ANNUAL REPORT 2024
Year Ended March 31, 2024

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

3

1

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

3

2

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

5

3

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

6

4

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

6

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

8

1

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

8

2

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

12

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

18

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

18

Part 2

Part 3
1

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

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

May 1949

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

July 1949

Listed on the Fukuoka Stock Exchange

July 1950

Listed on the Sapporo Securities Exchange

July 1958

Completed construction of the Fukuoka Shoken Building

March 1962

Completed construction of the Kyoto Shoken Building

March 1965

Completed construction of the Fukuoka Heiwa Building

April 1965

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

April 1969

Upgraded offices in Nagoya and Fukuoka to branches

May 1972

Completed construction of the Kabutocho Heiwa Building

March 1977

Commenced sales of houses in the Fusaheiwadai district of the city of AbikoMay 1980

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

October 1984

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

December 1984

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

April 1987

Completed construction of the Osaka Heiwa Building

April 1988

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

October 1993

Completed construction of the Daimaru Kyoto Store West Kyodo Building

June 1994

Completed construction of the Daimaru Kyoto Store North Kyodo Building

April 2000

Acquired the Mita Heiwa Building

February 2001

Acquired the Uchisaiwaicho Heiwa Building

September 2002

Acquired the Dogin Building

March 2004

Completed construction of the Nagoya Heiwa Building

December 2004

Completed construction of the Osaka Securities Exchange Building

December 2005

Acquired the Isemachi Heiwa Building

March 2006

Acquired the Sapporo Ekimae Godo Building

August 2006

Opened the Sapporo Branch

June 2007

Acquired the Kayabacho 1-Chome Heiwa Building

August 2007

Completed construction of the Nagoya Stock Exchange Building

February 2008

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

March 2008

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

May 2008

Acquired the Shin-Odori Building

October 2009

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

February 2010

consolidated subsidiary
Completed construction of CentRise Sakae

January 2012

Completed construction of the Ichibancho Heiwa Building

January 2013

Made The Tokyo Shoken Building Incorporated a consolidated subsidiary

March 2015

Completed construction of the Maruzen Nagoya Honten Building

December 2017

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

Acquired the Sakae Sun City Building
Opened KABUTO ONE

April 2022

The Company’s shares were listed on the Prime Market of the Tokyo Stock Exchange and the Premier Marketof the Nagoya Stock Exchange following the respective market reorganizations of each exchange

March 2024

Established the Heiwa Real Estate Group Purpose and formulated the Heiwa Real Estate Group Long-term
Vision, “WAY 2040”- 4 -2. Overview of Business Activities
The Heiwa Real Estate Group (hereafter, “the Group”) is comprised of Heiwa Real Estate Co., Ltd. (hereafter, “the Company”),
which files consolidated financial statements as the parent company, and its five consolidated subsidiaries. The main businessactivities conducted by the Group, the names of the companies engaged in these businesses, and the respective business activitiesof each of these companies are presented below.
The main business activities conducted by the Group are categorized according to its reportable business segments.
(1) Building BusinessHeiwa Real Estate Co., Ltd., The Tokyo Shoken Building Incorporated, and Tokyo Hibiya Hotel Corporation develop, lease,manage, and sell stock exchange buildings, office buildings, commercial facilities, and residential buildings.
Heiwa Real Estate Property Management Co., Ltd., provides property management services.
(2) Asset Management BusinessHeiwa Real Estate Co., Ltd., and HEIWA REAL ESTATE Asset Management Co., Ltd., manage the properties of HEIWA REALESTATE REIT, Inc.
Housing Service Co., Ltd., provides real estate agency services.
The details above are shown in the following diagram.

平和不動産株式会社

Heiwa Real Estate Co., Ltd.

ビルディング事業

Building Business

アセットマネジメント事業

Asset Management Business

平和不動産プロパティマネジメント株式会社

Heiwa Real Estate Property Management Co., Ltd.

株式会社東京証券会館

The Tokyo Shoken Building Incorporated

東京日比谷ホテル株式会社

Tokyo Hibiya Hotel Corporation

平和不動産アセットマネジメント株式会社

HEIWA REAL ESTATE Asset Management Co., Ltd.

ハウジングサービス株式会社

Housing Service Co., Ltd.

- 5 -

3. Overview of Subsidiaries and Affiliates
Company nameLocation

SharecapitalMain business activities*(millions of
yen)

The
Company’s
voting rights
andownership(%)

Related activities

Consolidated subsidiaries
Consigned to manage
the Company’s leased
buildings

Heiwa Real Estate
Property Management
Co., Ltd.*

Chuo-ku, Tokyo

134

Building Business

Rents offices from theCompany

100.0

Officers holdconcurrent positions
Housing Service Co., Ltd.

Chuo-ku, Osaka

95

Asset Management
Business

Officers holdconcurrent positions

100.0

Rents offices from the

HEIWA REAL ESTATE
Asset Management Co.,

Chuo-ku, Tokyo

295

Ltd.

Asset Management
Business

Company
Officers hold100.0

concurrent positions
Rents stores to the

The Tokyo Shoken
Building Incorporated

Chuo-ku, Tokyo

100

Building BusinessCompany
Officers hold100.0

concurrent positions
Tokyo Hibiya Hotel

Chiyoda-ku, Tokyo

Corporation

10

Building Business

Rents hotels from the

100.0

Company* The main business activities correspond to the business segment names.

4 Employee Data
(1) Employees of the Group(As of March 31, 2024)
Segment

Number of employees

Building Business

140

Asset Management Business

87

Group-wide non-segment

28

Total

255

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

- 6 -(2) Employees of the Company
Number of employees

Average age of employees

98

43.1

Average years of employment(As of March 31, 2024)
Average annual salary(thousands of yen)

15.1

Segment

11,198

Number of employees

Building Business

70

Asset Management Business－Company-wide non-segment

28

Total

98

(Notes) 1. Number of employees refers to full-time employees, excluding employees transferred to organizations outside the Company
and including personnel transferred to the Company from other organizations.
2. Average annual salary includes bonuses and additional wages.
3. Company-wide non-segment refers to employees of administration divisions.
(3) Labor unions
Employees of The Tokyo Shoken Building Incorporated, a consolidated subsidiary, have formed a labor union, and this company
and the labor union have been maintaining a constructive relationship. There are no matters deserving special mention.
(4) Percentages of female employees holding management positions and male employees who have taken childcare leave
Reported by the Company
Fiscal 2023
Percentage of female employees holding management positions(Note 1)

Percentage of male employees who have taken childcare leave(Note 2)

14.3%－

(Notes) 1. The percentage of female employees holding management positions was calculated as of March 31, 2024, pursuant toprovisions in the Act on Promotion of Women’s Participation and Advancement in the Workplace (Act No. 64 of 2015),
and in accordance with Paragraph 19-1-1 of the Ministry of Health, Labour and Welfare’s Ordinance on the Action Plans
for Business Owners (Ordinance No. 162 of 2015) based on this act.
2. The percentage of male employees who have taken childcare leave was determined over the fiscal year, pursuant toprovisions in the Act on the Welfare of Workers Who Take Care of Children or Other Family Members Including Child
Care and Family Care Leave (Act No. 76 of 1991; hereafter, the “Childcare and Family Care Leave Act”), and in accordancewith Paragraph 71-4-1 of the Ministry of Health, Labour and Welfare’s ordinance on the enforcement of this act (OrdinanceNo. 25 of 1991). No male employees were eligible for childcare leave during fiscal 2023, ended March 31, 2024.
3. Employees employed directly by the Company, including those seconded by the Company to other companies, were
included in calculations of the percentages of female employees holding management positions and male employees who
have taken childcare leave. Employees seconded by other companies to the Company were not included in thesecalculations.
4. The Company has not disclosed differences in the salaries of male and female employees during fiscal 2023, and therefore,
not included such data in this report, pursuant to provisions in the Act on Promotion of Women’s Participation andAdvancement in the Workplace, and in accordance with Paragraph 19-1-1 of the Ministry of Health, Labour and Welfare’s
Ordinance on the Action Plans for Business Owners based on this act.
5. Consolidated subsidiaries are not subject to the disclosure obligations under the Act on Promotion of Women’s Participation
and Advancement in the Workplace or the Childcare and Family Care Leave Act, and therefore their figures have been
omitted.

- 7 -Part 2 Business Overview
1. Management Policies, Operating Environment, and Issues to Address
Details of the Group’s management policies, operating environment, and issues to address are as follows.
Forward-looking statements in this report were based on judgments made as of March 31, 2024.
Management Policies, Operating Environment, and Issues to Address
Over the four-year period from fiscal 2020 to fiscal 2023, the Heiwa Real Estate Group advanced its medium-term management
plan, Challenge & Progress, positioned itself to strive for new heights as a company contributing to district revitalization.
We progressed with the revitalization of the Nihonbashi Kabutocho and Kayabacho district, as well as large-scale
redevelopment projects in Sapporo, and transitioned to a business model centered on creating added value through both external
and internal growth. Meanwhile, our commitment to sustainability initiatives led us to actively address social issues. As a result,
we achieved all key performance indicators (KPIs), including consolidated operating profit exceeding ¥12 billion, earnings per
share (EPS) over ¥200, and a return on equity (ROE) over 6%. These achievements represent a significant advance for the Groupover the past four years.
The Japanese economy is expected to pick up moderately due to improvements in employment and income conditions as wellas the impact of various economic measures to be implemented by the government. Nevertheless, potential economic downturns
around the world triggered by global inflation and monetary tightening will need to be closely monitored.
In Japan, the urban landscape and lifestyles are undergoing major changes due to various factors, including the diversificationand qualitative shifts in workstyles, expanded demand from inbound tourism, population decline, a dwindling birthrate and an
aging society, and intensified competition between cities and between regions. Additionally, heightened expectations for
improved capital efficiency, the advancement of sustainability management, progress in digital technology, and the increasing
threat of natural disasters are all contributing to the rapidly evolving operating environment.
After considering this operating environment, the Company announced the Heiwa Real Estate Group Purpose, “Enriching
everyone’s future with Bazukuri* that draws people in,” and the Heiwa Real Estate Group Long-term Vision, “WAY 2040,” onMarch 29, 2024, followed by a new medium-term management plan, “WAY 2040 Stage 1,” on April 30, 2024. In accordancewith these plans, the Group will work to expand its redevelopment business, cultivate profit growth while enhancing capitalefficiency, boost social value, and strengthen its business foundations, in an effort to increase corporate value.
* Bazukuri includes operations such as construction of buildings, creation of community and opportunities.
New Medium-Term Management Plan: Background to Formulation and Positioning
In the new medium-term management plan, WAY 2040 Stage 1 (FY2024–FY2026), we have positioned this period as the initialsprint toward dynamic growth. This involves establishing the Nihonbashi Kabutocho and Kayabacho district brand, undertaking
our largest-ever redevelopment projects, located in Sapporo, and venturing into new business domains to realize our vision,
characterized by the slogan: Pursue perpetual dynamic growth to become the “Bazukuri Company.”
Key Strategies of the Plan to Realize Our Vision(1) Expand redevelopment business: Deploy Bazukuri endeavors that draw people in throughout Japan1) Establish the Nihonbashi Kabutocho and Kayabacho district brand
The introduction of new features through the opening of Caption by Hyatt Kabutocho Tokyo, the first of this series in Tokyo,
will generate synergies among different aspects and services within the city, enhancing overall urban functionality. Further,
we will implement diverse Bazukuri endeavors that draw people in and entrench our Nihonbashi Kabutocho and Kayabacho
district brand. This will be achieved primarily through the expansion of FinGATE, a platform supporting the establishment
and growth of entrepreneurs and startups, as well as the attraction and operation of unique commercial establishments thatbring vibrancy both on weekdays and weekends, and cutting-edge urban sustainability initiatives.
2) Advance our largest-ever redevelopment projects, located in Sapporo
We will steadily advance toward the completion in 2028 of our largest-ever redevelopment projects —the Odori-nishi 4
South, Type 1 District Redevelopment Project and the Sapporo Station South Exit North 4 West 3, Type 1 District
Redevelopment Project (provisional names)—as part of our Bazukuri endeavors in Sapporo that people draw in. Throughthis, we aim to help boost the competitiveness of the city.
3) Expand redevelopment projects nationwide
To enhance our presence as a Bazukuri Company, we will drive the implementation of redevelopment projects centeredaround our assets in major cities throughout Japan.

- 8 -(2) Cultivate profit growth while enhancing capital efficiency: Expand leasing business, promote reinvestment by realizing gains
from property sales, and diversify into new business areas
1) Develop a business model for creating added value in the Building BusinessWe will realize gains from property sales by renewing our portfolio and sustainably develop our business model focused on
creating added value.
2) Expand revenue in the Asset Management BusinessWe will strive to increase asset management fees by supporting the growth of HEIWA REAL ESTATE REIT, Inc., and toenhance Group earnings with high capital efficiency through stable growth in brokerage business.
3) Venture into new business domains to realize our vision
To achieve the dynamic growth emphasized in our Long-term Vision, we will strengthen our hotel business and explore
opportunities for expansion into new business domains, primarily through M&A.
(3) Boost social value: Promote sustainability initiatives
1) Implement sustainability management
We, as a Bazukuri Company, will contribute to realizing a sustainable society by addressing environmental and social issues,
including achieving net-zero greenhouse gas (GHG) emissions, while encouraging interactive communication with all
stakeholders.
2) Promote the creation of sustainable districts
We will enhance the competitiveness of our asset portfolio by addressing social issues such as environmental friendlinessand boosting disaster preparedness. This will be achieved through building development and operation as well as facility
investment, and continuing efforts to reduce GHG emissions, among other initiatives.
(4) Strengthen business foundations: Maximize human capital for accelerated growth1) Implement management with an awareness of the cost of shareholders’ equity and stock price
From fiscal 2024 to fiscal 2026, we have set an ROE target of at least 7%, exceeding the cost of shareholders’ equity. For
shareholder returns from fiscal 2024 to fiscal 2026, we aim to maintain a consolidated dividend payout ratio of 50% in
consideration of the cost of shareholders’ equity, capital efficiency, and other factors. We will also flexibly implement sharebuybacks, taking into account aspects such as stock price, investment plans, and financial condition.
2) Maximize human capital
As part of our Long-term Vision, we will promote human capital management to drive dynamic growth. This involves
cultivating human resources capable of realizing our Purpose through career development, as well as individuals proficientin digital transformation (DX). Additionally, we will create an organization that promotes and maximizes diversity, while
fostering comfortable and vibrant workplaces through health and productivity management, among other measures.
3) Further strengthen corporate governance
We will bolster corporate governance mainly by enhancing the functions of the Board of Directors and reducing crossshareholdings.

