Hoosiers Holdings / 3284

COVERAGE INITIATED ON: 2021.08.03 LAST UPDATE: 2021.08.05

Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will always present opinions from company management as such. Our views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at [email protected] or find us on Bloomberg.

Research Coverage Report by Shared Research Inc. Hoosiers Holdings / 3284 RCoverage LAST UPDATE: 2021.08.05 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

INDEX

How to read a Shared Research report: This report begins with the trends and outlook section, which discusses the company’s most recent earnings. First-time readers should start at the business section later in the report.

Executive summary ------3 Key financial data ------5 Recent updates ------6 Highlights ------6 Trends and outlook ------7 Quarterly trends and results ------7 Business ------15 Business model ------15 Real Estate Development segment (68.4% of revenue and 87.1% of operating profit in FY03/21) ------18 CCRC segment (14.3% of revenue and 6.5% of operating profit in FY03/21) ------25 Real Estate Investment segment (9.5% of revenue and 7.5% of operating profit in FY03/21) ------29 Condominium Management and Related Services segment (7.7% of revenue and a JPY71mn operating loss in FY03/21) ---- 34 Other (PFI) segment (0.1% of revenue and 0.1% of operating profit in FY03/21) ------35 Market and value chain------36 Competitors ------43 Strengths and weaknesses ------45 Historical performance and financial statements ------47 Income statement ------47 Balance sheet ------49 Cash flow statement ------52 Historical performance ------54 Other information ------58 History ------58 Sustainability initiatives ------58 Corporate governance and top management ------59 Dividend policy and shareholder returns ------60 Major shareholders ------61 Employees ------61 Profile ------62

02/63 Hoosiers Holdings / 3284 RCoverage LAST UPDATE: 2021.08.05 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Executive summary

Business overview

◤ Hoosiers is a medium-sized condominium developer focused on new-build condominiums in the Tokyo metropolitan area and regional core cities nationwide (populations of 100,000 to 500,000). The company is an independent developer unaffiliated with any of the major corporate groups. When the company was established in 1994, it concentrated on the Tokyo metropolitan area. After the Great East Japan Earthquake in 2011, Hoosiers began shifting its focus beyond the above to regional core cities. Populations in these cities were growing but they were being overlooked by large competitors. (In FY03/21, sales in regional areas accounted for 80% of the company’s total.) Since 2015, the company has diversified, moving into condominiums for seniors and real estate investment. Hoosiers’ business model has three focuses: regional areas, seniors, and high-net-worth individuals.

◤ In terms of earnings contribution, the largest segment is Real Estate Development, which handles new-build condominiums (68.4% of total revenue and 87.1% of operating profit in FY03/21). Next is the CCRC segment (short for “Continuing Care Retirement Community”), which handles condominiums for seniors (14.3%, 6.5%). The Real Estate Investment segment acquires, develops, holds and disposes of income properties (9.5%, 7.5%). In addition, the company has the Condominium Management and Related Services segment (7.7%, operating loss of JPY71mn), and the Other (PFI) segment, which handles business related to private finance initiatives (0.1%, 0.1%).

◤ In its mainstay Real Estate Development segment, the company targets customers who already own houses in regional core cities but want to relocate to highly convenient urban centers. For this clientele, the company develops and sells the “Duo Hills” brand of condominiums. In this segment, the company also develops and sells compact condominiums (brand name: “Duo Veel”). These are designed mainly for single women who live in major metropolises: Tokyo, Sapporo, Nagoya, and Fukuoka. According to a study by the Japan Real Estate Institute, in 2019 Hoosiers ranked third, by sales, in the condominium business in regional areas. Shared Research thinks this figure suggests the company has a certain level of name recognition in this category. Hoosiers mainly sells condominiums in blocks containing 50 to 100 units per building. Units are typically priced at JPY20mn to JPY50mn (average price of around JPY35mn). These condominiums are more spacious than an equivalently priced condominium in the Tokyo metro area. The company says it pays special attention to the quality and functionality of interior furnishings, which is popular with female customers. Women are key members of Hoosiers’ sales team, and they are closely involved in planning and product development. The company explains that few large developers are promoting business in regional areas, even though the stock of suitable condominiums for sale is lower than in the Tokyo metro area and potential demand exists among cash-rich business owners and seniors. Revenue is calculated as units sold multiplied by unit price. Expenses include direct costs (land, construction), personnel expenses (salespeople and people to manage model rooms), and promotional and other SG&A expenses.

◤ The company positions the Real Estate Investment segment as a growth business. In the four years to FY03/20, operating profit grew by a CAGR of 38.9% in this segment, compared with 9.3% in the Real Estate Development segment. (In FY03/21, operating profit was down 88.9% YoY because the company decided to hold on to properties and wait for a better time to exit through sale.) In this segment, the company develops investment rental properties: “Duo Maison Flat” buildings, which are priced at less than JPY500mn, and “Duo Flats” rental housing, which are priced at JPY500mn to JPY1.0bn. The company also invests in office buildings in convenient locations in regional core cities. In this segment, the company generates rental income on owned properties and capital gains on the disposition. For rental housing, the company draws on its experience in developing condominiums. The company says it may also get involved in rebuilding condominiums in convenient locations near stations currently occupied by offices. In Real Estate Investment, Hoosiers sees synergies with the Real Estate Development segment’s condominium business. The company’s investment portfolio contains the Hoosiers Sapporo Building (Chuo-ku, Sapporo), Sendai Business Hotel Ekimae (Aoba-ku, Sendai), Hoosiers Nagano Ekimae Building (Nagano), and Kozenmachi East Building (Nagasaki). Along with raising property values and pursuing redevelopment in regional core cities going forward, the company may convert these properties into new condominiums.

03/63 Hoosiers Holdings / 3284 RCoverage LAST UPDATE: 2021.08.05 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

◤ Hoosiers’ target market in the CCRC segment is healthy seniors aged 70 or more. The company develops, sells, and manages condominiums with unit ownership rights (which can be held as assets). In this business, the company is addressing what it sees as a social issue: supplying homes for seniors as Japan’s population continues to age. As of FY03/21, the company managed 1,385 units of condominiums for seniors (the highest number in Japan, according to the company’s medium-term management plan). Hoosiers says large developers frequently develop serviced housing for the elderly and fee-charging nursing homes as right-of-use properties. Most do not sell condominiums with unit ownership rights. The company explains that large developers are cautious about condominiums for seniors because of the difficulty of working with buyers and residents who may require long-term care. Hoosiers’ condominiums for seniors come with conveniences, such as restaurants, large spas, resident nurses, 24-hour staff, and round-the-clock monitoring.

◤ In January 2021, the company outlined its new medium-term management plan, unveiling further details in May. This plan calls for Hoosiers to concentrate management resources on efforts to meet residential demand for housing. By FY03/26, the final year of the plan, the company expects to generate revenue of JPY92.0bn, recurring profit of JPY10.0bn, net income attributable to owners of the parent of JPY6.5bn, and ROE of 15% or more. At the same time, the company plans to maintain a D/E ratio of around 2.0x, a dividend payout ratio of 40% or more, and a dividend on equity (DOE) ratio of 4% or more.

Earnings trends

◤ In FY03/21, revenue amounted to JPY80.2bn (-5.9% YoY). Operating profit was JPY5.4bn (-18.8% YoY), recurring profit was JPY4.6bn (-16.3% YoY), and net income attributable to owners of the parent was JPY2.9bn (+942.8% YoY). ROE increased to 8.1%, from 0.6% in FY03/20. In the Real Estate Investment segment, performance was down substantially YoY. The decline was mainly because the company chose not to dispose of some of the owned properties under the uncertainty surrounding the COVID-19 pandemic.

◤ For FY03/22, the company forecasts revenue of JPY76.0bn (-5.3% YoY), operating profit of JPY5.7bn (+4.9% YoY), recurring profit of JPY5.0bn (+8.3% YoY), and net income attributable to owners of the parent of JPY3.1bn (+7.7% YoY). Hoosiers expects EPS to grow from JPY51.0 in FY03/21 to JPY87.6 in FY03/22. The company aims to boost profitability in the residential property sales business, so anticipates ROE of 10% or more.

Strengths and weaknesses

Strengths

◤ The company enters the regional core cities where population is from 100,000 to 500,000 as niche markets where large competitors are absent. Hoosiers is collaborating with regional government bodies and local companies to build relationships by sharing its expertise and taking such a role as an executive director of a redevelopment association. In this way, the company is creating a virtuous cycle for increasing profit and barriers to entry for other developers.

◤ The company was an early entrant into the market for providing condominiums for seniors (an area where large competitors were absent). Hoosiers differentiates itself in this category, handled by the CCRC segment, where risk is relatively high.

Weaknesses:

◤ The proportion of stable profits from invested income-producing properties is relatively low since a majority of profits depend on condominium unit sales and dispositions of invested property buildings.

◤ Sports club and hotel operations have been underperforming, resulting in a bottleneck to improving asset efficiency.

◤ As a condominium developer, the equity ratio of 27% is lower than the industry average (35%).

04/63 Hoosiers Holdings / 3284 RCoverage LAST UPDATE: 2021.08.05 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Key financial data

Income statement FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 FY03/22 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Est. Revenue 21,045 32,955 36,943 40,033 35,943 52,726 63,364 89,882 85,231 80,222 76,000 YoY 143.3% 56.6% 12.1% 8.4% -10.2% 46.7% 20.2% 41.9% -5.2% -5.9% -5.3% Gross profit 7,429 9,788 11,094 10,102 8,657 13,022 16,041 21,720 18,011 16,077 YoY 92.3% 31.8% 13.3% -8.9% -14.3% 50.4% 23.2% 35.4% -17.1% -10.7% Gross profit margin 35.3% 29.7% 30.0% 25.2% 24.1% 24.7% 25.3% 24.2% 21.1% 20.0% Operating profit 5,183 6,283 6,790 4,783 3,184 5,590 7,289 9,287 6,692 5,435 5,700 YoY 122.8% 21.2% 8.1% -29.6% -33.4% 75.5% 30.4% 27.4% -27.9% -18.8% 4.9% Operating profit margin 24.6% 19.1% 18.4% 11.9% 8.9% 10.6% 11.5% 10.3% 7.9% 6.8% Recurring profit 4,702 6,015 6,421 4,464 2,811 5,325 6,936 8,478 5,513 4,616 5,000 YoY 142.0% 27.9% 6.7% -30.5% -37.0% 89.4% 30.3% 22.2% -35.0% -16.3% 8.3% Recurring profit margin 22.3% 18.3% 17.4% 11.2% 7.8% 10.1% 10.9% 9.4% 6.5% 5.8% Net income attributable to owners of the parent 5,362 5,574 3,856 3,079 1,835 3,357 4,564 3,195 276 2,878 3,100 YoY 104.0% 3.9% -30.8% -20.2% -40.4% 82.9% 36.0% -30.0% -91.4% 942.8% 7.7% Net margin 25.5% 16.9% 10.4% 7.7% 5.1% 6.4% 7.2% 3.6% 0.3% 3.6% Per-share data (split-adjusted; JPY) Shares issued (year-end; '000) 326 326 31,556 31,556 31,556 43,745 59,354 57,554 57,554 36,917 EPS 16,992.7 17,663.6 122.2 99.7 61.7 87.8 118.6 55.7 4.9 51.0 87.6 EPS (fully diluted) - - - 99.2 61.3 86.2 112.2 55.6 4.9 50.9 Dividend per share 300.0 800.0 12.0 14.0 14.0 24.0 24.0 25.0 35.0 24.0 36.0 Book value per share 33,614.1 50,877.7 619.0 713.4 777.6 639.3 734.5 766.8 738.9 815.8 Balance sheet (JPYmn) Cash and cash equivalents 4,432 8,293 12,477 15,722 13,822 21,383 30,493 26,112 31,736 29,293 Total current assets 25,789 33,634 44,760 57,732 57,766 88,329 107,282 125,701 114,734 105,142 Tangible fixed assets 1,759 492 3,279 3,778 14,905 12,567 20,493 20,674 21,999 22,449 Investments and other assets 893 829 310 1,046 1,275 2,294 5,799 7,830 6,394 7,990 Intangible assets 124 215 176 76 640 1,468 1,692 526 741 448 Total assets 28,565 35,169 48,525 62,631 74,585 104,660 135,359 154,792 143,897 136,030 Short-term debt 10,588 6,921 6,818 8,808 14,686 14,888 24,537 28,027 32,859 29,624 Total current liabilities 13,050 11,881 12,595 17,750 24,856 29,960 35,893 43,487 45,294 41,530 Long-term debt 4,826 7,178 15,785 22,777 26,831 48,736 54,700 65,438 52,059 54,473 Total fixed liabilities 4,908 7,234 16,398 23,361 27,838 50,169 56,873 67,326 55,776 58,131 Total liabilities 17,958 19,115 28,992 41,112 52,694 80,129 92,767 110,814 101,070 99,661 Shareholders' equity 10,607 16,055 19,533 21,516 21,888 24,444 42,447 43,675 42,113 28,861 Total net assets 10,607 16,055 19,533 21,519 21,891 24,530 42,592 43,977 42,827 36,368 Total interest-bearing debt 15,414 14,099 22,603 31,585 41,517 63,624 79,237 93,465 84,918 84,097 Cash flow statement (JPYmn) Cash flows from operating activities 1,817 5,312 -1,383 -3,268 -5,695 -4,162 -9,053 -3,316 16,110 10,722 Cash flows from investing activities -102 -6 -996 -1,231 -4,497 -8,961 -10,843 -12,987 -670 -3,058 Cash flows from financing activities -1,459 -1,444 6,458 7,686 8,437 20,680 28,783 12,131 -10,159 -15,077 Financial ratios ROA (RP-based) 17.9% 18.9% 15.3% 8.0% 4.1% 5.9% 5.8% 5.8% 3.7% 3.3% ROE 67.3% 41.8% 21.7% 15.0% 8.5% 14.5% 13.7% 7.4% 0.6% 8.1% Payout ratio 1.8% 4.5% 9.8% 14.0% 22.7% 27.3% 20.2% 44.9% 720.2% 47.1% DOE 1.2% 1.9% 2.1% 2.1% 1.9% 4.0% 2.8% 3.3% 4.6% 3.8% Total shareholder returns - - - - 85.5% 111.7% 137.1% 121.1% 118.9% - Debt-to-equity ratio 1.45 0.88 1.16 1.47 1.90 2.59 1.86 2.13 1.98 2.31 Net debt-to-equity ratio 1.04 0.36 0.52 0.74 1.27 1.72 1.14 1.53 1.24 1.51 Equity ratio 37.1% 45.6% 40.3% 34.4% 29.3% 23.4% 31.4% 28.2% 29.3% 21.2% Total asset turnover 44.0% 59.7% 54.2% 45.9% 36.0% 29.4% 40.5% 33.9% 37.5% 27.0% Source: Shared Research based on company data Note: Net equity ratio = shareholders’ equity ÷ (assets - cash and deposits)

05/63 Hoosiers Holdings / 3284 RCoverage LAST UPDATE: 2021.08.05 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Recent updates

Highlights

On August 5, 2021, Hoosiers Holdings announced earnings results for Q1 FY03/22; see the results section for details.

On August 3, 2021, Shared Research initiated coverage of the company.

For previous releases and developments, please refer to the News and topics section.

06/63 Hoosiers Holdings / 3284 RCoverage LAST UPDATE: 2021.08.05 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Trends and outlook Quarterly trends and results

Cumulative FY03/20 FY03/21 FY03/22 FY03/22 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1% of Est.FY Est. Revenue 10,153 34,007 54,673 85,231 10,346 29,249 51,686 80,222 9,585 12.6% 76,000 YoY 27.7% 61.7% 17.2% -5.2% 1.9% -14.0% -5.5% -5.9% -7.4% -5.3% Gross profit 2,234 7,499 12,037 18,011 2,047 5,773 10,530 16,077 2,113 YoY 19.9% 49.6% 12.3% -17.1% -8.4% -23.0% -12.5% -10.7% 3.2% Gross profit margin 22.0% 22.1% 22.0% 21.1% 19.8% 19.7% 20.4% 20.0% 22.0% SG&A expenses 2,387 5,559 8,469 11,318 2,221 4,844 7,481 10,642 2,093 YoY 8.0% 21.2% 6.9% -9.0% -7.0% -12.9% -11.7% -6.0% -5.8% SG&A ratio 23.5% 16.3% 15.5% 13.3% 21.5% 16.6% 14.5% 13.3% 21.8% Operating profit -152 1,939 3,567 6,692 -173 928 3,049 5,435 19 0.3% 5,700 YoY - 353.0% 27.5% -27.9% - -52.1% -14.5% -18.8% - 4.9% Operating profit margin - 5.7% 6.5% 7.9% - 3.2% 5.9% 6.8% 0.2% 7.5% Recurring profit -402 1,505 2,808 5,513 -177 726 2,723 4,616 -115 - 5,000 YoY - 196.8% 18.0% -35.0% - -51.8% -3.0% -16.3% - 8.3% Recurring profit margin - 4.4% 5.1% 6.5% - 2.5% 5.3% 5.8% - 6.6% Net income -289 1,016 1,846 276 -367 832 2,199 2,878 -194 - 3,100 YoY - 319.8% 30.0% -91.4% - -18.1% 19.1% 942.8% - 7.7% Net margin - 3.0% 3.4% 0.3% - 2.8% 4.3% 3.6% - 4.1% Quarterly FY03/20 FY03/21 FY03/22 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1 Revenue 10,153 23,854 20,666 30,558 10,346 18,903 22,437 28,536 9,585 YoY 27.7% 82.4% -19.4% -29.3% 1.9% -20.8% 8.6% -6.6% -7.4% Gross profit 2,234 5,265 4,538 5,974 2,047 3,726 4,757 5,547 2,113 YoY 19.9% 67.1% -20.4% -45.7% -8.4% -29.2% 4.8% -7.1% 3.2% Gross profit margin 22.0% 22.1% 22.0% 19.5% 19.8% 19.7% 21.2% 19.4% 22.0% SG&A expenses 2,387 3,172 2,910 2,849 2,221 2,623 2,637 3,161 2,093 YoY 8.0% 33.6% -12.7% -36.9% -7.0% -17.3% -9.4% 11.0% -5.8% SG&A ratio 23.5% 13.3% 14.1% 9.3% 21.5% 13.9% 11.8% 11.1% 21.8% Operating profit -152 2,091 1,628 3,125 -173 1,101 2,121 2,386 19 YoY - 169.8% -31.3% -51.8% - -47.3% 30.3% -23.6% - Operating profit margin - 8.8% 7.9% 10.2% - 5.8% 9.5% 8.4% 0.2% Recurring profit -402 1,907 1,303 2,705 -177 903 1,997 1,893 -115 YoY - 199.8% -30.4% -55.6% - -52.6% 53.3% -30.0% - Recurring profit margin - 8.0% 6.3% 8.9% - 4.8% 8.9% 6.6% - Net income -289 1,305 830 -1,570 -367 1,199 1,367 679 -194 YoY - 254.6% -29.5% - - -8.1% 64.7% - - Net margin - 5.5% 4.0% - - 6.3% 6.1% 2.4% - Source: Shared Research based on company data Notes: Figures may differ from company materials due to differences in rounding methods.

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Quarterly performance by segment (cumulative)

Cumulative FY03/20 FY03/21 FY03/22 FY03/22 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1% of Est.FY Est. Revenue Real Estate Development External 6,706 23,000 30,890 46,508 7,940 20,258 37,083 55,315 5,238 15.4% 34,100 Internal 10 48 74 99 12 27 39 54 1 Sum 6,717 23,049 30,965 46,608 7,952 20,285 37,122 55,370 5,239 % of total revenue 65.0% 67.0% 56.0% 54.2% 75.5% 68.5% 71.1% 68.4% 53.7% YoY 108.9% 177.1% 33.8% -12.3% 18.4% -12.0% 19.9% 18.8% -34.1% CCRC External 298 2,670 7,656 8,947 307 4,235 5,725 11,466 1,454 6.9% 21,200 Internal 54 108 157 190 31 63 75 75 - Sum 352 2,779 7,814 9,138 339 4,299 5,801 11,542 1,455 % of total revenue 3.4% 8.1% 14.1% 10.6% 3.2% 14.5% 11.1% 14.3% 14.9% YoY -74.1% -19.8% 62.1% 51.7% -3.7% 54.7% -25.8% 26.3% 329.2% Real Estate Investment External 1,329 4,183 10,061 21,826 958 2,009 4,435 7,409 1,385 10.0% 13,800 Internal 60 130 220 295 70 139 211 290 86 Sum 1,389 4,313 10,281 22,122 1,029 2,149 4,647 7,700 1,471 % of total revenue 13.4% 12.5% 18.6% 25.7% 9.8% 7.3% 8.9% 9.5% 15.1% YoY 73.4% 34.8% 35.2% 80.8% -25.9% -50.2% -54.8% -65.2% 43.0% Condominium Management and Related Services External 1,798 4,109 5,999 7,857 1,122 2,716 4,389 5,959 1,492 21.8% 6,840 Internal 51 111 168 253 65 139 209 280 75 Sum 1,849 4,221 6,167 8,111 1,188 2,856 4,598 6,239 1,567 % of total revenue 17.9% 12.3% 11.2% 9.4% 11.3% 9.6% 8.8% 7.7% 16.1% YoY 8.1% 8.8% 3.6% -5.0% -35.7% -32.3% -25.4% -23.1% 31.9% Other (PFI) External 20 42 65 90 16 29 52 72 14 23.3% 60 Internal ------Sum 20 42 65 90 16 29 52 72 14 % of total revenue 0.2% 0.1% 0.1% 0.1% 0.2% 0.1% 0.1% 0.1% 0.1% YoY 100.0% 82.6% 71.1% 52.5% -20.0% -31.0% -20.0% -20.0% -12.5% Adjustments External ------Internal -175 -400 -621 -839 -180 -371 -535 -701 -164 Sum -175 -400 -621 -839 -180 -371 -535 -701 -164 Total revenue External 10,153 34,007 54,673 85,231 10,346 29,249 51,686 80,222 9,585 Internal ------Sum 10,153 34,007 54,673 85,231 10,346 29,249 51,686 80,222 9,585 12.6% 76,000 % of total revenue 27.7% 61.7% 17.2% -5.3% 1.9% -14.0% -5.5% -5.9% -7.4% -5.3% Segment profit Real Estate Development 22 1,540 1,436 2,212 329 1,210 2,784 4,671 22 Segment profit margin 0.3% 6.7% 4.6% 4.7% 4.1% 6.0% 7.5% 8.4% 0.4% % of total segment profit - 85.7% 42.7% 34.4% - 144.0% 96.9% 87.1% -157.1% CCRC -240 -224 364 259 -271 37 56 351 -33 Segment profit margin -68.2% -8.1% 4.7% 2.8% -79.9% 0.9% 1.0% 3.0% -2.3% % of total segment profit - - 10.8% 4.0% - 4.4% 1.9% 6.5% - Real Estate Investment 14 357 1,355 3,637 -85 -261 106 402 -62 Segment profit margin 1.0% 8.3% 13.2% 16.4% -8.3% -12.1% 2.3% 5.2% -4.2% % of total segment profit - 19.9% 40.3% 56.6% - - 3.7% 7.5% - Condominium Management and Related Services -8 118 199 300 -149 -142 -77 -71 53 Segment profit margin -0.4% 2.8% 3.2% 3.7% -12.5% -5.0% -1.7% -1.1% 3.4% % of total segment profit -6.6%5.9%4.7%-----378.6% Other (PFI) 1 4 7 11 - -4 4 8 5 Segment profit margin 5.0% 9.5% 10.8% 12.2% 0.0% -13.8% 7.7% 11.1% 35.7% % of total segment profit - 0.2% 0.2% 0.2% - - 0.1% 0.1% -35.7% Adjustments 57 143 204 270 3 88 175 72 33 Total segment profit -152 1,939 3,567 6,692 -173 928 3,049 5,435 19 Source: Shared Research based on company data Notes: Figures may differ from company materials due to differences in rounding methods.

