ANNUAL REPORT 2021
Year Ended March 31, 2021

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Contents
Page
Part 1Company Overview……………………………………………………………………………………………………

3

1

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

3

2

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

4

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…………………………………………………………………………………

18

Part 2

Part 3

Independent Auditor’s Report

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Part 1 Company Overview
1. History
July 1947

The Company was established 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 of stock
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
July 1949

Listed on the Tokyo Stock Exchange, Osaka Securities Exchange (Currently Osaka Exchange), and Nagoya
Stock Exchange
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
December 1984

Completed construction of the trading floor building (currently Arrows) in the Tokyo Stock Exchange 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
February 2010

Made Canal Investment Trust Co., Ltd., (currently Heiwa Real Estate Asset Management Co., Ltd.) a
consolidated subsidiary
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

March 2019

Acquired the Sakae Sun City Building－3－

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 four 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. Effectivefrom April 1, 2020, the Company’s reportable segments were changed as follows: the Leasing Business segment was renamed as
the Building Business segment, and the Real Estate Solutions Business segment was renamed as the Asset Management Businesssegment. This change was limited to reportable segment names only, and had no effect on segment reporting.
(1) Building Business
The Company develops, leases, manages and operates stock exchange buildings, office buildings, commercial facilities, andresidential buildings. The Tokyo Shoken Building Incorporated owns and leases real estate, and manages halls, conference
facilities, and restaurants.
(2) Asset Management Business
The Company develops, sells, operates, and manages revenue-generating real estate, develops and sells residential properties,
and provides real estate agency services.
Heiwa Real Estate Asset Management Co., Ltd. manages the properties of Heiwa Real Estate REIT, Inc.
Housing Service Co., Ltd. also provides real estate agency services.
(3) Other Businesses
Heiwa Real Estate Property Management Co., Ltd. provides building facility maintenance and management, repair work
contracting, and insurance services.
The details above are shown in the following diagram.

(上図内テキスト)
平和不動産株式会社
ビルディング事業
アセットマネジメント事業
その他の事業
建物設備保守管理事業
改修工事請負事業
保険代理店業務
株式会社東京証券会館
平和不動産アセットマネジメント株式会社
ハウジングサービス株式会社
平和不動産プロパティマネジメント株式会社

Heiwa Real Estate Co., Ltd.
Building Business
Asset Management Business
Other Businesses
Building facility maintenance and management
Repair work contracting
Insurance services
The Tokyo Shoken Building Incorporated
Heiwa Real Estate Asset Management Co. Ltd.
Housing Service Co., Ltd.
Heiwa Real Estate Property Management Co., Ltd.
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The Company’s Board of Directors resolved, in a meeting held on April 30, 2021, to change its reportable segments from thecurrent fiscal year, effective retroactively from April 1, 2021.
Firstly, the Company will transfer the Real Estate Investment Department from the Asset Management Business segment to the
Building Business segment. The Real Estate Investment Department handles the development, sale, and investment in real estate
for sale, and the acquisition and sale of fixed assets. This change was made in consideration of future business development plans
following a decision to transfer two properties for lease from fixed assets to real estate for sale effective from April 1, 2021. This
reassignment is in line with the Company’s portfolio strategy in its current medium-term management plan of acquiring newproperties for lease as a means to expand the portfolio, and generating earnings from the sale of properties in the process of replacing
portfolio properties.
Secondly, the Company will transfer its subsidiary, Heiwa Real Estate Property Management Co., Ltd. (renamed from Heiwa
Service Co., Ltd., effective from March 1, 2021), from the Other Businesses segment to the Building Business segment, effectivefrom April 1, 2021. This change was made because the subsidiary will develop comprehensive property management services while
expanding its current building facility maintenance and management business.
As a result of these two changes, the Building Business segment will handle the development, leasing, management, operations,and sales of stock exchange buildings, office buildings, commercial facilities, and residential buildings, while the AssetManagement Business segment will mainly manage the properties through Heiwa Real Estate REIT, Inc., and provide real estate
brokerage services though Housing Service Co., Ltd..

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3. Overview of Subsidiaries and Affiliates
Company nameLocation

Common stock(millions ofyen)

Main businessactivities2

The Company’s
voting rights andownership (%)

Related activities

Consolidated subsidiaries

Heiwa Real Estate
Property Management
Co., Ltd.1

Chuo-ku, Tokyo

134

Other Businesses

100.0

Consigned to
manage theCompany’s leased
buildings
Rents offices fromthe Company
Officers holdconcurrent positions

Housing Service Co., Ltd.

Chuo-ku, Osaka

95

Asset Management
Business

100.0

Officers holdconcurrent positions

100.0

Rents offices fromthe Company
Officers holdconcurrent positions

100.0

Rents stores to theCompany
Officers holdconcurrent positions

Heiwa Real Estate AssetManagement Co., Ltd.

Chuo-ku, Tokyo

The Tokyo Shoken
Building Incorporated

Chuo-ku, Tokyo

295

100

Asset Management
Business

Building Business(Notes) 1. Heiwa Real Estate Property Management Co., Ltd. was renamed from Heiwa Service Co., Ltd., effective from March 1,
2021.
2. The main business activities correspond to the business segment names. As stated in 2. Overview of Business Activities
above, the main operations of Heiwa Real Estate Property Management Co., Ltd. were transferred to the Building Business
effective from April 1, 2021.

4. Employee Data
(1) Employees of the Group(As of March 31, 2021)
Segment

Number of employees

Building Business

72

Asset Management Business90

Other Businesses

51

Group-wide non-segment

27

Total

240

(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.

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(2) Employees of the Company
Number of employees

Average age of employees

102

42.5

Average years of employment(As of March 31, 2021)
Average annual salary(thousands of yen)

14.8

Segment

10,126

Number of employees

Building Business

59

Asset Management Business

16

Company-wide non-segment

27

Total

102

(Notes) 1. Number of employees refers to full-time employees, excluding employees transferred to organizations outside theCompany 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 this company
and the labor union have been maintaining a constructive relationship. There are no matters deserving special mention.

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Part 2 Business Overview
1. Management Policies, Operating Environment, and Issues to Address
Forward-looking statements in this report were based on judgements made as of March 31, 2021.
Management Policies, Operating Environment, and Issues to Address
The Japanese economy is expected to recover due to various measures implemented by the government, but the impact of the COVID19 pandemic on the domestic and global economy will need to be closely monitored going forward. In Japan’s real estate industry,
the Company must pay close attention to the impact of recent trends on demand for leased offices in the office building leasing market,
including increasingly diverse working conditions and lifestyles. In Japan’s real estate investment market, investors are expected tocontinue actively investing in real estate as the government maintains its easy monetary policy.
In this operating environment, the Group will execute the following business strategies of its medium-term management plan,
Challenge & Progress, spanning from fiscal 2020 to fiscal 2023.
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
The Company will work to foster prosperity in the Nihonbashi Kabutocho and Kayabacho districts it is redeveloping andcontribute to the Tokyo Metropolitan Government’s vision to make Tokyo a “global financial city” by initiating new urban
redevelopment projects, including the KABUTO ONE building, with a view to create sustainable and diverse urban areas.
2) Redevelopment of commercial areas in Sapporo
The Company will promote full-fledged redevelopment of commercial areas in Sapporo through its Dogin Building
redevelopment project and participation in a city-led project to redevelop Sapporo Station’s South Exit area (surrounding the
Sapporo Ekimae Godo 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 in－8－

facilities and solutions-oriented building management with a view to reduce CO2 emissions over the long term.
(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.
2) 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.
(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 intends to further strengthen its corporate governance by reducing cross-shareholdings and continually revamping
its compensation system for directors and officers. 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 Sustainability Development Goals. To more effectively execute
these actions, the Company established its Sustainability Committee and has assigned management and executives to monitor
related activities by implementing a PDCA cycle. 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 forshareholder returns based on current investment returns in the real estate market.

Earnings per share

Minimum ¥200 by fiscal 2023

Consolidated
operating income

Minimum ¥12 billion* by fiscal 2023

Capital efficiency

ROE

Minimum 6% from fiscal 2020 to 2023
Around 70% from fiscal 2020 to 2023

Shareholder returns

Consolidated total
shareholder return
ratio
Consolidated
dividend payout ratio

Profit targets

Around 50% by fiscal 2023

(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

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(2) Investment Plan for Fiscal 2020 to 2023
Business

Investment amount

Redevelopment
Business

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.

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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 2020, ended March 31, 2021, economic conditions in Japan remained severe as a result of the worldwide COVID-19
pandemic. Although economic activity is expected to resume following various measures implemented by the government, theeffectiveness of those measures is not entirely clear. The impact of the COVID-19 situation on the domestic and global economy
will need to be closely monitored going forward.
In Japan’s real estate industry, vacancy rates increased in the office building leasing market as companies adopted remote
work practices in response to the COVID-19 situation. In the real estate investment market, demand was bullish and properties
continued to be actively acquired as investors demonstrated strong interest in investing in Japanese real estate amid favorable
financing conditions and a relatively insignificant effect from the pandemic. Nevertheless, the impact of the COVID-19 situation
on Japan’s real estate market will need to be continually monitored.
In that business environment, the Heiwa Real Estate Group worked to increase its corporate value under its medium-term
management plan, Challenge & Progress, which was announced on April 30, 2020, by promoting redevelopment projects andpursuing external growth in its Building Business and Asset Management Business. The Group also took steps to prevent thefurther spread of coronavirus infections by having its employees telecommute and use online meeting systems, and by digitalizing
in-house work procedures.
Among consolidated financial results in the fiscal year under review, operating revenue totaled ¥35,048 million, a decrease of¥11,590 million (24.9%) year on year. Operating income was ¥11,228 million, up ¥324 million (3.0%), ordinary income cameto ¥10,244 million, an increase of ¥238 million (2.4%), and net income attributable to owners of parent amounted to ¥7,118
million, an increase of ¥72 million (1.0%) compared with the previous fiscal year, a record-high for the Group.
Effective from April 1, 2020, the Company’s reportable segments were changed as follows: the Leasing Business segment
was renamed as the Building Business segment, and the Real Estate Solutions Business segment was renamed as the AssetManagement Business segment. This change was limited to reportable segment names, and had no effect on segment reporting.
Consolidated financial results by business segment are shown in the following table.
Consolidated Financial Results by Segment
Fiscal 2019
Segment
OperatingOperatingrevenueincomeFiscal 2020
OperatingOperatingrevenueincome(Millions of yen)
Difference
OperatingOperatingrevenueincomeBuilding Business

22,5089,080

21,713

8,573

(794)

(507)

Asset Management Business

22,136

3,128

11,9693,937(10,166)

809

Other Businesses

1,995

180

1,365

84

(630)

(95)

—

(1,485)—(1,367)—

118

46,63910,90335,048

11,228(11,590)324

Adjustments
Total

Operating revenue from major tenants and their percentage of total operating revenue in fiscal 2019 and 2020 are as follows.
Fiscal 2019
Fiscal 2020
TenantOperating revenue
Percentage of total
Operating revenue
Percentage of total(millions of yen)operating revenue(millions of yen)operating revenue
Asil Sapporo GK
Nippon Open Ended Real Estate
Investment Corporation

12,000

25.7

—

—

—

—

8,160

23.3

(Note) Only tenants that account for 10% or more of total operating revenue are reported as major tenants.

