Tokyo Tatemono : Integrated Report 2021

Integrated Report 2021

TOKYO TATEMONO GROUP Integrated Report

Corporate Philosophy

"Trust beyond the era."

We aim to grow the Company and to create a prosperous society, taking pride in the trust placed in us that extends over a century.

CONTENTS
INTRODUCTION	Contents ...........................................................................	02
	Corporate Philosophy ........................................................	01
	At a Glance .......................................................................	03
VALUE CREATION	Message from the CEO......................................................	08
	Overview of the Medium-Term Business Plan.....................	05
	History of Value Creation ...................................................	13
	Value Creation Process .....................................................	15
	Long-Term Vision ..............................................................	17
	Materiality ..........................................................................	19
	Feature
	The Value Urban Development Brings: Hareza Ikebukuro ....	21

Corporate Stance

We support affluent and dream-filled living.

We aim to create comfortable urban environments. We create worthwhile spaces offering peace of mind.

CAPITAL STRENGTHENING

Financial Capital: Message from the CFO ..........................	25
Intellectual Capital .............................................................	29
Social and Relationship Capital .........................................	31
Business Capital
Commercial Properties Business ................................	32
Residential Business ..................................................	36
Asset Service Business ..............................................	39
STRATEGIC FOCUS Meeting Demand for Real Estate
Investment: Property Sales to Investors......................	41
Other Businesses .......................................................	43
Human Capital ..................................................................	46
Natural Capital ..................................................................	49

Founding Spirit

FOUNDATIONS FOR	Dialogue between the Chairman of the Board
	Corporate Governance ......................................................	53
VALUE CREATION	Risk Management .............................................................	65
	and an External Director ..................................................	57
	Management Structure ......................................................	61
	Compliance .......................................................................	66

"The Customer Always Comes First" Spirit

Established in 1896 by Zenjiro Yasuda, the founder of the former Yasuda conglomerate, Tokyo Tatemono is Japan's oldest comprehensive real estate company. From the outset, Yasuda's principle of always putting the customer first, along with an enterprising spirit that has anticipated changes in the times, have been the ground of the Company's activities. From this foundation, Tokyo Tatemono has helped to enhance the attractiveness and value of various regions and expanded into a range of real estate development businesses, including the development of new assets that

have responded to the needs of society over time. Even now, more than a century after the Company's founding, this mindset continues to

inform and guide the Tokyo Tatemono Group. Taking pride in the trust we have accumulated

DATA SECTION

Editorial Policy

Integrated Report 2021 was prepared with the goals of enhancing communication with stakeholders and fostering understanding regarding the intention of the Tokyo Tatemono Group to create value over the medium to long term through the provision of financial and non-financial information. For future reports, we intend to incorporate feedback from readers to improve the contents.

Reporting Period

This report primarily covers the fiscal year ended December 31, 2020. However, some information on activities before or after this period and forward-looking forecasts are also included.

Key Financial and Non-Financial Data ...............................	67
Financial Statements .........................................................	69
Corporate Data .................................................................	74
Referenced Frameworks
In preparing this report, we referenced
the Guidance for Integrated Corporate
Disclosure and Company Investor Dialogues
for Collaborative Value Creation: ESG
Integration, Non-Financial Information
Disclosure, and Intangible Assets into
Investment released by the Ministry of
Economy, Trade and Industry and the International Integrated
Reporting Council's International Integrated Reporting
Framework. Non-financial information has been disclosed	with
reference to the standards of the Global Reporting Initiative.

Disclaimer Regarding Forward-Looking Statements

over the years, Tokyo Tatemono will continue to grow as a company as we contribute to the creation of a prosperous society.

Zenjiro Yasuda	Company headquarters at its
	establishment in 1896

Scope of Reporting	Data and information regarding future outlooks provided
The scope of this report includes Tokyo Tatemono Co., Ltd.	in this integrated report are forward-looking statements
based on the Company's judgments in light of currently
and Tokyo Tatemono Group companies.
available information. Actual results may differ materially
	from those projected as a result of economic conditions,
	market trends, demand fluctuations, foreign exchange
	rate movements, and other factors.

