Mitsui Fudosan Co., Ltd. (8801) Earnings Call Transcript & Summary

I am Retsu Togashi, Executive Managing Officer. I will briefly present the results for the fiscal year ended March 2021. I will start with a summary of the consolidated profit and loss statement. We were able to exceed our most recent forecast for operating revenue, operating income and net profit attributable to the owners of the parent. Operating revenues increased JPY 101.9 billion year-on-year, hitting a new record high as well as surpassing JPY 2 trillion for the first time. This was mainly the result of posting a new record high in operating revenues from Property Sales to Investors, strong domestic sales of residential properties and good progress on handovers as well as revenue growth in the office leasing business. In contrast, operating income declined JPY 76.8 billion year-on-year. The key contributing factors were the substantial profit declines related to the temporary closures of retail facilities, hotels and resorts in first quarter and lower occupancy rates for the Car Park Leasing business Repark in response to the government state of emergency as well as the ongoing impact of the pandemic from second quarter onward. In addition to the lower operating income, as a result of the combined impact of extraordinary losses related to the pandemic and the sale of assets as a part of balance sheet control initiatives, net profit attributable to the owners of the parent fell JPY 54.3 billion year-on-year. Now moving on to the next page. I will quickly touch upon the conditions in each business and segment. The Leasing segment reported a JPY 12.9 billion year-on-year drop in operating revenues and a JPY 25.1 billion year-on-year decline in operating income. This was primarily due to the temporary closure of retail facilities during first quarter and the subsequent impact of shortened hours of operation. However, for the office leasing business, operating revenues increased, mainly driven by existing offices. Our nonconsolidated Tokyo Metropolitan Area office vacancy rate was lower than the market vacancy rate at 3.1%, down 0.4 percentage points from the end of third quarter. For the Property Sales segment, starting with the strong domestic residential business, total units sold, a combination of condominiums and detached homes, was 4,290. We were able to generate an OPM of 12.3%, with operating revenues up JPY 56.7 billion year-on-year and operating income up JPY 10.3 billion. Completed inventory on hand as of the end of March 2021, was a very low 167 units. In Property Sales to Investors and Overseas individuals, while operating revenues hit a new high, there was a high bar for comparison at the operating profit level. In the absence of last fiscal year sales of high margin properties, profits fell year-on-year. Appetite to acquire properties remains firm in the real estate transaction market. We have seen no deterioration in cap rates relative to pre-pandemic levels. In the Management segment, we reported an JPY 18.5 billion year-on-year decline in operating revenues and a JPY 15.7 billion drop in operating profits. The Rehouse business reported year-on-year declines in both operating revenues and profits on a full year basis, reflecting the impact of temporary closures in first quarter. However, on a stand-alone basis in second half, there was a recovery in the number of brokerage transactions with second half transaction numbers up year-on-year. The Repark business reported weaker year-on-year operating revenues and profits on activity restrictions, which led to lower occupancy rates. Near term, we continue our efforts to improve profitability by reducing costs. Finally, for the Other segment, operating revenues fell JPY 57.1 billion year-on-year, while operating income dropped JPY 29.5 billion year-on-year. This reflects the impact of the temporary closure of hotel properties in first quarter and the subsequent significant decline in demand for accommodations, both domestically and overseas. This covers the segment overview. I will now comment on major highlights for the balance sheet. We made Tokyo Dome Corporation a consolidated subsidiary as of January 25, 2021. Tokyo Dome's balance sheet has been integrated into our accounts as of the end of March 2021. The impact is shown in the table on the lower left. With regard to the profit and loss statement, we plan to reflect Tokyo Dome's P&L in our accounts from first quarter fiscal 2021. Total consolidated assets were JPY 7.7419 trillion, up JPY 346.6 billion versus March 2020. The increase is the result of making Tokyo Dome a consolidated subsidiary and new investments, which was offset by sales of assets such as the Shinjuku Mitsui Building. Interest-bearing debt was JPY 3.6234 trillion, up JPY 142.3 billion versus March 2020. Net assets were JPY 2.6559 trillion, up JPY 169.4 billion versus March 2020. As shown in the lower right, the D/E ratio was 1.42x, down 0.03 points from March 2020. Finally, I will discuss our full year forecast for the current fiscal year. As noted in our disclosure materials, we have assumed that the pandemic situation will remain challenging given the rise in infections from variants. Our group's businesses are being impacted near term by requests from national and municipal governments to temporarily close some facilities, shorten operating hours or restrict capacity based on the state of emergency declared by the government on May 25, 