Message to Shareholders

The Tokyo Tatemono Group advantage: The personal strengths of each employee

The Group has a long-term vision for 2030 of becoming a next-generation developer. We aim to achieve an overarching balance between solving social issues and growing as a company. I believe that the key to realizing this long-term vision is the personal strength of each employee—the inner motivation to achieve ambitious targets.

I hold to the view that this personal strength is what gives our company its strength. I would like to share an anecdote with you to illustrate this point. One time back when I was the general manager of a business division, I was in the process of tenant leasing for a large newly constructed property. A potential main tenant came to view the property. The viewing of another property had run over time, which meant that we had to make this proposal at night. That made it difficult for us to convey certain selling points of the property like the surrounding environment and the view. I myself saw little chance of us being able to advance the discussion. But our key person for the project, who was in her twenties at the time, made an enthusiastic presentation to the customer in the form of story told with handmade pictures. It illustrated how well the property matched the concept of the working style the client was aiming for. Our client counterparts sat up in their seats as they watched this presentation, which was backed by in-depth research conducted in advance about the client’s corporate culture and way of thinking. A situation that had looked hopeless was turned around completely, and as a result, the client moved into our office building. That episode that still stands out to me as something that exemplifies our corporate culture. The fundamental premise for our business as a developer is that we deliver quality in our physical output. But we also want to be a company that goes further, embracing the challenge of difficult projects and competing on the basis of personal strength.

Our long-term vision includes the statement, "We aim to be a good company for all stakeholders." I believe that our employees are the starting point for all our stakeholders. When employees use their individual strengths and teamwork, that enables us to provide value to all stakeholders. We will work to improve the Tokyo Tatemono community by proactively addressing the internal communication issues that emerged during the COVID-19 pandemic. I strongly believe that doing so will nurture the personal strength that gives us our advantage, strengthening our competitiveness.

A developer that creates not only real estate, but also a sense of place

Another important point in realizing our long-term vision "Becoming a Next-Generation Developer" is the concept of creating a sense of place. Throughout its more than 125-year history, the Group has cultivated this concept, which includes not only the physical aspect of developing real estate, but also the intangible elements such as providing services.

We have positioned the Yaesu-Nihonbashi-Kyobashi area of central Tokyo as a priority area. We are pursuing various initiatives alongside promoting large-scale redevelopment projects such as the Yaesu Project and Gofukubashi Project. This area has many redevelopment projects planned over the next 10 years, including those by other companies, which will bring about a major renewal at a functional level. It also has a history of growth as a traditional merchant district and is lined with long-established stores that have been in the area for generations. This gives the area a distinctive atmosphere that cannot be found elsewhere. We value the history of the city as well as our relationships with the people who live and work there. We are involved in a wide range of area management activities, including participation in the Sanno Festival, which has been held since the Edo period, the organization of other events, and disaster prevention activities. In addition, an ecosystem that can autonomously produce innovation is vital for a city to have new vibrancy and to achieve sustainable development. Our materiality also includes value co-creation and innovation. We actively promote interactions between existing industries and startups in the area as we work to support their growth.

The word "develop" has two layers of meaning to it. In the hard sense, it means developing land and buildings. In the soft sense, it means promoting growth and advancement. Our long-term vision, "Becoming a Next-Generation Developer," incorporates our desire to work as a Group to provide place value and customer experience value, rather than simply building buildings. We aim to enhance the attractiveness of our communities and portfolio value from a long-term, multifaceted perspective.

Anticipating the needs of customers and society in a time of uncertainty

In FY2021, the second year of the medium-term business plan, some of the Group’s businesses, including the Parking business and Resort business, continued to be affected by the impact of the COVID-19 pandemic. However, we achieved solid performance in our mainstay Commercial Properties Business and Residential Business. In our overseas businesses, we suspended operations at some projects in Indonesia due to the spread of coronavirus and other factors. In Myanmar, we recorded equity in losses of entities accounted for using the equity method as a result of the total suspension of operations following the declaration of a state of emergency. Ultimately, however, operating revenue reached a record high for the fifth consecutive fiscal year, and profit attributable to owners of the parent increased for the sixth consecutive fiscal year. In this way, we were able demonstrate that even in a difficult business environment our company maintains its financial strength.

The environment for acquiring new projects is harsh, however, and securing projects consistently remains difficult. Although we have secured a sufficient stock of projects that will contribute for the duration of the medium-term business plan, we still face the task of securing projects that will contribute to growth over the next 10 to 20 years. If we purchase a site at a high price, the success or failure of that project is to some extent already determined, regardless of how hard we work after acquisition. Our policy therefore is to avoid price competition such as through bidding, instead maintaining strict discipline as we select targets for investment. We will continue to work more aggressively on redevelopment and reconstruction projects as well as projects that require expertise in areas such as rights adjustment and consensus building. In this way, we will secure projects that can be expected to be highly profitable.