- 9 -Quantitative Targets(1) Financial and non-financial key performance indicators (KPIs)

Profit targets

Financial
KPIs

Capitalefficiency

EPS

At least ¥270 (fiscal 2026)

Consolidated
operating profit

At least ¥14 billion* (fiscal 2026)

ROE

At least 7% from fiscal 2024 to fiscal 2026
We aim to maintain a consolidated dividend payout

Shareholder
returns

Consolidated
dividend payout

ratio of approximately 50% (fiscal 2024–fiscal 2026)
and will flexibly implement share buybacks, taking

ratio

into account factors such as stock price, investment
plans, and financial condition.
Reduce by 80% compared to fiscal 2018 by fiscal
2025 (Scope 1 and 2)
Achieve net-zero emissions by fiscal 2050 (Scope 1,

GHG emissions

2, and 3)

Environmental
Water usage

Reduce in each application year on year

Waste generation

Reduce in each application year on year

Ratio of new graduate female hires: At least 30% (five-year average)
Ratio of female managers: At least 20% by fiscal 2030
Ratio of mid-career workers in management positions: At least 40% by

Nonfinancial

fiscal 2030
Annual health check uptake: 100%

KPIs
SocialUptake of cancer screenings (every two years): 100% of employees aged
35 or above
Annual stress check uptake: 100%
Annual paid holiday uptake: At least 70%
Male childcare leave uptake: 100% by fiscal 2030
First aid training qualification: All of our officers and employees

GovernanceRatio of cross-shareholdings to consolidated net assets: 10% or less by
fiscal 2026

* Breakdown of consolidated operating profit
Building Business: ¥13.8 billion
Asset Management Business: ¥2.4 billion
Corporate and elimination: -¥2.2 billion* Reference indicator (financial soundness): Net debt-to-equity (D/E) ratio of approximately 2.0- 10 -

(2) Capital allocation (fiscal 2024–fiscal 2026)
Fiscal 2024

Fiscal 2026

Cash balance at beginning of period: Approx. ¥28 billion

Cash balance at end of period: Approx. ¥20 billion
Redevelopment investment: Approx. ¥60 billion(Breakdown)

Capital generated through business and other sources:
Approx. ¥70 billion(Incl. revenue from sales of properties: Approx. ¥37
billion)Nihonbashi Kabutocho and Kayabacho district: Approx.
¥16 billion
Sapporo: Approx. ¥40 billion
Other: Approx. ¥4 billion
Investment in property acquisition: Approx. ¥23 billion

Proceeds from interest-bearing liabilities: Approx. ¥40

CAPEX: Approx. ¥17 billion

billionShareholder returns: Approx. ¥18 billion(Note) Currently, the estimated total investment for the provisionally named Odori-nishi 4 South, Type 1 District
Redevelopment Project, scheduled for completion in 2028, and Sapporo Station South Exit North 4 West 3, Type 1
District Redevelopment Project, scheduled for completion in FY2028, is approximately ¥120 billion.
The targeted and planned amounts for the KPIs and investment plans, above, are as of the time this report was submitted.
The Company makes no guarantee that these targets and plans will be achieved, and results could differ substantially. Thesetargets and investment plans may be revised in the future due to changes in the operating environment or other factors.

- 11 -

2 Management’s Analysis of Financial Position, Operating Results, and Cash Flows(1) Overview of financial results
An overview of the Group’s consolidated financial position, operating results, and cash flows (hereafter, “financial results”) in
fiscal 2023 is presented as follows.
1) Financial position and operating results
In fiscal 2023, the Japanese economy continued to pick up moderately on the back of improved employment and income
conditions as well as various economic measures implemented by the government. Nevertheless, the impacts of rising prices,
economic downturns in other countries, and financial capital market trends and volatility risks will need to be closely monitored
going forward.
Against this backdrop, conditions were favorable in Japan’s real estate industry. In the office building leasing market, vacancy
rates declined in central Tokyo, reflecting a rebound in demand for office space despite substantial availability in newly
constructed buildings. In the real estate investment market, investment demand for real estate remained firm and stable due tocomparably low interest rates in Japan’s financing market.
In this operating environment, the Company’s consolidated financial results were mixed. Net sales totaled ¥44,433 million, adecrease of ¥89 million (0.2%) compared with the previous fiscal year. Operating profit increased by ¥2,237 million (20.7%) to¥13,022 million, while ordinary profit rose by ¥1,816 million (18.8%) to ¥11,463 million. Profit attributable to owners of parent
amounted to ¥8,450 million, down ¥686 million (7.5%) year on year. Nevertheless, the Company achieved all of the KPIs set inits medium-term management plan, Challenge & Progress, particularly its fiscal 2023 operating profit target of ¥12.0 billion,
posting a record high for this indicator.
Consolidated financial results by business segment are as follows.
(Millions of yen)Segment

Fiscal 2022
Net sales

Fiscal 2023

Operating profit

Net sales

Difference

Operating profit

Net sales

Operating profit

Building Business

40,848

10,57240,544

12,639

(303)

2,066

Asset Management Business

3,674

2,071

3,888

2,197

214

126

－

(1,859)－(1,814)－44

44,522

10,78444,43313,022

(89)

2,237

Adjustments
Total

Net sales from major tenants and their percentage of net sales in fiscal 2022 and 2023 are as follows.
Tenant
HEIWA REAL ESTATE REIT, Inc.
Godo Kaisha Shinsatsu

Fiscal 2022
Net sales
Percentage of net(millions of yen)sales

Fiscal 2023
Net sales
Percentage of net(millions of yen)sales

13,365

30.0

8,164

18.4

－

－

4,500

10.1

(Note) Only tenants that account for 10% or more of net sales are reported as major tenants.
(i) Building BusinessIn the Building Business segment, leasing revenue increased by ¥1,251 million (5.0%) year on year to ¥26,382 million, primarily
due to contributions from buildings acquired in the previous fiscal year, namely the Heiwa Real Estate Nagoya Fushimi Building
and the Heiwa Real Estate Sakura-dori Building (both in Nagoya-shi, Aichi), as well as to the leasing of newly occupied officespace. Revenue from sales of properties decreased by ¥1,284 million (9.1%) to ¥12,780 million, reflecting a year-on-year
decrease in proceeds from the sell-off of properties designated as real estate for sale. These results combined with other net sales
in this segment brought total net sales to ¥40,544 million, a decrease of ¥303 million (0.7%) compared with the previous fiscal
year. On the other hand, segment operating profit rose by ¥2,066 million (19.5%) to ¥12,639 million.
As of March 31, 2024, the vacancy rate of buildings leased by the Heiwa Real Estate Group (excluding buildings for whichleases have been suspended due to redevelopment) was 2.83%.

- 12 -

Breakdown of net sales(Millions of yen)
Fiscal 2022

Classification

Fiscal 2023

Area (m2)AmountArea (m2)

Leased land area 3,380.75
Leasing revenue

Leased land area 3,272.00
25,130

Leased floor space
434,916.94

Revenue from sales ofproperties
Other
Total

Amount26,382

Leased floor space
381,500.28－

14,065－

12,780

－

1,652

－

1,382

－

40,848－40,544(ii) Asset Management BusinessIn the Asset Management Business segment, asset management revenue increased by ¥82 million (3.3%) to ¥2,565 million, andbrokerage commissions rose by ¥131 million (11.0%) to ¥1,322 million. As a result, segment net sales came to ¥3,888 million,up ¥214 million (5.8%) year on year. Segment operating profit totaled ¥2,197 million, an increase of ¥126 million (6.1%)
compared with the previous fiscal year.
Breakdown of net sales
Classification(Millions of yen)
Fiscal 2022

Fiscal 2023

Difference

Asset management revenue

2,482

2,565

82

Brokerage commissions

1,191

1,322

131

3,674

3,888

214

Total
2) Cash flows

As of March 31, 2024, consolidated cash and cash equivalents amounted to ¥26,316 million, up ¥508 million compared with
March 31, 2023.
Fiscal 2023 consolidated results for each category of cash flows and main factors underlying the results are as follows.
Cash flows from operating activities
Net cash provided by operating activities totaled ¥19,584 million, compared with ¥23,952 million in the previous fiscal year.
Major inflows included profit before income taxes of ¥12,409 million and a decrease in inventories of ¥6,273 million.
Cash flows from investing activities
Net cash used in investing activities amounted to ¥19,356 million, compared with ¥40,250 million in the previous fiscal year.
Main outflows included ¥18,190 million for the purchase of property, plant and equipment, and ¥1,231 million in payments foracquisition of businesses.
Cash flows from financing activities
Net cash provided by financing activities came to ¥280 million, compared with ¥13,994 million in the previous fiscal year. Main
outflows included ¥16,050 million for repayments of long-term borrowings and a ¥3,000 million net decrease in short-termborrowings, while main inflows included ¥19,827 million in proceeds from long-term borrowings.

- 13 -

(Reference) Results for cash flow-related indicators
As of March 31, As of March 31,
Indicator
2020
2021

As of March 31,2022

As of March 31,2023

As of March 31,2024

Equity ratio

31.6%

31.1%

31.7%

30.0%

30.9%

Market cap-to-assets ratio

31.2%

33.7%

38.4%

34.0%

36.0%

Debt repayment period (years)

6.5

26.0

6.0

9.5

11.8

Interest coverage ratio (times)

22.8

6.2

24.2

16.2

11.8

Net D/E ratio

1.5

1.6

1.5

1.7

1.6

(Notes) 1. The following formulas for calculating the indicators shown above are based on consolidated financial results.
Equity ratio = shareholders’ equity ÷ total assets
Market cap-to-assets ratio = market capitalization ÷ total assets
Debt repayment period = interest-bearing liabilities ÷ net cash provided by operating activities
Interest coverage ratio = net cash provided by operating activities ÷ interest expenses
Net D/E ratio = (interest-bearing liabilities – cash and deposits + securities) ÷ net assets
2. Interest-bearing liabilities comprise short-term borrowings, the current portion of bonds payable, the current portion of longterm borrowings, certain other current liabilities, bonds payable, long-term borrowings, and long-term accounts payable–
other, as stated in the consolidated balance sheets. Interest expenses used for the calculations are recorded in the consolidated
statements of income.
3. Net cash provided by operating activities used for the calculations are recorded in the consolidated statements of cash flows.
3) Production, orders, and net sales
Results related to production, orders, and net sales for each segment are presented above in 1) Financial position and operating
results.
(2) Management’s analysis of business results and issues for consideration
Management’s recognition and analysis of the Group’s financial results as well as issues for consideration are presented below.
Forward-looking statements in this report were based on judgments made as of March 31, 2024.
1) Recognition and analysis of financial position and operating results, and issues for consideration
The Group is striving to increase its corporate value based on the business strategies of its medium-term management plan,
Challenge & Progress, which was announced on April 30, 2020. Specifically, it is carrying out redevelopment projects and taking
steps to realize external growth in its Building Business and Asset Management Business. In fiscal 2023, we focused on external
growth through the acquisition of Pregio Shin-Osaka Rouge (Osaka City, Osaka Prefecture) and construction activities at Caption
by Hyatt Kabutocho Tokyo (Chuo-ku, Tokyo), as well as internal growth through rental rate increases. Among consolidated
financial results, operating profit increased by ¥2,237 million to ¥13,022 million, mainly due to an increase in earnings from thesale of real estate in the Building Business segment. Profit attributable to owners of parent decreased by ¥686 million to ¥8,450
million, mainly reflecting a decline in gain on sale of investment securities following a reduction in cross-shareholdings.
Major factors that could have a significant impact on the Group’s operating results include trends in the domestic economy
and real estate market, particularly the office building leasing market and real estate investment market.

- 14 -

Total assets, total liabilities, and net assets as of March 31, 2023, and March 31, 2024 were as follows:(Millions of yen)
As of March 31, 2023

As of March 31, 2024

Difference

Total assets

398,333

405,979

7,645

Total liabilities

279,009280,334

1,324

Net assets

119,324

125,6456,321Interest-bearing liabilities

226,895

231,323

4,428(Note) Interest-bearing liabilities were comprised of short-term borrowings, the current portion of bonds payable, the current portion of
long-term borrowings, certain other current liabilities, bonds payable, long-term borrowings, and long-term accounts payable–
other.

Total assets
As of March 31, 2024, total assets amounted to ¥405,979 million, an increase of ¥7,645 million compared with March 31, 2023.
Among the main factors underlying this result, investment securities increased by ¥3,440 million mainly due to rises in market
values, construction in progress rose by ¥3,316 million, which reflected construction cost outlays for Caption by Hyatt Kabutocho
Tokyo (Chuo-ku, Tokyo), and goodwill increased by ¥645 million.
In the consolidated balance sheets, the combined balance of leased property and real estate that includes the portion used aslease property was ¥304,487 million as of March 31, 2024, a decrease of ¥4,162 million compared with April 1, 2023. As of
March 31, 2024, the market value of the Company’s holdings was ¥421,246 million, an increase of ¥1,061 million from April 1,
2023.
Total liabilities
As of March 31, 2024, total liabilities amounted to ¥280,334 million, an increase of ¥1,324 million compared with March 31,
2023. Among the main factors underlying this result, interest-bearing liabilities rose by ¥4,428 million and accrued consumption
taxes increased by ¥1,096 million, more than offsetting a decrease in trade accounts payable of ¥3,803 million.
As of March 31, 2024, the balance of interest-bearing liabilities was ¥231,323 million, and the net D/E ratio stood at 1.6. The
Company has set a net D/E ratio target of 1.8 in its medium-term management plan, Challenge & Progress, and has kept the ratio
within this range.
Net assets
As of March 31, 2024, net assets stood at ¥125,645 million, an increase of ¥6,321 million compared with March 31, 2023. Thiswas mainly due to an increase in retained earnings of ¥4,713 million and an increase in valuation difference on available-for-salesecurities of ¥1,896 million.
Considering that our performance for fiscal 2023, the final year of the medium-term management plan “Challenge &Progress,” exceeded the planned targets, we have announced both an ordinary dividend and a special dividend. This action aligns
with our goal of achieving a consolidated total shareholder return ratio of around 70%.
The Company’s recognition and analysis of its financial position and operating results by business segment along with related
issues for consideration are as follows.
Analysis of financial position
As of March 31, 2024, Building Business segment assets amounted to ¥341,445 million, an increase of ¥4,005 million comparedwith the previous fiscal year-end. This mainly reflected an increase in property, plant and equipment resulting from the acquisitionof Pregio Shin-Osaka Rouge (Osaka City, Osaka Prefecture) and construction activities at Caption by Hyatt Kabutocho Tokyo(Chuo-ku, Tokyo). However, this was partially offset by a decrease in real estate for sale due to property disposals. AssetManagement Business segment assets totaled ¥24,653 million, down ¥611 million compared with the previous fiscal year-end.
This was largely due to a decrease in the market value of investment units of HEIWA REAL ESTATE REIT, Inc. held by theCompany.