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(1) Building BusinessIn the Building Business segment, revenue from building leasing increased by ¥550 million (2.7%) year on year to ¥21,110
million. This was mainly due to the contribution of leasing revenue from Solala Plaza (Sendai-shi, Miyagi), acquired in theprevious fiscal year, and the Kabutocho Heiwa Building No. 7 (Chuo-ku, Tokyo), Shimbashi Square Building (Minato-ku,
Tokyo), and Heiwa Real Estate Nihonbashi Building (Chuo-ku, Tokyo), which were acquired in the fiscal year under review.
This contribution offset decreases in revenues from other operations caused by the impact of COVID-19. By property type, thetotal amount of leasing revenue was comprised of ¥3,317 million from stock exchange buildings, ¥14,617 million from officebuildings, and ¥3,175 million from commercial facilities. Combined with operating revenue from other types of Companyowned properties, total operating revenue in the Building Business segment amounted to ¥21,713 million, down ¥794 million(3.5%) year on year. Operating income totaled ¥8,573 million, a decrease of ¥507 million (5.6%), largely as a result of increases
in operating asset management expenses and property taxes.
As of March 31, 2021, the overall vacancy rate of leased buildings of the Building Business segment was 1.96%. Excluding
buildings for which leases have been suspended due to redevelopment in the Nihonbashi Kabutocho and Kayabacho districts,
the vacancy rate would be 1.50%.
Breakdown of operating revenue
Classification
Leasing revenue from land
Leasing revenue frombuildings(Millions of yen)
Fiscal 2019

Fiscal 2020

Area (m2)
Leased land area

Area (m2)Amount3,380.75

111

Leased floor space
402,575.70

20,560Subleased floor space
163.96

Leased land area

Amount3,380.75

107

Leased floor space
413,058.42

21,110Subleased floor space
23.74

Operating revenue fromleased assets

—

1,080

—

—

Other

—

756

—

495

—

22,508—21,713Total(2) Asset Management BusinessIn the Asset Management Business segment, although management fees increased by ¥147 million (12.3%) to ¥1,343 million,
operating revenue from developed real estate decreased by ¥9,890 million (54.8%) to ¥8,160 million, mainly due to decreased
sales of inventories (real estate properties). Combined with the results for leasing revenue from developed real estate andbrokerage commissions, operating revenue amounted to ¥11,969 million, a decrease of ¥10,166 million (45.9%) compared withthe same period of the previous fiscal year. On the other hand, operating income increased by ¥809 million (25.9%) year on yearto ¥3,937 million, largely due to increased sales of inventories.
Breakdown of operating revenue
Classification(Millions of yen)
Fiscal 2019

Fiscal 2020

DifferenceManagement fees

1,196

1,343

147

Operating revenue fromdeveloped real estate

18,0508,160(9,890)

Leasing revenue fromdeveloped real estate

2,058

1,778

(280)

Brokerage commissions

831

688

(143)

22,136

11,969(10,166)

Total(3) Other Businesses
In the Other Businesses segment, operating revenue decreased by ¥630 million (31.6%) to ¥1,365 million, and operating income
fell by ¥95 million (52.9%) to ¥84 million year on year.
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2) Cash flows
As of March 31, 2021, cash and cash equivalents amounted to ¥29,585 million, an increase of ¥2,419 million compared with
March 31, 2020.
Fiscal 2020 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 came to ¥8,292 million, compared with ¥28,680 million in the previous fiscal year.
Main inflows were income before income taxes of ¥10,216 million and depreciation of ¥5,077 million. Main outflows were
¥4,006 million in income taxes paid, ¥1,320 million in interest paid, a decrease in accrued consumption taxes of ¥1,320 million,
and an increase in operating investments of ¥1,199 million.
Cash flows from investing activities
Net cash used in investing activities amounted to ¥30,200 million, compared with ¥11,427 million in the previous fiscal year.
Main outflows included ¥26,894 million for the purchase of tangible fixed assets and ¥4,231 million for the purchase of intangible
fixed assets.
Cash flows from financing activities
Net cash provided by financing activities totaled ¥24,327 million, compared with net cash used in financing activities of ¥1,829
million in the previous fiscal year. Main inflows were an increase in short-term loans payable of ¥3,000 million, proceeds fromlong-term loans payable of ¥27,150 million, and proceeds from the issuance of bonds totaling ¥7,000 million. Main outflows
included repayment of long-term loans payable of ¥6,307 million, redemption of bonds totaling ¥2,092 million, purchase oftreasury shares of ¥2,015 million, and payment of dividends amounting to ¥2,366 million.
(Reference) Results for cash flow-related indicators
Indicator

March 31, 2017

March 31, 2018

March 31, 2019

March 31, 2020

March 31, 2021

Equity-assets ratio

33.3%

34.9%

32.5%

31.6%

31.1%

Market cap-to-assets ratio

21.4%

27.2%

24.6%

31.2%

33.7%

Debt repayment period (years)

7.5

11.6

—

6.5

26.0

Interest coverage ratio (times)

14.5

10.4

—

22.8

6.2

Net debt-to-equity ratio

1.4

1.4

1.6

1.5

1.6

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 long-termloans, bonds, long-term loans payable, and a portion of long-term accounts payable, as stated in the consolidated balance
sheets. Interest expenses used for the calculations are recorded in the consolidated statements of profit and loss.
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.
(2) Management’s analysis of business results and issues for consideration
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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, 2021.
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 worked towards external growth through the acquisitions of the Kabutocho Heiwa Building No. 7 (Chuo-ku, Tokyo),
Shimbashi Square Building (Minato-ku, Tokyo), and Heiwa Real Estate Nihonbashi Building (Chuo-ku, Tokyo). It also worked
towards internal growth by increasing rent amounts in lease agreements. Consolidated financial results in the fiscal year underreview were impacted by the COVID-19 pandemic, and the Building Business segment posted a decline in revenues from thesale of properties. These factors, however, were more than offset by increased sales of inventories in the Asset Management
Business segment. As a result, operating income grew by ¥324 million to ¥11,228 million, and net income attributable to ownersof parent increased by ¥72 million to ¥7,118 million, a record-high for the Group.
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, 2020, and March 31, 2021 were as follows:(Millions of yen)March 31, 2020

March 31, 2021

Difference

Total assets

339,545

381,353

41,807

Total liabilities

232,243

262,71330,469Net assets

107,302118,639

11,337

Interest-bearing liabilities

186,977

215,727

28,749Note: Interest-bearing liabilities are comprised of short-term loans payable, current portion of bonds payable, current portion of longterm loans, bonds payable, long-term loans payable, and a portion of long-term accounts payable.
Total assets
As of March 31, 2021, total assets amounted to ¥381,353 million, an increase of ¥41,807 million compared with March 31, 2020.
Among the main factors underlying this result, while marketable securities decreased by ¥12,986 million, tangible fixed assets
increased by ¥16,389 million and intangible fixed assets increased by ¥4,090 million, primarily due to the acquisitions of the
Kabutocho Heiwa Building No. 7 (Chuo-ku, Tokyo), Shimbashi Square Building (Minato-ku, Tokyo), and Heiwa Real Estate
Nihonbashi Building (Chuo-ku, Tokyo), as well as to construction cost outlays for KABUTO ONE (Chuo-ku, Tokyo).
Furthermore, cash and deposits grew by ¥13,919 million, investment securities rose by ¥12,513 million, and real estate for saleincreased by ¥5,602 million.
In the consolidated balance sheets, the combined balance of lease property and real estate of which a portion was leased was¥264,488 million as of March 31, 2021, an increase of ¥20,439 million compared with April 1, 2020, and, as of those respective
dates, had a market value of ¥376,897 million, an increase of ¥13,352 million.
Total liabilities
As of March 31, 2021, total liabilities amounted to ¥262,713 million, an increase of ¥30,469 million compared with March 31,
2020. Among the main factors underlying this result, interest-bearing liabilities grew by ¥28,749 million and deferred tax
liabilities increased by ¥5,114 million, which more than offset decreases in accrued corporation and other taxes of ¥2,171 million
and accrued consumption tax of ¥1,320 million.
As of March 31, 2021, the balance of interest-bearing liabilities was ¥215,727 million, and the net debt-to-equity ratio stoodat 1.6. 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.

－

14

－

Net assets
As of March 31, 2021, net assets stood at ¥118,639 million, an increase of ¥11,337 million compared with March 31, 2020.
Among the main factors underlying this result, unrealized gain on securities increased by ¥8,602 million and retained earnings
were up by ¥4,743 million, offsetting a decrease in purchase of treasury shares, of ¥2,008 million.
The Company implemented concrete measures to raise capital efficiency and return stable profits to shareholders, including
an acquisition of 625,900 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, 2021, Building Business segment assets amounted to ¥280,919 million, up ¥25,910 million compared with ayear earlier. This increase was mainly due to the acquisitions of the Kabutocho Heiwa Building No. 7 (Chuo-ku, Tokyo),
Shimbashi Square Building (Minato-ku, Tokyo), and Heiwa Real Estate Nihonbashi Building (Chuo-ku, Tokyo), as well as toconstruction cost outlays for KABUTO ONE (Chuo-ku, Tokyo). Asset Management Business segment assets stood at ¥53,080
million, an increase of ¥10,549 million, year on year. This mainly reflected an increase in inventories and a higher market valueof owned investment units of Heiwa Real Estate REIT, Inc.
Segment assets(Millions of yen)March 31, 2020

March 31, 2021

Difference

Building Business

255,008

280,919

25,910Asset Management Business

42,53153,080

10,549Other Businesses

1,599

1,552

(46)

Adjustments

40,40745,801

5,394

339,545

381,353

41,807

Amount in consolidated financial statements

Analysis of business results
Business 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 as redevelopment andbuilding businesses. The Group’s working capital is mainly used to pay expenses for the operation of business assets, 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 the net
debt-to-equity ratio as an indicator of financial discipline. As of March 31, 2021, interest-bearing liabilities, which include loans
and corporate bonds, stood at ¥215,727 million, net interest-bearing liabilities, which exclude marketable securities and cash anddeposits from interest-bearing liabilities, amounted to ¥186,025 million, and the net debt-to-equity ratio came to 1.6.
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 expects to pay dividends totaling ¥2,877 million for fiscal 2020 and acquired a total of ¥1,999
million in treasury shares during the same year. As a result, the consolidated total shareholder return ratio is expected to reach
68.5%.

－

15－

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 the Consolidated
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.
Information concerning the impact of the COVID-19 pandemic is presented in Part 3 Financial Reporting, Consolidated
Financial Statements, 6. Notes to Consolidated Financial Statements, Note 6 Additional Information.

－

16

－

Part 3 Financial Reporting
Consolidated Financial Statements
1．Consolidated Balance Sheets(Millions of yen)
Fiscal 2019
(As of March 31, 2020)
AssetsCurrent assets
Cash and deposits (Note 13)
Accounts receivable–trade (Note 13)
Marketable securities (Notes 13 and 14)
Real estate for sale
Real estate for sale in process
Other inventories
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
Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land (Note 7)
Construction in progress
Total tangible fixed assets
Intangible fixed assets
Leasehold rights
Other
Total intangible fixed assets
Investments and other assets
Investment securities (Notes 7, 13 and 14)
Long-term loans to employees
Deferred tax assets (Note 18)
Other
Allowance for doubtful accounts
Total investments and other assets
Total fixed assets
Deferred assets
Bond issuance cost
Total deferred assets
Total assets

－

17

－

Fiscal 2020
(As of March 31, 2021)

15,766
1,121
13,002
24,659
785
2
485
3,192
(2)
59,01329,6851,633
16
30,261
834
1
1,684
3,850
(26)
67,942160,947(85,764)
75,182
2,211(1,845)366
1,680(1,445)235
144,010
2,552
222,347

163,896(89,763)
74,133
2,236(1,909)327
1,913(1,523)389
154,043
9,843
238,737

22,518107
22,625

26,61897
26,71630,751
2
189
4,374
(0)
35,317280,291

43,265
0
155
4,310
(0)
47,732
313,185240
240
339,545

224
224
381,353(Millions of yen)
Fiscal 2019
(As of March 31, 2020)
Liabilities
Current liabilities
Accounts payable–trade (Note 13)
Current portion of bonds payable (Notes 13 and 24)
Short-term loans payable (Notes 13 and 24)
Current portion of long-term loans
Income taxes payable (Note 18)
Accrued consumption taxes
Accrued bonuses for directors
Accrued bonuses
Assets retirement obligations (Note 19)
Other (Note 24)
Total current liabilities
Long-term liabilities
Bonds payable (Notes 13 and 24)
Long-term loans payable (Notes 13, 15 and 24)
Long-term accounts payable (Notes 13 and 24)
Leasehold and guarantee deposits received(Note 13)
Deferred tax liabilities (Note 18)
Deferred tax liabilities for land revaluation (Note 7)
Provision for share-based remuneration
Retirement benefit liability (Note 16)
Assets retirement obligations (Note 19)
Other (Note 24)
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
Land revaluation surplus (Note 7)
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets
See notes to consolidated financial statements.