01

TOKYO TATEMONO GROUP  INTEGRATED REPORT 2021

TOKYO TATEMONO GROUP  INTEGRATED REPORT 2021

02

INTRODUCTION

At a Glance

Tokyo Tatemono Group in Numbers

Operating revenue

(Billion yen)

400				323.0	334.9
	254.4	266.9	273.3
200
0	FY2016	FY2017	FY2018	FY2019	FY2020

Operating revenue per segment

Business profit / Profit attributable to owners of parent

	Business profit	Profit attributable to owners	of	parent
(Billion yen)		47.1	51.6	49.8
		46.4
50
	38.2
			27.2		29.7	31.7
25	19.7	22.5
0	FY2016	FY2017	FY2018		FY2019	FY2020

Business profit per segment

Earnings per share (EPS)

(Yen)
200
				141.59	152.12
			125.79
	91.00	104.17
100
0	FY2016	FY2017	FY2018	FY2019	FY2020

Annual dividend per share / Payout ratio

	Annual dividend per share		Payout ratio
(Yen)	(%)

100				40
28.6	28.8	27.8	29.0	30.2

				41	46
50			35		20
26	30
0	FY2016	FY2017	FY2018	FY2019	FY2020	0

Other 13% 44.5

	Commercial Properties
Asset Service 14%	43%
144.5
46.6
334.9
Residential 30%	billion yen
99.1

Total assets / ROA

Total assets	ROA
(Billion yen)					(%)
3,000		3.4	3.3	3.4	3.1	4
	2.9
	1,314.5	1,441.0	1,450.0	1,564.0	1,624.6
1,500					2
0	FY2016	FY2017	FY2018	FY2019	FY2020	0

* ROA=Business profit ÷ total assets (average at start and end of fiscal year)

Debt-equity ratio

(Times)
3.0	2.3	2.4	2.5	2.5	2.5
1.5

0

FY2016

FY2017

FY2018

FY2019

FY2020

	Other 15%
	8.6
Asset Service 5%	Commercial Properties
2.6	69%
Residential 12%	40.8
49.8
7.1
billion yen*
	* After elimination and corporate

ROE
(%)
10		7.9	8.2	8.3
	6.4	6.8
5

0

FY2016

FY2017

FY2018

FY2019

FY2020

Interest-bearing debt/EBITDA multiple

(Times)

20

13.0

12.5

12.7

12.6

13.4

10

0

FY2016

FY2017

FY2018

FY2019

FY2020

Segment Overview

Commercial Properties Business

The Commercial Properties Business encompasses business activities ranging from urban development and office building development and operation to facility management, building maintenance, and maintenance/remodeling. Our sphere of operations centers mainly on the international city of Tokyo. We are working together as a group to provide not only quality properties and facilities but also a range of services to provide office building users with a sense of safety, security, and comfort.

pp. 32-35

Asset Service Business

Capitalizing on the range of services offered by the Tokyo Tatemono Group for the effective use of property and land, the Asset Service Business provides comprehensive solutions through several business activities: the real estate brokerage business; the asset solution business, which seeks to increase the value of and sell acquired real estate; the management service business; and the parking business, centered on the NPC24H brand of parking lots.

pp. 39-40

Residential Business

The Residential Business is engaged in the for-sale condominiums and for-rent condominiums businesses, centered on the Brillia brand of refinement and comfort, primarily in the Tokyo metropolitan area. We offer high-quality housing based on a unique, comprehensive framework that includes all the functions needed to support a more comfortable life for our customers, ranging from planning and development to management, repair, renovation, and brokerage.

pp. 36-38

Other Businesses

Other Businesses have grown to include a variety of business activities: overseas businesses engaged in property development in China and other Asian countries; real estate fund business, which offers and manages various real estate investment products such as J-REITs, private REITs, and private funds; and leisure and child care businesses which address the real lifestyles and needs of people.

