SYLA Holdings Co.,Ltd. Q2 FY2026 earnings call

• Overall 2Q Results: 2Q sales of 10.73 billion yen, operating profit of 1.12 billion yen, beating expectations driven by the unplanned sale of the Roppongi income property and on-schedule property sale to BlackRock. Interim consolidated results: total sales 19.29 billion yen, gross profit 4.095 billion yen, EBITDA 1.998 billion yen, operating profit 1.799 billion yen, ordinary profit 1.263 billion yen, net income attributable to parent shareholders 6.15 billion yen. Progress against full-year forecast: 55.9% for sales, 74.6% for operating profit, 93.6% for ordinary profit.
• Balance Sheet: Total assets 62.921 billion yen, cash and deposits 10.621 billion yen, interest-bearing debt 36.651 billion yen, inventory assets 29.373 billion yen, net assets 18.614 billion yen. The apparent drop in equity ratio is due to post-merger new borrowing for Kumika, and the business is on track at cruising speed. The firm holds 3 years of selling, general and administrative expenses (SG&A) in cash, a competitive advantage for M&A and property acquisition. Key metrics: ROE 35.1% (irregular due to negative goodwill from business integration), ROIC 2.1% (targeting industry average 3.5%), ROA 10.4% (cruising target 3-5%), net D/E ratio 1.4x, DOE 2.8%, shareholder return ratio 94.9%.
• Development Strategy: Focused on the Nishi-Azabu area via a dominant strategy, currently negotiating acquisition of the 6th parcel (price gap of 30-40 million yen remaining). The firm focuses on assembling adjacent parcels to create larger contiguous land, with flexible development that accommodates holding for rental or sale to large developers, and creates unique value that large developers do not pursue.
• M&A and Venture Investment: Follows a "group strategy" modeled after SoftBank in real estate, with 3 portfolio companies already listed (one with sales over 30 billion yen), and 2 pre-IPO candidates currently. Continuously negotiates M&A with middle-market companies facing business succession challenges, with support from financial institutions.
• Profit Structure Goal: Continue growing bedrock (recurring) revenue from rental and management, with the long-term goal of covering all SG&A with this recurring revenue. This stability allowed the firm to implement its first base salary increase, increase defined contribution pension by up to 200%, add a 20% subsidy to the employee stock ownership plan, and extend the retirement age, all this term.
• Shareholder Return: Actively conducting share buybacks, as management believes the current share price is undervalued (the firm estimates 10 billion yen in latent net asset value from historical Kumika assets). Acquired shares can be used for future capital raising without dilution, M&A stock swaps, or executive stock compensation. Dividend policy follows a steady gradual increase approach, prioritizing long-term sustainable growth over large one-time payouts. Shareholder benefits are maintained and expanded, including digital gifts and Hirami-kun coins for the firm's real estate crowdfunding service.
• Long-term Growth Target: 1 trillion yen in total assets within 5 years, no fixed annual sales target to maintain flexibility and avoid forcing low-quality property acquisitions. Explicitly does not publish a mid-term management plan to avoid being bound by arbitrary sales targets. The firm aims for steady gradual growth, with occasional non-continuous growth from M&A, to deliver long-term returns.
• Core Competitiveness: Integrated end-to-end business model from land acquisition/rights adjustment, in-house design/construction, sales, management, and large-scale renovation — a model almost no other Japanese developer has. Focuses on small (10-15 tsubo) commercial and office buildings that large developers ignore, and has built out the real estate crowdfunding platform "Hirami-kun" as a future growth driver.

1. Comprehensive Real Estate Business: Sales progress to full-year forecast is 55.4%, with above-expectation profit progress. The segment completed high-price sales of a prime Roppongi building, and acquired prime central Tokyo properties (Machida, Nihonbashi Bakurocho, Ichigaya Yanagimachi, Higashi-oi) with an average project gross margin of 18%. 2. Real Estate Management Business (interim half-year): Revenue of 1.348 billion yen, segment profit of 470 million yen. Profit was temporarily compressed by acquisition-related costs (rent guarantee for 2 months, agent AD fees), but margin is expected to recover to cruising levels from Q3. Key KPIs: average rent increase rate of 5.65%, over 100 managed buildings as of January 15 2026, rental units expected to exceed 4,000 this term. Current annual recurring (ARR) bedrock revenue is 1.812 billion yen, on track to hit 1.9 billion yen this term and 2 billion yen next term. 3. Construction Business: Full-year budgeted completion revenue of 6.1 billion yen. Currently all work is on in-house projects, so no external revenue is recorded yet, but the segment delivers a 10+% profit margin by retaining the 10% margin that would otherwise go to external general contractors. 9 in-house properties are currently under construction, with capacity being expanded via hiring and partnerships with succession-challenged small contractors/general contractors. 4. Renewable Energy Business: Currently focused on solar power via the PPA (power purchase agreement) model, with the number of on-site and off-site projects steadily increasing. The firm has also entered the grid-scale storage battery business, with operations starting next term.