－

18

－

Fiscal 2020
(As of March 31, 2021)

2,236
2,092
6,250
5,736
2,509
1,397
68
211
21
1,727
22,251

1,818
1,891
9,250
26,961
337
77
86
213
1
1,753
42,391

23,107
145,791
4,004

28,216
145,408
4,000

22,18822,829

6,264
7,663
24
292
655
1
209,992
232,243

11,378
7,663
47
115
662
0
220,322262,713

21,492
19,72039,996(2,487)78,722

21,492
19,72044,740(4,496)81,457

11,584
16,99528,579107,302339,545

20,187
16,99537,182
118,639
381,353

２．Consolidated Statements of Income(Millions of yen)
Fiscal 2019
(From April 1, 2019 toMarch 31, 2020)
Operating revenue (Note 21)
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 21)
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)
Total extraordinary income
Extraordinary loss
Loss on sales of fixed assets (Note 8)
Loss on disposal of fixed assets (Note 8)
Loss on valuation of investment securities
Loss resulting from fraudulent transactions (Note 8)
Impairment loss (Note 8)
Total extraordinary loss
Income before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes (Note 18)
Net income
Net income attributable to owners of parent
See notes to consolidated financial statements.

－

19

－

Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)

46,63931,54815,09135,048
19,687
15,361

1,391
68
132
29
63
532
1,970
4,187
10,903

1,397
87
137
26
33
496
1,953
4,132
11,228

14
471
23
509

10
445
65
522

1,256
64
86
1,407
10,006

1,331
54
120
1,506
10,244

256
256

—
—

—
18
85
177
8
289
9,972
3,146
(219)
2,926
7,046
7,046

1
18
—
—
8
27
10,216
1,745
1,351
3,097
7,118
7,118

３．Consolidated Statements of Comprehensive Income(Millions of yen)
Fiscal 2019
(From April 1, 2019 toMarch 31, 2020)
Net income
Other comprehensive income (Note 9)
Unrealized gain on securities
Total other comprehensive income
Comprehensive income (Note 9)Comprehensive income attributable to:
Owners of parent
See notes to consolidated financial statements.

－

20

－

Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)

7,046

7,118

(3,647)(3,647)
3,398

8,602
8,602
15,721

3,398

15,721

４．Consolidated Statements of Changes in Net Assets
Fiscal 2019 (From April 1, 2019 to March 31, 2020)(Millions of yen)
Shareholders’ equity
Common stock
Balance at the beginning of theperiodCapital surplus

21,492Retained earnings

19,72038,665

Total shareholders’equityTreasury shares(3,030)76,848Change during the period
Distribution of surplus(2,034)(2,034)

Net income attributable toowners of parent

7,046

7,046

Acquisition of treasury shares(2,101)(2,101)0

55Cancellation of treasury shares(2,638)2,638—Transfer from retained
earnings to capital surplus

2,638

Disposal of treasury shares

Net loss from mergers with
non-consolidated subsidiaries(2,638)—(1,042)(1,042)

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

—

—

1,330

542

1,873

Balance at the end of the period

21,492

19,72039,996(2,487)78,722

Accumulated other comprehensive income
Unrealized gain (loss)
on securities
Balance at the beginning of theperiodTotal accumulated
other comprehensive
incomeLand revaluation
surplus15,231

16,99532,227

Total net assets

109,075

Change during the period
Distribution of surplus(2,034)

Net income attributable toowners of parent

7,046

Acquisition of treasury shares(2,101)

Disposal of treasury shares

5

Cancellation of treasury shares—

Transfer from retained
earnings to capital surplus—

Net loss from mergers with
non-consolidated subsidiaries(1,042)

Net changes of items otherthan shareholders’ equity(3,647)—(3,647)(3,647)

Total change during the period(3,647)—(3,647)(1,773)

Balance at the end of the period

11,584

16,99528,579107,302－

21－

Fiscal 2020 (From April 1, 2020 to March 31, 2021)(Millions of yen)
Shareholders’ equity
Common stock
Balance at the beginning of theperiodCapital surplus

21,492Retained earnings

19,72039,996

Total shareholders’equityTreasury shares(2,487)78,722

Change during the period
Distribution of surplus(2,375)(2,375)

Net income attributable toowners of parent

7,118

7,118

Acquisition of treasury shares(2,011)(2,011)

Disposal of treasury shares

0

2

2

Cancellation of treasury shares

—

—

—

Transfer from retained
earnings to capital surplus—

Net loss from mergers with
non-consolidated subsidiaries

—

—

—

—

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

—

0

4,743

(2,008)2,735

Balance at the end of the period

21,492

19,72044,740(4,496)81,457

Accumulated other comprehensive income
Unrealized gain on
securities
Balance at the beginning of theperiodTotal accumulated
other comprehensive
incomeLand revaluation
surplus11,584

16,99528,579Total net assets

107,302

Change during the period
Distribution of surplus(2,375)

Net income attributable toowners of parent

7,118

Acquisition of treasury shares(2,011)

Disposal of treasury shares

2

Cancellation of treasury shares—

Transfer from retained
earnings to capital surplus—

Net loss from mergers with
non-consolidated subsidiaries—

Net changes of items otherthan shareholders’ equity

8,602

—

8,602

8,602

Total change during the period

8,602

—

8,602

11,337

Balance at the end of the period

20,187

16,99537,182

118,639

See notes to consolidated financial statements.

－

22

－

５．Consolidated Statements of Cash Flows(Millions of yen)
Fiscal 2019
(From April 1, 2019 toMarch 31, 2020)
Cash flows from operating activities
Income before income taxes
Depreciation
Loss on disposal of fixed assets
Impairment loss
Loss (gain) on valuation of investment securities
Loss resulting from fraudulent transactions
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 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 2020
(From April 1, 2020 toMarch 31, 2021)

9,972
4,814
18
8
85
177
(4)
(3)
33
(485)
1,256
64
(256)

10,216
5,077
18
8
—
—
24
2
(176)
(456)
1,331
54
1

(56)

(512)

12,881
14
0
333

(410)
(1,199)
6
(758)

17

(188)

174
1,323
(124)

49
(1,320)
(14)

803

609

(291)
30,756479(1,261)(1,293)
28,680793
13,157462(1,320)(4,006)8,292

(Millions of yen)
Fiscal 2019
(From April 1, 2019 toMarch 31, 2020)
Cash flows from investing activities
Decrease (increase) in time deposits
Proceeds from sales and redemption of securities
Purchase of investment securities
Proceeds from sales and redemption of investment
securities
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 assets 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 increased 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 in cash and cash equivalents resulting frommerger with unconsolidated subsidiaries
Balance of cash and cash equivalents at end of period(Note 11)
See notes to consolidated financial statements.

－

24

－

Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)

(500)
130
(285)

500
1,003
(296)

78

97

(11,751)
590
(54)
(16)
(162)
520
(77)
100
(11,427)(26,894)
4(4,231)
(180)
(198)
14
(20)
1
(30,200)(5,000)22,600(14,470)—(4,824)4,000(2,105)(2,027)(1)(1,829)3,000
27,150(6,307)7,000(2,092)—(2,015)(2,366)(40)
24,327——

15,423

2,419

11,71027,16632—

27,166

29,585

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: 4Names of consolidated subsidiaries:
Heiwa Real Estate Property Management Co., Ltd. (renamed from Heiwa Service Co., Ltd., effective from March 1, 2021)
Housing Service Co., Ltd.
HEIWA REAL ESTATE Asset Management CO., LTD.
The Tokyo Shoken Building Incorporated(2) Names, etc. of major non-consolidated subsidiaries
Major non-consolidated subsidiaries
The Company has no major non-consolidated subsidiaries 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. Accounting policy(1) Method and basis of valuation of significant assets
1) Marketable 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 securities
a. Securities with market quotations
Market value method based on the market price at the end of the consolidated fiscal year is used (differences in valuation
are included directly in net assets, and costs of securities sold are calculated using the moving-average method).
b. Securities without market quotations
Securities without market quotations are mainly valued at cost determined using the moving-average method.
2) Inventory
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).

－

25

－

(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, except for the Tokyo Stock Exchange
Building, two other buildings, buildings (excluding attached facilities) acquired on or after April 1, 1998, and facilities andstructures attached to buildings acquired on or after April 1, 2016, for which the straight-line method is used.
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 – 55 years
Machinery, equipment, and vehicles: 2 – 23 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 for share-based remuneration was calculated based on the expected amount of stock compensation obligations
as of the end of the fiscal year under review in order to provide the Company’s stock as compensation to directors and executive
officers in accordance with its share-based remuneration rules.
(5) Accounting for retirement benefits
Retirement benefit liability is calculated at an amount equal to the projected benefit obligation as of the end of the current
consolidated fiscal year minus the fair value of pension assets. Retirement benefit liability is not calculated at any consolidated
subsidiary that has a defined contribution plan.
(6) 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.
(7) 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
investments with maturities of three months or less from the acquisition date, which are highly liquid instruments that can beeasily converted into cash and are exposed to little risk of change in value.

－

26

－

(8) Other important matters for the preparation of consolidated financial statements
Accounting for consumption taxes
Profit and loss accounts are stated net of consumption tax. Where consumption taxes paid are not fully credited against
consumption taxes received, as a general rule, the non-credited portion is charged as an expense in the consolidated period
under review in which the consumption taxes are paid.

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 2020
Tangible fixed assets(Mainly in the Building Business segment)

238,737

Leasehold rights among intangible fixed assets(Mainly in the Building Business segment)

26,618

Impairment loss

8(2) Information on the details of the significant accounting estimates for identified items
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 torecognize an impairment loss.
If the Company decides that recognizing an impairment loss is necessary, it will reduce the book value to a recoverable amount(either the net sales price or the value in use, whichever is higher), and record the reduced book value as an impairment loss.
The Group sets market values based on the real estate appraisal value determined by external real estate appraisers (hereafter,“externally appraised real estate value”). Recoverable amounts are estimated based on the externally appraised real estate value
and the asset group’s operating results and forecast, which includes the assumption that future results will improve after the
impact of the COVID-19 pandemic subsides.
Due to the impact of the COVID-19 pandemic, the operating results of certain assets worsened markedly, specifically four
hotels (some of which also have office space) located in Sapporo, Tokyo, and Osaka with a combined book value of ¥18,700
million. Therefore, the Company determined that there were indications of impairment and examined whether an impairment
loss should be recorded. It decided not to record an impairment loss in the fiscal year under review, however, because theexternally appraised real estate value exceeded the book value.
In addition, when multiple assets held for the Company’s real estate redevelopment projects in Tokyo (Nihonbashi Kabutocho
and Kayabacho districts) and Sapporo are integrated in development plans, the Company groups these assets together from thetime that is deemed feasible based on negotiations with landowners.
The impact of the COVID-19 pandemic and the feasibility of development projects in the future remain uncertain. Due tothese and other factors, the Company may need to recognize impairment losses in the future, which could impact its consolidated
financial results.

－

27

－

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 2020
Real estate for sale
(Mainly in the Building Business segment and Asset Management
Business segment)

30,261

Real estate for sale in process(Mainly in the Asset Management Business segment)

834

Loss on revaluation of inventories (recorded in cost of sales)48(2) Information on the details of the significant accounting estimates for identified items
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 construction costs and the expected amount of selling expenses. If the net sales priceis less than the book value, the difference is recorded in cost of sales as a loss on revaluation of inventories.
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, 2021, the Group had estimated the expected sales prices of its residential buildings based on its rental rates
and forecast yields, and assumed no major fluctuations in rental rates and forecast yields in the real estate market going forward.
This assumption could change in the future, however, as falling demand in the real estate market could lead to a decline in expectedsales prices of properties. In that event, the Company may record a loss on revaluation of inventories, which could impact its
consolidated financial results.

