)(678)(3,303)

45

Balance at the end of the period

15,443

16,366

31,810

119,324- 22 -

5. Consolidated Statements of Cash Flows(Millions of yen)
Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)
Cash flows from operating activities
Income before income taxes
Depreciation
Loss on disposal of fixed assets
Impairment losses
Loss (gain) on sale of businesses
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in accrued bonuses
Increase (decrease) in retirement benefit liability
Interest and dividends income
Interest expenses
Amortization of bond issuance cost
Loss (gain) on sale of investment securities
Loss (gain) on sales of fixed assets
Decrease (increase) in notes and accounts receivable –trade
Decrease (increase) in inventories
Decrease (increase) in operating investments
Decrease (increase) in prepaid expenses
Decrease (increase) in accounts receivable – other
Increase (decrease) in notes and accounts payable –trade
Increase (decrease) in advances received
Increase (decrease) in accrued consumption taxes
Increase (decrease) in deposits received
Increase (decrease) in leasehold and guarantee deposits
received
Other
SubtotalInterest and dividend income received
Interest paid
Income taxes paid
Net cash provided by operating activities- 23 -

Fiscal 2022
(From April 1, 2022 toMarch 31, 2023)

12,544
5,418
49
2
—
(1)
36
4
(540)
1,414
56
(761)
(344)

13,260
5,668
61
108
(240)
(0)
6
114
(545)
1,480
56
(3,543)
—

(175)

(157)

18,578
60
(25)
(895)

11,012
597
0
1,323

274

(55)

(66)
19
633

12
545
(544)

(281)

1,006

144
36,144540(1,407)(1,088)34,18935
30,203522(1,457)(5,315)23,952

(Millions of yen)
Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)
Cash flows from investing activities
Purchase of marketable securities
Proceeds from sales and redemption of securities
Purchase of investment securities
Proceeds from sales and redemption of investment
securities
Proceeds from sale of businesses
Purchase of tangible fixed assets
Proceeds from sales of tangible fixed assets
Purchase of intangible fixed assets
Purchase of long-term prepaid expenses
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Payments for asset retirement obligations
Other
Net cash used in investing activities
Cash flows from financing activities
Increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from issuance of bonds
Redemption of bonds
Proceeds from increase in long-term accounts payable
Purchase of treasury shares
Payment of dividends
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash
equivalents
Increase (decrease) in cash and cash equivalents
Balance of cash and cash equivalents at beginning of
periodIncrease (decrease) in cash and cash equivalents resulting
from change in scope of consolidation
Balance of cash and cash equivalents at end of period(Note 11)

- 24 -

Fiscal 2022
(From April 1, 2022 toMarch 31, 2023)(2,000)2,016(1,632)(3,000)
1,015
(313)

986

4,141

—
(18,218)984(2,156)
(498)
(237)
42
(1)
11
(20,705)240(38,239)—(2,374)(1,155)
(614)
48
—
2
(40,250)(5,450)25,010(27,159)—(1,891)—(2,820)(3,176)(2)(15,490)—
29,860(13,472)
7,790(4,368)850(2,704)(3,761)(198)
13,994——(2,006)(2,303)29,585

28,111

532—

28,11125,807

6. Notes to Consolidated Financial Statements
Note 1 － Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Heiwa Real Estate Co., Ltd.(the “Company”) and its subsidiaries (collectively,
the “Group”) have been prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Act of Japanand its related accounting regulations, and accounting principles generally accepted in Japan (“Japanese GAAP”), which are different
in certain respects as to the application and disclosure requirements of International Financial Reporting Standards.
The accompanying consolidated financial statements have been compiled from the consolidated financial statements of theCompany prepared in accordance with Japanese GAAP and translated into English for the benefit of readers outside Japan. In addition,
the notes to the consolidated financial statements include information which may not be required under Japanese GAAP but ispresented herein as additional information.
Note 2 － Significant Accounting Policies
1. Scope of consolidation(1) Consolidated subsidiaries: 5
Names of consolidated subsidiaries:
Heiwa Real Estate Property Management Co., Ltd.
Housing Service Co., Ltd.
HEIWA REAL ESTATE Asset Management Co., Ltd.
The Tokyo Shoken Building Incorporated
Tokyo Hibiya Hotel Corporation
Tokyo Hibiya Hotel Corporation was newly established and included in the scope of consolidation in the fiscal year.
(2) Names, etc. of major non-consolidated subsidiaries
Major non-consolidated subsidiaries
The Company has no major non-consolidated subsidiaries or affiliates to report.
(Reason for exclusion from scope of consolidation)
All non-consolidated subsidiaries are small-scale businesses and their aggregated total assets, net sales, net income/loss(corresponding to the equity owned by the Company) and retained earnings (corresponding to the equity owned by the Company)
have no significant effect on the overall results of the consolidated financial statements.
2. Application of the equity method(1) Names of major non-consolidated subsidiaries or affiliates not accounted for using the equity method
The Company has no major non-consolidated subsidiaries or affiliates to report.
(2) Reason for exclusion from application of equity method accounting
A non-consolidated subsidiary or affiliate not accounted for using the equity method is excluded from the scope of application ofequity method accounting because its net income/loss (corresponding to the equity owned by the Company) and retained earnings(corresponding to the equity owned by the Company), etc. have an immaterial effect on the consolidated financial statements andis insignificant as a whole.
3. Matters related to the fiscal year period of consolidated subsidiaries
The accounting year of consolidated subsidiary Tokyo Hibiya Hotel Corporation ends on February 28. This closing date was used
for the preparation of these consolidated financial statements, however, if any significant transactions occur between March 1 andthe end of the consolidated fiscal year on March 31, adjustments for the consolidated financial statements will be implemented asnecessary.
4. Accounting policy(1) Method and basis of valuation of significant assets
1) Securities
Held-to-maturity bonds
Held-to-maturity bonds are valued at cost, with cost being determined using the amortized cost method (straight-line method).
Available-for-sale securitiesa) Investments other than stocks without quoted market prices
The market value method is used for investments other than stocks without quoted market prices (differences in valuation
are included directly in net assets, and costs of securities sold are calculated using the moving-average method).
b) Stocks without quoted market prices
They are mainly valued at cost determined using the moving-average method.
2) Inventory- 25 -

Inventories are valued at cost determined by the specific identification method (the value on the consolidated balance sheet isappraised by the write-down of the book value of inventories based on the deterioration of profitability).
(2) Depreciation method for significant depreciable assets
1) Tangible fixed assets (excluding lease assets)
Depreciation of tangible fixed assets is computed using the declining balance method. The straight-line method, however, isused for the Tokyo Stock Exchange Building and one other building, as well as for buildings (excluding attached facilities)
acquired on or after April 1, 1998, and facilities and structures attached to buildings acquired on or after April 1, 2016.
Depreciation of consolidated subsidiaries’ tangible fixed assets is computed using the straight-line method.
The principal useful lives of tangible fixed assets are as follows:
Buildings and structures: 2 – 65 years
Machinery, equipment, and vehicles 2 – 30 years
Tools, furniture and fixtures 2 – 20 years
2) Intangible fixed assets (excluding lease assets)
Amortization of intangible fixed assets is computed using the straight-line method. The cost of software for internal use isamortized using the straight-line method based on the expected useful life of the software (five years).
3) Lease assets
Lease assets are depreciated to a residual value of zero using the straight-line method over the lease period.
(3) Method of accounting for significant deferred assets
Bond issuance cost
Bond issuance cost is amortized using the straight-line method over the period until bond redemption.
(4) Basis of accounting for significant accruals and reserves
1) Allowance for doubtful accounts
An allowance for doubtful accounts is provided to cover losses on bad debts at an amount estimated based on the historical
write-off ratio for general accounts receivables. For doubtful accounts receivable, the allowance is determined at the amountestimated to be uncollectible on an individual basis.
2) Accrued bonuses for directors
The accrual for bonuses to directors is calculated based on the estimated payments.
3) Accrued bonuses
The accrual for bonuses to employees is calculated based on the estimated payments.
4) Provision for share-based remuneration
The provision of share-based remuneration was calculated based on the expected amount of stock compensation obligations asof the end of the fiscal year under review in order to provide the Company’s stock as compensation to directors and executive
officers of the Company and certain subsidiaries in accordance with its share-based remuneration rules, and as compensation toits employees in accordance with share-based remuneration rules concerning the trust for the Company’s stock ownership planfor employees.
(5) Accounting for retirement benefits
In order to provide the retirement benefits of employees and pension recipients, retirement benefit liability is calculated at an
amount equal to the projected benefit obligation as of the end of the fiscal year under review minus the fair value of pension
assets. Retirement benefit liability is not calculated at any consolidated subsidiary that has a defined contribution retirement plan.
(6) Basis for calculating significant revenues and expenses
Details about the primary performance obligations of the Heiwa Real Estate Group’s main businesses that generate revenue fromcontracts with customers, and the points in time when such performance obligations are generally satisfied (the points in time
when revenues are generally recognized) are as follows.
1) Building Business
Revenue from sales of properties
The Company generates revenue from sales of properties by increasing the value of properties it has acquired throughredevelopment, lease-ups, and renovations, and then selling them for higher prices than their acquisition prices. The Company
has performance obligations to deliver properties based on real estate sales agreements.
These performance obligations are satisfied at the time of delivering a property, and revenue is recognized once the property
is delivered.

