HEIWA REAL ESTATE CO., LTD.

1-10, Nihonbashi Kabutocho, Chuo-ku, Tokyo 103-8222
TEL 03-3666-0181 FAX 03-3666-4930
URL https://www.heiwa-net.co.jp/en/

INTEGRATEDREPORT 2021

Value Creation by Heiwa Real Estate

CONTENTS
Value Creation by Heiwa Real Estate
02

Management Policy and Statement

05

Value Creation Model

03
07
09

History of Value Creation

The Source of Corporate Value

Financial and Non-Financial Highlights

Value Creation Strategy
11

Message from the President

15 	Medium-term Management Plan
“Challenge & Progress”

17 	Message from the Officer in Charge ofFinancial Affairs

Business Review

Sustainability / ESG

27 	Identification of Materiality
29

Sustainability and ESG

35

Society

31
39
45
46
47

Environment
GovernanceCompliance and Risk Management Systems
Message from the External Director
Management Team

Financial and Corporate Information
49

Consolidated Financial Data

52

Corporate Information

51

Stock Information

19 	Feature Article
	Nihonbashi Kabutocho and Kayabacho
Revitalization Project
21

Redevelopment Business

25

Asset Management Business

23
26

Period Covered by the Report

The report covers mainly the results of FY2020 (from April
2020 to March 2021). It also includes some information on
activities before or after said period as well as forecasts.

01

HEIWA REAL ESTATE INTEGRATED REPORT 2021

Statement

Creating _Communities, Building for the Future
What makes a neighborhood bring people joy?

while maximizing local histor y and tradition.

Just as Japan flourished upon the dawn of capitalism,
we develop lively, forward-looking environments

EDITORIAL POLICY[Design Concept]
The Heiwa Real Estate Group, as "acompany that contributes to revitalizing
districts," is currently promoting the
Nihonbashi Kabutocho and Kayabacho
Revitalization Project. The designconcept of this Integrated Report is"SPROUT." The tender green motif using
a pictogram pattern has been designed
to reflect the sprouting and growth of
new individual characteristics, values andinnovations in Nihonbashi Kabutocho
and Kayabacho, which has been an
entrepreneurial district for investment
and securities.

Provision of Safe and Comfortable Offices and Living Spaces,
thereby Contributing to People and the City

that invite residents and visitors alike to create new value

Business Review (Consolidated)

The Corporate Report that had been published until FY2020 was
renamed Integrated Report in FY2021. The Integrated Reporthas been compiled to help you understand The Heiwa Real
Estate Group's initiatives to enhance its corporate value froma medium- to long-term perspective by including more nonfinancial information focusing on environmental, social andgovernance (ESG) than the conventional Corporate Report.
Its aim is to serve as a tool for all of our stakeholders,
including shareholders and investors, to gain an understandingof the Heiwa Real Estate Group and deepen dialogue with us.

Management Policy

At Heiwa Real Estate, we build communities

Building Business

Editorial Policy

Management Policy and Statement

Organizations Covered

Heiwa Real Estate Co., Ltd. and its Group companies

Date of Publication
October 2021

Guideline used as reference

The report has been edited with reference to the International
Integrated Reporting Framework by the International
Integrated Reporting Council (IIRC).
With the aim of making the presentation of the Report
simple and easy to understand, we exercised creativity tomake important items visually comprehensible. Highly
important information is summarized and stated in thisIntegrated Report to help you gain an understanding of the
Heiwa Real Estate Group. For further information, please refer
to our corporate website.

Disclaimer

Information in the report other than statements of historicalfact are forecasts and forward-looking statements that are
based on judgments by the management of Heiwa Real
Estate in light of available information. Actual results may
differ materially from these forecasts due to various factors.
Heiwa Real Estate assumes no responsibility for the use of
information contained in the report.

that embrace a mature culture.

In today’s rapidly changing society,urban development plays an ever more significant role.
Heiwa Real Estate has supported

Japan’s financial and societal growth over generations
through revitalizing districts.

Utilizing unique perspectives nurtured through our legacy,
we help solve societal challenges

by expanding the possibilities of community renovation— with bold ambitions and out-of-the-box thinking.

What the _ in the Tagline Represents
There are many ways in which
we contribute to community de velopment .

And the possibilities continue to expand
with each and e ver y one of us asking ourselves,“how can I make a difference?”
and acting on it .

The _ symbolizes the diversity of ideas
Heiwa Real Estate has towards re vitalizing districts.
HEIWA REAL ESTATE INTEGRATED REPORT 2021

02

Value Creation by Heiwa Real Estate

History of Value Creation

Heiwa Real Estate was founded in 1947 as the owner of stock exchange buildings in Tokyo,
Osaka, Nagoya and elsewhere, which play a central role in Japan’s financial markets.
Nihonbashi Kabutocho and Kayabacho, where the Company was founded, havedeveloped as the home of the securities industry. As the social environment changed with

12,00010,0008,000

the development of information and communications, these districts have likewise witnessed

6,000

While harnessing the area’s character and history as a securities trading hub and a financial

4,000

significant change, including the closure of the trading floor and relocations of securities firms.
and investment center, we seek to bring new energy and visitors back to the community, anddevelop new functions and culture. In doing so, we will reach for new heights as “a company
that contributes to revitalizing districts.”

Chronology of Events in Heiwa Real Estate Group
1947 Heiwa Real Estate established 11949 Listed on the Tokyo Stock Exchange,
Osaka Securities Exchange, Nagoya
Stock Exchange and Fukuoka Stock
Exchange1950 Listed on the Sapporo Securities
Exchange
1958 Completed construction of Fukuoka
Shoken Building
1962 Completed construction of Kyoto
Shoken Building

1980 E
 ntered the condominium sales
business
1984 Completed construction of the stock
trading floor building (currently
Arrows) within the Tokyo Stock
Exchange Building complex 21986 Completed‌
construction of
Yokohama Heiwa Building
1987 Completed‌
construction of Osaka
Heiwa Building

7,074

8,267

10,903
9,432

11,500

11,2289,335

12,000

1,688
1,400

1,574

4,500
4,000
3,500

3,455

3,000

2,799
2,050

(Yen)

2,500

2,131

2,000
1,500
1,000
500

2011 2012 20132008 Completed construction of Hotel
Brighton City Osaka Kitahama
2009 Initiated full-scale participation in
the REIT business(Made the current Heiwa Real Estate
Asset Management Co., Ltd.
a consolidated subsidiary)2010 Completed construction of CentRise
Sakae 42011 Completed construction of Heiwa
Real Estate Kitahama Building
2012 Completed construction of
Ichibancho Heiwa Building 5

1980-

2000-

Establishment Phase:
Supporting the
Securities Industry

Business Diversification Phase:House Sales Business and Other Businesses

Leasing Business Asset Expansion Phase:
Enhancing the Revenue Base

Expanded into new businesses in step with changes inthe social environment. Entered the suburban housingdevelopment business and the condominium sales
business.

1,648

8,548

9,673

1,125*

2,000

2000 Acquired Mita Heiwa Building
2001 Acquired Uchisaiwaicho Heiwa
Building
2002 Acquired Dogin Building
2004 Completed construction of Nagoya
Heiwa BuildingCompleted construction of the Osaka
Securities Exchange Building 3
2007 Completed construction of the
Nagoya Stock Exchange Building

8,055

1,838

0
1988 Completed construction of themain building of the Tokyo Stock
Exchange Building complex 2
1992 Completed construction of
Kayabacho Heiwa Building
1993 Completed construction of Daimaru
Kyoto Store (West) Kyodo Building
1994 Completed construction of Daimaru
Kyoto Store (North) Kyodo Building

7,355

1947-

Established as the owner of stock
exchange buildings, we built thefoundation of our business byleasing stock exchange buildings
and by developing the building
leasing business mainly in theneighborhoods where stock
exchanges are located.

Aggressively redeveloped properties in Osaka and Nagoya.
In the leasing business, increased assets such as officebuildings and commercial facilities to enhance our revenue
base.

2014 2015 2016 2017 2018 2019 2020 2021
2014 A nnounced the Revitalization Vision
for Nihonbashi Kabutocho
2015 Completed construction of
Kitahama 1-Chome Heiwa BuildingCompleted construction of Maruzen
Nagoya Honten Building
2017 Acquired Osaka Midosuji Building
Opened FinGATE KAYABA 6（Forecast）

2018 Opened FinGATE KABUTO 7
Opened FinGATE BASE
2019 Acquired Sakae Sun City Building

Tackling the challenge of, and making
progress in, the aim to be“a company that contributes
to revitalizing districts”
EPS target: At least

From

Consolidated operating income:¥10 billion to ¥12 billion

Consolidated operating income (Millions of yen) (Left scale)Closing share price (Yen) (Right scale)* A five-to-one share consolidation was executed on October 1, 2012; the share pricein FY2011 is presented by converting it into the post-consolidation share price.

02023 FY（Target）

2020 Opened K5 8Opened FinGATE TERRACE
2021 Opened KABUTO ONE 9

2014-

2020-

The Next-Generation Heiwa Real Estate:
Taking On the Challenge of Becoming “a Company
That Contributes to Revitalizing Districts”

Moving to a New Stage of Growth as“a Company That Contributes to Revitalizing Districts”

Engaged in the revitalization of Nihonbashi Kabutocho andKayabacho, successfully launching KABUTO ONE as the firstproject.

¥200

Reaching for new heights as “a company that contributes to revitalizing districts.”
Working to contribute to the realization of a sustainable society while enhancing
corporate value through the resolution of environmental and social issues,and dialogue with stakeholders.

Opened "KABUTO ONE"

1 Former Tokyo Stock Exchange Building 2 Tokyo Stock Exchange Building(Chuo-ku, Tokyo)

3 Osaka Securities Exchange Building 4 CentRise Sakae(Osaka City)

History of Nihonbashi Kabutocho and Kayabacho(Nagoya City)

5 Ichibancho Heiwa Building(Sendai City)

Meiji Era (1870s)

Taisho Era to 1940s

Recently

Japan’s first modern bank, First National
Bank (now Mizuho Bank) opened in
Kabutocho in 1873.
The Kabutocho district subsequently
developed as a center of the Japanese
economy with the establishment of a stock
exchange, which then became the Tokyo
Stock Exchange, and numerous companies.

Japan’s securities markets resumed with the approvalof the GHQ in 1949. As a securities district, Kabutocho
became synonymous with the country’s financial
markets and economy due to the development of
the Japanese economy and the boom in its securities
markets.

The trading floor of the Tokyo Stock Exchange, which
had been active for many years, closed in 1999 due
to factors including the introduction of electronic
trading and the increase in internet transactions. The
Kabutocho district changed significantly as securities
companies moved elsewhere.

From a Banking to a Securities and Financial
District03(Millions of yen)

Medium-term Management Plan
“Challenge & Progress”（FY2020–FY2023）

Reconstruction after the Great Kanto
Earthquake and World War II

HEIWA REAL ESTATE INTEGRATED REPORT 2021

Changes in Nihonbashi Kabutocho

6 FinGATE KAYABA(Chuo-ku, Tokyo)

7 FinGATE KABUTO(Chuo-ku, Tokyo)

Recreating the Classic Look and Feel of
Nihonbashi Kabutocho

We are implementing the Nihonbashi Kabutocho andKayabacho Revitalization Project while preserving
the district’s history as the birthplace of Japan’s
financial markets. Aligned with the Tokyo metropolitan
government’s “Global Financial City: Tokyo” vision, weare creating a new Kabutocho as a district where people
connect, and where investment and growth are born.

8 K5 hotel interior(Chuo-ku, Tokyo)

Currently

Its middle floors accommodate"KABUTO ONE HALL &CONFERENCE" and a booklounge, while its atrium on thefirst floor has a new information
dissemination function named"The HEART ." To become a newlandmark of this district, KABUTO
ONE serves as a hub for companies
and investors to interact with eachother.

ⒸK5

P.19

9 KABUTO ONE（Chuo-ku, Tokyo）

Announcement of a Revitalization Tagline:
A Starting Point and A Highlight

It will speed up the Nihonbashi Kabutocho and Kayabacho
Revitalization Project in the future, and the district will
become an even greater starting point for the passion of
those looking to the future and a place where all attempts
and challenges shine as it offers value and charm as anentrepreneurial starting point.

HEIWA REAL ESTATE INTEGRATED REPORT 2021

04

Value Creation by Heiwa Real Estate

Value Creation ModelAs “a company that contributes to revitalizing districts,”

we strive to help society become more sustainable while

also improving corporate value, by increasing satisfaction
through dialogue with stakeholders and by providing
solutions to environmental and social issues.

01

The Source ofCorporate Value(The Heiwa Real Estate Group’s Strengths)* Figures are as of March 31, 2021

Track record and trust as anowner of securities exchangebuildings

・The Heiwa Real Estate Group has owned
and leased stock exchange buildings
across Japan since its foundation

Superior portfolio

・Owns assets in the central districts ofmajor cities across Japan・O
 wns candidate areas of medium- tolong-term redevelopment

02

Improvingsocial value

Making society sustainable as“a company that contributes to revitalizing districts”● Nihonbashi Kabutocho and Kayabachorevitalization● Progress in commercializing the
Sapporo Redevelopment Project

The Value We Offer
P.15

P.15

● P romotion of capital policythat takes into accountcapital costs and capitalefficiency● Strengthening corporate
governance・M arket value of leased and other realestate: ¥376.8 billion

P.23

Building Business● Pursuing external and internal growth● Sustainable building operations toimprove environmental performanceand disaster preparedness

P.25

Value chain of thegroup as a Whole

・Sourcing capability developed throughtrack record in the purchase and sale ofreal estate

Good relationship withclients and local communities
・Playing a part in the "Global Financial
City: Tokyo" vision
・Number of tenants:

Approx. 600 companies

P.27

Materiality

Climate ChangeCountermeasures

Human capital・Number of employees in the Group:

240 persons

・Percentage of female employees(Non-consolidated): 28.3%

Stable financial base・Net D/E ratio: 1.57 times

・Equity ratio: 31.1%

・Equity: ¥118.6 billion

05

HEIWA REAL ESTATE INTEGRATED REPORT 2021

● Growing asset management earnings

Practicing Sustainable Management

・Cooperative relationship with local
communities

・Number of employees(Non-consolidated): 102 persons

Asset Management BusinessResponding toSocial Needs

Industrial
Development /Regional Development
Natural Disaster
Risk Mitigation
MeasureStrengtheningof Corporate
Governance

Structure to Promote Sustainable Management

Established the Sustainability Committee and will monitor the plan-do-check-act (PDCA) cyclefor each sustainability initiative

At least¥200

EPS
Profittargets● Generating earnings from inventory sales・U nrealized gains of leased and otherreal estate: ¥112.4 billion

・Ensuring steady growth of assets
managed by Heiwa Real Estate REIT,
Inc. and stable medium- to long-term
earnings

03

Generating Greater Value

Corporate Activities

The Group will help our society become moresustainable and promote the revitalization ofsafe and secure districts, taking into accountenvironmental concerns and disaster
preparedness, through initiatives such as therevitalization of Nihonbashi Kabutocho andKayabacho, the Sapporo Redevelopment
Project and asset management.

P.21

Capitalefficiency

Consolidated
operatingincomeAt least¥12 billion
At least 6％(FY2020-FY2023)

Approx.70％(FY2020-FY2023)
Consolidated dividend
payout ratio of approx.
50% by FY2023

・Waste: 20% reduction by FY2030(All vs. FY2018)

・Paid holiday usage rate: At least 70%

・Uptake of cancer screening (every 2 years): 100%of employees aged 35 years or above

・Annual health check uptake: 100% every year
・Composition of the Board of Directors:

G:
GovernanceHeiwa Real
Estate GroupAs “a company that contributes torevitalizing districts,” the Group strives
to help our society become moresustainable while also improving
corporate value, by increasing
satisfaction through interactive
communication with stakeholders andproviding solutions to environmental
and social issues.

・G HG emissions: 50% reduction by FY2030

・Water usage: 20% reduction by FY2030

・Rate of new hires that are female: At least 30%

S:
Society

Vision for the(FY2023)

ROE

Consolidated
Shareholder
total return
returnsratio

E:
Environment(FY2023)04

At least one-third external directors

・Number of female directors: At least one

・Composition of Nomination and Compensation
Committees:

Improvingshareholder value
Improving shareholder value as alisted real-estate company

The Company will improve shareholder
value through returns and greater capitalefficiency by maximizing the use of theGroup’s corporate value and by creating
and achieving added value in real estate.

Majority external directors

・Compliance training:

At least five times each year
HEIWA REAL ESTATE INTEGRATED REPORT 2021

06

Value Creation by Heiwa Real Estate

Track Record and Trust as an Owner of Securities Exchange Buildings

The Source of Corporate Value

Heiwa Real Estate was founded as a company that owns and leases stock exchange buildings, and currently owns the Tokyo Stock Exchange
Building, the Osaka Securities Exchange Building, the Nagoya Stock Exchange Building and the Fukuoka Shoken Building. By holding a
superior portfolio of properties in the central districts of major cities across Japan and supporting Japan's financial infrastructure facilities,
etc., we have built relationships of trust with various stakeholders.
Our experience and track record in revitalizing the Nihonbashi Kabutocho and Kayabacho districts has enabled us to position ourselves
to make significant contributions in the Sapporo Redevelopment Project and to further fulfill our role as “a company that contributes torevitalizing districts.”

Tokyo Stock Exchange Building Osaka Securities Exchange Building Nagoya Stock Exchange Building Fukuoka Shoken Building(Chuo-ku, Tokyo)(Osaka City)(Nagoya City)(Fukuoka City)

Superior Portfolio in Central Districts of Major Cities across JapanTokyo area

• Tokyo Stock Exchange Building• Nisshokan Building• KABUTO ONE• Kabutocho Heiwa Building• Kabutocho Heiwa Building No. 1• Kabutocho Heiwa Building No. 2• Kabutocho Heiwa Building No. 4• Kabutocho Heiwa Building No. 5• Kabutocho Heiwa Building No. 6• Kabutocho Heiwa Building No. 7• Kayabacho 1-Chome Heiwa Building• Kayabacho Broad Square• Heiwa Real Estate Nihonbashi Building• Quatro Muromachi Building• Mita Heiwa Building• Uchisaiwaicho Heiwa Building• Shimbashi Square Building• Yokohama Heiwa Building

Market Value of Lease Properties, etc.

Sapporo area

Sapporo(Billions ofyen)• Dogin Building• Shin-Odori Building• Park East Sapporo• Sapporo Ekimae Godo
Building• AFT Building• Hotel Emisia Sapporo

400
300
200

Dogin Building

1000Uchisaiwaicho Heiwa Building Mita Heiwa Building

Osaka area

• Osaka Securities Exchange Building• Osaka Heiwa Building• Hotel Brighton City Osaka Kitahama• Heiwa Real Estate Kitahama Building• Kitahama 1-Chome Heiwa Building• Osaka Midosuji Building

6.0

Ichibancho Heiwa Building

Osaka
Kitahama 1-Chome
Heiwa Building

Heiwa Real Estate
Kitahama Building

Fukuoka

4.0

Nagoya area

07

HEIWA REAL ESTATE INTEGRATED REPORT 2021

Maruzen Nagoya Honten
Building

2018

2019

264.4

2020

(FY)

2015

3.6

1.3

2016

2.8
2.1
2017

1.9

1.8

1.5

2018

1.2

2019

1.5
2020

(FY)

All properties of the Company(vacancy rate excluding areas subject to redevelopment-related lease suspension, etc.)

Portfolio Data (Building leasing earnings) (FY2020)

Sendai and
Sapporo6%

CentRise Sakae

2017

Unrealized gains

244.0* Figures are at the end of each year

FukuokaTenjin Heiwa Building

236.2

Tokyo business district (ﬁve wards in Tokyo metropolitan area) * Source: Miki Shoji Co., Ltd.