2021. In addition, restrictions on going out have led to a decline in traffic at our facilities and lower occupancy rates. Given this backdrop, while we expect the operating environment to recover as progress is made on vaccinations, the pace of the recovery is still unclear. Our forecasts assume the impact of COVID-19 will persist throughout the fiscal year. I will now explain the forecast. For the Leasing segment, while we have factored in an impact from the pandemic, we expect GMV improvements at retail facilities and full year contributions from new properties, which came online in the previous fiscal year for a JPY 56.9 billion year-on-year rise in operating revenues and a JPY 7.2 billion increase in operating income. In the Property Sales segment, for the domestic residential business, we expect operating revenues and income to decline year-on-year on the smaller number of handovers of large-scale properties. For Property Sales to Investors, we expect operating revenues and income to improve year-on-year as a result of expected property sales into a firm real estate investment market. For the segment as a whole, we are projecting a JPY 44.7 billion decline in operating revenues and a JPY 14.7 billion increase in operating profit. For the Management segment, we are guiding for JPY 17 billion increase in operating revenues and a JPY 4 billion rise in operating income on the profit contribution from an increase in the number of retail brokerage transactions and the continued contribution of cost reduction initiatives and improved occupancy rates at Repark. For the Other segment, we expect to see continued losses in the Hotel and Resorts business as a result of the pandemic, but we are guiding for operating revenue and income improvements of JPY 113.1 billion and JPY 5.2 billion, respectively, mainly on higher occupancy rates supported by efforts to capture domestic demand. In addition, revenues and profits from Tokyo Dome will also be reflected in this segment. As a result, at the consolidated level, we expect operating revenues to rise JPY 142.2 billion; operating income to improve JPY 26.2 billion; ordinary income to improve JPY 36.1 billion on an expected recovery in equity method profits; and net profit attributable to the owners of the parent to rise JPY 30.4 billion after factoring in JPY 30 billion in net extraordinary gains. Finally, with regard to dividends per share, we are guiding for an annual dividend of JPY 44 per share, split equally between the interim and year-end. This completes my remarks.

Hello, everyone. I am President and CEO, Komoda. Thank you for taking the time to participate in the fiscal 2020 Mitsui Fudosan analyst briefing. Please note I confirmed earlier today through a PCR test that I am negative for COVID-19. As such, I will not be wearing a mask during this presentation. I will cover several topics today and update on our view of the external environment, a discussion of the earnings forecast and some highlights of initiatives in various businesses. I will start with my view of the external operating environment. More than 1 year has passed since the global outbreak of COVID-19. We are now seeing countries around the world make progress with vaccinations. That said, we are also seeing a resurgence in infections with the spread of variants that appear to have the ability to spread faster or to lead to more severe illness, exacerbating the situation. Some countries have made good progress with vaccination, although Japan is lagging. Increasingly, however, there is a widening gap between countries on the percentage of the population that has been vaccinated. This has led to variance in terms of the degree of recovery. At this stage, it is not clear when the COVID-19 situation can be brought under control on a global basis. Countries around the world are maintaining easier monetary policies on a large scale as they desperately try to keep their economies on an even keel. Japan, as I noted earlier, has been slow to roll out vaccination. We certainly would hope to see a faster expansion of vaccination programs. However, given the rapid spread of variants, the medical system, particularly at the front line, remains under great pressure. In recognition of this situation, the state of emergency announced in April was extended. It seems likely that we will see restrictions on economic activity persist repeatedly over a prolonged period of time. If vaccinations can be swiftly deployed on a large scale, it is possible that Japan's economy could see the kind of sharp recovery already experienced in the U.S. and Europe. However, it seems more likely that we will probably be dealing with COVID-19 for most of this fiscal year. The second topic I will cover is our ESG initiatives. The increasing frequency and severity of large-scale natural disasters as a consequence of climate change is mankind's biggest threat in my view. If we were to attempt to determine the root causes for the COVID-19 outbreak, it may well be that global warming played a role in activating a virus that might otherwise have remained dormant. With each passing day, it is increasingly important for corporates to tackle sustainability challenges. We had already been focused on sustainability with our strategy to contribute to a sustainable society through our neighborhood creation initiatives. We position decarbonization as our top priority challenge and aim to formulate a robust action plan to realize our