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Quarterly performance by segment (non-cumulative)

Quarterly FY03/20 FY03/21 FY03/22 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1 Revenue Real Estate Development External 6,706 16,294 7,890 15,618 7,940 12,318 16,825 18,232 5,238 InteYoY change 10 38 26 25 12 15 12 15 1 SumYoY 6,717 16,332 7,916 15,643 7,952 12,333 16,837 18,248 5,239 CCRC External 298 2,372 4,986 1,291 307 3,928 1,490 5,741 1,454 Internal 54 54 49 33 31 32 12 - - Sum 352 2,427 5,035 1,324 339 3,960 1,502 5,741 1,455 Real Estate Investment External 1,329 2,854 5,878 11,765 958 1,051 2,426 2,974 1,385 Inte% of total revenue 60 70 90 75 70 69 72 79 86 SumYoY 1,389 2,924 5,968 11,841 1,029 1,120 2,498 3,053 1,471 Condominium Management and Related Services External 1,798 2,311 1,890 1,858 1,122 1,594 1,673 1,570 1,492 Internal 51 60 57 85 65 74 70 71 75 Sum 1,849 2,372 1,946 1,944 1,188 1,668 1,742 1,641 1,567 Other (PFI) External 20 22 23 25 16 13 23 20 14 Internal ------Sum 20 22 23 25 16 13 23 20 14 Adjustments External ------Internal -175 -225 -221 -218 -180 -191 -164 -166 -164 Sum -175 -225 -221 -218 -180 -191 -164 -166 -164 Condominium Management and Related Services External 10,153 23,854 20,666 30,558 10,346 18,903 22,437 28,536 9,585 Internal ------Sum 10,153 23,854 20,666 30,558 10,346 18,903 22,437 28,536 9,585 Segment profit Real Estate Development 22 1,518 -104 776 329 881 1,574 1,887 22 CCRC -240 16 588 -105 -271 308 19 295 -33 Real Estate Investment 14 343 998 2,282 -85 -176 367 296 -62 Condominium Management and Related Services -8 126 81 101 -149 7 65 6 53 Other (PFI) 1 3 3 4 - -4 8 4 5 Adjustments 57 86 61 66 3 85 87 -103 33 Total segment profit -152 2,091 1,628 3,125 -173 1,101 2,121 2,386 19 Source: Shared Research based on company data Notes: Figures may differ from company materials due to differences in rounding methods.

Q1 FY03/22 results Overview

▷ Revenue: JPY9.6bn (-7.4% YoY) (progress toward full-year company target: 12.6%)

▷ Operating profit: JPY19mn (JPY173mn operating loss in Q1 FY03/21) (0.3%)

▷ Recurring loss: JPY115mn (JPY177mn recurring loss in Q1 FY03/21)

▷ Net loss*: JPY194mn (net loss of JPY367mn in Q1 FY03/21) *Net loss attributable to owners of the parent

Revenue fell JPY761mn YoY, decreasing JPY2.7bn YoY in the Real Estate Development segment and JPY2mn in the Other (PFI) segment while increasing JPY1.1bn in the CCRC segment, JPY427mn YoY in the Real Estate Investment segment, and JPY370mn in the Condominium Management and Related Services segment. Contracts were made for 315 units in a single condominium building, while the number of of units delivered were 172 in two buildings. The number of managed units at the end of Q1 were 18,551. In the Real Estate Development, CCRC, and Real Estate Investment segments, revenue is booked upon delivery to the customer, not at the time of concluding the purchase contract. Therefore, revenue tends to become concentrated based on these delivery periods.

Operating profit rose JPY192mn YoY. The source of this growth was YoY increases of JPY238mn in CCRC, JPY202mn in Condominium Management and Related Services, JPY23mn in Real Estate Investment, JPY5mn in Other (PFI), and JPY30mn in adjustments.

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Performance by segment Real Estate Development segment In the mainstay Real Estate Development segment, external revenue was JPY5.2bn (-34.0% YoY), and operating profit was JPY22mn (-93.3% YoY). These results are a product of selling 132 condominiums, such as Duo Hills Yamagata Nanokamachi Tower, and seven detached houses, such as Duo Avenue Motoyama Hills.

CCRC segment In the CCRC segment, revenue was JPY1.5bn (+373.6% YoY), and operating loss was JPY33mn (operating loss of JPY271mn in Q1 FY03/21).These results are a product of selling 29 condominium units, such as Duo Scene Kunitachi.

Real Estate Investment segment In the Real Estate Investment segment, revenue was JPY1.4bn (+44.6% YoY), and operating loss was JPY62mn (operating loss of JPY85mn in Q1 FY03/21). Within revenue, the company generated JPY648mn from real estate sales and JPY649mn from rental income. Sales contracts for 875 units have already been completed, reaching 63.0% of the forecast of 1,389.

Condominium Management and Related Services segment In the Condominium Management and Related Services segment, revenue was JPY1.5bn (+33.0% YoY), and the operating profit was JPY53mn (JPY149mn operating loss in Q1 FY03/21). Within revenue, the company generated JPY471mn from condominium management, JPY819mn from sports club operation, and JPY200mn in other revenue (hotel operation and contracted construction). The company recorded extraordinary losses on fixed expenses that were incurred at locations temporarily closed due to the COVID-19 pandemic.

Other (PFI) segment In the Other (PFI) segment, the company produced revenue of JPY14mn (-7.9% YoY) and operating profit of JPY5mn (JPY0mn in Q1 FY03/21), stemming from the private finance initiative (PFI) business.

For details on previous quarterly and annual results, please refer to the Historical financial statements section.

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Full-year FY03/22 company forecast Numeric targets FY03/20 FY03/21 FY03/22 YoY (JPYmn) 1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. FY Est. FY Est. Revenue 34,007 51,224 85,231 29,249 50,973 80,222 76,000 -5.3% Cost of revenue 26,507 40,713 67,220 23,475 40,670 64,145 Gross profit 7,499 10,512 18,011 5,773 10,304 16,077 Gross profit margin 22.1% 20.5% 21.1% 19.7% 20.2% 20.0% SG&A expenses 5,559 5,759 11,318 4,844 5,798 10,642 SG&A ratio 16.3% 11.2% 13.3% 16.6% 11.4% 13.3% Operating profit 1,939 4,753 6,692 928 4,507 5,435 5,700 4.9% Operating profit margin 5.7% 9.3% 7.9% 3.2% 8.8% 6.8% 7.5% Recurring profit 1,505 4,008 5,513 726 3,890 4,616 5,000 8.3% Recurring profit margin 4.4% 7.8% 6.5% 2.5% 7.6% 5.8% 6.6% Net income 1,016 -740 276 832 2,046 2,878 3,100 7.7% Net margin 3.0%-1.4%0.3%2.8%4.0%3.6%4.1% Source: Shared Research based on company data

For FY03/22, the company forecasts revenue of JPY76.0bn (-5.3% YoY), operating profit of JPY5.7bn (+4.9% YoY), and net income attributable to owners of the parent of JPY3.1bn (+7.7% YoY). The expectation for lower revenue is due to changes in the intersegment sales structure. The company expects profitability to rise in the residential property sales business (Real Estate Development segment + CCRC segment) and as the result of its efforts to put in place a post-pandemic business structure.

Performance by segment Real Estate Development segment The company forecasts segment revenue of JPY34.1bn (-38.4% YoY). Due to a decline in the number of condominiums completed, the company expects to deliver 783 units (-487 YoY). As of the beginning of FY03/22, the company had contracts in place for 360 condominiums (45.9% of the expected total). The company plans to deliver 89 detached houses (-36 YoY).

CCRC segment The company forecasts segment revenue of JPY21.2bn (+84.9% YoY). The company plans to complete two blocks of CCRC condominiums totaling 473 units. During FY03/22, the company plans to deliver 517 units (+249 YoY) and already has contracts signed on 219 units. The company plans to have around 1,850 units under operation.

Real Estate Investment segment In this segment, the company anticipates revenue of JPY13.8bn (+86.3% YoY). The company plans to sell a total of 20 properties in FY03/22 (income properties + flats), 10 more than in FY03/21. Hoosiers is actively investing in development-type rental housing. The company aims to step up purchases of high-yield properties in good locations that can be redeveloped in the future. The company plans to sell more of these properties in FY03/22 than it did in FY03/21.

Condominium Management and Related Services segment The company forecasts segment revenue of JPY6.8bn (+14.8% YoY). Hoosiers plans to return this segment to operating profitability through a thorough focus on low-cost operations.

Pipeline As of end-March 2021, the company held income property worth around JPY35.0bn (worth an expected JPY38.0 bn when complete), broken down as JPY20.0bn in fixed assets, JPY12.0bn in real estate for sale, and JPY3.0bn in real estate for sale in process. The company had 3,701 units in the residential property sales business, including 2,519 condominiums, 1,028 condominiums for seniors, and 154 detached houses. As of May 2021, the company contemplated to fill its pipeline for FY03/24 and beyond.

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Medium-term management plan Summary In May 2021, Hoosiers announced details of its new medium-term management plan (FY03/22 to FY03/26). Under the new plan, the company will realign diverse businesses that end up with low profitability. Instead, the company will concentrate management resources on its core housing business.

While maintaining the strengths it has cultivated since establishment, the company plans to dramatically reconfigure its fundamental business and strategies. In this way, the company plans to adapt to a changing operating environment and social requirements. The company aims to maintain its basic policy of focusing on “regional areas, seniors, and high-net-worth individuals”. As for the dramatic reconfiguration, the company intends to shift from its philosophy of helping to resolve societal issues through its business to one that concentrates on fusing its business and ESG strategies and enhancing corporate governance and risk management.

As to reconfiguring strategies, the company will retain its core focus on regional areas nationwide and condominiums for seniors in Greater Tokyo. At the same time, it will realign all businesses under the theme of “housing.” Through this approach, the company looks to achieve stable and sustained growth. By revamping its capital structure, Hoosiers aims to bolster capital efficiency. Furthermore, the company aims to make its overseas business profitable in FY03/22, in preparation for the overseas business to become a pillar of operations a decade hence.

Numeric targets For FY03/26, the final year of the new medium-term management plan, the company is targeting revenue of JPY92.0bn, recurring profit of JPY10.0bn, net income attributable to owners of the parent of JPY6.5bn, ROE of 15% or more, and DOE of 4% or higher.

Numeric targets (consolidated) (JPYmn) FY03/21 Act. FY03/22 Est. FY03/23 Est. FY03/24 Est. FY03/25 Est. FY03/26 Est. Revenue 80,222 76,000 92,000 Real Estate Development 55,315 34,100 CCRC 11,466 21,200 Real Estate Investment 7,409 13,800 Condominium Management and Related Services 5,959 6,840 Other (PFI) 7260 Recurring profit 4,616 5,000 6,500 7,500 8,500 10,000 Recurring profit margin 5.8% 11% Net income attributable to owners of the parent 2,878 3,100 4,200 4,800 5,500 6,500 Shareholders' equity 28,861 30,000 40,000 Debt-to-equity ratio 2.3x Approx. 2.0x Approx. 2.0x ROE 8.1% 10% or more 15％ or more Payout ratio 47.1% 41.1% 40% or more DOE 3.1% 4% or more 4% or more Source: Shared Research based on company data

In the past, the company’s shareholder return policy called for a “total distribution ratio of 40% or more.” While maintaining the link between shareholder returns and company performance, the company intends to raise the lower limit to dividends by introducing a DOE target. Thus, its new policy from FY03/22 is a “dividend payout ratio of 40% or more and DOE of 4% or more.”

Strategies by segment Real Estate Development segment The company has set FY03/26 KPIs for the residential property sales business (Real Estate Development segment + CCRC segment). The company estimates units delivery of 1,500–1,700 (1,663 units in FY03/21), assuming revenue of JPY60.0–65.0bn (JPY66.8bn), and a contribution to consolidated net income of JPY1.9–3.0bn. (Profit excludes management of condominiums for seniors.)

From FY03/23, the company targets annual net income attributable to owners of the parent of JPY3.0bn or more from the residential unit sales alone. The company expects shareholders’ equity to reach JPY40.0bn in FY03/26. The company calculates that it needs dividend resources of JPY1.6bn to achieve companywide DOE of 4%. As the company expects to generate JPY3.0bn in net income from the residential unit sales business alone, our calculations suggest that business on its own would meet the 4% DOE target.

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KPIs for residential property sales (Real Estate Development segment + CCRC segment) FY03/21 Act. Medium-term management plan (target range per fiscal year) Units delivered 1,663 Stable supply of 1,500 to 1,700 units Revenue Approx. JPY66.8bn Approx. JPY60.0–65.0bn Contribution to consolidated net income Approx. JPY1.9bn JPY3.0bn or more Source: Shared Research based on company data Note: Before consolidation; the total for condominiums, condominiums for seniors, and houses, excluding the management of condominiums for seniors.

CCRC segment (condominiums for seniors) In FY03/21, the company had 1,385 units under operation in the CCRC segment. The company continues to develop condominiums for seniors, as it believes the market will grow as Japan continues to age. Specifically, the company is focusing on condominiums that have unit ownership rights attached and are tailored to seniors’ needs. In FY03/21, the company’s total number of condominiums for seniors supplied exceeded 2,000 units. By FY03/26, the company aims to reach 3,000 units. By FY03/26, Hoosiers expects revenue from operating condominiums for seniors to reach around JPY2.0bn.

Real Estate Investment segment The company aims to further strengthen this segment as a growth business. This segment’s core business is buying and developing income-producing properties, increasing their value, and selling them on. This cycle requires the company to look ahead to future real estate market conditions and the funding environment and to be flexible in deciding when to hold and when to sell. The company aims to increase its income property portfolio from JPY35.0bn in FY03/21 to JPY45.0bn in FY03/26. To date, the company has maintained a balanced portfolio spanning residential property, offices, commercial property, hotels and others (approximately 20% each). Hoosiers intends to change its proportion, so that 75% or more of its portfolio is “residential property or offices that can be converted to residences.” Hoosiers plans to launch a private REIT in FY03/23 to provide an additional off-balanced option for selling owned properties and to expand group earnings. Furthermore, the company aims to make its overseas business profitable in FY03/22, in preparation for making it a growth business 10 years in the future.

To date, the company has considered the formation of listed REITs to be one aspect of its business expansion and growth strategy. Initially, the company had planned to list a REIT in FY03/20 that would invest in healthcare facilities (defined in a broad sense to include housing for seniors, clinical malls and hospitals, sports facilities, commercial facilities, and CCRCs). In August 2019, however, the company announced a change in focus from listed REITs to private REITs. At the same time, the company postponed its origination timing from FY03/20 to FY03/21. The company changed its approach again in May 2020, shifting the investment focus from healthcare facilities to mainly residential property (but also including healthcare facilities), and stated that origination timing was to be determined. When unveiling the new medium-term management plan, the company announced that this timing would be in FY03/23. The company plans to focus on forming REITs, which it considers a way to move owned assets off the balance sheet and an important exit strategy.

Real Estate Investment segment Standard holding period Rental housing development: 3 years; income-producing properties: 5 years Profit target GPM of 8% or more on each project Aim to increase the ratio of rental residences and well-located offices in regions that can be redeveloped into condominiums to Asset portfolio 75% of total assets (FY03/26) Other The company plans to utilize private REITs/funds and hybrid debt capital to diversify exit strategies and sources of funds. Source: Shared Research based on company data

Condominium Management and Related Services segment The company targets segment revenue of JPY10.0bn by FY03/26. Hoosiers aims to continue boosting segment profit by focusing on condominium management.

Condominium management Hoosiers manages most of the condominiums it developed. In FY03/21, condominiums under management totaled 17,015 units. The company aims to increase earnings by providing new value-added and services to existing customers and raising the number of condominiums it manages above 20,000.

Sports club operation Demand is firm in the company’s main category: operating swimming schools for children. The company aims to pursue synergies with PFI and local redevelopment projects in regional core cities but will hold back on opening new locations that burden its balance sheet.

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Hotel operation The company operates well-located aged business hotels and plans to improve operational efficiency and simplify services. In its aim to generate steady earnings while streamlining the balance sheet, the company plans to limit its new acquisitions of sports clubs and hotels mainly to contracted operation.

Other (PFI) segment Government efforts to promote regional revitalization are driving up needs for PFI among local public entities. In designated administrative districts, the company intends to undertake combined urban developments that include PFI and condominium businesses. By involving other company departments in development, ongoing maintenance, operations, and management, Hoosiers plans to help resolve regional issues and promote its own ESG activities.

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Business Business model

Overview

Hoosiers is a medium-sized real estate developer. The company is independent (unaffiliated with any of the major corporate groups) and specializes in new-build condominiums in the Tokyo metropolitan area and regional core cities (populations of 100,000 to 500,000) nationwide. When the company was established in 1994, it concentrated on the Tokyo metropolitan area. After the Great East Japan Earthquake in 2011, however, Hoosiers began shifting its focus to regional core cities. (In FY03/21, regional areas accounted for 80% of condominium sales. Since 2015, the company has diversified, moving into condominiums for seniors and real estate investment.

Origin of the company name: “Hoosier” is a nickname for a person from the central US state of Indiana. The company based its name on the perception that Hoosiers enjoy relatively sumptuous housing conditions even if annual incomes are not particularly high. The name therefore carries the context of “bringing better living conditions to the people of Japan.”

The company has five segments: the Real Estate Development segment, which handles new-build condominiums (68.4% of total revenue and 87.1% of operating profit in FY03/21); the CCRC segment, which handles condominiums for seniors (14.3%, 6.5%); the Real Estate Investment segment, which holds and sells income property (9.5%, 7.5%); the Condominium Management and Related Services segment (7.7%, operating loss of JPY71mn); and the Other (PFI) segment, which handles business related to private finance initiatives (0.1%, 0.1%).

Business structure and customer segments

Condominium Management and Real Estate Development CCRC Real Estate Investment Other (PFI) Related Services Condos for Management Sales of Investment Condo Business unit Condominiums Houses Rental Flats Overseas Sports clubs Hotels PFI seniors for seniors houses ma na gement ma na gement North Am., Region Greater Tokyo Local Greater Tokyo Greater Tokyo Greater Tokyo, local Greater Tokyo, local Local Asia Development Fee service Development Development Fee service Development Fee service Profit type Development profit Rental profit Fee service income profit income profit profit income profit income % of total profit 70–80% 15–25% About 5% Family households (middle ◎〇◎ ------〇 (Asia) ◎◎◎ - Buying to class) live Senior households (high net 〇◎ - ◎◎ -----◎ --- worth) Customers Individual investors (high net Investment ------◎ ------worth) Corp., 〇 (North investors ------〇〇 - ---- America) (fund/REIT)

Condominium development in regional cities New business model looking Development capabilities unique to developers, product offerings to meet Main characteristics, strength Stable earnings, affinity with local redevelopment activities (little competition) ahead to market expansion diverse lifestyles Source: Shared Research based on company data

Real Estate Development segment, a major contributor to revenue and profit Over the five years to FY03/21, revenue has grown at a CAGR of 20.6%, with operating profit rising at 24.7%. The company focuses on the family-oriented housing market in Greater Tokyo including metro area and on high-net-worth individual customers in regional areas nationwide. In the outskirts of Tokyo and metro area, the company sells detached houses. In regional core cities, the company targets customers who already own detached houses in regional core cities but want to relocate to highly convenient urban centers. The company notes that supplies of condominiums in outlying areas are lower than those targeting first-time home buyers in the Tokyo metropolitan area. The company expects to continue focusing on this market in the Real Estate Development segment, partly because only a few companies are developing and supplying condominiums in regional areas.

Regional cities accounted for 80% of the condominium business (in FY03/21, based on the number of buildings). In FY03/21, the company sold 1,270 units of condominiums (80% in regional areas). For reference, prices were around JPY20mn for condominiums in Ishinomaki, Miyagi Prefecture (e.g., JPY20mn for a 67sqm-condo located a 9-minute walk from Ishinomaki Station) and around JPY30mn for properties in Kasugai, Aichi Prefecture (e.g., for a 60sqm-condo located a 6-minute walk from Kasugai Station). According to a study by the Japan Real Estate Institute, in 2019 Hoosiers ranked third, by sales, in the condominium business in regional areas.

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Background to the company’s shift toward the regional condominium business When the company was founded, it concentrated on sales of family-oriented condominiums on the Tokyo outskirts. Its first business was in Saitama and Chiba prefectures, which neighbor Tokyo. The condominium business in the Tokyo metropolitan area grew increasingly difficult for the company after 2013, due to soaring land and construction costs. The company changed course substantially following the global financial crisis of 2008 and the Great East Japan Earthquake of 2011; since 2017, Hoosiers has developed the condominium business in regional core cities.

Regional areas are characterized by a growing number of vacant houses, while their urban centers are hollowing out as businesses move out and stores close. Even while their buildings are becoming decrepit, due to falling tax revenues many local governments lack the funds to rebuild these buildings. These local governments need to make their regions more attractive through redevelopment and attract stores and companies to their regions. The reality, however, is a lack of incoming companies and sponsors. Against this backdrop, Hoosiers is working with local governments to promote redevelopment in regional core cities by supplying high-quality condominiums.