- 15 -

Segment assets(Millions of yen)
As of March 31, 2023

As of March 31, 2024

Difference

Building Business

337,439

341,445

4,005

Asset Management Business

25,26424,653(611)

Adjustments

35,62939,881

4,251

Amount in consolidated financial
statements

398,333

405,979

7,645

Analysis of operating results
Operating results for each segment are presented above in (1) Overview of financial results, 1) Financial position and operating
results.
2) Analysis of cash flows, issues for consideration, and sourcing and liquidity of funds
An analysis of cash flows for fiscal 2023 is presented in (1) Overview of financial results, 2) Cash flows.
The Group’s sources of funds include cash inflows from its business activities, loans from financial institutions, and bonds
issued by the Company. The funds it secures are allocated in a manner that ensures a sound balance between working capital,
shareholder returns, internal reserves needed for maintaining stable operations, and investment for future growth, such asredevelopment and building businesses. The Group’s working capital is mainly used to pay expenses for the operation of businessassets, operating expenses, including selling, general and administrative expenses, and non-operating expenses, such as interest
expenses.
As a basic policy, the Company maintains an appropriate level of discipline when financing and procuring funds, using the
net D/E ratio as an indicator of financial discipline. As of March 31, 2024, interest-bearing liabilities, which include loans andcorporate bonds, stood at ¥231,323 million; net interest-bearing liabilities, which exclude marketable securities and cash anddeposits from interest-bearing liabilities, amounted to ¥202,902 million; and the net D/E ratio came to 1.6.
The Company will return profits to shareholders based on the assumption that its businesses, particularly the redevelopment
and building businesses, will operate stably over the long term, and sufficient internal reserves for raising shareholder value will
be secured. As a basic policy, the Company aimed for a consolidated total shareholder return ratio of around 70% from fiscal
2020 to 2023, taking into account returns on business investments while focusing on capital cost and capital efficiency. In
accordance with this policy, the Company paid dividends totaling ¥5,969 million for fiscal 2023, which includes a special
dividend of ¥1,797 million. As a result, the consolidated total shareholder return ratio stood at 70.6%.
3) Significant accounting policies and estimates
The Group prepares its consolidated financial statements in accordance with accounting standards generally accepted in Japan.
When preparing these statements, accounting estimates are made based on reasonable standard.
More details are presented in Part 3 Financial Reporting, Consolidated Financial Statements, 6. Notes to Consolidated
Financial Statements, Note 2 Significant Accounting Policies.
Accounting estimates are necessary for the impairment of fixed assets and valuation of real estate for sale, in particular.
Information concerning the impact of uncertainty inherent in such estimates and assumptions as well as changes therein on
operating results is presented in Part 3 Financial Reporting, Consolidated Financial Statements, 6. Notes to Consolidated
Financial Statements, Note 3 Significant Accounting Estimates.

- 16 -

Additional Information
1. Building Business
Breakdown of net sales, segment profit (loss), and depreciation
Fiscal 2022
Classification
Segment profit
Net sales(loss)(Millions of yen)
Depreciation

Net sales

Fiscal 2023
Segment profit(loss)

Depreciation

Leasing revenue

25,130

7,549

5,600

26,382

8,007

5,681

Revenue from sales ofproperties

14,0653,140－

12,780

4,808

－

Other

1,652

(118)

4

1,382

(176)

5

40,848

10,572

5,605

40,544

12,639

5,687

Total

(Note) Leasing revenue includes sales and expenses associated with restaurant operations. In fiscal 2022, these operations contributed¥381 million to net sales, reduced segment profit by ¥130 million, and accounted for ¥47 million in depreciation. In fiscal 2023,
they contributed ¥500 million to net sales, reduced segment profit by ¥20 million, and included ¥35 million in depreciation.

2. Asset Management Business
Breakdown of net sales, segment profit, and depreciation
Fiscal 2022
Classification
Net sales
Segment profit(Millions of yen)
Fiscal 2023
Depreciation

Net sales

Segment profit

Depreciation

Asset management revenue

2,482

1,828

10

2,565

1,885

9

Brokerage commissions

1,191

242

4

1,322

312

2

3,674

2,071

14

3,888

2,197

11

Total

- 17 -

Part 3 Financial Reporting
Consolidated Financial Statements
1. Consolidated Balance Sheets(Millions of yen)
As of March 31, 2023
AssetsCurrent assets
Cash and deposits (Notes 10 and 12)
Trade accounts receivable (Notes 6, 12 and 21)
Securities (Notes 10, 12 and 13)
Real estate for sale (Note 6)
Real estate for sale in process (Note 6 )Operating investments in capital (Notes 12 and 13)
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures (Note 6)
Accumulated depreciation
Buildings and structures, net (Note 6)
Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles, net (Note6)
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net (Note 6)
Land (Note 6)
Construction in progress
Total property, plant and equipment
Intangible assets
Leasehold interests in land (Note 6)
Goodwill (Notes 10, 18 and 22)
Other
Total intangible assets
Investments and other assets
Investment securities (Notes 6, 12 and 13)
Deferred tax assets (Note 17)
Other
Total investments and other assets
Total non-current assets
Deferred assets
Bond issuance costs
Total deferred assets
Total assets- 18 -

As of March 31, 2024

20,908
1,967
6,999
14,153
298
1,027
1,300
(24)
46,63020,416
2,114
8,005
20,645
567
551
956
(0)
53,257

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

180,769(96,211)84,557
2,259(1,834)

480

425

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

2,669(1,839)829
184,669
5,039
275,52230,464－193
30,65830,492645
181
31,32034,632
226
6,345
41,204351,388

38,072250
7,175
45,498352,341314
314
398,333381
381
405,979

(Millions of yen)
As of March 31, 2023
Liabilities
Current liabilities
Trade accounts payable (Note 12)
Current portion of bonds payable (Notes 12 and 25)
Short-term borrowings (Notes 12 and 25)
Current portion of long-term borrowings (Notes 12 and25)
Income taxes payable (Note 17)
Accrued consumption taxes
Provision for bonuses for directors (and other officers)
Provision for bonuses
Other (Notes 6, 21 and 25)
Total current liabilities
Non-current liabilities
Bonds payable (Notes 12 and 25)
Long-term borrowings (Notes 12, 14 and 25)
Long-term accounts payable – other (Notes 12 and 25)
Leasehold and guarantee deposits received (Note 12)
Deferred tax liabilities (Note 17)
Deferred tax liabilities for land revaluation (Note 6)
Provision for share awards
Retirement benefit liability (Note 15)
Asset retirement obligations (Note 19)
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land (Note 6)
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets- 19 -

As of March 31, 2024

5,727
3,648
3,800

1,923
3,624
800

15,727

16,681

2,618
642
134
256
1,988
34,543

1,674
1,738
109
272
2,228
29,052

27,989170,880
4,850
23,524
8,849
7,314
147
234
676
－
244,466
279,009

27,864
173,703
8,391
23,636
9,466
7,186
213
126
683
9
251,282
280,334

21,492
19,72056,298(9,997)87,513

21,492
19,72061,012(9,989)92,235

15,443－
16,366
31,810
119,324
398,333

17,339(6)
16,07633,409125,645405,979

2. Consolidated Statements of Income(Millions of yen)
Year ended March 31, 2023
Net sales (Notes 7, 21 and 22)
Cost of sales
Gross profit
Selling, general and administrative expenses
Salaries and allowances
Provision for bonuses for directors (and other officers)
Provision for bonuses
Provision for share awards
Retirement benefit expenses
Commission expenses
Other
Total selling, general and administrative expenses
Operating profit (Note 22)
Non-operating income
Interest income
Dividend income
Miscellaneous income
Total non-operating income
Non-operating expenses
Interest expenses
Amortization of bond issuance costs
Miscellaneous losses
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on sale of investment securities
Gain on sale of businesses (Note 7)
Subsidy income
Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets (Note 7)
Impairment losses (Notes 7 and 22)
Loss on tax purpose reduction entry of non-current assets
Loss on valuation of investment securities
Total extraordinary losses
Profit before income taxes
Income taxes – current
Income taxes – deferred
Total income taxes (Note 17)
ProfitProfit attributable to owners of parent- 20 -

Year ended March 31, 2024

44,522
28,242
16,27944,43325,863
18,569

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

1,610
112
180
87
24
848
2,683
5,547
13,022

6
539
30
575

17
382
44
444

1,480
56
175
1,713
9,647

1,664
50
287
2,003
11,463

3,543
240
44
3,827

1,215
－
2
1,218

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

20
66
2
181
271
12,409
4,040
(81)
3,959
8,450
8,450

3. Consolidated Statements of Comprehensive Income(Millions of yen)
Year ended March 31, 2023
ProfitOther comprehensive income (Note 8)
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Total other comprehensive income
Comprehensive income (Note 8)
Comprehensive income attributable toComprehensive income attributable to owners of parent- 21 -

Year ended March 31, 2024

9,137

8,450

(2,624)－(2,624)
6,512

1,896
(6)
1,889
10,3406,512

10,3404. Consolidated Statements of Changes in Equity
Year ended March 31, 2023
(Millions of yen)
Shareholders’ equity
Share capital
Balance at beginning of period

Capital surplus

21,492Retained earnings

19,72050,258

Total shareholders’equityTreasury shares(7,306)

84,165

Changes during period
Dividends of surplus(3,775)(3,775)

Profit attributable to owners ofparent

9,137

9,137

Purchase of treasury shares
Disposal of treasury shares

0

Reversal of revaluation reserve
for land(2,708)(2,708)

17

17

678

678

Net changes in items otherthan shareholders’ equity
Total changes during period
Balance at end of period

－

0

6,040

(2,691)

3,348

21,492

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

Accumulated other comprehensive income

Balance at beginning of period

Valuation difference
on available-for-salesecurities

Deferred gains orlosses on hedges

Revaluation reserve forland

Total accumulated
other comprehensive
income18,068－17,045

35,113

Total net assets

119,278

Changes during period
Dividends of surplus(3,775)

Profit attributable to owners ofparent9,137

Purchase of treasury shares(2,708)

Disposal of treasury shares

17

Reversal of revaluation reserve
for land678

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

Total changes during period(2,624)－(678)(3,303)

45

Balance at end of period

15,443－

16,366

31,810

119,324- 22 -

Year ended March 31, 2024
(Millions of yen)
Shareholders’ equity
Share capital
Balance at beginning of period

Capital surplus

21,492Retained earnings

19,72056,298

Total shareholders’equityTreasury shares(9,997)87,513

Changes during period
Dividends of surplus(4,027)(4,027)

Profit attributable to owners ofparent

8,450

8,450

Purchase of treasury shares
Disposal of treasury shares

0

Reversal of revaluation reserve
for land

(12)

(12)

20

20

290

290

Net changes in items otherthan shareholders’ equity
Total changes during period
Balance at end of period

－

0

4,713

7

4,721

21,492

19,72061,012(9,989)92,235

Accumulated other comprehensive income

Balance at beginning of period

Valuation difference
on available-for-salesecurities

Deferred gains orlosses on hedges

Revaluation reserve forland

Total accumulated
other comprehensive
income15,443－

16,366

31,810Total net assets

119,324

Changes during period
Dividends of surplus(4,027)

Profit attributable to owners ofparent8,450

Purchase of treasury shares(12)

Disposal of treasury shares

20

Reversal of revaluation reserve
for land290

Net changes in items otherthan shareholders’ equity

1,896

(6)

(290)

1,599

1,599

Total changes during period

1,896

(6)

(290)

1,599

6,321

Balance at end of period

17,339(6)

16,07633,409125,645- 23 -

5. Consolidated Statements of Cash Flows(Millions of yen)
Year ended March 31, 2023
Cash flows from operating activities
Profit before income taxes
Depreciation
Loss on retirement of non-current assets
Impairment losses
Amortization of goodwill
Loss (gain) on valuation of investment securities
Loss (gain) on sale of businesses
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in retirement benefit liability
Interest and dividend income
Interest expenses
Amortization of bond issuance costs
Loss (gain) on sale of investment securities
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Decrease (increase) in operating investments in capital
Decrease (increase) in prepaid expenses
Decrease (increase) in accounts receivable – other
Increase (decrease) in trade payables
Increase (decrease) in advances received
Increase (decrease) in accrued consumption taxes
Increase (decrease) in deposits received
Increase (decrease) in leasehold and guarantee deposits
received
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities- 24 -

Year ended March 31, 2024

13,260
5,668
61
108
－
－
(240)
(0)
6
114
(545)
1,480
56
(3,543)(157)
11,012
597
0
1,323
(55)
12
545
(544)

12,409
5,778
20
66
7
181
－
(24)
15
(108)
(400)
1,664
50
(1,215)
(147)
6,273
475
(10)
264
(144)
(46)
1,096
26

1,006

(181)

35
30,203522(1,457)(5,315)23,952(253)
25,798422(1,650)(4,984)
19,584

(Millions of yen)
Year ended March 31, 2023
Cash flows from investing activities
Purchase of securities
Proceeds from sale and redemption of securities
Purchase of investment securities
Proceeds from sale and redemption of investment
securities
Payments for acquisition of businesses (Note 10)
Proceeds from sale of businesses
Purchase of property, plant and equipment
Purchase of intangible assets
Purchase of long-term prepaid expenses
Payments of guarantee deposits
Proceeds from refund of guarantee deposits
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Proceeds from long-term borrowings
Repayments of long-term borrowings
Proceeds from issuance of bonds
Redemption of bonds
Proceeds from increased long-term accounts payable
Purchase of treasury shares
Dividends paid
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 10)- 25 -

Year ended March 31, 2024

(3,000)
1,015
(313)

(4,000)4,000(1,290)

4,141

1,816

－
240
(38,239)(2,374)(1,155)(614)
48
2(40,250)(1,231)－(18,190)
(74)
(396)
(65)
73
1
(19,356)－
29,860(13,472)
7,790(4,368)850(2,704)(3,761)(198)
13,994－(2,303)
28,11125,807(3,000)19,827(16,050)
3,500(3,648)3,800(14)(4,012)
(120)
280
－
508
25,80726,316