aims. Reflecting this from last year, we declared our support for TCFD, have joined RE100, have acquired certification for SBT initiatives and have set and disclosed our medium- to long-term target for the reduction of greenhouse gases. Currently, we are in the process of developing an action plan that will allow us to achieve this medium to long-term target. With regard to ESG, I believe our initiatives will also enhance our competitiveness and contribute to differentiation for each of our businesses. We are firmly committed to executing on initiatives in this area. I will now move on to talk about our forecast for the fiscal year ending March 2022. And as you can see on this slide, operating income in fiscal 2020 fell more than JPY 70 billion versus fiscal 2019. The single biggest factor behind this decline was obviously the impact of the pandemic. The COVID-19 impact in fiscal 2020 was JPY 84 billion at the operating profit level. If we include the impact of COVID-19 below the line, the total impact for fiscal 2020 was close to JPY 104 billion. If we look at our forecast for fiscal 2021, as I noted earlier, we have no choice, but to factor in a continued impact from COVID-19 given near-term conditions. This is reflected in our operating income guidance of JPY 230 billion. We are projecting a year-on-year increase in operating income of only around JPY 26 billion in fiscal 2021. We expect the COVID-19 impact on a stand-alone basis at the operating profit level to shrink to approximately JPY 40 billion, down JPY 44 billion from fiscal 2020's JPY 84 billion. Effectively, we are expecting a year-on-year improvement of JPY 44 billion on a stand-alone basis. Factoring in the expected COVID-19 impact at Tokyo Dome Corporation, which is being consolidated from this year, results in the net year-on-year increase in operating income of JPY 26 billion. If we look at total COVID-19 impact for fiscal 2021, including below-the-line items, but before reflecting the Tokyo Dome impact, our forecast is JPY 45 billion. We estimate the total COVID-19 impact on Tokyo Dome to be around JPY 20 billion given that it consistently reported operating income of around JPY 10 billion pre pandemic, but with ongoing restrictions, is projected to generate an operating loss of close to JPY 10 billion this fiscal year. This brings the total COVID-19 impact to around JPY 65 billion, including Tokyo Dome. Last fiscal year's JPY 104 billion did not include the impact of Tokyo Dome. If we exclude Tokyo Dome in making the year-on-year comparison at JPY 45 billion, COVID-19 losses will decline to around 40% of last year's level. Furthermore, the total COVID-19 impact of JPY 65 billion should be considered a one-off. When the pandemic stabilizes, this negative impact should drop out. We will focus on locking in a recovery in profits when the pandemic ends. I will now talk about the markets for each of our businesses, changes in client preferences and our initiatives. It is true that there have been changes in how people live and work triggered by the pandemic. While the pandemic has created many challenges over a prolonged period of time, the Mitsui Fudosan Group is not content to simply hunker down and weather the storm. Instead, we aim to proactively seek out new opportunities that are the result of such changes. To do so, it is very important to have an understanding that of the changes brought about by the pandemic, there are those that are irreversible and those that will return to the previous normal once the pandemic subsides. As an example, we saw a strong take-up of working from home, but as we are doing today, there are meetings that are happening in person. Through the experience of the last year, many companies now know that it is possible to have a certain level of success in working from home, but there is also a clear understanding that there are limits as well. As a result, once the threat of the virus goes away, I believe that many companies will return to working in real offices based on the assessment that real offices confer greater benefits than working from home. That said, there are some things where remote working may be more convenient, like simple administrative processing, information sharing or international gatherings where coordinating schedules can be very complicated. There will be some things that will not revert to pre-pandemic practices. What I believe is most important is to think about the optimal combination of real and digital. Also, while we will fully leverage digital tools, I believe that the pandemic created an opportunity to reaffirm the value of real spaces. In the post-pandemic era, it will be important to think about how to elevate the value of real, in my view. Another major change is how we look at our business. To date, our focus had been product-centric, but with the pandemic, it has become clear that it is necessary to reframe businesses around client behaviors as opposed to product. In other words, working is not something that is limited to office space. Other spaces like hotel rooms, homes and possibly bullet trains, planes or cars are all places where people can work. We need to change our perspective. Our role should be to offer our clients the environment necessary for a specific behavior. Even before the pandemic, we have been exploring the potential of Real Estate-as-a-Service, where rather than providing real estate as a physical object, we provide it as a service. I believe this point of view will become even more important going forward. I will now comment on the operating environment for our individual businesses. Starting with offices. As you know, the vacancy rate for the 5 central wards of Tokyo in April was 5.65%. And as you can see from the graph, this represents a sharp increase over the 1.5% of April 2020. However, from a historical perspective, 5.65% is not hugely elevated. 