NagoyaHotel Brighton City
Osaka Kitahama

230.6

112.4

5.4

18%

• Fukuoka Shoken Building• Fukuoka Heiwa Building• Tenjin Heiwa Building

Osaka Midosuji Building

2016

1.8

0

• Nagoya Stock Exchange Building• CentRise Sakae• Nagoya Heiwa Building• Maruzen Nagoya Honten Building• Isemachi Heiwa Building• Sakae Center Building• Sakae Sun City Building

Fukuoka area

2015

4.3

2.0

Nagoya

219.2

856

703

119.4

103.3

（%）
8.0

Sendai

Tokyo

224.4

620

316.3

376.8

Trends in Vacancy Rate

• Ichibancho Heiwa Building• Solala Plaza• Kyoto Shoken Building• Daimaru Kyoto Store (West)
Kyodo Building• Daimaru Kyoto Store (North)
Kyodo Building

289.6

Book value

Sendai area

Kabutocho Heiwa Building No. 6

286.4

363.5

339.5

12%

Tokyo

Leasing revenue
by region

Osaka

20%

Commercial

15%

44%

Stock
exchange

16%

Other

1%

Leasing revenue
by usage
Office68%

HEIWA REAL ESTATE INTEGRATED REPORT 2021

08

Value Creation by Heiwa Real Estate

Financial and Non-Financial Highlights
Financial Highlights (Consolidated)
Operating Revenue(Millionsof yen)50,00040,00041,74732,69830,00039,480Operating Income(Millionsof yen)12,00046,63910,00035,04820,00010,000
0

2016

2017

2018

2019

2020 (FY)Net
Income Attributable to
Owners of Parent and EPS(Millionsof yen)
8,000
6,000
4,000

113.174,514

132.57
5,288

158.736,174

184.82
7,046

0

2017

2018

2019

6,000

4,000

4,000

2,000

2,000

0

2016

150

293,025 300,243
300,000

02020 (FY)

200,000
100,000
0

33.3

2020 (FY)

34.9

335,572 339,545

32.5

31.6

2016

2017

2018

Total assets (Left scale)

2019

1.57

381,353 60
45

31.1

1.47

1.57

1.36

2017

(Millionsof yen)20,00015,00010,00014,920 14,476 14,596

9.24

9.84

11.77

2018

2019

2020 (FY)

0

2016

2017

2018

EBITDA (Left scale)2019

liabilities (Right scale)

HEIWA REAL ESTATE INTEGRATED REPORT 2021

8,430

2016

2017

2018

2019

57.8

60

0

2020 (FY)

23.0
26

2016

27.9

37

※

2017

48

30.2

2018

56

30.3

2019

68.5

4

5

2

0
2020 (FY)

0

11.10

95,365

197.3

104,401

180

173.0

120

77
40.6

4.7

5.2

3.3

3.2

2016

2017

ROE

ROA

0

60

2018

2019

2020

Energy usage (Left scale)

(FY)

0

45

1,200

30

900

15

600

0

2020 (FY)

2.30

2018

4

992

2.27

300
0

(kg/㎡)
5

1,292

2019

3
2

1.76

2020

Waste emissions (Left scale)

1
(FY)

0

2.9

2018

20,000

6.3

3.2

3.1

2019

2020 (FY)

67.3

61.3

27,430 27,466 25,557

15,00010,000
5,000

2,999

0

2018

3,184
2019

2,961
2020

(FY)

(kg-CO2/㎡)
90(㎥)
600,00075

500,000

60

400,000

45

300,000

30

200,000

15

100,000

00

Rate of Female Employees*3

26.8

28.3

1.0

375,102

0.8
0.6

0.62

0.4
0.2

2018

2019

Water usage (Left scale)

2020

(FY)

0

Water usage per square meter (Right scale)

(%)
100

31.3

80
60

20

Target: At least 70%

61.7

70.5

79.7

40

10
0

1.02

Paid Holiday Usage Rate*3

(%)
40
30

1.04

459,325(㎥/㎡)
1.2

604,937

20

2018

2019

2020

(FY)

0

2018

2019

2020

(FY)

Waste per square meter (Right scale)At least one-third external directors
6.5

72.8

28,519GHG emissions per square meter (Right scale)Board of Directors

5.8

30,000 ater Usage and Water UsageW
per Square Meter*1

Scope 2 (electricity) (Left scale)

(t)
1,500

1,186

GHG emissions=Scope1+2

30,430 30,650

Scope 1 (gas) (Left scale)60

Annual dividends per share (Left scale)

(％)
8

10

25,000(％)
75

ROE and ROA

6

240

225.4 116,660

 aste Emissions and Waste per
W
Square Meter*1*2* Includes 4.0 yen 70th anniversary commemorative dividend

15(t-CO2)

Energy usage per cubic meter (Right scale)

Consolidated total return ratio (Right scale)(Times)20(kWh/m2)
300

90,000

72.1

80

20

(MWh)
150,000

30,000

(Yen)
100

40

 HG Emissions and GHG
GEmissions per Square Meter*1

120,000

Consolidated payout ratio (Right scale)

16,203 16,763

9.76

8,395

 nergy Usage and Energy UsageE
per Cubic Meter*1

60,000Net assets (Left scale)

Ratio of EBITDA to net interest-bearing

09

30

0
2020 (FY)

5,000

2016

0

8,431

10,006 10,244AnnualDividends per Share,
Consolidated Payout Ratio andConsolidated Total Return Ratio

 BITDA and Ratio of EBITDA toE
Net Interest-Bearing Liabilities

0.5
0

2019

Equity ratio (Right scale)Net D/E Ratio

1

2018

118,639 15
97,524 104,900 109,075 107,302

EPS (Right scale)

1.41

2017

(％)

(Left scale)

1.5

10,0006,000

Net income attributable to owners of parent(Times)2

10,903 11,228

8,000

200

50

2016

9,335

(Millionsof yen)12,0008,000(Millionsof yen)400,000

100

2,000

9,432

Ordinary Income

 otal Assets, Net Assets
Tand Equity Ratio

189.76 (Yen)
7,118

9,673

Non-Financial Highlights

Four independent
external directors(including one female
director)

Five internal directors

Nomination Committee

Chaired by an external director,
and external directors comprise the majorityof the committee

Committee
chair

Three external directors

One internal director

Compensation Committee

Chaired by an external director,
and external directors comprise the majorityof the committee

Committee
chair

Two external directors

One internal director*1 The portfolio of real estate owned by the Group (excluding buildings designated to be sold and jointly owned buildings of which the Company has an ownership share of less than 25%)
is within the scope of calculation. Actual per-square-meter figures are calculated by dividing annual emissions/usage by the total floor area of the relevant property, regardless of theperiod of ownership.
*2 Recycled waste is excluded from the actual figures for waste and waste emissions per square meter.
*3 Heiwa Real Estate on a non-consolidated basis is within the scope of calculation.

HEIWA REAL ESTATE INTEGRATED REPORT 2021

10

Value Creation Strategy

MESSAGE FROM THE PRESIDENT

Heiwa Real Estate Will Contributeto the Development of Sustainable
and Diverse Districts by Flexibly
Adapting to the Drastically Changing
Business Environment
Representative Director and President

Kiyoyuki Tsuchimoto

Boosting Our Presence
as a Real Estate Developer

The Heiwa Real Estate Group declared its goalof becoming "a company that contributes
to revitalizing districts" by working on therevitalization of the Nihonbashi Kabutocho
and Kayabacho areas, where the Company
was founded, in its previous medium- tolong-term management plan "Over the NEXT
DECADE." Despite the goal being an extremely
challenging one for us at the time, we havesteadily been making achievements, includingcommercializing the "KABUTO ONE" project—
our first project in the Nihonbashi Kabutocho
and Kayabacho Revitalization Project—andattracting independent asset managementcompanies and financial venture companies(e.g., Fintech) by rolling out the "FinGATE" series
aimed at contributing to the "Global Financial
City: Tokyo" vision.
Our medium-term management plan
"Challenge & Progress" formulated in April 2020seeks to follow and further evolve the businessstrategies based on the previous medium- tolong-term management plan that had madesmooth progress, in addition to dealing withthe risks of natural disasters that are increasing
year by year, the advancement of corporate
governance, the rising global awareness of
ESG management and the United Nations'Sustainable Development Goals (SDGs), the
COVID-19 pandemic and other drastic changes
in the business environment. In accordancewith the plan, we are working on the two major
pillars presented as our vision for Heiwa Real11

HEIWA REAL ESTATE INTEGRATED REPORT 2021

Estate, namely, "improving social value" and"improving shareholder value," as well as"practicing sustainable management" to help
realize a sustainable society as our key theme.

Heiwa Real Estate's Concept of"Revitalization of Districts"

Nihonbashi Kabutocho and Kayabachoflourished as a district serving as a securities
trading hub and a financial and investment
center where many business people would
come and go. Heiwa Real Estate, which hasroots in this location and is still based here
today, believes it has a certain responsibility torevitalize the area. Rather than bringing back thebustle of the earlier days, we hope to transform
it into a vibrant, brilliant district where a wide
range of people gather, including not only
workers but also residents, overnight guests,
and others who come to enjoy shopping, meals,
music, etc.
K5, which opened in February 2020, won
the Good Design Award 2020, and "HOTEL
K5" was listed in the "MICHELIN Guide Tokyo
2021." This building, almost 100 years old andlocated adjacent to the Tokyo Stock Exchange,
was renovated in accordance with the idea of"sustainable redevelopment"; we believe thisis a necessary approach for today's society
where sustainability is required, also from theperspective of continuing the use of a historicbuilding by giving it new value.
With K5 as the starting point, we haveattracted a patisserie, bistro and craft beer

store and made other efforts to liven up the
district. As a result, Nihonbashi Kabutocho
has been selected by the worldwide versionof the global city guide "Time Out" as one of"The 40 coolest neighborhoods in the world" atpresent, reflecting the growing attention paid
to the district. We are extremely pleased to seethat people who want to change the districtby becoming a member of its community areflocking to this district, so we intend to continue
accelerating these measures going forward.

Leveraging the District's Edge by
Taking Advantage of Its History andDistinctive Characteristics

We should also not forget about developmentthat takes advantage of the distinctive
characteristics unique to Nihonbashi
Kabutocho and Kayabacho. "FinGATE," which
is our initiative to contribute to the "Global
Financial City: Tokyo" vision pursued by theJapanese government and Tokyo metropolitan
government, is tenanted by approximately
50 companies, including independent asset
management companies and financial startups consisting primarily of Fintech firms.
Furthermore, in 2021, the "Financial Market
Entry Office" of the Financial Services Agency
and Local Finance Bureaus, which serves as apoint of contact for inquiries targeting foreign
financial business operators, was opened
in FinGATE TERRACE. We think it is highly
significant that we have been able to attract sucha base that contributes to the "Global Financial

City: Tokyo" vision. We believe this kind of
initiative could have been realized in the formof added value only by Heiwa Real Estate, whichshares its history with the securities and financeindustries. We will continue making efforts to
help enhance its functionality as Tokyo's global
financial center.

Opening of a New Landmark:"KABUTO ONE""KABUTO ONE", the first project in the Nihonbashi
Kabutocho and Kayabacho Revitalization Project,
opened on August 24, 2021. "KABUTO ONE" isa building recognized as a project of one of the
National Strategic Special Zones, and has thefollowing three major characteristics.
The first characteristic is one of the world's
biggest cube-shaped LED displays called "TheHEART," a new information dissemination
function that has been installed in the atrium
space on the first floor. The cube-shaped display,which was designed to represent the heart of theJapanese economy, not only conveys standard
economic information as in the past but also
converts economic trends (pulsation/dynamic
movement) and market conditions into an artistic
expression suggestive of a heartbeat and blood
circulation, thereby making you instinctively
sense what is happening in the market right now.
We hope to communicate the heartbeat of theJapanese economy through the latest technology
and design.
The second is "KABUTO ONE HALL &CONFERENCE" and a book lounge, which
HEIWA REAL ESTATE INTEGRATED REPORT 2021

12

Value Creation Strategy

MESSAGE FROM THE PRESIDENT

are accommodated as financial contribution
facilities on the middle floors. While it is difficult
to have face-to-face dialogue under the current
circumstances due to the COVID-19 pandemic,
we hope to offer a place where companies andinvestors can interact with each other.
The third is the office section tenanted bythose who support the capital market.
The building was named "KABUTO ONE" tohighlight its significance as the starting point for
the Japanese economy, in the hope of becoming
a familiar, new face of this district.

Announcement of a Revitalization Tagline:"A Starting Point and A Highlight"
Following the opening of "KABUTO ONE",the Nihonbashi Kabutocho and Kayabacho
Revitalization Project will enter the second
stage. At this juncture, we determined therevitalization tagline: "A Starting Point and A
Highlight."
In Stage Two, Heiwa Real Estate will further
expand on its efforts in Stage One to increase
opportunities to visit, and will continue torevitalize the area in a way that makes visitors
want to be here, spend time here and visit again,
giving people the central role in the district fromthree aspects: financial, as a district that updates
the concept of finance; bridging, as a district thatconnects people together; and place making, asa district where everyone fits in.
It will speed up the Nihonbashi Kabutocho
and Kayabacho Revitalization Project in the
future, and the district will become an evengreater starting point for the passion of thoselooking to the future and a place where all
attempts and challenges shine as it offers value
and charm as an entrepreneurial starting point.

What does this district need in a time frame
as long as 10 to 20 years?
What can Heiwa Real Estate do?
Envisioning the Post-COVID-19 WorldThe Heiwa Real Estate Group's business portfolio
primarily consists of office buildings across Japan.
In FY2020, our business performance was good inthat we posted record-high profits as a result of
being able to operate buildings stably even in the
terrible business environment amid the COVID-19
pandemic, in addition to the steady accumulationof accomplishments made by each and every oneof our employees. On the other hand, there is still
no end in sight to the COVID-19 pandemic, giving
rise to the argument that offices are no longer
needed due to the widespread adoption of workfrom home (WFH)/telework, not to mention thedramatic decrease in inbound tourists. However,
we hope to figure out what this district needs ina time frame as long as 10 to 20 years and what
Heiwa Real Estate can do, especially at times like
this, rather than panicking based on an excessively
pessimistic view of the past year. How should the
district be shaped to win people's hearts when the
pandemic comes to an end? We intend to keepquestioning in this manner at all times.

13

HEIWA REAL ESTATE INTEGRATED REPORT 2021

Steadily Promoting
Sustainable Management

As a business company required by society,we identified material issues, and in December
2020 established the Sustainability Committee.
We will monitor the PDCA cycle for various
sustainability measures and enhance theireffectiveness. As part of such initiative, we haveswitched the electricity used at 17 properties
in the Tokyo and Yokohama areas to renewableenergy sources since May 2021. This is expected
to reduce CO2 emissions by approximately 4,900
tons in FY2021.
On the other hand, in order to further boost
the vitality of the Company organization, we
will implement "job satisfaction reform" andtranslate it into higher corporate value. Being
able to really feel your own personal growth gives
you a greater sense of satisfaction. We will realize
a company in which "people grow" rather thana company that "nurtures people," by making
employees' career vision transparent throughthe review of the human resources development
system, and recommending employees to gain aspecialty. In parallel with this, we believe now is
the time to build up experience and confidence
both as a company and as an individual while
actually performing and truly experiencing workthat is recognized by improving the evaluation
system and work that is appreciated throughsustainability measures.

Working On Health Managementin Earnest

For the sustained growth of the Company, it
is important that each and every employee ishealthy—both mentally and physically—andable to fully demonstrate his/her abilities andindividual characteristics.
Having set forth the "Declaration of HealthManagement" aimed at making full-fledged
efforts on the health improvement investment
project currently being promoted, we will
engage in initiatives on an ongoing basis,including bearing cancer screening expenses
and other initiatives for early discovery, andinitiatives to reduce excessively long working
hours based on a prior approval system forovertime work, in addition to health-enhancing
initiatives such as seminars on dietary habits.

Becoming a "Company with a Strong
Presence" by Utilizing Corporate Branding
The Heiwa Real Estate Group is currently
in the phase of propelling itself to a higher
stage, which involves taking on challenges

and reaching new heights as “Creating __Communities, Building for the Future” This year
will be one of importance in that anything andeverything done by Heiwa Real Estate will attract
greater interest than ever before, following the
opening of "KABUTO ONE". My intention behindthe statement “Creating __ Communities,
Building for the Future” that we have newly set
out at this juncture is to make each and every
employee constantly think about how he/she
can contribute to revitalizing districts in thework that he/she is in charge of, in seemingly
unnatural endeavors. While "revitalizing
districts" is interpreted as "developing this area"
in many cases, we firmly believe that no matter
how trivial or personal they may be, each andevery employee's thoughts and actions translate
into the revitalization of districts by Heiwa Real
Estate. Going forward, we will utilize this tagline
in combination with the logo of the Company
name, to strongly evoke the image of the "Vision
for the Heiwa Real Estate Group."

Contributing to Society by Inheriting
Transformational DNA

Nihonbashi Kabutocho and Kayabacho is the place
where Eiichi Shibusawa literally dedicated the primeof his life from his 30s to 50s to the rise of Japan as
an entrepreneur, industrialist and financier. Since
the Meiji Era, this area has been filled with thechallenger's spirit—the strong desire to make it bigfrom this district—so we, too, are eager to take on
the challenge as a novice real estate developer. A
location that still has deep connections with Eiichi
Shibusawa to this day is "KABUTO ONE". The "RedStone" sitting in the atrium on the first floor of thebuilding is claimed to have been cherished by Eiichi
Shibusawa throughout his life, having placed it inhis home as a stone of good luck after his residence
was newly built in Kabutocho. Everyone is welcome
to touch the Red Stone.
In his book "Rongo and Soroban (Analects ofConfucius and the Abacus )," Eiichi Shibusawa
preached the importance of striking a balance
between morality and the pursuit of profit, andthinking about public interest at all times. Likewise,

the Heiwa Real Estate Group is committed tocontinuing its contribution to society while also
flexibly adapting to the drastically changing businessenvironment, with this philosophy—which may be
regarded as Eiichi Shibusawa's DNA—etched in ourmind.
Going forward, we ask for your continued
understanding and support for the Heiwa Real
Estate Group's business activities as “a company
that contributes to revitalizing districts," and yourinterest in our future initiatives to take on challenges
and reach new heights will be highly appreciated.
HEIWA REAL ESTATE INTEGRATED REPORT 2021

14

Value Creation Strategy

Medium-term Management Plan “Challenge & Progress”
Positioning of the Medium-term Management Plan

For the purpose of further advancing the business strategies of the previous medium- to long-term management plan—which had made smooth
progress—while following their path, we will refocus our business model on added-value creation through the revitalization of Nihonbashi
Kabutocho and Kayabacho, the commercialization of the Sapporo Redevelopment Project, and external and internal growth. Also, we consider
this a period for tackling the challenge of, and making progress in, the aim to be "a company that contributes to revitalizing districts,"
by helping resolve social issues through the promotion of sustainability measures.

KPIs
Profittargets
Capitalefficiency

Aim to be “a company that contributes to revitalizing districts”(Taking on the challenge of becoming a developer)

Shareholder
returns

Consolidated operating income : From ¥8 billion to ¥10 billion over 10 years
FY2014-FY2019 actual

Redevelopment Investment Plan

FY2020–FY2023 plan

Approx. ¥32 billion

Approx. ¥15 billion

Improving social value

Improving shareholder valuethat contributes to revitalizing districts”

as a listed real-estate company

Making society sustainable as “a company

2. Building Business● P rogress in commercializing the Sapporo Redevelopment Project● S ustainable building operations to improve environmental

3. Asset Management Business● Growing asset management earnings● Pursuing external and internal growth

performance and disaster preparedness● Generating earnings from inventory sales

4. Corporate Activities● P romotion of capital policy that takes into account capital costs

and capital efficiency● Strengthening corporate governance● Practicing sustainable management

HEIWA REAL ESTATE INTEGRATED REPORT 2021

Approx. ¥60 billion(including former
Asset Management
Business)

Returns from portfolio renewal:

Approx. ¥20 billion

Approx.
¥8.1 billion

Returns from existing inventory sales:

Approx. ¥34 billion

1. Nihonbashi Kabutocho and Kayabacho revitalization

1・Development of KABUTO ONE

Redevelopment
Business・Contribution to "Global Financial City: Tokyo" vision (opening of FinGATE TERRACE)

・Promotion of development of diverse districts (contribution to culture, art, etc, including holding local community events)

・Promotion of development of sustainable districts (commencement of construction of (tentative name) Kabutocho 85 Project）

2. Progress in commercializing the Sapporo Redevelopment Project・Acquired Kabutocho Heiwa Building No. 7 Shimbashi Square Building, Heiwa Real Estate Nihonbashi Building and Asakusa
Residence, totaling approx. ¥20 billion, in FY2020.

Building
Business4● N ihonbashi Kabutocho and Kayabacho revitalization

Approx.
¥20.5 billion

Acquisitions:

Building
Business・Raised ROE and proactively generated shareholder returns while maintaining financial discipline.

Corporate
Activities

1. Redevelopment BusinessApprox.
¥6.5 billion(Breakdown)
Nihonbashi Kabutocho andKayabacho: Approx. ¥22 billion
Sapporo: Approx. ¥10 billion

・Achieved record highs for operating income and ordinary income for the second consecutive year and net income
attributable to owners of parent for the fourth consecutive year.

Summary of FY2020

Asset Management
Business● Growth in EPS, awareness of ROE, substantial shareholder returns

Approx. ¥32 billion

Progress of Medium-term Management Plan

3

Business Strategies

15

Approx. 70%(Tackling the challenge of, and making progress, as a developer)● Practicing sustainable management(FY2020–FY2023)(FY2020–FY2023)
Consolidated
total return ratio Consolidated dividend payout ratio of
approx. 50% by FY2023

2● Quantitative and qualitative expansion of the Redevelopment Business ● Refocusing the business model on added-value creation

At least 6%

ROE“Challenge & Progress” (FY2020–FY2023)

Consolidated operating income : From ¥10 billion to ¥12 billion over 4 years(FY2023)

Redevelopment
Business

FY2020 results* Breakdown of consolidated operating income…Building Business: ¥11.8 billion;
Asset Management Business: ¥1.8 billion;
Corporate/Eliminations, etc.: -¥1.6 billion

Improving shareholder value

Tackling the challenge of, and making progress in, the aim to be“a company that contributes to revitalizing districts”

At least ¥12 billion*

Plan(Reference) Financial soundness: Net D/E ratio of 1.8 times or less

Overview of the Medium-term Management Plan “Challenge & Progress”

As “a company that contributes to revitalizing districts,” the Group strives to help society become more sustainable while also improving
corporate value, by increasing satisfaction through interactive communication with stakeholders and providing solutions to environmental andsocial issues.

(FY2023)

Consolidated
operating income

Previous Medium- to Long-term Management Plan, “Over the NEXT DECADE”(FY2014–2019)

At least ¥200

EPS

Investment Plan for FY2020 to FY2023

・Worked to raise lease prices while increasing tenant satisfaction by maintaining and improving building value and raising thestandard of building operation and management services.
・Executed development, lease up and remodeling projects, etc. and sold profitable assets after maximizing their value.
・Increased Heiwa Real Estate Group's earnings steadily in line with the growth of Heiwa Real Estate REIT, Inc.