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

- 26 -

(2) Depreciation method for significant depreciable assets
1) Property, plant and equipment (excluding leased assets)
Depreciation of property, plant and equipment is computed using the declining balance method. The straight-line method,
however, is used for the Tokyo Stock Exchange Building and one other building, as well as for buildings (excluding attachedfacilities) acquired on or after April 1, 1998, and facilities and structures attached to buildings acquired on or after April 1, 2016.
Depreciation of consolidated subsidiaries’ property, plant and equipment is computed using the straight-line method.
The principal useful lives of property, plant and equipment are as follows:
Buildings and structures: 2–65 years
Machinery, equipment and vehicles: 2–30 years
Tools, furniture and fixtures: 2–20 years
2) Intangible assets (excluding leased assets)
Amortization of intangible assets is computed using the straight-line method. The cost of software for internal use is amortizedusing the straight-line method based on the expected useful life of the software (five years).
3) Leased assets
Leased assets are depreciated to a residual value of zero using the straight-line method over the lease period.
(3) Method of accounting for significant deferred assets
Bond issuance costs
Bond issuance costs are amortized using the straight-line method over the period until bond redemption.
(4) Basis of accounting for significant allowances and provisions
1) Allowance for doubtful accounts
An allowance for doubtful accounts is provided to cover losses on trade accounts receivable and bad debts at an amount estimatedbased on the historical write-off ratio for general accounts receivables. For doubtful accounts receivable, the allowance isdetermined at the amount estimated to be uncollectible on an individual basis.
2) Provision for bonuses for directors (and other officers)
Provision for bonuses for directors (and other officers) is calculated based on the total amount of estimated bonus payments.
3) Provision for bonuses
Provision for bonuses for employees is calculated based on the total amount of estimated bonus payments.
4) Provision for share awards
The provision of share awards was calculated based on the expected amount of stock compensation obligations as of March 31,
2024 in order to provide the Company’s stock as compensation to directors and executive officers of the Company and certain
subsidiaries in accordance with its share-based remuneration rules, and as compensation to its employees in accordance withshare-based remuneration rules concerning the trust for the Company’s stock ownership plan for employees.
(5) Accounting for retirement benefits
In order to provide the retirement benefits of employees and pension recipients, retirement benefit liability is calculated at an
amount equal to the projected benefit obligation as of March 31, 2024 minus the fair value of pension assets. Retirement benefit
liability is not calculated at any consolidated subsidiary that has a defined contribution retirement plan.
(6) Basis for calculating significant revenues and expenses
Details about the primary performance obligations of the Heiwa Real Estate Group’s main businesses that generate revenue fromcontracts with customers, and the points in time when such performance obligations are generally satisfied (the points in time
when revenues are generally recognized) are as follows.
1) Building Business
Revenue from sales of properties
The Company generates revenue from sales of properties by increasing the value of properties it has acquired throughredevelopment, lease-ups, and renovations, and then selling them for prices that exceed their acquisition prices. The Company
has performance obligations to deliver properties based on real estate sales agreements.
These performance obligations are satisfied at the time of delivering a property, and revenue is recognized once the property
is delivered.

- 27 -

2) Asset Management Business
Asset management revenue from management fees
The Company generates asset management revenue from management fees obtained through asset management services
provided to HEIWA REAL ESTATE REIT, Inc. Based on property lease agreements, the Company has performance obligations
to manage properties, handle leasing and financing, and acquire and transfer ownership of properties.
Its performance obligations to manage properties and handle leasing and financing are satisfied by providing these services
over their specified periods of time, and revenue is recognized in proportion to the degree these performance obligations are
satisfied.
Its performance obligations to acquire and transfer ownership of properties are satisfied once an acquisition or transfer of aproperty has been completed, and revenue is recognized at either of those points in time.
(7) Method of significant hedge accounting
1) Method of hedge accounting
The Company applies deferred hedge accounting. The special treatment applies to interest rate swaps because they meet therequirements.
2) Hedging instruments and hedged items
Hedging instruments: interest rate swaps
Hedged items: interest rates of borrowings
3) Policy of hedging transactions
Interest rate swap transactions are conducted to reduce the exposure to fluctuations in the interest rates of borrowings.
4) Method of assessing hedge effectivenessHedge effectiveness is assessed by comparing the percentage differences between accumulated changes in cash flows of hedged
items and the hedging instruments that are applied.
Interest rate swaps for which special treatment is applied, however, are excluded from this assessment of hedge effectiveness.
(8) Method and period of goodwill amortization
Goodwill is amortized using the straight-line method over the period in which it has an effect.
(9) Scope of cash and cash equivalents in the consolidated statements of cash flows
Cash and cash equivalents consist of cash on hand, cash in banks that can be withdrawn on demand, and short-term investmentswith maturities of three months or less from the acquisition date, which are highly liquid instruments that can be easily converted
into cash and are exposed to little risk of change in value.
(10) Other important matters for the preparation of consolidated financial statements
Accounting for consumption taxes
In principle, non-deductible consumption taxes were charged as expenses in the fiscal year ended March 31, 2024.
Note 3 － Significant Accounting Estimates
1. Impairment of non-current assets(1) Amounts recorded in the consolidated financial statements for the fiscal year ended March 31, 2024.
Fiscal year ended(Millions of yen)
Fiscal year ended

March 31, 2023

March 31, 2024

Property, plant and equipment

279,526

275,522

Leasehold interests in land and goodwill among intangible assets

30,464

31,13810866

Impairment losses(2) Information on the details of the significant accounting estimates for identified items
1) Method for calculating amounts recorded in the consolidated financial statements for the fiscal year ended March 31, 2024
In principle, individual assets that generate cash flow independently from other asset groups are recognized as the minimum unit
for indications of impairment.
Indications of impairment include recurring operating losses, significant deteriorating of the business environment, andsignificant declines in market value.
If indications of impairment are deemed to exist, the Company will decide whether to recognize an impairment loss. If
recording an impairment loss is deemed necessary, the Company will compare the undiscounted future cash flow with the bookvalue, and if the undiscounted future cash flow is less than the book value, the Company will reduce the book value to arecoverable amount (either the net sales price or the value in use, whichever is higher), and record the reduced book value as an- 28 -

impairment loss.
2) Main assumptions used for significant accounting estimates
The Group sets market values based on the real estate appraisal value determined by external real estate appraisers (hereafter,“externally appraised real estate value”). Future cash flows and recoverable amounts are estimated based on the externallyappraised real estate value and forecasts of an asset group’s operating results, which includes assumptions regarding future rent
levels, occupancy rates, operating expenses, and other factors.
In addition, for its real estate redevelopment projects in Tokyo (Nihonbashi Kabutocho and Kayabacho district) and Sapporo,
the Company groups together multiple assets from the time when redevelopment plans are deemed feasible based on negotiations
with landowners.
3) Possible impact of changes in main assumptions on results recorded in consolidated financial statements for the following fiscal
year
The main assumptions listed in 2), above, are derived from the best estimates based on available information as of March 31,
2024, however, if those assumptions change due to changes in redevelopment projects or market conditions, the Group’s
performance could be affected, such as recording impairment losses.
2. Valuation of real estate for sale(1) Amounts recorded in the consolidated financial statements for the fiscal year ended March 31, 2024

Real estate for sale
Real estate for sale in process

Fiscal year ended(Millions of yen)
Fiscal year ended

March 31, 2023

March 31, 2024

14,153

20,645298567(2) Information on the details of the significant accounting estimates for identified items
1) Method for calculating amounts recorded in the consolidated financial statements for the fiscal year ended March 31, 2024
The net sales price of real estate for sale and real estate for sale in process is estimated based on the expected sales price minus
the expected amount of site preparation and building construction costs and the expected amount of selling expenses. If the net
sales price is less than the book value, the difference is recorded in cost of sales as a loss on revaluation of inventories.
2) Main assumptions used for significant accounting estimates
To estimate the expected sales price, the Group takes into account the externally appraised real estate value, its rental rates andforecast yields, and the impact of falling demand in the future, among other factors.
As of March 31, 2024, the Group had estimated the expected sales prices of its residential buildings based on its rental rates
and forecast yields, and assumed no major fluctuations in rental rates and forecast yields in the real estate market going forward.
3) Possible impact of changes in main assumptions on results recorded in consolidated financial statements for the following fiscal
year
The main assumptions listed in 2), above, are derived from the best estimates based on available information as of March 31,
2024, however, if those assumptions change due to certain factors, such as lower than expected sales prices caused by fallingdemand in the real estate market, the Group’s performance could be affected, such as recording a loss on revaluation of
inventories.
Note 4 － Accounting Standards Not Yet Adopted• Accounting Standard for Current Income Taxes (ASBJ Statement No. 27 (revised)) issued on October 28, 2022
• Accounting Standard for Presentation of Comprehensive Income (ASBJ Statement No. 25 (revised)) issued on October 28, 2022
• Guidance on Accounting Standard for Tax Effect Accounting (ASBJ Guidance No. 28 (revised)) issued on October 28, 2022
(1) Overview
Partial Amendments to Accounting Standard for Tax Effect Accounting (ASBJ Statement No. 28) was issued in February 2018,
and the transfer of practical guidelines for tax effect accounting from the Japan Institute of Certified Public Accountants to the
ASBJ was completed. In deliberations during that process, however, the following two matters were reconsidered following theissuance of ASBJ Statement No. 28, and then further deliberated and announced:
1. Classification of tax expenses for the taxation of other comprehensive income
2. Tax effect of selling shares of subsidiaries or affiliated companies when a consolidated corporate tax system is used
(2) Scheduled date of application
The Company will apply the accounting standards, etc. from April 1, 2024.

- 29 -

(3) Impact of applying the accounting standards, etc.
The impact of applying the revised Accounting Standard for Current Income Taxes on the consolidated financial statements iscurrently being assessed.
Note 5 － Additional Information
Performance-based stock compensation plan for directors and executive officers
The Company has established a performance-based stock compensation plan for its executive officers (excluding non-residents ofJapan), managing officers (excluding those who have been specially appointed to be in charge of the Audit Committee Office, as
well as managing officers of Group companies and non-residents of Japan), and directors and managing officers of the Company’s
major subsidiaries (excluding part-time directors, directors or managing officers who have been seconded from the Company, andnon-residents of Japan).
(1) Overview of the ownership planA trust established with funds contributed by the Company acquires company stock to be used as compensation for directors andofficers eligible under the plan (listed above). Through the trust, company stock or a cash amount equivalent to the value of thestock is delivered to these individuals in an amount commensurate with the number of points each has earned based on sharebased remuneration rules set by the Company’s Board of Directors. As a rule, they will receive this compensation upon retiringfrom their respective post.
(2) Company stock held in the trust
Company stock held in the trust is calculated based on the book value of the stock (excluding incidental expenses) and is included
in treasury shares under net assets. The book value of the applicable treasury shares amounted to ¥321 million as of March 31,
2023, and ¥304 million as of March 31, 2024, and the amount of treasury shares totaled 104,400 shares as of March 31, 2023, and98,700 shares as of March 31, 2024.
Stock ownership plan for employees
The Company has set up a stock ownership plan for employees as a means to provide them with incentives.
(1) Overview of the ownership plan
The plan provides employees with the Company’s stock or a cash amount equivalent to the market value of the stock commensuratewith a number of points awarded based on share-based remuneration rules concerning the trust for the Company’s stockcompensation plan for employees set by the Board of Directors. The shares for the plan are acquired by a trust that has been set
up using funds contributed by the Company.
(2) Company stock held in the trust
Company stock held in the trust is calculated based on the book value of the stock (excluding incidental expenses) and is included
in treasury shares under net assets. The book value of the applicable treasury shares amounted to ¥298 million as of March 31,
2023, and ¥295 million as of March 31, 2024, and the amount of treasury shares totaled 70,900 shares as of March 31, 2023, and70,300 shares as of March 31, 2024.

- 30 -

Note 6 － Consolidated Balance Sheets
1. Net balances of receivables from contracts with customers, contract assets, and contract liabilities are as follows:(Millions of yen)
As of March 31, 2023

As of March 31, 2024

186
485

281
510

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

Contract liabilities (Note 2)
5(Notes) 1. Receivables from contracts with customers and contract assets are included in “trade accounts receivable.”44

2. Contract liabilities are included in “other” under “current liabilities.”
2. Guarantee liabilities
The Company-guaranteed loans owed by employees to financial institutions are as follows:(Millions of yen)
As of March 31, 2023
Housing loans for employees of Heiwa Real
Estate Co., Ltd.

As of March 31, 2024
114

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

91

3. Pursuant to the Act on Revaluation of Land (Act No. 34 of March 31, 1998) and the Act for Partial Revision of the Act on
Revaluation of Land (Act No. 19 of March 31, 2001), the Company revalued its land held for business. Corporation taxes
equivalent to net unrealized gains are reported as “deferred tax liabilities for land revaluation” in liabilities, and net unrealized
gains, net of deferred taxes, are reported as “revaluation reserve for land” in net assets.
- Method of revaluation: Fair values are determined by applying appropriate adjustments to values computed using the method
published by the Commissioner of the National Tax Agency for the calculation of land values thatserve as the basis for taxable amounts of land-holding tax set forth in Article 16 of the Land-holding
Tax Act as set forth in Article 2, Item 4 of the Order for Enforcement of Act on Revaluation of Land
(Cabinet Order No. 119 of March 31, 1998).
- Date of revaluation: March 31, 2001
- Since the fair value of the revalued land exceeded the carrying value of the land after the revaluation as of March 31, 2023,
and March 31, 2024, the difference between the amounts has not been stated.
4. Assets included under investment securities are as follows:(Millions of yen)
As of March 31, 2023
Investment units of HEIWA REAL ESTATE REIT, Inc.

As of March 31, 2024

22,444

21,596(147,179 units)(151,979 units)

5. Amount of reduction entry associated with national subsidies, etc.
Due to the receipt of state subsidies, the following amounts of reduction entry were deducted from acquisition costs.
(Millions of yen)
As of March 31, 2023

As of March 31, 2024

48

41

Buildings and structures

283

244

Total

332

285

Real estate for sale- 31 -

6. The amounts below were transferred due to a change in their purpose of ownership(Millions of yen)
As of March 31, 2023
Transferred from non-current assets to real

As of March 31, 2024
5,589

estate for sale

13,035Note 7 － Consolidated Statements of Income
1. Revenue from contracts with customers
Revenue from contracts with customers and revenues other than those from contracts with customers are not recorded separately
under net sales. Revenues from contracts with customers are shown as follows.
(Millions of yen)
Year ended March 31, 2023

Year ended March 31, 2024
20,293

19,7192. Gain on sale of businesses is due to the sale of the insurance-related business operated by Heiwa Real Estate Property Management
Co., Ltd., the consolidated subsidiary of the Company.