5% is generally considered to be a barometer for the office market, with anything below 5% leading to clear rent increases. On the back of the pandemic, we have seen changes. Some companies have seen earnings deteriorate. There has been a diversification of work styles as well. It will be important to continue to monitor market trends going forward. There may be questions about this later. But we have seen virtually no request for immediate lease cancellations from major tenants. However, many tenants have been consulting us with a view to revisiting their overall strategy for office space. We must respond appropriately. Our vacancy rate as of the end of March was 3.1%, up from 1.9% a year ago. However, although it is up, our vacancy rate is low relative to the market level of 5.65% because of the strong and long-standing relationships we have with our tenants and efforts to lengthen lease terms reflecting these strong relationships. We are expecting our vacancy rate as of March 2022 to be around the low 3% level. I touched upon this earlier, but in the post-pandemic area, we expect there will be greater diversity in working styles, with workers choosing where and when to work. Given this, spaces will likely become a combination of real and digital, such as the combination of a headquarter office plus multi-site satellite office space, such as work styling, plus workspace in the home. From this perspective, in our case, we would be able to propose the combination of a fixed location office plus work styling to our tenants. In addition to this, we can also offer soft services such as and well. In other words, we can provide a total solution for office life. Given this, we believe we will have an overwhelming advantage in the post pandemic office market. Also, as I alluded to earlier, we have had many requests for consultations as our tenants revisit their overall office space strategy. Some have indicated a desire to consolidate their footprint in a better property. I believe this is a favorable trend for us given the superior quality of our portfolio in terms of location and building specs. In addition, other key elements that our tenants view as important in considering office space are offices that are designed to minimize risk of infectious diseases, provide green power that have resilient features and proper BCP functionalities and are enabled for cybersecurity. If we use Tokyo Midtown Yaesu, as an example, it will be fully enabled with leading-edge technology for contactless usage in response to the risk of infectious diseases. The building will also be fully enabled for 5G. We will also create spaces to accommodate diverse working styles and offer wellness support services to workers at the property. We plan to also offer the green power provision service. We launched the green power provision service from April 2021. In response to tenant request, we are able to provide a flexible menu of electric power choices, including power from renewable sources. Already around 10 tenants, mainly major corporates, have signed up for this service. I believe supporting our tenants' efforts to reduce carbon emissions further enhances our competitiveness. We plan to roll out the green power provision service to more than 120 of our properties. As you can see, our office offering combines digital and real space and hard and soft elements. We will leverage this strength going forward, and we'll continue to focus on driving the evolution of our business. Next, our retail facilities business. From the experience of last year, based on the conditions at our retail facilities after the lifting of the first state of emergency, we were able to confirm that it would generally have been possible to generate close to normal levels of GMV even during the ongoing outbreak as long as the facilities remain open. The only exception is facilities in central urban locations, and within these, particularly dining establishments. Restaurants have been subject to restrictions on opening hours and more recently prohibited from providing alcoholic beverages. We expect conditions will remain challenging for restaurants until progress is made on vaccinations or the development of an effective drug, which will make people feel safe in removing their mask to eat in public. As such, we will need to continue to provide support for some of our tenants, primarily restaurants, for a while longer. There was significant growth in e-commerce, but as noted earlier, when we examined GMV for our retail facilities following the lifting of the first state of emergency, we found consumers exhibited a clear preference for real shopping malls for certain items in choosing to wait for the reopening of stores to buy even though these items were available online as well. So in thinking about shopping in the post-pandemic world, we must recognize that consumer purchasing decisions between real shopping centers and online will be influenced by their situation and what and when they are buying. Given this, I believe the development of an