Regarding the outlook for the market environment for offices, in last year’s Integrated Report, I stated that face-to-face meetings between people would remain important. That was my response to the argument that offices have been rendered unnecessary. Many companies are as yet unable to decide fully on their future work styles and office strategies. But we have heard that many of our tenants are in fact planning to return their office attendance arrangements to a condition similar to that before the pandemic, once COVID-19 is under control. On the other hand, the COVID-19 pandemic has also led to widespread recognition of the importance of work flexibility. We believe that it is essential to properly serve the changing needs of the times. We can do this by offering options such as satellite offices and shared offices that support efficient and diverse work styles, in addition to a central office that encourages team building.

As for the Residential Business, the increasing proportion of dual-income households has combined with low interest rates to provide a tailwind for increased purchasing power. Sales progress is steady and sales prices are at a very high level. Our reputation has grown precisely because we are able to provide high-quality products that meet the needs of our customers. At the same time, I feel that prices are approaching their upper limits. In preparation for the risk of changes in the external environment in the future, we will continue to make selective investments with a discerning eye, while also promoting the planning of highvalue-added products.

Environmental and human rights awareness—essential to sustainable growth

Last year, the Group moved to clarify its stance as a business on addressing the urgent social issue of climate change. This involved setting mediumand long-term goals and KPIs, including for the reduction of greenhouse gas emissions, obtaining SBT (Science Based Targets) certification, and participating in various initiatives. Specifically, we are promoting initiatives such as power generation and self-consignment using solar panels in the T-LOGI series of logistics properties, development of ZEB and ZEH, and development of condominiums using the wooden CLT (Cross Laminated Timber) panel construction method. Disasters and abnormal weather events have occurred with increasing frequency, conveying the immediacy of the climate crisis. With a sense of urgency being felt around the world, it is only natural that we too should do our utmost to respond to this crisis. The idea that we could continue business as usual when the very survival of the planet is at stake is nonsense.

I must confess that when discussions of environmental targets first began, I sometimes wondered what a single company could do, and whether such targets were even feasible. But through discussions with board members and employees, I came to see the value of setting deliberately ambitious goals and then continuing to work hard on tackling the challenges to achieve them. Although the power of each individual is small, if we all work hard in the same direction, I believe that we can change the world. Sales of ZEH condominiums are in fact progressing extremely well. We see this as a good example of how our efforts match the trend of the market. In addition, in the Parking Business, we are also promoting advanced initiatives, such as our ZEP (Net Zero Energy Parking) project. For this, we are conducting a demonstration test of a parking lot fitted with solar road surface power generation panels designed to reduce the annual primary energy consumption balance to zero. By accelerating these efforts, we will make progress toward achieving our environmental goals.

In addition, on the social front, we have formulated a human rights policy and sustainable procurement standards. We must address risks related to human rights and political situations, including overseas. We must never take the attitude that if we are making a profit that is good enough. A company that operates globally cannot afford to be unaffected by human rights issues around the world. I believe that it is the responsibility of a modern company always to be aware of this while developing its business. In terms of human resources, we will further promote KPIs and targets such as skills development and the promotion of health management. These are essential for cultivating employees who have the kind of inner motivation to work that I referred to earlier.

Enhancing the effectiveness of governance by building a system that goes beyond procedural formalities

The Group’s board of directors engages in very candid and active discussions. Its members, including those from outside the Company, expresses frank opinions on business initiatives regardless of their areas of expertise or their positions. This is true not only of board of directors meetings, but also of other discussions such as those at management meetings, where employees express their candid opinions to the directors. I would like to see this trend continue throughout the company.

In this context, I believe that the qualities required of a CEO are not so much expertise or skills per se, but rather a sense of humanity and of balance based on an accurate view of the Company as a whole. A CEO also needs to be able to make appropriate decisions regarding individual investments and other matters.

I focus on having a balanced sense of judgment while appropriately updating my knowledge in various fields, instead of being constrained by my experience or preconceptions. In this sense, I believe that the most appropriate way to select a successor will be to cultivate someone within the company who has a deep understanding of our corporate culture as well as excellent human qualities. That individual can then be selected provided they are acceptable to all members of organizational bodies such as the Nomination and Remuneration Advisory Committee.

Continuing to provide value to society requires an earning mindset

I sometimes tell our employees that for us to continue to provide value to society, we must be a company that has an earning mindset and continues to grow profitably. We must be able to respond to the demands of the times and social issues. We must earn the trust of our customers and encourage them to reach out to us. We must create a cycle in which such customer expectations are firmly translated into profits. Without that kind of mindset, the business of our Group cannot succeed. Although we maintain balance as a so-called zebra company that values sustainability, at the same time we must not forget our appetite for profitable growth, which is like the horn of a unicorn. This mindset is becoming firmly established throughout our organization. I believe that is one reason why the Group’s business has remained strong in the COVID-19 pandemic and why we are making steady progress toward the goals of our medium-term business plan. We will continue our efforts so that we can earn recognition from our stakeholders as a corporate group that will continue to show steady growth while at the same time being of service to the world. I would like to ask all of you for your continued understanding and support of our Group.

July 2022
President and Chief Executive Office

Hitoshi Nomura