3. Details of loss on retirement of non-current assets are as follows:(Millions of yen)
Year ended March 31, 2023

Year ended March 31, 2024

Buildings and structures
Other

59
2

19
0

Total

61

20

4. Impairment losses
Year ended March 31, 2023
Location
Abiko-shi, Chiba

Principal use
Stores and other commercial
facilities

Category

Impairment losses

Land and buildings¥108 million

The Group recorded impairment losses on the asset group above. To calculate impairment losses, assets are grouped according
to the smallest unit of assets that generates cash flows that are largely independent of the cash flows provided from other assets
or asset groups.
The book values of real estate for rent whose profitability substantially decreased were written down to a recoverable amount,and the decreased amounts were recorded as impairment losses of ¥108 million under extraordinary losses.
The recoverable amount of this asset group was determined by its net realizable value, which was based on amounts assessedby real estate appraisers.
Year ended March 31, 2024
Location
Abiko-shi, Chiba

Principal use
Stores and other commercial
facilities

Category

Impairment losses

Land and buildings¥66 million

The Group recorded impairment losses on the asset group above. To calculate impairment losses, assets are grouped according to
the smallest unit of assets that generates cash flows that are largely independent of the cash flows provided from other assets or- 32 -

asset groups.
The book values of real estate for rent whose profitability substantially decreased were written down to a recoverable amount,and the decreased amounts were recorded as impairment losses of ¥66 million under extraordinary losses.
The recoverable amount of this asset group was determined by its net realizable value, which was based on amounts assessedby real estate appraisers.
Note 8 － Consolidated Statements of Comprehensive Income
Reclassification adjustment and tax effect related to other comprehensive income(Millions of yen)
Year ended March 31, 2023

Year ended March 31, 2024

Valuation difference on available-for-sale securities:
Amount incurred for the fiscal year
Reclassification adjustment(220)(3,562)

3,936(1,203)

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

2,733
(836)

Valuation difference on available-for-sale securities(2,624)

1,896

－

(9)

Deferred gains or losses on hedges:
Amount incurred for the fiscal year
Reclassification adjustment－－

Before tax effect adjustment－(9)

Tax benefit (expense)－2

Deferred gains or losses on hedges－(6)(2,624)

1,889

Total other comprehensive income

Note 9 － Consolidated Statements of Changes in Equity
Year ended March 31, 2023
1. Type and number of shares issued and treasury shares(Number of shares)
At the beginning of
the fiscal year

Increase in the fiscal
year

Decrease in thefiscal year

At the end of the
fiscal year

38,859,996－－

38,859,996

Total

38,859,996－－

38,859,996

Common shares (Notes 1, 2, 3)

2,380,419

700,264

7,169

3,073,514

Total

2,380,419

700,264

7,169

3,073,514

Shares issued
Common shares

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

- 33 -

2. Dividends(1) Payments of dividends
Approval

Type of shares

Total amount ofdividends(millions of yen)

Common shares

1,976

Common shares

1,798

Dividend per share(yen)

Record date

Effective date

54.0

March 31, 2022

June 27, 2022

50.0

September 30, 2022

December 1, 2022

Ordinary General
Shareholders’Meeting held on June24, 2022
Meeting of Board of
Directors held on
October 31, 2022
(Notes) 1. The total amount of dividends approved at the Ordinary General Shareholders’ Meeting held on June 24, 2022, included ¥7
million in dividends for the Company’s stock held as trust assets in the trust for the Company’s stock compensation plan for
directors and executive officers, and the trust for the Company’s stock compensation plan for employees.
2. The total amount of dividends approved at the Board of Directors meeting held on October 31, 2022, included ¥8 million in
dividends for the Company’s stock held as trust assets in the trust for the Company’s stock compensation plan for directors
and executive officers, and the trust for the Company’s stock compensation plan for employees.
(2) Dividends with a record date falling in the fiscal year ended March 31, 2023, and an effective date falling in the fiscal year ended
March 31, 2024
Total amount ofApproval

Type of shares

Meeting of Board of
Directors held on
Common shares

dividends(millions of yen)
1,941

May 17, 2023

Source ofDividend per share

dividends(yen)

Retained

54.0

earnings

Record date

Effective date

March 31, 2023

June 5, 2023

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

Year ended March 31, 2024
1. Type and number of shares issued and treasury shares(Number of shares)
At the beginning of
the fiscal year

Increase in the fiscal
year

Decrease in thefiscal year

At the end of the
fiscal year

38,859,996－－

38,859,996

Total

38,859,996－－

38,859,996

Common shares (Notes 1, 2, 3)

3,073,514

3,168

6,338

3,070,344

Total

3,073,514

3,168

6,338

3,070,344

Shares issued
Common shares

Treasury shares(Notes) 1. The increase of 3,168 common shares of treasury shares was comprised of 3,168 odd-lot shares acquired.
2. The decrease of 6,338 common shares of treasury shares was comprised of 4,000 shares provided to and 1,700 shares sold by
the trust for the Company’s stock compensation plan for directors and executive officers, 300 shares provided to and 300
shares sold by the trust for the Company’s stock compensation plan for employees, and 38 odd-lot shares sold.
3. The total number of common shares of treasury shares as of March 31, 2024, included 169,000 shares held in the trust for theCompany’s stock compensation plan for directors and executive officers, and the trust for the Company’s stock compensation
plan for employees.

- 34 -

2. Dividends(1) Payments of dividends
Approval

Type of shares

Total amount ofdividends(millions of yen)

Common shares

1,941

Common shares

2,085

Dividend per share(yen)

Record date

Effective date

54.0

March 31, 2023

June 5, 2023

58.0

September 30, 2023

December 1, 2023

Meeting of Board of
Directors held on
May 17, 2023
Meeting of Board of
Directors held on
October 31, 2023

(Notes) 1. The total amount of dividends approved at the Board of Directors meeting held on May 17, 2023, included ¥9 million in
dividends for the Company’s stock held as trust assets in the trust for the Company’s stock compensation plan for directors
and executive officers, and the trust for the Company’s stock compensation plan for employees.
2. The total amount of dividends approved at the Board of Directors meeting held on October 31, 2023, included ¥9 million in
dividends for the Company’s stock held as trust assets in the trust for the Company’s stock compensation plan for directors
and executive officers, and the trust for the Company’s stock compensation plan for employees.
(2) Dividends with a record date falling in the fiscal year ended March 31, 2024, and an effective date falling in the fiscal year ending
March 31, 2025
Approval

Type of shares

Total amount ofdividends(millions of yen)

Meeting of Board of
Directors held on
May 17, 2024

Common shares

3,883

Source ofdividends

Dividend per share(yen)

Retainedearnings

108.0

Record date

Effective date

March 31, 2024

June 3, 2024

(Notes) 1. The total amount of dividends included ¥18 million in dividends for the Company’s stock held as trust assets in the trust for
the Company’s stock compensation plan for directors and executive officers, and the trust for the Company’s stockcompensation plan for employees.
2. The amount of dividend per share includes a special dividend of ¥50 per share.

Note 10 － Consolidated Statements of Cash Flows
1. Reconciliation of the balance of cash and cash equivalents at the end of the period and account items on the consolidated balance
sheet(Millions of yen)
Year ended March 31, 2023

Year ended March 31, 2024

Cash and deposits

20,90820,416

Marketable securities

6,999

8,005

Time deposits with terms of more than 3 months
Bonds with redemption periods of more than 3 months(100)(2,000)(100)(2,005)

Cash and cash equivalents

25,80726,316- 35 -

2. Breakdown of main assets and liabilities associated with acquisitions of businesses for which consideration is paid in cash andcash equivalents
Year ended March 31, 2023
Not applicableYear ended March 31, 2024
The breakdown of assets acquired and liabilities assumed for acquisitions, and the relationship between the acquisition cost andpayments for acquisition of businesses, is as follows.
(Millions of yen)
Current assets
Non-current assets

18
598

Goodwill
Non-current liabilities

652
(18)

Acquisition cost
Cash and cash equivalents

1,250
(18)

After deduction: Payments for acquisition of businesses

1,231

Note 11 － Lease Transactions
1. Finance lease transactions(As lessee)
Finance lease transactions not involving transfer of ownership
Not applicable
2. Operating lease transactions(As lessor)
Future lease payments on operating leases for which leasing contracts cannot be cancelled.
(Millions of yen)
As of March 31, 2023

As of March 31, 2024

Due within 1 year

4,937

5,014

Due after 1 year

12,25812,595

Total

17,196

17,610Note 12 － Financial Instruments
1. Items related to financial instruments(1) Measures and policies concerning financial instruments
The Group procures necessary funds specified in its capital investment plans mainly by borrowing from banks and issuing bonds. It
invests temporary surplus cash in highly liquid assets, and raises short-term working capital through bank loans. The Group does notengage in speculative investments as a matter of policy, and uses derivatives to hedge against the following risks.
(2) Details of financial instruments and related risks
Trade accounts receivable as operating receivables expose the Company to credit risk of building tenants and other clients.
Marketable securities and investment securities, which are mainly comprised of shares of companies with which the Company has
business relationships, expose the Company to the risk of market price fluctuations.
Trade accounts payable as operating payables are due within a period of three months.
The Company secures loans payable, issues corporate bonds, and holds long-term accounts payable–other mainly for the purposeof procuring funds needed for capital investment, with the repayment and redemption dates extending no more than 19 years after
the settlement date. Some of these financial instruments are subject to variable interest rates, and are, therefore, exposed to the riskof interest rate fluctuations; however, the Company uses derivatives in the form of interest rate swaps to hedge against these risks.
Interest rate swaps are also used for the purpose of hedging against the risk of fluctuating interest payments on loans. For
information regarding hedging instruments, hedged items, hedging policies, and methods for evaluating hedge effectiveness, please- 36 -

refer to Note 2 － Significant Accounting Policies, 4. Accounting Policy, (7) Method of significant hedge accounting.
(3) Financial instrument-related risk management
1) Management of credit risk (including risk relating to non-performance of contract by a counterparty)
With respect to operating receivables, relevant departments of the Company regularly monitor the status of major counterparties,
manage due dates and balances for each counterparty, quickly identify concerns regarding collection due to worsening financial
conditions or other factors, and take steps to mitigate a damage. Consolidated subsidiaries manage these risks in the same way inaccordance with the Company’s credit management rules.
2) Management of market risks (including risk relating to fluctuating exchange rates and interest rates)
The Company uses interest rate swaps to mitigate the risk of fluctuating interest payments on loans.
The Company regularly checks the market price of marketable securities and investment securities along with the financial statusof their issuers, which are the Company’s business partners. The Company also continually reviews its holdings of securities otherthan held-to-maturity bonds, taking into consideration market conditions and its relationships with business partners.
3) Management of fund procurement-related liquidity risk (including risk of being unable to pay by due dates)
The Company manages liquidity risk by having departments in charge prepare and update on a timely basis financing plans basedon reports submitted by all relevant departments, and by maintaining liquidity on hand.
(4) Additional information regarding items related to the fair value of financial instruments
Variable factors are considered when calculating the fair value of financial instruments, and therefore, the amount of fair value couldchange due to adoption of different assumptions. In addition, the contract amounts of derivatives, shown in Note 14 － Derivatives,
do not represent derivative-related market risks.
2. Items related to the fair value of financial instruments
The amount recorded in the consolidated balance sheet, fair value, and their differences are presented as follows.
As of March 31, 2023
Amount on the consolidatedbalance sheet(millions of yen)
(1) Marketable securities and investment securities

Fair value

Difference(millions of yen)(millions of yen)

40,70440,7050Total assets

40,70440,7050(1) Bonds payable

31,63731,144(492)(2) Long-term borrowings

186,607

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

4,850

4,709

(140)

(4) Leasehold and guarantee deposits received

23,52423,085(438)

246,619

243,811(2,808)－－－

Total liabilities
Derivatives(Notes) 1. In the table above, cash was not included, and deposits, trade accounts receivable, trade accounts payable, and shortterm borrowings were also not included because their fair value approximates their book value since they are settled
over short periods of time.
2. Stocks without quoted market prices are not included in (1) Marketable securities and investment securities in the table
above. The amount of this financial instrument in the consolidated balance sheets is shown below.

- 37 -

(Millions of yen)Classification

As of March 31, 2023

Stocks without quoted market prices655

3. In accordance with the treatment specified in Paragraph 24-16 of the Implementation Guidance on Accounting Standard
for Fair Value Measurement (ASBJ Guidance No. 31 (revised)) issued on June 17, 2021, the table above does not include
investment in partnerships for which the net amount of equity stakes is recorded in the consolidated balance sheets(totaling ¥1,298 million in the consolidated balance sheets).
As of March 31, 2024
Amount on the consolidatedbalance sheet(millions of yen)
(1) Marketable securities and investment securities

Fair value(millions of yen)

Difference(millions of yen)

45,28645,295

9

Total assets

45,28645,2959(1) Bonds payable

31,48930,686(802)(2) Long-term borrowings

190,384

187,705(2,678)(3) Long-term accounts payable – other

8,650

8,327

(322)

(4) Leasehold and guarantee deposits received

23,636

23,103(533)

254,160

249,823(4,337)

(9)

(9)

－

Total liabilities
Derivatives (Note 4)(Notes) 1. In the table above, cash was not included, and deposits, trade accounts receivable, trade accounts payable, and shortterm borrowings were also not included because their fair value approximates their book value since they are settled
over short periods of time.
2. Stocks without quoted market prices are not included in (1) Marketable securities and investment securities in the table
above. The amount of this financial instrument in the consolidated balance sheets is shown below.
(Millions of yen)Classification

As of March 31, 2024

Stocks without quoted market prices524

3. In accordance with the treatment specified in Paragraph 24-16 of the Implementation Guidance on Accounting Standard
for Fair Value Measurement (ASBJ Guidance No. 31 (revised)) issued on June 17, 2021, the table above does not include
investment in partnerships for which the net amount of equity stakes is recorded in the consolidated balance sheets(totaling ¥818 million in the consolidated balance sheets).
4. Net receivables and payables arising from derivatives are presented in net amounts, with items that result in a net liability
indicated in parentheses.