Positioning Real Estate Investment as a growth business Hoosiers is positioning the Real Estate Investment segment as a growth business. This segment includes three businesses: real estate investment, asset investment, and overseas business. In this segment, the company provides rental housings and other income property to professional investors (high-net-worth individuals, operating companies, J-REITs, and private funds) to hold and sell. From FY03/16 to FY03/20, external revenue in this segment rose by 5.2x, from JPY4.2bn to JPY21.8bn. Over the same period, operating profit increased 3.7x, from JPY976mn to JPY3.6bn. In FY03/21, external revenue was down 66.1% YoY, due to the company’s decision to curtail sales of real estate during the fiscal year in favor of continued holdings. Despite the decline in revenue, Hoosiers continued to see the segment as a growth business.

Other business segment The company has a CCRC (“Continuing Care Retirement Community”) segment. Business in this segment includes development of condominiums for healthy seniors, long-term care insurance, and condominium operation and management. In the Condominium Management and Related Services segment, the company operates and manages sports clubs, condominiums, and hotels.

Value-added earned through sales (capital gains) is the source of profits Hoosiers derives profits from the sale of income producing properties. Thanks in part to favorable real estate market conditions over the past few years (as of FY03/21), the Real Estate Investment segment has generated higher gross profit margins than the company’s mainstay Real Estate Development segment. Over the past five years, OPM has averaged 16.5% in the Real Estate Investment segment, versus 9.2% for the Real Estate Development segment. This difference reflects the higher selling expenses in the Real Estate Development segment. (In addition to land and construction costs, in the condominium business the company incurs expenses to maintain model rooms and expenses for sales personnel.) The Real Estate Investment segment involves lower selling costs, as the company sells entire buildings rather than units.

Another reason for the higher profitability in the Real Estate Investment segment is that the company earns rental income on real estate it holds prior to sale, contributing to operating profit. In FY03/21, the Real Estate Investment segment generated external revenue of JPY7.4bn, of which JPY2.4bn was rental income. (The company does not disclose the operating profit percentages.)

Concentrating on housing, which is relatively unaffected by volatilities in real estate market conditions We understand that the condominium unit sales business is relatively impervious to these influences, for two reasons. First, sales are mostly to individuals, where demand is firm. Second, the company concentrates on condominiums conveniently located in regional core cities, where demand is expected to be robust. Regarding profits on the sale of income-producing properties, it is typically susceptible to swings in real estate market conditions. Shared Research understands that investor sentiment and market conditions are particularly important factors in the Real Estate Investment segment, which centers on the sale of income-producing properties. The company sells residential buildings to a range of professional investors, including high-net-worth individuals, companies, real estate funds, and other professional investors.

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FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 Revenue Real Estate Development Revenue from external customers 21,708 30,911 21,861 53,107 46,508 55,315 Revenue from internal customers - - - 17 99 54 Sum 21,708 30,911 21,861 53,125 46,608 55,370 % of total revenue 60.3% 58.3% 34.2% 58.6% 54.2% 68.4% YoY - - - 143.0% -12.3% 18.8% CCRC Revenue from external customers 942 4,285 14,639 5,823 8,947 11,466 Revenue from internal customers 29 38 129 199 190 75 Sum 971 4,323 14,769 6,022 9,138 11,542 % of total revenue 2.7% 8.1% 23.1% 6.6% 10.6% 14.3% YoY - - - -59.2% 51.7% 26.3% Real Estate Investment Revenue from external customers 4,192 4,484 11,074 11,990 21,826 7,409 Revenue from internal customers 4 170 229 248 295 290 Sum 4,196 4,655 11,304 12,239 22,122 7,700 % of total revenue 11.6% 8.8% 17.7% 13.5% 25.7% 9.5% YoY - - - 8.3% 80.8% -65.2% Condominium Management and Related Service Revenue from external customers 1,457 4,029 6,555 8,278 7,857 5,959 Revenue from internal customers 31 102 112 260 253 280 Sum 1,489 4,131 6,667 8,538 8,111 6,239 % of total revenue 4.1% 7.8% 10.4% 9.4% 9.4% 7.7% YoY - - - 28.1% -5.0% -23.1% Other (PFI) Revenue from external customers 8 38 45 59 90 72 Revenue from internal customers ------Sum 8 38 45 59 90 72 % of total revenue 0.0% 0.1% 0.1% 0.1% 0.1% 0.1% YoY - - - 31.1% 52.5% -20.0% Adjustments Revenue from external customers ------Revenue from internal customers -82 -328 -490 -744 -839 -701 Sum -82 -328 -490 -744 -839 -701 Total revenue Revenue from external customers 35,943 52,726 63,364 89,982 85,231 80,222 Revenue from internal customers ------Sum 35,943 52,726 63,364 89,982 85,231 80,222 Segment profit Real Estate Development 1,552 3,991 1,909 5,992 2,212 4,671 Segment profit margin 7.1% 12.9% 8.7% 11.3% 4.7% 8.4% % of total segment profit 49.1% 73.3% 25.9% 63.2% 34.4% 87.1% CCRC 243 302 1,775 89 259 351 Segment profit margin 25.1% 7.0% 12.0% 1.5% 2.8% 3.0% % of total segment profit 7.7% 5.5% 24.1% 0.9% 4.0% 6.5% Real Estate Investment 976 652 2,771 2,711 3,637 402 Segment profit margin 23.3% 14.0% 24.5% 22.2% 16.4% 5.2% % of total segment profit 30.9% 12.0% 37.6% 28.6% 56.6% 7.5% Condominium Management and Related Service -32 -94 -4 10 300 -71 % of total segment profit - - - 0.1% 4.7% - Other (PFI) -14 8 8 - 11 8 % of total segment profit - 0.1% 0.1% - 0.2% 0.1% Adjustments 25 145 -86 -198 270 72 Total segment profit 3,184 5,590 7,289 9,287 6,692 5,435 Segment assets Real Estate Development 28,724 30,574 38,433 40,276 45,792 31,460 % of total segment assets 46.2% 34.6% 35.5% 30.1% 38.8% 29.5% CCRC 7,697 19,386 12,488 17,850 19,468 20,217 % of total segment assets 12.4% 21.9% 11.5% 13.4% 16.5% 18.9% Houses and Flats 10,157 11,489 17,340 21,729 - - % of total segment assets 3 2 2 2 - - Real Estate Investment 14,858 21,747 34,714 50,179 49,596 51,418 % of total segment assets 23.9% 24.6% 32.0% 37.6% 42.0% 48.2% Condominium Management and Related Service 732 5,152 5,372 3,545 3,245 3,579 % of total segment assets 1.2% 5.8% 5.0% 2.7% 2.7% 3.4% Other (PFI) 11 23 24 39 56 61 % of total segment assets 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% Adjustments 12,406 16,286 26,985 21,171 25,738 29,293 Total segment assets 74,586 104,660 135,359 154,792 143,897 136,030 Note: From FY03/21, Detached houses is included in Real Estate Development, and Apartments is included in Real Estate Investment. Up to FY03/16, segments were Real Estate Sales and Property Management. Figures from FY03/17 are presented for purposes of comparison. Source: Shared Research based on company data

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Real Estate Development segment (68.4% of revenue and 87.1% of operating profit in FY03/21)

In the mainstay Real Estate Development segment, the company develops new-build condominiums and detached houses. The company reshuffled its segments in FY03/21, bringing the detached housing business into this segment. According to Hoosiers’ fact book, in FY03/21 segment revenue was JPY55.5bn, and operating profit was JPY4.7bn. Condominiums accounted for JPY45.3bn of revenue, detached houses for JPY9.8bn, and other property for JPY378mn. Condominiums in regional areas make up a particularly high percentage of revenue, accounting for 80% in FY03/21 (based on the number of buildings).

Condominium business In regional core cities, the company’s main customers are people who already own houses but want to relocate to highly convenient urban centers. The company develops and sells high-end condominiums (brand name: Duo Hills) for this market. The company also develops and sells compact condominiums (brand name: Duo Veel). These are designed for single women who live in major metropolises: Tokyo, Sapporo, Nagoya, and Fukuoka. The company develops detached houses under the Duo Avenue brand. The company sells detached houses mainly in the Jonan/Josai area of Tokyo, as well as in Aichi and Kanagawa prefectures.

Of the new-build condominiums the company supplied between FY03/17 and FY03/21, 62% were in regional core cities and 38% were in the Tokyo metropolitan area. The 62%breaks down further into cities with populations of 100,000 to 500,000 (39%), cities of more than 500,000 (17%), and cities of fewer than 100,000 (6%).

A major change in focus to condominiums in regional core cities When the company was first founded, it concentrated on sales of family-oriented condominiums on the Tokyo outskirts. Its first business was in Saitama and Chiba prefectures, which neighbor Tokyo. This regional focus was due in part to President Hirooka’s familiarity with land in this vicinity through his previous employment at Recruit Cosmos Co., Ltd. (now Cosmos Initia Co., Ltd.) Also, at that time land in the area was relatively inexpensive. Also, from the company’s start of business in 1994 through 2009, the Japanese economy was deflationary. As a result, the costs of land and construction were relatively low at the time, making condominium sales in the Tokyo suburbs highly profitable. From around 2013, amid soaring land and construction costs Hoosiers found it difficult to differentiate itself in the condominium business in the Tokyo metropolitan area.

Impact of the global financial crisis and Great East Japan Earthquake The company shifted its business focus significantly following the global financial crisis of 2008 and the Great East Japan Earthquake of 2011, and from 2017 it began developing condominiums in regional core cities. Shortly after the 2011 earthquake, President Hirooka decided the company should make construction in disaster areas a business focus. As part of its redevelopment work, the company began developing and selling condominiums in the city of Ishinomaki, Miyagi Prefecture. Whereas no large developers came forward, Hoosiers’ decision to shoulder the risk of development in this area marked its full-fledged entry into the regional condominium business.

Assuming steady demand for condominiums in regional core cities The main buyers of the company’s condominiums in regional core cities are high-net-worth individuals who are cash-rich. Frequently they already own detached houses, but they want to move to urban centers with more convenient access to shopping and lifestyle activities. They tend to purchase the properties with cash. The company says sales are favorable, as it typically develops condominiums in areas that were previously unbuilt or had few condominiums.

Growing steadily through alliances with redevelopment consultants The company is working with local governments to redevelop central areas of regional core cities. Hoosiers concentrates on converting commercial facilities in convenient central locations to joint use as condominiums. The company has steadily built up expertise in this area by working with consultants experienced in redevelopment. As populations decline, this approach offers a way for local governments to encourage seniors to relocate from suburbs to more convenient central areas. The company believes demand for condominiums in regional core cities have room to grow.

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Large developers, such as Mitsui Fudosan and Sumitomo Realty & Development, have been cautious about developing condominiums in regional cities. Being small relative to their scale of operations in the Tokyo metro area, these areas are less attractive to large developers. Hoosiers says the right market size for new-build condominiums in regional core cities is 50 to 100 units. At an average selling price of JPY30mn per unit, a block would deliver JPY1.5bn to JPY3.0bn, which is too small to attract large developers.

Conversely, such markets are too large for local developers, who also lack expertise in redevelopment. This situation puts Hoosiers at a competitive position. Hoosiers has been collaborating with shopping districts and local governments in regional core cities since the start of its redevelopment business, working to re-energize and reinvigorate these areas. Shared Research understands that the company is leveraging this experience to develop condominiums in regional core cities.

Room for growth in condominiums in regional core cities In FY03/14, the company generated 28.6% of revenue in the Real Estate Development segment from business in regional areas. By FY03/21, this figure had risen to 80%. The company has defined its target market as the 230 cities around Japan with populations of 100,000 to 500,000. Hoosiers believes it has ample room to grow, as it has developed real estate in only 70 of these cities to date. The company narrowed its number of target cities down further, to 50 (areas where competition is not excessive and demand is favorable). Between 2016 and 2020, the company developed and sold 6,100 units in these areas, 51% of what it calculates to be the potential demand of 12,000 units. Put differently, the company believes these markets still have another potential demand for 5,900 units (the remaining 49%).

The company explains that redevelopment projects are an effective way to spur condominium demand in regional areas. Sites of former shops and department stores that have vacated the area are a frequent occurrence in the central urban areas of regional locations. Redevelopment into condominiums helps revitalize these regions. One such example is Duo Hills Yamagata Nanokamachi Tower, a block of condominiums in the city of Yamagata (in Yamagata Prefecture). This was the first large-scale development in Yamagata’s Nanokamachi area in eight years. The population of central Yamagata had been on a decline; the company expects this development to boost the resident population and prompt an urban turnaround. As a landowner, the company heads the local redevelopment association and is collaborating with the city of Yamagata and the local chamber of commerce to attract named tenants to empty store spaces. The company is also promoting a plan to support female entrepreneurs.

Hoosiers’ redevelopment business (These are projects outside metropolitan areas that have involved a city planning decision or were completed in the five years from 2016 to 2020.)

Condos Redevelopment project Type District Area Population Project status Fiscal year for sale Ishinomaki Terrace Independent Y Ishinomaki 3-1 Chuo 89,688 Completed FY 03/17 Hakodate Marks the Tow er Independent Y Hakodate Hakodate Ekimae Wakamatsu 265,979 Completed FY03/18 Duo Hills Ishinomaki Tachimachi Independent Y Ishinomaki 2-5 Tachimachi 89,688 Completed FY03/18 The Tow er Obihiro JV Y Obihiro West 3-9 169,327 Rights transfer plan approved FY03/19 Duo Hills Shiogama Kaigandori Independent Y Shiogama Shiogama Kaigandori 1, 2 54,187 Rights transfer plan approved FY03/19 Duo Hills Yamagata Nanokamachi Tow er Independent Y Yamagata Block 5 South, Nanokamachi 253,832 Rights transfer plan approved FY03/20 Okayama Omotecho redevelopment project Independent Y Okayama 3-15 Omotecho, Okayama 719,474 City planning decision FY03/21 Iw aki Eki Namiki Dori regional redevelopment project JV Y Iw aki Iw aki Eki Namiki Dori 350,237 Project plan approved FY03/21 Source: Shared Research based on company materials (Urban Renewal Coordinator Association of Japan, based on original data from the Urban Renewal Association of Japan)

The company says 35 urban redevelopment projects have taken place between 2016 and 2020 in Japan (including condominium developments, but excluding metropolitan areas). Hoosiers has been involved in eight of these projects, six on its own and two through joint ventures. Daikyo, a competitor, is the only company that was involved in more of these projects (nine, and only three of these projects were on its own). Shared Research understands that Hoosiers is working to use its experience and expertise in the redevelopment business in regional core cities to distinguish itself from competitors.

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Urban redevelopment business (including condominium development, excluding metropolitan areas) Developer Total Individual JV Hoosiers 8 6 2 Daikyo 9 3 6 Mitsubishi Estate 5 1 4 Marimo 4 3 1 Daiwa House Industry 4 1 3 Asahi Kasei Realty & Residence 2 1 1 Nomura Real Estate Development 3 1 2 Source: Shared Research based on company earnings presentation materials for FY03/21 (Urban Renewal Coordinator Association of Japan, based on original data from the Urban Renewal Association of Japan)

As of May 2021, the company was involved in three such projects on its own and four through joint ventures. The independent projects are Ishinomaki Chuo 2-4 district (Miyagi Prefecture), Mito Ekimae Sannomaru district (Ibaraki Prefecture), and Tawaramoto Ekinan district (Nara Prefecture). The joint ventures are Tajimi Ekinan district (Gifu Prefecture), Honatsugi Ekiminamiguchi district (Kanagawa Prefecture), and two others.

Redevelopment projects underway Sales Project name Prefecture Area Type Participation Project state phase Ishinomaki Chuo 2-4 district Miyagi Others Development business for superior buildings Independent Subsidy grant approved On sale Tajimi Ekinan district Gifu Metropolitan area Category 1 urban redevelopment project JV Rights transfer plan approved On sale Honatsugi Ekiminamiguchi district Kanagawa Metropolitan area Category 1 urban redevelopment project JV Rights transfer plan approvedOn sale Oyamacho Crosspoint Tokyo Metropolitan area Category 1 urban redevelopment project JV Rights transfer plan approved - Mito Ekimae Sannomaru district Ibaraki Metropolitan area Category 1 urban redevelopment project Independent Project plan approved - Ome Ekimae district Tokyo Metropolitan area Category 1 urban redevelopment project JV Project plan approved - Tawaramoto Ekinan district Nara Metropolitan area Category 1 urban redevelopment project Independent Project plan approved - Fukui Prefecture project Fukui Others - - - - Aomori Prefecture project Aomori Others - - - - Tochigi Prefecture project Tochigi Metropolitan area - - - - Source: Shared Research based on the company’s earnings presentation materials for FY03/21 Note: As of May 2021

Duo Hills Yamagata Nanokamachi Tower Duo Hills Sakai The Residence

▷ Completed in March 2021 ▷ Scheduled for completion in August 2022

▷ 144 units ▷ 81 units

▷ Access: A 19-minute walk from Yamagata Station on the ▷ Access: 6-minute walk from Sakai Station on the Nankai Yamagata Shinkansen Line Main Line

▷ Steel-reinforced concrete structure with some steel ▷ Steel-reinforced concrete structure, 14 stories above structural areas; 20 stories above ground ground

▷ Site area: 2,170.27sqm ▷ Site area: 1,348.53sqm

▷ Total floor space: 16,264.85sqm ▷ Total floor space: 6,016.33sqm Source: Shared Research based on company data

The condominiums the company has developed in regional areas are diverse and tailored to regional needs. Duo Hills Yamagata Nanokamachi Tower condominiums have 15 different floor layouts, ranging from 66sqm 3LDKs (three rooms plus a living/dining/kitchen area) to 100sqm 4LDKs. By offering a variety of layouts, the company caters to people who want compact

20/63 Hoosiers Holdings / 3284 RCoverage LAST UPDATE: 2021.08.05 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

living areas as well as families who require more space. These condominiums are located within a five-minute walk of shops and restaurants, and have convenient access to museums and other cultural facilities. The area is home to the Yamagata Hanagasa Festival, one of the four great festivals in the Tohoku area.

Differentiating development from a female perspective Compared with other Japanese companies, Hoosiers’ ratio of female employees is high, at 42% (FY03/20). These employees concentrate on developing condominiums with features that other women will find attractive. The company says that more than 10% of managers (section manager level or above) are women. According to Hoosiers, the women of a family tend to play a major role in deciding what condominiums or houses to buy. Accordingly, taking a female perspective into consideration when building properties is vital. Many women work in the company’s condominium development department, where they play a major role at the product planning and development stage. Women are also active in frontline sales.

Examples of products developed from a female perspective Women have been instrumental in developing a number of fittings: a toilet paper holder with a shelf for small items, a towel rack with a hook for accessories, a shoe cupboard with storage space for a folding baby buggy, and a closet for storing futons. The company offers numerous plan variations. For example, spacious walk-in closets are popular with women and families who have lots of clothing. Kitchen islands facilitate communication with guests.

Toilet paper holder with shelf Towel rack with hook for accessories

Shoe cupboard with storage space for a folding baby buggy Futon closet

Source: Shared Research based on company materials

Compact condominiums that target working women In major urban areas (the Tokyo metro area, as well as Nagoya, Sapporo, and Fukuoka), the company develops compact condominiums targeting working women (brand name: Duo Veel). In addition to being developed from a female perspective, the company notes that security, privacy, and storage space are selling points for these compact condominiums. The condominiums are priced to be affordable for single women. For example, 30sqm compact condominiums at Duo Veel Sakae (Aichi Prefecture) are priced at JPY27mn. The COVID-19 pandemic has encouraged women to think more carefully about their living arrangements, says the company, prompting them to move out of cramped rental housing.

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Duo Veel Sendai Kamisugi Walk-in closet

▷ Scheduled for completion in November 2021 (1) Adjustable-height pillow storage

▷ 58 units (2) Hanger for short clothing (optional) (3) Hanger pipe for long clothing ▷ Access: 2-minute walk from Kita-Yobancho Station on the Namboku subway line (4) Adjustable-height shelving Island kitchen ▷ Steel-reinforced concrete structure, 13 floors above ground

▷ Site area: 426.05sqm

▷ Total floor space: 2,866.54sqm

Source: Shared Research based on company data

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Duo Veel Nishijin Integrated sink

Storage behind three mirrored doors

▷ Scheduled for completion in July 2021

▷ 57 units

▷ Access: 5-minute walk from Nishijin Station on the Airport subway line

▷ Steel-reinforced concrete structure, 15 stories above ground ▷ Site area: 572.71sqm

▷ Total floor space: 2677.36sqm Source: Shared Research based on company data

Duo Veel Sakae

▷ Scheduled for completion in September 2022

▷ 72 units

▷ Access: 5-minute walk from Yabacho Station on the Meijo subway line

▷ Steel-reinforced concrete structure, 15 stories above ground

▷ Site area: 471.01sqm

▷ Total floor space: 2,955.29sqm Source: Shared Research based on company data

Target under new medium-term management plan: improve profitability The new medium-term management plan, announced in January 2021, sets KPIs to be achieved by FY03/26 in the residential property sales business (Real Estate Development segment + CCRC segment). The company is targeting units delivered of 1,500–1,700 (1,663 units in FY03/21), revenue of JPY60.0–65.0bn (JPY66.8bn), and a contribution to consolidated net income of JPY1.9–3.0bn. (Profit target excludes management of condominiums for seniors.) The company has already acquired enough land to meet its property sales targets through FY03/23 (excluding the detached housing business).

A falling inventory turnover ratio Instead of pursuing growth in volume (i.e., the number of units delivered), the company aims to increase profits through improved profitability. The inventory turnover ratio has fallen over the past decade, from 1.56x at its peak in FY03/13 to 1.11x in FY03/21. By increasing turnover, the company intends to boost profitability without expanding the balance sheet. The company also intends to step up supplies of condominiums in its main market (central urban areas of regional core cities) where existing demand is not being met. With working styles changing due to the COVID-19 crisis, the company believes regional core cities are coming into the limelight and will underpin demand over the medium term. For reference, Hoosiers ranked third in 2019 in a nationwide ranking of condominium providers in the “other regions” category, which excludes the Tokyo and Osaka areas.

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Detached houses In the Tokyo metropolitan area and its suburbs, Hoosiers has a detached housing business (the Duo Avenue brand). The main sales area for this business is Tokyo’s Jonan and Josai areas, as well as Aichi and Kanagawa prefectures. Typical prices are JPY60mn to JPY69mn for a 90–100sqm house on a 110–120sqm site in Shakujii, Nerima-ku, Tokyo, an 11-minute walk from the nearest train station. Another typical example is a house priced at around JPY75mn in Kawasaki, Kanagawa Prefecture: a 100sqm building on a 160sqm site, located 10 minutes on foot from Saginuma Station. Hoosiers’ homes are in the upper-middle price range and tend to target demand from families who want spacious homes.