・Heiwa Real Estate REIT, Inc. reverted to the "external growth stage" based on capital increase through a public stock offering
for the first time in approx. five and a half years.
・Annual dividends per share: ¥77 (consolidated payout ratio: 40.6％)

・Repurchased 625,000 shares of the Company's stock amounting to ¥1,990 million (consolidated total return ratio: 68.5％).
・Established the Sustainability Committee and improved effectiveness through monitoring of the PDCA cycle by the
management team and executive employees.

Trends in Performance and Indicators

Profittargets

Capitalefficiency
Shareholder
returns

EPS

FY2019FY2020

FY2023¥184.82¥189.76

At least ¥200

(Results of previous medium - tolong- term management plan)(KPIs)

Consolidated
operating income¥10.9 billion

ROE

6.5％

¥11.22 billion

At least ¥12 billion

Consolidated
total return ratio(Consolidated payout ratio)

57.8％(30.3％)

68.5％(40.6％)

Approx. 70％(Approx. 50％)

6.3％

At least 6％

HEIWA REAL ESTATE INTEGRATED REPORT 2021

16

Value Creation Strategy

Message from the Officer in Charge of Financial Affairs

Heiwa Real Estate is Aiming for
Sustained Growth by
Taking Capital Costs andCapital Efficiency into Account.
Representative Director

and Senior Managing Executive Officer

Norio Iwasaki■ FY2020 Results

Posted Record-High Profits Due to Higher Profitability
in Terms of Earnings from Sales, etc.

As for Heiwa Real Estate's consolidated business performance in
FY2020, the first fiscal year of the medium-term management plan
"Challenge & Progress," operating revenue decreased 24.9% year on
year to 35 billion yen, operating income increased 3.0% year on year
to 11.2 billion yen, ordinary income increased 2.4% year on year to
10.2 billion yen, and net income attributable to owners of parent
increased 1.0% year on year to 7.1 billion yen. Operating revenue
fell due to the decrease in inventory sales, but profits increased
as a result of the increase in profitability in terms of earnings frominventory sales and the growth in leasing earnings, enabling us topost record-high profits. Heiwa Real Estate, whose earnings structure
is based on office leasing, has continued to grow profits steadily due
to the success of its own initiatives aimed at external growth (i.e.,acquiring properties) and internal growth (e.g., raising lease prices),in addition to the strong office market over the past few years. In
regards to shareholder returns, we paid annual dividends of 77 yen
per share (consolidated payout ratio: 40.6%), an increase of 21 yencompared to the previous year. Combined with repurchases of theCompany's shares amounting to approximately 2 billion yen,
the consolidated total return ratio was 68.5%.
■ Impact of the COVID-19 Pandemic

Limited Impact Overall

In the Building Business, some buildings for commercial andhotel purposes were impacted, but the impact on our mainstay
operation—i.e., office leasing—was limited. Also, in the AssetManagement Business, we managed to contain the impact to alow level due to the smooth progress of property sales by Heiwa
Real Estate REIT, Inc., in addition to being able to execute inventory
sales as planned. The Redevelopment Business has also been
operating smoothly without being affected. It is therefore fair to saythat the impact of the COVID-19 pandemic has been minor overall,
given that the impact on Heiwa Real Estate's consolidated businessperformance amounted to approximately 400 million yen in terms of
consolidated operating income.

17

HEIWA REAL ESTATE INTEGRATED REPORT 2021

■ Direction of the Medium-term Management Plan

Aiming for Sustained Profit Growth andManagement Taking Capital Costs into AccountUnder the slogan "Tackling the challenge of, and making progressin, the aim to be a company that contributes to revitalizing districts,"
our policy is to engage in initiatives aimed at "quantitative andqualitative expansion of the Redevelopment Business," "practicing
sustainable management," and "refocusing the business model on
added-value creation," in pursuit of sustained profit growth andmanagement taking capital costs into account. Specifically, we willseek to create added value through the Redevelopment Businessand push up leasing earnings by building up and reshuffling ourportfolio. We believe the driver for earnings going forward will beearnings obtained from property sales utilizing unrealized gainsof leasing business assets. In other words, in the context of new
segment classification,* growth is expected to be driven by theincrease in both leasing earnings and earnings from property sales
in the Building Business. In the Asset Management Business, wewill continue to support the growth of Heiwa Real Estate REIT, Inc.,
to pursue the stable expansion of asset management earnings.
Through these efforts, we plan to increase consolidated operating
income to the level of 12 billion yen in the final fiscal year of themedium-term management plan and enhance capital efficiency.
* From FY2021 onwards, development, sale, management, etc. of real estate for sale that
had conventionally belonged to the "Asset Management Business" were reclassified tothe "Building Business" in consideration of future business expansion.

■ Future Investment Plan and Progress of Plan

Improving the Quantity and Quality of thePortfolio along with Asset Rotation

In the next four years, we plan to invest approximately 32 billion
yen in the Redevelopment Business and approximately 60 billion
yen into external growth (i.e., property acquisition) and seek tobuild up our assets (portfolio) through redevelopment and property
acquisition. On the other hand, we plan to collect approximately
20 billion yen through sales by reshuffling our portfolio andapproximately 34 billion yen through inventory sales; our strategy is
to improve the quantity and quality of our portfolio along with asset
rotation. Sales through portfolio reshuffling is a new policy that wehave set forth, and the idea is to realize unrealized gains that havebeen accumulated in long-held properties to make use of themfor management in the next stage. We have already reclassified
two properties from fixed assets to inventory as of the end of theprevious fiscal year, and going forward, we will continue looking
into reclassifying and selling assets in due course.
As for the results in the previous fiscal year, inventory in theamount of approximately 8.1 billion yen was sold, while four
properties—i.e., Kabutocho Heiwa Building No. 7 Shimbashi Square
Building, Heiwa Real Estate Nihonbashi Building and Asakusa
Residence—were acquired for a total amount of approximately
20.5 billion yen. Our future plan is to continue building up newlease assets targeting mainly office buildings in central Tokyo andmajor cities. In the Redevelopment Business, we will promote thedevelopment pipeline, including the Sapporo Redevelopment
Project, in addition to "KABUTO ONE," which opened on August 24,
2021, as well as subsequent projects, with the aim of revitalizing
Nihonbashi Kabutocho and Kayabacho.
■ Important Management Indicators and Risk Factors

Adapting to the Changing Business Environment
in a Flexible MannerIn the latest medium-term management plan, we have placed
greater importance on not only profit growth but also capital costs
and capital efficiency, and our targets for the final fiscal year are:earnings per share (EPS) of 200 yen or more; being mindful of capitalcosts, return on equity (ROE) of 6% or more to exceed this; andconsolidated total return ratio of approx..70%*1. For shareholder
returns, we have set the target at a level where we can generate
returns after necessary funds for our businesses have been set
aside as internal reserves, and we will also seek to enhance capitalefficiency by repurchasing the Company's shares, combined withthe payment of dividends.
As for financial discipline, Heiwa Real Estate's net debt-to-equity(D/E) ratio had conventionally been kept to 1.5 times or less, leading
to the improvement of its financial soundness and the accumulationof unrealized gains of leasing business assets. Taking this into
consideration, our policy is to control the net D/E ratio at 1.8 times
or less during the period of the latest medium-term management
plan. With respect to risk factors, our understanding is that it isnecessary to carefully monitor how the office market is impacted bytrends in corporate business performance, the widespread adoptionof remote work and other such factors, including the prolongation

Investment Plan (from FY2020 to FY2023)
Plan

Approx. ¥32 billion(Breakdown)
Redevelopment
Nihonbashi Kabutocho andBusiness
Kayabacho: Approx. ¥22 billion
Sapporo: Approx. ¥10 billion
Building
Business(including former
Asset Management
Business)

Acquisitions:

Approx. ¥60 billion

Returns from reshuffling:

Approx. ¥20 billion

Returns from existing inventory sales:

Approx. ¥34 billion

FY2020 results

Approx.
¥6.5 billion
Approx.
¥20.5 billion
Approx.
¥8.1 billionof the COVID-19 pandemic. That said, the vacancy rate*2 as of March
31, 2021 was stable at a low level, i.e., around 1.5%. Going forward,
we intend to continue developing attractive districts and improving
the value of individual properties, as well as selecting properties tobe acquired based on stringent criteria, reshuffling our portfolio ina flexible manner and making other such efforts to flexibly adapt tochanges in the environment.
*1 Among these targets, we are aiming for a consolidated payout ratio of approx.50% by
FY2023.
*2 National average (excluding sections subject to lease suspension related toredevelopment, etc.)■ FY2021 Business Performance Forecast and Shareholder Returns

Forecasting Higher Revenue and Profitsas Well as Increase in Dividends

As for Heiwa Real Estate's business performance forecast for FY2021,
we are expecting both revenue and profits to increase, i.e., operating
revenue to increase 62.1% year on year to 56.8 billion yen, operating
income to increase 2.4% year on year to 11.5 billion yen, ordinary
income to increase 0.5 year on year to 10.3 billion yen, and net income
attributable to owners of parent to increase 2.5% year-on-year to
7.3 billion yen. The growth in earnings from property sales, the hikeof lease prices, etc., In the Building Business are expected to continue
contributing to profit growth. In regards to shareholder returns, weplan to pay annual dividends of 82 yen per share (consolidated payout
ratio: 41.4%), an increase of 5 yen compared to the previous year. In
addition, having passed a resolution to repurchase the Company's
shares in the amount of up to 2 billion yen, the consolidated total
return ratio is expected to be 68.8%.
■ To Our Stakeholders

Endeavoring to Realize Returns in Various Ways

It is necessary to expand Heiwa Real Estate's businesses by wisely
utilizing its equity and debt. However, as explained earlier, ourpolicy is to be more mindful of capital costs and capital efficiency
while observing fiscal discipline, rather than merely pursuing the
expansion of scale. We intend to promote businesses that can realize
the provision of value to our stakeholders in various ways, including
proactively generating shareholder returns, and translate them into
sustained growth. We ask for your continued support from a longterm perspective going forward.
EPS, Annual Dividends per Share, Consolidated Payout Ratio
and Consolidated Total Return Ratio

(Yen)
250

72.1

200
150
100
50
0

113.17

23.0
26
2016

EPS (Left scale)132.5757.8

158.73184.82

30.2

30.3

48

56

2018

2019

27.9

37※
2017

Annual dividends per share (Left scale)

Consolidated payout ratio (Right scale)

(%)
75

68.5

189.76

60

40.6

45
30

77

2020

15
(FY)

0

Consolidated total return ratio (Right scale)* Includes 4.0 yen 70th anniversary commemorative dividend

HEIWA REAL ESTATE INTEGRATED REPORT 2021

18

Business Review

Feature Nihonbashi Kabutocho and Kayabacho
ArticleRevitalization ProjectFeature Article

Nihonbashi Kabutocho is home to the Tokyo Stock Exchange and the center of
securities markets in Japan. Along with Wall Street in New York City and the Cityin London, it is one of the world’s leading securities districts. The three major
securities markets in Japan are Kabutocho, where the Tokyo Stock Exchange
is located, Kitahama, where the Osaka Exchange is located, and Isemachi,
where the Nagoya Stock Exchange is located.

Nihonbashi
Kabutocho
Japan's Financial
and Economic Heart

Leading Project to Create a Financial Hub That Helps Realize the "Global Financial City: Tokyo" Vision

1 Opening of KABUTO ONE

Building Name Concept

Kabutocho has prospered as the heart of the Japanese economy
since the Edo period and has grown into one of the world’s
leading economic areas.
The KABUTO ONE development has been named as such toreflect the idea that Kabutocho was, and will continue to be thestarting point for the Japanese economy.
Project Overview
Address

Book lounge on 3F

KABUTO ONE Hall on 4F

KABUTO ONE will introduce functionality to the district consistent with the “global
financial city” vision, fostering information sharing and talent development in thefinancial industry and promoting dialogue and communication between investors
and companies. KABUTO ONE will contribute to the vision as well as furthering thedevelopment and appeal of the entire region.
Facing the intersection of Eitai-dori and Heisei-dori, the KABUTO ONE’s
atrium is about 14 m high and is designed with a three-story glass wall. The
atrium symbolizes the financial base as a regional gateway and will be an “icon”
of the Japanese financial capital market. Using the open space in the atrium,
KABUTO ONE features the world’s largest LED video cube called “The Heart,” todisplay market energy and trends in a visual and spatial manner. The atrium alsofunctions as a site for visitors to gather, rest and interact and for local activities andother events.
Feature Article

Creation of a Revitalization Tagline

2 " A Starting Point and A Highlight "Nihonbashi Kabutocho and Kayabacho Revitalization Project Revitalization Tagline

150 years since Eiichi Shibusawa and his colleagues built the foundation for banks andAccessMain uses
Number of floors
Structure
Total floor area

Owner/Developer
Design/Supervision
Construction

One of the World's Largest Digital Signage「The HEART」

7-1, Nihonbashi Kabutocho, Chuo-ku, Tokyo

Direct access to Kayabacho Station on Tokyo
Metro’s Tozai and Hibiya lines* Connecting passages scheduled to open in
December 2022
Offices, shops, meeting rooms, conference
rooms, parking

15 above-ground floors, 2 basement floors,
2 penthouse floors

Above ground: Steel construction; Basement:
Steel-reinforced concrete (SRC) construction(steel construction in parts); intermediate layer
seismic isolation structure
Approx. 39,208m2

Heiwa Real Estate Co., Ltd. Yamatane
Corporation, Chibagin Securities Co., Ltd.

(Design/facilities) Mitsubishi Jisho Sekkei Inc.
(Structure) OBAYASHI CORPORATIONOBAYASHI CORPORATION"The HEART" inside KABUTO ONE"The HEART" is one of the world's biggest digital signage
installed in the atrium inside "KABUTO ONE.""The HEART" was designed in the image of the "heart" offinancial and economic district Nihonbashi Kabutocho andinstalled in the hope of turning it into a symbol of the region asa new face of the capital market.

It has entered Stage Two of the Nihonbashi Kabutocho and Kayabacho Revitalization Project with the opening of KABUTO ONE, the firststage of the revitalization project in the Nihonbashi Kabutocho and Kayabacho district, as a starting point in August 2021.
In Stage Two, Heiwa Real Estate will further expand on its efforts in Stage One to increase opportunities to visit, and will continue
to revitalize the area in a way that makes visitors want to be here, spend time here and visit again, giving people the central role in the
district from three aspects: financial, as a district that updates the concept of finance; bridging, as a district that connects people together;and place making, as a district where everyone fits in.
Nihonbashi Kabutocho and Kayabacho Revitalization Project Revitalization Tagline: Key Visual Element

securities here.
An entrepreneurial spirit has flowed continuously through Kabutocho.
A desire to take on challenges. A desire to move forward with confidence.
The district has supported and developed this human passion.
The new value born here in the future will become an endless radiance and will surely
continue to spread throughout the world.
Now it will become a district where all attempts and challenges sparkle.

Nihonbashi Kabutocho and Kayabacho Revitalization Project Revitalization Tagline: Logo A Golden Sash Connecting the District

As a district connecting entrepreneurial passion, Heiwa Real Estate offers a golden sash as a symbol of connecting people, people with the district,and the times and will utilize this in its revitalization.

The golden sash invites and connects all visitors while freely changing shapes in all areas of the district.
19

HEIWA REAL ESTATE INTEGRATED REPORT 2021

HEIWA REAL ESTATE INTEGRATED REPORT 2021

20

Business Review

Relevant SDGs

Developing Sustainable
and Diverse Districts

Redevelopment
Business

Business Environment●H eightened momentum to revitalize districts in Nihonbashi Kabutocho and Kayabacho● "Global Financial City: Tokyo" vision

Competitive Advantages
founded.

● Our relationship with communities● We have built a relationship of trust with securities and financial industries.

The area subject to district revitalization isapprox. 100,000 m2. The historical background of

Kabutocho and other factors were the basis for ourconcept of a district where people connect, andwhere investment and growth are born. Our goal isrevitalization that is unique to Kabutocho throughthe harmonization of Kabutocho's potential withneighboring districts.

Business Strategies

1. Revitalization of Nihonbashi Kabutocho and Kayabacho

We will promote the development of sustainable and diverse districts by engaging insuch initiatives as livening up the entire area within the scope of district revitalization andcontributing to the "Global Financial City: Tokyo" vision, as well as materializing district
redevelopment through the launch of new projects, in addition to KABUTO ONE.

2. Progress in Commercializing the Sapporo Redevelopment Project

We will promote the Sapporo Redevelopment Project on a full scale by participatingin Sapporo Station South Exit North 4 West 3, district redevelopment (i.e., block in which
the Sapporo Ekimae Godo Building is located), along with the commercialization of the
Dogin Building redevelopment project.

● Nihonbashi Kabutocho was selected by the global city guide "Time Out" as the only
place in Japan listed among "The 40 coolest neighborhoods in the world" in 2020.
● Kabutocho Heiwa Building No.5 (K5) won the Good Design Award 2020.

ho
oc
gy
N

K5

To

Nih

on

ba

sh

i

Jazz EMP

FinGATE KABUTO

KABUTO ONE

K5

sh
iA
ve
Nin
gy
oc
ho

● An office building doubling as a retailbuilding that adopts a hybrid structure(wooden construction and SRC construction)
for the first time for Heiwa Real Estate

To

inOh
a

District revitalization

Assets held by the Heiwa Real EstateGroup (Including some shared assets)

nz

K5

K5

Construction underway on Kabutocho 85 Project(Tentative Name)●A dopted for “leading projects” programfor sustainable buildings (wood-based
structures) in FY2020 by the Ministry of Land,
Infrastructure, Transport and Tourism.

Sh

FinGATE KAYABA

Mo

ⒸK5

ICHI-RYU MANBAI

Initiatives for Developing Sustainable Districts

FinGATE BASE

To

HEIWA REAL ESTATE INTEGRATED REPORT 2021

FinGATE TERRACE● We contributed to culture, art, etc., including co-hosting live jazz event "Jazz
EMP (Emerging Musicians Program)" and "ICHI-RYU MANBAI" live＠TSE Arrows
and holding "Shibuaka Festa."

FinGATE TERRACE

21

FinGATE BASE

Initiatives for Developing Diverse Districts

To

Opening of "KABUTO ONE"

Exterior of KABUTO ONEFinGATE KABUTO

in

P.19

This building was named "KABUTO ONE"to highlight its significance as " the starting
point for the Japanese economy.” Its entrance
has a new information dissemination
function named "The HEART." Its middle
floors accommodate "KABUTO ONE HALL &CONFERENCE" as a financial contribution
facility, as well as a book lounge. On the firstfloor, a community café and a food hall arescheduled to open in due course.

FinGATE KAYABA● "HOTEL K5" was newly listed in the "MICHELIN Guide Tokyo 2021."

TOPICSFirst Project for Revitalization of
Nihonbashi Kabutocho and Kayabacho"FinGATE": Offices for independent asset management companies and financial venture companies currently
in operation at four sites● Tenants of FinGATE consist of approx. 50 companies including independent asset management companies and financial start-ups (mainly
Fintech companies).
● In May 2021, "FinGATE KABUTO" was expanded with the aim of luring foreign financial business operators, etc.
● In June 2021, the "Financial Market Entry Office" of the Financial Services Agency and Local Finance Bureaus—a centralized point of contact
for inquiries targeting foreign financial business operators—was opened in FinGATE TERRACE.

●W
 e develop businesses based in Nihonbashi Kabutocho, where the Company was

Heiwa Real Estate Seeks to Inspire New Trendsin Nihonbashi Kabutocho and Kayabacho

Supporting the “Global Financial City: Tokyo” Vision

en

na

ka

ch

o

● Applied a common concept design tolandscaping and wooden benches in thearea subject to district revitalization tobring them together and create a senseof unity in the district as a whole andpromote the development of a districtin harmony with nature.

Overview of (Tentative name) Kabutocho 85 Project
Address
AccessMain purpose

8-5, Nihonbashi Kabutocho, Chuo-ku, Tokyo
One-minute walk from Tokyo Metro
Tozai Line "Kayabacho Station"
Stores and offices

Number of floors 10 floors above ground
Structure

Wooden hybrid structure

Total floor space Approx. 296 tsubo (978.5 m2)
Design,supervision and ADX Co., Ltd.
construction
Construction
periodFrom December 2020
to March 31, 2022 (schedule)
HEIWA REAL ESTATE INTEGRATED REPORT 2021

22

Business Review

Relevant SDGs

Leveraging Our Superior Portfolio
in Major Cities across Japan

Building
Business

Progress in Internal GrowthBusiness Environment● We will work to raise lease prices based on trends in the office leasing market● Diversification of workstyles and office needs(plan to raise lease prices from FY2020 to FY2023: Approx. ¥700 million)● Environmentally-friendly and BCP-conscious operation● We will work to raise lease prices while increasing tenant satisfaction by maintaining and improving building value
and raising the standard of building operation and management services.

Competitive Advantages

Progress of Lease Price Increases (No. of properties) *● We have a superior portfolio of properties in central districts of major cities across Japan.
● We have a track record and gained trust as an owner of securities exchange buildings.

(Properties)
150● We have tenant relationship/tenant leasing capabilities.

●W e have higher tenant satisfaction by maintaining and improving building value

100

and raising the standard of building operation and management services.