－

28

－

Note 4 － Unapplied Accounting Standards
・Accounting Standard for Revenue Recognition (revised ASBJ Statement No. 29, issued on March 31, 2020)
・Implementation Guidance on Accounting Standard for Revenue Recognition (revised ASBJ Guidance No. 30, issued on March
26, 2021)
・Implementation Guidance on Disclosures about Fair Value of Financial Instruments (revised ASBJ Guidance No. 19, issued on
March 31, 2020)(1) Overview
The International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB) jointly
developed a comprehensive accounting standard for revenue recognition, entitled Revenue from Contracts with Customers, andissued it as International Financial Reporting Standards (IFRS) 15 and Topic 606, respectively, in May 2014. Based on the factthat IFRS 15 was in effect from fiscal years beginning on or after January 1, 2018, and Topic 606 was in effect from fiscal years
beginning on or after December 15, 2017, the Accounting Standards Board of Japan (ASBJ) also developed a comprehensive
accounting standard for revenue recognition, and issued it along with its implementation guidance.
As a basic policy when developing the accounting standard for revenue recognition, the ASBJ maintained consistency withIFRS 15 to enable international comparisons of financial statements. Therefore, the ASBJ set accounting standards starting fromthe basic principles of IFRS 15, and added alternative accounting treatments of certain items for which business practices differ
in Japan within a scope that would not hinder international comparisons.
(2) Scheduled date of application
The Company applied the accounting standards, etc. from April 1, 2021.
(3) Impact of applying the accounting standards, etc.
The application of the Accounting Standard for Revenue Recognition, etc. will have no impact on retained earnings at the
beginning of the next fiscal year.
・Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, issued on July 4, 2019)
・Accounting Standard for Measurement of Inventories (revised ASBJ Statement No. 9, issued on July 4, 2019)
・Accounting Standard for Financial Instruments (revised ASBJ Statement No. 10, issued on July 4, 2019)
・Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31, issued on July 4,
2019)・Implementation Guidance on Disclosures about Fair Value of Financial Instruments (revised ASBJ Guidance No. 19, issued on
March 31, 2020)(1) Overview
The IASB and the FASB have developed almost identical guidance on measurements of fair value, both entitled Fair Value
Measurement, and issued them as IFRS 13 and Topic 820 (an amendment of the FASB Accounting Standards Codification),
respectively. Accordingly, the ASBJ also worked to make Japanese accounting standards consistent with international accounting
standards, primarily with respect to the guidance and disclosure of the fair value of financial instruments. Consequently, it issued
the Accounting Standard for Fair Value Measurement and other accounting standards.
As a basic policy when developing the accounting standard for fair value measurement, the ASBJ integrated practically all
elements of IFRS 13 and adopted the same measurement methods in order to improve the comparability of financial statements
disclosed by companies in Japan with those of companies in other countries. The ASBJ also established additional accounting
treatments of certain items for which business practices differ in Japan within a scope that would not significantly hinderinternational comparisons of financial statements.
(2) Scheduled date of application
The Company applied the accounting standards, etc. from April 1, 2021.
(3) Impact of applying the accounting standards, etc.
The application of the Accounting Standard for Fair Value Measurement, etc. will have no impact on the consolidated financial
statements.

－

29

－

Note 5 － Changes in Presentation Methods
Application of the Accounting Standard for Disclosure of Accounting Estimates
The Company applied the Accounting Standard for Disclosure of Accounting Estimates (ASBJ Statement No. 31, issued on
March 31, 2020) from the fiscal year ended March 31, 2021, and included notes on significant accounting estimates in the notes
to consolidated financial statements. Pursuant to transitional treatment as stipulated in the proviso of Paragraph 11 of theaccounting standard, information regarding the previous fiscal year was not included.

Note 6 － Additional Information
1. Performance-linked stock compensation plan for directors and executive officers
Pursuant to a resolution of the 99th Ordinary General Shareholders’ Meeting held on June 26, 2019, the Company adopted aperformance-linked stock compensation plan for directors (excluding external directors and non-residents of Japan) and executive
officers (excluding non-residents of Japan), and established a trust comprised of common stock for the plan.
(1) Overview of the compensation system
The trust was established using funds provided by the Company, and acquires company stock to be used as compensation for
directors and executive officers under the plan. Through the trust, company stock or a cash amount equivalent to the value of thestock is delivered to the directors and officers in an amount commensurate with the number of points each has earned under thestock compensation plan, based on stock compensation rules set by the Company’s Board of Directors. As a rule, directors andofficers will receive this compensation upon retiring from their respective 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 ¥139 million as of March 31,
2020, and ¥137 million as of March 31, 2021, and the amount of stock totaled 60,200 shares as of March 31, 2020, and 59,300
shares as of March 31, 2021.
2. Accounting estimates related to the impact of the COVID-19 pandemic
While the impact of the COVID-19 pandemic on consolidated profit and loss has been limited, the Group’s management assumes
that the pandemic will continue having a certain degree of impact on accounting estimates, such as the impairment of fixed assets
and recoverability of deferred tax assets, based on information available at the time of preparing the consolidated financial
statements.
3. Purpose of owning certain assets
An amount of ¥5,239 million previously included under fixed assets as either land, buildings and structures, leasehold rights, orother, was transferred to the line item real estate for sale in the consolidated balance sheets as of March 31, 2021, due to changes
in the purpose of ownership.

－

30

－

Note 7 － Consolidated Balance Sheets
1. Guarantee liabilities
The Company-guaranteed loans owed by employees to financial institutions are as follows:(Millions of yen)
Fiscal 2019
(As of March 31, 2020)
Housing loans for employees of Heiwa Real
Estate Co., Ltd.

Fiscal 2020
(As of March 31, 2021)
Housing loans for employees of Heiwa Real
Estate Co., Ltd.

223

157

2. 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 of deferred taxes, are reported as “land revaluation surplus” 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, 2020,
and March 31, 2021, the difference between the amounts has not been stated.

3. Items relevant to non-consolidated subsidiaries and affiliates are as follows:(Millions of yen)
Fiscal 2019
(As of March 31, 2020)
Investment securities

Fiscal 2020
(As of March 31, 2021)
2,569

2,512

4. Assets included under investment securities are as follows:(Millions of yen)
Fiscal 2019
(As of March 31, 2020)
Investment units of Heiwa Real Estate REIT,Inc.

Fiscal 2020
(As of March 31, 2021)

13,973(139,179 units)

21,628(139,179 units)

5. Amount of reduction entry associated with state subsidies, etc.
The following is the amount of reduction entry deducted from acquisition costs resulting from the receipt of state subsidies, etc.
(Millions of yen)
Fiscal 2019
(As of March 31, 2020)
Buildings and structures

Fiscal 2020
(As of March 31, 2021)
288

－

31

－

288

Note 8 － Consolidated Statements of Income
1. Ending balances of inventories indicate an amount after write-down due to deteriorating profitability, and the loss on revaluationof inventories stated below is included in the cost of sales.
(Millions of yen)
Fiscal 2019
Fiscal 2020
(From April 1, 2019 to(From April 1, 2020 toMarch 31, 2020)
March 31, 2021)
285

48

2. Details of gain on sales of fixed assets are as follows:
Fiscal 2019
(From April 1, 2019 toMarch 31, 2020)
Buildings and structures, etc.
Land
Total

(Millions of yen)
Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)

88
167

—
—

256

—

3. Details of loss on sales of fixed assets are as follows:
Fiscal 2019
(From April 1, 2019 toMarch 31, 2020)
Buildings and structures, etc.
Land
Total

(Millions of yen)
Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)

—
—

0
0

—

1

4. Details of loss on disposal of fixed assets are as follows:
Fiscal 2019
(From April 1, 2019 toMarch 31, 2020)(Millions of yen)
Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)

Buildings and structures
Other

17
1

17
1

Total

18

18

5. Loss resulting from fraudulent transactions
Fiscal 2019 (From April 1, 2019 to March 31, 2020)
Based on the findings of an investigation report submitted by an internal investigation committee set up by the Company, as
disclosed in a news release on December 12, 2019, an extraordinary loss was recorded in fiscal 2019 to reflect the amount of
the impact of fraudulent transactions conducted by former employees of the Company on net assets and other financial results.
The investigation report also determined that the fraudulent transactions resulted in a loss included in cost of sales in fiscal
2019.
The amounts for each of these items are as follows.
Operating costs¥116 million
Loss resulting from fraudulent transactions 177
Total

294

Fiscal 2020 (From April 1, 2020 to March 31, 2021)
Not applicable
－

32

－

6. Impairment loss
Fiscal 2019 (From April 1, 2019 to March 31, 2020)
Location
Abiko City, Chiba

Principal use

Category

Parking lot

LandImpairment loss
¥8 million

The Group recorded an impairment loss on the asset group above. Upon the calculation of the impairment loss, the Group groups
assets based on the minimum unit generating cash flows in a manner largely independent of cash flows provided by other assets
or asset groups.
The book values of real properties for lease with declines in profitability were written down to a recoverable amount. The Group
recorded the amount written off as impairment loss in extraordinary loss (¥8 million).
The recoverable amount of the above asset group is determined by net sales value. For the net sales value, the Group uses theindices which are considered as reflecting appropriate market prices.
Fiscal 2020 (From April 1, 2020 to March 31, 2021)
Location
Abiko City, Chiba

Principal use

Category

Parking lot

LandImpairment loss
¥8 million

The Group recorded an impairment loss on the asset group above. Upon the calculation of the impairment loss, the Group groups
assets based on the minimum unit generating cash flows in a manner largely independent of cash flows provided by other assets
or asset groups.
The book values of real properties for lease with declines in profitability were written down to a recoverable amount. The Group
recorded the amount written off as impairment loss in extraordinary loss (¥8 million).
The recoverable amount of the above asset group is determined by net sales value. For the net sales value, the Group uses theindices which are considered as reflecting appropriate market prices.

Note 9 － Consolidated Statements of Comprehensive Income
Reclassification adjustment and tax effect related to other comprehensive income(Millions of yen)
Fiscal 2019
(From April 1, 2019 toMarch 31, 2020)

Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)(5,256)—

12,399—Before tax effect adjustment
Tax benefit (expense)(5,256)
1,609

12,399(3,796)

Unrealized gain (loss) on securities(3,647)

8,602(3,647)

8,602

Unrealized gain (loss) on securities:
Unrealized gain (loss) on securities in the fiscal year
Reclassification adjustment

Total other comprehensive income

－

33

－

Note 10 － Consolidated Statements of Changes in Net Assets
Fiscal 2019 (From April 1, 2019 to March 31, 2020)
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

40,059,996—

1,200,000

38,859,996

Total

40,059,996—

1,200,000

38,859,996

Common shares (Notes 2, 3, 4)

1,378,119865,869

1,202,530

1,041,458

Total

1,378,119865,869

1,202,530

1,041,458

Shares issued
Common shares (Note 1)

Treasury shares(Notes) 1. The 1,200,000 common shares issued that decreased were canceled treasury shares, pursuant to a resolution of the Board of
Directors.
2. The 865,869 common shares of treasury shares that increased were comprised of 800,000 shares acquired by the Company
pursuant to a resolution of the Board of Directors, 62,600 shares acquired for the trust for the Company’s stock compensation
plan for directors and executive officers, and 3,269 fractional shares acquired.
3. The 1,202,530 common shares of treasury shares that decreased were comprised of 1,200,000 shares of canceled treasury
shares pursuant to a resolution of the Board of Directors, 2,400 shares provided to the trust for the Company’s stockcompensation plan for directors and executive officers, and 130 fractional shares sold.
4. The total number of common shares of treasury shares as of March 31, 2020, included 60,200 shares held in the trust for theCompany’s stock compensation plan for directors and executive officers.
2. Dividends(1) Payments of dividends(Resolution)

Type of shares

Total amount ofdividends(millions of yen)

Ordinary General
Shareholders’ Meeting
held on June 26, 2019

Common shares

1,083

October 31, 2019
Meeting of Board of
Directors

Common shares

951

Dividend per share(yen)

Record date

Effective date

28.0

March 31, 2019

June 27, 2019

25.0

September 30, 2019

December 2, 2019

(Note) The total amount of dividends resolved by the Board of Directors on October 31, 2019, included ¥1 million in dividends for
the Company’s stock held in the trust for its stock compensation plan for directors and executive officers.
(2) Dividends with a record date falling in the consolidated fiscal year ended March 31, 2020 and an effective date falling in the
consolidated fiscal year ended March 31, 2021
(Resolution)

Type of shares

Ordinary General
Shareholders’Common shares
Meeting held on June24, 2020

Total amount ofdividends(millions of yen)

1,174

Source ofdividends

Dividend pershare (yen)Retainedearnings

31.0

Record date

Effective date

March 31, 2020

June 25, 2020

(Note) The total amount of dividends included ¥1 million in dividends for the Company’s stock held in the trust for its stockcompensation plan for directors and executive officers.

