Message to Shareholders

"Trust beyond the era." Our corporate philosophy is grounded in trust extending over a century.

Tokyo Tatemono was established in 1896 by Zenjiro Yasuda, founder of the Yasuda conglomerate, and is Japan’s oldest comprehensive real estate company. Eiichi Shibusawa, the father of modern Japanese capitalism, was also deeply involved in our establishment. He helped start about 500 companies in his lifetime, of which 186 are said to still be in business. Tokyo Tatemono is one of them. Capital markets today are trending away from shareholder capitalism. One illustration of this is that the topic of the World Economic Forum annual meeting in Davos in January 2020 was "stakeholder capitalism." In that sense, we can say that what many entrepreneurs like Yasuda and Shibusawa aspired to, and what has continued down the years through the Japanese spirit of valuing both the public good and economic potential, already incorporated the notion of sustainability. This ethos is especially deeply engrained in Tokyo Tatemono. Our Group has always put emphasis on quality rather than the sheer pursuit of revenue and asset building. Our top priority when we do business is to earn the trust of our stakeholders. This has borne fruit in a variety of ways. After World War II, nearly all of Tokyo Tatemono’s overseas assets were seized, and the company was compelled to dramatically scale down its assets. But I believe this focus on earning trust is precisely why we were able to go on and establish our position as one of Japan’s foremost property developers. Without question, trust will be the lifeline for our sustainable growth going forward, and I believe the source of that trust lies in the way each of our people engages with our customers. Tokyo Tatemono, I feel, is blessed with many winsome employees who are well received by people. Customers often contact us requesting to work with a certain employee. As employees build a reputation for trustworthiness, this opens the door to new business opportunities. Any project, no matter how large, starts with gathering information, but in many cases, it is customers who come to us with information first, and we end up winning the project.

In a world that is changing rapidly and will continue to change, no matter how far property technology and other IT may progress, I’m convinced that we must never lose sight of our corporate philosophy, which is the DNA of the Group, and what will sustain us as long as business is something that human beings create together.

Companies that shirk challenges will never achieve their vision.

Guided by our long-term vision of "Becoming a Next-Generation Developer," we will continue to take on challenges as we look ahead to 2030. We purposefully used the word "next-generation"—this reflects our resolve that, as issues emerge in our quest to realize a sustainable society, the role our Group plays should change significantly. Our ideal of a next-generation developer is an organization that can achieve a high-level balance between providing solutions to social issues and pursuing growth as a business. To become such an organization, in our development projects we have to pursue transformative ideas both in terms of properties and buildings and in terms of thinking and innovation, to create places that allow people to thrive, where they work, live, and relax. Building the value of such places is how we can create the value of experience and contribute to people’s flourishing. This is the greatest value Tokyo Tatemono can bring to society, and the reason for the Group’s existence.

The force driving us to realize this vision is the ethos that has animated Tokyo Tatemono from the beginning: an enterprising spirit unafraid of failure as we boldly embrace challenges. A strong determination to break new ground runs through the heart of our corporate culture. Looking back, we see many instances of this—we were first in the industry to develop real estate securitized products under the Special Purpose Company Act (now the Act on Securitization of Assets), first to build a complex that integrates local government offices with residential space (Brillia Tower Ikebukuro), first to build a net zero-energy (ZEH) high-rise condominium (Brillia Tsurumaki). The list goes on.

Of course, if you keep taking on challenges like this, you will inevitably fail at times. I appreciate the words of the famous swordsman-philosopher Miyamoto Musashi: "Do not regret what you have done."

In times like these when no one can tell what lies ahead and even what tomorrow may bring is uncertain, anyone who is trying to decide whether or not to take some course of action will naturally be afraid to fail, and many will find it hard even to take the first step. Breaking down the psychology of not wanting to fail, it is not so much that people can’t stand the thought of failing itself, but rather they can’t stand the thought of themselves regretting having failed. In other words, if I’m confident that I can live with my mistakes, I won’t shy away from taking on a challenge. To fail after making a rational judgment and taking action is simply to have the chance to reflect on what happened and bring that insight to bear on the next action. As a manager, my personal philosophy is guided by the essence of Musashi’s words, which inspire me to do what needs to be done day by day. It is in this spirit that I hope to foster a corporate culture where people are prepared to give their best in dealing with any situation, no matter how hard, to make our vision a reality.

Creating shared values with society

After much discussion among management, centered on the Sustainability Committee formed in 2020, the Tokyo Tatemono Group identified new material issues in June 2021. I take materiality to be issues that are crucial to our long-term vision of achieving a balance between providing solutions to social issues and pursuing growth as a business—which is precisely the concept of sustainability management. We looked at materiality from the perspective of both creating social value and the infrastructure needed to create such value. We identified 14 material issues, including strengthening Tokyo’s competitiveness as an international city, value co-creation and innovation, promoting a decarbonized society, and diversity and inclusion. Going forward, we will ensure a common understanding of these issues among all Group employees as we pursue specific business initiatives. For instance, one initiative related to strengthening Tokyo’s competitiveness as an international city and to value co-creation and innovation involves building an "innovation ecosystem" in the area around Tokyo Station, where our company was founded. By bringing together and fostering exchanges among various players, such as major corporations, venture startups, investors, and research institutes, our redevelopment project in the Yaesu, Nihonbashi, and Kyobashi areas around the station will engender a virtuous cycle of developing new fields and driving economic growth. We expect this organic collaboration to bring new energy and excitement to the area.