50
0 perating Revenue from Building LeasingO(Excluding building sales)(Billionsof yen)
22
20
18
16
14
12
10
8
6
4
2
0

17.6
2.6
1.1
1.9
3.7

17.9
2.7
1.0
1.8
3.8

8.2

8.4

2015

2016

Tokyo

Osaka

19.2

18.7

2.8

2.7

1.1

1.0

1.2

1.3

4.3

9.4

4.1

4.3

4.4

8.9

8.9

9.1

2017

2018

Nagoya2019

Fukuoka e will generate earnings from the sale of properties during the process ofWrenewing the portfolio, while building up the portfolio through the acquisition of newlease assets. We will also improve portfolio profitability by raising lease prices basedon trends in the office leasing market.

3.7

3.6

2.5

2020

(FY)

Sendai, Sapporo

524

131

500
105
400
300
229
65
41
	We aim to maximize value through development,200
lease70
up and remodeling projects,
100
15with the goal of generating earnings from the sale of
0 profitable assets and further
2016
2017
2018
2019
2020（年度）
2016
2017
2018
2019

3. Generating Earnings from Inventory Sales
development of the HF Residence series.
※「増額」から「減額」を差し引いた件数

227
2020（年度）※「増額」から「減額」を差し引いた金額※2019年度は東証ビル賃料年間3億円の増額を含む● We plan to invest approx. ¥60 billion (net investment: ¥40 billion) in four years under the medium-term management plan as our
external growth strategy.
● Our goal is to build up new lease assets, mainly targeting office buildings in central Tokyo and major cities.

● We acquired Kabutocho Heiwa Building No. 7, Shimbashi Square Building, Heiwa Real Estate Nihonbashi Building and Asakusa
Residence, totaling approx. ¥20.5 billion, in FY2020.
Shimbashi Square Building

Heiwa Real Estate
Nihonbashi Building

23

2018

2019

2020

400

* Net number of properties
after subtracting total
number of properties forwhich lease prices decreased
from total number ofproperties for which they
(FY)
increased

200
0

70
2016

229
15

2017

2018

227

2019

2020

(FY)

* Net number of properties
after subtracting total
number of properties forwhich lease prices decreased
from total number ofproperties for which they
increased* FY2019 includes an annual
increase in rent of the Tokyo
Stock Exchange Building
amounting to ¥300 million.

（%）
6.0
5.5
4.0
3.0
2.0
1.0
0

Stock of Real Estate for Sale
Assets Held

Location* Area is proportionate to the Group's interest in the relevant property as of March 31, 2021

3.4 Ginza, Chuo-ku
Ginza offices
2.0
1.5
Osaki offices
Osaki, Shinagawa-ku
0.9
0.8
Kayabacho offices
Nihonbashi
Kayabacho, Chuo-ku
0.0
2016
2017
2018
2019
2020（年度）
Nagoya Sakae offices
Sakae, Naka-ku, Nagoya City
東京
大阪
名古屋
福岡
Chiba ResidenceChuo-ku, Chiba City
仙台・札幌
全国
HF Residence series

Properties developedby the Company

HF Shoukouji Akabane
Residence II

Exclusive-use floor space

8,427.67 ㎡
4,920.01 ㎡
3,375.83 ㎡
7,337.43 ㎡
1,703.23 ㎡(See table below)

HF Yahiro Residence

Completed

September 1974
October 1992
September 1991
March 1995
December 2018

HF Setagaya Kamimachi
Residence

Acquired

July 2018
September 2020
September 2013
February 2015
July 2019

Kawaguchi Sakaecho PJ

Stock balanceApprox. ¥31.0 billion(As of March 31, 2021)

Higashiogu PJ

Building image

Asakusa Residence

TOPICSFirst Flexible Office Project"XPORT Nihonbashi Kabutocho" Opened in July 2021

Building
image

Location
Exclusive-use
floor space
Main purpose
Completed
Acquired2017

Projects in the HF Residence Series

Progress in External Growth

Kabutocho Heiwa Building
No. 7

41

524

● Utilization of renewable energy	Guided by our long-term vision, we are working to reduce CO2 emissions throughinvestment in sustainable building facilities and operations to help address（百万円）
social issues such as disaster preparedness
andenvironmental concerns.
600
138

2016

105

(Millions of yen)
600

・By switching the electricity used at 17 properties in the Tokyo and Yokohama areas to renewable energy sources from May 2021 onwards,
our CO2 emissions are expected to be reduced by approx. 4,900 tons per year.
・Going forward, we plan to continue adding more properties utilizing renewable energy in due course.

2. S
 ustainable Building Operations, We Are Working to Improve
Environmental Performance and Disaster Preparedness
（件）
160
140
120
100
80
60
40
20
0

65

131

Promotion of Sustainable Building Operations,etc., Aimed at（百万円）
Improving Environmental Performance and Disaster Preparedness

1. Pursuing External and Internal Growth

21.3

21.0

2.5

1.9

1.8

Business Strategies

138

Net Amount of Lease Price Increases (Increased revenue on a fiscal year basis) *Chuo-ku, Tokyo

Minato-ku, Tokyo

Chuo-ku, Tokyo

Taito-ku, Tokyo

Banks and offices
October 1979
June 2020

Offices and stores
March 2008
September 2020

Offices and stores
December 1989
December 2020

Condominium units and stores
February 2021
February 2021

6,578.54 ㎡

HEIWA REAL ESTATE INTEGRATED REPORT 2021

5,422.10 ㎡

3,032.09 ㎡

1,457.28 ㎡

XPORT (pronounced "cross-port") is a flexible office meeting new
office demand. Values demanded in offices are changing day by
day in line with the diversification of workstyles.
"XPORT Nihonbashi Kabutocho" supports tenants—ranging
from start-ups to large enterprises—in the creation of new values, byproviding an environment in which they can work comfortably witha sense of security in the form of an office that boosts intellectual
productivity in the creation of new ideas and businesses.

HEIWA REAL ESTATE INTEGRATED REPORT 2021

24

Business Review

Meeting Ever-Growing
Real Estate Investment Demand

AssetManagement
Business

Business Review (Consolidated)
FY2020 Business Review (Consolidated)

Business Environment

・Operating revenue decreased due to such factors as the fall in the sale of inventory in the Asset Management Business.

● Higher demand for real estate investment

・Achieved record highs for operating income and ordinary income for the second consecutive year and net income attributable to● Real estate prices remaining at high levels

owners of parent for the fourth consecutive year.

Competitive Advantages

・Operating income, ordinary income and net income attributable to owners of parent increased due to the increase in the gain on thesale of inventory in the Asset Management Business, despite the decrease in the gain on the sale of properties in the Building Business● We are the sponsor of Heiwa Real Estate REIT, Inc.

and the impact of the COVID-19 pandemic, among others.

●W e collaborate with Group companies including Heiwa Real Estate Asset Management Co,

Ltd., i.e., the asset manager of Heiwa Real Estate REIT, Inc.

Operating revenue(Millions of yen)

Business Strategies

Operating income(Millions of yen)

1. Growing Asset Management Earnings

We aim to grow Heiwa Real Estate Group earnings, including asset management fees,by supporting growth of Heiwa Real Estate REIT, Inc.

Ordinary income(Millions of yen)

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

Growing Asset Management Earnings●H eiwa Real Estate Group's earnings steadily increased along with the growth of Heiwa Real Estate REIT, Inc.
●H
 eiwa Real Estate REIT, Inc. reverted to the "external growth stage" based on capital increase through a public stock offering for the first timein approx. five and a half years.
Trends in asset size of Heiwa Real Estate REIT, Inc.
(Unit: Billions of yen)

190
180
170
160

Asset Management Fees Earned from Heiwa Real Estate REIT, Inc.

162.8

166.6

166.3

165.4

168.1

173.1

174.7

178.7

178.0

184.1

1,100
1,000
900
800

140

979

1,096

1,132

1,196

600

P
No eriov. d e
20 n
1 de
d
Pe 6
M rio
ay d
20 en
17 de
d
P
No eriov. d e
20 n
17 de
d
P
M erio
ay d
20 en
18 de
d
Pe
No riov. d e
20 n
18 de
d
P
M erio
ay d
e
20 n
19 de
d
P
No erio
d
v.
20 en
19 de
d
Pe
M rio
ay d
20 en
20 de
d
P
No eriov. d e
20 n
20 de
As
d
of
Ap
ril
20
21

120

Dividend per Unit from Heiwa Real Estate REIT, Inc.
(Unit: Yen)

2,700
2,500
2,300

1,884

2,017

2,054

2,300

2,350

2,425

2,500

500

2,550

2,680

2,800

2013

2014

2015

2016

2017

2018

2019

2020

(FY)

700
600
500
400

1,500

200

P
No eriov. d e
20 n
1 de
d
Pe 6
M rio
ay d
20 en
17 de
d
P
No eriov. d e
20 n
17 de
d
P
M erio
ay d
20 en
18 de
d
Pe
No riov. d e
20 n
18 de
d
P
M erio
ay d
20 en
19 de
d
P
No eriov. d e
20 n
19 de
d
P
M erio
ay d
20 en
20 de
d
P
No eriov. d e
20 n
20 de
d
P
M erio
ay d
20 en
21 de
d

300

380

458

469

481

513

566

647

2013

2014

2015

2016

2017

2018

2019

Item

Leasing revenue
Revenue fromlease properties

11,22810,006

10,244

7,046

7,118

（3.9%）

Other
Business

Contract
construction

FY2020Operating
Revenue

Asset Management Business¥11,969 million¥35,048 million（34.1％）

Building Business¥21,713 million（62.0％）

Service Co., Ltd. on March 1, 2021), which has conventionally belonged
to the "Other Businesses" segment, will be included in the "Building
Business" segment from FY2021 onwards, given that it will operateproperty management services that involve comprehensive building
management based on the evolution of its conventional building facility
maintenance and management services, etc.
Due to these changes, the "Building Business" segment will engage inthe development, leasing, administration, management, sale, etc., of stock
exchange buildings, office buildings, commercial facilities, residentialbuildings, etc., while the "Asset Management Business" segment will
engage in the management of assets of Heiwa Real Estate REIT, Inc. andbrokerage of real estate through Housing Service Co., Ltd., etc.

Item

Sub-itemLease revenue from leasing assets

After Changes in Segment

Sub-itemLease revenue from leasing assets

PM fees

Leasing revenue Leasing earnings from inventories in
the former AM Business, and others

Management fees

Revenuefrom sale ofproperties

Sale of properties in Building
Business

Revenue from real
Sale of properties in AM Businessestate development

Asset
Revenue fromManagement
leasing ofBusinessreal estatedevelopment(FY)

10,903

Other Business¥1,365 million

Before Changes in Segment

Management fees

727

2020

35,048

Segment-by-segment Operating Revenue and Percentage BreakdownDescription of Changes in Segment

Brokerage
2012

46,639

Our strategy under the medium-term management plan is to "generateearnings from the sale of properties during the process of renewing theportfolio, while building up the portfolio through the acquisition of newlease assets." Based on such policy, we are promoting our portfolio
strategy after having reclassified two lease assets from fixed assets to realestate for sale at the end of FY2020.
In consideration of our planned business expansion going forward, theReal Estate Investment Department , which is engaged in the development,
sale, operation, etc., of real estate for sale and the acquisition and sale of
fixed assets and has conventionally belonged to the "Asset Management
Business" segment, will be changed to the "Building Business" segmentfrom FY2021 onwards. Also, subsidiary Heiwa Real Estate Property
Management Co., Ltd. (whose trade name was changed from Heiwa

Building
Business

685

FY2020Changes in Segment(Unit: Millions of yen)

800

1,700

HEIWA REAL ESTATE INTEGRATED REPORT 2021

2012

Dividend Revenues from Heiwa Real Estate REIT, Inc.

2,900

25

831

917

1,121

1,343

700

130

1,900

1,310

1,300
1,200

150

2,100

(Unit: Millions of yen)

1,400

FY2019Lease revenue from inventories in
AM Business,
Dividend revenue frominvestment by Heiwa Real Estate
REIT, Inc.
Brokerage

Contracting maintenance,
management and repair works ofbuilding and facilities, and others

Building
Business

Other revenue
Asset
Asset
management
Management revenue
Business
Brokerage

Sale of properties
in Building Business

Sale of properties
in the former AM BusinessPM fees

Contracting maintenance,
management and repair works ofbuilding and facilities, and others
Management fees

Dividend revenue from investment by
Heiwa Real Estate REIT, Inc.
Brokerage in Housing Service Co., Ltd.

HEIWA REAL ESTATE INTEGRATED REPORT 2021

26

Sustainability / ESG

Identification of Materiality

We used our business plans, the GRI Standards, ISO 26000 and the Sustainable Development Goals (SDGs), to help
identify social issues, and then considered them in terms of what is important to our Company and our stakeholders
in order to determine the social value and materiality shown in the table below that we aim for as a company.

Process of Identifying Materiality
Screening of social issues

Upon the determination of materiality, we used
our business plans, GRI Standards, ISO 26000,
the SDGs, etc., to help identify social issues.

STEP 4

Identification of materiality

Based on interview findings, social issues wereconsidered in terms of what is important to ourCompany and our stakeholders, after whichmateriality that had been picked was reported
to the Board of Directors and identified.

STEP 2

STEP 3Integration and consolidationof issues

Interview with stakeholders

Based on the Group's approach to stakeholder
engagement, interviews were conducted withstakeholders, and their opinions were gatheredregarding the materiality of social issues in the
Company and society.

Social issues that had been grasped/sorted were
integrated and consolidated by reorganizing
similar items and factoring in their relevance to
the Group.

Materiality

Building tenants and users

Business partners

Global environment

Giving full consideration to its
responsibility to conserve the naturalenvironment, the Group actively
implements environmental initiatives
while complying with environmentrelated laws and regulations.

27

HEIWA REAL ESTATE INTEGRATED REPORT 2021

Building tenants
and users
Shareholders
and investors

Business
partners

Employees

Globalenvironment

Local
communities

Industrial Development /Regional Development

We will play an active role in the creation of ideal areas,
where a diverse range of people gather and work
together, stimulate investment, securities and finance,
and foster culture and the arts.

CreateDisaster-Resistant,
Resilient Areas

We are dedicated to creating buildings and facilities witha high level of disaster preparedness and ensuring thatthe city continues to function safety through the daily
community activities of the people who live and work there.

Natural Disaster Risk
Mitigation Measures

We will enthusiastically support moves to embraceenergy-efficient technologies and renewable energy
to help reduce CO2 emissions in areas.

Climate ChangeCountermeasures

We will continue to strengthen corporate governanceon an ongoing basis and aim to be a company inwhich all officers and employees actively tackle
environmental and social issues.

Strengthening
Corporate Governance

Responding to Social Needs

Flow of Promotion of Sustainability

The Group promotes engagement with all stakeholders in order to mutually strengthen bonds with everyone who has a stake in its business. At the sametime, the Group endeavors to improve urban environments, bring value to communities and help people benefit economically with a view to help makesociety more sustainable.

The Group creates a wide range
of opportunities to engage withshareholders and investors by proactively
making such efforts as holding financial
results briefings and attending events forindividual investors as well as disclosing
information in a timely and proper.

SDGS

High

Stakeholder Engagement

Shareholders and investors

Materiality

CreateLively Areas throughDiversity & Incubation

CreateLively Areas throughCorporate GovernanceMateriality from the Company's viewpoint

The Group works to ensure sound businessactivities and improve its services fromthe standpoint of its building tenants andusers, while responding to their concerns
fairly and sincerely.

Social Value

CreateEnvironment-Friendly
Low-Carbon Areas

High
Materiality fromstakeholders' viewpoint

STEP 1Social Values Pursued by the Company and Materiality

The Group conducts business in goodfaith in accordance with societal
norms and laws related to free and faircompetition and transactions in an effort
to mutually raise corporate value together
with its business partners.

Employees

The Group endeavors to respect each
employee's character, eliminate any
and all discrimination and harassment,
and ensure a safe and comfortable work
environment. Through these efforts, theGroup strives to realize a sense of latitude
and abundance.

Local communities

The Group places importance on
coexistence with local communities andbroadly works to contribute to society asa good corporate citizen.

Management
policyProvision of Safe andComfortable Offices andLiving Spaces, thereby
Contributing to People
and the City.
The Source ofCorporate Value•T rack record andtrust as an ownerof securities
exchange buildings• Superior portfolio

・Value chain of theGroup as a whole・Good relationshipwith clients andlocal communities• Human capital・Stable financial
base

Sustainabilityconscious
business strategies•Redevelopment
Business•Building Business•A sset Management
Business

Materiality
in terms ofsustainability

Promotion ofsustainability
measuresIndustrial Development /Regional Development

Sustainability action plan

•Corporate Activities

Responding toSocial Needs

Nihonbashi
Kabutocho andKayabacho
revitalization

Natural Disaster Risk
Mitigation Measures

Pursuing external
and internal growth

Growing asset
management earnings
Promotion of capital
policy that takes into
account capital costs
and capital efficiency

Climate ChangeCountermeasures
Strengthening
Corporate Governance

Plan

Act

Resolution ofsustainability
issues focusing
on material
issuesDo

Check

Monitoring
the PDCA cyclefor each sustainability
initiative, with the"Sustainability
Committee" playing
a central role

Sustainedenhancement ofcorporate value

HEIWA REAL ESTATE INTEGRATED REPORT 2021

28

Sustainability / ESG

Sustainability and ESG

Sustainability Vision

We will work on resolving social issues through our corporate activities and contributing to the achievement of the SDGs,
in order to realize a sustainable society and growth.
We will engage in various initiatives with respect to issues that are deemed as materiality development, namely,
climate change countermeasures, industrial and regional development,
response to social needs, natural disaster risk mitigation measures and strengthening of corporate governance.

E

Environment

Materiality

Climate ChangeCountermeasures

Initiatives● Reduction of CO2 emissions,water use and industrial waste
generation

Society

Industrial Development /Regional Development
Responding toSocial Needs

Natural Disaster
Risk Mitigation Measures

G

Governance

Strengthening
Corporate Governanceto environmental and social issues, and interactive communication with shareholders,in our role as “a company that contributes to revitalizing districts”
Actual (Fiscal Year)

KPIs

2018

● GHG emissions:
50% reduction by FY2030*1(Total volume target compared to FY2018 level)

2019

2020

30,430ｔ-CO2 30,650ｔ-CO2 28,519ｔ-CO2● Water usage: 20% reduction by FY2030

1.04 m3/m2

1.02 m3/m2

0.62 m3/m2● Waste: 20% reduction by FY2030*1*2(Per-square-meter target compared to FY2018 level)

2.30 kg/m2

2.27 kg/m2

1.76 kg/m2● Rate of new hires that are female: At least 30%*3

33.3%

50%

100%

● More diverse human resources● Paid holiday usage rate: At least 70%*3

61.7%

70.5%

79.7％

● Work-life balance● Uptake of cancer screening (every 2 years):
100% of employees aged 35 years or above*3

-

-

100%

● Annual health check uptake: 100% every year*3

100%

100%

100%

● Buildings compliant with new earthquake
resistance standards: 100%*1

100%

100%

100%

-

-

100%

4/9
persons

4/9
persons

4/9
persons● Environmentally friendly building
development and management ofbuildings● Use of renewable energy

S

Help realize a sustainable society by increasing satisfaction through development of resolutions● Contribution to industrial andregional development● Promote occupational healthmanagement● Improve office environments● More efficient work practices● Enhancement of disasterprevention measures and action
programs for when a natural
disaster strikes, from a district BCP
viewpoint● Creation of regional communities● Director and officer compensation
system that allows interest in
shareholder value● Reduction in cross-shareholdings● Improvement of compliance● Governance to promotesustainable initiatives*1(Per-square-meter target compared to FY2018 level)(excluding buildings earmarked for redevelopment)●P eople with first aid training course qualifications:
All of our officers and employees*3● Composition of Board of Directors:
At least one-third external Directors(Actual figures in the table are as of June 30 of each fiscal year)● Number of female directors: At least one● Composition of Nomination
and Compensation Committees:
Majority external directors● Compliance training:
At least five times each year0
persons0
persons1
persons

Nomination: Nomination: Nomination:
3/4 persons
3/4 persons
3/4 persons
Compensation: Compensation: Compensation:
2/3 persons
2/3 persons
2/3 persons
2 times

2 times

SDGs

Social Value

CreateEnvironment-Friendly
Low-Carbon Areas

We will enthusiasticallysupport moves to embraceenergy-efficient technologies
and renewable energy
to help reduce CO2 emissions in areas.

Create Lively Areas
through Diversity& Incubation

We will play an active role in thecreation of ideal areas, where a diverse
range of people gather and work
together, stimulate investment, securities
and finance, and foster culture
and the arts.

CreateDisaster-Resistant,
Resilient Areas

Create Lively Areas
through Corporate
Governance

We are dedicated to creating buildings
and facilities with a high level of disaster
preparedness and ensuring that the city
continues to function safety through thedaily community activities of the people
who live and work there.

We will continue to strengthen corporate
governance on an ongoing basis
and aim to be a company inwhich all officers and employees actively
tackle environmental and social issues.

5 times*1 The portfolio of real estate owned by the Group (excluding buildings designated to be sold and jointly owned buildings of which the Company has an ownershipshare of less than 25%) is within the scope of calculation. Actual per-square-meter figures are calculated by dividing annual emissions/usage by the total floorarea of the relevant property, regardless of the period of ownership.
*2 Recycled waste is excluded from the actual figures for waste per square meter.
*3 Heiwa Real Estate on a non-consolidated basis is within the scope of calculation.

29

HEIWA REAL ESTATE INTEGRATED REPORT 2021

HEIWA REAL ESTATE INTEGRATED REPORT 2021

30

Relevant SDGs

Sustainability / ESG

Environment

Climate Change Countermeasures
Basic Approach

Environmental Basic Approach

The Heiwa Real Estate Group considers its initiatives in environmental concerns as fundamental managerial issues
and will promote the initiatives throughout its overall corporate activities. Giving full consideration to its responsibility
to conserve the natural environment, the Group actively implements environmental initiatives while complying withenvironment-related laws and regulations.