- 38 -

(Note) 1. Amounts of monetary claims and marketable securities with maturity dates expected to be redeemed after the balance sheet
date
As of March 31, 2023
Within one to five years Within five to 10 years

Within one year

(millions of yen)(millions of yen)(millions of yen)Over 10 years(millions of yen)

Cash and deposits

20,908－－－Trade accounts receivable

1,967

－

－

－

－

5

－

－

－

101

－

－

6,999

－

－

－

(1) Corporate bonds

－

－

－

－

(2) Other

－

－

－

－

29,875107－－

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

Total
As of March 31, 2024

Within one year
(millions of yen)

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

Cash and deposits

20,416－－－

Trade accounts receivable

2,114

－

－

－

(1) National and municipal
bonds

5

－

－

－

(2) Bonds payable

－

191

－

－

7,999

－

－

－

(1) Corporate bonds

－

－

－

－

(2) Other

－

－

－

－

30,536191－－

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

Total- 39 -

(Note) 2. Amounts of bonds payable, long-term borrowings, and other interest-bearing liabilities scheduled for repayment after thebalance sheet date
As of March 31, 2023
Within one year
(millions of yen)

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

Short-term borrowings

3,800

－

－

－

－

－

Bonds payable

3,648

3,449

4,084

539

539

19,376Long-term borrowings

15,727

15,95816,184

26,21728,25084,270

－

258

258

258

285

3,790

23,175

19,665

20,52627,01429,075

107,437

Long-term accounts
payable – other
Total
As of March 31, 2024

Within one year
(millions of yen)
Short-term borrowings

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

800

－

－

－

－

－

Bonds payable

3,624

4,259

714

714

5,714

16,461Long-term borrowings

16,681

16,907

26,99529,02920,54280,229

258

258

373

515

543

6,701

21,363

21,42528,08330,25926,799103,392

Long-term accounts
payable – otherTotal

3. Items related to different levels of the fair value of financial instruments
The fair value of financial instruments is classified according to the following three levels based on the observability and materialityof the inputs used to calculate fair value.
Level 1: Fair values determined based on quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: Fair values determined based on inputs other than Level 1 inputs that are observable, either directly or indirectly
Level 3: Fair values determined based on significant unobservable inputs
When multiple inputs that have material impacts on fair value calculations are used, the fair value falls under the lowest level inwhich the respective inputs correspond to the fair value calculations.
(1) Financial instruments recorded at fair value in the consolidated balance sheets
As of March 31, 2023
Classification

Fair value (millions of yen)
Level 1

Level 2

Level 3

Total

Marketable securities and investment
securities
Available-for-sale securities
Stocks10,935－－

10,935Investment trusts

22,662－－

22,662

33,597－－33,597

Total assets- 40 -

As of March 31, 2024
Classification

Fair value (millions of yen)
Level 1

Level 2

Level 3

Total

Marketable securities and investment
securities
Available-for-sale securities
StocksInvestment trusts
Total assets

15,111－－

15,111

21,978－－21,97837,090－－37,090

－

9

－

9

－

9

－

9

Derivatives
Interest rate-related derivatives
Total liabilities(2) Financial instruments other than those recorded at fair value in the consolidated balance sheets
As of March 31, 2023
Classification

Fair value (millions of yen)
Level 1

Level 2

Level 3

Total

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

5

Bonds payable
Other

5

－

－

－

101

－

101

－

7,000

－

7,000

5

7,101

－

7,107

Bonds payable－

31,144－

31,144Long-term borrowings－

184,871－

184,871

Long-term accounts payable – other

－

4,709

－

4,709

Leasehold and guarantee deposits received－

23,085－23,085－

243,811－

243,811

Total assets

Total liabilities- 41 -

As of March 31, 2024
Classification

Fair value (millions of yen)
Level 1

Level 2

Level 3

Total

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

5

－

－

5

Bonds payable

－

199

－

199

Other

－

8,000

－

8,000

5

8,200

－

8,205

Bonds payable－

30,686－30,686Long-term borrowings

Total assets－

187,705－

187,705

Long-term accounts payable – other

－

8,327

－

8,327

Leasehold and guarantee deposits received－

23,103－

23,103

Total liabilities－

249,823－

249,823(Note) Valuation methods and inputs used to calculate fair value are explained as follows.
Marketable securities and investment securities
Quoted market prices are used to measure fair values of stocks, investment trusts, and national bonds. Since they are traded inan active market, their fair values are classified as Level 1. The fair values of commercial paper and money in trust, which areincluded under “bonds payable” and “other” in the table above, are measured using market prices provided by financial
institutions dealing in such instruments. They are classified as Level 2 because of the relatively low frequency of trade in themarket and therefore they cannot be regarded as having quoted market prices in active markets.
Bonds payable
Bonds payable with fixed interest rates are classified as Level 2, and their fair value is calculated by discounting the total
amount of the principal and interest at an interest rate that reflects their remaining maturity and credit risk. Those with variableinterest rates are classified as Level 2, and their fair value is based on their book value, which are assumed to be similar sincevariable interest rates reflect market interest rates over the short term.
Long-term borrowings and long-term accounts payable – other
Long-term borrowings and long-term accounts payable – other with fixed interest rates are classified as Level 2, and their fairvalue is calculated by discounting the total amount of principal and interest at an interest rate estimated based on the scenario
of a similar loan or account. Those with variable interest rates are classified as Level 2, and their fair value is based on theirbook value, which are assumed to be similar since variable interest rates reflect market interest rates over the short term.
Among long-term borrowings and long-term accounts payable – other with variable interest rates, those subject to special
treatment of interest rate swaps are calculated by discounting the total amount of principal and interest treated together with
the interest rate swaps at an interest rate reasonably estimated based on the scenario of a similar loan.
Leasehold and guarantee deposits received
Leasehold and guarantee deposits received are classified as Level 2, and their fair value is calculated by discounting the current
amount of deposits at an interest rate that reflects the remaining period of redemption and credit risk.
Derivatives
Derivatives are valued based on market prices provided by financial institutions and classified as Level 2 in the fair value
hierarchy.
The fair value of derivatives subject to special treatment of interest rate swaps is included in the fair value of long-termborrowings since they are treated together with long-term loans payable – other designated as hedged items. (Refer to the
explanation under “Long-term borrowings and long-term accounts payable – other,” above.)- 42 -

Note 13 － Securities
1. Held-to-maturity bonds
As of March 31, 2023
Amount inconsolidatedbalance sheets(millions of yen)

Category

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

Fair value(millions of yen)

Difference(millions of yen)

(1) National and municipal bonds

5

5

0

(2) Bonds payable

－

－

－

2,000

2,001

1

Subtotal

2,005

2,006

1

(1) National and municipal bonds

－

－

－

(2) Bonds payable

101

101

(0)

4,999

4,999

(0)

5,101

5,100

(0)

7,106

7,107

0

(3) Other(3) Other
Subtotal
Total

As of March 31, 2024
Amount inconsolidatedbalance sheets(millions of yen)

Category

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

Fair value(millions of yen)

Difference(millions of yen)

(1) National and municipal bonds

5

5

0

(2) Bonds payable

89

98

8

2,000

2,001

1

Subtotal

2,095

2,105

10

(1) National and municipal bonds

－

－

－

(2) Bonds payable

101

101

(0)

5,999

5,999

(0)

6,100

6,100

(0)

8,196

8,205

9

(3) Other(3) Other
Subtotal
Total- 43 -

2. Available-for-sale securities
As of March 31, 2023
Amount inconsolidatedbalance sheets(millions of yen)

Category(1) Stocks
Available-for-sale securitiesof which the amountrecorded in the consolidatedbalance sheets exceeds theacquisition cost

Difference(millions of yen)

10,056

3,641

6,415

1) National and municipal bonds

－

－

－

2) Bonds payable

－

－

－

3) Other－－－(3) Other

22,474

6,322

16,15232,531

9,963

22,567

878

1,135

(256)

(2) Bonds

Subtotal(1) Stocks
Available-for-sale securities

Acquisition cost
(millions of yen)

(2) Bondsof which the amountrecorded in the consolidated

1) National and municipal bonds

－

－

－

2) Bonds payable

－

－

－

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

187

198

(11)

1,065

1,333

(267)

33,597

11,29722,299Subtotal
Total(Note) Stocks without quoted market prices (totaling ¥655 million in the consolidated balance sheets) and investment in partnerships
for which the net amount of equity stakes is recorded in the consolidated balance sheets (totaling ¥1,298 million in the
consolidated balance sheets) are not included in available-for-sale securities shown in the table above.

- 44 -

As of March 31, 2024
Amount inconsolidatedbalance sheets(millions of yen)

Category(1) Stocks
Available-for-sale securitiesof which the amountrecorded in the consolidatedbalance sheets exceeds theacquisition cost

4,652

10,4581) National and municipal bonds

－

－

－

2) Bonds payable

－

－

－

3) Other－－－(3) Other

21,607

7,022

14,58436,718

11,67525,042－－－

1) National and municipal bonds

－

－

－

2) Bonds payable

－

－

－

3) Other－－－(3) Other

371

381

(9)

371

381

(9)

37,09012,05725,032(2) Bonds(1) Stocks

recorded in the consolidatedbalance sheets does notexceed the acquisition cost

Difference(millions of yen)

15,111

Subtotal

Available-for-sale securitiesof which the amount

Acquisition cost
(millions of yen)

(2) Bonds

Subtotal
Total(Note) Stocks without quoted market prices (totaling ¥524 million in the consolidated balance sheets) and investment in partnerships
for which the net amount of equity stakes is recorded in the consolidated balance sheets (totaling ¥818 million in the
consolidated balance sheets) are not included in available-for-sale securities shown in the table above.
3. Held-to-maturity bonds soldYear ended March 31, 2023
Not applicableYear ended March 31, 2024
Not applicable
4. Available-for-sale securities soldYear ended March 31, 2023
Category(1) Stocks

Sale amount (millions of yen)

Gain on sale recorded(millions of yen)

Loss on sale recorded(millions of yen)

3,939

3,543

－

1) National and municipal bonds

－

－

－

2) Bonds payable

－

－

－

3) Other－－－(3) Other

－

－

－

3,939

3,543

－

(2) Bonds

Total- 45 -

Year ended March 31, 2024
Category

Sale amount (millions of yen)

(1) Stocks

Gain on sale recorded(millions of yen)

Loss on sale recorded(millions of yen)

1,377

1,215

－

1) National and municipal bonds

－

－

－

2) Bonds payable

－

－

－

3) Other－－－(3) Other

－

－

－

1,377

1,215

－

(2) Bonds

Total
5. Impairment losses on marketable securities
Year ended March 31, 2023
Not applicableYear ended March 31, 2024

Impairment losses on marketable securities for the fiscal year ended March 31, 2024, totaled ¥181 million. This includes ¥33 million
related to stocks without quoted market prices under available-for-sale securities and ¥148 million related to investment in
partnerships for which the net amount of equity stakes is recorded in the consolidated balance sheets.
Impairment losses on stocks without quoted market prices and investment in partnerships for which the net amount of equity
stakes is recorded in the consolidated balance sheets are individually assessed for recoverability to determine if impairment isnecessary. This assessment is conducted when there is a significant decline in fair value due to deteriorating financial conditions andother relevant factors.

Note 14 － Derivatives
1. Derivatives for which hedge accounting is not applied
Not applicable
2. Derivatives for which hedge accounting is applied
Interest rate-related derivatives
As of March 31, 2023
Hedge accounting
methodSpecial treatment ofinterest rate swaps

Type of transaction
Interest rate swaps:
Receiving floating
rate/payable fixed rate

Major hedged
items

Contract amount(millions of yen)

Long-term
borrowings

37,202Contract amountover one year
(millions of yen)
34,469Fair value(millions of yen)
(Note)(Note) The fair value of derivatives subject to special treatment of interest rate swap transactions is included in the fair valueof long-term borrowings since they are treated together with long-term borrowings designated as hedged items.

- 46 -

As of March 31, 2024
Hedge accounting
methodPrinciple treatment
methodSpecial treatment ofinterest rate swaps

Type of transaction
Interest rate swaps:
Receiving floating
rate/payable fixed rate
Interest rate swaps:
Receiving floating
rate/payable fixed rate

Major hedged

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

Long-term
borrowings

2,619

2,511

Long-term
borrowings

35,87531,499Fair value(millions of yen)
(9)

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

Note 15 － Retirement Benefits
1. Overview of retirement benefit plans in place
The Company and its consolidated subsidiaries have both a lump-sum retirement payment plan and a defined benefit pension plan.
Certain consolidated subsidiaries have adopted a defined contribution plan and other types of plans.
Simplified accounting methods are used to calculate retirement benefit liability and retirement benefit expenses for the lump-sum
retirement payment plan and defined benefit pension plan adopted by the Company and its consolidated subsidiaries.
2. Defined benefit plan
(1) Reconciliation of beginning and ending balances of retirement benefit liability(Millions of yen)
Year ended March 31, 2023
Balance at the beginning of the fiscal year
Retirement benefit expenses
Retirement benefits paid
Contributions to the plan
Balance at the end of the fiscal year

Year ended March 31, 2024

119
180

234
(6)

(32)
(32)

(67)
(34)

234

126

(2) Reconciliation between net defined benefit liabilities (assets) recorded in the consolidated balance sheets and the balances ofbenefit obligation and pension assets at the end of the period(Millions of yen)
As of March 31, 2023

As of March 31, 2024

1,350
(1,115)

1,351(1,225)234

126

Retirement benefit liability

234

126

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

234

126

Benefit obligation
Pension assets
Net balance of liabilities and assets recorded in the
consolidated balance sheets(3) Retirement benefit expenses(Millions of yen)
Year ended March 31, 2023
Retirement benefit expenses calculated using180

simplified accounting methods

Year ended March 31, 2024
(6)

3. Defined contribution plan
The required contributions for the defined contribution plans of consolidated subsidiaries amounted to ¥28 million in the fiscal year
ended March 31, 2023 and ¥29 million in the fiscal year ended March 31, 2024.

- 47 -

Note 16 － Stock Options
Not applicable

Note 17 － Tax Effect Accounting
1. Breakdown of main components of deferred tax assets and deferred tax liabilities
As of March 31, 2023
Deferred tax assets
Provision for bonuses
Accrued enterprise taxes
Inventory depreciation
Accounts receivable – other
Loss on building reconstruction
Impairment losses
Provision for share awards
Retirement benefit liability
Loss carryforwards
Asset retirement obligations
Asset adjustment account
Other
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Reserve for tax purpose reduction entry
Valuation difference on available-for-sale securities
Difference in valuation of non-current assets
Retirement expenses for asset retirement obligations
Other
Total deferred tax liabilities
Net amount of deferred tax assets (liabilities)(Millions of yen)
As of March 31, 2024

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

87
127
114
37
517
376
45
42
120
214
278
442
2,405
(1,086)
1,318

(833)
(6,834)(1,988)(95)(5)(9,756)(8,622)(764)(7,670)(2,005)(86)(6)(10,534)(9,215)

2. Breakdown of main items underlying a significant difference between the effective statutory tax rate and the tax burden rate ofcorporate and other taxes after the application of tax effect accounting
As of March 31, 2023

As of March 31, 2024

This information has
been omitted because thedifference between theeffective statutory tax
rate and the tax burden
rate of corporate andother taxes after theapplication of tax effectaccounting was less than
5% of the effective
statutory tax rate.

This information has
been omitted because thedifference between theeffective statutory tax
rate and the tax burden
rate of corporate andother taxes after theapplication of tax effectaccounting was less than
5% of the effective
statutory tax rate.

- 48 -

Note 18 － Business Combinations, etc.
Business combination through acquisition
1. Overview of business combination(1) Name of the acquired company and details of its businessCompany name

K5 Co., Ltd.