- 26 -

2) Asset Management Business
Asset management revenue from management fees
The Company generates asset management revenue from management fees obtained through asset management services
provided to Heiwa Real Estate REIT, Inc. Based on property lease agreements, the Company has performance obligations tomanage properties, handle leasing and financing, and acquire and transfer ownership of properties.
Its performance obligations to manage properties and handle leasing and financing are satisfied by providing these services
over their specified periods of time, and revenue is recognized in proportion to the degree these performance obligations are
satisfied.
Its performance obligations to acquire and transfer ownership of properties are satisfied once an acquisition or transfer of aproperty has been completed, and revenue is recognized at either of those points in time.
(7) Method of significant hedge accounting
1) Method of hedge accounting
The special treatment applies to interest rate swaps because they meet the requirements.
2) Hedging instruments and hedged items
Hedging instruments: interest rate swaps
Hedged items: interest rates of loans payable3) Policy of hedging transactions
Interest rate swap transactions are conducted to reduce the exposure to fluctuations in the interest rates of loans payable.
4) Method of assessing hedge effectivenessThe assessment of hedge effectiveness on the closing date is omitted because interest rate swaps meet the requirements forreceiving special treatment.
(8) Scope of cash and cash equivalents in the consolidated statements of cash flows
Cash and cash equivalents consist of cash on hand, cash in banks that can be withdrawn on demand, and short-term investmentswith maturities of three months or less from the acquisition date, which are highly liquid instruments that can be easily converted
into cash and are exposed to little risk of change in value.
(9) Other important matters for the preparation of consolidated financial statements
Accounting for consumption taxes
In principle, non-deductible consumption taxes were charged as expenses in the fiscal year under review.
Note 3 － Significant Accounting Estimates
1. Impairment of fixed assets(1) Amounts recorded in the consolidated financial statements for the fiscal year under review(Millions of yen)
Fiscal 2021

Fiscal 2022

Tangible fixed assets

249,379

279,526

Leasehold rights among intangible fixed assets

28,56030,4642

108

Impairment losses(2) Information on the details of the significant accounting estimates for identified items
1) Method for calculating amounts recorded in the consolidated financial statements for the fiscal year under review
In principle, individual assets that generate cash flow independently from other asset groups are recognized as the minimum unit
for indications of impairment.
Indications of impairment include recurring operating losses, significant deteriorating of the business environment, andsignificant declines in market value.
If indications of impairment are deemed to exist, the Company will decide whether to recognize an impairment loss. If
recording an impairment loss is deemed necessary, the Company will compare the undiscounted future cash flow with the bookvalue, and if the undiscounted future cash flow is less than the book value, the Company will reduce the book value to arecoverable amount (either the net sales price or the value in use, whichever is higher), and record the reduced book value as an
impairment loss.
2) Main assumptions used for significant accounting estimates
The Group sets market values based on the real estate appraisal value determined by external real estate appraisers (hereafter,“externally appraised real estate value”). Future cash flows and recoverable amounts are estimated based on the externallyappraised real estate value and forecasts of an asset group’s operating results, which includes assumptions regarding future rent

- 27 -

levels, occupancy rates, operating expenses, and other factors. Management also assumes that the impact of COVID-19 will belimited going forward.
In addition, for its real estate redevelopment projects in Tokyo (Nihonbashi Kabutocho and Kayabacho districts) and Sapporo,
the Company groups together multiple assets from the time when redevelopment plans are deemed feasible based on negotiations
with landowners.
3) Possible impact of changes in main assumptions on results recorded in consolidated financial statements for the following fiscal
year
The main assumptions listed in 2), above, are derived from the best estimates based on available information as of March 31,
2023, however, if those assumptions change due to changes in redevelopment projects or market conditions, the Group’s
performance could be affected, such as recording impairment losses.
2. Valuation of real estate for sale(1) Amounts recorded in the consolidated financial statements for the fiscal year under review.
(Millions of yen)
Fiscal 2021
Real estate for sale
Real estate for sale in process

Fiscal 2022

19,623

14,153251298(2) Information on the details of the significant accounting estimates for identified items
1) Method for calculating amounts recorded in the consolidated financial statements for the fiscal year under review
The net sales price of real estate for sale and real estate for sale in process is estimated based on the expected sales price minus the
expected amount of site preparation and building construction costs and the expected amount of selling expenses. If the net sales
price is less than the book value, the difference is recorded in cost of sales as a loss on revaluation of inventories.
2) Main assumptions used for significant accounting estimates
To estimate the expected sales price, the Group takes into account the externally appraised real estate value, its rental rates andforecast yields, and the impact of falling demand in the future, among other factors.
As of March 31, 2023, the Group had estimated the expected sales prices of its residential buildings based on its rental rates andforecast yields, and assumed no major fluctuations in rental rates and forecast yields in the real estate market going forward.
3) Possible impact of changes in main assumptions on results recorded in consolidated financial statements for the following fiscal
year
The main assumptions listed in 2), above, are derived from the best estimates based on available information as of March 31, 2023,
however, if those assumptions change due to certain factors, such as lower than expected sales prices caused by falling demand in
the real estate market, the Group’s performance could be affected, such as recording a loss on revaluation of inventories.
Note 4 － Changes in accounting policies
Adoption of Implementation Guidance on Accounting Standard for Fair Value Measurement
Effective from April 1, 2022, the Company has adopted the Implementation Guidance on Accounting Standard for Fair Value
Measurement (Accounting Standards Board of Japan (ASBJ) Guidance No.31 (revised)) issued on June 17, 2021, and decided toapply a new accounting policy based on this guidance prospectively in accordance with the transitional treatment specified in
Paragraph 27-2 of the guidance. These changes had no impact on the Company’s consolidated financial statements for the fiscal
year under review.
In addition, pursuant to Paragraph 27-3 of the guidance, a note regarding investment trusts for the previous fiscal year was notpresented with details of different levels of financial instruments described in Note 13 – Financial Instruments.
Note 5 － Unapplied Accounting Standards•Accounting Standard for Current Income Taxes (ASBJ Statement No. 27 (revised)) issued on October 28, 2022
• Accounting Standard for Presentation of Comprehensive Income (ASBJ Statement No. 25 (revised)) issued on October 28, 2022
• Guidance on Accounting Standard for Tax Effect Accounting (ASBJ Guidance No. 28 (revised)) issued on October 28, 2022

(1) Overview
Partial Amendments to Accounting Standard for Tax Effect Accounting (ASBJ Statement No. 28) was issued in February 2018, andthe transfer of practical guidelines for tax effect accounting from the Japan Institute of Certified Public Accountants to the ASBJ
was completed. In deliberations during that process, however, the following two matters were reconsidered following the issuance- 28 -

of ASBJ Statement No. 28, and then further deliberated and announced:
1. Classification of tax expenses for the taxation of other comprehensive income
2. Tax effect of selling shares of subsidiaries or affiliated companies when a consolidated corporate tax system is used
(2) Scheduled date of application
The Company applied the accounting standards, etc. from April 1, 2024.
(3) Impact of applying the accounting standards, etc.
The impact of applying the revised Accounting Standard for Current Income Taxes on the consolidated financial statements iscurrently being assessed.
Note 6 － Additional Information
Performance based stock compensation plan for directors and executive officers
The Company has established a performance-linked stock compensation plan for its executive officers (excluding non-residents
of Japan), managing officers (excluding those who have been specially appointed to be in charge of the Audit Committee Office,as well as managing officers of group companies and non-residents of Japan), and directors and managing officers of theCompany’s major subsidiaries (excluding part-time directors, directors or managing officers who have been seconded from theCompany, and non-residents of Japan).
(1) Overview of the compensation system
A trust established with funds contributed by the Company acquires company stock to be used as compensation for directors andofficers eligible under the plan (listed above). Through the trust, company stock or a cash amount equivalent to the value of the stockis delivered to these individuals in an amount commensurate with the number of points each has earned based on share-based
remuneration rules set by the Company’s Board of Directors. As a rule, they will receive this compensation upon retiring from theirrespective post.
(2) Company stock held in the trust
Company stock held in the trust is calculated based on the book value of the stock (excluding incidental expenses) and is included
in treasury shares under net assets. The book value of the applicable treasury shares amounted to ¥137 million as of March 31, 2022,
and ¥321 million as of March 31, 2023, and the amount of stock totaled 59,300 shares as of March 31, 2022, and 104,400 shares asof March 31, 2023.
Stock ownership plan for employees
The Company has set up a stock ownership plan for employees as a means to provide them with incentives.
(1) Overview of the ownership plan
The plan provides employees with the Company’s stock or a cash amount equivalent to the market value of the stock commensuratewith a number of points awarded based on share-based remuneration rules concerning the trust for the Company’s stockcompensation plan for employees set by the Board of Directors. The shares for the plan are acquired by a trust that has been set up
using funds contributed by the Company.
(2) Company stock held in the trust
Company stock held in the trust is calculated based on the book value of the stock (excluding incidental expenses) and is included
in treasury shares under net assets. The book value of the applicable treasury shares amounted to ¥298 million as of March 31, 2022,
and ¥298 million as of March 31, 2023, and the amount of stock totaled 71,100 shares as of March 31, 2022, and 70,900 shares asof March 31, 2023.

- 29 -

Note 7 － Consolidated Balance Sheets
1. Net balances of receivables from contracts with customers, contract assets, and contract liabilities are as follows:(Millions of yen)
Fiscal 2021
(As of March 31, 2022)

Fiscal 2022
(As of March 31, 2023)

197
465

186
485

Receivables from contracts with customers (Note 1)
Contract assets (Note 1)

Contract liabilities (Note 2)25(Notes) 1. Receivables from contracts with customers and contract assets are included in “accounts receivable–trade.”5

2. Contract liabilities are included in “other” under “current liabilities.”
2. Guarantee liabilities
The Company-guaranteed loans owed by employees to financial institutions are as follows:(Millions of yen)
Fiscal 2021
(As of March 31, 2022)
Housing loans for employees of Heiwa Real
Estate Co., Ltd.

Fiscal 2022
(As of March 31, 2023)
142

Housing loans for employees of Heiwa Real
Estate Co., Ltd.

114

3. Pursuant to the Act on Revaluation of Land (Act No. 34 of March 31, 1998) and the Act for Partial Revision of the Act on
Revaluation of Land (Act No. 19 of March 31, 2001), the Company revalued its land held for business. Corporation taxes equivalent
to net unrealized gains are reported as “deferred tax liabilities for land revaluation” in liabilities, and net unrealized gains, net ofdeferred taxes, are reported as “Revaluation reserve for land” in net assets.
- Method of revaluation: Fair values are determined by applying appropriate adjustments to values computed using the method
published by the Commissioner of the National Tax Agency for the calculation of land values thatserve as the basis for taxable amounts of land-holding tax set forth in Article 16 of the Land-holding
Tax Act as set forth in Article 2, Paragraph 4 of the Order for Enforcement of Act on Revaluation ofLand (Cabinet Order No. 119 of March 31, 1998).
- Date of revaluation: March 31, 2001
- Since the fair value of the revalued land exceeded the carrying value of the land after the revaluation as of March 31, 2022,
and March 31, 2023, the difference between the amounts has not been stated.
4. Assets included under investment securities are as follows:(Millions of yen)
Fiscal 2021
(As of March 31, 2022)
Investment units of Heiwa Real Estate REIT, Inc.

