3486.T

• Corporate Strategy & Long-Term Vision

  • The company has set the long-term group policy "GLM1000" targeting for 2040, with a goal of ordinary profit exceeding 100 billion yen, and targets to maintain an average annual growth rate of 25% to achieve sustainable corporate value improvement.
  • The first phase towards GLM1000 is the medium-term management plan "GLM100", which targets 100 billion yen in net sales, 17 billion yen in gross profit, and 10 billion yen in ordinary profit by 2027. The certainty of achieving GLM100 has increased further after the 2025 fiscal year results.
  • The company has achieved 11 consecutive years of revenue growth, 5 consecutive years of profit growth, and 4 consecutive years of dividend increases, with both revenue and ordinary profit reaching record highs in 2025.

• Business Model Transformation & Growth Strategy

  • Build an investor needs-centered business model: A survey of 12 existing investor partners shows that their total planned investment in Japanese real estate from 2025 to 2027 is 3.3 trillion yen, while the company's supply plan is only 250 billion yen, leaving large room for growth. The company will explore joint projects with investors to expand asset types and business scale to meet investor demand.
  • Expand the use of DX: Combine investor data, real estate industry data, and company-held data to promote business digital transformation and improve productivity.
  • Expand asset types and revenue models:
    • ESG-type residence: Operate the ARTESSIMO series of residence brands with 3 sub-brands, and expects to supply approximately 140 billion yen after 2026.
    • Urban central hotels: Operate the RESITEL brand of urban residential hotels, plans to sell 1 building in 2026, and expects to supply approximately 10 billion yen after 2026.
    • Land planning business: Accumulated supply of approximately 36 billion yen from 2023 to 2025, expects increased land sales driven by inheritance in the next 10 years, and can improve profit scale and margin by expanding land scale through adjacent land acquisition.
    • Renovation business: Operate the RENEX brand for renovated office buildings, supplies approximately 14 billion yen accumulated from 2024 to 2025, and expects supply of approximately 16 billion yen in 2026, representing substantial growth.
  • New business model transformation via SPC (Special Purpose Company): Current land planning and renovation businesses still need improvements including shortening capital recovery periods and diversifying revenue points. Starting from 2026, the company will accelerate building a new business model that uses SPC to cooperate with partners for development, value enhancement and operation. It will aim to expand borrowing scale based on trust building with financial institutions, and plans to announce formal business alliances with multiple partners in 2026 and 2027.

• Financial & Capital Market Status

  • 2025 fiscal year financial indicators: Equity ratio of 31.3%, ROE of 34.8%, both exceeding GLM100 targets. A dividend of 80.5 yen per share is planned for 2025.
  • The company met the Tokyo Stock Exchange Prime market listing maintenance criteria, with a traded market capitalization of 19.3 billion yen exceeding the 10 billion yen requirement. The next target is inclusion in TOPIX, and aims to reach a total market capitalization of 100 billion yen during the GLM100 period.

• 2026 December Fiscal Year full-year guidance: The company targets new record highs for revenue and profit, with plans for 75 billion yen in net sales, 14.5 billion yen in gross profit, and 7.5 billion yen in ordinary profit, representing growth from 69.2 billion yen and 6.7 billion yen in 2025. The company is currently prioritizing pipeline construction for the 10 billion yen ordinary profit target in 2027, but will actively pursue upside to 2026 results if medium-to-long term growth certainty increases.
  • Segment guidance for 2026:
    • Development Business: Sales revenue and number of units sold are expected to decrease compared to 2025, but gross profit will maintain a high growth rate due to continued high gross margin.
    • Land Planning Business: Revenue and gross profit are expected to remain at similar levels to 2025, as the company has adopted a policy of longer value enhancement periods for medium-to-long term growth.
    • Renovation Business: Both revenue and gross profit are expected to exceed the medium-term plan, driven by strong acquisition results in 2025.
  • Financial guidance: The company maintains the GLM100 financial targets of equity ratio above 30% and ROE above 30%. A dividend of 100 yen per share is planned for 2026, representing a 19.5 yen increase from 2025, consistent with the company's base policy of 30% payout ratio and progressive dividends.
  • Quarterly performance: Profit is expected to be concentrated in the second half of 2026, but the company will work to smooth performance across quarters as much as possible.
  • The company confirms that it is steadily advancing preparations for GLM100 and GLM200, follows a consistent policy of conservative initial planning that has resulted in upward revisions for 4 consecutive years, and will follow the same approach for 2026.