omnichannel, which brings together our retail facilities, which generate JPY 1.3 billion in annual GMV; &mall, which already has 3 million registered users; and our logistics capabilities will give us an overwhelming advantage. We have already launched a joint project between our real retail facilities, &mall and our logistics business. Our aim is to create an omnichannel framework that has benefits for both our tenants and end consumers. With regard to our retail facilities, another important consideration is the value of the real-world, which I referred to earlier. After the lifting of the first state of emergency when our facilities reopened, we saw a strong rebound in customer traffic. I believe this is a reflection of the fact that our facilities are not just simply places to shop, but that the experience of shopping is a form of entertainment to consumers. Our facilities need to evolve by elevating the entertainment element of the shopping experience, nurturing a sense of community and enhancing the ability to be a source of new information for consumers. I believe this will enhance the attractiveness and value of our retail facilities. Last year, under the brand name RAYARD, we launched a new format, which integrates retail facilities with park space, opening Miyashita Park RAYARD, and in Nagoya, Hisaya-odori Park RAYARD. I would like to do more projects in this format. Moving on to logistics facilities. I think it is fair to say this is a segment that is truly flourished as a result of the pandemic. Vacancy rates in Greater Tokyo are 1.1% and 1.9% for the Greater Osaka area. Despite the elevated levels of supply, vacancy rates have been very low. The backdrop, obviously, is the growth in the e-commerce market and an increase in logistics demand. In addition, the acceleration of digitalization has driven a shift to facilities enabled for cutting-edge digital technologies. Demand for better efficiencies in logistics and the need to consolidate logistics bases has also contributed. We currently have 31 operational properties. The scale of our logistics business has grown to a total of 46 properties, if we include properties under development, for a total floor space area of 3.9 million square meters and a total investment amount of JPY 610 billion. Our biggest strength is the relationships we have with potential end users, where we leverage our 3,000 office tenants and 2,400 retail tenants. Of course, 3PLS are also tenants in our facilities, but our relationships give us direct access to end users. From time to time, these end users can also develop into the originators of business opportunities or business partners. Currently, the market is extremely active, which is intensifying competition to acquire land. However, as noted earlier, we can leverage the potential for end users to develop into originators or partners to create business opportunities by proposing equivalent exchanges or alternatives for the use of idle land. In terms of differentiating ourselves going forward, I believe the key points will be digitalization and the diversification of logistics. On digitalization, as you know, we are leveraging ICT LABO 2.0 located in Funabashi to promote digitalization in logistics facilities and delivery services, showcasing fully-automated and labor-saving solutions. On diversification initiatives, we would like to expand into data centers, cold and frozen storage facilities, mixed industrial facilities such as Haneda, which includes office space, and urban facilities for last-one-mile services as well as discussed earlier, the joint project between &mall, our real shopping centers and the logistics business is very important. Within this, a framework for providing joint delivery services between facilities our last-one-mile services is becoming increasingly important. We would like to also fully address this as well. Next, the residential business. Immediately following the initial outbreak of COVID-19, there were fears that housing prices would fall or that there might be an outflow from major urban centers as a result of working from home. In fact, this did not happen at all. The residential market is very solid, and we continue to see strong sales of high-end central urban properties. However, one thing that has changed as a result of the pandemic is the diversification of consumer needs on increased take-up of remote working. As a result of this diversification, suburban properties located close to hubs are selling very well. In addition, there are typically few condominiums that offer a 4-bedroom configuration, so we have seen strong sales of detached homes. As well, spending prolonged periods either working from home or sheltering in place has highlighted to many people issues with their current homes. On the back of this, we have seen an increase in new customers considering moving into either new builds or existing properties. We expect a significant decline in profits on the domestic residential business this fiscal year, but this is purely a function of the number of projected units for sale at the lower level of high-margin, large-scale redevelopment projects compared to that of last fiscal year. It is in no way an indication of a weak market or a change in the residential business. As you know, competition for land bank has escalated because the market is very good. In addition, the solid financial markets have also meant that there is a scarcity of good properties available for