Environmental Concepts

Specific Initiatives

Regarding Switchover to Renewable Energy Sources

Promotion System

In December 2020, the Company established a Sustainability Committee,
headed by the representative director and president and comprised ofthe executive officers and heads of departments, to facilitate the smooth
implementation of our sustainability initiatives.
By monitoring the PDCA cycle for each sustainability initiative, including
those for climate change and other environmental issues, and by reporting
important details to the Board of Directors, the Sustainability Committee acts
as a main driver in increasing the effectiveness of sustainable management.

Environmental Supply Chain

To promote ESG-friendly initiatives throughout the value chain for the Group's
real estate portfolio, we have established procurement policies for the Group's
major products, services, and business partners (e.g., property managementcompanies and building management companies).
The Group strives to build cooperative relationships by sharing information
on environmental concepts and goals to the greatest extent possible.

[Environmentally Friendly Procurement Policies](Excerpted from Sustainable Procurement Policy)②Introduction of Environmentally Friendly
Operational Procedures

Report Supervision
Sustainability Committee
Chief officer(Representative Director and President)

Operating officer(Officer in charge of Sustainability Promotion
Office, Corporate Planning and General
Affairs Department)

PM

Lately, there has been an accelerating tendency to demand environmental
performance in buildings due to the huge amount of energy required in theoperation of buildings. Heiwa Real Estate gives consideration to environmental
impact as well when constructing and renovating buildings.

[Examples of initiatives at each building]Tokyo Stock Exchange Building・E nergy-saving through electricity and air conditioning control(introduction of building management system)・R educing heat load by controlling operation through total heatexchangers and controlling by outside air cooling・R educing motor energy consumption with variable air volume
control using inverters・C ontrolling waste heat recovery with heat-recovery turbo freezers

PM

BM

BM

Osaka Securities Exchange Building・Energy-saving through electricity and air conditioning control(introduction of building management system)

CentRise Sakae

・Exterior Blind System and Automatic Adjustment of Blind Slats・Double-pane low-emissivity glass installed

Item

Violations of environmentrelated laws and regulations

Environmental accidents

Environment-related fines

HEIWA REAL ESTATE INTEGRATED REPORT 2021

Reducing Environmental Impact

Various departments

When selecting goods for procurement in construction projects, thefollowing items related to reducing environmental burden must be
satisfied in addition to the necessary quality, functions, economic
efficiency, and rationality.
a. W
 e shall strive to conserve resources and energy.
b. R eduction of environmental pollutants: We shall strive to reduce theuse and emission of harmful chemical substances, ozone-depleting
substances, and other such substances.
c. L ong useful lifespans: We shall explore improvements such as indurability and ease of repair and parts replacement.

31*1 Wind, solar, hydroelectric and other renewable energy sources that are not dependent
on Japan’s FIT system*2 Recognized as renewable energy by Japan’s Ministry of Economy, Trade and Industry
from among its certifiable non-fossil fuel energy sources that are not subject to its FIT
systemCommittee secretariat(Sustainability Promotion Office, Corporate
Planning and General Affairs Department )③ Procurement of Environmentally Friendly Goods

The Group maintains compliance with environment-related laws andregulations. There were no violations of environment-related laws andregulations or environmental accidents in FY2020.

The Company announced that 17 of its properties located in the Tokyo and
Yokohama areas will switch to renewable energy sources from May 2021. The
properties include the Nisshokan Building, which houses the Company’shead office in Tokyo’s Nihonbashi Kabutocho district. As a result of thisswitchover, the Company expects the properties to use about 12 gigawatt
hours of renewable energy annually, and to reduce annual CO2 emissions byapproximately 4,900 tons compared with the most recent level.
The renewable energy to be used will be a combination of electricity fromnon-feed-in-tariff (FIT) renewable energy sources*1 and certified non-FIT nonfossil fuel energy sources*1 and certified non-FIT non-fossil fuel energy sources(designated as renewable energy)*2. Starting from this switchover, Heiwa Real
Estate plans to steadily increase the number of its properties that will use
renewable energy going forward.

Board of Directors

We shall comply with the various laws, regulations, standards, and otherrequirements related to the environment and sustainability.

Environmental Compliance

The Group manages and maintains an appropriate understanding of energy
consumption and the status of greenhouse gas (GHG) emissions arising fromreal estate management in the Group's businesses. We also take various
initiatives to promote GHG emission reductions, efficient energy use, andrenewable energy utilization beyond compliance levels required by law,
thereby working to fight climate change.

Unit

FY2018FY2019FY2020

Cases

0

0

0

Accidents

0

0

0

Yen

0

0

0

KABUTO ONE

・Solar panels to be installed as an initiative to use renewable energy
・LED lighting and control systems as well as high-efficiency devices tobe installed to efficiently use energy
・Greenery to cover 40% of the entire redevelopment site as a measure
to combat the heat island effectInitiative Targets

The Group has set the following targets and will promote GHG emissions
reduction, energy conservation, and renewable energy utilization in contributing
to fighting climate change.

50% reduction

GHG emissions

by FY2030 (Target total emissions
compared to FY2018)

Green Lease

Heiwa Real Estate's practices involve initiatives that benefit both the building
owner and tenants based on collaboration with tenants and voluntaryarrangements in the form of contracts, memorandums of understanding, etc.,
on the reduction of environmental impact and improvements in the workplaceenvironment through energy conservation, etc. at the properties it owns.

Development
and deepening ofrelationship between
building owner andtenants

Reduction ofmaintenance andmanagement
costs

Reduction ofheating andlighting costs

Improvementof workplaceenvironment

Improvement ofcorporate image

Reduction of
CO2 emissions(compliance withenvironmental laws
and regulations)

Enhancement ofreal estate value

Improvementof health ofand comfort for
office workers

Green Finance

We utilized the ESG Regional Finance Interest Subsidy Programme
implemented by the Ministry of the Environment and obtained ESG financefrom a designated financial institution under the Programme.
KABUTO ONE was assessed as an energy-saving building that will contributeto the reduction of environmental burden by financial institutions designatedunder the Programme and ESG financing was proposed as a result.

[Illustration of ESG Regional FinanceInterest Subsidy Programme]

Ministry of the Environment

Application for
subsidization

Interest subsidy
grantedReport on initiatives
contributing to ESG

Finance/interest subsidy

Designated financial institution

Heiwa Real Estate

HEIWA REAL ESTATE INTEGRATED REPORT 2021

32

Sustainability / ESG

Water Resource Initiatives
Basic Approach

The Group manages and maintains an appropriate understanding of thestatus of water usage arising from real estate management in the Group'sbusinesses. We also take various efficiency improvement actions to promotewater usage efficiency beyond compliance levels required by law.

Initiative Targets

The Group has set the following targets and will promote reduced water
consumption. The Sustainability Committee determines water consumption
reduction targets and manages consumption amounts at a frequency of
not less than once every 12 months, in principle (management includes
determination of target achievement levels for actual performance, and yearon-year comparison/analysis).

Water usage

20% reduction

by FY2030 (target water usage persquare meter compared to FY2018)

Ratings from Outside Bodies

Specific Initiatives

Acquisition of Environmental Certification

Initiatives in Building Operation

The Group takes a number of actions as initiatives for the effective use of water
resources, including installing rainwater storage tanks in newly developedbuildings for everyday facility use and effectively using well water. We arealso working to reduce the amount of water used in existing properties by
gradually promoting renovation work to switch to water-saving equipment.

[Examples of Initiatives at Each Building]Tokyo Stock Exchange Building・Utilization rainwater, etc.

KABUTO ONECentRise SAKAE

・Effective use of rain andwell water, etc.

・Rainwater storage tanks to be installed as a means to reuserainwater for everyday facility use (non-drinking water), etc.

Cooperation with Business Partners

We have established the Tenant Guidelines for Environmental Concerns aspart of our water usage efforts, and call on not only the Group but also ourbusiness partners to help conserve water.

Waste Initiatives
Basic Approach

The Group strives to reduce (the generation of waste), reuse, and recycle in allof its corporate activities. It also works toward reducing the life cycle cost ofits buildings and resource conservation in order to realize a recycling-oriented
society.

Initiative Targets

The Group has set the following targets and will promote reduced waste
emissions. The Sustainability Committee determines our performance,comparing actual waste figures each fiscal year versus consumption andconsumption intensity, either on a year-on-year or multi-year basis.

Waste

20% reduction

by FY2030 (target waste per square
meter compared to FY2018)

Specific Initiatives

Initiatives in Nihonbashi Kabutocho and Kayabacho
Revitalization ProjectAs part of the "Nihonbashi Kabutocho and Kayabacho Revitalization Project,"Heiwa Real Estate commercialized a project for a retail and office building
adopting a hybrid structure (wooden construction and SRC structure) in
Nihonbashi Kabutocho, Chuo-ku, Tokyo. The project has been adopted in the"leading projects" program for sustainable buildings (wood-based structures)in FY2020 implemented by the Ministry of Land, Infrastructure, Transport andTourism (MLIT), which aims to drive technological advancement and boost
public awareness related to wooden structures.
The 10-floor retail and office building adopts a hybrid structure that
includes three-floor mega-structures made using SRC frames, with each floor
within the mega-structures made of wood. This is the first project for theCompany to adopt such a hybrid structure.

33

HEIWA REAL ESTATE INTEGRATED REPORT 2021

When constructing new buildings and conducting major renovation projects, the Group gives top priority to the environment; hence we have received high ratingsfrom the SMBC Sustainable Building Assessment Loan program, the DBJ Green Building Certification program and CASBEE.

The combination of SRC mega-structures with fire-resistant wooden
structures has been praised for opening up new possibilities in terms of
methods and benefits of utilizing wood in high-rise buildings, and for
prolonging the life of the buildings in practical usage terms.
For the outer premises, the Company plans to install benches madeof wood from a Tokyo Stock Exchange (TSE) Listing Forest* located innortheastern Japan based on a social contribution program being run byJapan Exchange Group, Inc. (JPX).
The wood is called “Kablocks,”
which can be used in a multitudeof applications, and will beprocessed into benches. There
are high hopes that the hybrid
structure will provide a senseof warmth unique to wood forworkers, visitors and people living
nearby, while adding a touch of
tranquility to the area. Plans arein place to acquire a certificate forcarbon dioxide fixation promoting
the use of wood produced in Akita
Prefecture.

Cooperation with Business Partners

We have established the Tenant Guidelines for Environmental Concerns aspart of our water management efforts, and call on not only the Group but also
our business partners to cooperate.

KABUTO ONETokyo Stock
Exchange
Building

Osaka Securities
Heiwa RealIchibancho
Exchange
CentRise Sakae Estate Kitahama
Heiwa Building
Building
Building

Nisshokan
Building

Kitahama
1-Chome Heiwa
Building

DBJ Green
Building
Certification
program
SMBC
Sustainable
Building
Assessment
Loan programGold

CASBEE

Platinum

SilverPlatinum

Platinum

CASBEE-Nagoya
Rank SCASBEE-Osaka
Rank ACASBEE Rank A*The selfassessment

CASBEE-Osaka
Rank A・DBJ Green Building Certification: Certification system established by the Development Bank of Japan (DBJ) to support the green building real estate with consideration for the environmentand society. A program for identifying and certifying “green buildings” in response to the needs of today’s real estate market. The evaluation is comprehensive, taking into account not only
the property’s environmental performance but also the degree to which the societal needs of various stakeholders surrounding the property are considered.
・SMBC Sustainable Building Assessment Loan program: An evaluation of environmental performance based on a set of criteria independently developed by Sumitomo Mitsui Banking
Corporation and Woonerf Inc.
・CASBEE: A method for evaluating and rating the environmental performance of buildings. This program comprehensively assesses building quality, including eco-friendliness (such asenergy efficiency and use of materials and fixtures with a small environmental footprint), interior comfort, and respect for the surrounding landscape.

GRESB Real Estate Assessment

The Company has for the first time participated in the "GRESB Real Estate
Assessment," which is the benchmark for assessing ESG initiatives in thereal estate sector, and acquired two stars under the "Standing Investments
Benchmark" for the operation of existing properties.
GRESB, which is an annual benchmark assessment for measuring ESG
considerations by real estate companies and funds and is also the name of theorganization that manages such assessment, was established as the Global
Real Estate Sustainability Benchmark in 2009 primarily by a group of major
European pension funds that played a leading role in the formulation of the
Principles for Responsible Investment (PRI). Currently, investors who aremembers of GRESB and utilize GRESB data for the selection of and dialogue
with investees exceed 100 institutions, and in Japan, multiple institutions,such as the Government Pension Investment Fund (GPIF), use GRESB
assessment results. In 2020, 1,229 real estate companies and funds throughout
the world participated in the GRESB Real Estate Assessment.
Going forward, we will continue to engage
in proactive activities to achieve a higher
GRESB rating by enhancing sustainable
management practices.

S&P/JPX Carbon Efficient Index

The Company has been selected as a constituent stock of the S&P/JPX Carbon
Efficient Index. The S&P/JPX Carbon Efficient Index is an index that determines
the weight of a constituent stock by focusing on the company's disclosure
status of environmental information and its level of carbon efficiency (carbon
emissions per sales) with respect to the constituent universe of TOPIX, a major
stock price index reflecting Japanese market trends.

HEIWA REAL ESTATE INTEGRATED REPORT 2021

34

Relevant SDGs

Sustainability / ESG

Society

Human Resource Management＜Declaration of Health Management＞

The Heiwa Real Estate Group believes that if each and every employee is in good health—both mentally and physically—and able
to fully demonstrate his/her abilities and individual characteristics, it will translate into the company's sustained growth.

Based on such philosophy, we will promote health management by driving forward activities to maintain and improve our
employees' health.

Structure to Promote Health Management

The Representative Director serves as the chief officer

Representative Director

responsible for promoting health management, who works

with the Health Committee, industrial physicians, and healthinsurance associations primarily through the Corporate Planning

Corporate Planning andGeneral Affairs Department

and General Affairs Department.

The Health Committee is held once a month, in principle,

where attendees discuss the importance of maintaining andimproving health, as well as share information within the
Company.

Employee Health Initiatives

Initiatives for Prevention and Early

・Support for Off-Work Activities

・Implementation of Stress Checks

・Introduction of a cafeteria plan

Initiatives to Reduce Overtime Work・Implementation of e-Learning Courses

・Understanding of work hours, and・Company-Paid Cancer Screenings

Productivity Management Outstanding Organization for 2021 by the

Ministry of Economy, Trade and Industry and the Nippon Kenko Kaigi(Japan Health Conference). This program highlights outstanding

enterprises engaging in efforts to advance health management. We

have also been certified as a Sports Yell Company for 2020 by the JapanSports Agency and as a Tokyo Sports Promotion Company for 2020

by the Tokyo metropolitan government for our efforts to support and
HEIWA REAL ESTATE INTEGRATED REPORT 2021

Health insurance
associations

・Established “No Overtime Day”

Heiwa Real Estate has been recognized as a Certified Health &promote our employees’ sports activities.

Industrial
physicians

OJT and Job Rotation

Detection of Health Issues

Rating from Outside Bodies

35

HealthCommittee

Initiatives to Improve Health・Participation in RIZAP Health Seminars

Major Initiatives

・Pre-approval system for overtime

raising employee awareness regarding
overtime

We practice job rotation so employees can gain experience in a numberof departments over the first 10 years after they join the Company.
Employees also gain specific departmental business and real estateknowledge through OJT, systematically and continuously developing
the abilities necessary for the execution of their work. Throughcommunication between employees, we foster motivation to contributeto the organization and assess each employee’s own aptitude.

Training Programs

From new employee training to management training, we haveestablished a series of training programs tailored to employee
career plans. At the same time, we offer a system where employees
may take courses at university city campuses, aimed at cultivatingnext-generation human resources with skills in areas like planning,proposal, negotiation and leadership.
As part of new employee training, we also conduct fundamental realestate training, IT literacy training and training to improve PC skills.

Support System for Qualification Acquisition

We recommend that employees acquire multiple real estaterelated qualifications—e.g., Real Estate Transaction Agent, FirstClass Architect or Real Estate Appraiser—before being promoted
to a managerial position. The Company bears the costs required
when acquiring these qualifications. By encouraging and assisting
employee acquisition of official qualifications, we seek to cultivate
a pool of official qualification holders, including those who arenecessary for business operation and those who have advanced
specialized abilities.

Rank

Support for
Qualification
Acquisition Support Self-Development

Rank-Specific Training

Management
Training
ManagerTraining

Real EstateTransaction Agent

University City
Campus Course
SystemFirst-Class
Architect

Urban Renewal
Planner

Pre-Manager
Training

Leader Training

Mid-Career
Employees
Training

Early-Career
Employees
Training

New Employee
Training

Fundamental
Real Estate
Training
PC Skills

IT Literacy

Financial
Accounting

Job Rotation

with the health improvement investment project.

Human Resource Development Structure

Short-Term Overseas Training Program/English Training

Having announced our health management philosophy in the form of the "Declaration of Health Management," we are pushing ahead

At Heiwa Real Estate, we practice a job rotation system so
employees can gain experience in a number of departments
over the first 10 years after they join the Company. In addition,
we use on-the-job training (OJT) and other methods to instill realestate knowledge, fostering their motivation to contribute to theorganization and assessing each employee's own aptitude.
From new employee training to management training,
we have established a series of training programs tailored to
employee career plans. At the same time, we offer a system
where employees may take courses at university city campuses,
aimed at cultivating next-generation human resources with skills
in areas like planning, proposal, negotiation and leadership.
We also recommend that employees acquire multiple
real estate-related qualifications before being promoted
to a managerial position. The Company bears the costs
associated with acquiring these qualifications. Furthermore,by encouraging the acquisition of other qualifications in selfdevelopment, we support our employees in their self-growthand development of specializations.

On-the-Job Training (OJT)Health Management Declaration

Development of Human Resource Development Structure

Mid-Career Management
Employees
Level

Heiwa Real Estate believes that it is essential that its employees be healthy, both mentally and physically, for thecontinuous growth of its businesses and corporate value.
We seek to increase corporate value by improving the health of our employees, creating a safe working environment,
and preventing overwork and occupational accidents. We also call on our subcontractors and other important
stakeholders in our businesses to implement health and safety initiatives for their employees.

New Employees
and Early-Career Employees

Promotion of Health Management

Heiwa Real Estate’s greatest asset is its people.
Recognizing the importance of having diverse perspectives and values in achieving new growth, we will strive to ensure diversity in ourhuman resources. We also believe that fostering employee self-growth and their motivation to contribute to the organization is an importantelement of strategic management.
We will establish a mechanism for fostering their growth through fundamental real estate training necessary for employees of a realestate company and training systems tailored to their career plans, and will strengthen support systems for self-development and acquiringcertifications. By taking these actions, we will help instill specializations among each individual and improve their sense of fulfillment.

ARES Certified
MasterCertified Building
Administrator
Real EstateAppraiser

Real EstateConsulting Masteretc.

*Employees are
generally expectedto acquire
two or morequalifications
before promotion
to managerial
positions.

SelfDevelopment
Incentive
System for
Qualification
Acquisition

Supportfor SelfDevelopment(Englishconversation)
e-Learning
External
Seminars

Support for Self-Development

Employees are offered e-learning programs and business seminars
on subjects like qualifications exams, language learning andbusiness skills. As a means of developing global human resources,
we also have a system offering subsidies to employees who achievea standard attendance rate at English conversation courses
specified by the Company.
In addition, through our incentive system for qualificationacquisition, we encourage our employees toward thesequalifications as a means of self-development, supporting themin their self-growth and development of specializations.

Short-Term Overseas Training Program and English
Training Program

We offer a short-term overseas training program where employees
are dispatched for around three months, as well as an English training
program where employees attend an English conversation school forthree months. These programs are intended to develop global humanresources, including the improvement of language skills, acquisitionof communication skills,
experience in overseas crosscultural environments, andforming personal networks at
the company where they aredispatched.

Establishment of the Employee Stock Ownership Plan

Heiwa Real Estate decided to establish the Plan as part of theCompany’s initiatives to provide incentives to employees, with thegoal of raising employees’ morale and motivation to contribute toimproving the Company’s medium- and long-term performance andto raising corporate value.
HEIWA REAL ESTATE INTEGRATED REPORT 2021

36

Sustainability / ESG

Achieving Diverse Workstyles

Promote the Revitalization of Safe and Secure Districts/Community Initiatives

Promotion of DiversitySupporting the “Global Financial City: Tokyo” Vision

We strive to realize comfort and affluence by respecting the personalities of each and every employee, rejecting all forms of
discrimination and harassment, and securing a working environment that is safe and easy to work in. We are also working to improve
work-life balance by promoting work efficiency and reducing overtime hours.

Our basic policy is to be inclusive of diversity in characteristics such as gender, age, nationality, and values, to create an environment where
each individual can maximize their abilities and to promote the active participation of diverse human resources.
We are working to promote diversity, including the success of women, conduct rigorous evaluations regardless of gender and have set
quantitative targets for the ratio of new female hires.

Initiatives Supporting Work-Life BallanceCommunication lounge(head office of Heiwa Real Estate)Initiatives to Develop Sustainable Districts

Heiwa Real Estate endeavors to build and maintain a safe and exemplary working environment that respects the personality and individualityof each individual.

Heiwa Real Estate does not discriminate on the basis of nationality,
race, gender, age, sexual orientation, disability, beliefs, ideas, andreligions. In addition, we do not conduct or permit any behavior
that may cause a negative impact on the working environment,
including unilateral coercion or solicitation regarding beliefs, ideas,or religions.