－

34

－

Fiscal 2020 (From April 1, 2020 to March 31, 2021)
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)

1,041,458

629,569

1,160

1,669,867

Total

1,041,458

629,569

1,160

1,669,867

Shares issued
Common shares

Treasury shares(Notes) 1. The 629,569 common shares of treasury shares that increased were comprised of 625,900 shares acquired by the Company
pursuant to a resolution of the Board of Directors and 3,669 fractional shares acquired.
2. The 1,160 common shares of treasury shares that decreased were comprised of 900 shares provided to the trust for theCompany’s stock compensation plan for directors and executive officers, and 260 fractional shares sold.
3. The total number of common shares of treasury shares as of March 31, 2021, included 59,300 shares held in the trust for
the Company’s stock compensation plan for directors and executive officers.
2. Dividends(1) Payments of dividends(Resolution)

Type of shares

Total amount ofdividends(millions of yen)

Ordinary General
Shareholders’Meeting held on June24, 2020

Common shares

1,174

October 30, 2020
Meeting of Board of
Directors

Common shares

1,200

Dividend per share(yen)

Record date

Effective date

31.0

March 31, 2020

June 25, 2020

32.0

September 30, 2020

December 1, 2020

(Notes) 1. The total amount of dividends resolved at the Ordinary General Shareholders’ Meeting held on June 24, 2020, included ¥1
million in dividends for the Company’s stock held in the trust for its stock compensation plan for directors and executive
officers.
2. The total amount of dividends resolved by the Board of Directors on October 30, 2020, included ¥1 million in dividends
for the Company’s stock held in the trust for its stock compensation plan for directors and executive officers.
(2) Dividends with a record date falling in the consolidated fiscal year ended March 31, 2021 and an effective date falling in the
consolidated fiscal year ended March 31, 2022
The following resolution is scheduled.
(Resolution)

Type of shares

Ordinary General
Shareholders’Common shares
Meeting held on June24, 2021

Total amount ofdividends(millions of yen)

1,676

Source ofdividends

Dividend pershare (yen)Retainedearnings

45.0

Record date

Effective date

March 31, 2021

June 25, 2021

(Note) The total amount of dividends includes ¥2 million in dividends for the Company’s stock held in the trust for its stockcompensation plan for directors and executive officers.

－

35

－

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 2019
(From April 1, 2019 toMarch 31, 2020)

Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)

Cash and deposits

15,766

29,685Marketable securities

13,002

16

Time deposits with terms of more than 3 months
Bonds with redemption periods of more than 3months

(600)

(100)

(1,002)(16)

27,166

29,585

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 3. Accounting Policy, (2) Depreciation method for significant depreciable assets, under Basis of presenting
consolidated financial statements.
2. Operating lease transactions(As lessor)
Future lease payments on operating leases for which leasing contracts cannot be cancelled.
(Millions of yen)
Fiscal 2019
(As of March 31, 2020)

Fiscal 2020
(As of March 31, 2021)

Due within 1 year

3,483

3,347

Due after 1 year

10,992

8.928

Total

14,475

12,275－36－

Note 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 19 years after thesettlement date. Some of these financial instruments are subject to variable interest rates, and are, therefore, exposed to the risk ofinterest 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 3. Accounting Policy, (6) 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
The fair value of financial instruments is based on market prices. If no market price is available, the fair value is based on the valuethat is calculated in a reasonable manner. The determination of such value contains variable factors, and the adoption of different
assumptions may cause value to change. In addition, the contract amounts of derivatives, shown in Note 15 “Derivatives”, do not
represent derivative-related market risks.

－

37

－

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.
Items for which determining fair value is extremely difficult are not included (refer to Note 2, below).
Fiscal 2019 (As of March 31, 2020)
Amount on consolidatedbalance sheet(millions of yen)

Fair value(millions of yen)

Difference(millions of yen)

(1) Cash and deposits

15,766

15,766—(2) Accounts receivable–trade

1,121

1,121

—

(3) Marketable securities and investment
securities

40,39640,395(0)57,28357,283(0)(1) Accounts payable—trade

2,236

2,236

—

(2) Bonds payable

25,19925,21515(3) Short-term loans payable

6,250

6,250

—

(4) Long-term loans payable

151,528

153,1121,583(5) Long-term accounts payable

4,004

3,973

(31)

Liabilities

189,218

190,786

1,568

Derivatives

—

—

—

AssetsFiscal 2020 (As of March 31, 2021)
Amount on consolidatedbalance sheet(millions of yen)

Fair value(millions of yen)

Difference(millions of yen)

(1) Cash and deposits

29,68529,685—(2) Accounts receivable–trade

1,633

1,633

—

(3) Marketable securities and investment
securities

39,92939,930071,24971,2490(1) Accounts payable—trade

1,818

1,818

—

(2) Bonds payable

30,10730,12316(3) Short-term loans payable

9,250

9,250

—

(4) Long-term loans payable

172,370

172,296(74)(5) Long-term accounts payable

4,000

3,915

(84)

Liabilities

217,545

217,403(142)

Derivatives

—

—

—

Assets(Notes) 1. Methods of calculating the fair value of financial instruments and matters related to marketable securities and derivatives
Assets(1) Cash and deposits, (2) Accounts receivable–trade
These items are recorded at their book value because their fair value is similar to their book value since they are settled overshort periods of time.
－

38

－

(3) Marketable securities and investment securities
The fair value of these securities is measured at their stock market price, while the fair value of bonds is based on their stock
market price or the price offered by financial institutions. For information concerning the specific purposes of holding
marketable securities, please refer to Note 14 “Marketable Securities.”
Liabilities(1) Accounts payable—trade
Accounts payable—trade are recorded at their book value because their fair value is similar to their book value since they aresettled over short periods of time.
(2) Bonds payable
The fair value of bonds payable is calculated by discounting the total amount of principle and interest at an interest rateestimated in consideration of the remaining period of the bonds and their credit risk.
(3) Short-term loans payable
Short-term loans payable are recorded at their book value because their fair value is similar to their book value since they aresettled over short periods of time.
(4) Long-term loans payable, (5) Long-term accounts payable
When these items have fixed interest rates, fair value is calculated by discounting the total amount of principle and interest
at an interest rate that would assumingly be applied in the case of a similar loan. When these items have variable interest
rates, they are recorded at their book value because their fair value is similar to their book value since they reflect market
interest rates over short periods of time. Among items with variable interest rates, those subject to special treatment of interest
rate swaps are calculated by discounting the total amount of principle and interest treated together with the interest rate swaps
at an interest rate reasonably estimated based on the scenario of a similar loan.
(6) 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 (4), above).
2. Financial instruments for which determining fair value is extremely difficult(Millions of yen)
Fiscal 2019
(As of March 31, 2020)

Financial instrument(1) Unlisted stocks (Note 1)(2) Operating investments (Note 2)(3) Leasehold and guarantee deposits received (Note 3)

Fiscal 2020
(As of March 31, 2021)

3,358

3,352

485

1,684

22,18822,829(Notes) 1. Unlisted stocks are not included in the tables above under (3) Marketable securities and investment securities, because they
have no market prices and determining their fair value is extremely difficult.
2. The fair value of operating investments is not disclosed because they have no market prices and determining their fair value
is extremely difficult.
3. Leasehold and guarantee deposits received deposited by lessees of leased properties is not subject to disclosure of fair value
since reasonably estimating cash flows is extremely difficult because they have no market prices, the duration of deposits
between the time a tenant moves in and moves out is difficult to calculate, and the duration of other deposits is also difficult
to calculate.

－

39

－

3. Amounts of monetary claims and marketable securities with maturity dates expected to be redeemed after the balance sheet
date
Fiscal 2019 (As of March 31, 2020)
Within one year
(millions of yen)

Within one to
five years(millions of yen)

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

Cash and deposits

15,766———

Accounts receivable–trade

1,121

—

—

—

(1) National and municipal bonds

2

36

—

—

(2) Bonds payable

—

—

—

—

1,000

—

—

—

—

—

—

—

12,000———29,89036——

Within one year
(millions of yen)

Within one to
five years(millions of yen)

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

Cash and deposits

29,685———

Accounts receivable–trade

1,633

—

—

—

(1) National and municipal bonds

16

20

—

—

(2) Bonds payable

—

—

—

—

(3) Other

—

—

—

—

(1) Corporate bonds

—

—

—

—

(2) Other

—

—

—

—

31,33520——

Marketable securities and investment
securities
Held-to-maturity bonds(3) Other
Available-for-sale securities withmaturity dates(1) Corporate bonds(2) Other
Total
Fiscal 2020 (As of March 31, 2021)

Marketable securities and investment
securities
Held-to-maturity bonds

Available-for-sale securities withmaturity dates

Total

－

40

－

4. Amounts of bonds payable, long-term loans payable, and other interest-bearing liabilities scheduled for repayment after thebalance sheet dateFiscal 2019 (As of March 31, 2020)
Within one year
(millions of yen)

Within one toWithin two to Within three to Within four toOver five 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

6,250

—

—

—

—

—

Bonds payable

2,092

1,891

4,327

3,259

3,060

10,570Long-term loans payable

5,736

25,77910,836

11,96012,19185,022

—

—

—

—

258

3,741

14,07827,67015,163

15,21915,50999,334Long-term accounts
payableTotal
Fiscal 2020 (As of March 31, 2021)

Within one year
(millions of yen)

Within one toWithin two to Within three to Within four toOver five 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

9,250

—

—

—

—

—

Bonds payable

1,891

4,327

3,259

3,060

3,695

13,875Long-term loans payable

26,961

12,09013,214

13,445

13,671

92,985

—

—

—

258

258

3,483

38,102

16,417

16,473

16,763

17,624

110,344

Long-term accounts
payable
Total

－

41

－

Note 14 － Marketable Securities
1. Held-to-maturity bonds
Fiscal 2019 (As of March 31, 2020)
Amount in consolidatedbalance sheets(millions of yen)

Category
Held-to-maturity bonds
with fair value
exceeding the amountstated in the
consolidated balance
sheets
Held-to-maturity bonds
with fair value notexceeding the amountstated in the
consolidated balance
sheetsFair value
Difference(millions of yen) (millions of yen)

(1) National and municipal bonds

39

40

0

(2) Bonds payable

—

—

—

(3) Other———

Subtotal

39

40

0

(1) National and municipal bonds

—

—

—

(2) Bonds payable

—

—

—

1,000

999

(0)

1,000

999

(0)

1,039

1,039

(0)

(3) Other
Subtotal
Total

Fiscal 2020 (As of March 31, 2021)
Amount in consolidatedbalance sheets(millions of yen)

Category
Held-to-maturity bonds
with fair value
exceeding the amountstated in the
consolidated balance
sheets
Held-to-maturity bonds
with fair value notexceeding the amountstated in the
consolidated balance
sheetsFair value
Difference(millions of yen) (millions of yen)

(1) National and municipal bonds

36

37

0

(2) Bonds payable

—

—

—

(3) Other———

Subtotal

36

37

0

(1) National and municipal bonds

—

—

—

(2) Bonds payable

—

—

—

(3) Other

—

—

—

—

—

—

36

37

0

Subtotal
Total

－

42

－

2. Available-for-sale securities
Fiscal 2019 (As of March 31, 2020)
Amount inconsolidated balance
sheets(millions of yen)

Category(1) Stocks
Available-for-salesecurities of which theamount stated in the
consolidated balance
sheets exceeds theacquisition cost

Difference(millions of yen)

11,703

3,459

8,244

1) National and municipal bonds

—

—

—

2) Bonds payable

—

—

—

3) Other———(3) Other

14,286

5,301

8,985

25,9908,760

17,230

1,272

1,759

(486)

1) National and municipal bonds

—

—

—

2) Bonds payable

—

—

—

3) Other———(3) Other

12,09312,098(5)

13,366

13,858(492)

39,356

22,61816,737(2) Bonds

Subtotal(1) Stocks
Available-for-salesecurities of which theamount stated in the
consolidated balance
sheets does not exceed
the acquisition cost

Purchase amount(millions of yen)