pp. 43-45

03

TOKYO TATEMONO GROUP  INTEGRATED REPORT 2021

TOKYO TATEMONO GROUP  INTEGRATED REPORT 2021

04

VALUE CREATION

Overview of the Medium-Term Business Plan

Trajectory of Past Business Plans

Long-Term Vision

2012-2014Medium-Term Business Plan

	Quantitative Targets	Results
Operating profit	35 billion yen	30.5 billion yen
Debt-equity ratio	3	2.6

	In light of our desired future direction for the Group,
Targets
Achieved	this medium-term business plan was positioned as a
	stage for reinforcing the business foundation. The plan
	called for the company's transformation centered on
	strategically focused structural realignment and
	optimization of the value chain. Our aim was to
	thoroughly strengthen earnings power and the Group's
	financial position.
	We implemented various measures, including selling
	some business units and reorganizing the special
	purpose company structure for large-scale projects. In
	addition, by keeping interest-bearing debt down and
	expanding the equity base, we reinforced the financial
	position beyond the plan's initial targets.
Issues	Although we built a sound financial	base,	we failed to
Remaining	achieve target profit levels, and the	plan	concluded

with profitability as an ongoing issue.

We recognized the need to boost profitability by building a business portfolio with high growth potential, which would enable us to achieve sustainable growth over the longer term. We incorporated this recognition into the next medium-term plan.

2015-2019Medium-Term Business Plan

		Quantitative Targets	Results
		50 billion yen	52.4 billion yen
Operating profit
		Targets for Financial	Results
		Indicators
Debt-equity ratio	3	2.5
Interest-bearing debt/	13	12.6
EBITDA multiple
Targets	The objective of this medium-term business plan was
Achieved	to strengthen earnings power and build a business

portfolio with high growth potential. To achieve this, the plan called for us to provide a range of high-quality services to enhance customer satisfaction, strategically focus on fields and business domains where we could take full advantage of the Group's unique expertise and competitive strengths, strengthen the value chain, and deliver "amazing value" through organic collaboration between a variety of business units.

We achieved profit growth in excess of the initial target and practiced a more disciplined financial management approach. At the same time, in addition to pursuing consistent growth in each business, we took various initiatives for future growth, such as investing in hotels and logistics facilities and other new asset types and expanding the stock of quality real estate.

Issues We were successful in strengthening earnings power Remaining and maintaining a sound financial position. However,

the need for actions that would ensure sustainable growth became more apparent as we faced shifts in the business environment, including mounting competition between international cities, increasingly diverse lifestyles, and rapid advances in digital technology, coupled with the pressing issue of sound ESG management.

Long-Term Vision Looking Ahead to the Period around 2030

Becoming a Next-Generation Developer

The pace of change in the business environment is accelerating, while the need for sounder ESG management grows more urgent every year. In this environment, to equip the Tokyo Tatemono Group as a whole to realize sustainable growth after 2020, in February 2020 we formulated a long-term vision looking ahead to the period around 2030, the year when a number of large-scale redevelopment projects currently under way will be completed, and which also coincides with the target year of the Sustainable Development Goals (SDGs).

Long-Term Vision and Materiality p. 17

Positioning of the Current Medium-Term Business Plan (FY2020-2024)

In February 2020, to accomplish the Group's long-term vision looking ahead to 2030, together with a new long-term vision statement, we formulated a medium-term business plan covering the five years from fiscal 2020 to 2024. The plan targets a milestone of 75 billion yen in consolidated business profit in its last year.