1. Development Business (2025 December Fiscal Year): 1,147 units were sold and settled, exceeding the initial plan of 1,100 units. Business conditions were favorable, with gross margin exceeding plan and gross profit coming in above target. For 2026 December Fiscal Year, 758 units are planned for sale, with approximately 70% of sales contracts already concluded.
2. Land Planning Business (2025 December Fiscal Year): 22 properties were sold (1 property was delayed to 2026 from an original target of 23 properties). Both revenue and gross profit greatly exceeded the initial plan. For 2026 December Fiscal Year, 25 properties are planned for sale, and revenue/gross profit are expected to be at similar levels to 2025.
3. Renovation Business (2025 December Fiscal Year): 5 properties were acquired and 4 properties were sold. Both acquisition and sales performed strongly, with high-margin properties sold. Although some property sales were delayed to 2026, gross profit still met plan. For 2026 December Fiscal Year, 12 properties are planned for acquisition (5 already completed), with 9 properties planned for sale (including 4 properties acquired in 2025), and both revenue and gross profit are expected to exceed the medium-term management plan target.

• Exchange rate: The yen has seen high volatility recently, moving from a low of 159 JPY/USD to around 152 JPY/USD. Continued yen depreciation could increase overseas investor preference for Japanese real estate, but the company will continue to monitor demand trends closely.
  • Construction costs: Building material prices have stabilized after 2021's surge, but construction costs continue to rise due to labor shortages stemming from the 2024 labor market reforms. Profit may be affected depending on the progress of price pass-through and construction timing. However, reduced new construction activity by general contractors and developers has tightened supply for new residences, which gives the company stronger pricing power as it has already secured its supply volume, creating a favorable tailwind.
  • Interest rate hikes: The Bank of Japan raised the policy unsecured call rate by 0.25% to a target of around 0.75% in December 2025. While rising rates have a negative impact on real estate prices, the market has already priced in long-term rate increases, and current rent growth is outpacing inflation, creating a net positive impact on real estate values. Investor feedback confirms Japanese real estate remains an attractive investment. To mitigate risk: In the short-to-medium term, the company will reduce interest rate risk exposure by shortening capital recovery periods and expanding high-margin land planning and renovation businesses. In the long term, the company will use SPC to further shorten capital recovery periods, build a business model less sensitive to interest rate fluctuations, and work to diversify and stabilize revenue points and expand stock-based revenue.
  • The company has already fully incorporated the impact of a 0.5% interest rate hike into its 2026 selling, general and administrative expense plan: a 0.25% hike would increase costs by 120 million yen, and a 0.5% hike would increase costs by 240 million yen, and the company's plan still allows it to fully meet its targets under this scenario.

Q: What magnitude of interest rate increase is the company currently assuming for 2026, and what impact would this have on performance, funding costs, and property sales market conditions?

A: The company understands that interest rates will be on an upward trajectory in 2026. It has already incorporated the cost impact of a 0.5% interest rate increase into its current plan: a 0.25% rise increases costs by 120 million yen, and a 0.5% rise increases costs by 240 million yen. Even with this increase, calculations confirm the company can still fully achieve its targets.

Q: Is the SPC scheme used by the company the same as the fund scheme used by companies like Kasumigaseki Capital?

A: It is exactly the same type of scheme as Kasumigaseki Capital. The company wants to use SPC to improve capital efficiency and hedge against interest rate hikes by completing land planning and short-term value enhancement, then letting SPC handle subsequent development, value enhancement and operation. This will diversify flow revenue channels from the previous flow-focused business model, and also strengthen stock revenue through building up AUM. The company plans to fully accelerate this business model starting in 2026.

Q: Will SPC only focus on construction, or will it also handle upstream areas such as fund formation?

A: The company plans to use SPC for all its existing business formats, including development-focused SPC, value-add focused SPC, and operation-focused SPC, to cover the various methods and diverse assets in its land planning, development, and renovation businesses. It aims to use external capital as much as possible to continue value enhancement and diversify revenue channels.

Q: If the current 7.5 billion yen ordinary profit target for this year is exceeded, can we expect ordinary profit of over 10 billion yen next year, and will there be an update to the medium-term management plan during this year?