KPIs and Track Record Related to Human Resources*

For Heiwa Real Estate, employees and officers are regarded asimportant partners in the execution of work duties. Accordingly, theGroup prohibits sexual harassment, power harassment or any otherforms of harassment in recognition of its obligation to maintainorderly and cooperative relations in the workplace. It has alsoestablished official rules prohibiting sexual and power harassment
in an effort to prevent workplace harassment.

KPIs in medium-term
management plan

FY2017FY2018FY2019FY2020Uptake of cancer screening (every 2 years)

100% of employees aged
35 years or above

－

－

－

100%

Rate of new hires that are female
Stress check uptake rate

Rate of Female Employees
Rate of female managers

100% every year

HEIWA REAL ESTATE INTEGRATED REPORT 2021

55.9%
100%

61.7%
100%

70.5%
100%

At least 30%

25.0%

33.3%

50.0%

－

26.4%

26.8%

28.3%

－

－

* Heiwa Real Estate on a non-consolidated basis is within the scope of calculation.

37

Prohibition of Harassment

Item

At least 70%

100%
5.2%

"The HEART" in KABUTO ONE

Contribution to culture, art, etc.

・Commencement of construction of (tentative name) Kabutocho 85
Project・Utilization of renewable energy
・Promotion of Green and Wood Projects

Contributing to Communities as a Corporate Citizen

Prohibition of Discrimination“FinGATE” brand・Nihonbashi Kabutocho was selected by the global city guide "TimeOut" as the only place in Japan listed among "The 40 coolest
neighborhoods in the world" in 2020.
・Kabutocho Heiwa Building No.5 (K5) won the Good Design Award 2020.
・"HOTEL K5" was newly listed in the "MICHELIN Guide Tokyo 2021."
・We contributed to culture, art, etc., including co-hosting live jazz
event "Jazz EMP (Emerging Musicians Program)" and "ICHI-RYU
MANBAI" live＠TSE Arrows and holding "Shibuaka Festa."

Human Rights Initiatives

Annual health check uptake

・Roll out of offices targeting independent asset managementcompanies and financial venture companies in the form of "FinGATE"
・Establishment of The Consortium for Japan International AssetManagement Center Promotion (JIAM)
・Opening of KABUTO ONE (August 2021)

Initiatives to Develop Diverse Districts

・Development of employee childcare support programs	(childcare leave program/childcare shortened working hours program/childcare overtime
exemption program/childbirth gift money and paid time off)・Development of employee nursing care support programs	(nursing care leave program/nursing care shortened working hours program/nursing careovertime exemption program）
・Enhancement of employee healthcare initiatives	(flextime system/telecommuting system/cafeteria plan/summer vacation/extra day-off
program/annual paid vacation accumulation system/long-service leave program/hour-based
leave system)
・Creating a more comfortable office environment(placing of a communication lounge)
・Pursuit of higher operational efficiency
・Promotion of digitization
・Encouragement of employees to take paid leave
・Reduction of overtime working hours

Paid holiday usage rate

Heiwa Real Estate will promote the revitalization of safe and secure districts by taking into account environmental-friendliness anddisaster-preparedness and help realize a sustainable society.
Also, Heiwa Real Estate will place importance on coexistence with local communities, look into ways to contribute to local
communities, etc. of its own accord and endeavor to broadly contribute to society as a good corporate citizen.

100%
5.1%

100%
4.7%

79.7%
100%

100%
100%

31.3%
5.0%

・Participation in the Sanno Festival・Cleanup events in Nihonbashi Kabutocho・Trees donated to Chuo Ward for lining streets in Nihonbashi Kayabacho・Wildflowers donated to Sakamotocho Park in Nihonbashi Kabutocho
・Exhibition of the Red Stone from Sado in connection with
Old Eiichi Shibusawa
・Operation of CAFE SALVADOR BUSINESS SALON, an information
source for local communities
・Operation of Nihonbashi Kabutocho and Kayabacho's community
website "Kabuto Live!"

Promotion of Green and Wood Projects

Participation in the Sanno Festival

 aintaining and Improving
M
the Quality of Office Building Operations

Placement and exhibition of
the Red Stone(inside atrium on the firstfloor of KABUTO ONE)・Disaster preparation and BCP measures
・First aid certificate obtained by all officers and employees (set as a KPI)
・Conducting customer satisfaction (CS) questionnaire surveys
・Holding gatherings for tenants
・Ensuring earthquake resistance of buildings in operation

PICK UP

Disaster preparation drills

COVID-19 Workplace Vaccinations for Tenants

We carried out workplace vaccinations for COVID-19 targeted at officers and employees of tenant companies (approx. 150 companies)
in buildings owned by the Heiwa Real Estate Group (19 properties) located in the Nihonbashi Kabutocho and Kayabacho areas. As acompany that contributes to revitalizing districts, we will strive to provide safe, high-quality and valuable goods and services from theviewpoints of our customers in accordance with our basic policy of providing comfortable and affluent office spaces.
HEIWA REAL ESTATE INTEGRATED REPORT 2021

38

Relevant SDGs

Sustainability / ESG

GovernanceCorporate Governance System (As of July 30, 2021)

Corporate Governance(1 internal statutory auditor,
3 external statutory auditors)

Initiatives to Strengthen Corporate Governance
Board of Directors(Figures in
represent the
number of
persons)

Internal(Figures in
represent the
number of
persons)

External
Internal

1

External

2013

2014

2015

4
3

Board of Statutory
Auditors

2012

3

2016

2017

5

2018

2019

2020

2021

’20- Appointed one female director

4’14- Appointed one female statutory auditor’15- Established Nomination Committee’20- Established Meeting for Collaboration
between External Directors andStatutory Auditors

Committee/Meeting’20- Established Sustainability Committee’21- Established Meeting for
Independent External Directors’07- Introduced takeover defense measures’15- Established Corporate Governance Guidelines

Abolished’15- Established Standards for Assessing the Independence of Independent Officers’16- Implemented evaluation of the effectiveness of the Board of Directors’18- Amended rules to make external directors the chair of theNomination Committee and Compensation Committee andthe majority of each committee’s members’19- Reduced term of office for directors fromtwo years to one year
’19- Introduced performance-linked stockcompensation (medium- and long-term incentive)’21- Established an employee
stock ownership plan

39

HEIWA REAL ESTATE INTEGRATED REPORT 2021

Corporate Auditors Office

Cooperation’11- Established Compensation Committee

Regulation/System

Election Dismissal

Board of Statutory Auditors

Heiwa Real Estate considers the enhancement of corporate governance an important business issue. We strengthenGroup corporate governance to earn the trust of shareholders and other stakeholders and to manage our businesses
fairly and efficiently.

2011

General Shareholders’ Meeting

Election Dismissal

Basic Approach

Internal
Cooperation

Board of Directors(5 internal directors,
4 external directors)

Audit

ReportReportInternal Audit Department

Internal audit

Managing Officers’ Meeting
Various departments

Board of Directors

・The Board of Directors is currently comprised of nine directors, including four
external directors.
・The main roles of the Board of Directors are to establish the Company’s
management philosophy and set and review strategic directions. In deciding
and reviewing management plans and strategies, the Board of Directors
conducts sound discussions, and based on the direction of those discussions,
it decides and supervises the execution of important matters.
・The Board makes decisions on matters specified by laws and regulations andthe Regulations of the Board of Directors’ Meetings (development of mediumto long-term management plans, disposal of important assets, etc.). The
execution of other business is delegated to directors serving as managing
officers, or to managing officers.

Nomination Committee

・Heiwa Real Estate has a discretionary Nomination Committee under the Boardof Directors. It is chaired by an external director and consists of a majority of
external directors to ensure the objectivity and transparency of personnel
affairs associated with directors and statutory auditors.
・The committee selects director and statutory auditor candidates of goodcharacter with sufficient ability and discernment to properly perform theduties required of the respective positions.
・The committee can also resolve to dismiss a sitting director or statutory
auditor if he or she has, in the execution of management duties, seriously
violated the law, been involved in a major scandal or clearly failed to meet
acceptable standards of conduct.
・For matters related to the aforementioned nomination or dismissal of
directors and statutory auditors, the committee responds to questions fromand reports its opinions to the Board of Directors.
・Based on the opinions of the committee, regarding the election or dismissalof the relevant individuals, the Board of Directors determines the specifics ofthe proposals to be submitted to the General
Nomination Committee
Shareholders’ Meeting. In the case of mattersconcerning the statutory auditors, proposals
are subject to the consent of the Board of
Statutory Auditors.
・The Company discloses the reasons forappointing or dismissing individual directors
and statutory officers, and for nominating
individual candidates for director and statutory
auditor positions.

Chaired by an external director,
and external directors comprisethe majority of members
Committee
chair

Meeting for Independent External Directors

External
director

Internal
director・The Meeting for Independent External Directors has been established for the
purpose of making independent external directors exchange informationand share their understanding with each other, and build an appropriate
management structure of the Heiwa Real Estate Group through their activities.
・The Meeting for Independent External Directors consists entirely of
independent external directors, and a lead independent external auditor
who contacts and coordinates with the management and collaborates withstatutory auditors or the Board of Statutory Auditors, etc., has been selected.

Independent auditor(Auditing firm)

Audit

Compensation Committee

Representative Director and President

Appointment

Election Dismissal

Nomination Committee

Supervision
Appointment

Audit

External

Management Conference

Sustainability Committee

Cooperation

Risk Management Committee

Administration

Subsidiaries

Initiatives to Reduce Overtime Work・The Board of Statutory Auditors consists of four statutory auditors, including
three external statutory auditors.
・The Board of Statutory Auditors makes appropriate decisions from an
independent and objective standpoint conscious of its fiduciary duties toshareholders in performing its roles and responsibilities, which include
auditing the execution of duties by directors, selection and dismissal of the
independent auditor and exercising its authority in matters pertaining tostatutory auditor compensation.
・The Board of Statutory Auditors ensures cooperation with external directors
through discussions held in Board of Directors’ meetings. In addition,
cooperation between external directors and statutory auditors is ensured
as necessary.
・The Board of Statutory Auditors sets evaluation criteria for evaluating theindependent auditor, and accordingly, selects external auditing firms after
verifying and confirming their independence and expertise, and other factors.
・To ensure that audits conducted by independent auditors meet highstandards, the Board of Statutory Auditors oversees the appropriateness ofauditing times in their audit plans.

Compensation Committee

・Heiwa Real Estate has a discretionary Compensation Committee under the
Board of Directors. It is chaired by an external director and consists of a majorityof external directors to ensure the objectivity and transparency of director
compensation.
・Director compensation consists of fixed base salary, bonuses and performancelinked stock compensation under a system that motivates directors to improvebusiness performance and enhance corporate value over the medium to longterm, that considers sharing value with shareholders and that helps Heiwa Real
Estate secure outstanding people.
・The committee determines the basic policy for director compensation, total
amount of compensation and compensation
Compensation Committee
for individual directors. It also addresses
inquiries from and presents opinions to theBoard of Directors regarding matters pertaining
to director compensation that the Board of
Directors submits to the General Shareholders’Meeting.

Chaired by an external director,
and external directors comprisethe majority of members
Committee
chair

External
director

Internal
director

Meeting for Collaboration between External Directors andStatutory Auditors

・The Meeting for Collaboration between External Directors and Statutory
Auditors has been established for the purpose of enhancing informationcollection and improving the quality of supervision of business execution bymaking external directors and statutory auditors exchange information andcomplement each other in terms of their respective fields of specialization.

HEIWA REAL ESTATE INTEGRATED REPORT 2021

40

Sustainability / ESG

Members Attending the Meetings of Board of Directors, Board of Statutory Auditors and Committees (As of July 30, 2021)

Classification

Name

Kiyoyuki Tsuchimoto
Kazuo Yamada
Directors

Board of
Statutory
Auditors

6 years○―

1 year

1 year

◎

○
○
○

―

Attendance in FY2020

Nomination Compensation
Committee Board of Directors Board of Statutory
Committee〇――

Junji Ota

4 years○―◎

Junko Utsunomiya

External/
Independent

1 year
1 year○―〇Kiichiro Masui

Naoto Kato

External/
Independent

Shosaku Shimomura

External/
Independent

Jun Sekine

External/
Independent

Chikami Tsubaki

External/
Independent

3 years

6 years―

7 years
3 years

○

○

○

○

○
○

〇

―

External/
Independent
External/
Independent

Takahiro Moriguchi

Statutory
Auditors

Board ofDirectors

10 years

Hiroki Mizuta

Tomoharu Nakao

Term ofoffice4 years

Norio Iwasaki◎ denotes chairperson/committee chair and 〇 represents attending members

―

―

◎

〇

〇
〇

〇

〇

◎

10 of 10 meetings(100%)
10 of 10 meetings(100%)
10 of 10 meetings(100%)
9 of 9 meetings(100%)
9 of 9 meetings(100%)
10 of 10 meetings(100%)
10 of 10 meetings(100%)
9 of 9 meetings(100%)

8 of 9 meetings(88.9%)――

10 of 10 meetings(100%)――

10 of 10 meetings(100%)

―

―

―

―

―

10 of 10 meetings(100%)

Auditors

―
―
―
―
―
―
―
―
―

11 of 11 meetings(100%)
11 of 11 meetings(100%)―

11 of 11 meetings(100%)(Notes) 1. Mr. Hiroki Mizuta, Mr. Tomoharu Nakao, Mr. Takahiro Morugichi and Ms. Junko Utsunomiya were elected at the 100th Ordinary General Shareholders' Meeting held on June 24, 2020;
accordingly, their attendance since their assumption of office is shown.
2. Mr. Shosaku Shimomura was elected at the 101st Ordinary General Shareholders' Meeting held on June 24, 2021.

Reasons for Election of External Directors and External Statutory Auditors
Classification

Name
Kiichiro Masui

Junji Ota

Independent
officer○○

External
Directors
Takahiro Moriguchi

Junko Utsunomiya

External
Statutory
Auditors○○

Shosaku Shimomura○

Chikami Tsubaki○

Jun Sekine○

Reason for Election
Mr. Kiichiro Masui has abundant experience and deep insight in the world of finance and securities, and plays an appropriate rolein providing advice to management and supervising the execution of business, etc.
In addition, as a chairman of the Nomination Committee, he has provided opinions from an objective and neutral standpoint,
including those on the personnel affairs of officers at the Company in the meetings of the Nomination Committee.
The Company determined that Mr. Kiichiro Masui would continue to contribute to the enhancement of corporate value of theCompany going forward, and thus elected him as External Director.

Mr. Junji Ota has abundant experience and deep insight as a corporate manager, and plays an appropriate role in providing advice
to management and supervising the execution of business, etc.
In addition, as a member of the Nomination Committee and Compensation Committee, he has provided opinions from an
objective and neutral standpoint, including those on the personnel affairs of officers and officer compensation at the Company inthe meetings of these committees.
The Company determined that Mr. Junji Ota would continue to contribute to the enhancement of corporate value of theCompany going forward, and thus elected him as External Director.
Mr. Takahiro Moriguchi has broad knowledge of finance and securities, international business experience, and abundant
experience and deep insight as a corporate manager. Mr. Takahiro Moriguchi plays an appropriate role in providing advice tomanagement and supervising the execution of business, etc.
In addition, as a member of the Nomination Committee and a chairman of the Compensation Committee, he has provided
opinions from an objective and neutral standpoint, including those on the personnel affairs of officers and officer compensation
at the Company in the meetings of these committees.
The Company determined that Mr. Takahiro Moriguchi would continue to contribute to the enhancement of corporate value of
the Company going forward, and thus elected him as External Director.
Ms. Junko Utsunomiya has acquired a high degree of expertise as an attorney, and has abundant experience and deep insight in thefield of corporate legal affairs. Ms. Junko Utsunomiya plays an appropriate role in providing advice to management and supervising theexecution of business, etc.
The Company determined that Ms. Junko Utsunomiya would continue to contribute to the enhancement of corporate value of theCompany going forward, and thus elected her as External Director.
Mr. Shosaku Shimomura possesses substantial expertise and knowledge in finance and accounting. The Company determinedthat he would be able to make use of his specialized knowledge and experience, etc. he has acquired through audits for theaudit system of the Company from an independent and objective standpoint, and thus elected him as External Statutory Auditor.
(Assumed office in June 2021)

The Company determined that Ms. Chikami Tsubaki would be able to make use of her specialized knowledge and experience, etc. as acertified public accountant for the audit system of the Company from an independent and objective standpoint, and thus elected her as
External Statutory Auditor.

The Company determined that Mr. Jun Sekine would be able to make use of his deep knowledge amassed at the Bank of Japanand experience in corporate management at a securities company, etc., for the audit system of the Company from an independentand objective standpoint, and thus elected him as External Statutory Auditor.

(Note) The Company has established the "Standards for Assessing the Independence of Independent Officers " to ensure the independence and neutrality of external directors and external
statutory auditors.,

41

HEIWA REAL ESTATE INTEGRATED REPORT 2021

Compensation of Directors and Officers

Remuneration, etc., for Directors and Managing Officers (hereinafter, the “Officer Compensation”)

Basic Policy

1) Provide motivation to improve the business performance and enhance corporate value in the medium and long term;2) Seek shared value with shareholders;
3) Establish standards and systems to contribute to securing excellent human resources; and
4) Maintain a decision-making process with sufficient transparency and impartiality.
・Officer Compensation shall be composed of the fixed-amount compensation as basic compensation, the bonuses as short-term incentives, and the performancelinked stock compensation plan as medium- and long-term incentives. However, remuneration for External Directors shall be composed only of basic compensationin view of their roles and independence.

Basic Compensation

・Basic compensation shall be determined by taking all factors into accountbased on the significance of roles and the scope of responsibility for eachrank, in consideration of business performance, etc., based on the Officer
Compensation system. External Directors, who take on the supervisory
function, shall only be provided basic compensation in view of their
responsibilities.
・Basic compensation shall be fixed-amount compensation provided monthly.

Bonuses・Short-term incentives shall be provided through bonuses paid as cash
remuneration in June every year in order to raise awareness for improving
business performance each fiscal year.
・Bonuses shall be calculated by multiplying the standard amountcorresponding to rank by a coefficient corresponding to the results fornet income attributable to owners of parent, and then adding an amountobtained by multiplying the monthly fixed-amount compensation for thatrank by a coefficient corresponding to individual evaluations (including ESG
evaluations). The coefficient for net income attributable to owners of parent
shall be a variable determined within the range of 0% to 150%, and thecoefficient for individual evaluations (including ESG evaluations) shall be avariable determined within the range of 0% to 100%.
・The total amount of bonuses for Directors shall be limited to 5% of the total
amount of dividends for the relevant accounting period in consideration ofproviding a balance with shareholder returns.
・Bonuses for Managing Officers shall be determined in accordance with thebonuses for Directors.

Performance-Linked Stock Compensation

・Medium- and long-term incentives are provided through performancelinked stock compensation, which consists of a fixed-amount portion and aperformance-linked portion.
・The fixed-amount portion is determined according to rank, and theperformance-linked portion is determined according to the achievement of
performance conditions, stock price level, etc.
・The fixed-amount portion aims to strengthen shared value with shareholders,
and the performance-linked portion aims to provide motivation to improvebusiness performance and enhance corporate value in the medium and longterm, in addition to strengthening the link between business performance andremuneration.
・Share benefits shall be provided using a trust comprised of common stock, inprinciple, upon the retirement of the eligible Directors and Managing Officers.

[Standards for Calculating
Performance-Linked Stock Compensation]・The evaluation indices for the performance-linked portion shall beconsolidated operating income, which is a concise indication of theearning power of the core business, and Total Shareholder Return(TSR), which indicates the return provided to shareholders as a resultof increased corporate value, from the viewpoint of improving businessperformance over the medium to long term.
・Stock compensation for the performance-linked portion shall be avariable determined within the range of 0% to 150%, corresponding
to the achievement of performance targets for consolidated operating
income and a comparative assessment of the stock price index for TSR.
・Details shall be prescribed in the stock compensation rules establishedby the resolution of the Board of Directors.

Breakdown of Directors/Officers' Compensation

・The proportion of each type of remuneration shall be decided by the Board of Directors in accordance with the report of the Compensation Committee, taking
into account such factors as the remuneration standards of other companies in the same industry, etc., and the following ratios will be used as an approximate
reference when performance targets are achieved.

Item

Fixed-amount compensation

Ratio of total compensation(approximate)

Position

Basic compensation

Bonus

Short-term incentive

Performance-linked stock compensation

55％-65％

20％-30％10％-20％Medium- and long-term incentive

Delegation of Determination of Details in Relation to Remuneration for Individual Directors

・R egarding the determination of individual remuneration amounts, specific details shall be delegated to the Representative Director and President based on
the resolution of the Board of Directors, and said authority shall include the amount of basic compensation and the amount of bonuses for each Director, etc.
on an individual basis.
・T he Board of Directors, to ensure that said authority is properly exercised by the Representative Director and President, shall consult with the Compensation
Committee, which is composed mainly of External Directors, and receive their reports with regard to a draft prepared by the Representative Director andPresident, and the Representative Director and President to whom the above authority has been delegated shall make such decisions in accordance withsaid reports.

