Nomura Real Estate Holdings,Inc. Q3 FY2026 earnings call

• Consolidated Third Quarter Performance Context
  • The year-over-year decrease in business profit is primarily driven by the timing shift: more residential and income-producing real estate sales will be recorded in the fourth quarter this year, compared to the prior year.
  • The year-over-year decrease in net profit is primarily due to the recognition of impairment and demolition costs as special losses for the Hamamatsucho Building reconstruction project, which was fully anticipated at the start of the fiscal year and is progressing on schedule.
• Strategic Project & Pipeline Progress
  • The company's 3-year plan strategy to expand rental housing (including senior housing) and hotels is progressing as scheduled. The residential segment continues to acquire development land for income-producing assets to grow its long-term pipeline.
  • The Hamamatsucho Building reconstruction project is progressing according to plan, with special loss items already finalized as expected.
  • The company continues to expand its overseas business pipeline, adding new projects in Vietnam and the US in the third quarter, and closed its first overseas development-focused fund targeting domestic institutional investors.
• Shareholder Return Framework
  • The company's core policy is to balance profit growth from reinvestment and shareholder value improvement through returns, targeting a total payout ratio of 40% to 50%. Through the 2024 March fiscal year, the company executed share buybacks in addition to dividends to reach a ~45% total payout ratio, as its stock was considered undervalued. In the 2025 March fiscal year, the company shifted to prioritize dividends, introducing a 4% lower bound for DOE (Dividend on Equity) and raising the payout ratio from the 30% range to ~40%, while still executing share buybacks as the stock remained undervalued.
  • In the current fiscal year, even after accounting for the special losses for BLUE FRONT SHIBAURA TOWER N development, business is progressing well and the confidence of meeting full-year performance targets has increased significantly, leading to the decision to increase shareholder returns. The company evaluated additional share buybacks but chose to increase dividends instead, as the current stock price is now close to the company's NAV per share, reducing the relative advantage of share buybacks. The company still believes there is room for the current stock price to rise, and will continue to pursue 8% annual profit growth to drive enterprise value and stock price appreciation through aligned dividend increases.
  • The adjusted full-year dividend forecast is 40 yen per share (up from the initial 36 yen), bringing the payout ratio to 45.7%, which management considers an appropriate level balancing reinvestment and returns.

Consolidated (third quarter actual): Net sales 581.5 billion yen, operating business profit 86.2 billion yen, net profit 42.9 billion yen, both business profit and net profit decreased year-over-year.

• Residential Segment: At the third quarter stage, the segment recorded year-over-year decrease in revenue and profit, as more condominium unit sales are scheduled to be recorded in the fourth quarter compared to the previous year. For the third quarter cumulative period: For-sale condominiums have a gross profit margin of 26.3%. Revenue from sales of income-producing real estate (senior housing, hotels, rental housing) reached 8.7 billion yen, with gross profit of 5.1 billion yen. The segment holds approximately 2.5 trillion yen in land bank for for-sale condominiums, which covers 6 to 7 years of business volume, with 1.6 trillion yen (60% of the total by sales value) located in Tokyo's 23 wards. For income-producing real estate development pipeline, the segment acquired 13 development parcels cumulatively this fiscal year with a total investment value of 88.6 billion yen, and holds a total pipeline of approximately 270 billion yen including completed (90 billion yen) and planned projects. Full-year segment business profit guidance was upwardly revised, with full-year revenue and profit expected to increase year-over-year, and full-year gross margin is projected to stay in the 25% range. 99.6% of the full-year planned for-sale sales target of 310 billion yen is already contracted.
• Urban Development Segment: In the third quarter, the segment recorded a profit decrease due to opening costs for BLUE FRONT SHIBAURA TOWER S, even as income-producing real estate sales outpaced the prior year's pace. For the third quarter cumulative period: income-producing real estate sales reached 119.2 billion yen, with gross profit of 36.6 billion yen. Cumulative land acquisition for income-producing real estate reached 47 billion yen. The segment holds a total pipeline of approximately 1.1 trillion yen (including projects under development, concentrated in office and logistics facilities), which covers 5 to 6 years of business volume. The overall vacancy rate for held rental assets is 5.9%, up 1.2 percentage points from the second quarter, almost entirely due to the company's own headquarters moving out of a Shinjuku-area building. Approximately half of the vacated space in Shinjuku Nomura Building is already contracted or conditionally agreed, and remaining space is being actively leased. New asking rent for the company's flagship PMO office brand is on an upward trend, and 70% of existing tenant rent renewals achieved rent increases of 5% to 10%. Full-year segment sales and business profit guidance was upwardly revised, with full-year sales gross profit projected to exceed 50 billion yen.
• Overseas Segment: Year-over-year decrease in revenue and profit in the third quarter, due to the absence of the large Vietnam for-sale condominium project that was recorded in the prior year's same period. The segment holds a total project pipeline with total project cost of approximately 840 billion yen. In the third quarter, the segment secured participation in one new for-sale condominium project in Vietnam and one new rental housing project in the US. Vietnam residential sales performance varies by project: Grand Park in Ho Chi Minh City is progressing well, while Royal Island in Haiphong is slightly behind plan due to increased market supply in the area. Full-year segment business profit guidance was downwardly revised, after the company pushed the planned sale of a London, UK office building to next fiscal year or later.
• Asset Management Segment: Assets under management for private REITs and private funds are growing steadily. The segment closed the company's first overseas development-focused fund in Houston, US, which offers domestic institutional investors access to a high-rise rental housing development project.
• Brokerage & CRE Segment: Transaction volume increased across all three business lines (retail for individual customers, middle market for corporate owners and high-net-worth individuals, wholesale for large corporations and investors), leading to year-over-year increase in both revenue and profit. Full-year sales and business profit guidance was upwardly revised.
• Operations & Management Segment: Both core operations management business and contracted construction work recorded year-over-year revenue growth, leading to an overall increase in revenue and profit. The growth was driven by increased contracted construction revenue from tenant move-in work for BLUE FRONT SHIBAURA. Full-year sales and business profit guidance was upwardly revised.

• Full-year consolidated business profit is projected at 137 billion yen, which is an upward revision from the initial forecast, and is on track to exceed the company's 8% annual growth target.
• Full-year consolidated net profit is projected to hit the initial forecast of 75 billion yen, after accounting for finalized special losses for the Hamamatsucho Building project and anticipated special gains from domestic fixed asset sales.
• Segment-level guidance revisions: Business profit guidance was upwardly revised for Residential, Urban Development, Brokerage & CRE, and Operations & Management segments, while business profit guidance was downwardly revised for the Overseas segment due to the delayed sale of the London office building.
• For the residential segment's for-sale business, full-year gross profit margin is expected to remain in the 25% range.
• For the urban development segment's income-producing real estate sales, full-year gross profit is projected to exceed 50 billion yen.

• In the Haiphong market in Vietnam, the Royal Island project is slightly behind sales plan due to increased supply in the local market.
• The vacancy rate for the company's held rental assets rose 1.2 percentage points quarter-over-quarter to 5.9%, driven by the company's own headquarters moving out of a Shinjuku building, though leasing of the vacated space is already progressing well.

No question and answer section is included in the provided transcript.