Fiscal 2022
(As of March 31, 2023)

22,04722,444(147,179 units)(147,179 units)

5. Amount of reduction entry associated with state subsidies, etc.
Due to the receipt of state subsidies, the following amounts of reduction entry were deducted from acquisition costs.
(Millions of yen)
Fiscal 2021
(As of March 31, 2022)

Fiscal 2022
(As of March 31, 2023)

Real estate for sale
Buildings and structures

48
239

48
283

Total

288

332

- 30 -

6. The amounts below were transferred due to a change in their purpose of ownership(Millions of yen)
Fiscal 2021
(As of March 31, 2022)
Transferred from fixed assets to real estate for

Fiscal 2022
(As of March 31, 2023)
7,355

5,589

sale

Note 8 － Consolidated Statements of Income
1. Revenues from contracts with customers
Revenues from contracts with customers and revenues other than those from contracts with customers are not recorded separately
under operating revenue. Revenues from contracts with customers are shown as follows.
(Millions of yen)
Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)

Fiscal 2022
(From April 1, 2022 toMarch 31, 2023)
32,087

20,293

2. Details of gain on sales of fixed assets are as follows:

Buildings and structures, etc.
Land

Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)
139
204

Total

344

(Millions of yen)
Fiscal 2022
(From April 1, 2022 toMarch 31, 2023)———

3. Gain on sale of business is due to the sale of the insurance-related business operated by Heiwa Real Estate Property Management
Co., Ltd, the consolidated subsidiary of the Company.
4. Details of loss on disposal of fixed assets are as follows:

Buildings and structures
Other

Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)
45
3

Total

49

5. Loss on building reconstruction is construction costs associated with KABUTO ONE- 31 -(Millions of yen)
Fiscal 2022
(From April 1, 2022 toMarch 31, 2023)
59261

6. Impairment losses
Fiscal 2021 (From April 1, 2021 to March 31, 2022)
Location
Abiko City, Chiba

Principal use

Category

Sports facilities

Land

Impairment losses¥2 million

The Group recorded impairment losses on the asset group above. To calculate impairment losses, assets are grouped according to
the smallest unit of assets that generates cash flows that are largely independent of the cash flows provided from other assets orasset groups. The book values of real estate whose market value substantially decreased were written down to a recoverable
amount, and the decreased amounts were recorded as impairment losses of ¥2 million under extraordinary losses. The recoverable
amount of this asset group was determined by its net realizable value, which was based on indices designed to reflect market
prices.
Fiscal 2022 (From April 1, 2022 to March 31, 2023)
Location
Abiko City, Chiba

Principal use
Stores and other commercial
facilities

Category

Impairment losses

Land and buildings¥108 million

The Group recorded impairment losses on the asset group above. To calculate impairment losses, assets are grouped according to
the smallest unit of assets that generates cash flows that are largely independent of the cash flows provided from other assets orasset groups. The book values of real estate for lease whose profitability substantially decreased were written down to arecoverable amount, and the decreased amounts were recorded as impairment losses of ¥108 million under extraordinary losses.
The recoverable amount of this asset group was determined by its net realizable value, which was based on amounts assessed byreal estate appraisers.

Note 9 － Consolidated Statements of Comprehensive Income
Reclassification adjustment and tax effect related to other comprehensive income(Millions of yen)
Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)

Fiscal 2022
(From April 1, 2022 toMarch 31, 2023)(2,289)
(764)

(220)
(3,562)

Before tax effect adjustment
Tax benefit(3,054)935(3,783)
1,158

Unrealized gain on securities(2,119)(2,624)49—(2,069)(2,624)

Unrealized gain on securities:
Unrealized gain on securities in the fiscal year
Reclassification adjustment

Revaluation reserve for land:Tax benefit (expense)
Total other comprehensive income- 32 -

Note 10 － Consolidated Statements of Changes in Net Assets
Fiscal 2021 (From April 1, 2021 to March 31, 2022)
1. Type and number of shares issued and treasury shares(Number of shares)
At the beginning of
the fiscal year

Increase in the fiscal
year

Decrease in thefiscal year

At the end of the
fiscal year

38,859,996——

38,859,996

Total

38,859,996——

38,859,996

Common shares (Notes 1, 2, 3)

1,669,867

710,670118

2,380,419

Total

1,669,867

710,670118

2,380,419

Shares issued
Common shares

Treasury shares(Notes) 1. The increase of 710,670 common shares of treasury shares was comprised of 636,600 shares acquired by the Company
pursuant to a resolution of the Board of Directors, 71,100 shares acquired for the trust for the Company’s stock compensation
plan for employees, and 2,970 odd-lot shares acquired.
2. The decrease of 118 common shares of treasury shares was due to the sale of odd-lot shares.
3. The total number of common shares of treasury shares as of March 31, 2022, included 130,400 shares held in the trust for theCompany’s stock compensation plan for directors and executive officers, and the trust for the Company’s stock compensation
plan for employees.
2. Dividends(1) Payments of dividends
Approval

Type of shares

Total amount ofdividends(millions of yen)

Ordinary General
Shareholders’ Meeting

Common shares

1,676

Common shares

1,512

Dividend per share(yen)

Record date

Effective date

45.0

March 31, 2021

June 25, 2021

41.0

September 30, 2021

December 1, 2021

held on June 24, 2021
Meeting of Board of
Directors held on
October 29, 2021

(Notes) 1. The total amount of dividends approved at the Ordinary General Shareholders’ Meeting held on June 24, 2021, included ¥2
million in dividends for the Company’s stock held as trust assets in the trust for the Company’s stock compensation plan for
directors and executive officers.
2. The total amount of dividends approved at the Board of Directors meeting held on October 29, 2021, included ¥5 million in
dividends for the Company’s stock held as trust assets in the trust for the Company’s stock compensation plan for directors
and executive officers, and the trust for the Company’s stock compensation plan for employees.
(2) Dividends with a record date falling in the consolidated fiscal year ended March 31, 2022 and an effective date falling in the
consolidated fiscal year ended March 31, 2023
Approval

Type of shares

Total amount ofdividends(millions of yen)

Ordinary General
Shareholders’Meeting held on
June 24, 2022

Common shares

1,976

Source ofDividend per

dividends

share (yen)Retainedearnings

54.0

Record date

Effective date

March 31, 2022

June 27, 2022

(Note) The total amount of dividends included ¥7 million in dividends for the Company’s stock held as trust assets in the trust for theCompany’s stock compensation plan for directors and executive officers, and the trust for the Company’s stock compensation
plan for employees.

- 33 -

Fiscal 2022 (From April 1, 2022 to March 31, 2023)
1. Type and number of shares issued and treasury shares(Number of shares)
At the beginning of
the fiscal year

Increase in the fiscal
year

Decrease in thefiscal year

At the end of the
fiscal year

38,859,996——

38,859,996

Total

38,859,996——

38,859,996

Common shares (Notes 1, 2, 3)

2,380,419

700,264

7,169

3,073,514

Total

2,380,419

700,264

7,169

3,073,514

Shares issued
Common shares

Treasury shares(Notes) 1. The increase of 700,264 common shares of treasury shares was comprised of 646,100 shares acquired by the Company
pursuant to a resolution of the Board of Directors, 52,000 shares acquired for the trust for the Company’s stock compensation
plan for directors and executive officers, and 2,164 odd-lot shares acquired.
2. The decrease of 7,169 common shares of treasury shares was comprised of 4,900 shares provided to and 2,000 shares sold by
the trust for the Company’s stock compensation plan for directors and executive officers, 200 shares sold by the trust for theCompany’s stock compensation plan for employees, and 69 odd-lot shares sold.
3. The total number of common shares of treasury shares as of March 31, 2023, included 175,300 shares held in the trust for theCompany’s stock compensation plan for directors and executive officers, and the trust for the Company’s stock compensation
plan for employees.
2. Dividends(1) Payments of dividends
Approval

Type of shares

Total amount ofdividends(millions of yen)

Common shares

1,976

Common shares

1,798

Dividend per share

Record date

Effective date

54.0

March 31, 2022

June 27, 2022

50.0

September 30, 2022

December 1, 2022

(yen)

Ordinary General
Shareholders’Meeting held on
June 24, 2022
Meeting of Board of
Directors held on
October 31, 2022

(Notes) 1. The total amount of dividends approved at the Ordinary General Shareholders’ Meeting held on June 24, 2022, included ¥7
million in dividends held as trust assets in the trust for the Company’s stock compensation plan for directors and executive
officers, and the trust for the Company’s stock compensation plan for employees.
2. The total amount of dividends approved at the Board of Directors meeting held on October 31, 2022, included ¥8 million in
dividends for the Company’s stock held as trust assets in the trust for the Company’s stock compensation plan for directors
and executive officers, and the trust for the Company’s stock compensation plan for employees.
(2) Dividends with a record date falling in the consolidated fiscal year ended March 31, 2023 and an effective date falling in the
consolidated fiscal year ending March 31, 2024
Approval

Total amount ofType of shares
dividends(millions of yen)

Meeting of Board of
Directors held on
Common shares
May 17, 2023

1,941

Source ofDividend per

dividends

share (yen)Retainedearnings

54.0

Record date

Effective date

March 31, 2023

June 5, 2023

(Note) The total amount of dividends included ¥9 million in dividends for the Company’s stock held as trust assets in the trust for theCompany’s stock compensation plan for directors and executive officers, and the trust for the Company’s stock compensation
plan for employees.