In terms of promoting a decarbonized society, calls for companies to turn their attention to the environment are growing more urgent. In 2020, many of the world’s leading countries, including Japan, declared that they will be carbon neutral by 2050.The Group has set medium- and long-term targets for reducing greenhouse gas emissions, aiming by fiscal 2030 to reduce CO2 emissions by 40% compared to fiscal 2019 and to net zero emissions by 2050. With our sights on this target, we will step up our efforts to achieve carbon neutrality.

Taking the lead in uncertain times

The impact of the COVID-19 pandemic caused earnings in our hotel and retail facility leasing businesses and parking and leisure businesses to decline in fiscal 2020. Performance in the office leasing business remained solid, however, and sales of condominiums were up both in city centers and suburban areas. As a result, operating profit reached a record high for the fourth year in a row, and net Taking the lead in uncertain times income attributable to owners of the parent was up for the fifth year in a row, making fiscal 2020 a very fruitful and important year for the Group.

In line with the policy of optimizing the business portfolio and asset structure laid out in the Medium-Term Business Plan, in December 2020 we transferred all shares of Tokyo Tatemono Senior Life Support, an operator of nursing homes and assisted living residences, to another company.

It is far from clear what course the COVID-19 pandemic will take in fiscal 2021 and further ahead, but we will steer the company through this crisis. Some news media have reported on the notion that offices are no longer necessary. If that notion actually gained traction, it would represent a serious risk to our Group, but I don’t think it will come to that. Rather, although ways of working will likely shift to a hybrid of working from home and in offices, as AI, robotics and other technologies take over more routine tasks, I think human creativity will become more and more important. Regardless of how much digitalization advances, there is definitely a need for places where people can sit down together and thoroughly discuss issues. I see the diversification of values as an opportunity— Tokyo Tatemono will take the lead in further adding value to the office buildings, condominiums, and other "places" we provide.

Responding to the environment and ensuring a growth trajectory

Looking ahead at market conditions, although our leasing office portfolio at the moment has been spared any significant impact in terms of rent levels or vacancy rates, it takes time for companies to decide to relocate offices, and leasing periods are tending to lengthen somewhat. Vacancy rates in the market as a whole are also climbing, and I think we have to keep close watch on leasing office market trends.

As for for-sale condominiums, real demand is firm, and sales have been robust both in highly convenient city center locations and in suburban areas with favorable living conditions. We expect to continue seeing a market environment conducive to sales, particularly against the backdrop of low interest rates and high stock market prices, which both tend to encourage investment in real estate.

In the real estate transaction market, domestic and foreign investors remain enthusiastic about property investment, not only in conveniently located offices, logistics facilities, and for-rent condominiums—there is also renewed investment interest in hotels and retail facilities that are expected to see a recovery in demand once the pandemic subsides. We expect ongoing solid performance in this market.

In the short term, we will make a considered response to these market conditions while continuing to ensure a growth trajectory for the Group. One key to enabling the Group to increase profits and continue to grow over the longer term is the steady expansion of leasing profit, which is primarily supported by large-scale developments. However, having completed the Hareza Tower in May 2020, we have no such developments in the pipeline until the Yaesu Project, planned for completion in 2025. During this four-year lull when we can’t expect a sizable influx of leasable space, we will seek to grow profits by channeling resources into areas like the for-sale condominium business and property sales to investors. A current focus is the development of logistics facilities. Given the tremendous growth of the e-commerce market, we anticipate robust demand for logistics facilities to continue. Already, we have increased the total investment amount for properties earmarked for sales to investors to around 340 billion yen (decided), of which more than 110 billion yen is for logistics facilities. Going forward, we will more actively develop such properties, drawing on a broad range of information routes, relationships with various operating companies, and our expertise in the field.

Providing value and continuing to meet expectations

A key target set out in our previous Medium-Term Business Plan (FY 2015-2019) was significant growth in operating profit. All of our employees worked together to put the plan into action, and we ended up going above and beyond the target. Even though the current Medium-Term Business Plan (FY 2020-2024) was impacted by the COVID-19 pandemic soon after we launched it, we are making extremely good progress in terms of both qualitative and quantitative targets. However, there have been occasions in the past when we failed to achieve our targets, and after the global financial crisis of 2008 the Company recorded a deficit. Some of the stakeholders who have supported Tokyo Tatemono over the years may be wondering if we really have what it takes to carry through with the current plan and achieve our targets. We take such concerns to heart, and are committed to steadily implementing the priority measures outlined in the current plan, while reinforcing corporate governance through greater management transparency and a more diverse board of directors. In these ways we will carry forward the trust we have earned into our future business activities. Our aim is always to become, as our long-term vision says, a "next-generation developer." I am convinced this is the way the Tokyo Tatemono Group can provide value to our customers, employees, business partners, local communities, shareholders, and all our stakeholders.

I am grateful to our stakeholders for your continued understanding and support for the Group.

July 2021
President and Chief Executive Office

Hitoshi Nomura