Nomura Real Estate Holdings,Inc. Q3 FY2025 earnings call

Consolidated Financial Results

• For the third quarter of the 2025 March fiscal year, the company reported consolidated revenue of 571.8 billion yen, operating profit of 101.3 billion yen, and net profit attributable to parent company shareholders of 62.4 billion yen. All metrics reached record highs for a third quarter.

Residential Segment Operations

• Cumulative contracted condominium units reached 2,486, a 69-unit decrease year-over-year that remains in line with plan. Despite rising mortgage rates, customer purchase demand remains strong, and contract progress reached 97.5% of the full-year planned 290 billion yen in condominium revenue, putting full-year targets almost within reach.
• Cumulative land acquisition for the fiscal year reached 1,400 units equivalent to 150 billion yen in planned revenue, bringing the company's medium- to long-term land stock to approximately 2 trillion yen, enough to support 4-5 years of operations. Including developments under construction, the company holds approximately 110 billion yen in income-producing rental residential stock, with more than 50 billion yen already completed.

Urban Development Segment Operations

• The company acquired 6 parcels of land totaling 58 billion yen in the first three quarters, successfully accumulating sites for office and logistics facilities despite a competitive acquisition market. Including developments under construction, the segment holds approximately 900 billion yen in income-producing property stock.

Overseas Segment Operations

• Total committed overseas investment reaches approximately 710 billion yen, with 250 billion yen reflected on the balance sheet. In Q3, the company committed an additional 50 billion yen to a new Vietnam condominium project and 10 billion yen to a new US rental residential development project. Investment in a China condominium project has been fully completed, and almost all invested capital in China has been recovered.
• Newly added projects include the "Royal Island" condominium development in Haiphong, Vietnam, and the "Jefferson Morningstar" rental residential development in Dallas, Texas, USA. The company now has 3 active projects in the US, adding Dallas to existing developments in Portland and Atlanta.

Shareholder Return

• Following the upward full-year earnings revision, the company plans to increase the year-end dividend per share by 5 yen, bringing the full-year dividend to 170 yen. This will mark the 13th consecutive year of dividend increases, with a projected payout ratio of 40.7% and total return ratio of 47.7%.

All 6 segments achieved year-over-year revenue and profit growth:

1. Residential Segment: The segment delivered overall revenue and profit growth, driven by increased unit deliveries, higher average selling prices and improved gross margin for condiminiums. Condominium gross margin reached 27% for the first three quarters. Revenue from income-producing property sales declined year-over-year due to high sales volume in the prior year period, but renovation business revenue grew on higher transaction volume. Hotel operations grew on strong performance and the addition of UDS to the group this fiscal year.
2. Urban Development Segment: The segment achieved revenue and profit growth, driven by increased year-over-year income-producing property sales. Operating revenue also grew on strong performance from fitness and shared office businesses. As of Q3, income-producing property sales reached 97.7 billion yen with 31 billion yen in gross profit. The average vacancy rate for held rental assets fell to 4.7% across all areas.
3. Overseas Segment: The segment grew revenue and profit from the recognition of a Vietnam condominium project that was not included in the initial full-year forecast.
4. Asset Management Segment: The segment delivered revenue and profit growth, with steady increases in domestic assets under management (AUM) centered on private REITs and private funds. Overseas AUM declined due to ongoing wind-down of the Rossberry fund managed by the UK-based affiliate, which is selling properties to meet redemption requests.
5. Brokerage & CRE Segment: All three business lines (retail for individual consumers, middle market for SMEs/business owners/ high-net-worth individuals, and wholesale for large corporations/funds) saw increased transaction volume and deal count on the back of a strong market, driving overall revenue and profit growth.
6. Operations & Management Segment: Revenue and profit grew driven by steady growth in the number of managed residential units and commercial buildings, plus higher revenue from contracted construction projects.

• Full-year consolidated guidance was revised: revenue is now projected at 760 billion yen, a 30 billion yen decrease from the initial forecast, while operating profit is projected at 120 billion yen (a 2 billion yen increase), ordinary profit at 102 billion yen (a 2 billion yen increase), and net profit at 72 billion yen (a 2 billion yen increase). All revenue and profit projections represent new all-time highs for the company.
• Upward revisions to full-year operating profit were implemented for the Residential, Overseas, Brokerage & CRE, and Operations & Management segments, reflecting stronger than expected performance through the first three quarters.
• A downward revision to full-year revenue and operating profit was implemented for the Urban Development segment, following a revised sales plan for income-producing properties that projects lower full-year gross profit than the initial forecast. The Residential segment also revised its income-producing property sales plan lower, projecting gross profit below the prior year level, but the segment's overall operating profit forecast was raised on strong condominium performance.
• The full-year condominium gross margin is projected to remain in the 26% range, a high level that supports the upward profit revision for the Residential segment.

• The company noted that mortgage rates are on an upward trend, though customer purchase demand has remained strong to date.
• Land acquisition conditions remain competitive and challenging, though the company has continued to accumulate suitable parcels for planned development as scheduled.
• The company is in the process of winding down the Rossberry fund held by its UK asset management affiliate, which has led to a steady decline in overseas AUM as properties are sold to meet redemption requests.

The provided earning call transcript does not include a Question and Answer section.