Compensation of Statutory Auditors

Compensation for Statutory Auditors consists of monthly compensation only, with the limit on the amount of compensation determined at the General Shareholders’Meeting and basic compensation for internal, external, full-time and part-time statutory auditors determined by the Board of Statutory Auditors.
HEIWA REAL ESTATE INTEGRATED REPORT 2021

42

Sustainability / ESG

 otal Amount of Remuneration, etc., by Officer Category, Total Amount of Remuneration, etc., by Type andT
Number of Eligible Directors and Managing Officers (FY2020)
Category
Directors(including external directors)

Total compensation(Millions of yen)

Statutory auditors(including external statutory
auditors)

Total(including external directors andexternal statutory auditors)

261
（28）

56
（35）

317
（64）

Total compensation by type (Millions of yen)

Basic compensation

173
（28）

56
（35）

229
（64）

Performance-linked
compensation, etc.

Performance-linked
stock compensation

68

19

－

－

－

－

Persons
eligible
12
（6）

４
（3）

16
（9）

(Notes) 1. The above includes three Directors (including two External Directors) who retired at the close of the 100th Ordinary General Shareholders' Meeting held on June 24, 2020.
2. The amount of remuneration, etc., for Directors (excluding External Directors) has been set to be within ¥250 million per year (the amount of remuneration for Directors does not include
the employee salaries of Directors who serve concurrently as employees) by a resolution of the 88th Ordinary General Shareholders’ Meeting held on June 26, 2008, and the amount of
remuneration, etc., for External Directors has been set to be within ¥40 million per year by a resolution of the 98th Ordinary General Shareholders’ Meeting held on June 26, 2018.
3. Apart from the amount of remuneration, etc. for Directors mentioned in (Notes) 2 above, the Company adopted a new performance-linked stock compensation plan for directors (excluding
external directors and non-residents of Japan; hereinafter, the same applies in this paragraph) and managing officers (excluding non-residents of Japan; hereinafter, the same applies in thisparagraph) of the Company at the 99th Ordinary General Shareholders’ Meeting held on June 26, 2019. It was resolved at the Meeting that the funds contributed by the Company to the trust for
the acquisition of the Company’s shares to be awarded to Directors and Managing Officers as stock compensation shall be set within ¥150 million for the period of three fiscal years.
4. The amount of remuneration, etc., for Statutory Auditors has been set to be within ¥70 million per year by a resolution of the 98th Ordinary General Shareholders’ Meeting held on June 26, 2018.

Evaluation of Effectiveness of Board of the Directors

The Company conducts a self-evaluation of the Board of Directors each year, and based on the results of the evaluation, a discussion formaking improvements is held at the Board of Directors' meeting, and efforts are made to enhance the effectiveness of the Board of Directors.

≪Summary of Results of Evaluation of Effectiveness of Board of Directors in FY2020≫

The Company conducted a self-evaluation of the effectiveness of the Board of Directors in FY2020 targeting directors and statutory auditors.
The evaluation results were compiled by the secretariat of the Board of Directors, after which the Board of Directors analyzed and evaluatedthe effectiveness of the Board of Directors as a whole.
As a result, the Board of Directors in FY2020 was deemed to have ensured adequate effectiveness on the whole, given that it had
continued to effectively utilize free discussions, etc., engaged in broad discussions and made other efforts to further enhance deliberations,combined with stable Board operation including the remote convocation of Board meetings in view of measures against COVID-19.
Based on such evaluation, we will continue to enhance the effectiveness of the Board of Directors on an ongoing basis going forward.

Training of Directors and Statutory Auditors

The Company provides explanations about its management strategies and business description and situations to external directors
and external statutory auditors upon their assumption of office and upon their request thereafter for the purpose of improving theirunderstanding of the Company’s business operations.
The Company has a system for providing support, including financial assistance, to directors and statutory auditors to undergo external
training as appropriate to gain the qualities and knowledge required of corporate managers and statutory auditors for the purpose of
making them better understand the roles and duties expected of each individual.

Cross-Shareholdings

The Company maintains cross-shareholdings to strengthening business relationships, as well as to facilitate financial activities and tostrengthen business alliances considered to be beneficial for medium- to long-term business development.
Every year, the Board of Directors verifies the appropriateness of individual cross-shareholdings in overall consideration of yields andcapital costs, as well as whether they are useful for medium- to long-term business development and are in line with Company objectives,
including strengthening business relationships, facilitating smooth financial activities and enhancing business alliances. If, as a result of thisverification, holdings are determined to be inappropriate, they are reduced through disposal by sale after considering for share prices andmarket trends.
The Company deliberates on each proposal regarding the exercising of voting rights from the perspective of the issuing company’s
prospects for sustained growth, corporate value enhancement over the medium- to long-term and increased shareholder value, while
confirming that the issuing company has not engaged in any anti-social acts, been involved in major scandals and that there are no serious
concerns regarding corporate governance.
In addition, the Company thoroughly investigates the appropriate reasons, objectives, and other factors regarding proposals that havethe potential to affect corporate value and shareholder value, and then determines whether or not to grant approval.
43

HEIWA REAL ESTATE INTEGRATED REPORT 2021

Initiatives for Shareholders and Investors
Approach to Information Disclosure

In accordance with its Disclosure Policy, Heiwa Real Estate discloses accurate
information in an impartial and timely manner in order to facilitate investment
decisions among shareholders and investors. In compliance with relevant laws
and regulations, the Group proactively provides details of its management
strategies and financial results, which promotes better understanding of
its business activities. The Group also promptly provides information on its
website that falls outside the scope of timely disclosure regulations and related
laws when such information is deemed useful for investment decisions byshareholders and investors.

External Ratings of IR Activities

Various initiatives by the Company are disclosed to the public on its website. In
FY2020, the Company won Grade AA in the overall ranking of the" All Japanese
Listed Companies' Website Ranking" of 2020 by Nikko Investor Relations Co.,
Ltd. and the Silver Prize in Overall IR Website Ranking in the Gómez IR Website
Ranking.

Briefing Sessions for Institutional and Individual Investors

We hold briefing sessions primarily for analysts and institutional investors
twice a year (end of the second quarter and end of the fiscal year). In addition,
we participate in IR fairs and seminars for individual investors to create
opportunities for more people to learn about the Heiwa Real Estate Group.

Enhancement of Shareholder Returns

In FY2020, we repurchased 625,000 shares of the Company, amounting to 1,990
million yen, for the purpose of enhancing shareholder returns and improving
capital efficiency.
At the meeting of the Board of Directors held on April 30, 2021, a resolution
was passed to repurchase up to 600,000 shares of the Company, capped at 2
billion yen.
Annual dividends per share were 77 yen (consolidated payout ratio: 40.6%)
in FY2020, and are expected to be 82 yen (consolidated payout ratio: 41.4%) for
FY2021.
Repurchases of Company Stock (FY2020)

Class of shares to be repurchased
Total number of sharesfor repurchase

Aggregate amount repurchased
Period for repurchases

Common stock of the Company

349,000 shares¥0.99 billion

May 1, 2020–
September 4, 2020

Common stock of the Company

276,000 shares¥0.99 billion

February 1, 2021–
March 2, 2021

Details of Resolution Regarding Repurchases of Company Stock (As of April 30, 2021)

Class of shares to be repurchased

Common stock of the Company

Total number of sharesfor repurchase

Maximum of 600,000 shares

Period for repurchases

May 20, 2021–December 31, 2021

Aggregate amount repurchased

Maximum of ¥2 billion

Shareholder Bonus Program

Shareholders who hold at least 100 of the Company’s shares(one trading unit) as of March 31 of each year are given
an original QUO prepaid card worth ¥1,000. Long-term
shareholders are given an original QUO prepaid card worth¥3,000.
Record dateof allotment

March 31

Granting date Late June*

Basic Policy on Shareholder Returns

The Company returns profits to shareholders on the basis of having ensured
funds for the stable long-term development of its businesses, particularly the
Redevelopment Business and the Building Business, and secures sufficientinternal reserves for the ongoing enhancement of shareholder value. As a basic
policy, the Company is targeting a consolidated total return ratio of 70% fromFY2020 to FY2023, taking into account standards for business investment returns
as well as capital costs and capital efficiency.
Annual Dividends per Share,
Consolidated Payout Ratio and Consolidated Total Return Ratio
(Yen)

72.1

90

60

30

0

27.9

37

2017

48

57.8
56

30.2

30.3

2018

2019

Annual dividends per share (Yen) (Left scale)
Consolidated payout ratio (%) (Right scale)

68.5
77

(%)
75

68.8
82

40.6

41.4

2020

2021(Forecast)

50

25

(FY)

0

Consolidated total return ratio (%) (Right scale)* Includes 4.0 yen 70th anniversary commemorative dividend

Latest9th Nihonbashi Kabutocho and Eiichi Shibusawa* Sent together with the notice of year-end dividend after the close of the General
Shareholders’ Meeting.

QUO prepaid card features an
original design that showcases
Nihonbashi Kabutocho andKayabacho's culture, historicallandmarks and famous places,
to make the Nihonbashi
Kabutocho and Kayabacho
Revitalization Project currently
being promoted by theCompany better known.

HEIWA REAL ESTATE INTEGRATED REPORT 2021

44

Sustainability / ESG

Message from the External Director

Compliance and Risk Management Systems
Basic Policy for Compliance

In order for the Heiwa Real Estate Group to earn the trust of society and achieve sustainable development, we will consistently maintain an awareness of compliance andconduct business in keeping with our Code of Conduct and the Standards for Behavior for Heiwa Real Estate Group. To stamp out misconduct and further strengthen compliance,
we also enacted the Announcement on Stamping Out Misconduct and Strengthening Compliance in December 2019, and are taking initiatives in keeping with this.

≪Announcement on Stamping Out Misconduct and Strengthening Compliance≫

Enacted December 2019

1. No growth that compromises trust

The Company's officers and employees shall constantly be aware that stakeholder trust is the platform for, anddriver of, growth. These agents of the Company shall work to improve mindsets in order to regain that trust.

2. Stamping out misconduct

The Company's officers and employees shall carry out their duties in accordance with the highest ethicalprinciples and good sense, and stamp out misconduct by pledging to not engage or become involved in any
wrongdoings, with a clear distinction between personal interests and company interests.

3. Strengthening compliance further

The Company's officers and employees shall rigorously adhere to the Code of Conduct and the Standards
for Behavior for Heiwa Real Estate Group, and shall place the utmost priority on compliance.

Compliance System

The Group has established the Risk Management Committee, a body forsharing, discussing, and controlling compliance and business risks in the Group.
Serious violations of compliance or material emerging risks are reported to
the Company's Board of Directors and handled accordingly.
The Corporate Planning and General Affairs Department, which serves as
the secretariat for the committee, is responsible for coordinating with Group
companies, and promotes improved compliance and risk management function
across the entire Group.

Prevention of Corruption and Bribery

The Group has enacted the Code of Conduct and the Standards for Behavior
for Heiwa Real Estate Group, and drafted a summary of matters to be compliedwith in order to act with fairness and honesty without violation of social norms.
In keeping with these we maintain an awareness of the gravity of our social
responsibility, strictly comply with all laws, regulations and rules, and seek to be
a company that has a strong sense of ethics and can keep the trust of society.
The Standards for Behavior for Heiwa Real Estate Group calls on us to strictly
refrain from behavior that may seem like collusion from society's standpointin our relationships with government and administrative bodies, prohibits
entertainment, gifts and other benefits deviating from social conventions, andconcretely defines measures to prevent not only bribery but corrupt behavior
in general. These details are published to our intranet, and are available for
employee viewing at any time.

Compliance Hotline

Based on our Internal Reporting Regulations, the Group has established aninternal compliance hotline in order for us to rapidly be aware of organizational
or individual misconduct or violations of laws and regulations and to takenecessary measures in response. This system also promotes ethics andcompliance with laws and regulations at Group companies.
Reports may be made to internal or external desks. We protect those who
provide us with reports, like ensuring that they are not penalized for their use of
our compliance hotline.
To promote fair transactions with business partners such as corporations,
we have also set up an external reporting desk to receive reports on complianceviolations and suspected violations by officers and employees of the Group.

Compliance Training

The Group regularly conducts compliance training for the purpose of raising awarenessof compliance among officers and employees. We are also working to spread awarenessof compliance by conducting company-wide simultaneous inspections for compliance,
information security and other areas, and disseminating inspection results internally.

Combating Anti-Social Forces

The Company has clearly established a number of policies showing its strong
resolve to combat anti-social forces. These can be found in the Code of Conduct,
the Standards for Behavior for Heiwa Real Estate Group, the Basic Policy for Building
Internal Control Systems and the Regulations for Exclusion of Anti-Social Forces. We
thoroughly disseminate these policies to directors, executive officers, and employees.

Basic Policy for Risk Management

The Company has put a risk management system in place in order to properly manage and control risks, limit or prevent risks from materializing,and minimize any damage in the event such risks materialize, and smooth control work, minimize damages for corporate resource.
Risk Management System

To have an overall understanding of the Group's risks and appropriately take actionin the event of their emergence, the Risk Management Committee meets quarterly,
chaired by the Representative Director and President and comprised of executive
officers and heads of department. At its meetings, the committee works tounderstand risks that have emerged within the Group and discusses matters suchas how to prevent recurrence in keeping with the Risk Management Guidelines.

Investment Risk Working Group

Before a potential property transaction is discussed by the Board of Directors, theInvestment Risk Working Group analyzes the risks associated with buying or selling
the property in question and reports its findings to the Managing Officers’ Meeting.

Business Continuity Plan

In an effort to mitigate the risk of a company crisis in the event of an emergency,
45

HEIWA REAL ESTATE INTEGRATED REPORT 2021

we have drafted a business continuity plan (BCP) and a manual based on thisplan, and we conduct regular inspections in line with this.

Information Security

We view the appropriate management of information risks as one of the Company's mostimportant information strategies, have established an information security management
system, and strive to protect and appropriately manage all information assets held by us.
We maintain internal rules, conduct ongoing training, etc., required to ensure
information security and attempt to improve information literacy among all officers
and employees.
We implement appropriate countermeasures for ensuring the safety of information
assets and protecting against threats including unauthorized access, destruction,
data leaks, spoofing, loss and theft, and in the event that information asset security isbreached, we make every effort to minimize damage, quickly identify the cause andprevent future recurrence.

I Will Assist the Heiwa Real Estate Group in Further Value Creationby
Contributing to the Promotion of Diversity
and Revitalization of Districts.
Junko Utsunomiya

External Director

Carefully Executed the Development of an Environmentfor External Directors to Fulfill Their Duties

The Board of Directors of Heiwa Real Estate gives the impressionthat its operations are highly conscious of corporate governance.

It not only distributes materials of the Board meetings in advancebut also shares materials of the Managing Officers' Meeting.

In addition, it gives prior explanations and holds deliberations

on particularly important matters at times, which is a reflectionof a carefully developed environment that encourages external
directors to proactively express their opinions. As an attorney,
I am expected to oversee management mainly from a legal

perspective; depending on the content of the proposal, there arecases in which it is impossible to comment on it without reading

it thoroughly, so I am extremely appreciative of such efforts madeby those on the operation side that enable me to fulfill my duties
at ease.

It is fair to say that the meetings of the Board of Directors

serve as a place where external directors candidly speak out

their opinions and engage in lively discussions based on theirrespective expertise on the proposals that internal officers

fully and repeatedly examined. I acknowledge that external

directors' opinions, questions and requests to have information
provided are seriously considered and addressed, and in cases
where an answer or response cannot be given on the spot,

we receive a solid response at a later date including receivinga report after having the information summarized and being
presented with the outcome of discussions held again inconsideration of external officers' opinions.

Promoting Diversity as a Company with Social Influence
When attending the Board meetings, there are a number ofthings that I bear in mind, one of which is to be particularly

mindful of checking whether the management has overlookedanything in the legal context, as an attorney engaged in corporate
legal affairs over many years. At the same time, as the person

responsible for enhancing corporate governance, I am always
conscious of shareholders and investors' perspectives andmake sure that I ask questions and make comments in view ofwhether or not an adequate explanation has successfully been
given so that it seems like a rational decision even from theviewpoint of shareholders and investors. Furthermore, there

has been an increasing number of instances in which various

acknowledged in ways more similar to what I have personallyexperienced, in my experience of serving as an external director
and external auditor at multiple growth companies, as well as

in discussions that I have had as an attorney with my clients on
the management team on such topics as management issues.
Needless to say, to the extent that there is no breach of duty ofconfidentiality, I am eager to boost Heiwa Real Estate's corporate
value by proactively taking advantage of my expertise in thatsense.

What I would like to ask of Heiwa Real Estate going forward

is the further promotion of diversity. Given the rapidly growing
awareness of diversity, Heiwa Real Estate is no exception inthat the promotion of female executives is one of the issues,

but I hope Heiwa Real Estate will go beyond that and become
a company in which a wide range of individuals can play agreater role in their respective ways. I believe the enhancementof initiatives in this area will result in the retention of individuals
with various views and the creation of a strong organization, so
I also intend to proactively give support to that end.

I also have expectations for Heiwa Real Estate's contribution tothe "revitalization of districts."

In the "Nihonbashi Kabutocho and Kayabacho Revitalization

Project" promoted by Heiwa Real Estate, no one other thanHeiwa Real Estate can revitalize the district by leveraging thecharacteristics of the area, given that it has been based in

Nihonbashi Kabutocho and Kayabacho—known as the district
for securities and finance—for more than 70 years since its

foundation and seen how the district has changed over the years.
Undertakings such as the renovation of historic buildings are

initiatives that will also help realize a sustainable society, which
is nothing other than a challenge for the world as a whole.

As buildings are utilized by various people and companies,

I believe it is possible to significantly influence society throughtheir development. As a member of Heiwa Real Estate,

it is extremely exciting for me to be able to revitalize districts
in such a manner that is useful to society.

This will be my second year since my assumption of office as

an external director. I am committed to assisting the Heiwa Real
Estate Group in value creation, including contributing to the"revitalization of districts," by further deepening communication
with internal directors and employees.

issues at companies and their awareness of problems are being
HEIWA REAL ESTATE INTEGRATED REPORT 2021

46

Sustainability / ESG

Management TeamDirectors(As of June 24, 2021)

Apr. 1982 Joined Tokyo Stock Exchange, Inc. (TSE)
Jun. 2013 Managing Director of TSE
Jun. 2014 Director and Senior Executive Officer of TSE
Apr. 2016 Director and Executive Vice President of TSE
Jun. 2017 Director of Heiwa Real Estate Co., Ltd. (the Company)
Managing Senior Executive Officer of the Company
In charge of Real Estate Marketing Department of theCompany
Jun. 2018 In charge of Office Building Development
Department of the Company
May 2019 Representative Director of the Company
Acting President of the Company
Dec. 2019 Representative Director and President of theCompany (current position)
Chief Executive Officer of the Company (current
position)

Representative Director,
President and Chief Executive Officer

Kiyoyuki Tsuchimoto

Director and Senior Managing
Executive Officer

Kazuo Yamada
In charge of Development
Promotion Department
and Real Estate Investment
Department

Director and Managing Officer

Tomoharu
Nakao

In charge of Office Building
Development Department

External Director

Junji Ota

47

Apr. 1980 Joined Heiwa Real Estate Co., Ltd. (the Company)
Dec. 2004 General Manager of Building Department of theCompany
Jul. 2006 General Manager of Office Building Development
Department and Manager of Sapporo Branch of theCompany
Apr. 2007 General Manager of Finance Department of theCompany
Jun. 2009 Managing Officer of the Company
Jun. 2010 Deputy General Manager of General Affairs
Headquarters, and Group Leader of Planning Financeof the Company
Jun. 2011 Director (current position), Managing Executive
Officer, and General Manager of General Affairs andPlanning Headquarters of the Company
Jun. 2014 In charge of Real Estate Solutions Department of theCompany
Jun. 2016 In charge of Development Planning Department(Development) of the Company
Jun. 2018 In charge of Development Promotion Department(Development) of the Company
Jun. 2020 Senior Managing Executive Officer of the Company(current position)
In charge of Development Promotion Department
and Real Estate Investment Department of theCompany (current position)
Apr. 1987 Joined Tokyo Stock Exchange, Inc. (TSE)Jul. 2006 General Manager of Corporate Headquarters, Nippon
Parking Development Co., Ltd.
Jun. 2009 Outside Corporate Auditor of HoriPro Inc.
Oct. 2009 Director and General Manager of General Affairs
Department of Nippon Parking Development Co., Ltd.
Aug. 2011 General Manager of Planning & Finance Group,
General Affairs and Planning Headquarters of Heiwa
Real Estate Co., Ltd. (the Company)
Jun. 2013 Group Leader of Planning & Finance Group, General
Affairs and Planning Headquarters of the Company
Jun. 2014 Managing Officer of the Company (current position)
General Manager of Corporate Planning and General
Affairs Department of the Company
Nov. 2014 In charge of Corporate Planning and General Affairs
Department (Corporate Planning) of the Company
In charge of Office of the Council on Urban
Development for Investment and Economic Growthof the Company
May 2015 In charge of Urban Development Promotion Office of
the Company
Jun. 2018 In charge of Development Promotion Department(Corporate Planning) of the Company
Jun. 2020 Director of the Company (current position)
In charge of Office Building Development Departmentof the Company (current position)
Apr. 1971 Joined Nippon Steel Corporation
Jun. 2001 Director, General Manager of Department of AffiliatedCompanies, Nippon Steel Corporation
Apr. 2003 Director, General Manager of Corporate Planning
Department, Nippon Steel Corporation
Apr. 2005 Managing Director, Member of the Board of Nippon
Steel Corporation
Jun. 2008 Senior Auditor of Nippon Steel Corporation
May 2011 Chairman of Japan Audit & Supervisory Board
Members Association
Jun. 2012 Advisor (full-time) of Nippon Steel Corporation
External Statutory Auditor of Nippon SteelEngineering Co., Ltd.
External Auditor of Enterprise Turnaround Initiative
Corporation of Japan (currently Regional Economy
Vitalization Corporation of Japan)
Jul. 2014 Advisor of Nippon Steel Corporation
Nov. 2014 Supreme Advisor of Japan Audit & Supervisory Board
Members Association
Jul. 2016 Public Governor, Chair of Self-regulation Board & ViceChairman of Japan Securities Dealers Association
Jun. 2018 External Director of Heiwa Real Estate Co., Ltd.  (theCompany) (current position)
Outside Director of Toshiba Corporation (Retired as ofJune 25, 2021)