- 34 -

Note 11 － Consolidated Statements of Cash Flows
Reconciliation of the balance of cash and cash equivalents at the end of the period and account items on the consolidated balance
sheet(Millions of yen)
Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)

Fiscal 2022
(From April 1, 2022 toMarch 31, 2023)

Cash and deposits

23,211

20,908Marketable securities

5,014

6,999

Time deposits with terms of more than 3 months

(100)

(100)

Bonds with redemption periods of more than 3months(14)(2,000)28,11125,807

Cash and cash equivalents

Note 12 － Lease Transactions
1. Finance lease transactions(As lessee)
Finance lease transactions not involving transfer of ownership
1) Types of leased assets
・Tangible fixed assets
Office equipment (devices, and fixtures)
2) Leased assets depreciation method
Included in Note 2 “Significant Accounting Policies 4. Accounting Policy, (2) Depreciation method for significant depreciable
assets.”
2. Operating lease transactions(As lessor)
Future lease payments on operating leases for which leasing contracts cannot be cancelled.
(Millions of yen)
Fiscal 2021
(As of March 31, 2022)

Fiscal 2022
(As of March 31, 2023)

Due within 1 year

4,852

4,937

Due after 1 year

12,254

12,258

Total

17,106

17,196Note 13 － Financial Instruments
1. Items related to financial instruments(1) Measures and policies concerning financial instruments
The Group procures necessary funds specified in its capital investment plans mainly by borrowing from banks and issuing bonds. It
invests temporary surplus cash in highly liquid assets, and raises short-term working capital through bank loans. The Group does notengage in speculative investments as a matter of policy, and uses derivatives to hedge against the following risks.
(2) Details of financial instruments and related risks
Accounts receivables-trade as operating receivables expose the Company to credit risk of building tenants and other clients.
Marketable securities and investment securities, which are mainly comprised of shares of companies with which the Company has
business relationships, expose the Company to the risk of market price fluctuations.
Accounts payable-trade as operating payables are due within a period of three months.
The Company secures loans payable, issues corporate bonds, and holds long-term accounts payable mainly for the purpose of
procuring funds needed for capital investment, with the repayment and redemption dates extending no more than 20 years after thesettlement date. Some of these financial instruments are subject to variable interest rates, and are, therefore, exposed to the risk of- 35 -

interest rate fluctuations; however, the Company uses derivatives in the form of interest rate swaps to hedge against these risks.
Interest rate swaps are also used for the purpose of hedging against the risk of fluctuating interest payments on loans. For
information regarding hedging instruments, hedged items, hedging policies, and methods for evaluating the effectiveness of hedging,please refer to Note 2 “Significant Accounting Policies 4. Accounting Policy, (7) Method of significant hedge accounting.”(3) Financial instrument-related risk management
1) Management of credit risk (including risk relating to non-performance of contract by a counterparty)
With respect to operating receivables, relevant departments of the Company regularly monitor the status of major counterparties,
manage due dates and balances for each counterparty, quickly identify concerns regarding collection due to worsening financial
conditions or other factors, and take steps to mitigate a damage. Consolidated subsidiaries manage these risks in the same way inaccordance with the Company’s credit management rules.
2) Management of market risks (including risk relating to fluctuating exchange rates and interest rates)
The Company uses interest rate swaps to mitigate the risk of fluctuating interest payments on loans.
The Company regularly checks the market price of marketable securities and investment securities along with the financial statusof their issuers, which are the Company’s business partners. The Company also continually reviews its holdings of securities otherthan held-to-maturity bonds, taking into consideration market conditions and its relationships with business partners.
3) Management of fund procurement-related liquidity risk (including risk of being unable to pay by due dates)
The Company manages liquidity risk by having departments in charge prepare and update on the timely basis financing plans basedon reports submitted by all relevant departments, and by maintaining liquidity on hand.
(4) Additional information regarding items related to the fair value of financial instruments
Variable factors are considered when calculating the fair value of financial instruments, and therefore, the amount of fair value couldchange due to adoption of different assumptions. In addition, the contract amounts of derivatives, shown in Note 15 － “Derivatives,”
do not represent derivative-related market risks.
2. Items related to the fair value of financial instruments
The amount recorded in the consolidated balance sheet, fair value, and their differences are presented as follows.
Fiscal 2021 (As of March 31, 2022)
Amount on the consolidatedbalance sheet(millions of yen)

Fair value(millions of yen)

Difference(millions of yen)

(1) Marketable securities and investment
43,081

43,081(0)

43,081

43,081(0)(1) Bonds payable

28,216

28,114(101)(2) Long-term loans payable

170,220

169,629(590)(3) Long-term accounts payable

4,000

3,904

(95)

22,514

22,116(397)

Liabilities

224,950

223,765(1,185)Derivatives

—

—

—

securities
Assets(4) Leasehold and guarantee deposits
received(Notes) 1. In the table above, cash was not included, and deposits, accounts receivable–trade, accounts payable–trade, and short-termloans payable were also not included because their fair value approximates their book value since they are settled over shortperiods of time.
2. Stocks without quoted market prices are not included in (1) Marketable securities and investment securities in the table
above. The amount of this financial instrument in the consolidated balance sheets is shown below.

- 36 -

Financial instrument(Millions of yen)
Fiscal 2021
(As of March 31, 2022)

Stocks without quoted market

720

prices

3. The table above does not include investment in partnerships for which the net amount of equity stakes is recorded in the
consolidated balance sheets (totaling ¥1,902 million in the consolidated balance sheets).
Fiscal 2022 (As of March 31, 2023)
Amount on the consolidatedbalance sheet(millions of yen)

Fair value

Difference(millions of yen)(millions of yen)

(1) Marketable securities and investment
40,70440,705040,70440,7050(1) Bonds payable

31,63731,144(492)(2) Long-term loans payable

186,607

184,871(1,736)(3) Long-term accounts payable

4,850

4,709

(140)

23,52423,085(438)

Liabilities

246,619

243,811(2,808)Derivatives

—

—

—

securities
Assets(4) Leasehold and guarantee deposits
received(Notes) 1. In the table above, cash was not included, and deposits, accounts receivable–trade, accounts payable–trade, and short-termloans payable were also not included because their fair value approximates their book value since they are settled over shortperiods of time.
2. Stocks without quoted market prices are not included in (1) Marketable securities and investment securities in the table above.
The amount of this financial instrument in the consolidated balance sheets is shown below.
(Millions of yen)
Fiscal 2022
Financial instrument(As of March 31, 2023)
Stocks without quoted market
655
prices
3. In accordance with the treatment specified in Paragraph 24-16 of the Implementation Guidance on Accounting Standard for
Fair Value Measurement (ASBJ Guidance No. 31 (revised)) issued on June 17, 2021, the table above does not include
investment in partnerships for which the net amount of equity stakes is recorded in the consolidated balance sheets (totaling¥1,298 million in the consolidated balance sheets).

- 37 -

(Note) 1. Amounts of monetary claims and marketable securities with maturity dates expected to be redeemed after the balance sheet
date
Fiscal 2021 (As of March 31, 2022)
Within one year

Within one to five years Within five to 10 years(millions of yen)(millions of yen)(millions of yen)Over 10 years(millions of yen)

Cash and deposits

23,211———

Accounts receivable–trade

1,809

—

—

—

14

5

—

—

—

—

—

—

4,999

—

—

—

(1) Corporate bonds

—

—

—

—

(2) Other

—

—

—

—

30,0355——Marketable securities andinvestment securities
Held-to-maturity bonds(1) National and municipal
bonds(2) Bonds payable(3) Other
Available-for-sale securities
with maturity dates

Total

Fiscal 2022 (As of March 31, 2023)
Within one year
(millions of yen)

Within one to five years Within five to 10 years(millions of yen)(millions of yen)Over 10 years(millions of yen)

Cash and deposits

20,908———

Accounts receivable–trade

1,967

—

—

—

(1) National and municipal
bonds

—

5

—

—

(2) Bonds payable

—

101

—

—

6,999

—

—

—

(1) Corporate bonds

—

—

—

—

(2) Other

—

—

—

—

29,875107——

Marketable securities andinvestment securities
Held-to-maturity bonds(3) Other
Available-for-sale securities
with maturity dates

Total- 38 -

(Note) 2. Amounts of bonds payable, long-term loans payable, and other interest-bearing liabilities scheduled for repayment after thebalance sheet dateFiscal 2021 (As of March 31, 2022)
Within one year
(millions of yen)

Within one to Within two to Within three to Within four toOver 5 years
two years
three years
four years
five years(millions of yen)(millions of yen) (millions of yen) (millions of yen) (millions of yen)

Short-term loans payable

3,800

—

—

—

—

—

Bonds payable

4,327

3,259

3,060

3,695

150

13,725Long-term loans payable

13,077

14,201

14,431

14,65824,65389,198

—

—

258

258

258

3,225

21,204

17,46017,74918,611

25,061

106,149

Long-term accounts
payableTotal

Fiscal 2022 (As of March 31, 2023)
Within one year
(millions of yen)

Within one to Within two to Within three to Within four toOver 5 years
two years
three years
four years
five years(millions of yen)(millions of yen) (millions of yen) (millions of yen) (millions of yen)

Short-term loans payable

3,800

—

—

—

—

—

Bonds payable

3,648

3,449

4,084

539

539

19,376Long-term loans payable

15,727

15,95816,184

26,21728,25084,270

—

258

258

258

285

3,790

23,175

19,665

20,52627,01429,075

107,437

Long-term accounts
payableTotal

3. Items related to different levels of the fair value of financial instruments
The fair value of financial instruments is classified according to the following three levels based on the observability and materialityof the inputs used to calculate fair value.
Level 1:
Level 2:
Level 3:

Fair values determined based on quoted prices (unadjusted) in active markets for identical assets or liabilities
Fair values determined based on inputs other than Level 1 inputs that are observable, either directly or indirectly
Fair values determined based on significant unobservable inputs

When multiple inputs that have material impacts on fair value calculations are used, the fair value falls under the lowest level inwhich the respective inputs correspond to the fair value calculations.
(1) Financial instruments recorded at fair value in the consolidated balance sheets
Fiscal 2021 (As of March 31, 2022)
Financial instrument

Fair value (millions of yen)
Level 1

Level 2

Level 3

Total

Marketable securities andinvestment securities
Available-for-sale securities
StocksTotal assets

15,394——

15,394

15,394——

15,394(Note) The fair value of investment trusts is not included in the table above. The amount for investment trusts recordedin the consolidated balance sheets was ¥22,667 million.