A: The 7.5 billion yen ordinary profit target for this year is the second-year target of the medium-term management plan announced in November 2024, which the company has stated from the beginning of the term. The plan is progressing very well so far, as it has done since last year. The company is focused on achieving the 10 billion yen ordinary profit target for GLM100 next year, while building the new business model and preparing for GLM200 in parallel. The 7.5 billion yen target is a solid, conservative plan, just as the company has done for the past 4 years, where it has upwardly revised forecasts after setting the annual target, and it plans to follow the same approach this year. Stakeholders should understand that the company is advancing reforms targeting GLM100 while actively preparing for GLM200 to expand and diversify its assets.

Q: Are there any plans for share buybacks going forward, to re-evaluate the company's valuation?

A: The company completed a share buyback last year. It recognizes that the current share price has a lower PER than last year and is currently very undervalued. While there are trade-offs with financial indicators, the company will actively consider share buybacks going forward and respond flexibly when opportunities arise.

Q: What was the split between Japanese and Western institutional investors that purchased the company's properties in 2025?

A: Last year, approximately 90% of buyers were Japanese institutional investors, and the remaining 10% were European and American (mostly US) institutional investors. Recently, demand from Japanese institutional investors has been very strong, and Japanese institutional investors have been dominant over overseas investors since around two years ago.

Q: Is the company also benefiting from tailwinds from inflation, like other major real estate companies, across the residence, hotel, and office markets?

A: It is unclear if this applies to all large companies, but for the company's assets focused on Tokyo: residence, hotel, and office rents are all rising strongly. Hotel room rates in the Tokyo area are also increasing, so the company is seeing significant impact from inflation and is enjoying clear tailwinds. This trend is expected to accelerate going forward.

Q: Do you have any plans to develop non-residential assets such as commercial facilities?

A: The company has collected demand for various asset types beyond residences from the 12 surveyed investors, and wants to meet as much of this demand as possible. The company's current main focus is residences, offices, and hotels. It has also received orders for logistics facilities, so it will actively pursue opportunities in this area going forward. It has also received orders for commercial tenant buildings, so it will actively pursue development opportunities for these assets as well, limited to central Tokyo and urban areas.

Q: How is the performance and outlook for the two new businesses of land planning and renovation? Which one has stronger profitability and growth potential?

A: Both new businesses are showing strong promising performance. In particular, the renovation business has large room for growth: in Tokyo, many buildings have not had rent increases in 30 years even as overall rents have risen sharply amid inflation, so the company is building a track record of reliably adding value to high-upside buildings in a short timeframe. It aims to build a structure that realizes profits with fast turnover and builds up AUM. For land planning, the company expects increasing land sales driven by inheritance over the next 10 years. While expanding scale by combining adjacent parcels to the company's original land takes some time, it greatly improves profitability, so the company plans to accelerate this business. Both new businesses have fast capital recovery and high profit margins, making them excellent contributors to the company's asset expansion, so the company will continue to promote them alongside the core development business.

Q: The initial guidance feels conservative. Can we expect an upward revision?

A: For the past 4 years, the company has set conservative plans and has always revised guidance upward. This year's plan is also very conservative, and business structural reform and asset expansion for GLM100 and GLM200 are progressing as planned. While the company cannot provide specific details on upward revision at this stage, stakeholders should understand this is the company's consistent approach to management and can expect an upward revision if performance allows.

Q: Can we expect that partnering with large companies in the SPC scheme will contribute to more stable growth for the company, and how will equity funding be approached?

A: The company plans to partner with a variety of companies and institutional investors going forward. It aims to build up a large scale of SPC for development and operation and accumulate significant AUM, which will require large amounts of equity capital from large institutional investors. Partnerships with such investors, including operating companies, are expected. The company will make appropriate disclosures once preparations are complete.

Q: Why should investors hold the company's stock long-term, with regard to long-term strategy, payout ratio, and business structural reform?

A: The company has set the long-term strategy GLM1000, which targets 25% annual profit growth, doubling profit every 3 years. The company has built clear strategies to achieve this goal and is advancing business expansion and structural reform. It is a consistently growing company that deserves long-term holding. In addition, while targeting 25% annual profit growth, the company maintains a 30% payout ratio and a progressive dividend policy, so dividend yield is expected to increase steadily year over year. This consistent policy makes the company a suitable long-term investment for investors that support its strategy.