HEIWA REAL ESTATE INTEGRATED REPORT 2021

Apr. 1981 Joined Tokyo Stock Exchange, Inc. (TSE)Jan. 2013 Executive Officer of Japan Exchange Group, Inc.
Jun. 2013 Executive Officer of TSE
Jun. 2014 Managing Executive Officer of Heiwa Real Estate Co.,
Ltd. (the Company) (current position)
In charge of Finance Department of the Company(current position)
Nov. 2014 In charge of Corporate Planning and General Affairs
Department (General Affairs) of the Company
Jan. 2015 In charge of Legal Office of the Company (current
position)
Jun. 2015 Director of the Company
Dec. 2019 Representative Director of the Company (current
position)
Jun. 2020 Senior Managing Executive Officer of the Company(current position)
In charge of Corporate Planning and General Affairs
Representative Director and
Department of the Company (current position)
Senior Managing Executive Officer

Norio Iwasaki

In charge of Corporate Planning and General Affairs
Department, Finance Department and Legal Office
Apr. 1987 Joined Heiwa Real Estate Co., Ltd. (the Company)
Apr. 2007 Manager of Osaka Branch of the Company
Jun. 2010 Manager of Nagoya Branch of the Company
Jun. 2012 G roup Leader of Building Leasing Group, Leasing
Headquarters of the Company
Jun. 2013 Managing Officer of the Company (current position)
G roup Leader of Building Sales Group, Leasing
Headquarters of the Company
Apr. 2014 Sales Manager of Osaka Branch of the Company
Jun. 2014 Manager of Osaka Branch of the Company
Jun. 2020 Director of the Company (current position)
In charge of Community Co-Creation Department of
the Company (current position)

Director and Managing Officer

Hiroki Mizuta

Kiichiro Masui

External Director

TakahiroMoriguchi

External Director

Junko
Utsunomiya

Statutory Auditors

Apr. 1979 Joined Heiwa Real Estate Co., Ltd. (the Company)
Dec. 1987 Finance Department of the Company
Apr. 1997 Osaka Branch of the Company
Jul. 2001 Fukuoka Branch of the Company
Jul. 2002 General Affairs Department of the Company
Jun. 2010 General Manager of General Affairs Headquarters, andGroup Leader of General Affairs of the Company
Jun. 2014 General Manager of Corporate Planning and General
Affairs Department of the Company
Jun. 2015 Statutory Auditor of the Company (current position)

Statutory Auditor (Full-time)

In charge of Community Co-Creation Department

External Director

Apr. 2000 Registered as a lawyer and joined the law firm
Nagashima, Ohno & Tsunematsu
Oct. 2007 Seconded to the Tokyo Stock Exchange, Inc. (TSE)
Nov. 2011 Founded Utsunomiya Law OfficeJun. 2012 External Statutory Auditor of Start Today Co., Ltd.
(currently ZOZO, Inc.) (current position)
Apr. 2013 Outside Corporate Auditor of Solasto Corporation
Sep. 2013 Outside Director of Adventure Inc.
(current position)
Feb. 2018 Founding partner of Utsunomiya & Shimizu andHaruki Management Legal Office (current position)
Oct. 2018 Outside Audit & Supervisory Board Member of
RAKSUL INC.
Oct. 2019 Outside Director, Audit & Supervisory Committee
Member of RAKSUL INC. (current position)
Jun. 2020 External Director of Heiwa Real Estate Co., Ltd. (theCompany) (current position)
Mar. 2021 Outside Director (Audit & Supervisory Committee
Member) of PeptiDream Inc. (current position)

Apr. 1973 Entered the Ministry of FinanceJun. 2000 Director-General of Kinki Local Finance Bureau
Jul. 2003 Director-General of the Planning and Coordination
Bureau of the Financial Services Agency
Sep. 2005 Senior Managing Director of Japan Securities Dealers
Association (JSDA)
May 2006 Vice-Chairman of JSDA
Jun. 2012 Director of The Tokyo Shoken Building Incorporated
Jul. 2013 Chairman of the Japan Investor Protection Fund
Jun. 2014 C hairman of the Board of the Japan Securities
Research Institute (current position)
Jun. 2016 Outside Director of Japan Credit Rating Agency, Ltd.
(current position)
Jun. 2017 External Director of Heiwa Real Estate Co., Ltd.
(the Company) (current position)

Apr. 1967 Joined the Bank of Tokyo, Ltd. (currently MUFG Bank,
Ltd.)
Jun. 1995 Member of the Board of Directors of the Bank of Tokyo,
LTD., Director and Vice-President of Union Bank
Apr. 1996 Member of the Board of Directors of the Bank ofTokyo-Mitsubishi, Ltd. (currently MUFG Bank, Ltd.)May 1997 President of UnionBanCal Corporation President ofUnion Bank of California
Jun. 2000 Managing Director of the Bank of Tokyo-Mitsubishi,Ltd. (BTM) (currently MUFG Bank, Ltd.)
Jul. 2001 Managing Director, General Manager of Treasury
Division and E-Commerce Promotion Division of BTM
May 2003 Representative Director, Deputy President, andGeneral Manager of Global Banking Operations
Division of BTM
May 2004 Representative Director, Deputy President, andGeneral Operations Manager of BTM
Jun. 2005 Advisor of BTM
Jan. 2006 Advisor of the Bank of Tokyo-Mitsubishi UFJ, Ltd.
(currently MUFG Bank, Ltd.)
Feb. 2006 Chairman of J.P. Morgan Securities Asia Pte.
Limited Tokyo Branch (currently JPMorgan Securities
Japan Co., Ltd.)
Apr. 2006 Chairman of JPMorgan Securities Japan Co., Ltd.
(JPMSJ)
Jun. 2006 Representative Director, Chairman, CEO andPresident of JPMSJ
Sep. 2007 Representative Director and Chairman of JPMSJ
Jul. 2016 Senior Advisor of JPMSJ
Jun. 2020 External Director of Heiwa Real Estate Co., Ltd. (theCompany) (current position)

External Statutory Auditor(Full-time)

Naoto Kato

Shosaku Shimomura
Apr. 1970 Joined Ebara-Infilico Co., Ltd. (currently Ebara
Corporation)
May 1975 Joined Asahi & Co. (currently KPMG AZSA LLC)
Mar. 1979 Registered and commenced practice as Certified
Public Accountant (current position)
Jul. 1999 Representative Partner of Asahi & Co.
Jul. 2004 Executive Board Member of the Japanese Institute ofCertified Public Accountants
Jun. 2013 Outside Audit & Supervisory Board Member of NKSJ
Holdings Inc. (currently Sompo Holdings, Inc.)
Jun. 2014 External Statutory Auditor of Heiwa Real Estate Co.,
Ltd. (the Company) (current position)
Jun. 2016 Outside Director of Seiko Epson Corporation (Audit &Supervisory Committee Member)

External Statutory Auditor

Chikami Tsubaki

External Statutory Auditor

Managing Officers

Skill Matrix

President and Chief
Executive Officer
Senior Managing
Executive Officers

Managing Officers

Apr. 1987 Joined Tokyo Stock Exchange
Jun. 2010 Seconded to Financial Accounting Standards
Foundation as Research Specialist and General
Manager of Planning Division of AccountingStandards Board of Japan (until June 2012)
Jun. 2012 Director of Participant Examination and Inspection
Department of Tokyo Stock Exchange Regulation(currently Japan Exchange Regulation)
Apr. 2014. Director of Participant Examination Department ofJapan Exchange Regulation
Jun. 2014 Director of Listing Examination Department of Japan
Exchange Regulation
Apr. 2016 Management of Planning in General Administration
Office of Japan Exchange Regulation
Jun. 2016 Standing Auditor of Japan Exchange Regulation
Jun. 2021 External Statutory Auditor of Heiwa Real Estate Co.,
Ltd. (the Company) (current position)

Kiyoyuki
Tsuchimoto
Norio
IwasakiKazuo
YamadaHirokiMizutaJun Sekine

In charge of Corporate Planning and General
Affairs Department (General Affairs), Finance
Department and Legal Office

In charge of Development Promotion Department
and Real Estate Investment Department
In charge of Community Co-Creation Department

charge of Office Building Development
Tomoharu In
Department
Nakao

Nobuhiro
Seo

In charge of Corporate Planning and General
Affairs Department, and Legal Office
General Manager of Corporate Planning andGeneral Affairs Department, and Legal Office

AkihitoTakanoIn charge of Development Promotion Department
General Manager of Development Promotion
Department

Takahisa
AoyamaIn charge of Development Investment Department
General Manager of Real Estate Investment
Department

Apr. 1978 Joined The Bank of Japan (BOJ)
May 2001 General Manager of Matsumoto Branch, BOJ
Jul. 2003 General Manager of Hiroshima Branch, BOJ
Jan. 2006 Director-General of Personnel and Corporate Affairs
Department, BOJ
Mar. 2007 Director-General of Research and Statistics
Department, BOJ
May 2008 Joined Okasan Securities Co., Ltd.
Jun. 2008 Director of Okasan Securities Co., Ltd.
Apr. 2017 Executive Officer of Okasan Securities Group Inc.
Jun. 2017 Managing Executive Officer of Okasan Securities Co.,
Ltd.
Jun. 2018 External Statutory Auditor of Heiwa Real Estate Co.,
Ltd. (the Company) (current position)
Outside Director of Shinhan Bank Japan
June 2021 Outside Director THE TOCHIGI BANK, LTD. (Appointed
on June 29, 2021)

Directors

Male ●
Female ●Independence(External
directors only)

Norio Iwasaki●―

Kiyoyuki Tsuchimoto
Kazuo Yamada
Hiroki Mizuta

Tomoharu Nakao
Kiichiro Masui
Junji Ota

Takahiro Moriguchi
Junko Utsunomiya

●

●

●

●

●

●

●

○

―

―

―

―

●

●

●

●

Finance
Corporate/affairs/ Legal affairs Financial
management accounting
securities

●

●

●

●

●

●

●

●

●
●

●

●

●

●

●

●

●

Planning / International
sales
perspective

●

●

●

●

●

●

●

●

* This list does not indicate all of the expertise and knowledge possessed by each director.

HEIWA REAL ESTATE INTEGRATED REPORT 2021

48

Financial and Corporate Information

Consolidated Financial Data
For the fiscal year:
Operating revenue

Operating income

2010

2011

2012

2013

2014

2015

2016

2017

2018

Millions of yen

30,13535,20532,99243,28434,34737,01041,74732,69839,480Millions of yen

Ordinary income

Net income attributable to owners of parent

Depreciation

Capital expenditures

Cash flows from operating activities

Cash flows from investing activities

Cash flows from financing activities

Balance of cash and cash equivalents at end of period
At fiscal year-end:
Net assets

Unit

Total assets*1

Interest-bearing liabilities

Equity ratio*1

Performance indicators:
Dividends per share*2 *3

Earnings per share (EPS)*2 *4Book value per share (BPS)*2 *4
Price-earnings ratio (PER)

Price-book ratio (PBR)

Consolidated Payout ratio

Consolidated total return ratio

EBITDA*5

Millions of yen

Millions of yen

Millions of yen

Millions of yen

Millions of yen

Millions of yen

Number of outstanding shares

Number of employees*5

11,945(3,921)(17,286)

4,634

5,243

13,271

Yen

22,903

11,242

15,377

19,117

296,834

9,954(8,923)(3,218)92,29894,827

297,736

10,006

10,244

7,046

7,118

4,814

5,077

30,872(12,946)(11,427)(30,200)

12,784

11,71027,166

29,58597,524

104,900

109,075

107,302118,639(4,222)

293,025

21,82435,048

11,228

12,633

20,980294,021

4,766

16,642

46,63910,903

13,482(12,780)(2,499)24,652300,243

335,572

28,6808,292(1,829)24,327

339,545

381,353

197,083

186,902170,335

162,490

160,232

157,051

155,786

184,672

186,977

215,727

4

4

22

22

22

26

26

37

48

56

77

24.5

13.47

24.3

10.30

26.7

29.0

61.51

31.0

72.72

62.53

32.3

33.3

110.5

113.1734.9

32.5

132.57158.7331.6

31.1

184.82189.76Yen

363.13375.82

2,096.60

2,154.94

2,313.34

2,377.02

2,444.84

2,630.07

2,819.82

2,837.29

3,190.09

Times

0.53

0.59

0.87

0.76

0.73

0.59

0.64

0.78

0.76

0.99

1.08

Times
%

%

Times
%
%

Shares

Persons

14.25
29.7

29.7

21.84
38.8

38.8

29.88

22.66

35.8

27.00

30.3

35.8

12.67

35.2

30.3

35.2

13.91

23.5

15.46

23.0

23.5

23.0

13.43

27.9

15.14

30.2

27.9

72.1

18.21

30.3

40.6

57.8

68.5

13,941

12,432

12,905

13,64813,883

13,641

14,92014,476

14,596

16,203

16,763

2.03

2.04

1.82

1.71

1.64

1.53

1.41

1.36

1.57

1.47

1.57

2.55

10.64

2.8
3.2

200,299,980

261

2.61

12.42

2.3
2.8

200,299,980

271

2.22

1.98

11.84

1.76

10.79

2.4

10.89

2.6

3.1

2.9

3.4

40,059,996

2.8

40,059,996

293

40,059,996

285

281

1.69

1.61

10.61

1.49

9.24

2.8

9.84

3.3

4.7

4.7

40,059,996

40,059,996

281

224

1.69

1.74

11.77

3.2

9.76

2.9

5.2

5.8

40,059,996

40,059,996

233

236

1.82

11.10

3.2

3.1

6.5

6.3

38,859,996

38,859,996

237

240

Trends in Share Price (From April 2010 to March 2021/monthly)

(Yen)
（円）
4,000
5,000
3,500

4,000
3,000

2,500
3,000
2,000

2,000
1,500
1,000
1,000
500

00

April
2010

April
2011

April
2012

* Amount stated is the monthly closing price

HEIWA REAL ESTATE INTEGRATED REPORT 2021

4,661

(17,265)

12,557

8,430

6,174

2020

186,358*1 Total assets and equity ratio for FY2017 have been retroactively restated to reflect the application of the partial amendments to Accounting Standard for Tax Effect Accounting, etc.
*2 A five-to-one share consolidation was executed on October 1, 2012; accordingly, the data varies significantly between the pre-consolidation period (until FY2011) and the postconsolidation period (FY2012 and thereafter).
Of note, dividends per share in FY2012 consisted of an interim dividend of 2 yen (before consolidation) and a year-end dividend of 12 yen (after consolidation); the interim dividend wasconverted into the post-consolidation amount of 10 yen, bringing the total amount to 22 yen*3 Annual dividends per share for FY2017 included a 4.0 yen commemorative dividend celebrating the 70th anniversary of the Company’s founding.
*4 The Company established a trust for its stock compensation plan for directors and managing officers in FY2019, and the Company’s shares held in the trust account for this trust were
included in treasury stock for calculations of earnings per share and book-value per share.
*5 Financial indicators are calculated as follows:
    EBITDA: Operating income + Financial income + Depreciation
    D/E ratio: Interest-bearing liabilities ÷ Net assets
    Net D/E ratio: (Interest-bearing liabilities – Cash and deposits – Marketable securities) ÷ Net assets
    ROA: Operating income ÷ Total assets (average of total assets at beginning and end of period) x 100
    ROE: Net income attributable to owners of parent ÷ Equity (average of equity at beginning and end of period) x 100*6 The decrease in the number of employees in FY2016 is mainly due to the exclusion of Heiwa Health Care Co., Ltd. from the scope of consolidation because the Heiwa Real Estate Group
sold its entire stake in this company.

49

4,878

15,838

8,395(13,017)85,990

Yen

5,028

9,335

5,288

(2,600)84,002

%

8,431

4,514

(15,160)

75,497313,096

6,708

4,408

9,432

(6,388)73,01033,493

9,673

15,461

13,824(11,199)

8,267

15,326

Millions of yen

308,964

4,989

9,001

(18,026)

296,058

2,495

5,326

12,587(11,083)

Millions of yen

6,568

2,901

9,834

Millions of yen

8,548

5,644

2,455

42,504Times

Return on equity (ROE)

16,6395,194

17,016

8,055

38,010

Ratio of EBITDA to net interest-bearing liabilities
*5

5,098

3,748

3,910

2,055

7,355

(11,612)Times

Return on assets (ROA)*1 *5

5,183

2,062

7,074

Millions of yen

Millions of yen

D/E ratio*5

Net D/E ratio*5

8,403

2019

April
2013

April
2014

April
2015

April
2016

April
2017

April
2018

April
2019

April
2020

HEIWA REAL ESTATE INTEGRATED REPORT 2021

50

Financial and Corporate Information

Stock Information
Status of Shares

Major Shareholders (Top 10)

Total authorized shares: 110,000,000 shares
Number of shareholders: 16,724

Mitsubishi Estate Co., Ltd.

Distribution of Shares by Shareholder Category

Custody Bank of Japan, Ltd. (Trust Account)

Securities companies

1,065,000（2.74％）

7,411,000（19.07％）

Individuals and others

6,691,000（17.22%）Foreign corporations

13,982,000

The Master Trust Bank of Japan, Ltd.
(Trust Account)
JP MORGAN CHASE BANK 385632
THE BANK OF NEW YORK 133970
Taisei Corporation

Total outstanding
shares:38,859,000

CGML PB CLIENT ACCOUNT/COLLATERAL

Custody Bank of Japan, Ltd. (Trust Account 5)

Financial institutions

9,709,000（24.99%）（35.98％）JP MORGAN CHASE BANK 385781

SSBTC CLIENT OMNIBUS ACCOUNT

https://www.heiwa-net.co.jp/
en/Company
name:

4,274

11.47

Date ofestablishment:

3,076

8.26

Head office:

3,255

8.74

2,415

6.48

1,369

3.68

618
532
518

499

493

1.66
1.43
1.39
1.34

https://www.heiwa-net.co.jp/
en/ir/

Sustainability

https://www.heiwa-net.co.jp/
en/sustainability/

Osaka
BranchHEIWA REAL ESTATE CO., LTD.

NagoyaBranchJuly 1947

1-10, Nihonbashi Kabutocho, Chuo-ku,
Tokyo 103-8222, Japan¥21,492 million

Capital:URL:

Listedexchanges:

Stock code:

Businesses:

1.33

https://www.heiwa-net.co.jp/en/

Tokyo and Nagoya (First Section), Fukuoka and Sapporo
8803

1. Building Business	Development, leasing, administration and managementof stock exchange buildings, office buildings, commercial
facilities, and residential buildings
2. Asset Management Business	Development, sale, operation and management of revenuegenerating real estate, development and sale of residentialbuildings, and real estate agency services
3. Other Businesses	Building facility maintenance and management, repair work
contracting, and insurance services

Group Companies

Heiwa Real Estate Property Management Co., Ltd.
Housing Service Co., Ltd.

Heiwa Real Estate Asset Management Co., Ltd.
The Tokyo Shoken Building Incorporated

102 (non-consolidated) / 240 (consolidated)

Organization (As of April 1, 2021)
Board of Statutory Auditors
Statutory Auditors

General Shareholders’ Meeting

Corporate Auditors Office

Board of Directors

Internal Audit Department

Representative Director and PresidentManaging Officers' Meeting

Legal OfficeFinance Department

Development Promotion Department

Real Estate Investment Department
Office Building Development Department
Community Co-Creation Department

HEIWA REAL ESTATE INTEGRATED REPORT 2021

8-21, Sakae 3-chome, Naka-ku,
Nagoya 460-0008, Japan

Sapporo 1, Odori-nishi 4-chome, Chuo-ku,
Branch Sapporo 060-0042, Japan

Corporate Planning and General Affairs Department

51

5-5, Kitahama 1-chome, Chuo-ku,
Osaka 541-0041, Japan

Fukuoka 14-2, Tenjin 2-chome, Chuo-ku,
Branch Fukuoka 810-0001, Japan

Osaka Branch, Nagoya Branch, Fukuoka Branch, Sapporo Branch

Branches:

Number of
employees:

IR Information

Branch Locations

Representative: Kiyoyuki Tsuchimoto,
Representative Director and President(Notes)1. Percentage of total equity was calculated after deducting the number of shares held by
the Company as treasury stock from total outstanding shares.
2. The list of Major Shareholders above excludes 1,610,000 shares held by the Company in theform of treasury stock. Of note, 59,000 shares of the Company held by Custody Bank of Japan,
Ltd. (Trust Account) as assets in trust for the Company's stock compensation plan for directors
and officers are not included in such treasury stock.

Corporate Website
Home Page

(As of March 31, 2021)

Corporate Profile

Number
Percentage ofof shares
total equity(Thousands)
(%)

Name

Total outstanding shares: 38,859,996 shares

Other corporations

Corporate Information(As of March 31, 2021)

Nomination Committee
Compensation Committee
Management Conference

Sustainability Committee

Risk Management Committee
Sustainability Promotion OfficeOsaka Branch

Nagoya Branch

Fukuoka Branch

Sapporo Branch
HEIWA REAL ESTATE INTEGRATED REPORT 2021

52