Hoosiers plans to sell around 100 detached houses per year. The company notes that the COVID-19 pandemic has heightened demand for comfortable, spacious living quarters. Demand for detached housing is relatively firm, explains the company, helping to offset earnings volatility in the condominium business.

Duo Avenue Nerima Shakujiidai ▷ Completed in May 2021

▷ 20 blocks

▷ Access: 11-minute walk from Musashi-Seki Station on the Seibu Shinjuku Line

▷ Wooden, two-story (2x4 construction)

▷ Zoning: Category I low-rise residential-only zone

Source: Shared Research based on company materials

Duo Avenue Hachioji II

▷ Completed in August 2020

▷ 30 blocks

▷ Access: 12-minute walk from Hachioji Station on the JR Chuo Honsen, Yokohama, and Hachiko lines; 12-minute walk from Keio Hachioji Station on the Keio Line

▷ Wooden, two-story (2x4 construction)

Source: Shared Research based on company materials

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CCRC segment (14.3% of revenue and 6.5% of operating profit in FY03/21)

Business in the CCRC segment includes development of condominiums for healthy seniors, long-term care insurance, and the operation and management of condominiums for seniors. The segment name is short for “continuing care retirement community” and describes the company’s approach of ensuring ongoing care for seniors from the time they are healthy until they require long-term care. The company sells condominiums for seniors under the Duo Scene brand via Hoosiers Care Design, a wholly owned subsidiary.

In FY03/21, this segment produced revenue of JPY11.5bn and operating profit of JPY351mn. OPM, at 3.0%, is lower than that in other segments because of the company’s aggressive investment in staffing for future growth. The company expects profitability to gradually improve as utilization rates of condominiums improve. The number of units sold was 162 in FY03/19, 206 in FY03/20, and 268 in FY03/21.

Target under new medium-term management plan: increase profitability instead of pursuing quantity Although the new medium-term management plan does not specify unit sales targets, in this segment company says it aims to sell between 200 and 300 units per year and expand profit by improving profitability rather than increasing scale (i.e., the number units sold). The company already has enough land in inventory to meet its unit sales targets through FY03/23. The company had 1,385 units under operation in FY03/21. The company already has 1,000 units in the pipeline from FY03/22 and aims to reach 2,500 units under operation by FY03/26.

Target customers: healthy seniors In this segment, the company targets healthy seniors who own their homes. Buyers tend to be high-net-worth individuals who are in their early 70s and have financial assets worth JPY100mn or more. The company tends to supply condominiums on the outskirts of the Tokyo metro area, in areas convenient for everyday life. Buyers often purchase condominiums in cash. The company says the number of healthy seniors aged 65 or older who live in the three prefectures around Tokyo (Chiba, Kanagawa, and Saitama prefectures) and along the Tsukuba Express train line (Ibaraki Prefecture) is forecast to rise to 10.3mn in 2045, from 8.5mn in 2020.

Main services provided The primary services these facilities provide are round-the-clock monitoring, health support, medical care, and nursing care (even though healthy seniors are the main market). Common spaces offer restaurants, large spas, and rooms for karaoke and other leisure activities. Facilities also have resident nurses and 24-hour staff. Toilets, sinks, baths, kitchens, storage, bedrooms, and living rooms are in private areas. Facility staff prepare meals and cleaning services, so residents can enjoy their leisure time pursuing hobbies, karaoke, shopping, or other pastimes. Hoosiers has built up substantial experience in this area; as of September 2020, the company was Japan’s leading provider of condominiums for seniors on a cumulative basis.

How condominiums for seniors differ from serviced housing for the elderly and fee-charging nursing homes There are five main differences between condominiums for seniors and serviced housing for the elderly and fee-charging nursing homes: 1) freedom of lifestyle, 2) monitoring and medical care, nursing care, and health support services, 3) amount of living space, 4) type of rights, and 5) asset prices.

In terms of freedom of lifestyle, condominiums for seniors place fewer restrictions on outings and facility use than the other two categories of housing. Despite having fewer people providing nursing care services, condominiums for the elderly offer monitoring and medical care, nursing care, and health support on a par with serviced housing for the elderly and fee-charging nursing homes. Condominiums for seniors have more living space: typically, around 60sqm versus only around 20sqm in serviced housing for the elderly and fee-charging nursing homes.

Hoosiers’ condominiums for seniors include ownership rights, whereas serviced housing for the elderly offer the right to lease and fee-charging nursing homes provide right of use. Because they have ownership rights, the company’s condominiums for seniors have asset characteristics; serviced housing for the elderly and fee-charging nursing homes do not.

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Major projects completed in FY03/21 Major projects completed in FY03/21 were Duo Scene Sagamihara Kamimizo Ekimae (233 units, completed in June 2020), Duo Scene Yokohama Higashi Totsuka (186 units, completed in November 2020), Duo Scene Funabashi Takanedai (208 units, completed in February 2021). One key project scheduled for completion in FY03/22 is Duo Scene Omiya (266 units, scheduled for completion in August 2021). Units at Duo Scene Sagamihara Kamimizo Ekimae (51sqm) and Duo Scene Funabashi Takanedai (39sqm) are both priced at around JPY30mn.

With more seniors refraining from outings, the company has had fewer visits to its model rooms during the COVID-19 pandemic. Even so, the company is investing aggressively in the CCRC segment, which it believes offers the sort of housing that will be in demand as Japanese society ages. The company targets a contract rate of 70% at project completion but says the current figure is slightly below this level.

Sold with unit ownership rights rather than right of use Previously, the CCRC business provided right-of-use properties; it now develops and sells condominiums for seniors with unit ownership rights attached. To date, real estate developers have been cautious about providing condominiums for seniors with unit ownership rights attached. The reason is that developers have intended to avoid such sensitive issues as selling units after their owners have died or transferring rights if residents develop dementia.

The company works to keep monthly fees low to reduce the burden on residents. According to its website, the standard management charge for the use of common spaces on properties in the Tokyo metropolitan area is between JPY40,000 and JPY70,000 per month. Meals (three a day) are billed separately, and monthly charges for repair reserve funds are JPY6,000 to JPY10,000. The company’s charges are lower than for right-of-use condominiums for seniors.

Duo Scene Omiya

▷ Scheduled for completion in August 2021

▷ 266 units

▷ Access: Bus from Omiya Station on the JR Keihin Tohoku and Takasaki lines, 8-minute walk from Tetsudo Hakubutsukan Station on the Saitama New Urban Transit Line

▷ Steel-reinforced concrete structure, 10 stories above

ground

▷ Site area: 7,959.06sqm

▷ Total floor area: 19,392.71sqm Source: Shared Research based on company materials

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Duo Scene Funabashi Takanedai Common space

▷ Completed in February 2021

▷ 208 units

▷ Access: 4-minute walk from Takanekodan Station on the Shin-Keisei Line

▷ Steel-reinforced concrete structure, 10 stories above ground

▷ Site area: 6,546.65sqm

▷ Total floor area: 15,677.87sqm Source: Shared Research based on company materials

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Duo Scene Yokohama Higashi Totsuka

Common spaces

Lounge

▷ Completed in November 2020

▷ 186 units

▷ Access: By bus from Higashi-Totsuka Station on the JR Yokosuka Line

▷ Steel-reinforced concrete structure, five stories above ground

▷ Site area: 8,586.56sqm Large communal bath (artificial hot spring) ▷ Total floor area: 15,395.28sqm Capacious entry storage

Living/dining area

Source: Shared Research based on company materials

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Real Estate Investment segment (9.5% of revenue and 7.5% of operating profit in FY03/21)

This segment contains the real estate investment, asset management, and overseas businesses. Revenue in this segment comes from rental income on income property and gains on the disposition of property. In FY03/21, the segment generated revenue of JPY7.4bn. Of this amount, JPY2.4bn was from rental income, and JPY4.4bn came from the disposition of real estate. Due to a reshuffling of segments, the development of rental housings was included in the Real Estate Investment segment in FY03/21.

Hoosiers Asset Management, a wholly owned subsidiary, handles real estate investment and asset management. Two other companies are also involved in these businesses, Vermilion Capital Management (an asset management company in which Hoosiers acquired a 50% stake in September 2017) and Hoosiers REIT Advisors (a wholly owned subsidiary that is scheduled to manage assets of a future private REIT).

Real Estate Investment segment positioned as a growth business From FY03/16 to FY03/20, revenue in this segment rose by 5.2x, from JPY4.2bn to JPY21.8bn. Over the same period, operating profit increased 3.7x, from JPY976mn to JPY3.6bn. In FY03/21, revenue was down 66.1% YoY, due to the company’s decision to curtail dispositions of real estate during the year in favor of continued holdings. Despite the decline in revenue, Hoosiers continued to see the segment as a growth business.

Balance sheet amounts and future investment opportunities As of end-FY03/21, the Real Estate Investment segment held assets of around JPY35.0bn, including JPY12.0bn in real estate for sale. This figure breaks down approximately into 20% offices, 20% residential, and 60% other properties (such as sports facilities, hotels, and parking lots). Going forward, the company plans to accelerate its acquisition of buildings in favorable locations near train stations in regional areas. Such property provides stable rental income, and the company plans to use it to take advantage of investment opportunities such as urban redevelopment and reconstruction into condominiums. To date, the company has maintained a balanced portfolio spanning residential property, offices, commercial property, and hotels. Hoosiers intends to change this weighting, so that 75% or more of its portfolio is “residential property or offices that can be converted to residences.” The company is acquiring real estate in regions where populations are falling because it believes high-net-worth individuals are likely to move from outskirts to convenient station-front locations in regional core cities. The company thinks it can capture significant demand by collaborating with government entities to build parks and other infrastructure and providing attractive, high-end condominiums.

The company intends to use its expertise in condominiums to purchase land for development into new rental flats (small units priced at JPY500mn or less, sold under the Duo Maison brand) and rental housings (sold under the Duo Flats brand). Hoosiers plans to sell completed buildings on to high-net-worth individuals and real estate funds.

Development projects Two of the company’s recent developments are Duo Flats Nishijin East and West in the city of Fukuoka. With this project, the company aims to strike a balance between its goal of sustainable urban development and providing an ideal lifestyle for residents. The project is designed to be low in energy requirements, and housing is developed around the concept of environmentally friendly bicycling. Residences will have indoor bike parking spaces and walls they can refurbish by themselves. At Duo Flats Nishijin West, a shared space on the first floor houses a cycle shop and café, as well as a lounge and terrace where bike friends can gather. With these projects, Hoosiers is focused on providing higher value to a narrower range of target customers.

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Duo Flats Nishijin East and West

▷ Name: Duo Flats Nishijin East

▷ Address: Imagawa 2-chome, Chuo-ku, Fukuoka

▷ 36 units

▷ Scheduled for completion in January 2022

▷ Scheduled move-in date: From February 2022

▷ Name: Duo Flats Nishijin West

▷ Address: Takatori 1-chome, Sawara-ku, Fukuoka

▷ 36 (cycle shop and café on 1F)

▷ Scheduled for completion in January 2022

▷ Scheduled move-in date: From February 2022 Source: Shared Research based on company materials

Acquisition of station-front old buildings in regional core cities One project in this genre is the former Nippon Life building, located in front of Nagano Station. Completed in 1972, this medium-sized 49-year-old building (as of 2021) has a standard floor size of 671sqm and total floor space of 9,349.07sqm. Structurally intact and well maintained, the building is also sited conveniently, being just five minutes on foot from Nagano Station, so the company believes it can generate rental income on the building. Local companies lack the financial muscle to purchase the property, while large real estate developers are uninterested because the building offers low liquidity. Hoosiers plans to hold the property for a certain period for its stable rental income. At some point in the future, it intends to demolish the building and build condominiums.

While liquidity risk (the risk of being unable to sell for the expected price) is higher on station-front buildings in regional areas than in major metropolises, the company believes the risks of rising vacancies and falling rents for these buildings in poor economic times are low. If market conditions deteriorate, the company can choose between long-term holding and conversion to condominiums. The company believes station-front buildings such as the above are in good locations for conversion into condominiums and that it has the development expertise to do so.

Hoosiers Nagano Ekimae Building (formerly the Nippon Life Nagano Building) ▷ Completed in May 1972

▷ Access: 5-minute walk from Nagano Station on the Nagano Railway Line

▷ Steel/steel-reinforced concrete structure, eight stories above ground, two below

▷ Standard floor area: 671.0sqm

▷ Total floor area: 9,349.07sqm

Source: Shared Research based on company materials and CBRE data

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Hoosiers Sapporo Building

▷ Completed in May 1974

▷ Access: 3-minute walk from Sapporo Station on the Namboku metropolitan subway line

▷ Steel/steel-reinforced concrete structure, 10 stories above ground, one below

▷ Standard floor area: 309.53sqm

▷ Total floor area: 4,487.82sqm

Source: Shared Research based on company materials and CBRE data

Target exit: Sale to professional investors In the Real Estate Investment segment, the company aims to sell properties priced at JPY500mn or less to high-net-worth individuals and those priced at JPY500mn to JPY1.0bn to either individuals or professional investors. For properties priced at JPY1.0bn to more than JPY2.0bn, the company expects to exit investments to J-REITs, private funds, operating companies and other professional investors. Hoosiers believes it will continue to enjoy a seller’s advantage because of high demand for investment properties among institutional investors (such as Japanese and overseas funds) in the current ultralow-interest-rate environment. The company also believes its rental housing are less susceptible to fluctuations in the business environment than other categories of real estate assets, such as offices, commercial properties, and hotels. Furthermore, the company says demand remains strong among high-net-worth individuals to purchase real estate for asset investment and tax purposes. The company also views that it has few concerns in disposition of these properties since the supply of investment-grade properties available to professional investors (J-REITs, private funds, and corporations) is limited.

Aiming to form private REITs In the past, the company used to consider the formation of listed REITs to be one aspect of its business expansion and growth strategy. Initially, the company had planned to list a REIT in FY03/20 that would invest in healthcare facilities (defined in a broad sense to include rental housing for seniors, clinical malls and hospitals, sports facilities, commercial facilities, CCRC, and other properties with a quality-of-life focus). In August 2019, however, the company announced a change from a listed REIT to a private REIT. At the same time, the company postponed its launch timing from FY03/20 to FY03/21. The company changed its approach again in May 2020, shifting the investment focus from healthcare facilities to mainly residential rental housing, which had remained robust amid the COVID-19 pandemic (but also including healthcare facilities), and stated that launch timing was to be determined. When unveiling the new medium-term management plan in January 2021, the company announced that launch timing would now be in FY03/23. The company plans to focus on forming REIT, which it considers a way to move owned assets off the balance sheet and an important exit strategy.

Private funds formed in 2019 Before forming a private REIT, the company formed two pre-REIT private funds. QOL Limited Bridge 1 was backed by real estate trust beneficiary rights from sports facilities in Tokyo’s Nakano-ku and healthcare facilities in northern Nagoya, Aichi Prefecture. QOL Limited Bridge 2 was backed by real estate trust beneficiary rights from a clinic building in the city of Sendai, Miyagi Prefecture.

Differences between private funds, private REITs, and listed REITs: Private funds are designed for investment over specified periods. When that period ends, properties must be sold off regardless of gains or losses, and cash must be returned to lenders and investors. (Private funds differ from listed REITs in that they need not provide detailed press releases with timely disclosure information when properties are bought or sold.) Private REITs

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and listed REITs are both assumed to be open-ended investments with no specific terms, but for private REITs investment unit prices are determined on the basis of real estate appraisal values. As a result, these investments are considered better suited to institutional investors who are adverse to (daily) volatility. REITs are not required to return the cash they have amassed unless an investor requests a redemption. Accordingly, REITs tend to be suited to long-term property holdings and steady investment. Private funds and private REITs tend to have large minimum investment amounts (JPY100mn or more), whereas the minimum amount for listed REITs may be JPY100,000 or less. Many large real estate companies form their own private funds, private REITs, and listed REITs to which they can sell properties.

Overseas business The company aims to expand, partly through its overseas business. This business is a small component of the Real Estate Investment segment, so the company does not disclose revenue or profit from overseas business. According to earnings briefings materials for FY03/19, the company had 16 overseas projects underway as of end-March 2019, with eight in Vietnam, two in Indonesia, two in Thailand, one in Cambodia, and three in North America.

Vietnam

AnGia Skyline (condominiums, 471 units) AnGia Riverside (condominiums, 246 units)

Source: Shared Research based on company materials

Indonesia

Kawana Golf Residence (condominiums, 234 units) Serpong Garden (condominiums, 5,293 units)

Source: Shared Research based on company materials

Thailand Cambodia

Impression Ekkamai (condominiums, 380 units) Arta Garden Residences (townhouses, 773 units)

Source: Shared Research based on company materials

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The company began a condominium development project in Bangkok, Thailand, in 2017. Named Ekkamai, this is the company’s second project there. This project is being handled by a local company with investment from three parties (Hoosiers, a local developer named All Inspire Development, and Kyushu Railway Company).

The company believes the overseas business will begin contributing to earnings in FY03/22. The company’s overseas business is handled by two wholly owned subsidiaries: Hoosiers Asia Pte. Ltd. (which handles the Asia/Pacific region) and Hoosiers, Inc. (which handles business in North America).

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Condominium Management and Related Services segment (7.7% of revenue and a JPY71mn operating loss in FY03/21)

In the Condominium Management and Related Services segment, the company operates and manages sports clubs, condominiums, buildings, and hotels and conducts insurance agency business. In FY03/21, the segment produced external revenue of JPY6.0bn. Of this amount, sports club operation generated JPY3.3bn, and condominium management provided JPY1.8bn. Other revenue was JPY870mn. Hoosiers Wellness & Sports, a wholly owned consolidated subsidiary, operates sports clubs. Another subsidiary, Hoosiers Living Service, manages condominiums and buildings, and Hoosiers Accommodation Service operates hotels.

Condominium management The company notes that condominium management enables it to boost stable earnings and provide new value-added. Hoosiers manages nearly all the condominiums it sells. As of end-FY03/21, the company had 17,015 units under management. By FY03/26, the company aims to increase this figure to 20,000.

Sports clubs The company operates 35 sports clubs around Japan. To date, Hoosiers has grown this business by acquiring the companies that operate existing facilities. In April 2016, Sports Academy (which operates sports clubs nationwide) became a wholly owned subsidiary. Miya no Mori Sports, which operates sports clubs in Hokkaido, similarly became a wholly owned subsidiary in August 2016.

Hotels The company owns and operates hotels in Tokyo (Akihabara and Kasai) and the city of Sendai, Miyagi Prefecture. The Tourist Hotel & Café Akihabara, which opened in September 2020, marked the company’s first operation of a newly built hotel. Other hotels include the Tourist Hotel Kasai, in Edogawa-ku, Tokyo, and two in Sendai (Sendai Business Hotel and Sendai Business Hotel Ekimae). The company has also acquired hotels in Kofu (Yamanashi Prefecture) and Kanazawa (Ishikawa Prefecture) that it does not manage.

The company’s policy regarding sports club and hotel operation is to complement the Real Estate Development and Real Estate Investment segments without growing its balance sheet through new land acquisition and development.

Impairment losses on sports clubs The company recorded extraordinary losses (due to impairment losses on owned assets) of JPY2.2bn in FY03/19 and JPY3.2bn in FY03/20. Impairment losses in FY03/19 were on sports clubs (JPY1.4bn) and other assets (JPY825mn). In FY03/20, the company recorded a JPY3.2bn impairment loss on biomass generation facilities and JPY31mn on sports clubs. Performance from sports club operation has been lower than what the company expected when it initially acquired shares in the operators, and the impairment losses are a result of the company’s reassessment of recoverable value.

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Other (PFI) segment (0.1% of revenue and 0.1% of operating profit in FY03/21)

In the Other (PFI) segment, the company plans public private partnerships (PPP) and PFI businesses and engages in management and consulting. IEA, a wholly owned consolidated subsidiary, handles PFI. In FY03/21, the Other (PFI) segment generated revenue of JPY72mn and JPY8mn in operating profit. In the PFI business, Hoosiers aims to benefit from synergies with its local development business. The company sees PFI as a way to build relationships with government bodies and plans to concentrate on PFI as a source of stable future earnings.

Examples of Hoosiers’ PFI business The company’s first PFI* project is the setup and operation of a heated pool in the city of Otsu, Shiga Prefecture. In this same business area, the company relocated and established anew the Fujimi heated pool through a BTO** form of PFI. The period of this project is December 2016 through March 2034. According to an August 2020 press release, as part of the PFI business the company was managing operations at Harayama Park in Sakai, Osaka. The company has reorganized the Harayama Park PFI Co., Ltd., with a stated aim to “create a park that contributes to health and enjoyment for all, from children to seniors.” The renovated Harayama Park will feature a new water slide, as well as an outdoor pool and wellness park containing a heated pool and fitness area.

*A private finance initiative (PFI) is a way of using private-sector cash, management expertise, and technological knowhow for public works projects. A PFI can involve the design, build, repair, upgrade, maintain, and management of public facilities. With PFIs, local public entities place orders with private companies for public-sector projects. This framework differs from privatization of formerly government entities, such as JR or NTT.

**Under a build, transfer, and operate (BTO) scheme, a private company builds a public facility (such as a government building, public housing, or elementary school). After the facility is complete, the private entity transfers ownership rights to a national or local government but continues to manage and operate the facility.

Withdrawing from the renewable energy businesses In January 2021, the company announced it would withdraw from the renewable energy business to focus management resources on its core businesses, the Real Estate Development and Real Estate Investment segments. The company had embarked on the renewable energy business to diversify earnings opportunities and reinforce its recurring-revenue business. In January 2018, the company made an equity investment in a silent partnership involving the biomass power generation business. At the time, the company thought it could benefit from a future gain on the sale of this equity interest. However, an uncertain business environment surrounding renewable energy and economic conditions due to the COVID-19 pandemic led to the indefinite postponement of this business in May 2020. The company wrote off its entire JPY3.2bn in asset value as a loss.

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Market and value chain

The market for new-build condominiums in the Tokyo metro area In the Tokyo metro area, the market for new-build condominiums was characterized by sharp sales declines in April and May 2020 due to state of emergency declarations stemming from the COVID-19 pandemic. The market then rebounded swiftly. Sales of condominiums in favorable urban locations returned to their previous level. Consumer interest also rose toward condominiums in suburban areas, where sales have typically struggled, and sales turned positive. Amid an increase in COVID-19 cases, demand expanded as people looked from a medium- to long-term perspective for larger homes and well-insulated working spaces.