- 39 -

Fiscal 2022 (As of March 31, 2023)
Financial instrument

Fair value (millions of yen)
Level 1

Level 2

Level 3

Total

Marketable securities andinvestment securities
Available-for-sale securities
Stocks10,935——

10,935Investment trusts

22,662——

22,662

Total assets

33,597——33,597(2) Financial instruments other than those recorded at fair value in the consolidated balance sheets
Fiscal 2021 (As of March 31, 2022)
Financial instrument

Fair value (millions of yen)
Level 1

Level 2

Level 3

Total

Marketable securities andinvestment securities
Held-to-maturity bonds
National and municipal
bonds

20

—

—

20

Other

—

4,999

—

4,999

20

4,999

—

5,019

Bonds payable—

28,114—

28,114Long-term loans payable—

169,629—

169,629

Long-term accounts payable

—

3,904

—

3,904

—

22,116—

22,116—

223,765—

223,765

Total assets

Leasehold and guarantee
deposits received
Total liabilities
Fiscal 2022 (As of March 31, 2023)
Financial instrument

Fair value (millions of yen)
Level 1

Level 2

Level 3

Total

Marketable securities andinvestment securities
Held-to-maturity bonds
National and municipal
bonds

5

Bonds payable
Other

—

—

—

101

—

101

—

7,000

—

7,000

5

7,101

—

7,107

Bonds payable—

31,144—

31,144Long-term loans payable—

184,871—

184,871

Long-term accounts payable

—

4,709

—

4,709

—

23,085—23,085—

243,811—

243,811

Total assets

Leasehold and guarantee
deposits received
Total liabilities- 40 -

5

(Note) Valuation methods and inputs used to calculate fair value are explained as follows.
Marketable securities and investment securities
Quoted market prices are used to measure fair values of stocks, investment trusts, and national bonds. Since they are traded inan active market, their fair values are classified as Level 1. The fair values of commercial paper and money in trust, which areincluded under “bonds payable” and “other” in the table above, are measured using market prices provided by financial
institutions dealing in such instruments.
They are classified as Level 2 because of the relatively low frequency of trade in the market and therefore they cannot be
regarded as having quoted market prices in active markets.
Bonds payable
Bonds payable with fixed interest rates are classified as Level 2, and their fair value is calculated by discounting the total
amount of the principal and interest at an interest rate that reflects their remaining maturity and credit risk. Those with variableinterest rates are also classified as Level 2, and their fair value is based on their book value, which are assumed to be similar
since variable interest rates reflect market interest rates over the short term.
Long-term loans payable and long-term accounts payable
Long-term loans payable and long-term accounts payable with fixed interest rates are classified as Level 2, and their fair value
is calculated by discounting the total amount of principal and interest at an interest rate estimated based on the scenario of asimilar loan or account. Those with variable interest rates are classified as Level 2, and their fair value is based on their bookvalue, which are assumed to be similar since variable interest rates reflect market interest rates over the short term. Among
long-term loans payable and long-term accounts payable with variable interest rates, those subject to special treatment ofinterest rate swaps are calculated by discounting the total amount of principal and interest treated together with the interest
rate swaps at an interest rate reasonably estimated based on the scenario of a similar loan.
Leasehold and guarantee deposits received
Leasehold and guarantee deposits received are classified as Level 2, and their fair value is calculated by discounting the current
amount of deposits at an interest rate that reflects the remaining period of redemption and credit risk.
Derivatives
The fair value of derivatives subject to special treatment of interest rate swaps is included in the fair value of long-term loans
payable since they are treated together with long-term loans payable designated as hedged items. (Refer to the explanation
under “Long-term loans payable and long-term accounts payable,” above.)- 41 -

Note 14 － Securities
1. Held-to-maturity bonds
Fiscal 2021 (As of March 31, 2022)
Category

Amount inconsolidatedbalance sheets(millions of yen)

(1) National and municipal

20

20

0

(2) Bonds payable

—

—

—

(3) Other———

Subtotal

20

20

0

(1) National and municipal
bonds

—

—

—

(2) Bonds payable

—

—

—

4,999

4,999

(0)

4,999

4,999

(0)

5,020

5,019

(0)

Held-to-maturity bonds withbonds

fair value exceeding theamount recorded in the
consolidated balance sheets

Held-to-maturity bonds withfair value not exceeding theamount recorded in the
consolidated balance sheets

Fair value (millions Difference (millionsof yen)of yen)(3) Other
Subtotal
Total

Fiscal 2022 (As of March 31, 2023)
Category

Held-to-maturity bonds withfair value exceeding theamount recorded in theAmount inconsolidatedbalance sheets(millions of yen)

(1) National and municipal
bonds

5

5

0

(2) Bonds payable

—

—

—

2,000

2,001

1

2,005

2,006

1

—

—

—

101

101

(0)

4,999

4,999

(0)

5,101

5,100

(0)

7,106

7,107

0

(3) Otherconsolidated balance sheets

Subtotal(1) National and municipal
Held-to-maturity bonds withfair value not exceeding theamount recorded in the
consolidated balance sheets

Fair value (millions Difference (millionsof yen)of yen)bonds(2) Bonds payable(3) Other
Subtotal

Total- 42 -

2. Available-for-sale securities
Fiscal 2021 (As of March 31, 2022)
Category

Amount inconsolidatedbalance sheets(millions of yen)

(1) Stocks

Purchase amount(millions of yen)

Difference (millionsof yen)14,467

3,986

10,480(2) Bonds
Available-for-sale securitiesof which the amount

1) National and municipal
bonds

—

—

—

recorded in the consolidatedbalance sheets exceeds the2) Bonds payable

—

—

—

3) Other———(3) Other

22,666

6,823

15,84337,133

10,81026,323

927

1,167

(240)

—

—

—

acquisition cost

Subtotal(1) Stocks(2) Bonds
Available-for-sale securitiesof which the amount

1) National and municipal

recorded in the consolidatedbalance sheets does not2) Bonds payable

—

—

—

3) Other———(3) Other

0

0

(0)

927

1,168

(240)

38,061

11,97826,083bonds

exceed the acquisition cost

Subtotal
Total(Note) Stocks without quoted market prices (totaling ¥720 million in the consolidated balance sheets) and investment in partnerships
for which the net amount of equity stakes is recorded in the consolidated balance sheets (totaling ¥1,902 million in the
consolidated balance sheets) are not included in available-for-sale securities shown in the table above.
Fiscal 2022 (As of March 31, 2023)
Category

Amount inconsolidatedbalance sheets(millions of yen)

(1) Stocks

Purchase amount(millions of yen)

Difference (millionsof yen)10,056

3,641

6,415

—

—

—

(2) Bonds
Available-for-sale securitiesof which the amount

1) National and municipal

recorded in the consolidatedbalance sheets exceeds the2) Bonds payable

—

—

—

3) Other———(3) Other

22,474

6,322

16,15232,531

9,963

22,567

878

1,135

(256)

—

—

—

bonds

acquisition cost

Subtotal(1) Stocks(2) Bonds
Available-for-sale securities

1) National and municipalof which the amountrecorded in the consolidatedbonds2) Bonds payable

—

—

—

balance sheets does notexceed the acquisition cost3) Other———(3) Other

187

198

(11)

1,065

1,333

(267)

33,597

11,29722,299Subtotal
Total(Note) Stocks without quoted market prices (totaling ¥655 million in the consolidated balance sheets) and investment in partnerships- 43 -

for which the net amount of equity stakes is recorded in the consolidated balance sheets (totaling ¥1,298 million in the
consolidated balance sheets) are not included in available-for-sale securities shown in the table above.
3. Held-to-maturity bonds soldFiscal 2021 (From April 1, 2021 to March 31, 2022)
Not applicable
Fiscal 2022 (From April 1, 2022 to March 31, 2023)
Not applicable
4. Available-for-sale securities soldFiscal 2021 (From April 1, 2021 to March 31, 2022)
Category

Sale amount(millions of yen)

Gain on sale recorded(millions of yen)

Loss on sale recorded(millions of yen)

828

761

—

1) National and municipal
bonds

—

—

—

2) Bonds payable

—

—

—

3) Other———(3) Other

—

—

—

828

761

—

(1) Stocks(2) Bonds

Total

Fiscal 2022 (From April 1, 2022 to March 31, 2023)
Category

Sale amount(millions of yen)

Gain on sale recorded(millions of yen)

Loss on sale recorded(millions of yen)

3,939

3,543

—

1) National and municipal
bonds

—

—

—

2) Bonds payable

—

—

—

3) Other———(3) Other

—

—

—

3,939

3,543

—

(1) Stocks(2) Bonds

Total
5. Impairment losses on marketable securities
Fiscal 2021 (From April 1, 2021 to March 31, 2022)
Not applicable
Fiscal 2022 (From April 1, 2022 to March 31, 2023)
Not applicable- 44 -

Note 15 － Derivatives
1. Derivatives for which hedge accounting is not applied
Not applicable
2. Derivatives for which hedge accounting is applied
Interest rate-related derivatives
Fiscal 2021 (As of March 31, 2022)
Hedge accounting
methodType of transaction

Major hedged items

Contract amount(millions of yen)Contract amountover one year
(millions of yen)

Fair value(millions of yen)Interest rate swaps:
Special treatment ofinterest rate swaps

Receivable floating
rate/payable fixedLong-term loans
payable40,07636,022(Note)

rate(Note) The fair value of derivatives subject to special treatment of interest rate swap transactions is included in the fair valueof long-term loans payable since they are treated together with long-term loans payable designated as hedged items.
Fiscal 2022 (As of March 31, 2023)
Hedge accounting
methodSpecial treatment ofinterest rate swaps

Type of transaction

Major hedged items

Interest rate swaps:
Receivable floating

Long-term loans

rate/payable fixed
rate

Contract amountContract amount

Fair value
over one year
(millions of yen)(millions of yen)(millions of yen)payable37,202

34,469(Note)(Note) The fair value of derivatives subject to special treatment of interest rate swap transactions is included in the fair valueof long-term loans payable since they are treated together with long-term loans payable designated as hedged items.