Business

Hotel and tenant operations(2) Main reason for business combination
The Company aims to enhance synergies for hotel leasing revenue and the revitalization of the Kabutocho district.
(3) Date of business combination
February 1, 2024
(4) Legal form of business combination
Business transfer(5) Name of acquired company after business combination
Unchanged(6) Main rationale for determining the acquired company
The Company acquired business in exchange for cash.
2. Business period of the acquired company included in the consolidated financial statements
February 1, 2024, to March 31, 2024
3. Acquisition cost and breakdown by type of consideration (Millions of yen)
Consideration for the acquisition

Cash

Acquisition cost

1,250
1,250

4. Nature and amount of major acquisition-related costs
Notes omitted due to lack of materiality.
5. Amount of goodwill, reason for recognition, and method and period of amortization(1) Amount of goodwill¥652 million(2) Reason for recognition
Since the acquisition cost exceeded the net allocated amount of acquired assets and assumed liabilities, the difference wasrecorded as goodwill.
(3) Method and period of amortization
Goodwill is amortized using the straight-line method over its expected useful life.
6. Amount and details of the assets acquired and liabilities assumed on the date of the business combination(Millions of yen)
Current assets

18

Non-current assets

598

Total assets

616

Non-current liabilities

18

Total liabilities

18

7. Estimated impact on the consolidated statement of income for the fiscal year ended March 31, 2024, with the method of its- 49 -

calculation, assuming that the business combination was completed on the commencement date of the fiscal year
Notes omitted due to lack of materiality.

Note 19 － Asset Retirement Obligations
Asset retirement obligations recorded in the consolidated balance sheets
1. Summary of the asset retirement obligations
The obligations are for the removal of asbestos from buildings used as operating assets.
2. Method for calculating the amount of the asset retirement obligations
The amount of asset retirement obligations is calculated at discount rates between 0.2% and 2.3% over expected period of use
estimated between 8 and 50 years.
3. Changes in the asset retirement obligations(Millions of yen)
Year ended March 31, 2023
Beginning balance

669

Adjustment due to passage of time
Ending balanceYear ended March 31, 2024
676

6

7

676

683

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

Year ended March 31, 2024

Lease property, etc.
Amount on the consolidated balance sheet
Beginning balance

252,485

275,533

Increase (decrease)

23,047(21,871)

Ending balance

275,533

253,661

Market value at fiscal year-end

373,765

350,858

Beginning balance

24,22833,117

Increase

8,889

17,709Ending balance

33,11750,826

Market value at fiscal year-end

46,42070,388

Real estate that includes the portion used aslease property, etc.
Amount on the consolidated balance sheet(Notes) 1. The amount on the consolidated balance sheet is equal to the acquisition cost minus the accumulated depreciation andaccumulated impairment losses.
2. The net increase in the fiscal year ended March 31, 2023 was mainly due to the acquisition of real estate (¥35,221 million),while the net decrease was mainly due to the transfer of properties to real estate for sale (¥5,572 million). The net increasein the fiscal year ended March 31, 2024 was mainly due to the progress and completion of construction (¥4,323 million)
as well as the acquisition of real estate (¥4,319 million), while the net decrease was mainly due to the transfer of properties
to real estate for sale (¥13,009 million).
3. The market values of principal properties as of March 31, 2024, are based on the standards of real estate appraisal byindependent real estate appraisers, and those of other properties are calculated by the Company based on the Real EstateAppraisal Standard. If, however, certain appraisal values and indices considered to appropriately reflect the fair values
have not changed significantly from the time of acquisition from a third party or the latest appraisal, an amount- 50 -

appropriately adjusted using the appraisal values and indices is used.
Profit and loss on lease property, etc. and real estate that includes the portion used as lease property, etc. are as follows.
(Millions of yen)
Year ended March 31, 2023

Year ended March 31, 2024

Lease property, etc.
Leasing revenue

20,13820,933

Leasing expenses

12,971

12,444

Net

7,166

8,489

Other loss

(141)

(72)

Leasing revenue

3,328

3,693

Leasing expenses

1,952

3,199

Net

1,375

493

(19)

(13)

Real estate that includes the portion used aslease property, etc.

Other loss

(Notes) 1. Because the real estate that includes the portion used as lease property, etc. includes portions used by the Company andsome consolidated subsidiaries for the delivery of services and business management, the relevant leasing revenue was notreported. Expenses for real estate (depreciation, repair expenses, insurance expenses, taxes and dues, etc.) were includedin the leasing expenses.
2. Other loss is comprised of a loss on retirement of non-current assets and impairment losses.

Note 21 － Revenue Recognition
1. Revenues from contracts with customers
Year ended March 31, 2023
(Millions of yen)
Reportable segments
Total

Building Business

Asset Management
Business

Revenue from sales of properties

14,065－

14,065

Asset management revenue frommanagement fees

－

1,573

1,573

Other

3,463

1,191

4,655

Revenue from contracts withcustomers

17,5282,764

20,293

Other revenue (Note)

23,320909

24,229Net sales from externalcustomers

40,8483,674

44,522(Note) Other revenue includes leasing revenue calculated based on accounting standards related to lease transactions.

- 51 -

Year ended March 31, 2024
(Millions of yen)
Reportable segments
Total

Building Business

Asset Management
Business

Revenue from sales of properties

12,780－12,780Asset management revenue frommanagement fees

－

1,598

1,598

Other

4,017

1,322

5,339

Revenue from contracts withcustomers

16,7972,921

19,719Other revenue (Note)

23,747966

24,714

Net sales from externalcustomers

40,544

3,888

44,433(Note) Other revenue includes leasing revenue calculated based on accounting standards related to lease transactions.
2. Basis for understanding revenues from contracts with customers
The basis for understanding revenues from contracts with customers is explained in Note 2 － Significant Accounting Policies, 4.
Accounting Policy, (6) Basis for calculating significant revenues and expenses.
3. Satisfaction of performance obligations in accordance with contracts with customers and cash flows generated from such contracts,
and the timing and amounts of revenue expected to be recognized during and after the next fiscal year from contracts with customers
in effect during the fiscal year ended March 31, 2024
(1) Balance of contract assets and contract liabilities(Millions of yen)
Year ended March 31,
2023
Receivables from contracts with customers

Year ended March 31,
2024

197

186

Receivables from contracts with customers(Ending balance)

186

281

Contract assets (Beginning balance)

465

485

Contract assets (Ending balance)

485

510

Contract liabilities (Beginning balance)

25

5

Contract liabilities (Ending balance)

544(Beginning balance)

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

- 52 -

Note 22 － Segment and Other Information
Segment information
1. Reportable segments overview
The reportable segments of the Company are the business units for which the separate financial information is available in orderfor the Board of Directors to conduct periodic reviews to determine the distribution of management resources and evaluate theirbusiness results.
The Company’s two reportable segments are the Building Business segment and Asset Management Business segment.
The Building Business segment deals with the development, leasing, management, and sale of stock exchange buildings,
office buildings, commercial facilities, and residential buildings. The Asset Management Business segment manages theproperties of HEIWA REAL ESTATE REIT, Inc., and provides real estate brokerage services through Housing Service Co., Ltd.
2. Methods of calculating the amounts of net sales, profit/loss, assets, liabilities, and other items by reportable segments
The accounting methods for the reportable segments are the same as those described in Note 2 －Significant Accounting
Policies.
The amounts of reportable segment profit are based on operating profit. Intersegment sales is based on prevailing market
prices.
3. Information on net sales, profit/loss, assets, liabilities, and other items by reportable segments
Year ended March 31, 2023
(Millions of yen)
Reportable segments
Asset
Management
Business

Building
Business

Total

Adjustments(Note 1)

Amount inconsolidated
financial statements(Note 2)

Net sales
Net sales from external

40,8483,674

44,522－

44,522

37

－

37

(37)

－

40,885

3,674

44,560(37)

44,522

Segment profit

10,572

2,071

12,643(1,859)10,784

Segment assets

337,439

25,264

362,704

35,629398,333

5,605

14

5,619

49

5,668

43,952

943,962150

44,112

customers
Intersegment sales andtransfers
Total

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

- 53 -

Year ended March 31, 2024
(Millions of yen)
Reportable segments
Asset
Management
Business

Building
Business

Total

Adjustments(Note 1)

Amount inconsolidated
financial statements(Note 2)

Net sales
Net sales from externalcustomers

40,544

3,888

44,433－44,433

Intersegment sales andtransfers

47

－

47

(47)

－

40,592

3,888

44,480(47)

44,433

Segment profit

12,6392,197

14,836(1,814)

13,022

Segment assets

341,445

24,653366,098

39,881

405,979

Depreciation (Note 3)

5,687

11

5,698

79

5,778

Increase in property, plantand equipment and

15,62532

15,657

11

15,668

Total

Other items

intangible assets (Note 3)(Notes) 1. Details of adjustments are as follows:(1) The negative adjustments to segment profit of ¥1,814 million mainly include corporate expenses amounting to¥1,814 million that belong to the administration division and are not allocated to any of the reportable segments.
(2) Adjustments to segment assets of ¥39,881 million mainly include unallocated corporate assets amounting to¥42,134 million, which primarily consist of cash and deposits, securities, and investment securities that belong
to the administration division.
(3) The adjusted amounts of increases in property, plant and equipment and intangible assets are the amount of
increase of the unallocated corporate assets that have not been assigned to the reportable segments.
2. Segment profit is adjusted with operating profit in the consolidated statements of income.
3. The depreciation and increases in property, plant and equipment and intangible assets in the other items include
the amortization of and an increase in long-term prepaid expenses.

- 54 -

Related Information
Year ended March 31, 2023
1. Information by products and services
These details have been omitted because the same information is disclosed in the segment information.
2. Information by geographical area
(1) Net sales
There are no applicable details to report because the Company receives no sales from tenants or other clients outside Japan.
(2) Property, plant and equipment
There are no applicable details to report because the Company possesses no property, plant and equipment outside Japan.
3. Information by major tenants(Millions of yen)
Name of tenant

Net sales

HEIWA REAL ESTATE REIT, Inc.

Applicable business segment

13,365

Building Business
Asset Management BusinessYear ended March 31, 2024
1. Information by products and services
These details have been omitted because the same information is disclosed in the segment information.
2. Information by geographical area
(1) Net sales
There are no applicable details to report because the Company receives no sales from tenants or other clients outside Japan.
(2) Property, plant and equipment
There are no applicable details to report because the Company possesses no property, plant and equipment outside Japan.
3. Information by major tenants(Millions of yen)
Name of tenant

Net sales

Applicable business segment

HEIWA REAL ESTATE REIT, Inc.

8,164

Building Business
Asset Management Business

Godo Kaisha Shinsatsu

4,500

Building BusinessInformation on Impairment Losses of Non-current Assets by Reportable Segment
Year ended March 31, 2023
(Millions of yen)
Asset Management
Building BusinessBusiness
Impairment losses

108－

Intersegment
eliminations

Total
108

－

Year ended March 31, 2024
(Millions of yen)
Asset Management
Building BusinessBusiness
Impairment losses

66－- 55 -

Intersegment
eliminations
－

Total
66

Amortization and Unamortized Balance of Goodwill by Reportable Segment
Year ended March 31, 2023
Not applicableYear ended March 31, 2024
(Millions of yen)
Building
Business

Asset
Management
Business

Intersegment
eliminations

Total

Depreciation for the period

7

－

－

7

Balance at end of period

645

－

－

645

Information on Gain on Negative Goodwill by Reportable Segment
Year ended March 31, 2023
Not applicableYear ended March 31, 2024
Not applicable
Information on Related Parties
Year ended March 31, 2023
Not applicableYear ended March 31, 2024
Not applicable

Note 23 － Per Share Information(Yen)
Year ended March 31, 2023

Year ended March 31, 2024

Net assets per share

3,334.34

3,510.66

Earnings per share

254.27236.13(Notes) 1. Diluted earnings per share is not presented, as there are no potentially dilutive shares.
2. To calculate net assets per share and earnings per share, the Company’s stock held in the trust for its stock compensation planfor directors and officers and in the trust for its employee stock ownership plan was included in the amount of treasury shares
subtracted from calculations of the total number of shares issued as of March 31 of the respective fiscal year and the average
number of shares outstanding during each respective fiscal year. The number of such treasury shares issued as of the end of
the period subtracted from calculations of the total number of shares issued as of the end of the period came to 175,000 sharesin the fiscal year ended March 31, 2023 and 169,000 shares in the fiscal year ended March 31, 2024, and the average numberof such treasury shares during the period subtracted from calculations of the average number of shares outstanding during theperiod was 159,000 shares in the fiscal year ended March 31, 2023 and 170,000 shares in the fiscal year ended March 31,
2024.

- 56 -

3. Earnings per share is calculated based on the following.
Year ended March 31, 2023
Profit attributable to owners of parent (millions of yen)Amount not attributable to common shareholders(millions of yen)
Profit attributable to common shareholders of parent(millions of yen)
Average number of shares outstanding during the period(thousands of shares)

Year ended March 31, 2024

9,137

8,450

－

－

9,137

8,450

35,93435,789Note 24 － Significant Subsequent Events
Conclusion of Capital and Business Alliance Agreement between the Company and Taisei Corporation, and Related Tripartite
Agreement including Mitsubishi Estate Co., Ltd.
The Company resolved at the Board of Directors meeting held on June 7, 2024, to enter into a capital and business alliance (hereafter,
the “Alliance”) with Taisei Corporation (hereinafter, “Taisei”) and signed a capital and business alliance agreement (hereafter, the“Alliance Agreement”) on the same day. Additionally, the Company, Taisei, and Mitsubishi Estate Co., Ltd. (hereinafter, “Mitsubishi
Estate”) signed an agreement concerning tripartite collaboration on this date (hereafter, the “Cooperation Agreement”). This agreement
pertains to the Alliance Agreement as well as a capital and business alliance agreement between the Company and Mitsubishi Estate
dated February 17, 2011. Details of the Alliance are as follows.
1. Reasons for Concluding the Alliance and the Cooperation Agreement
Under the Group Purpose, “Enriching everyone’s future with Bazukuri that draws people in,” and guided by the Group Long-term
Vision, “WAY 2040,” the Company is committed to various growth strategies based on the slogan, “Pursue perpetual dynamic
growth to become the ‘Bazukuri Company.’” These strategies include efforts to expand the redevelopment business (deploy Bazukuri
endeavors that draw people in throughout Japan), cultivate profit growth while enhancing capital efficiency (expand leasing business,promote reinvestment by realizing gains from property sales, and enter new business areas), and boost social value (promotesustainability initiatives). The Company has been considering business alliances with potential collaborators who can work together
to achieve these goals.
Taisei, a partner in the Alliance, has an outstanding track record, particularly in urban redevelopment, as one of Japan’s leading
general contractors. Moreover, both the Company and Taisei believe they can establish a strong collaborative relationship, especiallyin asset management and sustainability initiatives. Based on these considerations, the Company concluded that Taisei is the optimalbusiness alliance partner to collaboratively develop these areas.
Additionally, since the Company has already formed a capital and business alliance with Mitsubishi Estate, the conclusion of the
Cooperation Agreement aims to establish mutual understanding between the three parties—Heiwa Real Estate, Taisei, and Mitsubishi
Estate—regarding how the new Alliance Agreement relates to the existing alliance with Mitsubishi Estate.
2. Details of the Alliance and the Cooperation Agreement(1) Details of the Alliance
The Company and Taisei have agreed to collaborate in various business domains, with the main contents outlined as follows.
1) Collaboration in redevelopment business, etc.
To facilitate the progress of long-term redevelopment projects, the parties have agreed to establish and develop a
collaborative relationship for redevelopment projects in the Nihonbashi Kabutocho district, along with Mitsubishi Estate.
They will also engage in sincere discussions to: a) examine and promote redevelopment projects in Sapporo, b) establish acomprehensive cooperative relationship, including the mutual provision of know-how related to redevelopment projects asneeded, and c) collaborate on redevelopment projects that either or both may consider pursuing in the future.
2) Collaboration in new business fields such as new real estate investment
The Company aims to venture into new business fields to achieve the Group Long-term Vision, and the parties have agreed
to actively collaborate on business alliances in new business fields such as investment in logistics facilities, a new asset
class.
3) Collaboration in sustainability and DX
The parties have agreed to actively collaborate on business alliances in the fields of sustainability and DX.