Sales of condominiums in the Tokyo metropolitan area According to data from the Real Estate Economic Institute, condominiums offered for sale in the Tokyo metropolitan area totaled 2,243 units in February 2021, up 50.7% YoY and rising for the third consecutive month. The first-month contract rate was 76.0%, above the 70% threshold for judging whether the market is in a positive or negative state, despite the major rise in the number of units offered for sale. The supply of new condominiums in Tokyo’s 23 wards was up 61% YoY, while the total for Tokyo outside the 23 wards was down 47.2% YoY. The figure was up 131.9% YoY in Kanagawa Prefecture, down 44.3% in Saitama Prefecture, and up108.5% in Chiba Prefecture.

For the period from April 2020 to February 2021, the supply of new condominiums across the entire Tokyo metropolitan area amounted to 25,929 units, down 1.9% YoY. The figure for Tokyo’s 23 wards was 9,916 units (-17.8% YoY), but the supply of condominiums outside those wards expanded during the COVID-19 pandemic. The number for other parts of the metro area (Tokyo outside the 23 wards, Kanagawa Prefecture, Saitama Prefecture, and Chiba Prefecture) was 16,013 units (+11.5% YoY).

Homes in the suburbs regaining popularity The company explains that the COVID-19 pandemic has caused working from home to gain momentum, boosting demand for more spacious condominiums. Rather than high-priced condominiums in densely populated areas, consumers are reconsidering condominiums located on the outskirts, in locations that are physically distant from their workplaces and that have good living environments. Even after the pandemic subsides, in addition to convenience the company expects homebuyers to consider functions and needs such as harmony with the surrounding environment, level of comfort, spaciousness, and diverse other factors. The company explains that there is a clear tendency among homebuyers to reconsider relatively inexpensive suburban homes.

The first-month contract rate (the number of condominiums sold in the first month of offering divided by the number offered for sale) serves as a barometer of the condominium business. A rate of 70% or more suggests conditions are favorable; 70% or less is considered unfavorable. However, the contract rate can be manipulated. Developers can decide how many units they offer for sale, doling out a few at a time. For this reason, the number of contracts is also an important indicator. Recent market trends show the first month contract rate is above 70% and the number of contracts is up YoY, indicating positive market conditions.

Tokyo metro area: Contract rate for new-build Tokyo metro area: Number of contracts for new-build condominiums condominiums (three-month moving average)

100%

90%

80%

70%

60%

50%

40% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Source: Shared Research from Japan Real Estate Institute data

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The affordability of new-build condominiums The ease with which consumers can purchase new-build condominiums (their affordability) is a function of condominium prices, mortgage interest rates, and household income. Condominiums grow more affordable as interest rates decline, condominium prices fall, and income rises.

Affordability up For the past few years, household incomes have remained flat due to an inflationary economic environment, so affordability has been affected mainly by interest rates and condominium prices. Over the past decade, condominium prices (per sqm) in the Tokyo metro area have risen 39%, but mortgage interest rates (35-year, fixed-rate mortgage) have fallen from 2.91% (January 2011) to 1.77% (April 2021). As a result, affordability has increased. Meanwhile, more people have purchased condominiums in anticipation of rising prices, so condominium sales in the Tokyo metropolitan area have remained largely unchanged. Rising prices have swept away the sense that condominiums are inexpensive, but with the Bank of Japan having announced plans to keep its low-interest-rate policy in place, mortgage interest rates are likely to remain at their current low levels.

Hoosiers focuses on the condominium business in regional areas. In regional core cities, high-net-worth individuals are the predominant buyers, purchasing condominiums for cash. The graph below shows condominiums purchased in the Tokyo metro area. Assuming buyers take out loans to make purchases, affordability is significantly affected by mortgage interest rates and condominium prices. Hoosiers’ main market is high-net-worth individuals in regional areas. As they pay cash rather than taking out loans, these affordability considerations are less relevant. According to data from the Real Estate Economic Institute, condominium prices have risen by 48.1% in the Tokyo metro area over the 15 years to January 2020. Over this same period, condominium prices in regional areas rose 42.4%, making them more affordable than their Tokyo counterparts.

Affordability, condominium prices, and fundraising capacity

220

Fundraising capacity 200 Housing affordability index 180 Condominium price index

160

140

120

100

80

60

40

Sources: Shared Research based on data from the Real Estate Economic Institute, the Ministry of Land, Infrastructure, Transport and Tourism, and the Japan Housing Finance Agency Notes: Figures are indexed to January 2001 = 100. Prices are condominium prices in the Tokyo metro area; income refers to income in worker houses in metropolitan areas in the Kanto region. Housing affordability = fundraising capacity/condominium prices in the Tokyo metro area Fundraising capacity = borrowable amount + own cash Borrowable amount = maximum borrowable amount for a 30-year term at average interest rates (repayable amount assumed at 30% of income) Own cash = savings - debt From October 2003, average interest rates refer to interest rates on a fixed-rate 35-year mortgage. Previous figures are average interest rates at three large banks. Condominium prices in the Tokyo metro area are three-month averages for a 70sqm condominium according to data from the Real Estate Economic Institute.

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Mortgage interest rates (35-year, fixed-rate mortgage)

Source: Shared Research based on data from the Japan Housing Finance Agency Market for detached houses in the Tokyo metropolitan area According to the Real Estate Information Network for East Japan (REINS), sales of new detached houses in the Tokyo metropolitan area remain robust. The number of contracts signed in this area rose YoY for six consecutive months from June 2020. Although down YoY in the three months after that, the overall level remains high. Inventories have continued to decline since July 2020 due to favorable sales and a decline in the supply of new detached houses amid rising land prices. Prices have increased slightly, reflecting the tight balance between supply and demand. However, the rise in prices on detached houses has been moderate compared with the increase for new-build condominiums. In 2020, the average price of a detached house in the Tokyo area was JPY34.9mn, down 0.7% YoY. During that same period, average condominium prices in the Tokyo metro area were up 1.7% YoY.

COVID-19 pandemic has boosted demand for more spacious living quarters, driving up the number of buyers of detached houses in suburban areas offering comfortable living environments. Sales have also been favorable as prices have risen more slowly than for new-build condominiums.

Supply of newly built condominiums in regional areas According to data from the Real Estate Economic Institute, nationwide the supply of condominiums has fallen by 64.2% over the past 15 years, from 167,465 units in 2005 to 59,907 in 2020. Supplies have fallen in the Tokyo metropolitan area (down 67.6%, to 27,228 units), the Kansai region (down 54.0%, to 15,195 units), and in other areas (down 65.2%, to 17,484 units). Over the past 10 years, however, the decline has been more gradual in other areas (-5.2%) than in the Tokyo metropolitan area (-38.9%) and the Kansai region (-30.0%). This situation is notably a result of soaring land prices, making the development of new condominiums in the Tokyo metropolitan area problematic over the past five years. As a result, supplies of new-build condominiums in the Tokyo metropolitan area have fallen 32%, compared with 19.7% in the Kansai region and 6.5% in other areas.

Housing prices in regional core cities: limited downside risk Looking at publicly assessed land values as of January 1, 2021, average values nationwide for all uses (residential, commercial, and industrial) were down 0.5% YoY, falling for the first time in six years. The impact of the COVID-19 outbreak was significant, with values falling in the Tokyo, Nagoya, and Osaka metropolitan areas, as well as overall in regional areas. The amount of decrease differed by type of use, however (residential, commercial, offices), with the decrease for commercial-use land being greater than that for residential land. The rise in the value of land for residential use halted, but the extent of decrease was limited. Shared Research understands this to mean that the outlook for the company’s condominium business, based on actual demand, remains solid.

Hoosiers ranks high nationally as a developer of condominiums in regional areas (“other” category in the tables below). Although the company ranked 20 in 2020, selling 98 units, in 2019 the company was third, selling 1,023 units.

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Condominiums offered for sale

(2020) 2020 2019 Vs. 2019 Ranking Operat or Ticker Greater T ok yo Kinki Other Nationwide Share Cml. share Natiowide (nat ionwide) 1 Pressance Corporation 3254 70 2,766 1,506 4,342 7.2% 7.2% 5,305 -963 2 Nomura Real Estate Development 3231 2,698 322 771 3,791 6.3% 13.6% 3,941 -150 3 Sumitomo Realty & Development 8830 2,530 415 567 3,512 5.9% 19.4% 5,690 -2,178 4 Mitsui Fudosan Residential - 1,995 227 112 2,334 3.9% 23.3% 2,365 -31 5 Eslead 8877 0 1,861 290 2,151 3.6% 26.9% 2,121 30 6 Anabuki Kosan 8928 39 207 1,827 2,073 3.5% 30.4% 1,599 474 7 Daiwa House Industry 1925 973 268 798 2,039 3.4% 33.8% 1,702 337 8 Mitsubishi Estate Residence - 1,354 109 304 1,767 2.9% 36.7% 3,365 -1,598 9 Nippon Steel Kowa Real Estate - 1,120 517 74 1,711 2.9% 39.6% 1,479 232 10 Tokyu Land Corporation 3289 1,023 443 83 1,549 2.6% 42.2% 1,812 -263 11 Takara Leben 8897 505 256 621 1,382 2.3% 44.5% 1,765 -383 12 Shinnihon 1879 1,232 0 0 1,232 2.1% 46.5% 1,232 13 Anabuki Construction - 125 42 850 1,017 1.7% 48.2% 1,032 -15 14 Open House Development - 401 0 586 987 1.6% 49.9% 987 15 Marimo - 193 138 602 933 1.6% 51.4% 933 16 Kintetsu Real Estate - 239 535 147 921 1.5% 53.0% 1,019 -98 17 Meiwa Jisho 8869 509 0 265 774 1.3% 54.3% 774 18 Daikyo - 225 113 431 769 1.3% 55.6% 1,296 -527 19 ES-CON Japan 8892 90 670 0 760 1.3% 56.8% 760 20 Hoosiers Corporation 3284 587 38 98 723 1.2% 58.0% 1,348 -625 Total for the top 20 (1) 15,908 8,927 9,932 34,767 100.0% - 40,782 -6,015 Condo units sold nationwide (2) 27,228 15,195 17,484 59,907 (1)/(2) 58.4% 58.7% 56.8% 58.0% (2019) 20192018 Vs. 2018 Ranking Operat or Ticker Greater T ok yo Kinki Other Nationwide Share Cml. share Natiowide (nat ionwide) 1 Sumitomo Realty & Development 8830 4,136 744 810 5,690 8.1% 8.1% 7,377 -1,687 2 Pressance Corporation 3254 147 3,825 1,333 5,305 7.5% 15.6% 5,267 38 3 Nomura Real Estate Development 3231 3,111 414 416 3,941 5.6% 21.1% 5,224 -1,283 4 Mitsubishi Estate Residence - 2,277 396 692 3,365 4.8% 25.9% 3,614 -249 5 Mitsui Fudosan Residential - 1,750 29 586 2,365 3.3% 29.2% 3,198 -833 6 Eslead 8877 0 2,121 0 2,121 3.0% 32.2% 2,401 -280 7 Tokyu Land Corporation 3289 1,340 435 37 1,812 2.6% 34.8% 1,426 386 8 Takara Leben 8897 531 272 962 1,765 2.5% 37.3% 1,873 -108 9 Daiwa House Industry 1925 1,046 340 316 1,702 2.4% 39.7% 1,627 75 10 Anabuki Kosan 8928 0 62 1,537 1,599 2.3% 42.0% 2,450 -851 11 Nippon Steel Kowa Real Estate - 1,109 290 80 1,479 2.1% 44.1% 1,539 -60 12 Hoosiers Corporation 3284 171 154 1,023 1,348 1.9% 46.0% 1,348 13 Daikyo - 421 170 705 1,296 1.8% 47.8% 1,389 -93 14 Nissho Estem 0 646 631 1,277 1.8% 49.6% 1,053 224 15 Anabuki Construction - 84 0 948 1,032 1.5% 51.1% 1,427 -395 16 Kintetsu Real Estate - 221 704 94 1,019 1.4% 52.5% 1,138 -119 17 Meitetsu Real Estate - 569 174 194 937 1.3% 53.9% 1,184 -247 18 Tokyo Tatemono 8804 744 137 48 929 1.3% 55.2% 929 19 Hankyu Hanshin Properties 305 596 0 901 1.3% 56.4% 1,459 -558 20 Sekisui House 1928 265 422 212 899 1.3% 57.7% 1,127 -228

Total for the top 20 (1) 18,227 11,931 10,624 40,782 100.0% - 46,917 -6,135 Condo units sold nationwide (2) 31,238 18,042 21,380 70,660 (1)/(2) 58.3% 66.1% 49.7% 57.7% Source: Shared Research based on data from the Real Estate Economic Institute

Condominiums offered for sale 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Greater Tokyo 84148 74463 61021 43733 36,376 44,535 44,499 45,602 56,478 44,913 40,449 35,772 35,898 37,132 31,238 27,228 YoY -1.5% -11.5% -18.1% -28.3% -16.8% 22.4% -0.1% 2.5% 23.8% -20.5% -9.9% -11.6% 0.4% 3.4% -15.9% -12.8% Kinki 33,064 30,146 30,219 22,744 19,784 21,716 20,219 23,266 24,691 18,814 18,930 18,676 19,560 20,958 18,042 15,195 YoY 3.8% -8.8% 0.2% -24.7% -13.0% 9.8% -6.9% 15.1% 6.1% -23.8% 0.6% -1.3% 4.7% 7.1% -13.9% -15.8% Other 50,253 51,257 42,430 31,560 23,435 18,450 21,864 24,993 24,113 19,478 18,710 22,545 21,905 22,166 21,380 17,484 YoY 18.7% 2.0% -17.2% -25.6% -25.7% -21.3% 18.5% 14.3% -3.5% -19.2% -3.9% 20.5% -2.8% 1.2% -3.5% -18.2% Nationwide 167,465 155,866 133,670 98,037 79,595 84,701 86,582 93,861 105,282 83,205 78,089 76,993 77,363 80,256 70,660 59,907 YoY 4.9% -6.9% -14.2% -26.7% -18.8% 6.4% 2.2% 8.4% 12.2% -21.0% -6.1% -1.4% 0.5% 3.7% -12.0% -15.2% Source: Shared Research based on data from the Real Estate Economic Institute

Condominium prices (JPY'000) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Greater Tokyo 41,080 42,000 46,440 47,750 45,350 47,160 45,780 45,400 49,290 50,600 55,180 54,900 59,080 58,710 59,800 60,830 YoY 0.1% 2.2% 10.6% 2.8% -5.0% 4.0% -2.9% -0.8% 8.6% 2.7% 9.1% -0.5% 7.6% -0.6% 1.9% 1.7% Kinki 31,640 33,800 34,780 35,130 34,110 34,520 34,900 34,380 34,960 36,470 37,880 39,190 38,360 38,440 38,660 41,810 YoY -0.4% 6.8% 2.9% 1.0% -2.9% 1.2% 1.1% -1.5% 1.7% 4.3% 3.9% 3.5% -2.1% 0.2% 0.6% 8.1% Nationwide 34,910 35,600 38,130 39,010 38,020 40,220 38,960 38,240 41,740 43,060 46,180 45,600 47,390 47,590 47,870 49,710 YoY -1.6% 2.0% 7.1% 2.3% -2.5% 5.8% -3.1% -1.8% 9.2% 3.2% 7.2% -1.3% 3.9% 0.4%0.6%3.8% Source: Shared Research based on data from the Real Estate Economic Institute

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Regional demographics and moves to invigorate the market Looking at macro demographic data, the share of the population in metropolitan areas (Tokyo, Osaka, and Nagoya) is rising. Meanwhile, the percentage of the population in other regions is falling, due to an outflow to metropolitan areas. As of 2015, 65.7% of the Japanese population lived in cities with populations of 100,000 or more (of which Japan has 371). (These data are Shared Research’s estimates, based on official population data according to the 2015 national census.) In addition to people congregating in urban areas, Japan’s towns and villages continue to merge, causing the number of cities with populations of 100,000 or more to rise. Currently, town structures are becoming more urban-centered.

Japan’s shrinking, aging population Japan’s population is shrinking, mainly because of a declining birth rate and a rising number of deaths. The birth rate (the number of children a woman is expected to bear over her lifetime) is low by international standards, at 1.36. For 2019, the population’s “natural decline” (the number of deaths minus the number of births) was 516,000. Japan’s population is also graying fast by international standards. According to World Bank data (2019), Japan had the world’s highest rate of aging (percentage of the population aged 65 or older), at 28.0%; Italy was second, at 23.01%; Portugal was third, at 22.36%; Finland was fourth, at 22.14%; and Greece was fifth, at 21.94%.

Initiatives to invigorate central districts of regional core cities In regional core cities, the number of vacant houses is rising, commercial facilities are moving out of central areas, and stores are closing, accelerating the hollowing out. Even while their buildings are becoming decrepit, due to falling tax revenues many local governments lack the funds to rebuild these buildings. These governments need to make their regions more attractive through redevelopment and attract stores and companies to their regions. The reality, however, is a lack of incoming companies and sponsors. Meanwhile, the COVID-19 crisis is prompting a resurgence in demand for housing in regional areas, as people reconsider outlying areas that offer clean air and attractive living environments.

For instance, Hoosiers is providing new-build condominiums in the cities of Oita and Utsunomiya. Populations in the prefectures where these cities are located (Oita and Tochigi prefectures, respectively) are falling, but the number of households is rising in the core cities (Oita and Utsunomiya). The company’s projects in these cities were Utsunomiya Peaks (Utsunomiya, Tochigi Prefecture, 237 units, completed in January 2019) and Duo Hills Oita Nakashima (Oita, Oita Prefecture, 99 units, completed in March 2021).

Populations of Oita and Tochigi prefectures

10-year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 CA GR Population: Oita Pref. 1,200,000 1,197,000 1,192,000 1,186,000 1,180,000 1,173,000 1,166,000 1,160,000 1,152,000 1,144,000 1,135,000 -0.56% YoY -0.33% -0.25% -0.42% -0.50% -0.51% -0.59% -0.60% -0.51% -0.69% -0.69% -0.79% Population: Oita City 472,310 474,122 475,227 476,612 477,738 478,753 478,700 479,155 479,562 479,466 478,806 0.14% YoY 0.42% 0.38% 0.23% 0.29% 0.24% 0.21% -0.01% 0.10% 0.08% -0.02% -0.14% No. of households: Oita City 201,329 203,553 206,047 207,683 209,735 211,688 214,080 216,455 218,362 220,355 222,188 0.99% YoY 1.6% 1.10% 1.23% 0.79% 0.99% 0.93% 1.13% 1.11% 0.88% 0.91% 0.83%

10-year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 CA GR Population: Tochigi Pref. 2,011,000 2,008,000 2,000,000 1,992,000 1,986,000 1,980,000 1,974,000 1,966,000 1,957,000 1,946,000 1,934,000 -0.39% YoY -0.20% -0.15% -0.40% -0.40% -0.30% -0.30% -0.30% -0.41% -0.46% -0.56% -0.62% Population: Utsunomiya City 510,063 510,639 512,221 513,635 515,341 516,513 518,097 519,283 519,731 520,407 520,157 0.20% YoY 0.44% 0.11% 0.31% 0.28% 0.33% 0.23% 0.31% 0.23% 0.09% 0.13% -0.05% No. of households: Utsunomiya City 208,970 211,046 210,959 213,313 216,079 218,525 221,459 217,977 220,348 222,990 225,412 0.76% YoY 1.79% 0.99% -0.04% 1.12% 1.30% 1.13% 1.34% -1.57% 1.09% 1.20% 1.09% Source: Shared Research based on data from the cities of Oita and Utsunomiya

In an effort of promoting regional revitalization, the Ministry of Land, Infrastructure, Transport and Tourism has formulated business plans to invigorate the central districts of regional core cities across Japan. By relaxing floor area ratios for station-front areas in these regions, the ministry hopes to encourage the construction of appealing urban facilities (commercial facilities, houses, and hotels). Japan’s national government is also working with local governments on revitalization initiatives to make communities more resilient to disasters. The government has put support structures in place, such as setting up comprehensive grants (subsidies) for the preparation of social capital.

The government has designed several categories of area for regional revitalization.

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Regions in urgent need of urban revitalization 51 regions, 9,171ha (as of September 16, 2020)

Specific regions in urgent need of urban revitalization 15 regions, 4,336ha (as of September 16, 2020)

Special districts designated for urban revitalization 98 districts (as of April 1, 2020)

Designation of private-sector urban revitalization plans 129 plans (as of April 1, 2020)

Projects to improve the international competitiveness of cities 38 projects (as of April 1, 2020) Source: Shared Research based on data from the Ministry of Land, Infrastructure, Transport and Tourism

Utsunomiya Peaks Duo Hills Oita Nakashima

▷ Completed in January 2019 ▷ Completed in March 2021

▷ 237 units ▷ 99 units

▷ Access: Approx. 1.0km from JR Utsunomiya Station ▷ Access: 17-minute walk from JR Oita Station

▷ Steel-reinforced concrete structure, 31 stories above ▷ Steel-reinforced concrete structure, 15 stories above ground, one below ground

▷ Site area: 1,818.0sqm

▷ Total floor space: 8,405.48sqm Source: Shared Research based on company materials Commercial real estate market According to CBRE, investment in commercial real estate in Japan totaled JPY3.8tn in 2020, up 5.2% YoY. Investment by overseas investors rose 30% YoY, and REITs invested 2% more, while other Japanese investors invested 15% less. Amid concerns about how the January 2021 state of emergency declaration would affect investment activity, activity on many projects has already returned to pre-pandemic levels, suggesting that the impact on business has been slight. Investor appetites have been strong in 2021, as well. According to a CBRE study in November 2020, 87% of respondents indicated that they planned to increase acquisition levels in 2021, compared with 2020. CBRE attributes this enthusiasm to low policy interest rates around the world, noting that risk-averse institutional investors are pouring cash into real estate, where yields are relatively high.

Cap rates A CBRE survey on cap rates reported a 53bp rise (from 4.50% at end-2019 to 5.03% at end-2020) over the past year for hotels, as occupancy rates have fallen off sharply amid the COVID-19 pandemic. However, cap rates in other asset classes were at historically low levels. Demand for residential properties has remained robust during the pandemic, and cap rates fell even further, to 4.2% (from 4.25% at end-2019 to 4.20% at end-2020). For urban commercial facilities, where performance has been extremely poor due to the pandemic, the cap rate inched up 5bp (from 3.35% at end-September 2020 to 3.40% at end-2020). Cap rates remained flat for offices (3.35% at end-2020), even though performance deteriorated due to rising vacancies and falling rents.