(2) Bonds

Subtotal
Total(Note) Unlisted stocks (totaling ¥3,358 million in the consolidated balance sheets) and operating investments (totaling ¥485 million
in the consolidated balance sheets) are not included in available-for-sale securities, above, because they have no market prices
and determining their fair value is extremely difficult.
Fiscal 2020 (As of March 31, 2021)
Amount inconsolidated balance
sheets(millions of yen)

Category(1) Stocks
Available-for-salesecurities of which theamount stated in the
consolidated balance
sheets exceeds theacquisition cost

Difference(millions of yen)

16,583

4,011

12,571

1) National and municipal bonds

—

—

—

2) Bonds payable

—

—

—

3) Other———(3) Other

22,267

5,535

16,731

38,8509,547

29,303

1,041

1,207

(165)

1) National and municipal bonds

—

—

—

2) Bonds payable

—

—

—

3) Other———(3) Other

0

0

(0)

1,042

1,208

(165)

39,893

10,755

29,137(2) Bonds

Subtotal(1) Stocks
Available-for-salesecurities of which theamount stated in the
consolidated balance
sheets does not exceed
the acquisition cost

Purchase amount(millions of yen)

(2) Bonds

Subtotal
Total(Note) Unlisted stocks (totaling ¥3,352 million in the consolidated balance sheets) and operating investments (totaling ¥1,684 million
in the consolidated balance sheets) are not included in available-for-sale securities, above, because they have no market prices
and determining their fair value is extremely difficult since.
－

43

－

3. Held-to-maturity bonds soldFiscal 2019 (From April 1, 2019 to March 31, 2020)
Not applicable
Fiscal 2020 (From April 1, 2020 to March 31, 2021)
Not applicable
4. Available-for-sale securities soldFiscal 2019 (From April 1, 2019 to March 31, 2020)
Not applicable
Fiscal 2020 (From April 1, 2020 to March 31, 2021)
Not applicable
5. Impairment loss on marketable securities
Fiscal 2019 (From April 1, 2019 to March 31, 2020)
In fiscal 2019, the Company recorded an impairment loss on marketable securities (stocks under available-for-sale securities) totaling¥85 million.
When the value of stocks for which determining fair value is extremely difficult substantially has declined

due to worsening

financial conditions or other factors, the Company decides whether to record an impairment loss after judging the recoverability of
individual stocks.
Fiscal 2020 (From April 1, 2020 to March 31, 2021)
Not applicable

－

44

－

Note 15 － Derivatives
1. Derivatives for which hedge accounting is not applied
Not applicable
2. Derivative for which hedge accounting is applied
Interest rate-related derivatives
Fiscal 2019 (As of March 31, 2020)
Hedge accounting
methodType of instrument Main hedged items

Special treatment ofinterest rate swaps

Interest rate
swaps: Receivable
floating
rate/payable fixedrate

Long-term loans
payableContract amount(millions of yen)Contract amountover one year
(millions of yen)

30,833

28,779Fair value(millions of yen)

(Note)(Note) The fair value of derivatives subject to special treatment of interest rate swap transactions 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.
Fiscal 2020 (As of March 31, 2021)
Hedge accounting
methodType of instrument Main hedged items

Special treatment ofinterest rate swaps

Interest rate
swaps: Receivable
floating
rate/payable fixedrate

Long-term loans
payableContract amount(millions of yen)Contract amountover one year
(millions of yen)

37,25434,723

Fair value(millions of yen)

(Note)(Note) The fair value of derivatives subject to special treatment of interest rate swap transactions 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.

－

45

－

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 2019
(From April 1, 2019 toMarch 31, 2020)(Millions of yen)
Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)

Balance at the beginning of the fiscal year
Retirement benefit costs
Retirement benefits paid
Contributions to the plan

258
74
(3)
(37)

292
10
(153)
(34)

Balance at the end of the fiscal year

292

115

(2) Reconciliation between net liability recorded in the consolidated balances sheets and the balances of benefit obligation andpension assets at the end of the period.
(Millions of yen)
Fiscal 2019
(As of March 31, 2020)
Benefit obligation
Pension assets

Fiscal 2020
(As of March 31, 2021)

1,432(1,140)1,301(1,185)Net balance of liabilities and assets recorded in the
consolidated balance sheets

292

115

Retirement benefit liability

292

115

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

292

115

(3) Retirement benefit costs
Fiscal 2019
(From April 1, 2019 toMarch 31, 2020)
Retirement benefit costs calculated using simplified
accounting methods

74(Millions of yen)
Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)
10

3. Defined contribution plan
The required contributions for the defined contribution plans of consolidated subsidiaries amounted to ¥27 million in the fiscal
year ended March 31, 2020 and ¥27 million in the fiscal year ended March 31, 2021.

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 2019
(As of March 31, 2020)

Fiscal 2020
(As of March 31, 2021)

68
161
189
127
531
1,555
96
13
211
278
3,234
(1,106)
2,127

69
59
198
60
531
327
39
—
199
313
1,799
(1,030)768(1,028)(5,130)(1,916)(127)(8,202)(6,075)(1,007)(8,927)(1,942)(114)(11,992)(11,223)

Deferred tax assets
Accrued bonuses
Accrued enterprise taxes
Inventory depreciation
Accounts receivable—other
Reconstruction-related loss
Impairment loss
Provision for retirement benefits
Loss carryforwards
Assets retirement obligations
Other
Deferred tax assets subtotal
Valuation allowance
Deferred tax assets total
Deferred tax liabilities
Reserve for fixed assets reduction
Unrealized gain (loss) on securities
Difference in valuation of fixed assets
Retirement expenses for assets retirement obligations
Total deferred tax liabilities
Net balance of deferred tax assets and (liabilities)

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 2019
(As of March 31, 2020)
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.

－

47

－

Fiscal 2020
(As of March 31, 2021)
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 － Assets Retirement Obligations
Assets retirement obligations recorded in the consolidated balance sheets
1. Summary of the assets retirement obligations
The obligations are for the removal of asbestos from buildings used as operating assets.
2. Method for calculating the amount of the assets retirement obligations
The amount of the assets retirement obligations are calculated at discount rates between 0.0% and 2.3% over expected building
usage periods estimated between less than one year to 50 years.
3. Changes in the assets retirement obligations(Millions of yen)
Fiscal 2019
(From April 1, 2019 toMarch 31, 2020)
Beginning balance
Adjustment due to passing of time
Reduction due to fulfillment of assets retirement
obligations
Other increases (decreases)
Ending balance

Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)

695
5

677
6

(77)

(20)

53

—

677

664

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 2019
Fiscal 2020
(From April 1, 2019 to(From April 1, 2020 toMarch 31, 2020)
March 31, 2021)
Lease property, etc.
Amount on consolidated balance sheet
Beginning balance

216,665

224,652

Increase (decrease)

7,986

20,456

Ending balance

224,652

245,108

Market value at fiscal-year end

331,826

345,311

Beginning balance

19,565

19,396

Increase (decrease)

(168)

(16)

Ending balance

19,396

19,380Market value at fiscal-year end

31,71931,586

Real estate that includes the portion usedas lease property, etc.
Amount on consolidated balance sheet(Notes) 1. The consolidated balance sheet amount is equal to the acquisition cost minus the accumulated depreciation and accumulated
impairment loss.
2. The net increase in lease property, etc., in fiscal 2019 was mainly due to acquisition of real estate totaling ¥8,092 million.
The net increase in fiscal 2020 was mainly due to acquisitions of real estate totaling ¥20,817 million and an increase inconstruction in progress amounting to ¥7,130 million, which offset a decrease due to transfer to real estate for saleamounting to ¥5,229 million.
3. The market values of principal properties at the end of the current consolidated fiscal year are based on the standards of realestate 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 appropriately reflect thefair values have not changed significantly from the time of acquisition from a third party or the latest appraisal, an amountappropriately 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 2019
Fiscal 2020
(From April 1, 2019 to(From April 1, 2020 toMarch 31, 2020)
March 31, 2021)
Lease property, etc.
Leasing revenue

18,344

18,865

Leasing expenses

9,634

10,215

Net

8,710

8,649

150

(17)

Leasing revenue

2,652

2,552

Leasing expenses

1,435

1,367

Net

1,217

1,184

(4)

(5)

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

Other 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 expenses, taxes and other duties, etc.) were
included in the leasing expenses.
2. The amounts of other profit (loss) were mainly net balances of gain on sales of fixed assets, a loss on disposal of fixed
assets, and an impairment loss.

－

49

－

Note 21 － Segment and Other Information【Segment Information】
1. Outline of reportable segments
The reportable segments of the Company are the business units for which the Company is able to obtain the respective financial
information separately in order for the Board of Directors to conduct periodic reviews to determine the distribution of management
resources and evaluate their business results.
The Company’s two reportable segments are the Building Business segment and Asset Management Business segment.
The Building Business segment handles the development, leasing, management, and operations of stock exchange buildings,
office buildings, commercial facilities, and residential buildings. The Asset Management Business segment develops, sells, operates,
and manages revenue-generating real restate, develops and sells residential properties, and provides real estate brokerage services.
Effective from April 1, 2020, the Company’s reportable segments were changed as follows: the Leasing Business segment was
renamed as the Building Business segment, and the Real Estate Solutions Business segment was renamed as the Asset Management
Business segment. This change was limited to reportable segment names only, and had no effect on segment reporting. The new
segment names were used for segment-related results in the fiscal year prior to the change.
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 Accounging
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 2019 (From April 1, 2019 to March 31, 2020)
Reportable segments
Building
Business

Asset
Management
Business

Others(Note 1)

Total

Total

(Millions of yen)Amount inconsolidated
Adjustments
financial(Note 2)statements(Note 3)Operating revenue
Operating revenue
from externalcustomers

22,50822,13644,644

1,995

46,639—46,639

57

—

57

1,613

1,670

(1,670)—Total

22,565

22,13644,701

3,608

48,309(1,670)46,639Segment income

9,080

3,128

12,208180

12,389

(1,485)

10,903

Segment assets

255,008

42,531

297,5391,599

299,138

40,407

339,545

Depreciation (Note 4)

4,781

13

4,795

4

4,799

14

4,814

Increase in tangible
and intangible fixed
assets (Note 4)

13,42521

13,4462

13,449(29)

13,419Inter-segment revenue
and transfer

Other items(Notes) 1. “Others” means business segments which are not included in the reportable segments and includes management
and repair work contracting of buildings, facilities, etc., and insurance agency business.
2. Details of adjustments are as follows:(1) The negative adjustments to segment income of ¥1,485 million mainly include corporate expenses amounting to¥1,484 million that belong to the administration division and are not allocated to any of the reportable segments.
(2) Adjustments to segment assets of ¥40,407 million mainly include corporate assets amounting to ¥43,454 million,
which primarily consist of cash and deposits, marketable securities, and investment securities that belong to theadministration division.
－

50

－

(3) The negative adjustments to increases in tangible and intangible fixed assets mainly represent the elimination ofintersegment transactions of ¥31 million.
3. Segment income is adjusted with operating income in the consolidated statements of profit and loss.
4. The depreciation and increase in tangible and intangible fixed assets in the other items include the amortization ofand an increase in long-term prepaid expenses.
Fiscal 2020 (From April 1, 2020 to March 31, 2021)
Reportable segments
Building
Business

Asset
Management
Business

Others(Note 1)

Total

Total

(Millions of yen)Amount inconsolidated
Adjustments
financial(Note 2)statements(Note 3)Operating revenue
Operating revenue
from externalcustomers

21,713

11,96933,6831,365

35,048—35,048

59

—

59

1,644

1,704

(1,704)—

Total

21,773

11,96933,7433,009

36,753(1,704)35,048Segment income

8,573

3,937

12,51084

12,595(1,367)

11,228Segment assets

280,91953,080333,999

1,552

335,551

45,801

381,353

Depreciation (Note 4)

5,045

18

5,063

4

5,068

9

5,077

Increase in tangible
and intangible fixed
assets (Note 4)

29,825

1,025

30,851

2

30,85417

30,872

Inter-segment revenue
and transfer

Other items(Notes) 1. “Others” means business segments which are not included in the reportable segments and includes management
and repair work contracting of buildings, facilities, etc., and insurance agency business.
2. Details of adjustments are as follows:(1) The negative adjustments to segment income of ¥1,367 million mainly include corporate expenses amounting to¥1,368 million that belong to the administration division and are not allocated to any of the reportable segments.
(2) Adjustments to segment assets of ¥45,801 million mainly include corporate assets amounting to ¥57,485 million,
which primarily consist of cash and deposits, marketable securities, and investment securities that belong to theadministration division.
(3) The negative adjustments to increases in tangible and intangible fixed assets mainly represent the elimination ofintersegment transactions of ¥29 million.
3. Segment income is adjusted with operating income in the consolidated statements of profit and loss.
4. The depreciation and increase in tangible and intangible fixed assets in the other items include the amortization ofand an increase in long-term prepaid expenses.