Note 16 － Retirement Benefits
1. Overview of retirement benefit plans in place
The Company and its consolidated subsidiaries have both a lump-sum retirement payment plan and a defined benefit pension plan.
Certain consolidated subsidiaries have adopted a defined contribution plan and other types of plans.
Simplified accounting methods are used to calculate retirement benefit liability and retirement benefit costs for the lump-sum
retirement payment plan and defined benefit pension plan adopted by the Company and its consolidated subsidiaries.
2. Defined benefit plan
(1) Reconciliation of beginning and ending balances of retirement benefit liability
Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)
115

Balance at the beginning of the fiscal year

(Millions of yen)
Fiscal 2022
(From April 1, 2022 toMarch 31, 2023)
119

Retirement benefit costs
Retirement benefits paid

105
(67)

180
(32)

Contributions to the plan

(33)

(32)

119

234

Balance at the end of the fiscal year

- 45 -

(2) Reconciliation between net defined benefit liabilities (assets) recorded in the consolidated balance sheets and the balances ofbenefit obligation and pension assets at the end of the period.
(Millions of yen)
Fiscal 2021
(As of March 31, 2022)
Benefit obligation
Pension assets

Fiscal 2022
(As of March 31, 2023)

1,285(1,166)

1,350(1,115)119

234

Retirement benefit liability

119

234

Net balance of liabilities and assets recorded in the
consolidated balance sheets

119

234

Net balance of liabilities and assets recorded in the
consolidated balance sheets(3) Retirement benefit costs
Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)
Retirement benefit costs calculated using simplified
accounting methods

105(Millions of yen)
Fiscal 2022
(From April 1, 2022 toMarch 31, 2023)
180

3. Defined contribution plan
The required contributions for the defined contribution plans of consolidated subsidiaries amounted to ¥28 million in the fiscal year
ended March 31, 2022 and ¥28 million in the fiscal year ended March 31, 2023.

Note 17 － Stock Options
Not applicable- 46 -

Note 18 － Income Taxes
1. Breakdown of main components of deferred tax assets and deferred tax liabilities(Millions of yen)
Fiscal 2021
(As of March 31, 2022)
Deferred tax assets
Accrued bonuses
Accrued enterprise taxes
Inventory depreciation
Accounts receivable—other
Loss on building reconstruction
Impairment losses
Provision for share-based remuneration
Retirement benefit liability
Loss carryforwards
Asset retirement obligations
Other
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Reserve for reduction entry
Unrealized gain (loss) on securities
Difference in valuation of fixed assets
Retirement expenses for asset retirement obligations
Other
Total deferred tax liabilities
Net amount of deferred tax assets (liabilities)

Fiscal 2022
(As of March 31, 2023)

78
200
94
43
517
327
18
39
27
209
452
2,010
(974)
1,035

82
166
140
42
517
360
30
75
106
211
413
2,148
(1,014)
1,133

(987)
(7,992)(1,961)(104)(3)(11,050)(10,014)(833)(6,834)(1,988)(95)(5)(9,756)(8,622)

2. Breakdown of main items underlying a significant difference between the effective statutory tax rate and the tax burden rate ofcorporate and other taxes after the application of tax effect accounting
Fiscal 2021
(As of March 31, 2022)
This information has
been omitted because thedifference between theeffective statutory tax
rate and the tax burden
rate of corporate andother taxes after theapplication of tax effectaccounting was less than
5% of the effective
statutory tax rate.

Fiscal 2022
(As of March 31, 2023)
This information has
been omitted because thedifference between theeffective statutory tax
rate and the tax burden
rate of corporate andother taxes after theapplication of tax effectaccounting was less than
5% of the effective
statutory tax rate.

Note 19 － Asset Retirement Obligations
Asset retirement obligations recorded in the consolidated balance sheets
1. Summary of the asset retirement obligations
The obligations are for the removal of asbestos from buildings used as operating assets.
2. Method for calculating the amount of the asset retirement obligations
The amount of asset retirement obligations is calculated at discount rates between 0.2% and 2.3% over expected period of use
estimated between 8 and 50 years.

- 47 -

3. Changes in the asset retirement obligations(Millions of yen)
Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)

Fiscal 2022
(From April 1, 2022 toMarch 31, 2023)

Beginning balance
Adjustment due to passage of time

664
6

669
6

Reduction due to fulfillment of assets retirement
obligations(1)—

Ending balance

669

676

Note 20 － Lease Property, etc.
The Company and some consolidated subsidiaries own lease properties such as office buildings, and commercial facilities in Tokyoand other areas for the purpose of earning leasing revenue. Some lease office buildings used by the Company and consolidated
subsidiaries are presented as the real estate that includes the portion used as lease property, etc.
The amounts of such lease property, etc. and real estate that includes the portion used as lease property, etc. in the consolidatedbalance sheet, increase and decrease during the period, and their market values are as follows:(Millions of yen)
Fiscal 2021
Fiscal 2022
(From April 1, 2021 to(From April 1, 2022 toMarch 31, 2022)
March 31, 2023)
Lease property, etc.
Amount on the consolidated balance
sheet
Beginning balance

245,108

252,485

Increase (decrease)

7,377

23,047

Ending balance

252,485

275,533

Market value at fiscal-year end

349,750

373,765

Beginning balance

19,38024,228

Increase (decrease)

4,847

8,889

Ending balance

24,22833,117

Market value at fiscal-year end

39,23046,420Real estate that includes the portion usedas lease property, etc.
Amount on the consolidated balance
sheet(Note) 1. The amount on the consolidated balance sheet is equal to the acquisition cost minus the accumulated depreciation andaccumulated impairment losses.
2. The net increase in fiscal 2021 was mainly due to acquisitions of real estate totaling ¥16,094 million and increased assetsof ¥4,783 million resulting from the consolidation of LA3 Inc. and Kabutocho 12 Inc. These items offset a transfer of¥7,316 million to real estate for sale. The net increase in fiscal 2022 was mainly due to acquisitions of real estate totaling¥35,221 million, which offset a transfer of ¥5,572 million to real estate for sale.
3. The market values of principal properties at the end of the current consolidated fiscal year are based on the standards ofreal estate appraisal by independent real estate appraisers, and those of other properties are calculated by the Company
based on the Real Estate Appraisal Standard. If, however, certain appraisal values and indices considered to appropriatelyreflect the fair values have not changed significantly from the time of acquisition from a third party or the latest appraisal,
an amount appropriately adjusted using the appraisal values and indices is used.

- 48 -

Profit and loss on lease property, etc. and real estate that includes the portion used as lease property, etc. are as follows.
(Millions of yen)
Fiscal 2021
Fiscal 2022
(From April 1, 2021 to(From April 1, 2022 toMarch 31, 2022)
March 31, 2023)
Lease property, etc.
Leasing revenue

21,921

20,138

Leasing expenses

12,224

12,971

Net

9,697

7,166

227

(141)

Leasing revenue

3,017

3,328

Leasing expenses

1,666

1,952

Net

1,350

1,375

(2)

(19)

Other profit (loss)
Real estate that includes the portion usedas lease property, etc.

Other profit (loss)(Notes) 1. Because the real estate that includes the portion used as lease property, etc. includes portions used by the Company andsome consolidated subsidiaries for the delivery of services and business management, the relevant leasing revenue was notreported. Expenses for real estate (depreciation, repair expenses, insurance premiums, taxes and other duties, etc.) were
included in the leasing expenses.
2. The amounts of “other profit (loss)” were due to net balances of a gain on sales of fixed assets, a loss on building
reconstruction, a loss on disposal of fixed assets, and an impairment loss.

Note 21 － Revenue Recognition
1. Revenues from contracts with customers
Fiscal 2021 (From April 1, 2021 to March 31, 2022)(Millions of yen)
Reportable segments
Total

Building Business

Asset Management
Business

Revenue from sales of properties

26,770—26,770Management fee included in theasset management revenue

—

1,377

1,377

Other

2,747

1,191

3,939

Revenues from contracts withcustomers

29,5172,569

32,087

Other revenue (Note)

24,916815

25,731

Operating revenue from externalcustomers

54,433

3,384

57,818(Note) Other revenue includes leasing revenue calculated based on accounting standards related to lease transactions.

- 49 -

Fiscal 2022 (From April 1, 2022 to March 31, 2023)(Millions of yen)
Reportable segments
Total

Building Business

Asset Management
Business

Revenue from sales of properties

14,065—

14,065

Management fee included in theasset management revenue

—

1,573

1,573

Other

3,463

1,191

4,655

Revenues from contracts withcustomers

17,5282,764

20,293

Other revenue (Note)

23,320909

24,229Operating revenue from externalcustomers

40,8483,674

44,522(Note) Other revenue includes leasing revenue calculated based on accounting standards related to lease transactions.
2. Basis for understanding revenues from contracts with customers
The basis for understanding revenues from contracts with customers is explained in Note 2 － “Significant Accounting Policies,” 4.
“Accounting Policy,” (6) “Basis for calculating significant revenues and expenses.”
3. Satisfaction of performance obligations in accordance with contracts with customers and cash flows generated from such contracts,
and the timing and amounts of revenue expected to be recognized during and after the next fiscal year from contracts with customers
in effect during the fiscal year under review(1) Balance of contract assets and contract liabilities(Millions of yen)
Fiscal 2021

Fiscal 2022

238

197

Receivables from contracts with customers(Ending balance)

197

186

Contract assets (Beginning balance)

435

465

Contract assets (Ending balance)

465

485

Contract liabilities (Beginning balance)

32

25

Contract liabilities (Ending balance)

25

5

Receivables from contracts with customers(Beginning balance)

Contract assets are the Group’s right to consideration in exchange for services that have yet to be billed, and are recognized
as revenue over the course of satisfaction of its performance obligations. Contract assets are transferred to receivablesfrom contracts with customers at the time when the Group’s right to consideration becomes unconditional.
Contract liabilities are mainly advances received from customers and are reversed upon the recognition of revenue.
(2) Transaction prices allocated to remaining performance obligations
Transaction prices allocated to remaining performance obligations have not been described because the Group applied a practical
expedient since it has no significant contracts with an initially expected contract period extending beyond one year. Furthermore,transaction prices did not comprise any material amounts among considerations arising from contracts with customers.
Note 22 － Segment and Other Information
Segment Information- 50 -

1．Reportable segments overview
The reportable segments of the Company are the business units for which the separate financial information is available in order for
the Board of Directors to conduct periodic reviews to determine the distribution of management resources and evaluate their businessresults.
The Company’s two reportable segments are the Building Business segment and Asset Management Business segment.
The Building Business segment deals with the development, leasing, management, and sale of stock exchange buildings, officebuildings, commercial facilities, and residential buildings. The Asset Management Business segment manages the properties of
Heiwa Real Estate REIT, Inc., and provides real estate brokerage services through Housing Service Co., Ltd.
2. Methods of calculating the amounts of operating revenue, income/loss, assets, liabilities, and other items by reportable segments
The accounting methods for the reportable segments are the same as those described in the Note 2 “Significant Accounting Policies.”
The amount of income of each reportable segment is based on operating income. Inter-segment revenue is based on prevailingmarket prices.
3. Information on operating revenue, income/loss, assets, liabilities, and other items by reportable segments
Fiscal 2021 (From April 1, 2021 to March 31, 2022)

Reportable segments
Building
Business

Asset Management
Business

Adjustments(Note 1)

Total

(Millions of yen)Amount inconsolidated
financialstatements(Note 2)

Operating revenue
Operating revenue fromexternal customers

54,433

3,384

57,818—57,818

27

—

27

(27)

—

Total

54,461

3,384

57,845(27)

57,818Segment income

12,3991,977

14,377(1,762)

12,615

Segment assets

310,089

24,854

334,944

41,265376,210Depreciation (Note 3)

5,349

16

5,365

52

5,418

Increase in tangible andintangible fixed assets

26,331

68

26,39929

26,429Inter-segment revenue andtransfer

Other items(Note 3)(Notes) 1. Details of adjustments are as follows:(1) The negative adjustments to segment income of ¥1,762 million mainly include corporate expenses amounting
to ¥1,767 million that belong to the administration division and are not allocated to any of the reportablesegments.
(2) Adjustments to segment assets of ¥41,265 million, mainly include unallocated corporate assets amounting to¥43,069 million, which primarily consist of cash and deposits, marketable securities, and investment securities
that belong to the administration division.
(3) The adjusted amounts of increases in tangible and intangible fixed assets are the amount of increase of theunallocated corporate assets that have not been assigned to the reportable segments.
2. Segment income is adjusted with operating income in the consolidated statements of income.
3. The depreciation and increases in tangible and intangible fixed assets in the other items include the amortization ofand an increase in long-term prepaid expenses.