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Cap rates

(%) Hotels Logistics facilities Residential (for family) Office (Otemachi, Tokyo) Urban commercial properties 8.0

7.0

6.0

5.0

4.0

3.0

2.0 Jul 2009 Jul Jul 2010 Jul Jul 2011 Jul Jul 2012 Jul Jul 2013 Jul Jul 2014 Jul Jul 2015 Jul Jul 2016 Jul Jul 2017 Jul Jul 2018 Jul Jul 2019 Jul Jul 2020 Jul Jan2010 Jan2011 Jan2012 Jan2013 Jan2014 Jan2015 Jan2016 Jan2017 Jan2018 Jan2019 Jan2020 Oct 2009 Oct Oct 2010 Oct Oct 2011 Oct Oct 2012 Oct Oct 2013 Oct Oct 2014 Oct Oct 2015 Oct Oct 2016 Oct Oct 2017 Oct Oct 2018 Oct Oct 2019 Oct Oct 2020 Oct Apr 2010 Apr Apr 2011 Apr Apr 2012 Apr Apr 2013 Apr Apr 2014 Apr Apr 2015 Apr Apr 2016 Apr Apr 2017 Apr Apr 2018 Apr Apr 2019 Apr Apr 2020 Apr

Source: Shared Research based on CBRE data

The capitalization rate (or cap rate) refers to the expected yield on real estate. Buyers use the cap rate to value income property according to expected yield. As an example, if an office building has a cap rate of 3% and generates annual cash flows totaling JPY3mn, the theoretical real estate value would be JPY100mn (JPY3mn divided by 3%). In theory, the cap rate equals the risk-free rate (treasury yields) plus a real estate risk premium. (The risk premium takes various risk factors into account: liquidity risk, when converting an investment into cash; lease fee fluctuation risk; and risks related to real estate location or usage). Risk premiums are typically 200bp to 300bp above treasury yields. According to a survey by the Japan Real Estate Institute, as of October 2020 Class A buildings in the Marunouchi and Otemachi areas of Tokyo’s Chiyoda-ku had a cap rate of 3.5%. (Class A buildings are defined as having total floor space of 50,000sqm, been built within the past five years, and located a five-minute walk from the nearest train station.) The cap rate indicates the expected yield, which tends to be higher than the actual yield once all factors are taken into account. Actual yields on Class A buildings that listed REITs acquire in prime locations in central Tokyo tend to be below 3.5%.

Barriers to entry In the real estate business, barriers to entry are low and differentiation is difficult, as in most cases construction and design are outsourced. The number of real estate companies tends to decline during recessions and grow when conditions are favorable. The number of developers fell off significantly in Japan following the global financial crisis of 2008, and entering the market has become more difficult since, due to rising land acquisition and construction costs. Adding an appropriate margin to development costs and selling real estate require expertise in product planning and sales, so barriers to entry have grown higher than in the past. Even within the real estate business, development and investment require large amounts of bank borrowings and shareholders’ equity; real estate companies must have strong finances to withstand economic downturns.

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Competitors

Many real estate developers concentrate on the condominium business, but few specialize in regional areas in the way Hoosiers does. Other real estate developers that focus on the condominium business include Pressance Corporation, Takara Leben, Es-Con Japan, and Cosmos Initia.

Pressance Corporation Pressance Corporation is a real estate company that came under control of Open House in January 2021. Pressance develops and sells family-oriented condominiums and studio apartments, the latter for sale to investors. By number of units, family condominiums accounted for 28.6% of performance in the real estate sales business, while studio apartments made up 63.1% (FY03/21). Also by number of units, Pressance accounted for an 18.2% share of the market in the Kinki (Osaka) area, 22.4% in Tokai/Chukyo, and 7.2% nationwide. Pressance says its high market share in the Kinki, Chukyo, and Okinawa regions gives the company preferential access to land information. Pressance has raised its profile through bulk purchases and concentrated advertising campaigns.

Takara Leben In FY03/21, Takara Leben generated 79.0% of revenue from the real estate sales business. Within this business, sales of new-build condominiums accounted for 67.8% of revenue. Takara Leben has a relatively high percentage of business in regional areas. In terms of land purchased in FY03/21 for condominium development (equivalent to 6,803 units nationwide as of end-March 2021), 36.2% was in the Tokyo metro area, 10.7% was in Kanto Koshinetsu, 19.1% was in Tohoku, 5.8% was in Chubu, 4.1% was in Hokkaido, and 4.7% was in Hokuriku.

Es-Con Japan Like Takara Leben, Es-Con Japan generates most of its revenue from real estate sales: 92.5% of revenue in FY12/20, with 42.9% of real estate sales coming from new-build condominiums. The majority of the company’s business (in FY12/20, based on revenue) was in major cities in the Kansai and Kanto areas, at 64% and 35%, respectively. Revenue from other areas accounted for 1% of the total.

Anabuki Kosan A high percentage of Anabuki Kosan’s business is new-build condominiums. The real estate business accounted for 68.4% of revenue (FY06/20). The company does not disclose the share of revenue that comes from the condominium business. In terms of the percentage of condominium sales by region in FY06/20, Kyushu accounted for 34.3%, Chugoku for 28.9%, Shikoku for 19.3%, and Kinki for 7.4% (number of units sold are not disclosed). These figures indicate that the company concentrates on western Japan.

Cosmos Initia The residential business (condominiums, detached houses, and townhouses), accounted for a relatively low 33.6% share of revenue for Cosmos Initia (FY03/21). In FY03/21, new-build condominiums made up 49.3% of residential business revenue. The company does not disclose its sales areas. Cosmos Initia has recently been focusing on building new condominiums for active seniors, and multiple projects are underway in Hokkaido, Fukui, and Fukuoka prefectures.

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Competitors in the condominium business Company Market Ticker Fiscal year Revenue OP OPM ROE ROA Equity ratio TSE1 3254 FY03/21 243,813 29,762 12.2% 16.13% 7.09% 51.80%

A condominium developer and subsidiary of Open House <3288>. Business is centered in the Kinki and Tokai regions. In Kanto and Okinawa, the company Pressance develops and sells the Pressance Loger brand of family-oriented condominiums and the Pressance brand of studio apartments (mainly investment properties targeting single tenants). The company is a leading supplier of condominiums in the Kinki and Tokai/Chukyo regions. The company also plans, develops, and Corporation sells real estate for business hotels; manages studio apartment rentals (placing residents and handling rents on behalf of owners), and leases out its own condominiums. In 2017, the company established an overseas real estate investment company in collaboration with Sanei Architecture Planning <3228>. In 2020, the company entered a capital and business alliance with Open House.

TSE1 8892 FY12/20 77,308 12,202 15.8% 21.25% 5.43% 25.80% This real estate development company develops, plans, sells, and leases property in the Tokyo, Kansai and Chubu metropolitan areas—condominiums for sale (Le Jade and Grand Le Jade), detached housing (Jade), and commercial facilities and hotels. The company also provides real estate planning and brokerage services. The company offers diverse investment schemes (commercially based, income property, land planning, hotel development, and investment). The ES-CON Japan company is an asset manager for Escon Japan REIT Investment Corporation, an integrated J-REIT and an equity-method affiliate of Chubu Electric. In 2012, the company entered a business alliance with Nissei Build Kogyo (now Space Value Holdings). In 2016, the company also entered a business alliance with Ichigo Group Holdings in hotel and commercial development. A capital and business alliance with Chubu Electric followed in 2018. In 2019, Escon Japan REIT Investment Corporation listed, and the company opened Tonarie Toga Mikita, a community-based commercial facility. Key business partners are Escon Japan REIT Investment Corporation and Ascendas Hospitality Honmachi. TSE1 8871 FY03/21 28,890 6,795 23.5% 3.51% 2.30% 64.80% Gold Crest develops high-end condominiums. The company provides new-build condominiums centered on the populous Tokyo metro area (Tokyo, Kanagawa, and Chiba prefectures). Its condominium series are named Crest City, Crest Form, and Crest Tower (the third being located in condominium towers). The Gold Crest company’s properties include Bay Crest Tower (a super-high rise designer tower), Owl Tower, Kachidoki View Tower, and Crest Prime Tower Shiba. The company also conducts real estate leasing (office buildings and condominiums) and prope rt y ma na ge me nt (ov e rall ma nageme nt of condominiums for sale). In 2015, Gold Crest opened one of the largest properties in Japan, Crest Prime Residence, which had more than 2,500 units. The compa ny ’s main business partner is Nomura Real Estate Development. TSE1 8897 FY03/21 148,397 10,789 7.3% 8.95% 2.35% 26.50%

Takara Leben is a condominium developer, whose operations are focused in Tokyo’s Johoku area along the Tobu Tojo line and in southern part of Saitama Prefecture, but also include the Tohoku, Hokuriku, and Kinki regions. The company develops and sells Leben condominiums and Nebel compact condominiums. In addition, Takara Leben sells new-build detached housing, conducts other real estate sales (renovation and resale, securitization). The company also has recurring-revenue businesses, such as real estate leasing (apartments, condominiums, offices, stores, and hotels) and property management (overall Takara Leben management of condominiums for sale). Takara Leben is promoting business in regional cities and has a system in place to handle 1,000 units per year there. The company has an equity-method affiliate, Sunwood. In 2012, Takara Leben set up a branch in Yokohama to develop business more extensively in the Kanto area (Kanagawa, Nagano, and Tochigi prefectures). Later, the company expanded into the Tohoku, Hokuriku, Chugoku, and Shikoku regions. Takara Leben entered the megasolar business in 2013. In 2013, the company entered a capital and business alliance with Sunwood in the area of new-build condominiums. Jyutakujyohoukan became a wholly owned subsidiary in 2015. In 2016, the company listed its infrastructure fund, Takara Leben Infrastructure Fund, Inc. Takara Leben entered the renovation and sales business in 2017. Takara Leben Real Estate Investment Corporation listed in 2018.

TSE1 8935 FY03/21 72,988 7,351 10.1% 10.21% 6.52% 63.80% FJ Next is a condominium developer. The company conducts real estate development mainly in central Tokyo and Kanagawa. FJ Next’s key businesses are real estate development and real estate management. In real estate development, the company plans and sells family-type condominiums under the Gala series, FJ Next sells resort properties in Izu, and manages condominiums. Major investment-type condominium series the company develops and sells are Gala Condominium and the family-oriented Gala Residence series. FJ Next also sells preowned condominiums and has a construction business (condominium design and construction, the Curio series of custom-built houses, and renovation) and a Japanese inn business (in the Izu area). The company is one of the largest suppliers of condominiums for investment in the Tokyo metro area. In 2016, FJ Next acquired Gyohokukan, operator of a high-end Japanese spa in Kawazu, Izu. TSE1 8881 FY03/21 80,815 5,266 6.5% 5.70% 3.17% 57.20% Nisshin Group Holdings is a real estate developer whose core operations are handled by Nisshin Fudosan and Tada Corporation. In the Tokyo metro area (Tokyo, Kanagawa, Chiba, and Saitama prefectures), Nisshin Group Holdings engages in the businesses of real estate (planning, sales, and leasing of new- Nisshin Group build condominiums for sale), construction (architectural and engineering work on condominiums), and rental management. Nisshin Fudosan plans and sells Holdings Palacestage condominiums for families and Duostage investment condominiums targeting singles and DINKs. Tada Corporation handles architectural and engineering work on condominiums. The company also engages in real estate securitization (such as REIT investment through Nisshin Private Residential REIT, Inc., which was established in 2018 and became an equity-method affiliate in 2020) and renovation/resale. The company established Nisshin Asset Management in 2017. TSE1 8928 FY06/20 95,378 5,744 6.0% 12.74% 3.84% 31.10% Anabuki Kosan is a seller of condominiums, headquartered in the city of Takamatsu. Areas of business are real estate (condominium sales, purchase and resale of preowned condominiums, sale of detached houses), HR services, facility management (hotels), and medical care (operation of homes for seniors). The company sells the Alpha brand of condominiums, mainly in western Japan; builds Alpha Living homes for seniors and wooden detached homes on a Anabuki Kosan contract basis; brokers real estate; and operates hotels and Japanese-style inns. Anabuki Kosan stands out for the way it has developed its operations, using direct sales and using regional bases. Other business areas are retail (supermarkets in Nagasaki Prefecture), energy (receiving and offloading high-voltage electricity), and tourism (cruise ships). Anabuki Kosan’s parent company is Anabuki Housing Service, which manages condominiums. Crea Anabuki, a subsidiary, provides HR services and outsourcing. Another subsidiary, Anabuki Enterprise, operates hotels and other facilities. In 2020, Anabuki Kosan acquired Secom Homelife (which develops and sells condominiums) from Secom and made the company a subsidiary. TSE JSQ 8844 FY03/21 107,257 2,376 2.2% 5.99% 1.39% 24.00%

Cosmos Initia, a real estate developer, is a subsidiary of Daiwa House Industry. The company divides its operations into the residential business, the solutions business, and the accommodation business. In the residential business, the company builds and renovates condominiums under the Initia brand and builds Cosmos Initia detached homes. In the solutions business, the company handles leasing and brokers/sells investment real estate. The company develops family-oriented condominiums for first-time buyers and provides new-build condominiums (Initia) and detached houses (Initia Forum). In the accommodation business, the company operates MIMARU apartment hotels. Cosmos Initia split off from the Recruit group in 2005. In 2013, it entered a capital and business alliance with Daiwa House Industry, becoming a subsidiary. In 2017, Cosmos Initia established Cosmos Hotel Management (now a consolidated subsidiary). In 2018, the company withdrew from overseas hotel and resort operations. In 2020, Cosmos Initia consolidated its residential business under the Initia brand.

TSE1 8869 FY03/21 50,109 3,626 7.2% 11.05% 3.48% 33.90% Meiwa Estate is a developer that specializes in condominiums. In the Tokyo metro area, Sapporo, Fukuoka, and Nagoya, the company develops and sells Meiwa Jisho family-oriented condominiums under the Clio Mansion and Clio Residence brands, as well as the La Belle Vie series targeting DINKs. The company sells 800 to 1,500 new condominiums each year. Other businesses include comprehensive management services (real estate and condominium leasing), renovation, refurbishment, real estate brokerage and resale. The company entered the renovation business in 2019. In 2016, the company signed a comprehensive cooperation agreement with the Hokkaido government. In 2018, it moved into the Nagoya area.

Source: Shared Research based on individual companies’ materials

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Strengths and weaknesses

Strengths

The company focuses on niche markets where large competitors are absent (regional core cities with populations of 100,000 to 500,000). Hoosiers is collaborating with regional government bodies to build relationships and raise barriers to entry. One of the company’s key strategies is to focus on regional core cities with populations of 100,000 to 500,000, where condominium supplies are relatively low. (A 2019 study by the Japan Real Estate Institute ranked the company third nationwide for the number of condominiums supplied.) The company sells medium-sized condominium blocks containing 50 to 100 units. One example of large-scale redevelopment is Duo Hills Yamagata Nanokamachi Tower, a block of condominiums in the city of Yamagata. This was the first large-scale development in Yamagata’s Nanokamachi area in eight years. As a landowner, the company heads the local redevelopment association and is collaborating with the city of Yamagata and the local chamber of commerce to attract named tenants to large, empty store spaces. The company is also promoting a plan to support female entrepreneurs in the region.

Hoosiers seeks to differentiate itself through condominium sales in regional areas, where supplies are low. The company explains that business in these regions is not profitable enough for large competitors, while local developers lack the necessary financial heft. In addition, the company is working to raise barriers to entry in the redevelopment business in regional core cities by collaborating closely with regional communities and local governments.

The company is cultivating its experience in regional core cities to expand the range of investors through private funds. In this way, the company is creating a virtuous cycle for increasing profit in the Real Estate Investment segment. The condominium business, the company’s mainstay, is a mature industry, so the company is building the Real Estate Investment segment as a second business pillar. This segment accounted for 11.6% of revenue in FY03/16. By FY03/20, the figure had risen to 25.7%. Over the same period, the segment’s contribution to overall operating profit rose from 30.9% to 56.6%. In this segment, the company develops investment rental property and invests in office buildings in station-front locations in regional cities. The company generates segment revenues from capital gains on the sale of property and stable rental income on real estate the company holds. Over the four years to FY03/20, profit in this segment grew by a CAGR of 38.9%.

Several factors are driving this accelerating growth. First, the company has built a track record for selling condominiums in regional core cities where few competitors exist. In these locations, the company works to foster communication with local governments and local residents in redevelopment areas. These relationships facilitate access to information about older buildings near train stations in regional cities that are available for purchase. By purchasing such properties early, the company benefits from regional revitalization. The company is also expanding its exit strategies, such as by forming private funds. Hoosiers is thus creating a virtuous cycle for boosting profit in the real estate segment: enhancing information-gathering capabilities, having the option to sell or hold properties, and expanding the circle of investors through private funds.

The company was an early entrant into the market for providing condominiums for seniors (an area where large competitors were absent). Hoosiers differentiates itself in this category, handled by the CCRC segment, where risk is relatively high. In the CCRC segment, the company develops condominiums for seniors, handles long-term care insurance, and manages and operates condominiums for seniors. In this segment, the company aims to sell to healthy senior couples, who are typically in their early 70s and have high net worth (JPY100mn or more). Condominiums for seniors are typically right-of-use facilities, such as serviced housing for the elderly or nursing homes. By contrast, Hoosiers differentiates itself from competitors by developing and selling condominiums with ownership rights attached, which is a key element of the CCRC segment. Large developers and competitors have tended to shy away from this sort of business to avoid such sensitive issues as selling units after their owners have died or transferring rights if residents develop dementia. In the five years to FY03/21, the CCRC segment has delivered profitability of 8.6%, comparing favorably to the Real Estate Development segment’s 8.9%.

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Weaknesses

Condominium sales and property sales in the Real Estate Investment segment generate lumpy revenue. The proportion of stable, recurring-revenue business from leasing is relatively low. The company’s main business segments, Real Estate Development and Real Estate Investment, generate most of their income from the sale of real estate. In these segments, only a small percentage of revenue is from steady, recurring sources, such as rental income and management fees. (In FY03/21, rental income amounted to JPY2.4bn, or 3.0% of the total. In the same year, revenue from condominium management was JPY1.8bn, or 2.2%.) Although demand for residential property is less sensitive to economic fluctuations than other asset categories, demand is affected by interest rates and buyers’ income levels, employment conditions, and the economic environment.

Sports club and hotel operations have been slow to deliver synergies with the condominium business and the CCRC segment, resulting in a bottleneck to improving asset efficiency. In the Condominium Management and Related Services segment, the company operates sports clubs and hotels. Through this segment, the company seeks to generate synergies with the condominium business and the CCRC segment to create attractive communities in regional areas. However, the Condominium Management and Related Services segment incurred a JPY71mn operating loss in FY03/21 (it also posted losses FY03/16—FY03/18). These synergies have been slow to materialize, with hotel and sports club operation complementing the company’s main businesses only little. Improving asset efficiency is a bottleneck in the Condominium Management and Related Services segment, which has 47% of the company’s employees (FY03/20); the segment’s fixed costs are high, but its contribution to profits is low. Hoosiers’ ROA (based on net income) is 2.1% (FY03/21), below the industry average of 3.6%. The company’s medium-term management plan targets ROE of 15% by FY03/26. We believe the company needs to boost ROA.

At 27%, the equity ratio is below the industry average (35%). As a condominium developer, Hoosiers’ business is capital-intensive, and its scale of shareholders’ equity compares unfavorably with competitors. Ample shareholders’ equity is important for a real estate company that focuses on the capital-intensive condominium business. Rating and Investment Information, Inc. (R&I) considers the equity ratio an “extremely important” indicator when assessing financial risk, along with the ratio of EBITDA to net interest-bearing debt after deducting working capital. The company’s equity ratio averaged 27.1% between FY03/16 and FY03/21, below the real estate industry average of 35.1% (based on the Ministry of Finance’s Financial Statements Statistics of Corporations survey for FY03/20 of companies with JPY1.0bn or more in capital). In FY03/21, the company’s equity ratio was 21.2%, compared with an average of 42.1% for 10 competing condominium developers. In FY03/21, the company undertook measures to improve ROE and EPS. Even so, the company’s level of shareholders’ equity is lower than competitors’. In the real estate industry, shareholders’ equity is likely to affect corporate debt ratings and customer assessments of financial risk of the company versus its competitors.