－

51

－

【Related Information】
Fiscal 2019 (From April 1, 2019 to March 31, 2020)
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

Asil Sapporo GK

12,000Asset Management Business

Fiscal 2020 (From April 1, 2020 to March 31, 2021)
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

8,160

Asset Management BusinessNippon Open Ended Real Estate Investment
Corporation【Information Regarding Impairment Loss of Fixed Assets by Reportable Segment】
Fiscal 2019 (From April 1, 2019 to March 31, 2020)(Millions of yen)
Asset Management
Building BusinessBusiness
Impairment
loss

3

Inter-segment
eliminations

Others

5

—

Total

—

8

Fiscal 2020 (From April 1, 2020 to March 31, 2021)(Millions of yen)

Impairment
loss

Building Business

Asset Management
Business

3

5

－

52

－

Inter-segment
eliminations

Others
—

—

Total
8

【Amortization and Unamortized Balance of Goodwill by Reportable Segment】
Fiscal 2019 (From April 1, 2019 to March 31, 2020)
Not applicable
Fiscal 2020 (From April 1, 2020 to March 31, 2021)
Not applicable【Information on Gain on Negative Goodwill by Reportable Segment】
Fiscal 2019 (From April 1, 2019 to March 31, 2020)
Not applicable
Fiscal 2020 (From April 1, 2020 to March 31, 2021)
Not applicable【Information on Related Parties】
Fiscal 2019 (From April 1, 2019 to March 31, 2020)
Not applicable
Fiscal 2020 (From April 1, 2020 to March 31, 2021)
Not applicable
Note 22 － Per Share Information(Yen)
Fiscal 2019
(From April 1, 2019 to March 31, 2020)

Fiscal 2020
(From April 1, 2020 to March 31, 2021)

Net assets per share

2,837.29

3,190.09

Earnings per share

184.82189.76(Notes) 1. Diluted earnings 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 is included in treasury shares subtracted from calculations of the total number of shares issued as ofthe end of the period and the average number of shares outstanding during the period. The number of such treasury sharesissued 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 60,000 shares in fiscal 2019 and 59,000 shares in fiscal 2020, 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 41,000 shares infiscal 2019 and 59,000 shares in fiscal 2020.
3. Earnings per share is calculated based on the following.
Fiscal 2019
(From April 1, 2019 toMarch 31, 2020)

Fiscal 2020
(From April 1, 2020 toMarch 31, 2021)

7,046

7,118

Amount not attributable to common shareholders(millions of yen)——

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

7,046

7,118

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

38,12437,514

Net income attributable to owners of parent(millions of yen)

－

53

－

Note 23 － Significant Subsequent Events
1. Acquisition of the Company’s treasury shares
At a meeting held on April 30, 2021, the Company’s Board of Directors resolved to acquire its treasury shares in accordance with theprovisions of Article 156 of the Companies Act of Japan, applicable pursuant to Article 165, Paragraph 3, of the said act.
1. Reasons for acquisition of treasury shares
To improve capital efficiency and increase shareholder returns
2. Terms and conditions for the acquisition(1) Type of shares to be acquired: Common stock of the Company(2) Maximum number of shares to be acquired: 600,000 shares(equivalent to 1.61% of outstanding shares, excluding treasury shares)(3) Maximum aggregate amount of acquisition cost: ¥2 billion(4) Period of acquisition: From May 20 to December 31, 2021
(5) Method of acquisition: Purchase of shares through the Tokyo Stock Exchange
2. Establishment of an employee stock ownership plan
The Company’s Board of Directors resolved, in a meeting held on May 18, 2021, to establish an employee stock ownership plan(hereinafter, “the Plan”) as an incentive plan for its employees, conclude a trust agreement with Resona Bank, Limited, and set up atrust for the Plan (hereinafter, “the Trust”) based on that agreement.
1. Purpose of establishing the Plan
The establishment of the Plan was part of the Company’s initiatives to provide incentives to employees, with the goal of raising
employees’ morale and motivation to contribute to improving the Company’s medium- and long-term performance and to raising
corporate value.
2. Details of the trust agreement(1) Name of the Plan:
Heiwa Real Estate Employee Stock Ownership Plan
(2) Entrustor:
Heiwa Real Estate Co., Ltd.
(3) Trustee:Resona Bank, Limited (to be changed to Custody Bank of Japan, Ltd.)(4) Beneficiaries:
Employees who meet beneficiary requirements stipulated in the Company’s Stock Compensation
Rules(5) Trust administrator:
To be selected from the Company’s employees(6) Trust agreement date:
May 19, 2021
(7) Date of entrusting funds: May 19, 2021
(8) Period of the Trust:
Effective from May 19, 2021, until the Trust is terminated (continuing as long as the Plan is in place
without any specified date of expiry)
3. Details of the Company’s shares to be acquired at the time of establishing the Trust(1) Type of shares to be acquired:
Common stock(2) Amount of funds for acquiring the shares: ¥300 million(3) Method of acquiring the shares:
Stock market purchases(4) Planned period of share acquisitions:
May 19 to June 30, 2021
In accordance with 3., above, the Company acquired 71,100 of its treasury shares on May 26, 2021.

－

54

－

3. Change to reportable segments
The Company’s Board of Directors resolved, in a meeting held on April 30, 2021, to changes its reportable segments from the current
fiscal year, effective retroactively from April 1, 2021.
Firstly, the Company will transfer the Real Estate Investment Department from the Asset Management Business segment to the
Building Business segment. The Real Estate Investment Department handles the development, sale, and investment in real estate forsale, and the acquisition and sale of fixed assets. This change was made in consideration of future business development plans
following a decision to reassign two properties for lease from fixed assets to real estate for sale effective from April 1, 2021. This
reassignment is in line with the Company’s portfolio strategy in its current medium-term management plan of acquiring new properties
for lease as a means to expand the portfolio, and generating earnings from the sale of properties in the process of replacing portfolio
properties.
Secondly, the Company will transfer its subsidiary, Heiwa Real Estate Property Management Co., Ltd. (renamed from Heiwa Service
Co., Ltd., effective from March 1, 2021), from the Other Businesses segment to the Building Business segment, effective from April
1, 2021. This change was made because the subsidiary will develop comprehensive property management services while expanding
its current building facility maintenance and management business.
As a result of these two changes, the Building Business segment will handle the development, leasing, management, operations, andsales of stock exchange buildings, office buildings, commercial facilities, and residential buildings, while the Asset Management
Business segment will mainly manage the properties of Heiwa Real Estate REIT, Inc., and provide real estate brokerage services.
In accordance with these changes, results for segment operating revenue, income/loss, assets, liabilities, and other items in the fiscal
year under review have been changed as follows.
Information on operating revenue, income/loss, assets, liabilities, and other items by reportable segments
Fiscal 2020 (From April 1, 2020 to March 31, 2021)(Millions of yen)Amount inconsolidated financial
statements(Note 2)

Reportable segments
Asset
Management
Business

Building
Business

Total

Adjustments(Note 1)

Operating revenue
Operating revenue fromexternal customers

32,306

2,742

35,048—35,048

37

—

37

(37)

—

Total

32,343

2,742

35,086(37)

35,048Segment income

10,975

1,621

12,595(1,368)

11,228Segment assets

311,050

24,069335,119

46,234

381,353

Depreciation (Note 3)

5,021

15

5,037

40

5,077

Increase in tangible andintangible fixed assets(Note 3)30,821

3

30,82447

30,872

Inter-segment revenue andtransfer

Other items(Notes) 1. Details of adjustments are as follows:(1) The negative adjustments to segment income of ¥1,368 million mainly include corporate expenses amounting
to ¥1,368 million that belong to the administration division and are not allocated to any of the reportablesegments.
(2) Adjustments to segment assets of ¥46,234 million mainly include corporate assets amounting to ¥57,485
million, which primarily consist of cash and deposits, marketable securities, and investment securities thatbelong to the administration division.
(3) Adjustments to increases in tangible and intangible fixed assets are increases in corporate assets that have notbeen allocated to the reportable segments.
2. Segment income is adjusted with operating income in the consolidated statements of profit and loss.
3. The depreciation and increase in tangible and intangible fixed assets in the other items include the amortizationof and an increase in long-term prepaid expenses.
－

55

－

Note 24 － Consolidated Supplemental Schedules
1. Schedule of Bonds Payable
Issuing company

Bond nameDate of issuance

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

CouponSecuritization

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

Septemberbond

30, 2021

Unsecured

Decemberbond

30, 2022

Unsecured

June 30,

bond

2025

Unsecured

Septemberbond

30, 2020

Unsecured

Septemberbond

30, 2025

Unsecured

March 31,

bond

2026

19th Unsecured Bond (bankHeiwa Real Estate Co.,guarantee included and limited

September 28,

1,250

1,150

0.85%

Ltd.

to authorized institutional

2012

(100)

(100)

annually

investors)
21st Unsecured Bond (bankHeiwa Real Estate Co.,guarantee included and limited

September 30,

675

625

0.97%

Ltd.

to authorized institutional

2013

(50)

(50)

annually

investors)
22nd Unsecured Bond (bankHeiwa Real Estate Co.,guarantee included and limited

March 25,

800

600

0.88%

Ltd.

to authorized institutional

2014

(200)

(200)

annually

investors)
23rd Unsecured Bond (bankHeiwa Real Estate Co.,guarantee included and limited

March 31,

980

910

0.89%

Ltd.

to authorized institutional

2014

(70)

(70)

annually

750

750

investors)
24th Unsecured Bond (bankHeiwa Real Estate Co.,guarantee included and limited

September 25,

Ltd.

to authorized institutional

2014

1.03%
annually

investors)
25th Unsecured Bond (bankHeiwa Real Estate Co.,guarantee included and limited

September 25,

337

262

0.81%

Ltd.

to authorized institutional

2014

(75)

(75)

annually

1,087

1,012

0.79%

(75)

(75)

annually

investors)
26th Unsecured Bond (bankHeiwa Real Estate Co.,guarantee included and limited

September 30,

Ltd.

to authorized institutional

2014

investors)
27th Unsecured Bond (bankHeiwa Real Estate Co.,guarantee included and limited

September 30,

Ltd.

to authorized institutional

2014

500

500

0.60%

(500)

annually

investors)
28th Unsecured Bond (bankHeiwa Real Estate Co.,guarantee included and limited

December 30,

1,500

1,400

0.65%

Ltd.

to authorized institutional

2014

(100)

(100)

annually

2,557

2,392

0.76%

(165)

(165)

annually

investors)
30th Unsecured Bond (bankHeiwa Real Estate Co.,guarantee included and limitedLtd.

to authorized institutional

June 30, 2015

investors)
31st Unsecured Bond (bankHeiwa Real Estate Co.,guarantee included and limited

September 30,

701

Ltd.

to authorized institutional

2015

(701)

—

0.33%
annually

investors)
32nd Unsecured Bond (bankHeiwa Real Estate Co.,guarantee included and limited

September 30,

1,782

1,667

0.62%

Ltd.

to authorized institutional

2015

(115)

(115)

annually

investors)
33rd Unsecured Bond (bankHeiwa Real Estate Co.,guarantee included and limited

March 25,

880

825

0.52%

Ltd.

to authorized institutional

2016

(55)

(55)

annually

investors)

－

56

－

Issuing company

Bond nameDate of issuance

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

CouponSecuritization

Redemption
date

Unsecured

March 31,

bond

2023

Unsecured

Septemberbond29, 2023

Unsecured

March 31,

bond

2025

34th Unsecured Bond (bankHeiwa Real Estate Co.,guarantee included andLtd.

limited to authorized

March 31, 2016

1,092

990

0.19%

(102)

(102)

annually

institutional investors)
35th Unsecured Bond (bankHeiwa Real Estate Co.,guarantee included and

September 30,

1,531

1,397

0.11%

Ltd.

limited to authorized

2016

(134)

(134)

annually

March 31, 2017

1,000

1,000

December 8,

1,350

1,275

0.71%

Unsecured

December 8,

2017

(75)

(75)

annually

bond

2032

5,000

5,000

0.755%

Unsecured

Decemberannuallybond

13, 2028

January 31,

1,425

1,350

0.76%

Unsecured

January 31,

2019

(75)

(75)

annually

bond

2034

—

7,000

Unsecured

January 21,

bond

2031

25,19930,107(2,092)(1,891)

institutional investors)
Heiwa Real Estate Co.,Ltd.