sale. Acquiring new business opportunities is very challenging. Despite this environment, we have no intention of lowering our standards for acquiring new land. Where possible, we aim to avoid buying land through competitive tenders and will focus on large-scale or redevelopment opportunities. That said, we recognize that redevelopment projects typically involve lengthy and prolonged discussions with authorities and landowners. This makes it challenging to ensure a steady level of project completions on an annual basis. This fiscal year just so happens to be a follow year in terms of projects. However, our land bank currently stands at 26,000 units. Given this, on a longer-term view, we have an ample pipeline for generating stable profit. In terms of risk factors going forward, in addition to ensuring we remain alert to changes in customer preferences as a result of the pandemic, we also recognize that some companies have seen a deterioration in earnings as a result of COVID-19, which may have implications for employment and income. Another factor, which must be monitored, is the financial market. There have been suggestions that the current market is a bubble or is frothy. Given this, there is a risk that interest rates may rise when central bankers begin exploring an exit to the current easy monetary conditions. We will be tracking these trends closely. Next, the Hotels and Resorts business. This is the segment that was the most impacted by the pandemic. Inbound tourists accounted for about 40% of our hotels' guests. Inbound business has dropped away. About 30% or half of the remaining 60% was business demand. With companies cutting back on business travel and many companies in belt-tightening mode, even if the risk of infection eases somewhat, prospects for a rapid rebound appear limited. The impact on our business is very significant. The market had been very strong up until the pandemic, so we had a relatively narrow focus for the business, concentrating on hotels simply as venues for accommodation. Going forward, we will be taking a broader approach to capturing demand by looking at the potential for hotels to be a destination where guests spend time. One possibility is the use of hotel rooms to meet the need for teleworking space. This is something we have been doing through the workstyling business. Occupancy rates have been very high. We also offer a subscription model called subsumu, which responds to the need for fixed rate, long-stay living spaces. Another possibility where we see potential is a service we have already rolled out at Kashiwa-no-ha and other locations, which is tie-ins with medical institutions such as the cancer center for convalescent accommodation. There is one important point I would stress with regard to the absence of the 40% of guests related to inbound travel. Because of the same restrictions on overseas travel, Japanese have been unable to travel overseas. We have seen these travelers starting to visit luxury hotels in Japan. Effectively, we will be pursuing demand from outbound travelers. On top of this, we have seen a buildup of consumer spending capacity, particularly with the wealthy who have been unable to travel, shop or dine out. Our aim is to tap into these opportunities. There aren't many facilities in Japan that would be appropriate for capturing either outbound demand or pent-up demand to spend by the wealthy. However, we believe that we have a number of properties that would be a very good fit for this type of demand such as HOTEL THE MITSUI KYOTO, the Halekulani Okinawa and the Four Seasons Tokyo, Otemachi. We will fully tap into relationships that we have with various organizations through a variety of channels to promote our luxury hotels to this clientele. Next is the Overseas business. On the back of weaker economies and lockdowns much tougher than have been imposed in Japan, which has driven work from home, we have seen subleased floor space coming on to the market in the U.S. and Europe. This has led to a weakening in demand for leasing of new properties. However, we have recently seen a sharp shift. As vaccination rates rise, companies are starting to bring their workforces back into the office as has been reported in the press. We have also seen the emergence of moves to increased floor space by tech majors and life science companies. With regard to our own properties, our focus is on properties like 50 Hudson Yards, which is highly competitive in both location and specs, and properties that target strong sectors with features such as combined lab and office space. From that perspective, we have already been making good progress on leasing. In the post-pandemic period, I believe we will be able to clearly demonstrate our strength. Innovation Square in Boston, which is due to complete this fiscal year, has already been fully leased up. If we look at the tenant and portfolio composition of our existing properties, our tenant base is diversified with a focus on growth sectors. Lease periods are very long at more than 15 years and vacancy rates are very low. For this fiscal year, the overseas business will be negatively impacted by temporary closure of hotels in Hawaii, but as I noted earlier, near term, we have seen a rapid improvement in the operating environment and are making solid progress on development in our pipeline. In addition, 50 Hudson Yards will contribute to profits from fiscal 2022. I am confident this will support a significant