Basic Management Strategy
In the real estate industry, to which the Group belongs, real estate prices have risen stably, supported by continued low interest rate conditions. Investment type properties (rental condominiums and office blocks; income properties) have been favored and maintained high demand from domestic and overseas investors alike, due to the attractive yield gap between investment yields and long-term interest. In terms of residential type properties (owned condominium units and detached houses), the number of used condominium contracts has exceeded the number of newly built condominium contracts in the Greater Tokyo Area due to the recent rise in the price of newly built condominiums.
Under such business conditions, the Group will seek to expand its earnings by adding new initiatives to its mainstay Real Estate Trading Business, with the aim of expanding its base of real estate investors and end users by providing a diverse range of asset types and services.
We also aim to expand the earnings of our growth businesses—the Real Estate Development Business and Real Estate Specific Joint Enterprise Business—and build them as new pillars of our business. By diversifying our earnings in this way we will enhance our corporate value.
To strengthen the management base that supports our business strategy, we will also engage in management with an emphasis on capital efficiency and improve shareholder returns by investing in people and hardware in our main business and growth businesses while maintaining a high level of financial soundness.
MUGEN ESTATE's Positioning in the Used Real Estate Market
- A wide variety of used properties
- Specializing in the Greater Tokyo Area
Issues to be addressed
01Procurement of New Properties in the Purchase and Resale Business
Demand for investment type properties (rental condominiums and office blocks; income properties) remains at a high level with the continuation of monetary easing policies, while in terms of residential type properties (owned condominium units and detached houses), demand for used condominiums has exceeded that for newly built condominiums in the Greater Tokyo Area due to the recent rise in the price of newly built condominiums. As a result, real estate prices have remained high, making it more difficult to make purchasing decisions than in the past, and the competitive environment is becoming more challenging.
The Group will increase information from agents and proceed with the purchase of new properties by enhancing and speeding up purchasing decision-making capabilities utilizing IT.
02Increasing Inventory Turnover Rate of Real Estate for Sale
We expect the real estate market to remain uncertain for the fiscal year ending December 31, 2022 due to factors such as the COVID-19 pandemic, the office situation due to changes in working styles, soaring materials prices and supply shortages. Under such conditions, we believe it is necessary to increase inventory turnover rates and shorten the holding period for real estate.
The Group is working to bring properties to market at an early stage by speeding up the improvement of occupancy rates, and shortening construction periods for both interior and exterior construction work. In addition, we will make early sales by creating an environment for providing information to investors and end users, such as enhancing the functionality of property introduction sites for agents, streamlining sales activities using real estate tech, and working to increase customer motivation for purchasing.
03 Increasing Profitability by Reducing Construction Costs
Due to high real estate prices in recent years, it has become difficult to acquire properties that enable us to secure profit-making opportunities. Construction costs also tend to swell due to skyrocketing materials costs caused by the impact of the COVID-19 pandemic, supply delays, and soaring labor costs due to an increase in demand in the construction industry.
The Group will seek to optimize procurement costs by constantly expanding its range of suppliers, work to reduce unit labor costs and shorten construction periods by reviewing business processes, and strive to maintain gross profit margins.
04 Amendment to the Consumption Tax Act
The Consumption Tax Act has been partially revised, and tax amounts such as taxable purchases of residential rental buildings are longer eligible for purchase tax credits. As a result, for the purchase of residential rental buildings, in principle, the full purchase tax amount will be recorded in taxes and public dues.
The Group will aim to make sales during the third fiscal year (including the fiscal year of purchase), during which the amount of purchase tax credits can be adjusted.
05 Expanding Stable Earnings to Support Growth
Consolidated sales in our mainstay business—the Real Estate Trading Business—account for around 90% of total sales and segment profit of at least 70%. Securing stable earnings in preparation for future changes in real estate market conditions is a pressing issue.
As an opportunity to secure long-term stable earnings, we are working to acquire high-quality assets and increase the number of units we manage. With regard to the acquisition of high-quality assets, we have decided to acquire them based on consideration of the level of cash flow and cash in hand for each fiscal year. In terms of increasing our number of managed units, we will coordinate with the sales department to acquire contracts so that we can obtain commissions from asset owners when selling our own real estate properties.
06 Proactive Investment in Both Existing and New Businesses
In order to respond flexibly to changes in the external environment, we believe it is necessary to build a balanced business portfolio.
In addition to actively investing in its main business, the Real Estate Trading Business, the Group also aims to expand the earnings of its growth businesses—the Development Business and Real Estate Specific Joint Enterprise Business—and build them as new pillars of our business.
As a new business, we will also be forming business alliances with other firms and utilizing strategic investments such as mergers and acquisitions.
07 Personnel Recruitment and HR Development, Enhancing Organizational Strength
In order to achieve sustainable growth, we recognize the importance of continuously securing and developing excellent human resources and enhancing organizational strength. In terms of recruitment, we will work to strengthen recruitment of both new graduates and mid-career hires, and strengthen organizational productivity and corporate competitiveness by respecting diversity and individuality in recruiting and promoting personnel. In terms of human resources development, we will strive to improve human assets and organizational strength by enhancing internal and external education and training programs, developing and expanding core human resources who are skilled in management by utilizing OJT, establishing personnel systems according to individual abilities, recommending the acquisition of specialized skills, and sharing the company's values.
08 Enhancement of Corporate Governance
In order to maximize corporate value, we believe it is important to ensure transparency and soundness of management, and respond promptly and appropriately to changes in the business environment.
The Group considers corporate governance to be an important management issue. In order to achieve sustainable corporate growth, we will enhance our governance functions such as by ensuring transparency and diversity in our system for execution of business.