36th Unsecured Bond (limited
to authorized institutional
investors)

Heiwa Real Estate Co.,Ltd.

37th Unsecured Bond (limited
to authorized institutional
investors)

Heiwa Real Estate Co.,Ltd.

Heiwa Real Estate Co.,Ltd.

38th Unsecured Bond

39th Unsecured Bond (limited
to authorized institutional
investors)

Heiwa Real Estate Co.,
Ltd.

Total

40th Unsecured Bond—

December 13,
2018

January 21,
2021

—

0.42%
annually

0.78%
annually———(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, 2021
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)
1,891

4,327

3,259

－

57

－

3,060

Within four to fiveyears
(millions of yen)
3,695

2. Schedule of Borrowings
Balance as of
Balance as of
Average interest
April 1, 2020 March 31, 2021
rate (%)(millions of yen) (millions of yen)

Item

Repayment
periodShort-term loans payable

6,250

9,250

0.3

—

Long-term loans payable within one year

5,736

26,961

0.6—

Lease obligations payable within one year

0

0

—

—

145,791

145,408

0.7

2022–2037

1

0

—

2022

4,000

4,000

0.5

2024–2039

161,780

185,621——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, 2021.
2. The average interest rate for lease obligations is not shown because lease obligations are recorded at an amount before
subtracting the interest included in total lease payments are recorded in the consolidated balance sheets.
3. The payment period of long-term loans payable (excluding those payable within one year), lease obligations (excluding
those payable within one year), and long-term accounts payable within five years from March 31, 2021 are shown below.
Within one to two
years(millions of yen)

Within two to threeyears(millions of yen)

Within three to fouryears
(millions of yen)

Within four to fiveyears
(millions of yen)

Long-term loans
payable12,09013,214

13,445

13,671

Lease obligations

0

—

—

—

Long-term accounts
payable

—

—

258

258

3. Schedule of Asset Retirement Obligations
Pursuant to Article 92-2 of the Regulation on Terminology, Forms, and Preparation Methods of Consolidated Financial Statements, theamounts of assets retirement obligations as of April 1, 2020, and March 31, 2021, have been omitted because the amounts are less than
one percent of total balance of liabilities and net assets at the beginning and end of the fiscal year under review.

－

58

－

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 sheet as at March 31, 2021, the consolidated statements of income
and comprehensive income, changes in net assets and cash flows for the year then ended, and notes,
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, 2021, and its consolidated
financial performance and its consolidated cash flows for the year then ended in accordance withaccounting 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 judgment concerning the identification of an impairment
indicator for and the recognition of impairment losses on fixed assets which are partly used as a
hotel
The key audit matter

How the matter was addressed in our audit

Tangible fixed assets of ¥238,737 million andLeasehold rights among intangible fixed assets of¥26,618 million were recognized in the consolidatedbalance sheet of Heiwa Real Estate Co., Ltd. (the“Company”) and its consolidated subsidiaries for thecurrent fiscal year. Of these assets, 4 properties
located in Tokyo, Osaka and Sapporo totaled¥18,700 million, which were partly used as a hotel.

The primary procedures we performed to assess theappropriateness of the Company’s judgment
concerning the identification of an impairment
indicator for and the recognition of impairment
losses on fixed assets which are partly used as a
hotel included the following:

As described in Note 3, “Significant accounting
estimates, Impairment of fixed assets” to theconsolidated financial statements, whenever there is
an impairment indicator for fixed assets, they need
to be tested for impairment. The impairment
indicators include recurring operating losses, asignificant decline in market value, significant
deterioration of the business environment, and achange in usage. If the recognition of impairment
losses are deemed necessary, the carrying amount isreduced to the recoverable amount, and the resulting
decrease in the carrying amount is recognized as
impairment losses.
The Company obtains external real estate appraisals,
etc. of principal assets held by it. Based on them, theCompany identifies an impairment indicator andexamines whether impairment losses should berecognized.

(1) Internal control testing
We tested the design and operating effectiveness ofcertain of the Company’s internal controls to
identify an impairment indicator for fixed assets anddetermine whether impairment losses should berecognized.
The tested internal controls included the procedure
to confirm materials which the Company submitted
to external real estate appraisers when requestingthem to perform a real estate appraisal.
(2) Assessment of appropriateness of theCompany’s judgment concerning theidentification of an impairment indicator forand the recognition of impairment losses on
fixed assets
To assess the appropriateness of the Company’s
judgment concerning the identification of an
impairment indicator for and the recognition of
impairment losses on fixed assets, we:inspected the board minutes, the minutes of theexecutive officers, the future plan and therequests for approval, which the Company
prepared, as well as the relevant materials,
inquired of management and the head of thedepartment in charge, and evaluated theconsistency with the economic condition, thehotel market, the trends in land prices issued byexternal organizations in order to understandthe Company’s recognition of the present
situation and the future prospects about the
impact of the spread of COVID-19;

evaluated the accuracy and reasonableness ofthe data on actual operating profit and loss andcash flows for the Company’s each property
and the forecast of future plans by inspecting
relevant documents about occupancy rates,
average unit prices of guest rooms for each
property, etc. as well as negotiation records

Domestic and inbound demand declined across thehotel industry due to the impact of the spread of
COVID-19. As a result, the hotel occupancy inproperties which were partly used as a hotel
decreased, and the business environment
deteriorated significantly.
In this regard, assumptions about rent negotiations
with tenants and the impact of the spread of COVID19 on the future operating profit and loss and cash
flows involve a high degree of management’s
subjective judgment, and therefore the recoverable
amount may not be properly measured. As a result,the impairment loss to be recognized may not berecognized.
We, therefore, determined that our assessment of theappropriateness of the Company’s judgment
concerning the identification of an impairment
indicator for and the recognition of impairment
losses on fixed assets which are partly used as a
hotel was one of the most significant in our audit of
the consolidated financial statements for the current
fiscal year, and accordingly, a key audit matter.

with tenants, and comparing them withmaterials received from tenants;
compared materials which the Company
submitted to external real estate appraiserswhen requesting them to perform a real estateappraisal with the data on actual operating
profit and loss and cash flows for theCompany’s each property and the forecast of
future plans to assess the consistency;inquired of external real estate appraiserscommissioned by the Company and the head ofthe department in charge about the results of thereal estate appraisals and the underlying basis
for the establishment of future cash flows,
discount rates and as necessary, had ourproperty valuation specialists evaluate theappropriateness of valuation methods and thereasonableness of discount rates; and

assessed whether the results of the real estateappraisals of assets held by the Company wereappropriately reflected in the Company’s
judgment concerning the identification of an
impairment indicator for and the recognition of
impairment losses on fixed assets.

Appropriateness of the Company’s judgment concerning the identification of an impairment
indicator for fixed assets held for redevelopment projects
The key audit matter

How the matter was addressed in our audit

Tangible fixed assets of ¥238,737 million andLeasehold rights among intangible fixed assets of¥26,618 million were recognized in the consolidatedbalance sheet of Heiwa Real Estate Co., Ltd. (the“Company”) and its consolidated subsidiaries for thecurrent fiscal year. These assets included those heldby the Company and its consolidated subsidiaries for
multiple real estate redevelopment projects in Tokyo(Nihonbashi Kabutocho and Kayabacho districts)
and Sapporo.

The primary procedures we performed to assess theappropriateness of the Company’s judgment
concerning the identification of an impairment
indicator for fixed assets held for redevelopment
projects included the following:

As described in Note 3, “Significant accounting
estimates, Impairment of fixed assets” to theconsolidated financial statements, for redevelopment
projects, in order to identify an impairment indicator
for fixed assets, relevant assets are grouped for eachblock to be revitalized, and then the feasibility andreasonableness of the project as well as the progress
are assessed. As a result, if there is an impairment
indicator for these assets, they need to be tested for
impairment.
In redevelopment projects, there is a high degree of
uncertainty about the recovery of investment due tothe large amount of investment, the longdevelopment period and the possibility of changes indevelopment plans, and therefore if business risks
become obvious, the materiality in amount is likely
to increase.
In this regard, in order to identify an impairment
indicator for fixed assets held for redevelopment
projects, it is necessary to comprehensively evaluate
the status of negotiations with other landowners of
the blocks to be revitalized and negotiations foreviction with tenants of existing buildings as well asassumptions such as tenants’ rent and occupancy
rates after development. However, theseassumptions involve a high degree of management’s
subjective judgment, and therefore impairment
indicators may not be identified appropriately. As aresult, impairment losses to be recognized may not
be recognized.
We, therefore, determined that our assessment of theappropriateness of the Company’s judgment
concerning the identification of an impairment(1) Internal control testing
We tested the design and operating effectiveness ofcertain of the Company’s internal controls to identify
an impairment indicator for fixed assets.
The tested internal controls included the procedure
to internally inspect and approve development plans
prepared by the Company.
(2) Assessment of the appropriateness of theCompany’s judgment concerning theidentification of an impairment indicator for
fixed assets
To assess the appropriateness of the Company’s
judgment concerning the identification of an
impairment indicator for fixed assets, we:inspected the board minutes, the minutes of theexecutive officers, the development plan andthe requests for approval, which the Company
prepared, as well as the relevant materials,
inquired of management and the head of thedepartment in charge, and evaluated theconsistency with the management environment,
the real estate rental market, the trends in land
prices issued by external organizations in orderto agree the blocks to be revitalized, the detailsof projects and the progress of projects;evaluated the consistency between grouping
units of assets and development plans preparedby the Company;



examined the feasibility of projects byinquiring of the head of the department incharge about the status of negotiations withother landowners and negotiations for eviction
with tenants of existing buildings, inspecting
negotiation records with other landowners andtenants of existing buildings and other relevant
documents, and then evaluating the consistency
between these documents and the results ofqueries;

indicator for fixed assets held for redevelopment
projects was one of the most significant in our auditof the consolidated financial statements for thecurrent fiscal year, and accordingly, a key audit
matter.



examined the reasonableness of the underlying
construction cost and tenants’ rent andoccupancy rate after development by inspecting
the concluded construction contract, lease
contract and other relevant documents, andcomparing with similar projects in cases wherea specific development plan was prepared;

agreed the progress of projects which werealready under construction by observing theconstruction sites and inspecting thedevelopment plans and other materials; and

assessed whether impairment indicators for
fixed assets of the Company were identified
appropriately based on the feasibility andreasonableness of projects as well as the
progress.

Other Matter
We draw attention to the fact that we have not audited the accompanying consolidated financial
statements of the Company as at and for the year ended March 31, 2020, and accordingly, we do not
express an opinion on them. However, the consolidated financial statements of the Company as at andfor the year ended March 31, 2020, which were prepared pursuant to Article 193-2(1) of the Financial
Instruments and Exchange Act of Japan, were audited by another auditor who expressed an unmodified
opinionon those statements on June 23, 2020.
Responsibilities of Management and Corporate Auditors and the Board of Corporate Auditors
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.
Corporate auditors and the board of corporate auditors are responsible for overseeing the 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’sreport 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 corporate auditors and the board of corporate auditors regarding, among othermatters, the planned scope and timing of the audit, significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide corporate auditors and the board of corporate auditors with a statement that we havecomplied with relevant ethical requirements regarding independence, and communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards.
From the matters communicated with corporate auditors and the board of corporate auditors , wedetermine those matters that were of most 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 reportbecause the adverse consequences of doing 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
December 24, 2021
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.