Medium-Term Business Plan and Consolidated Business Profit

	2015-2019			Long-Term Vision Looking Ahead to the Period around 2030
Medium-Term Business Plan		2020-2024Medium-Term Business Plan	Consolidated business profit*
				Consolidated business profit*	120 billion yen
				75 billion yen
	46.4	47.1	51.6	49.8
35.2	38.2

Operating profit, Debt-equity ratio, ROE

Operating profit  Debt-equity ratio (times)  ROE

(Billion yen)

70			33.2%				7.9%	8.2%	8.3%
				6.8%
				6.4%
	5.3%	4.4%						52.4
							49.6
				5.6%			46.7
					44.7
				34.4	36.3
	30.8
35	29.3	30.5
	2.3		2.6	2.3	2.3	2.4	2.5	2.5	2.5
		1.7
0	FY2012	FY2013	FY2014	FY2015	FY2016	FY2017	FY2018	FY2019	FY2020

2015 2016 2017	2018 2019 2020	2024	around 2030
* Consolidated business profit	= consolidated operating profit	+ share of profit (loss) of entities accounted for using equity	method

Profit and Financial Plan

FY2024 Figures

Profit Target		Capital Efficiency		Financial Indicators
Consolidated					Interest-bearing debt /
business profit		ROE	Debt-equity ratio*1	EBITDA multiple*2
75 billion yen		8～10 %	Approx. 2.4 times	Approx. 12 times

*1 Debt-equity ratio = consolidated interest-bearing debt/consolidated owners' equity

*2 Interest-bearing debt/EBITDA multiple = interest-bearing debt/(operating profit + interest and dividend income + share of profit (loss) of entities accounted for using equity method + depreciation + amortization of goodwill)

05

TOKYO TATEMONO GROUP  INTEGRATED REPORT 2021

TOKYO TATEMONO GROUP  INTEGRATED REPORT 2021

06

VALUE CREATION

Overview of the Medium-Term Business Plan

Key Strategies

Message from the CEO

	Pursue large-scale
Key
Strategies	redevelopment projects
1	We engage in the pursuit of large-scale
	redevelopment projects and take initiatives to
	enhance the appeal of the areas around these
	projects, aiming to increase the value of our
	entire office building	portfolio and expand the
	flow of stable leasing	profit.

	Strengthen the for-sale
Key
Strategies	condominiums business
2	Redevelopment and rebuilding will be our tools
	enabling the ongoing acquisition of opportunities
	to develop highly-competitive condominiums,
	providing quality housing in response to
	social changes.

	Expand property sales to
Key
Strategies	investors
3	Through proactive investment in a broad pool of
	asset types, including logistics facilities, for-rent
	condominiums, and urban hotels, we will continue
	to seize development opportunities and sell
	properties expeditiously to generate profits.

	Strengthen brokerage, fund, and
Key
Strategies	parking businesses
4	We will strengthen our brokerage and parking
	businesses with a focus on building up the real
	estate portfolio and meeting needs for the
	effective use of real estate. We will strengthen
	the fund business by expanding property sales
	to investors; for instance, to REITs sponsored
	by the company.

	Grow our overseas businesses
Key
Strategies	We aim to collaborate with leading local partners,
5
primarily in China and other Asian countries, to
	acquire new business opportunities centered
	mostly on for-sale condominiums with
	quick turnover.

Building on a foundation of trust, we will achieve a balance at a higher level between providing solutions to social issues and pursuing growth as a business.

Evolution of ESG Management

We are developing ongoing sustainability measures, having established a Sustainability Committee to work with business divisions to set goals, monitor progress, and evaluate performance levels. We aim to leverage positive ratings from ESG rating agencies as benchmarks for our inclusion in ESG indices.

System to promote sustainability measures

Management by the Sustainability Committee (chaired by the President)

ofBoard	Report	Goal-setting		Implementation,		Evaluate	Stakeholder
				promotion
Directors			Review of	PDCA	cycle			engagement
			Monitoring,		activities,
	Monitor	activities		evaluation		Promoting
							disclosure
			Promoting sustainability measures within each business division

Improving ratings from ESG rating agencies, seeking inclusion in ESG indices

Hitoshi Nomura

Representative Director

President and

Chief Executive Officer

Tokyo Tatemono Co., Ltd.

07	TOKYO TATEMONO GROUP  INTEGRATED REPORT 2021