In fiscal year 2008, the Japanese economy felt the effects of the global economic slowdown brought about by the U.S. subprime loan crisis and jump in the prices of crude oil and raw materials, and the economic retreat became clear. The second half of the year was extremely challenging, with the collapse of major U.S. financial institutions leading to chaos in the global financial markets and pronounced effects on the real economies of many nations, and prompting reduced corporate earnings and a sharp slowdown in capital investment and production in Japan.
The real estate industry, while seeing increased vacancy rates in the office leasing market, has remained strong, led by city centers. A stronger aversion to buying among customers and a challenging business environment have persisted in the residential housing market, caused by increased retail prices due to the jump in construction fees and decreased consumer appetite caused by the economic retreat. The real estate securitization market has contracted rapidly in response to the chaos in the global financial markets and resulting sharp decrease in business. Real estate companies including listed companies continue to fail, and the business environment of the industry which up until this point had remained strong has now come to a large turning point.
Amid this type of business environment, while the Group has focused on building a stable management foundation for enhanced future profitability centered on its office building and other leasing businesses, and condominium, detached houses and other real estate sales businesses while actively pursuing its urban development projects, its results have been affected greatly by the dramatic change in the business environment.
As a result, results for the current consolidated accounting year were as follows: revenue from operations totaled ¥199,811 million (falling 6.3% from ¥213,218 million previous year); operating income totaled ¥27,710 million (falling 39.0% from ¥45,423 million the previous year); and recurring income totaled ¥20,500 million (falling 48.1% from ¥39,487 million the previous year). Furthermore, decreased earnings from condominium businesses utilising SPCs (special purpose companies) and the drop in the equity market led to the capitalization of ¥7,043 million in extraordinary losses in security write-downs, resulting in net income of ¥10,101 million for the year (falling 53.5% from ¥21,744 million the previous year).

In “Leasing,” the Company focuses on services towards tenants “providing a safe and comfortable space” and has been trying to improve occupancy rates and profitability.
In “Buildings,” in addition to maintaining high occupancy rates for buildings owned by the Company, the full-year occupancy of “Kasumigaseki Common Gate” (Chiyoda-ku, Tokyo), new occupancy of urban-style leased condominiums such as “Apartments Sangenjaya” (Setagaya-ku, Tokyo), occupancy of leased properties acquired in Shanghai, and the new occupancy of the suburban shopping mall “SMARK” (Isesaki, Gunma) have led to a 14.6% increase in revenue from the previous year.
Dividend income from SPCs from the sale of “Kokusai Sannoh Building” (Chiyoda-ku, Tokyo) and “Uchikanda 282 Building” (Chiyoda-ku, Tokyo) were capitalized as “Management services.”
As a result, revenue from operations in Leasing for the consolidated accounting year totaled ¥58,595 million (rising 9.5% from ¥53,513 million the previous year), but with increased costs from “SMARK” and other start-up-related expenses, operating income totaled ¥26,176 million (falling 5.7% from ¥27,772 million the previous year).

In Real Estate Sales, the Company has been strengthening its acquisition of selected land plots and its customer-oriented product planning and has also focused on quality control, after-sale services, and administration to establish Brillia’s brand identity as providing “sophisticated residences” and “safety and security.”
In condominium sales, “Brillia Tower KAWASAKI” (Kawasaki), “THE KOSUGI TOWER” (Kawasaki), “Brillia Shinagawa Nakanobu” (Shinagawa-ku, Tokyo) and “Brillia Rokko Island Branze Livio” (Kobe) were capitalized as sales, and in “detached houses,” “Brillia Terrace Mitaka No Mori” was capitalized. In the consolidated accounting year, the average sale price fell due to the high proportion of urban and suburban properties making up condominium subdivisions, and with prolonged sales periods due to the decline in the market, the total number of units sold and dollar amount of sales fell compared to the previous year, and with sales and fixed fees unable to cover the difference, this resulted in a drop in the profit ratio.
As a result, in Real Estate Sales for the current consolidated fiscal year, revenue from operations totaled ¥92,657 million (falling 12.2% from ¥105,556 million the previous year) and operating income totaled ¥1,262 million (falling 86.8% from ¥9,562 million the previous year).

The Company, using its abundant know-how, has developed the following businesses: brokerage, appraisal, consulting, resort/leisure/hotel, renovation, restaurants, retail of packaged media, and spas.
In “Resort/leisure/hotel,” while the Company has seen increased revenue from the full-year occupancy of “Kawaguchiko Country Club” (Fuji-Kawaguchi, Yamanashi) and the new acquisitions of “Tojo Golf Club” (Kato, Hyogo) and “River Fuji Country Club” (Fuji, Shizuoka), brokerage fees have declined in “Brokerage” due to stagnation in the real estate market, and SPC-related revenue has fallen largely in “Other.”
As a result, in Other for the consolidated accounting year, revenue from operations totaled ¥48,558 million (falling 10.3% from ¥54,148 million the previous year) and operating income totaled ¥8,081 million (falling 51.5% from ¥16,673 million the previous year).

Concern exists over a further retreat of the Japanese economy due to declining corporate earnings and consumer spending, with challenging conditions expected to persist.
The real estate industry is expected to remain weak, with a reduction in office needs expected in the office leasing market due to the decline in corporate business results. A challenging business environment is also expected to continue in the residential real estate sales market, with lack of buying expected to continue and sales inventory levels remaining high.
Given these circumstances, the Group decided to revise its previous business plan ending this year in response to changes in the external environments and establish a new Group medium-term business plan starting from this year (2009–2014). In the current plan, entitled, “The Challenge of a Turbulent Age and the Leap to a New Stage,” the Group will seek to enhance profitability and financial strength and come together as a one to progress to a new leap. The Group also plans to connect the new plan to the “Trust” and “Future” it has built over the past 110 years.

Revenues are expected to increase in the leasing segment due to the full-year occupancy of “SMARK,” the completion of construction on the “type-1 urban redevelopment project in Otemachi 1-chome” and increased occupancy of urban-style leased condominiums.
In the real estate sales segment, while construction is scheduled to be completed on the “Brillia Mare ARIAKE TOWER&GARDEN” (Koto-ku, Tokyo), “THE TOYOSU TOWER” (Koto-ku, Tokyo) and “Brillia Tower NAGOYA GRAND-SUITE” (Nagoya), profit ratios are expected to decrease given the challenging business environment expected to continue in the real estate sales market, and while revenues are expected to increase, earnings for the consolidated fiscal year are expected to remain unchanged.
In other business segments, while increased earnings are expected in “Resort/leisure/hotel” from the full-year occupancy of the golf course acquired in the consolidated fiscal year, reduced revenue and income is expected due to reduced revenue in “Brokerage” due to stagnant real estate sales.
As a result, revenue from operations is expected to total ¥270,000 million (+35.1% vs. the current period); operating income ¥30,000 million (+8.3% vs. the current period); recurring income ¥20,000 million (-2.4% vs. the current period), and while income for the consolidated fiscal year is expected to remain unchanged, with ¥9,000 million in extraordinary losses included due to the application of “Accounting standard for measurement of inventories,” net income for the next period is expected to total ¥8,000 million (-20.8% vs. the current period).

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