- 57 -

In addition, Taisei has agreed to nominate one person as a candidate for an executive officer position at the Company.
Taisei acknowledges and fully respects the Company’s commitment to maintaining listing status and management autonomy,prioritizing the collective interests of all shareholders in addition to its own.
(2) Details of the Cooperation Agreement
The Company, Taisei, and Mitsubishi Estate shall mutually respect the spirit, purpose, and content of each other’s capital andbusiness alliance agreements, and shall advance the alliances based on their respective agreements. In doing so, they shallcooperate and collaborate with each other within the required scope.
(3) Details of the capital alliance, etc.
The Company and Taisei, as well as the Company and Mitsubishi Estate, have agreed to smoothly advance their respective capitaland business alliance agreements and the tripartite collaborative relationship. To facilitate this process, on June 7, 2024, Taisei
entered into share transfer agreements with Simplex Asset Management Co., Ltd., and Simplex Asset Management (HK) Company
Limited (collectively referred to as “Simplex”) and Mitsubishi Estate. Under these agreements, Taisei will acquire all of thecommon shares of the Company held by Simplex (5,829,000 shares, representing 16.30% of the total voting rights (357,527) asof March 31, 2024, with the percentage rounded to two decimal places. This number includes one voting right for 100 shares that,while registered under the Company’s name in the shareholder register, are not substantially owned by the Company.) and a portionof the common shares of the Company held by Mitsubishi Estate (388,500 shares, representing 1.09% of the voting rights) throughoff-market transactions. The transfer of shares was completed on June 10, 2024, upon which Taisei became one of the Company’s
major shareholders as well as the largest shareholder among major shareholders. After the share repurchase outlined below, Taisei
has become one of the Company’s other affiliated companies, and the Company has become an equity-method affiliate of Taisei.
The Company also plans to acquire common shares of Taisei in the market, ensuring that the voting rights ratio does not exceed
0.5%.
In addition, on June 7, 2024, the Company resolved to execute a share repurchase and determined the specific acquisition
method. Subsequently, Mitsubishi Estate has sold a portion of its common shares of the Company back to the Company. As aresult, Mitsubishi Estate is no longer categorized as a major shareholder of the Company.

Share Repurchase
The Company decided at the Board of Directors meeting held on June 7, 2024 to conduct a share repurchase and determined thespecific acquisition method in compliance with Article 156 of the Companies Act of Japan, as applied pursuant to Paragraph 3 ofArticle 165 of this act. Moreover, the Company made the following share repurchase based on the aforementioned Board of Directors
resolution.
1. Reason for share repurchase
The Company repurchased its own shares in order to increase shareholders’ returns, specifically by increasing EPS and ROE.
2. Details of acquisition decision(1) Type of shares to acquire(2) Number of shares to acquire

The Company’s common shares
Up to 2,400,000 shares(3) Value of shares acquired(equivalent to 6.67% of all shares issued, excluding treasury shares)¥9,048 million (upper limit)(4) Date of acquisition(5) Share acquisition method

June 10, 2024
The shares were acquired through the Tokyo Stock Exchange Trading Network for
off-floor share repurchases (ToSTNeT-3).

3. Result of acquisition(1) Type of shares acquired

The Company’s common shares(2) Number of shares acquired(3) Value of shares acquired

2,400,000 shares¥9,048 million(4) Date of acquisition(5) Share acquisition method

June 10, 2024
The shares were acquired through the Tokyo Stock Exchange Trading Network for
off-floor share repurchases (ToSTNeT-3).

- 58 -

Note 25 － Consolidated Supplemental Schedules
1. Schedule of bonds payable
Issuing company

Bond nameDate of issuance

Balance atBalance at end of
beginning of
periodperiod(millions of yen)(millions of yen)

CouponSecurity

Redemption
date

Unsecured

Septemberbond29, 2023

Unsecured

March 25,

bond

2024

Unsecured

March 29,

bond

2024

Unsecured

Septemberbond25, 2024

Unsecured

Septemberbond25, 2024

Unsecured

Septemberbond

30, 2024

Unsecured

June 30,

bond

2025

Unsecured

Septemberbond

30, 2025

Unsecured

March 31,

bond

2026

Unsecured

Septemberbond29, 2023

Unsecured

March 31,

bond

2025

Unsecured

December 8,

21st Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 30,

525

Co., Ltd.

to authorized institutional

2013

(525)

－

0.97%
annually

investors)
22nd Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

March 25,

200

Co., Ltd.

to authorized institutional

2014

(200)

－

0.88%
annually

investors)
23rd Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

March 31,

770

Co., Ltd.

to authorized institutional

2014

(770)

－

0.89%
annually

investors)
24th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 25,

Co., Ltd.

to authorized institutional

2014

750

750

1.03%

(750)

annually

investors)
25th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 25,

112

37

0.81%

Co., Ltd.

to authorized institutional

2014

(75)

(37)

annually

investors)
26th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 30,

862

787

0.79%

Co., Ltd.

to authorized institutional

2014

(75)

(787)

annually

2,062

1,897

0.76%

(165)

(165)

annually

investors)
30th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limitedCo., Ltd.

to authorized institutional

June 30, 2015

investors)
32nd Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 30,

1,437

1,322

0.62%

Co., Ltd.

to authorized institutional

2015

(115)

(115)

annually

investors)
33rd Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

March 25,

715

660

0.52%

Co., Ltd.

to authorized institutional

2016

(55)

(55)

annually

investors)
35th Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

September 30,

1,129Co., Ltd.

to authorized institutional

2016(1,129)－0.11%
annually

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

36th Unsecured Bond (limited
to authorized institutional
investors)
37th Unsecured Bond (limited
to authorized institutional
investors)
38th Unsecured Bond
39th Unsecured Bond (limited
to authorized institutional
investors)

March 31,

1,000

0.42%

(1,000)annually

1,125

1,050

0.71%

(75)

(75)

annually

bond

2032

5,000

5,000

0.755%

Unsecured

Decemberannuallybond

13, 2028

1,200

1,125

0.76%

Unsecured

January 31,

(75)

(75)

annually

bond

2034

1,000

2017
December 8,
2017
December 13,
2018
January 31,
2019- 59 -

Issuing company
Heiwa Real EstateCo., Ltd.
Heiwa Real EstateCo., Ltd.

Bond name40th Unsecured Bond
41st Unsecured Bond (limited
to authorized institutional
investors)

Heiwa Real EstateCo., Ltd.

42nd Unsecured Bond (limited
to authorized institutional
investors)

Date of issuance

Balance atBalance at end of
beginning of
periodperiod(millions of yen)(millions of yen)

January 21,

Coupon0.78%

Security

Redemption
date

Unsecured

January 21,

bond

2031

Unsecured

Novemberbond

30, 2032

7,000

7,000

November 30,

3,258

3,093

0.76%

2022

(165)

(165)

annually

February 28,

2,490

2,365

1.00%

Unsecured

February 28,

2023

(124)

(124)

annually

bond

2033

2021

annually

43rd Unsecured Bond (bankHeiwa Real Estate

guarantee included and limited

February 28,

2,000

1,900

0.356%

Unsecured

February 25,

Co., Ltd.

to authorized institutional

2023

(100)

(100)

annually

bond

2031

Unsecured

March 17,

bond

2034

investors)
Heiwa Real EstateCo., Ltd.

44th Unsecured Bond (limited
to authorized institutional
investors)

Total

March 19,

－

2024

－

－

3,500

1.12%

(175)

annually

31,63731,489(3,648)(3,624)－－－(Notes) 1. Amounts shown in parentheses are scheduled for redemption within one year.
2. Amounts scheduled for redemption each year within five years from March 31, 2024
Within one to two
Within two to three
Within three to fourWithin one year
years
years
years
(millions of yen)(millions of yen)(millions of yen)(millions of yen)
3,624

4,259

714

Within four to fiveyears
(millions of yen)

714

5,714

Balance at
Average
Balance at end of
beginning ofinterest
periodperiodrate(millions of yen)(millions of yen)(%)

Repayment period

2. Schedule of borrowings
Classification
Short-term borrowings

3,800

800

0.5

－

Current portion of long-term borrowings

15,727

16,681

0.7

－

－

－

－

－

170,880

173,7030.8

2025–2038

－

－

－

－

－

258

0.5

－

Long-term accounts payable (excluding current portion)

4,850

8,391

0.9

2025–2043

Total

195,257

199,834－－

Current portion of lease liabilities
Long-term borrowings (excluding current portion)
Lease liabilities (excluding current portion)
Other interest-bearing liabilities
Current portion of long-term accounts payable- 60 -

(Notes) 1. The average interest rate is the weighted average interest rate for the respective item in the table as of March 31, 2024.
2. The payment period and amounts of long-term borrowings (excluding current portion) and long-term accounts payable(excluding current portion) within five years from March 31, 2024, are shown below.
Within one to two Within two to three Within three to four
years
years
years
(millions of yen)(millions of yen)(millions of yen)
Long-term borrowings
Long-term accounts payable– other

Within four to fiveyears
(millions of yen)

16,907

26,99529,02920,542

258

373

515

543

3. Schedule of asset retirement obligations
Pursuant to Article 92-2 of the Regulation on Terminology, Forms, and Preparation Methods of Consolidated Financial Statements,
the amounts of asset retirement obligations as of April 1, 2023, and March 31, 2024, have been omitted because the amounts are lessthan one percent of total balance of liabilities and net assets as of April 1, 2023 and March 31, 2024.

- 61 -

Independent auditor’s report
To the Board of Directors of Heiwa Real Estate Co., Ltd.:
Report on the Audit of the Consolidated Financial Statements
OpinionWe have audited the accompanying consolidated financial statements of Heiwa Real Estate Co., Ltd.
(“the Company”) and its consolidated subsidiaries (collectively referred to as “the Group”), which
comprise the consolidated balance sheets as at March 31, 2024 and 2023, the consolidated statements
of income and comprehensive income, changes in net assets and cash flows for the years then ended,and notes, comprising a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2024 and 2023, and its
consolidated financial performance and its consolidated cash flows for the years then ended inaccordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of the Groupin accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in thecontext of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.

Appropriateness of the Company’s valuation of non-current assets for the Building Business
The key audit matter

How the matter was addressed in our audit

Property, plant and equipment of ¥275,522
million and leasehold interests in land andgoodwill among intangible assets of ¥31,138
million (“real estate”) were recognized as realestate held for leasing in the consolidated balance
sheet of Heiwa Real Estate Co., Ltd. (the“Company”) and its consolidated subsidiaries forthe current fiscal year, representing 75.5% of total
assets in the consolidated financial statements.
These assets mainly include real estate such as
stock exchanges, offices and hotels in Japan andthe real estate owned by the Company and its
consolidated subsidiaries for several
redevelopment projects in Tokyo (Nihonbashi
Kabutocho and Kayabacho districts) and Sapporo.

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

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

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



We conducted a site inspection to confirm theoccupancy status and progress of theredevelopment plan for real estate that was
newly acquired and whose occupancy ratechanged.

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



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

Judgment as to whether there is an
impairment indicator

In determining whether there is an impairment
indicator, management needs to make a complex
judgment on expected changes in operating profits
and losses and the method of usage. The businessplan that serves as the basis for determining theredevelopment projects was prepared bymanagement using various assumptions including
the policy for developing blocks to becommercialized, prospective approval fordevelopments by local governments, development

costs and expected rental rates, and therefore
involved a high degree of uncertainty anddependency on management’s subjective
judgment.
-

Judgment as to whether impairment losses
should be recognizedWith respect to real estate for which an
impairment indicator (such as the cease ofoperations for future redevelopments and atemporary decrease in operating earnings rightafter the restart of operations) was identified, theestimate of future cash flows reflected significant
assumptions such as the level of rental rate, theoccupancy rate, and operating costs in the future,and therefore involved a high degree of
uncertainty and dependency on management’s
subjective judgment. In addition, it was possiblethat the business plan for redevelopment projects
was reviewed as it extended over a long period oftime.
We, therefore, determined that our assessment of
the appropriateness of the Company’s judgments
as to whether there is an impairment indicator forreal estate and whether impairment losses should
be recognized was of most significance in our
audit of the consolidated financial statements forthe current fiscal year, and accordingly, a key
audit matter.

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

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

For redevelopment projects, we compared theconstruction costs and the post-development
rental rate for tenants and vacancy rate, on
which the business plan was based, withsimilar cases by inspecting relevant
documents and assessed the consistency ofthese costs and rates with market information
on neighbouring real estate.

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

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

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

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

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



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

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

We communicate with the audit committee regarding, among other matters, the planned scope andtiming of the audit, significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide the audit committee with a statement that we have complied with relevant ethicalrequirements regarding independence, and communicate with them all relationships and other mattersthat may reasonably be thought to bear on our independence, and where applicable, actions taken toeliminate threats or safeguards applied.
From the matters communicated with the audit committee, we determine those matters that were ofmost significance in the audit of the consolidated financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of such communication.
Fee-related Information
Fees paid or payable to our firm and to other firms within the same network as our firm for audit andnon-audit services provided to the Company and its subsidiaries for the current year are 44 million yen
and 0 million yen, respectively.

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

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

KPMG AZSA LLC
Tokyo Office, Japan
July 31, 2024

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