- 51 -

Fiscal 2022 (From April 1, 2022 to March 31, 2023)

Reportable segments
Building
Business

Asset Management
Business

Adjustments(Note 1)

Total

(Millions of yen)Amount inconsolidated
financialstatements(Note 2)

Operating revenue
Operating revenue fromexternal customers

40,8483,674

44,522—

44,522

37

—

37

(37)

—

Total

40,885

3,674

44,560(37)

44,522

Segment income

10,572

2,071

12,643(1,859)10,784

Segment assets

337,439

25,264

362,704

35,629398,333

Depreciation (Note 3)

5,605

14

5,619

49

5,668

Increase in tangible andintangible fixed assets

43,952

943,962150

44,112

Inter-segment revenue andtransfer

Other items(Note 3)(Notes) 1. Details of adjustments are as follows:(1) The negative adjustments to segment income of ¥1,859 million mainly include corporate expenses amounting
to ¥1,859 million that belong to the administration division and are not allocated to any of the reportablesegments.
(2) Adjustments to segment assets of ¥35,629 million mainly include unallocated corporate assets amounting to¥37,382 million, which primarily consist of cash and deposits, marketable securities, and investment securities
that belong to the administration division.
(3) The adjusted amounts of increases in tangible and intangible fixed assets are the amount of increase of theunallocated corporate assets that have not been assigned to the reportable segments.
2. Segment income is adjusted with operating income in the consolidated statements of income.
3. The depreciation and increases in tangible and intangible fixed assets in the other items include the amortization ofand an increase in long-term prepaid expenses.

- 52 -

Related Information
Fiscal 2021 (From April 1, 2021 to March 31, 2022)
1. Information by products and services
These details have been omitted because the same information is disclosed in the segment information.
2. Information by geographical area
(1) Operating revenue
There are no applicable details to report because the Company receives no operating revenue from tenants or other clients outside
Japan.
(2) Tangible fixed assets
There are no applicable details to report because the Company possesses no tangible fixed assets outside Japan.
3. Information by major tenants(Millions of yen)
Name of tenantOperating revenue

Applicable business segment

Ginza Project Inc. (special purpose company)

18,000

Building BusinessHeiwa Real Estate REIT, Inc.

11,430

Building Business
Asset Management Business

Fiscal 2022 (From April 1, 2022 to March 31, 2023)
1. Information by products and services
These details have been omitted because the same information is disclosed in the segment information.
2. Information by geographical area
(1) Operating revenue
There are no applicable details to report because the Company receives no operating revenue from tenants or other clients outside
Japan.
(2) Tangible fixed assets
There are no applicable details to report because the Company possesses no tangible fixed assets outside Japan.
3. Information by major tenants(Millions of yen)
Name of tenantOperating revenue

Applicable business segment

13,365

Building Business
Asset Management BusinessHeiwa Real Estate REIT, Inc.

Information on Impairment Losses of Fixed Assets by Reportable Segment
Fiscal 2021 (From April 1, 2021 to March 31, 2022)(Millions of yen)
Building Business Asset Management
Business
Impairment
losses2

Inter-segment
eliminations

—

Total

—

2

Fiscal 2022 (From April 1, 2022 to March 31, 2023)(Millions of yen)
Building Business Asset Management
Business
Impairment
losses108

Inter-segment
eliminations——- 53 -

Total
108

Amortization and Unamortized Balance of Goodwill by Reportable Segment
Fiscal 2021 (From April 1, 2021 to March 31, 2022)
Not applicable
Fiscal 2022 (From April 1, 2022 to March 31, 2023)
Not applicable

Information on Gain on Negative Goodwill by Reportable Segment
Fiscal 2021 (From April 1, 2021 to March 31, 2022)
Not applicable
Fiscal 2022 (From April 1, 2022 to March 31, 2023)
Not applicable

Information on Related Parties
Fiscal 2021 (From April 1, 2021 to March 31, 2022)
Not applicable
Fiscal 2022 (From April 1, 2022 to March 31, 2023)
Not applicable

Note 23 － Per Share Information(Yen)
Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)

Fiscal 2022
(From April 1, 2022 toMarch 31, 2023)

Net assets per share

3,269.74

3,334.34

Earnings per share

236.74254.27(Notes) 1. Diluted net income per share is not presented, as there are no potentially dilutive shares.
2. To calculate net assets per share and earnings per share, the Company’s stock held in the trust for its stock compensation planfor directors and officers and in the trust for its employee stock ownership plan was included in the amount of treasury shares
subtracted from calculations of the total number of shares issued as of March 31 of the respective fiscal year and the average
number of shares outstanding during each respective fiscal year. The number of such treasury shares issued as of the end of
the period subtracted from calculations of the total number of shares issued as of the end of the period came to 130,000 sharesin fiscal 2021 and 175,000 shares in fiscal 2022, and the average number of such treasury shares during the period subtracted
from calculations of the average number of shares outstanding during the period was 124,000 shares in fiscal 2021 and
159,000 shares in fiscal 2022.
3. Earnings per share is calculated based on the following.
Fiscal 2021
(From April 1, 2021 toMarch 31, 2022)

Fiscal 2022
(From April 1, 2022 toMarch 31, 2023)

8,705

9,137

—

—

Net income attributable to common shareholders of
the parent (millions of yen)

8,705

9,137

Average number of shares outstanding during theperiod (thousands of shares)

36,76935,934

Net income attributable to owners of parent(millions of yen)Amount not attributable to common shareholders(millions of yen)

- 54 -

Note 24 － Significant Subsequent Events
Not applicable

Note 25 － Consolidated Supplemental Schedules
1. Schedule of Bonds Payable
Issuing company

Bond name

Balance at theBalance at the
beginning of theDate of issuanceend of the period
period(millions of yen)(millions of yen)

CouponSecurity

Redemption
date

Unsecured

Septemberbond

30, 2022

Unsecured

Septemberbond29, 2023

Unsecured

March 25,

bond

2024

Unsecured

March 29,

bond

2024

Unsecured

Septemberbond25, 2024

Unsecured

Septemberbond25, 2024

Unsecured

Septemberbond

30, 2024

Unsecured

Decemberbond

30, 2022

Unsecured

June 30,

bond

2025

Unsecured

Septemberbond

30, 2025

Unsecured

March 31,

bond

2026

Unsecured

March 31,

bond

2023

19th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 28,

1,050

Co., Ltd.

to authorized institutional

2012(1,050)—0.85%
annually

investors)
21st Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 30,

575

525

0.97%

Co., Ltd.

to authorized institutional

2013

(50)

(525)

annually

investors)
22nd Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

March 25,

400

200

0.88%

Co., Ltd.

to authorized institutional

2014

(200)

(200)

annually

investors)
23rd Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

March 31,

840

770

0.89%

Co., Ltd.

to authorized institutional

2014

(70)

(770)

annually

750

750

investors)
24th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 25,

Co., Ltd.

to authorized institutional

2014

1.03%
annually

investors)
25th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 25,

187

112

0.81%

Co., Ltd.

to authorized institutional

2014

(75)

(75)

annually

investors)
26th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 30,

937

862

0.79%

Co., Ltd.

to authorized institutional

2014

(75)

(75)

annually

investors)
28th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

December 30,

1,300Co., Ltd.

to authorized institutional

2014(1,300)—0.65%
annually

investors)
30th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limitedCo., Ltd.

to authorized institutional

June 30, 2015

2,227

2,062

0.76%

(165)

(165)

annually

investors)
32nd Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 30,

1,552

1,437

0.62%

Co., Ltd.

to authorized institutional

2015

(115)

(115)

annually

investors)
33rd Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

March 25,

770

715

0.52%

Co., Ltd.

to authorized institutional

2016

(55)

(55)

annually

investors)
34th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

March 31,888

Co., Ltd.

to authorized institutional

2016

(888)

investors)- 55 -—

0.19%
annuallyIssuing company

Bond nameDate of issuance

Balance at theBalance at the
beginning of theend of the period
period(millions of yen)(millions of yen)

CouponSecurity

Redemption
date

Unsecured

Septemberbond29, 2023

Unsecured

March 31,

bond

2025

35th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 30,

1,263

1,129

0.11%

Co., Ltd.

to authorized institutional

2016

(134)

(1,129)annually

1,000

1,000

investors)
Heiwa Real EstateCo., Ltd.

36th Unsecured Bond (limited
to authorized institutional

2017

investors)

Heiwa Real EstateCo., Ltd.

March 31,37th Unsecured Bond (limited
to authorized institutional

0.42%
annually

December 8,
2017

1,200

1,125

0.71%

Unsecured

December 8,

(75)

(75)

annually

bond

2032

5,000

5,000

0.755%

Unsecured

Decemberannuallybond

13, 2028

1,275

1,200

0.76%

Unsecured

January 31,

(75)

(75)

annually

bond

2034

7,000

7,000

Unsecured

January 21,

bond

2031

Unsecured

Novemberbond

30, 2032

Unsecured

February 28,

bond

2033

Unsecured

February 25,

bond

2031

investors)
Heiwa Real EstateCo., Ltd.
Heiwa Real EstateCo., Ltd.

