Nomura Real Estate Holdings, Inc. (NMEHF) Earnings Call Transcript & Summary

So let me start my explanation. First is about the consolidated financial results outline. Please turn to Page 4 of the presentation material. For the first quarter, operating revenue was JPY 221.4 billion, business profit was JPY 38.6 billion, profit attributable to the owners of the parent was JPY 23.1 billion. Year-over-year, business profit was flat and net profit declined slightly. The first quarter results were in line with the full year forecast. Next, I would like to explain about the performance highlights by business units. Please turn to Page 12. In the Residential Development business, both operating revenue and profit declined due to a decrease in the number of housing sales units. However, the progress was in line with the first quarter plan. For housing sales, we are planning to book JPY 320 billion of operating revenue for the full year. Booking of sales is expected to be at the largest in the fourth quarter. In the property sales business, we sold a senior housing and a hotel. In management, the revenue of UTS, which we started consolidating from the second quarter of the previous year, has contributed to our earnings in the first quarter and led to the increase in operating revenue. In Other, as we sold retail facilities located on the side of the condominium, operating revenue increased. Please turn to Page 13. As shown on the graph on the left-hand side, gross profit ratio of housing sales in the first quarter was 25.9%. We are expecting the 24% level of gross margin for the full year. Going to the chart on the right-hand side, from this quarter, we have started to show the sales amount, number of units sold and average sales price of the housing sales in the Tokyo 23 wards. As we have announced in the 3-year plan in our new business plan that we formulated this April, we are planning to increase the supply of high-end condominiums in the Tokyo Central area. Please turn to Page 14. The progress rate of housing sales was 75.3% against the scheduled housing sales of JPY 328 billion for this fiscal year. This progress for the contract is more or less in line with the full year plan. Although in some suburban projects, there were some contracts that are taking time to close, overall sales are proceeding well, including the Tokyo 23 wards. Please turn to Page 15. As shown in the chart on the right-hand side, there are about JPY 2.3 trillion worth of land bank for housing sales with the mid- to long term. This means that we have secured approximately 4 to 5 years' worth of land necessary for development. Out of the land bank, 30% or 5,800 units is for the Tokyo 23 wards. If this is converted to operating revenue, it is equivalent to JPY 1.2 trillion, about 50%. For further development projects that are going to start, please refer to Page 17 and Page 18. Please turn to Page 19. For the property sales business under the 3-year plan, we are planning to increase investment and payback of senior housings and hotels on top of PROUD FLAT, the conventional rental housing business. Against this backdrop, in the first quarter, the sales amount increased year-over-year. This is because in addition to hotel, we sold the senior housing, a first for us. Please turn to Page 20. As for the land bank for property sales, we have started to include senior housing and hotel held as current assets. We have secured JPY 80 billion worth of construction completed for the land bank. If land under development is included, we have secured JPY 230 billion worth in total. Please turn to Page 22. In the Commercial Real Estate business, both operating revenue and profit increased as property sales increased year-over-year. In the leasing business, as BLUE FRONT SHIBAURA TOWER S has been completed, rental revenue has started to be booked, leading to an increase of operating revenue. Please turn to Page 23. Regarding the property sales, the first quarter sales totaled JPY 36.5 billion with gross profits of JPY 10.4 billion. We expect full year gross profit on sales to be JPY 40 billion to JPY 50 billion, demonstrating steady progress against the plan. Next, please turn to Page 24. In the Commercial Real Estate business unit, we are continuing to acquire land, primarily for offices and logistics facilities. Our land bank for property sales, including properties under development, now stands at about JPY 980 billion. Next, Page 25. The vacancy rate for rental assets held as noncurrent assets averaged 3.8% across all areas. While the tenants have vacated some properties which are under reconstruction plan, progress has been made in filling vacancies at other properties, resulting in a decline in vacancy rates. Next, we move on to the Overseas business unit on Page 30. In the overseas business unit, both operating revenue and business profit decreased compared to the same period last year, where a large-scale housing sales project was booked in Vietnam. During the current fiscal year, in addition to housing sales in Vietnam, we plan to sell properties in Asia and the U.K., making steady progress against our full year plan. Please move on to Page 32. We have already secured JPY 810 billion for overseas investments, of which the balance sheet balance is about JPY 250 billion. In the first quarter, we decided to participate in the Hong Hac City Project, a large-scale township development in Vietnam. This project is our largest ever project in Vietnam and construction began in June of this year. We plan to gradually develop and sell the property over the next 10 years and beyond. Next, we look at the Investment Management business unit on Page 33. In the Investment Management business unit, both operating revenue and business profit increased. As shown in the graph at the bottom of the page, we have steadily increased the domestic AUM primarily through private REITs and private funds. Meanwhile, our overseas AUM has decreased. As previously reported, this is due to the sale of properties of the fund managed by Lothbury, a U.K. real estate investment manager in response to contract cancellation. Next, the property brokerage and CRE business unit on Page 34. In the property brokerage and CRE business unit, both operating revenue and business profit increased. Facing favorable market conditions, we saw increases in transaction value in retail for individuals, in middle business for business owners and wealthy individuals and wholesale business for large corporations and investors. Next, the Property and Facility Management business unit on Page 36. In the Property and Facility Management business unit, the number of residential units and buildings under management steadily increased, resulting in an increase in management revenue. Sales from construction contracts also increased, resulting in increased operating revenue and business profit. Now please turn to Page 39. Our company has always been conscious of capital markets as we manage our company. We have listed some of our key initiatives here. I will not go into detail here, but I hope you will find them useful. That concludes my presentation. We will continue to strive for growth across the entire group to satisfy our shareholders. Finally, please note that the 2025 edition of our integrated report was released on our website at the end of July. We plan to release the English version in September, and we'll notify you as soon as it is available. That ends my presentation. [Statements in English on this transcript were spoken by an interpreter present on the live call.]