improvement in absolute profits as well as our margin. I recognize that globalization initiatives tend to take a long time to bear fruit, this makes it challenging to avoid events like the pandemic or an economic crisis, such as the global financial crisis. However, given the decline in the Japanese population and low growth in Japan, I believe that globalizing our business is a challenge we must take on. We remain firmly committed to staying the course. Next, I will explain about Tokyo Dome. We had been focused on sports and entertainment as content that is important to neighborhood creation from several years ago. Against this backdrop, we were able to take advantage of the opportunity to invest in Tokyo Dome, which boasts 14 hectares of prime land in the center of Tokyo and generates annual footfall of 40 million people. I firmly believe we can create substantial real-world value through the combination of our neighborhood creation and town management know-how, Tokyo Dome's expertise in managing a stadium and planning events and the capacity of the Yomiuri Shimbun and the Yomiuri Giants to generate footfall and mobilize fans. Our decision to proceed with the TOB of Tokyo Dome was based on this view. As a result of the pandemic, the ability to hold sporting events or concerts is severely restricted. However, once the pandemic subsides, I believe that there will be strong demand for real and emotional experiences that appeal to the 5 census, which cannot be experienced online. Unfortunately, because of current restrictions on capacity, Tokyo Dome Corporation's earnings in the current fiscal year will continue to be challenging. Typically, Tokyo Dome has generated annual operating income of between JPY 11 billion to JPY 12 billion and net income of between JPY 7 billion to JPY 8 billion. However, I believe that once the pandemic comes under control, we should be able to exceed previous profit levels very quickly by executing on business model innovation and collaborative efforts with the Yomiuri Giants baseball team that should improve profitability and competitiveness. Tokyo Dome Corporation is also considering the future vision for Tokyo Dome City. This area is subject to restrictions given its zoning as an urban park. We have extensive experience and know-how in developing facilities that are integrated with Parkland such as Hinokicho Park at Tokyo Midtown, Hibiya Park and Tokyo Midtown Hibiya, Miyashita Park in Shibuya and Hisaya-odori Park in Nagoya. We aim to fully capitalize on this strength. Moving on to talk about balance sheet control. As you are already aware, our business model is focused on a comprehensive combination of holding, developing and managing assets. It is our aim to grow profits, while also maintaining financial soundness, which is reflected in our balance sheet control initiatives. Investors have highlighted the slight expansion on our balance sheet as a result of increased outstandings in real property for sale and the completion of a number of large-scale redevelopment projects in recent years. As a part of our efforts to control the overall balance sheet, both in terms of real property for sale and tangible assets, we chose to sell the Shinjuku Mitsui Building this time. Going forward, we remain committed to further measures to control the balance sheet, targeting both tangible assets and real property for sale. If we look at the real estate investment market, continued easy monetary conditions have kept investor appetite very strong. Cap rates have not shown signs of deterioration compared to pre-pandemic levels. With the balance of real property for sale at JPY 1.200 trillion, we plan to accelerate our property sales to investors this fiscal year. At the same time, we will also further reduce our holdings of strategic equities in line with our policy. As management, I remain consistently focused on boosting ROE through our efforts to enhance ROA. Finally, I will talk about shareholder returns. The Mitsui Fudosan Group is committed to simultaneously raising corporate value by investing for growth, while also rewarding shareholders with a combination of stable dividends and opportunistic share buybacks. Given the abundant development pipeline we have disclosed, I believe you can understand our growth investments. In terms of directly rewarding shareholders, we have consistently maintained or raised our dividend per share over time. Over the last few years, we have also developed a track record for share buybacks. We believe this track record is reflective of our commitment to shareholder returns. We view the substantial decline in profits reported in fiscal 2020 as the result of the unprecedented one-off impact of the pandemic. In light of the special circumstances, we have chosen not to limit ourselves to our stated target for total shareholder returns to date of 35%. Instead, we have chosen to maintain the scale of shareholder returns. As such, we have set the fiscal year-end dividend for fiscal 2020 at JPY 22 for an annual dividend per share of JPY 44 as well as announcing a JPY 15 billion share buyback. As a result, the total shareholder return level for fiscal 2020 will be 44.2%. For the same reasons as stated above, we have chosen to maintain an annual dividend per share of JPY 44 for fiscal 2021. I apologize for the lengthy presentation. This completes my remarks. [Statements in English on this transcript were spoken by an interpreter present on the live call.]