• Maintain original full-year guidance, with no upward revision despite strong early progress, due to the high uncertainty of the real estate market and the firm's inherently conservative forecasting approach.
• Bedrock recurring ARR is on track to hit 1.9 billion yen this term and 2 billion yen next term, in line with previous guidance.
• Grid-scale storage battery operations will start next term, as scheduled.
• 12 properties are already secured for completion next term and the term after, and land acquisition for 2029 projects is already underway, matching long-term pipeline plans.
• The 5-year target of 1 trillion yen in total assets remains on track, with current total assets already exceeding 620 billion yen.

• Deterioration of China-U.S. relations has almost no impact, as Chinese customers account for less than 1% of revenue.
• Uncertain geopolitical events such as the Venezuela situation could lead to higher crude oil prices, which may increase costs for plastic and FRP construction materials, but no material impact is expected at present.
• Inflation has a net positive impact: while it raises construction material and land costs, it also increases expected rental revenue for the 27 billion yen in fixed assets/inventory the firm holds, and improves margins for the in-house construction business the firm is scaling.
• Gradual interest rate increases have both positive and negative impacts: a 50bps increase would increase annual interest costs by approximately 400 million yen, equal to ~1% of total revenue, and the impact is spread out over time. Higher interest rates also allow for higher rent on new development projects. Even if rates rise further than expected, the firm holds long-term 30-35 year covenants-free loans for most fixed assets, and stress testing shows any impact is absorbable. Only a stagflation scenario would lead to material negative impacts, which is not expected currently.
• Inheritance tax reform has no material impact, as the firm never marketed its products based on inheritance tax benefits, avoiding the "cat and mouse" game of rule changes.
• Prime central Tokyo land acquisition is becoming more difficult due to higher land prices, construction material costs, and labor costs, but the firm is addressing this by focusing on limited areas and patient rights adjustment.
• The current share price is considered significantly undervalued by management, which is a key driver of ongoing share buyback programs.

Q: What is your outlook for the urban income property market and what is your strategy?

A: High-end luxury assets and large assets targeted at inheritance tax planning have seen a market correction after a period of unsustainable growth, but the market has not collapsed like the Lehman Shock period. Price corrections have actually made it easier for the firm to acquire suitable properties, and the small-to-mid sized building market the firm targets has returned to normal sustainable pricing after the bubble. The firm expects the market to remain solid going forward, especially if the LDP wins the upcoming general election and continues expansionary fiscal policy.

Q: What led to the transaction with BlackRock?

A: BlackRock highly evaluated the product quality of Seia's single-person compact apartments, specifically noting the firm's ability to grow rents after acquisition. They also awarded the firm the property management contract for these assets, which reflects high confidence in Seia's PM capabilities. Going forward, Seia will continue to work with BlackRock on transactions when opportunities arise, and will also sell to other institutional investors that offer attractive pricing.

Q: Will you enter the detached housing business?

A: The firm will not develop detached housing in its core operations, but it is possible that a future M&A could add a detached housing business to the group.

Q: What is the inquiry level for the properties completed in December?

A: There are already multiple inquiries for the three completed properties. Two properties have not yet finalized a buyer, as potential buyers arrange financing. The firm does not chase arbitrary sales targets, and is willing to hold unsold properties for its recurring revenue base if needed, so it will only transact at attractive terms. It is currently working towards completing sales this term.

Q: What level of share price satisfies management, and what is your approach to share price?

A: Management checks the share price daily but avoids being overly distracted by short-term movements. As a benchmark, the firm estimates there is roughly 10 billion yen in latent net asset value from legacy Kumika assets, so the minimum acceptable net asset value is 26-27 billion yen, and management works every day to reach this level. The firm focuses on building long-term value rather than chasing short-term share price spikes.

Q: The 2Q results are strong, what is your stance on share buybacks?

A: Thank you for the support. Management is still not satisfied with the current share price, so the firm will continue to conduct flexible share buybacks considering cash allocation. If the share price falls further, the firm will accelerate buybacks.

Q: Are there any concerns or major changes to expenses for the 3Q results?

A: There are no material concerns or expected changes to expense recognition at this time.

Q: Is prime location acquisition becoming more difficult?

A: Prime location acquisition is indeed more difficult due to higher land, material, and labor costs, but the firm is addressing this by focusing on a concentrated set of areas and advancing patient rights adjustment and internalization to deliver products at appropriate price points.