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Historical performance and financial statements Income statement

Income statement FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Sales 21,045 32,955 36,943 40,033 35,943 52,726 63,364 89,882 85,231 80,222 YoY 143.3% 56.6% 12.1% 8.4% -10.2% 46.7% 20.2% 41.9% -5.2% -5.9% Cost of sales 13,617 23,167 25,850 29,931 27,287 39,703 47,322 68,162 67,220 64,145 Cost ratio 64.7% 70.3% 70.0% 74.8% 75.9% 75.3% 74.7% 75.8% 78.9% 80.0% Gross profit 7,429 9,788 11,094 10,102 8,657 13,022 16,041 21,720 18,011 16,077 YoY 92.3% 31.8% 13.3% -8.9% -14.3% 50.4% 23.2% 35.4% -17.1% -10.7% Gross profit margin 35.3% 29.7% 30.0% 25.2% 24.1% 24.7% 25.3% 24.2% 21.1%20.0% SG&A expenses 2,245 3,505 4,304 5,320 5,472 7,432 8,752 12,432 11,318 10,642 SG&A ratio 10.7% 10.6% 11.6% 13.3% 15.2% 14.1% 13.8% 13.8% 13.3% 13.3% Operating profit 5,183 6,283 6,790 4,783 3,184 5,590 7,289 9,287 6,692 5,435 YoY 122.8% 21.2% 8.1% -29.6% -33.4% 75.5% 30.4% 27.4% -27.9% -18.8% Operating profit margin 24.6% 19.1% 18.4% 11.9% 8.9% 10.6% 11.5% 10.3% 7.9% 6.8% Non-operating income 44 81 64 112 83 384 686 763 380 682 Interest income 1 2 2 12 22 34 92 74 75 63 Dividend income ------456446 Cancellation fee income 18 46 27 56 21 91 96 83 76 144 Commission income 212827252521162723- Subsidy income ------184 Foreign exchange gains - - - - - 24 - 142 - 47 Compensation for expropriation ------333 253 - - Gain on invest ment s in invest ment part nerships - - - - - 83 29 54 78 152 Other 5 5 8 19 15 131 120 85 64 46 Non-operating expenses 526 348 433 430 456 649 1,039 1,572 1,559 1,502 Interest expenses 431 292 278 340 380 523 661 882 976 977 Commission expenses 4756938853102177500332373 Organization expenses - - 18------Amortization of shares issuance expenses ------3 31 31 28 Equity in loss of affiliates ------12 103 151 58 Foreign exchange losses ------123- 28- Other 480442232463564166 Recurring profit 4,702 6,015 6,421 4,464 2,811 5,325 6,936 8,478 5,513 4,616 YoY 142.0% 27.9% 6.7% -30.5% -37.0% 89.4% 30.3% 22.2% -35.0% -16.3% Recurring profit margin 22.3% 18.3% 17.4% 11.2% 7.8% 10.1% 10.9% 9.4% 6.5% 5.8% Extraordinary gains - 124 14 53 - 45 67 - 10 476 Gain on sale of fixed assets - - - 3 - 45 67 - 7 - Gain on negative goodwill - - 14 ------Gain on sale of bonds ------475 Liquidating dividend on investments in subsidiary - 124------Settlement following change in contract- - - 50------Other ------3- Extraordinary losses 8 0 57 36 - 447 40 2,229 3,291 1,742 Loss on sale of fixed assets ------28 - - - Loss on retirement on fixed assets 8 0 - - - 26 1 - 42 - Cancellation fee - - 50 ------Impairment loss - - - 36 - 398 10 2,208 3,248 1,360 Loss on valuation of investment securities - - - - - 19 - 18 - - Loss on COVID-19 pandemic ------290 Other - - 7 - - - - 2 - 91 Pre-tax profit 4,694 6,139 6,378 4,481 2,812 4,923 6,963 6,249 2,231 3,349 Income taxes -668 565 2,522 1,407 976 1,482 2,348 2,981 1,962 505 Implied tax rate -14.2% 9.2% 39.5% 31.4% 34.7% 30.1% 33.7% 47.7% 87.9% 15.1% Net income 5,362 5,574 3,857 3,074 1,836 3,441 4,615 3,267 268 2,878 YoY 104.0% 3.9% -30.8% -20.3% -40.3% 87.5% 34.1% -29.2% -91.8% 973.9% Net income attributable to non-controlling interests - - - -5 - 83 50 71 -8 -34 YoY ------39.8%42.0%-- Net income attributable to owners of the parent 5,362 5,574 3,856 3,079 1,835 3,357 4,564 3,195 276 2,878 YoY 104.0% 3.9% -30.8% -20.2% -40.4% 82.9% 36.0% -30.0% -91.4% 942.8% Net margin 25.5% 16.9% 10.4% 7.7% 5.1% 6.5% 7.3% 3.6% 0.3% 3.6% Net income 5,362 5,574 3,857 3,074 1,836 3,441 4,615 3,267 268 2,878 Other comprehensive income V aluat ion difference on market able securit ies - - - - -15 15 - - - 112 Foreign currency translation adjustment ------25 -8 -133 -90 Equity in other comprehensive income of affiliates ------1 - -3 6 T ot al ot her comprehensive income - - - - -15 15 27 -10 -136 28 Comprehensive income 5,362 5,574 3,856 3,074 1,820 3,456 4,642 3,256 132 2,873 Comprehensive income attributable to owners of parent 5,362 5,574 3,857 3,079 1,820 3,373 4,591 3,186 145 2,920 C omprehensiv e income attributable to non-controlling interests - - - -5 - 83 50 69 -13 -47 Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

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Until FY03/15, the company’s main businesses were sales of condominiums and detached houses. The company added the Real Estate Investment segment in FY03/16 to diversify its sources of earnings. Hoosiers launched a new medium-term management plan in March 2021.

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Balance sheet

Balance sheet FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. ASSETS Cash and deposits 4,432 8,293 12,477 15,722 13,822 21,383 30,493 26,112 31,736 29,293 Accounts receivable 131 144 197 122 65 136 394 600 607 382 Merchandise - - - - - 26394238334 Real estate for sale 2,640 5,276 9,365 11,282 10,035 12,718 16,471 33,785 25,888 31,122 Real estate for sale in process 16,356 17,878 20,062 27,588 30,705 47,922 53,680 59,093 50,283 37,029 Operational investment securities ------1,6711,463 Prepaid expenses 642 605 809 832 1,505 1,614 1,919 1,755 2,147 1,539 Other 1,605 1,440 1,855 2,188 1,636 4,537 4,304 4,337 2,380 3,997 Allowance for doubtful accounts -17 -2 -4 -2 -2 -7 -18 -23 -16 -17 Total current assets 25,789 33,634 44,760 57,732 57,766 88,329 107,282 125,701 114,734 105,142 Buildings (net) 869 142 1,532 1,615 4,852 5,102 9,245 7,230 9,930 11,081 Machinery, equipment, and vehicles (net) 96525191619517091 Tools, furniture, and fixtures (net) 11 14 21 26 63 188 367 182 288 107 Land 870 330 1,723 2,135 8,355 6,686 8,640 7,507 11,048 11,166 Construction in progress - - - - 1,631 570 2,223 5,557 562 3 Total tangible fixed assets 1,759 492 3,279 3,778 14,905 12,567 20,493 20,674 21,999 22,449 Goodwill - - - - 590 1,371 1,514 205 191 177 Other 124 215 176 76 49 97 178 320 549 271 Total intangible assets 124 215 176 76 640 1,468 1,692 526 741 448 Investment securities 8 8 36 79 209 506 2,855 3,759 2,535 2,908 Long-term loans receivable ------1,435 1,568 1,815 Investments in capital of subsidiaries200------Deferred tax assets 537 540 56 47 84 249 786 1,173 964 1,893 Other 150 287 226 927 992 1,547 2,165 1,470 1,332 1,377 Allowance for doubtful accounts -2-6-8-7-10-8-7-7-5-4 Investments and other assets 893 829 310 1,046 1,275 2,294 5,799 7,830 6,394 7,990 Total fixed assets 2,776 1,536 3,765 4,899 16,820 16,331 27,985 29,030 29,135 30,888 Deferred assets ------915928- Stock issuance expenses ------915928- Total assets 28,565 35,169 48,525 62,631 74,585 104,660 135,359 154,792 143,897 136,030 LIA BILITIES Notes and accounts payable 192 597 1,653 1,888 1,911 1,072 3,066 4,157 1,114 1,045 Short-term borrowings 3,175 3,372 100 100 2,104 5,792 4,252 4,467 9,362 11,216 Current portion of bonds - 50 50 150 210 227 342 672 622 3,582 Current portion of long-term borrowings 7,413 3,499 6,668 8,558 12,372 8,869 19,943 22,888 22,875 14,826 Income taxes payable 53 372 1,464 1,201 479 1,670 1,569 3,435 1,551 1,332 Advances received 1,496 3,252 1,268 2,395 4,272 9,050 3,442 3,463 4,411 4,517 Deposits received ------Provision for bonuses 36 46 47 59 103 147 183 331 354 315 Provision for after-sakes services - - - - - 275 115 196 182 48 Other 685 694 1,345 3,399 3,405 2,858 2,981 3,878 4,823 4,649 Total current liabilities 13,050 11,881 12,595 17,750 24,856 29,960 35,893 43,487 45,294 41,530 Bonds - 175 125 425 515 567 855 6,183 4,210 2,628 Long-term borrowings 4,826 7,003 15,660 22,352 26,316 48,169 53,845 59,255 47,849 51,845 Deferred tax liabilities - - 455 404 556 486 426 180 921 909 Provision for share-based remuneration for directors - - - - - 37 73 223 223 223 Retirement benefit liability - - 2 1 1 98 113 121 125 160 Asset retirement obligations 24 25 44 32 164 134 358 322 480 469 Other 58 31 113 147 285 678 1,203 1,042 1,968 1,897 Total fixed liabilities 4,908 7,234 16,398 23,361 27,838 50,169 56,873 67,326 55,776 58,131 Total liabilities 17,958 19,115 28,992 41,112 52,694 80,129 92,767 110,814 101,070 99,661 NET A S SETS Shareholders' equity 10,607 16,055 19,533 21,516 21,904 24,444 42,418 43,658 42,226 28,934 Capital stock 2,400 2,400 2,400 2,400 2,400 2,400 15,882 15,882 15,882 15,882 Capital surplus - - - - - 13- - - - Retained earnings 8,938 14,386 17,132 19,804 21,218 24,043 27,363 28,11226,65514,042 Treasury stock -731 -731 - -688 -1,714 -2,013 -827 -336 -311 -990 Accumulated other comprehensive income - - - - -15 - 27 16 -114 -185 Valuation difference on marketable securities - - - - -15 - 26 16 -114 -72 Share subscription rights - - - 3 3 3 - - - - Non-controlling interests - - - - - 83 145 302 714 7,507 Total net assets 10,607 16,055 19,533 21,519 21,891 24,530 42,592 43,977 42,827 36,368 Total liabilities and net assets 28,565 35,169 48,525 62,631 74,585 104,660 135,359 154,792 143,897 136,030 Working capital 18,936 22,701 27,970 37,104 38,893 59,730 67,518 89,363 75,702 67,822 Total interest-bearing debt 15,414 14,099 22,603 31,585 41,517 63,624 79,237 93,465 84,918 84,097 Net debt 10,981 5,806 10,126 15,863 27,695 42,241 48,744 67,353 53,182 54,804 Net debt-to-equity ratio 1.04 0.36 0.52 0.74 1.27 1.72 1.14 1.53 1.24 1.51 Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

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Assets As business grew more diverse and revenue increased, the company expanded its holdings of real estate for sale and fixed assets, and asset turnover fell. Total asset turnover fell from 0.94x in FY03/13 to 0.47x in FY03/18. Profitability also fell, with OPM declining from 26.9% in FY03/11 to 6.8% in FY03/21. The company announced the outline of a new medium-term management plan in January 2021. This plan calls for the concentration of management resources into the company’s original and current mainstay business of residential property sales. In this manner, the company aims to improve profitability and streamline its balance sheet without increasing volume.

Liabilities The company maintained a net D/E ratio of 1.0x or less through FY03/15. However, this ratio has been above 1.0x since FY03/16, as the company increased interest-bearing debt in line with business expansion. As of FY03/21, the company had a net D/E ratio of 1.51x.

Equity Until FY03/14, the company maintained an equity ratio of near 40%, which is high for a real estate company. The ratio has fallen since then, however, reaching 21.2% in FY03/21. ROE was also high through FY03/15, at more than 10%, but has since fallen. In FY03/20, ROE was 0.6%, due to the company’s recording of an impairment loss stemming from the company’s withdrawal from the biomass business. In FY03/21, ROE was back up to 8.1%.

To reconfigure its capital policy, in FY03/21 the company made a JPY14.8bn tender offer for its own shares and retired 35.86% of total shares outstanding. Shareholders’ equity decreased JPY13.3bn YoY. At the same time, the company raised cash using hybrid debt capital instruments.

In FY03/18, Hoosiers raised JPY13.5bn via a rights offering. The company aimed to use this cash to form a healthcare REIT and invest in the renewable energy business in the Other (PFI) segment. As of January 2021, JPY7.9bn of that amount was uninvested and remained as excess funds. The company also expects to raise JPY6.9bn through the sale of preferred shares in Hoosiers Wellness & Sports Co., Ltd., a consolidated subsidiary. The company decided that returning JPY14.8bn to shareholders was a rational move, which led to the acquisition of treasury stock.

Shared Research understands that the company’s use of excess funds to make a tender offer for its own shares, as well as the use of hybrid debt capital instruments to raise cash, are aimed at raising capital efficiency and financial soundness. These moves are part of the company’s growth strategy under its new medium-term management plan.

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Key financial indicators Profit margins FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Profitability Gross profit margin 35.3% 29.7% 30.0% 25.2% 24.1% 24.7% 25.3% 24.2% 21.1%20.0% Operating profit margin 24.6% 19.1% 18.4% 11.9% 8.9% 10.6% 11.5% 10.3% 7.9% 6.8% Recurring profit margin 22.3% 18.3% 17.4% 11.2% 7.8% 10.1% 10.9% 9.4% 6.5% 5.8% ROE (RP-based) 44.3% 37.5% 32.9% 20.7% 12.8% 21.8% 16.3% 19.4% 13.1% 16.0% ROA (RP-based) 17.9% 18.9% 15.3% 8.0% 4.1% 5.9% 5.8% 5.8% 3.7% 3.3% ROE (NI-based) 67.3% 41.8% 21.7% 15.0% 8.5% 14.5% 13.7% 7.4% 0.6% 8.1% Efficiency Total asset turnover (times) 0.74 0.94 0.76 0.64 0.48 0.50 0.47 0.58 0.590.59 Inventory turnover (times) 1.20 1.56 1.41 1.17 0.90 1.04 0.97 1.10 1.01 1.11 Days in inventory 304.0 233.4 259.7 311.3 404.2 351.0 376.9 331.2 362.1 329.2 Days in accounts receivable 2.1 1.5 1.7 1.5 0.9 0.7 1.5 2.0 2.6 2.2 Days in accounts payable 4.0 4.4 11.1 16.1 19.3 10.3 11.9 14.7 11.3 4.9 Cash conversion cycle (days) 302.1 230.6 250.3 296.7 385.9 341.4 366.5 318.5 353.4 326.5 Fixed asset turnover (times) 7.5821.469.818.172.143.232.263.102.93 2.60 Tangible fixed asset turnover (times) 11.96 67.00 11.26 10.60 2.41 4.20 3.09 4.35 3.87 3.57 Safety Equity ratio 37.1% 45.6% 40.3% 34.4% 29.3% 23.4% 31.4% 28.2% 29.3% 21.2% Interest-bearing debt dependency 54.0% 40.1% 46.6% 50.4% 55.7% 60.8% 58.5% 60.4% 59.0% 61.8% Current ratio 197.6% 283.1% 355.4% 325.2% 232.4% 294.8% 298.9% 289.1% 253.3% 253.2% Quick ratio 35.0% 71.0% 100.6% 89.3% 55.9% 71.8% 86.1% 61.4% 71.4% 71.5% Cash and marketable securities ratio (months) 2.63.14.14.74.64.95.83.64.64.4 Working capital to sales ratio 90.0% 68.9% 75.7% 92.7% 108.2% 113.3% 106.6% 99.4% 88.8% 84.5% Fixed ratio 26.2% 9.6% 19.3% 22.8% 76.8% 66.8% 65.9% 66.5% 69.2% 107.0% Fixed long term conformity rate 17.9% 6.6% 10.5% 10.9% 33.8% 21.9% 28.2% 26.2% 29.8% 35.5% Cash flows Cash flow margin 8.6% 16.1% -3.7% -8.2% -15.8% -7.9% -14.3% -3.7% 18.9% 13.4% CF-based current ratio 13.9% 44.7% -11.0% -18.4% -22.9% -13.9% -25.2% -7.6% 35.6% 25.8% CF-based interest coverage ratio (times) 5.1倍 19.0倍 -5.9倍 -16.6倍 -18.1倍 -9.6倍 -17.8倍 -5.1倍 13.7倍 9.2倍 OCF-based payout ratio 5.1% 2.3% -27.2% -12.4% -7.4% -12.7% -8.0% -38.4% 10.7% 12.8% Source: Shared Research based on company data

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Cash flow statement

Cash flow statement FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cash flows from operating activities (1) 1,817 5,312 -1,383 -3,268 -5,695 -4,162 -9,053 -3,316 16,110 10,722 Pre-tax profit 4,694 6,139 6,378 4,481 2,812 4,923 6,963 6,249 2,231 3,349 Depreciation 113 100 86 203 270 486 958 1,076 1,244 1,201 Amortization of guarantee deposits - - - 16 1 1 2 4 - - Amortization of share issuance expenses ------3313128 Amortization of goodwill 2246363401321632491313 Impairment loss - - - 36 - 398 10 2,208 3,248 1,360 Change in provision for doubtful accounts -13-164-3-1 3114-8 - Change in provision for bonuses 91001240353214822-38 Change in ret irement benefit liabilit y - - - 0 -2 1 5 7 3 35 Change in provision for aft er-sales services - - - - - 275 -159 80 -14 -133 C hange in provision for directors' stock-based remunerations - - - - - 37 36 149 - - Interest and dividend income -1 -2 -2 -12 -22 -37 -92 -119 -140 -109 Interest expenses 431 292 278 340 380 523 661 882 976 977 Liquidating dividend on investments in subsidiary - -124 ------Gains (losses) on earnings of affiliates ------1210315158 Foreign exchange gains (losses) ------24 123 -142 28 -47 Loss on store closures ------76 Loss on COVID-19 pandemic ------290 Change in accounts receivable -20 -13 -51 75 58 -51 -257 -200 -5 225 Change in inventories -2,989 -2,873 -5,960 -9,526 -8,470 -11,943 -9,357 -12,902 14,718 8,170 Change in operat ional invest ment securit ies ------1,668 195 Change in prepaid expenses -374 31 -197 -4 -651 -35 -231 392 -349 571 Change in accounts payable -79 405 1,056 235 23 -840 1,993 310 -3,043 -65 Change in consumption taxes refund receivable -53 8 0 -21 -145 -576 377 -559 649 -338 Change in consumption taxes payable -68 13 0 29 -17 133 232 -218 1,062 -1,093 Change in advances received 508 1,756 -1,985 1,127 1,871 4,550 -5,608 -309 932 106 Change in advance subsidy - - - 970 342 -809 -502 - - - Change in deposits -17 26 258 1,032 -1,065 -36 -35 318 1,229 89 Other 105 -101 -491 478 -301 574 -1,022 683 -843 -421 Subtotal 2,249 5,674 -577 -519 -4,839 -2,276 -5,679 -1,549 20,470 14,317 Interest and dividend income 1 2 212223792119140109 Interest expenses -397 -305 -286 -343 -388 -532 -665 -901 -1,018 -915 Income taxes refund - - 1 303 1,054 6 574 1,036 275 9 Income taxes -36 -60 -523 -2,720 -1,546 -1,397 -3,377 -2,021 -3,757 -2,670 Cash flows from investing activities (2) -102 -6 -996 -1,231 -4,497 -8,961 -10,843 -12,987 -670 -3,058 Purchase of intangible/tangible fixed assets -28 -14 -30 -700 -3,360 -5,861 -8,665 -8,620 -1,752 -3,278 Proceeds from sale of intangible/tangible fixed assets - - - 60 - 406 516 - 52 71 Purchase of intangible assets -70-1------Purchase of investment securities -5 - -27 -45 -159 -398 -2,605 -933 -297 -445 Proceeds from sale of investment securities ------151 Proceeds from distribution of investment securities - - - - - 159 285 225 1,443 396 Proceeds from distribution of investment in subsidiaries - 324 ------Payment of loans receivable - - -41 -1,277 -36 -3,911 -517 -855 -307 -280 Collection of loans receivable - - 45 784 195 1,983 647 533 427 80 Purchase of shares of subsidiaries resulting in change in scope of consolidation - - - - -1,133 -1,243 - - -1,932 - Payments of leasehold and guarantee deposits - -104-20-132------Collection of leasehold and guarantee deposits - - 255------Purchase of shares in subsidiaries - -212917------Purchase of shares in equity-method affiliates ------31 -102 - - Payments for acquisition of businesses ------390 -2,920 - - Other 1 1 -1,842 25 -4 -96 -83 -315 1,681 397 Free cash flow (1+2) 1,715 5,306 -2,379 -4,499 -10,192 -13,123 -19,896 -16,303 15,440 7,664 Cash flows from financing activities -1,459 -1,444 6,458 7,686 8,437 20,680 28,783 12,131 -10,159 -15,077 Net increase in short-term borrowings -3,710 197 -3,272 - 1,934 3,688 -1,540 215 4,644 1,849 Proceeds from long-term borrowings 6,557 7,068 18,310 19,815 19,021 37,969 42,543 48,132 39,392 33,421 Repayments of long-term borrowings -4,211 -8,807 -8,085 -11,233 -11,359 -20,235 -25,794 -39,829 -50,772 -37,303 Proceeds from issuance of bonds - 250 - 500 300 300 700 6,100 500 2,000 Redemption of bonds - -25 -50 -100 -150 -231 -297 -442 -2,522 -622 Proceeds from share issuance to non-controlling interests following establishment of subsidiaries - - - 5 - - 11 235 430 6,905 Proceeds from issuance of shares resulting from exercise of share subscription rights ------13,387 - - - Proceeds from disposal of treasury shares resulting from exercise of share subscription rights ------927 73 13 6 Proceeds from disposal of treasury shares - - - -688 -1,026 -465 -277 -753 - -14,800 Proceeds from sale of treasury shares - - - - - 179- - - - Dividends paid -93 -125 -376 -406 -421 -530 -725 -1,274 -1,720 -1,377 Dividends paid to non-controlling interests ------181- - Other -1 -2 -69 -206 139 4 -150 -143 -123 -157 Valuation difference eon cash and cash equivalents - - - - - 24 -155 110 -45 -10 Increase (decrease) in cash and cash equivalents 256 3,862 4,079 3,187 -1,756 7,580 8,730 -4,061 5,235 -7,424 Cash and cash equivalent at beginning of period 4,175 4,431 8,293 12,372 15,560 13,803 21,383 30,120 26,112 31,348 Change in cash and cash equivalent resulting from inclusion of subsidiaries in consolidation ------5 54 - - Cash and cash equivalent at end of period 4,431 8,293 12,372 15,559 13,803 21,383 30,120 26,112 31,348 23,923 Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.

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Cash flows from operating activities The main factors affecting cash flows from operating activities are pre-tax profit, depreciation, changes in inventories, and impairment losses. In FY03/21, operating activities provided a substantial amount of cash, as the company worked aggressively to sell inventory assets.

Cash flows from investing activities Cash flows from investing activities are primarily affected by the purchase and sale of tangible fixed assets and purchases of investment securities. In FY03/21, investing activities used cash due to the purchase of tangible and intangible fixed assets.

Cash flows from financing activities Cash flows from financing activities are typically positive. The company mainly raises cash through long-term borrowing to cover negative cash flows from operating and investing activities. In line with its capital policy, in FY03/21 the company spent cash to acquire treasury stock, while receiving cash from the issuance of preferred shares in a subsidiary and taking out long-term borrowings.