38th Unsecured Bond
39th Unsecured Bond (limited
to authorized institutional

December 13,
2018
January 31,
2019

investors)
Heiwa Real EstateCo., Ltd.

40th Unsecured Bond

January 21,
2021

0.78%
annually

41st Unsecured Bond (limited
Heiwa Real EstateCo., Ltd.

to authorized institutional
investors)

Heiwa Real Estate

42nd Unsecured Bond (limited
to authorized institutional

Co., Ltd.

investors)

November 30,

—

2022

February 28,

—

2023

3,258

0.76%

(165)

annually

2,490

1.00%

(124)

annually

2,000

0.35%

(100)

annually

43rd Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

February 28,

Co., Ltd.

to authorized institutional

2023

—

investors)
Total

—

—

28,216

31,637(4,327)(3,648)———(Notes) 1. Amounts shown in parentheses are scheduled for redemption within one year.
2. Amounts scheduled for redemption each year within five years from March 31, 2023
Within one to two
Within two to three
Within three to fourWithin one year
years
years
years
(millions of yen)(millions of yen)(millions of yen)(millions of yen)
3,648

3,449

4,084

- 56 -

539

Within four to fiveyears
(millions of yen)539

2. Schedule of Borrowings
Balance as of
Balance as ofApril 1, 2022 March 31, 2023
(millions of yen) (millions of yen)

Item

Averageinterest
rate(%)

Repayment period

Short-term loans payable

3,800

3,800

0.3

—

Long-term loans payable within one year

13,077

15,727

0.7—

Lease obligations payable within one year

0

—

—

—

157,143

170,880

0.7

2024–2037

—

—

—

—

4,000

4,850

0.6

2024–2043

178,020

195,257——

Long-term loans payable (excluding those payable within
one year)Lease obligations (excluding those payable within one year)
Other interest-bearing liabilities
Long-term accounts payable
Total(Notes) 1. The average interest rate is the weighted average interest rate for the respective item in the table as of March 31, 2023.
2. The payment period and amounts of long-term loans payable (excluding those payable within one year) and long-term
accounts payable within five years from March 31, 2023 are shown below.
Within one to two
Within two to three
Within three to four
years
years
years
(millions of yen)(millions of yen)(millions of yen)
Long-term loans
15,95816,184
26,217payableLong-term accounts
payable258

258

Within four to fiveyears
(millions of yen)

258

28,250285

3. Schedule of Asset Retirement Obligations
Pursuant to Article 92-2 of the Regulation on Terminology, Forms, and Preparation Methods of Consolidated Financial Statements,
the amounts of asset retirement obligations as of April 1, 2022, and March 31, 2023, have been omitted because the amounts are lessthan one percent of total balance of liabilities and net assets at the beginning and end of the fiscal year under review.

- 57 -

Independent auditor’s report
To the Board of Directors of Heiwa Real Estate Co., Ltd.:
OpinionWe have audited the accompanying consolidated financial statements of Heiwa Real Estate Co., Ltd.
(“the Company”) and its consolidated subsidiaries (collectively referred to as “the Group”), which
comprise the consolidated balance sheets as at March 31, 2023 and 2022, the consolidated statements ofincome and comprehensive income, changes in net assets and cash flows for the years then ended andnotes, comprising a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2023 and 2022, and its
consolidated financial performance and its consolidated cash flows for the years then ended inaccordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of the Groupin accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in thecontext of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.

Appropriateness of the Company’s valuation of fixed assets for the Building Business
The key audit matter

How the matter was addressed in our audit

Tangible fixed assets of ¥279,526 million andleasehold rights among intangible fixed assets of¥30,464 million (“real estate”) were recognized as
properties held for leasing in the consolidatedbalance sheet of Heiwa Real Estate Co., Ltd. (the“Company”) and its consolidated subsidiaries forthe current fiscal year, representing 77.8% of total
assets in the consolidated financial statements.
These assets mainly include real estate such as
stock exchanges, offices and hotels in Japan andthe real estate owned by the Company and its
consolidated subsidiaries for several
redevelopment projects in Tokyo (Nihonbashi
Kabutocho and Kayabacho districts) and Sapporo.

The primary procedures we performed to assess
the appropriateness of the Company’s judgments
as to whether there is an impairment indicator forreal estate and whether impairment losses should
be recognized included the following:

As described in Note 3, “Significant Accounting
Estimates, Impairment of fixed assets” to theconsolidated financial statements, management
identifies an impairment indicator based on thesmallest unit of assets (individual assets, inprinciple) that generates cash flows that arelargely independent of the cash flows from otherassets or asset groups. Impairment indicators
include changes that significantly decrease therecoverable amount, such as recurring operating
losses, a significant decline in market value,
significant deterioration of the businessenvironment, and a change in usage. When it isdetermined that there is an impairment indicator,
management judges whether an impairment loss
should be recognized by comparing theundiscounted future cash flows that are expected
to be generated from the related properties with
their carrying amounts. For the redevelopment
projects, several assets are grouped together when
the business plan is determined to be feasible. In
assessing the market value, the Company uses thereal estate appraisal value obtained from external
appraisers.
-(1) Internal control testing
We tested the design and operating effectivenessof certain of the Company’s internal controls
relevant to identifying an impairment indicatorfor real estate and determining impairment losses
to be recognized.
(2) Assessment of the appropriateness of theCompany’s judgment as to whether there is
an impairment indicator

We inspected the board minutes, the minutesof the executive officers, the requests forapproval, and other relevant materials, andinquired of management and responsible
personnel at the relevant department in order
to confirm management’s judgement on theprospects of the COVID-19 pandemic andexpected changes in operating profits andlosses and their decisions on changes in thescope and method of usage.



We conducted a site inspection to confirm theoccupancy status and construction progressof real estate that was newly acquired andwhose occupancy rate changed.

With respect to the redevelopment projects,
we evaluated the consistency between
grouping units of assets and the latest
business plans prepared by management. In
addition, we examined the feasibility of theredevelopment projects by inquiring of
responsible personnel at the relevant
department regarding whether there was any
change in development costs and a possible
delay in the business plan, inspecting
negotiation records with other landowners
and tenants of existing buildings and otherrelevant documents, and then evaluating theconsistency between these documents and theresults of queries.



We inquired of the external real estateappraisers used by management to assess themarket value about their appraisal value andassessed the appropriateness of the appraisal

Judgement as to whether there is an
impairment indicator

In determining whether there is an impairment
indicator, management needs to make a complex
judgment on prospects for the end of the COVID19 pandemic as well as expected changes inoperating profits and losses and the method ofusage. The business plan that serves as the basis
for determining the redevelopment projects was
prepared by management using various
assumptions including the policy for developing
blocks to be commercialized, prospective
approval for developments by local governments,

development costs and expected rental rates, andtherefore involved a high degree of uncertainty
and dependency on management’s subjective
judgement.
-

Judgement as to whether impairment losses
should be recognizedWith respect to real estate for which an
impairment indicator (such as a temporary
decrease in profitability due to termination bytenants and the cease of operations for future
redevelopments) was identified, the estimate of
future cash flows reflected significant assumptions
such as the level of rental rate, the occupancy rate,
and operating costs in the future, and therefore
involved a high degree of uncertainty anddependency on management’s subjective
judgement.
We, therefore, determined that our assessment of
the appropriateness of the Company’s judgments
as to whether there is an impairment indicator forreal estate and whether impairment losses should
be recognized was of most significance in our
audit of the consolidated financial statements forthe current fiscal year, and accordingly, a key
audit matter.

method, underlying basis and discount rates
for part of the real estate by involving a realestate appraisal specialist within our domestic
network firms.
(3) Assessment of the appropriateness of
judgment as to whether impairment losses
should be recognized

We assessed the reliability andreasonableness of management’s estimates bycomparing the estimated future cash flows
with the actual results for the current fiscal
year and inspecting the negotiation records
with tenants.



We assessed the consistency of the futureforecast with information such as the
management environment, the real estate
rental market, and the trends in land prices
issued by external organizations.

Other Information
The other information comprises the information included in the Annual Report, but does not include
the consolidated financial statements, the financial statements, and our auditor’s reports thereon.
Management is responsible for the preparation and presentation of the other information. The audit
committee is responsible for overseeing the executive officers’ and directors’ performance of theirduties with regard to the design, implementation and maintenance of the reporting process for the otherinformation.
Our opinion on the consolidated financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read theother information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears
to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of thisother information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management and the Audit Committee for the Consolidated Financial
Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern inaccordance with accounting principles generally accepted in Japan.
The audit committee is responsible for overseeing the executive officers’ and directors’ performance of
their duties with regard to the design, implementation and maintenance of the Group’s financial
reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’sreport that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with auditing standards generally accepted in Japan
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The riskof not detecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, while the objective of the audit is not to express an
opinion on the effectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting
and based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group tocease to continue as a going concern.



Evaluate whether the presentation and disclosures in the consolidated financial statements are inaccordance with accounting standards generally accepted in Japan, the overall presentation,
structure and content of the consolidated financial statements, including the disclosures, andwhether the consolidated financial statements represent the underlying transactions and events in amanner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remainsolely responsible for our audit opinion.

We communicate with the audit committee regarding, among other matters, the planned scope andtiming of the audit, significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the audit committee with a statement that we have complied with relevant ethicalrequirements regarding independence, and communicate with them all relationships and other mattersthat may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the audit committee, we determine those matters that were ofmost significance in the audit of the consolidated financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of such communication.

Interest required to be disclosed by the Certified Public Accountants Act of Japan
We do not have any interest in the Group which is required to be disclosed pursuant to the provisions of
the Certified Public Accountants Act of Japan.

/S/ Yohei Morimoto
Designated Engagement Partner
Certified Public Accountant/S/ Hirofumi Hanyu
Designated Engagement Partner
Certified Public Accountant

KPMG AZSA LLC
Tokyo Office, Japan
July 18, 2023

Notes to the Reader of Independent Auditor’s Report:
This is a copy of the Independent Auditor’s Report and the original copies are kept separately by theCompany and KPMG AZSA LLC.