Q: Completion volume is the same for next term as 2028, does that mean you are prioritizing profit over growth?

A: The number of completed buildings is the same, but the number of units is actually higher. There are always variable elements from in-period land acquisition and sales, and the firm continues to actively pursue new project acquisition to grow the pipeline.

Q: How will special gains be used?

A: Special gains will be used for property acquisition and share buybacks.

Q: What is your branding strategy for the SYFORME brand?

A: The firm's core approach is to focus on high-growth urban areas and create value that the firm's own professionals would want to buy. Brand building takes time and investment, so the firm will steadily continue to deliver quality products over the medium and long term without rushing.

Q: Is the 24 yen EPS forecast from Shikiho in line with your expectations?

A: Excluding one-time special gains/losses, current EPS is ~20.8 yen, so 24 yen next year would represent ~15% growth, which aligns with the 15% CAGR needed to hit the 1 trillion yen total asset target by 2030. The firm will pursue steady growth without overextending.

Q: Can you explain the "Hirami-kun" shareholder benefit?

A: Hirami-kun is the firm's real estate crowdfunding service that allows investment starting from 10,000 yen per unit. It has the largest number of members in Japan, and as of January 15 2026, there have been zero delayed dividends or unpaid redemptions. It is a safe, easy-to-use service for mobile that provides maximum yields over 8% depending on the shareholding level.

Q: When will dividends return to 40 yen (pre-merger level)?

A: The firm recognizes that long-standing shareholders from the Kumika era expect this, and will steadily grow the business to return to the 40 yen dividend level.

Q: Who handles negotiations with institutional investors outside of BlackRock?

A: Rarely, CEO Sugimoto handles negotiations directly, but most are led by President Yuto and executive officer Oguchi.

Q: How has post-merger integration progressed, and what synergies have been realized?

A: The interim results are almost exactly in line with internal forecasts. Synergies realized to date include expanded in-house construction projects and expanded purchasing area into southern Saitama. Post-merger integration (PMI) is complete, with all departments integrated.

Q: What organizational changes came with the 2025 name change and tech-focused restructuring, and what impact has that had?

A: All legacy paper-based accounting at Kumika was digitized, Salesforce was introduced for the sales division, AI tools were introduced for the development division to improve productivity, and all departments have been integrated, with PMI completed.

Q: What is the current status of the platform to achieve democratization of real estate investment?

A: Currently the business is limited to income property sales and the Hirami-kun crowdfunding service. The firm will continue to steadily grow the service, as many other crowdfunding providers have had issues that have made investors nervous, and the firm prioritizes safety. In the future, the firm plans to work on improving investment literacy in Japan.

Q: How do you plan to integrate DX and sustainability across your four business areas (development, management, tech, energy)?

A: The firm has already developed concept properties such as IoT homes and ZEH homes, and has been an early adopter of DX to improve productivity. Integration of the four areas will not happen quickly, so the firm will steadily implement initiatives piece by piece, expanding where it makes sense and contracting where needed, over the long term.

Q: Why do you think the share price has not reflected the strong earnings and shareholder return?

A: Two main reasons: business integration was completed recently, so many shareholders want to see a full-year result before committing, and the stock is still in the grace period following the merger that caused loss of substantive continuity, which weighs on the stock price. The firm will work to provide clearer disclosure on the path to lifting the grace period designation to reassure shareholders.

Q: What did you think about the share price drop after the 1Q results?

A: The market expected a more upbeat result given the strong real estate market, so the muted reaction was expected. The firm continues to believe the current share price is far too cheap, and will continue share buybacks and other measures to support the share price, while focusing on long-term value creation rather than short-term price movements.

Q: The broad market was up 20% in 2025, but the share price has not seen much organic gain outside of the rally from shareholder benefits. What is your take?

A: The stock has performed in line with peer real estate companies. The firm continues to believe the current share price is undervalued, and will continue share buybacks and other share price support measures, while focusing on long-term value creation.

Q: Will you expand shareholder return (dividends/benefits)?

A: The firm will consider expansion in line with growth and maintain it within a sustainable range.

Q: There are poor reviews from tenants on Google Business Profile, is there any legal risk?

A: The firm recognizes this as an issue, and is conducting internal training to improve service quality. Improvements will take time, so the firm will steadily work to raise review scores over the long term.

Q: Why didn't you upgrade full-year guidance even though operating profit is already 74.5% done in the first half?

A: The real estate market has high uncertainty, so the firm takes a cautious approach to guidance setting. Project completion does not align perfectly quarter to quarter, so there can be natural imbalances. The firm prioritizes long-term enterprise value growth over short-term earnings guidance changes.