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Historical performance

FY03/21 results Overview

▷ Revenue: JPY80.2bn (-5.9% YoY) (progress toward full-year company target: 100.3%)

▷ Operating profit: JPY5.4bn (-18.8% YoY) (129.4%)

▷ Recurring profit: JPY4.6bn (-16.3% YoY) (131.9%)

▷ Net income*: JPY2.9bn (+ 942.8% YoY) (119.9%) *Net income attributable to owners of the parent

Revenue fell JPY5.0bn YoY, decreasing JPY14.4bn YoY in the Real Estate Investment segment and JPY1.9bn YoY in the Condominium Management and Related Services segment. The declines in these segments easily offset revenue increases of JPY8.8bn YoY in the Real Estate Development segment and JPY2.5bn YoY in the CCRC segment. Performance exceeded the company’s expectations. Hoosiers attributes the stronger-than-expected results to the COVID-19 pandemic, which has changed the value people place on homes and buoyed its business for condominiums and detached houses.

Operating profit fell JPY1.3bn YoY. By segment, operating profit was down JPY3.2bn in Real Estate Investment, down JPY371mn in Condominium Management and Related Services, up JPY2.5bn in Real Estate Development , and up JPY92mn in CCRC segment. In the Condominium Management and Related Services segment, the pandemic affected operations in the hotel and sports business. In this segment, the company booked an extraordinary loss of JPY1.7bn stemming from asset impairment. At the same time, the company recorded JPY475mn in extraordinary gain from the sale of the biomass power generation business and booked around JPY620mn in deferred tax assets due to the adoption of the consolidated tax return filing system. The income tax burden decreased (deferred income taxes of minus JPY992mn).

Performance by segment Real Estate Development segment In the mainstay Real Estate Development segment, revenue was JPY55.3bn (+18.9% YoY), and operating profit was JPY4.7bn (+111.2% YoY). In the condominium business, the company sold 1,272 units in FY03/21, outpacing its forecast of 1,205 units. The company also sold 125 detached houses. The regional condominium business continued to progress steadily, accounting for 80% of the total in FY03/21 (based on the number of units completed and transferred; 81.8% in FY03/20). This segment was relatively unaffected by the pandemic, with revenue up JPY8.8bn YoY and increases in the number of units, higher gross profit, and lower selling expenses leading to a JPY2.5bn YoY rise in operating profit.

CCRC segment In the CCRC segment, revenue was JPY11.5bn (+28.2% YoY), and operating profit was JPY351mn (+35.5% YoY). Despite a decrease in outings amid the pandemic, the number of units delivered rose 62 YoY, to 268. As of end-March 2021, units under operation totaled 1,385.

Real Estate Investment segment In the Real Estate Investment segment, revenue was JPY7.4bn (-66.1% YoY), and operating profit was JPY402mn (-88.9% YoY). Within revenue, the company generated JPY4.4bn from real estate sales and JPY2.4bn from rental revenue. The company held back on sales of real estate in FY03/21, selling only 10 properties (21 in FY03/20). The company opted to continue holding more properties in the face of market uncertainty surrounding the pandemic. Compared with FY03/20, when property sales were higher, revenue was down JPY14.4bn, and operating profit decreased JPY3.2bn.

Condominium Management and Related Services segment In the Condominium Management and Related Services segment, revenue was JPY6.0bn (-24.2% YoY), and the operating loss was JPY71mn (-123.7% YoY). Within revenue, the company generated JPY1.8bn from condominium management , JPY3.3bn from sports club operation, and JPY870mn in other revenue (hotel operation and contracted construction). The number of

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condominium units rose steadily, to 17,015 units. The company recorded operating and extraordinary losses as the hotel and sports business was affected by the pandemic. The company decided to withdraw from operations at three low-profit facilities in the sports business.

Other (PFI) segment In the Other (PFI) segment, the company produced revenue of JPY72mn (-20% YoY) and operating profit of JPY8mn (-27.3% YoY), stemming from the private finance initiative (PFI) business.

Purchase and retirement of treasury shares In FY03/21, the company withdrew completely from the renewable energy business and changed its REIT funding policy. As a result, some JPY7.9bn the company had raised through the rights offering (JPY13.5bn) in 2018 remained as excess funds. In March 2021, the company raised JPY6.9bn via hybrid debt capital instruments that generated a total of JPY14.8bn through a takeover bid for its own shares and retired 35.86% of total shares outstanding. Its capital restructuring made it possible to improve ROE and EPS, strengthen shareholder returns, and introduce DOE. Shareholders’ equity decreased by JPY13.3bn YoY.

Shared Research understands that using excess funds to make a tender offer for its own shares and raising cash using hybrid debt capital instruments are facets of the company’s efforts to achieve capital efficiency and financial soundness. These are in line with the growth strategy in the new medium-term management plan.

Cumulative Q3 FY03/21 Overview

▷ Revenue: JPY51.7bn (-5.5% YoY; rate of progress toward revised full-year target: 64.6%)

▷ Operating profit: JPY3.0bn (-14.5% YoY; 72.6%)

▷ Recurring profit: JPY2.7bn (-3.0% YoY; 77.8%)

▷ Net income*: JPY2.2bn (+19.2% YoY; 91.6%) *Net income attributable to owners of the parent

Although progress on getting contracts for condominiums for seniors has taken time amid the COVID-19 pandemic, performance was favorable, mainly in the condominium and residential property sales businesses. Revenue tends to fluctuate by quarter because the company records revenue in the Real Estate Development, CCRC, and Real Estate Investment segments when properties are handed over to customers rather than at the time sales contracts are signed.

Performance by segment Real Estate Development segment In the Real Estate Development segment, revenue was JPY37.1bn (+20.0% YoY), and operating profit was JPY2.8bn (+93.9% YoY). During the period, the company delivered 837 condominium units in developments including Duo Veel Sapporo Hokudaimae Grace, The Tower Obihiro, and Duo Hills Tsukuba Century, and 94 detached houses at Duo Avenue Kamikitazawa Garden and Duo Avenue Higashifushimi, among other projects.

CCRC segment In the CCRC segment, revenue was JPY5.7bn (-25.2% YoY), and operating profit was JPY56mn (-84.6% YoY), due to the delivery of 137 condominiums for seniors at such properties as Duo Scene Sagamihara Kamimizo Ekimae.

Real Estate Investment segment In the Real Estate Investment segment, revenue was JPY4.4bn (-55.9% YoY), and operating profit was JPY106mn (-92.2% YoY).

The company made a large-scale purchase of treasury shares in January 2021, buying 37.59% of total shares outstanding (21,637,500 shares) for JPY14.8bn.

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1H FY03/21 Overview

▷ Revenue: JPY29.2bn (-14.0% YoY)

▷ Operating profit: JPY928mn (-52.1% YoY)

▷ Recurring profit: JPY726mn (-51.7% YoY)

▷ Net income*: JPY832mn (-18.2% YoY) *Net income attributable to owners of the parent

In the mainstay Real Estate Development segment, revenue skewed toward 2H, so 1H revenue was down YoY. Actual demand remains favorable, however. The number of contracts on condominiums in 1H was 1,028, reaching 85% of the full-year target of 1,205 units (77% at the same point in FY03/20). Demand for detached houses also rose, as people sought attractive suburban living environments prompted by the COVID-19 pandemic. In 1H, contracts on detached houses totaled 114, or 93% of the full-year target of 123 units (50% at the same point in FY03/20).

The CCRC segment was affected by the pandemic, as seniors curtailed trips away from home. As a result, contracts numbered 204, 67% of the full-year target of 304 units (81% at the same point in FY03/20). This result was generally in line with the company’s expectations. In the Real Estate Investment segment, in the interest of maximizing profit the company tightened its screening of assets for sale and took a cautious approach toward the timing of sales. Revenue fell significantly as a result. In the Condominium Management and Related Services segment, revenue fell significantly due to the suspension of operations at some sports clubs and hotels during the pandemic. The company recorded fixed costs from facilities that closed during this extraordinary suspension period as extraordinary losses. In 1H, the company recorded JPY264mn in extraordinary losses related to the pandemic. Although performance was affected by the pandemic, the company’s exposure to sports clubs and hotel operations is small, so the overall impact on the company was small.

Overview by segment Real Estate Development segment In the Real Estate Development segment, revenue was JPY20.3bn (-11.9% YoY), and operating profit was JPY1.2bn (-21.4% YoY). The company handed over 442 condominium units in such developments as Duo Hills Hineno The Premium and Duo Hills Obu The Residence. Hoosier also handed over 60 detached houses, including at Duo Avenue Kamikitazawa Garden and Duo Avenue Hachioji II.

CCRC segment The CCRC segment, the company handed over 103 condominiums at such developments as Duo Scene Sagamihara Kamimizo Ekimae, generating revenue of JPY4.2bn (+58.6% YoY) and operating profit of JPY37mn (operating loss of JPY224mn in 1H FY03/20).

Real Estate Investment segment In the Real Estate Investment segment, revenue was JPY2.0bn (-52.0% YoY), and the operating loss was JPY261mn (operating profit of JPY357mn in 1H FY03/20).

Condominium Management and Related Services segment In the Condominium Management and Related Services segment, revenue was JPY2.7bn (-33.9% YoY), and the operating loss was JPY142mn (operating profit of JPY118mn in 1H FY03/20). The substantial drop in revenue was due to the suspension of operation at some sports clubs and hotels due to the COVID-19 crisis.

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Q1 FY03/21 Overview

▷ Revenue: JPY10.3bn (+1.9% YoY)

▷ Operating loss: JPY173mn (operating loss of JPY152mn in Q1 FY03/20)

▷ Recurring loss: JPY177mn (recurring loss of JPY402mn in Q1 FY03/20)

▷ Net loss*: JPY367mn (net loss of JPY289mn in Q1 FY03/20) *Net loss attributable to owners of the parent Performance by segment Real Estate Development segment In the Real Estate Development segment, revenue was JPY7.9bn (+18.4% YoY), and operating profit was JPY329mn (JPY22mn in Q1 FY03/20). In the condominium business, the company generated revenue of JPY7.9bn (+18.3% YoY), due to the handover of 190 condominiums at properties such as Duo Hills Hineno The Premium and Duo Veel Akabane East.

CCRC segment In the CCRC segment, revenue was JPY307mn (+3.1% YoY), and the operating loss was JPY271mn (operating loss of JPY240mn in Q1 FY03/20). In condominiums for seniors, the company handed over five condominium units at Duo Scene Kunitachi and other properties, generating revenue of JPY181mn (-27.7% YoY).

Real Estate Investment segment In the Real Estate Investment segment, revenue was JPY958mn (-27.9% YoY), and the operating loss was JPY85mn (operating profit of JPY14mn in Q1 FY03/20).

Condominium Management and Related Services segment In the Condominium Management and Related Services segment, revenue was JPY1.1bn (-37.6% YoY), and the operating loss was JPY149mn (operating loss of JPY8mn in Q1 FY03/20).

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Other information

History

Date Activity Dec. 1994 Hoosiers established as limited liability company at 24-4 Naka Itabashi, Itabashi-ku, Tokyo Jun. 1995 Company upgraded from limited liability company to joint-stock corporation, name changed to Hoosiers Corporation Oct. 2002 Shares listed on JASDAQ, Hoosiers Living Service (wholly owned subsidiary) established Apr. 2003 Hoosiers Heart (wholly owned subsidiary) established Oct. 2003 Listed on the Second Section of the Tokyo Stock Exchange Sep. 2004 Listed on the First Section of the Tokyo Stock Exchange Oct. 2004 My Home Liner (wholly owned subsidiary) established Apr. 2005 Hoosiers Capital Partners (wholly owned subsidiary) established Mar. 2013 Absorption-type merger of Urban City Apr. 2013 Hoosiers Holdings established in Chiyoda-ku, Tokyo, through a sole share transfer; newly listed on the First Section of the Tokyo Stock Exchange; Hoosiers Avenue established Jan. 2014 AM 31 becomes a wholly owned subsidiary Apr. 2015 IEA (wholly owned subsidiary) established Jul. 2015 Hoosiers Care Design (wholly owned subsidiary) established Aug. 2015 Koken Community becomes a consolidated subsidiary Oct. 2015 Sugisho becomes a consolidated subsidiary Apr. 2016 AM 31 name changed to Hoosiers Asset Management Aug. 2016 Miya no Mori Sports becomes a wholly owned subsidiary May 2017 Hoosiers Asia Pacific Pte. Ltd. (wholly owned subsidiary) established in Singapore Oct. 2017 Hoosiers, Inc. (wholly owned subsidiary) established in the US state of Oregon Mar. 2018 Absorption-type merger of Sports Academy, Miya no Mori Sports, and Crystal Sports Club; name changed to Hoosiers Wellness & Sports Feb. 2019 Hoosiers Accommodation Service established Aug. 2019 Hoosiers REIT Advisors (wholly owned subsidiary) established Feb. 2020 Hoosiers Living Service Vietnam Co., Ltd. established

Sustainability initiatives

The company’s medium-term management plan calls for ongoing efforts to enhance governance and contribute to society through proactive ESG management. The company established a sustainability promotion office in April 2021 and plans to release a sustainability report in May 2021.

In addition to creating living environments that support diverse lifestyles, the company sees addressing the social and environmental issues (including climate change) that regional cities face as management priorities. The company aims to create value and contribute to society according to three key themes: affluent lifestyles, collaborative regional development, and the environment. The company aims to contribute to society through such initiatives.

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ESG themes and measures ESG themesMaterial issues Related SDGs Policy Key themes SDG-3 Good health and well-being Decent work and economic ・Diversifying housing needs SDG-8 ・Offer products and services responsive to ・Response to super-aged growth Affluent lifest yles Industry, innovation and changing lifestyles, such as the Duo Scene society SDG-9 infrastructure series Sustainable cities and SDG-11 communit ies Decent work and economic SDG-8 growth ・Vitalization of city centers ・Participate in urban redevelopment business Collaborative regional Industry, innovation and ・Vitalization of regional SDG-9 ・Part icipat e in PFI business development infrastructure economy Sustainable cities and SDG-11 communit ies SDG-3 Good health and well-being ・Use existing properties ・Response to climate changes Responsible consumption and ・Implement initiatives for resource/energy SDG-12 Environment ・Effective use of resources production saving SDG-14 Life below water ・Manage waste appropriately SDG-15 Life on land Basic themes ・Employee health SDG-3 Good health and well-being ・Ensure risk management and compliance management SDG-5 Gender equalit y ・Promote proactive participation of female W ellness ・Promote diverse human Decent work and economic employees and support childcare and nursing SDG-8 resources growth care ・Enhance corporate SDG-5 Gender equalit y ・Set up Compliance/Risk Control Committee governance Governance ・Develop Hoosiers Group Act ion Guidelines ・Promote compliance Peace and justice, strong SDG-16 ・Establish a risk management system ・Risk management inst it ut ions ・Conservation and Decent work and economic SDG-8 management of tangible growth ・Conserve and manage tangible cultural Social/community service cultural properties Industry, innovation and properties SDG-9 activities ・Recovery support for disaster- infrastructure ・Promot e recovery support act ivit ies Sustainable cities and stricken areas SDG-11 communit ies Source: Shared Research based on company materials

Corporate governance and top management Top management Tetsuya Hirooka President and CEO Born in 1963, Mr. Hirooka graduated from Keio University’s Faculty of Law. After working at Recruit Cosmos in the finance, sales, and corporate planning areas, in 1994 he established Hoosiers Limited (now Hoosiers Corporation).

The company’s management approach is somewhat group-oriented rather than being entirely top-down. Specifically, President Hirooka decides major policy direction, and the heads of segments set policies and strategies for their businesses. The managers of on-site businesses make business decisions, while Tsutomu Ikuma (senior managing director and head of the administrative department at the holding company) liaises with the individual businesses to delegate authority and control risk. Shared Research understands that President Hirooka is not averse to difficult projects; rather, he tenaciously follows projects to the end. He believes that women should be closely involved in management and encourages young employees to actively embrace challenges.

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Corporate governance Form of organization and capital structure Form of organization Company with Audit & Supervisory Board Controlling shareholder and parent company None Number of directors under Articles of Incorporation 10 or less Number of directors 7 Directors' terms under Articles of Incorporation 1 Chairman of the Board of Directors President Number of outside directors 4 Number of independent outside directors 4 Number of members of Audit & Supervisory Board under Articles of Incorporation 5 or less Number of members of Audit & Supervisory Board 3 Number of outside members of the Audit & Supervisory Board 2 Number of independent outside members of the Audit & Supervisory Board 2 Participation in electronic voting platform Yes Providing convocation notice in English Yes Implementation of measures regarding director incentives Performance-linked remunerations Eligible for stock option Yes Disclosure of individual director's compensation Yes Policy on determining amount of compensation and calculation methodology In place Corporate takeover defenses None Source: Shared Research based on company materials

Dividend policy and shareholder returns

The company’s dividend policy has been to maintain a “total distribution ratio of 40% or more.” This policy was based on the aim of ensuring a stable return to shareholders while retaining sufficient earnings to develop business and reinforce management. In January 2021, the company announced a change in its shareholder return policy. To ensure stable returns to shareholders, the company maintained the core link between dividends and operating performance. In addition, the company introduced a dividend on equity (DOE) element to its policy, thereby raising the floor level for dividends. The company’s policy from FY03/22 will be a “dividend payout ratio of 40% or more, and DOE of 4% or more.” With this policy, the company aims to optimize the level of shareholders’ equity and actively return profits to shareholders, while taking the overall investment environment into consideration.

Dividends FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 FY03/22 Est. Dividend per share (JPY) 8.76 10.22 10.22 17.52 20.22 25 35 24 36 Payout ratio 9.8% 14.0% 22.7% 27.3% 20.2% 44.9% 720.2% 47.1% Source: Shared Research based on company materials Group companies Gr oup c ompa ny Location Main businesses Stake Consolidated subsidiaries Hoosiers Corporation Japan Sales of new condominiums, participation in nationwide urban redevelopment business 100.0% Hoosiers Asset Management Japan Real estate investment, development of income properties, real estate leasing, real estate brokerage, sales of 100.0% renovated condominiums Hoosiers Avenue Japan Sale of new detached houses, development of apartments 100.0% Hoosiers Care Design Co., Ltd. Japan Sale of new condominiums for seniors, management and operation of condominiums for seniors, long-term care 100.0% insurance Hoosiers Living Service Co., Ltd. Japan Condominium management, building management, insurance agency operations, sale of interior items, refurbishment 100.0% Hoosiers Living Service Vietnam Co., Ltd. Vietnam Property management and ancillary businesses related to condominiums, office buildings, and commercial facilities 75.0% Hoosiers Accommodation Service Japan Hotel operation 100.0% Hoosiers Wellness & Sports Co., Ltd. Japan Sports club operation 100.0% Hoosiers Asia Pacific Pte. Ltd. Singapore Investment and business management and administration in the Asia/Pacific region 100.0% Hoosiers, Inc. US Investment and business management and administration in North America 100.0% Vermilion Capital Management Limited Japan Investment management, investment advisory, and consulting businesses 50.0% Hoosiers REIT Advisors Co., Ltd. Japan Investment management business 100.0% IEA Co., Ltd. Japan Planning and management of PPP and PFI businesses, consulting 100.0% Equity-method affiliates ALL INSPIRE-HOOSIERS SUKHUMVIT 50 Co., Ltd. Thailand Real estate investment 49.0% AHJ EKKAMAI Co., Ltd. Thailand Real estate investment 29.0% Source: Shared Research based on company materials

60/63 Hoosiers Holdings / 3284 RCoverage LAST UPDATE: 2021.08.05 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Major shareholders

Shares held Shareholding Top shareholders ('000) ratio City Index Eleventh Co. 19,154 33.36% Tetsuya Hirooka 5,060 8.81% DAIWA CM SINGAPORE LTD-NOMINEE HIROOKA TETSUYA (Standing proxy: Daiwa Securities Co., Ltd.) 3,363 5.86% The Master Trust Bank of Japan, Ltd. (Trust account) 2,283 3.98% Custody Bank of Japan, Ltd. (Trust account) 1,762 3.07% BNP PARIBAS SECURITIES SERVICES LUXEMBOURG/JASDEC/FIM/LUXEMBOURG FUNDS/UCITS ASSETS 1,310 2.28% (Standing proxy: The Hongkong and Shanghai Banking Corporation, Ltd. Tokyo Branch) T.H. One Co., Ltd. 1,000 1.74% Custody Bank of Japan, Ltd. 834 1.45% JP MORGAN CHASE BANK 385781 635 1.11% Haseko Corporation 576 1.00% SUM 35,976 62.66% Note: As of September 30, 2020. Holdings exclude treasury stock. Source: Shared Research based on company data

In January 2021, the company announced the acquisition of a substantial quantity of treasury shares and a tender offer to purchase 37.59% of its outstanding shares for JPY684 per share (21.6mn shares for JPY14.8bn). As a result of the tender offer, Hoosiers acquired 19.2mn shares (33.37% of issued shares) from major shareholder City Index Eleventh and 2.4mn shares (4.21%) from its fourth-largest shareholder, S-Grant Co., Ltd., both of which decided to sell their entire stakes. City Index Eleventh and S-Grant were both operated by members of the former Murakami Fund.

According to a news release dated March 3, 2021, on March 23, 2021 Tetsuya Hirooka (president and CEO) was slated to become the largest shareholder. According to a change report dated March 30, 2021, City Index Eleventh and S-Grant had both sold all of their holdings in Hoosiers.

Employees

As of end-March 2020, the company had 782 employees on a consolidated basis. Their average age was 37 years and nine months, average service period two years and four months, and average salary JPY6.3mn. (number of employees) FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 Consolidated 235 467 600 724 782 Real Estate Development 74 83 103 140 149 CCRC 59 82 106 Houses and Flats 23 27 32 39 42 Real Estate Investment 17 16 24 38 48 Property Management and Related Services 52 258 319 353 366 Senior 18 40 Other 11133 Parent Company-wide 50 42 62 69 68 Average age 35yrs 9mos 35yrs 3mos 35yrs 6mos 35yrs 9mos 37yrs 9mos Average years of service 4yrs 5mos 3yrs 10mos 3yrs 2mos 2yrs 4mos 5yrs 4mos Average annual salary (JPY'000) 6,347 5,750 6,113 6,447 6,340 Source: Shared Research based on company data

61/63 Hoosiers Holdings / 3284 RCoverage LAST UPDATE: 2021.08.05 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

Profile

Company Name Head Office 2-2-3, Marunouchi, Chiyoda-ku, Hoosiers Holdings Tokyo 100-0005 Phone Listed On + 81-3-3287-0704 First Section of the Tokyo Stock Exchange Established Exchange Listing April 2013 October 2002 Website Fiscal Year-End https://www.hoosiers.co.jp/index_en.html March IR Contact IR Web Business Planning Office https://www.hoosiers.co.jp/ir/index_en.html

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