5532.T

Core Financial Performance

• Operating profit reached 71% of the full-year plan at the end of the 2nd quarter, putting the company solidly on track to meet full-year targets, with all plan metrics currently outperforming projections.
• Stock-type revenue is growing steadily, driven by strong leasing progress for properties opened in the 1st quarter; stock gross profit has consistently exceeded plan. There was no cost of goods sold in the 2nd quarter following the completion of a property sale in the 1st quarter.
• Fixed assets on the balance sheet grew steadily due to consistent property acquisition activity.

Portfolio Transformation

• The company acquired 3 new properties in the 2nd quarter, bringing the half-year total to 6 acquisitions; 3 properties have been added to the portfolio since the start of the fiscal year, progress continues on shifting the portfolio toward a holding/master lease-focused model.
• The original annual target was 8 property acquisitions, which has been raised to 12 as the company pursues more aggressive growth.

Joint Venture with Hulic

• In February 2026, RealGate and Hulic established the joint venture HistoRy with a total committed investment of 100 billion yen. As of the end of the 2nd quarter, the JV has already acquired 2 well-located medium-to-large size properties.
• The JV combines property management (PM) and holding revenue streams to create multiple cash flow points, with profits distributed proportional to each party's ownership stake. The JV will continue to focus on acquiring older medium-to-large buildings in prime central Tokyo locations.

Mid-Term Strategic Goal

• The company is targeting 5 billion yen in operating profit for the mid-term plan, and current first half progress is very strong. Management aims to achieve the 5 billion yen target earlier than the original planned timeline, targeting over 30% annual growth in the 19th and 20th fiscal periods following full achievement of the 18th period's profit target.

• As of 2nd quarter end, revenue was 54% of full-year plan and operating profit was 71% of full-year plan; 3rd quarter end is projected to reach 73% revenue progress and 80% operating profit progress toward the full-year target, with the full-year plan of 1.47 billion yen in operating profit on track to be met.
• If the second half continues to outperform plan, any excess profit will be allocated to advance investment for property acquisitions, consistent with the prior year approach.
• The annual property acquisition target has been raised from the original 8 properties to 12 properties, maintaining an aggressive growth strategy.
• Management expects to advance the mid-term 5 billion yen operating profit target, driven by planned 30%+ annual growth in profit over the next two fiscal years.

The transcript does not provide separate segmented financial results with absolute figures and revenue contribution percentages for individual product segments of RealGate. Only consolidated results are reported: for the first half (ended 2nd quarter), revenue reached 54% of the full-year plan, and operating profit reached 71% of the full-year plan of 1.47 billion yen. Operating profit for the 2nd quarter increased 261 million yen year-over-year, and stock gross profit exceeded plan targets. As of the end of 2nd quarter, the company holds 14 properties with a total floor area of 14,700 square meters, estimated annual rent of 1.34 billion yen, and a total portfolio value exceeding 26 billion yen (calculated at a 5% cap rate).

• The ongoing Middle East conflict and associated impacts on naphtha supply have only a limited impact on RealGate's business, as the company focuses primarily on renovating older office buildings, so no material operational or cost disruption is expected.
• No other specific material operational risks or failures were discussed in the available transcript content.

Q: What is the progress and expected completion timeline for the 100 billion yen total investment committed to the JV with Hulic?

A: The JV was established just two months prior to the earnings call, and has already successfully acquired two medium-to-large prime-location properties, which is ahead of initial expectations. Management will continue to source and acquire attractive properties at a steady pace to deploy the committed capital, with no fixed rushed target for full deployment to maintain acquisition discipline.

Q: Why has the proportion of stock-type (recurring) revenue decreased temporarily, and what is the long-term portfolio direction?

A: The temporary drop reflects the planned sale of a property in the 1st quarter, and the shift to a higher proportion of stock-type revenue and holding assets remains the core long-term strategy. Acquisitions in the current period are already growing the holding portfolio, and the proportion of recurring revenue will increase steadily as new acquisitions are integrated.

Q: What impact will rising interest rates have on RealGate's business, and how is the company adjusting its strategy?

A: Rising interest rates have a limited impact on the company so far, as the company focuses on acquiring high-quality prime-location properties that can deliver stable rental yields that offset higher borrowing costs. The JV structure with Hulic also allows the company to share capital costs and expand acquisition capacity without taking on excessive balance sheet leverage. The company will maintain its disciplined underwriting approach for all new acquisitions to account for higher interest rate environments.

Q: Is the company considering an upward revision to its full-year earnings guidance given the strong 71% operating profit progress at the half-year point?

A: Management noted that progress is currently ahead of plan, but will maintain the current full-year guidance for now to account for uncertainty in the second half delivery schedule. If full-year results end up above plan, the excess will be allocated to accelerating property acquisition investment to drive faster long-term growth rather than being retained as incremental profit for the current fiscal year.