SYLA Holdings Co.,Ltd. Q1 FY2025 earnings call

• Completed Business Integration • Successfully completed the management integration with Kumika (Seira Technologies) in June 2025, after Kumika faced operational disruption following an incident by its founder that halted all financial institution transactions. The integration is mutually complementary: Seira focuses on single-occupancy/investment condominiums in Tokyo 23 wards, Yokohama, and Kawasaki, while Kumika focuses on family condominiums centered in Saitama Prefecture. PMI is progressing smoothly, and all financial institution transactions have been restarted. • The integration resulted in negative goodwill, driving a large jump in net income.

• Operational Highlights • Total consolidated revenue reached 8.553 billion yen, a 15.5x (1451.2%) increase year-over-year. The company turned profitable across all profit lines from the previous year's deficit: operating income was 677 million yen, ordinary income was 452 million yen, and parent-attributable quarterly net income was 5.689 billion yen. Key balance sheet metrics are healthy: cash and deposits reached 10.443 billion yen (31.2% increase from end of previous period), total assets reached 62.833 billion yen (275.2% increase), net equity reached 18.125 billion yen (63.8% increase), equity ratio is 27.4%, and net debt-to-equity ratio is 1.5x, all in healthy ranges. • In the Nishi-Azabu area of Tokyo, the company is executing a dominant strategy of acquiring small under-valued old buildings, renovating them to add value, and conducting right adjustment for adjacent land for future redevelopment — this is a guerrilla-style approach to projects large developers avoid. Currently, the company holds 6 buildings in the area, with value-add renovations driving rent and yield improvements. • The company pursues full vertical integration of all business stages, from land right adjustment, development, construction, sales, management, and large-scale repairs. This end-to-end internalization eliminates third-party margin costs, improving overall profitability and is a core competitive advantage.

• Growth Strategy • The company has a 5-year target to reach 1 trillion yen in total assets, with a target of ~400 billion yen of that being long-term self-held assets. It intentionally does not set rigid medium-term sales or market capitalization targets, to avoid forcing acquisition of low-margin projects just to hit arbitrary goals. • M&A is a core pillar of growth strategy. The company only targets acquisitions trading below P/B 1x, focusing on revitalizing undervalued companies or distressed companies with solid underlying assets that can be turned around with new capital, following a real estate-focused value investment approach modeled after Berkshire Hathaway. Over the past 2.5 years, 4 companies have joined the group, and the successful Kumika integration has built a foundation for future transactions. • The company aims to grow its base of stable 'bedrock revenue' from rent and management fees, which now covers over 50% of selling, general and administrative expenses. This structure builds resilience against market downturns.

1. Comprehensive Real Estate Business: Segment revenue was 7.465 billion yen, with a full-year progress rate of 24.6%, and segment profit reached 1.229 billion yen. Revenue contribution is ~87.3% of total company revenue. The segment saw smooth sales of new condominiums and income-producing buildings, with steady property acquisition.
2. Real Estate Management Business: Segment revenue was 666 million yen, with a full-year progress rate of 24.7%. Revenue contribution is ~7.8% of total company revenue. Higher temporary costs were recorded from brokerage and interior work related to two newly acquired buildings, with stronger profit contribution expected in the second half of the fiscal year.
3. Construction Business: Full-year progress rate reached 45%, significantly beating plan. This segment was a core priority of post-integration post-merger integration (PMI), with 9 construction projects currently handled in-house, and the company aims to eventually cover all self-developed projects internally and take on third-party projects.
4. Renewable Energy Business: Segment revenue was 334 million yen, with a full-year progress rate of 24.5%, in line with plan. The business was acquired via business transfer, with further internalization of solar panel installation planned.

• Parent-attributable full-year net income guidance was upwardly revised to 6.513 billion yen, driven by negative goodwill generated from the Kumika integration after Kumika's market capitalization fell well below its net asset value prior to the deal. This upward revision reflects the positive outcome of the integration after absorbing prior incremental losses from step-by-step share acquisition.
  • The company maintained its existing 12 yen per share full-year dividend (combining interim and final dividends), and implemented an incremental share repurchase program with an upper limit of 150 million yen / 500 thousand shares, bringing maximum total shareholder return payout to 74.5% of full-year net income. The company will continue to evaluate future share repurchases based on market conditions. The company also implemented new shareholder benefits including digital gift and

• The company faces integration risk from combining Kumika, which had an older average employee age (over 50) with Seira's younger workforce (mid-30s average), though integration progress to date has been better than expected.
  • The broader Japanese real estate market faces potential downside from interest rate hikes, though the company expects any rate increase will be limited to ~25 basis points, keeping market conditions stable.
  • The crowded real estate crowdfunding sector faces reputational risk from recent high-profile scandals involving unethical practices targeting unsophisticated investors chasing excessively high yields.
  • Pursuing growth via M&A carries execution and integration risk, though the company mitigates this by only transacting on deals below book value and maintaining a strong balance sheet with ample cash.

Q: How does Seira differentiate itself from competing real estate developers? / A: Seira is a unique player that holds a significant portion of the developed properties it creates (around 300 residential units already) alongside selling to third parties, and operates multiple adjacent lines of business including construction, renovation, crowdfunding, and renewable energy that all grew organically from existing operations. The company focuses on 5-10 ping small offices, a niche ignored by large developers, and its existing portfolio of these properties has a 100% occupancy rate matching demand from Japanese SMEs. Management prioritizes building a business that can grow sustainably over 30-100 years, rather than chasing aggressive short-term sales growth that exposes the firm to downside when market conditions shift, so it does not prioritize benchmarking against existing peers.

Q: Can you update on your real estate crowdfunding business (Rimari-kun) amid recent sector scandals? / A: Seira's crowdfunding platform has the largest member count in Japan, with approximately 6.1-6.2 billion yen in AUM. The company helped develop industry self-regulatory guidelines through the Real Estate Crowdfunding Association, establishing rules for transparent disclosure of yield, capital, and project details. Seira positions its platform as a safe, reliable option focused on moderate (3-4%) sustainable yields rather than the excessive double-digit yields that have led to problems at other platforms. It uses crowdfunding as a third funding source for development alongside bank lending and equity, and may spin the business out and pursue an IPO in the future.

Q: How has integration of Kumika progressed, particularly regarding cultural integration of the two workforces? / A: PMI has progressed much faster than expected, and the new combined organization is already fully formed. Almost no Kumika employees have left the company; most have relocated to Seira's main office, with construction staff remaining in Saitama for operational convenience, and all staff are working productively. Management initially told shareholders it would take 2 years to complete integration and deliver results, but it is now on track to complete the process in 1 year, earlier than planned.

Q: Why does management seem less excited than expected despite the strong quarterly results and upward revision? / A: The results are in line with internal expectations, and management still has higher internal targets, so it is not satisfied yet. The company just completed integration and asked shareholders for 2 years to build a solid foundation, so management wants to maintain pressure on the team to deliver further results rather than celebrate early progress. Management is optimistic about future growth but views the current results as an expected first step, not a final outcome.