Mitsubishi Estate Group Long-Term Management Plan 2030 Contents
Long-Term Management Plan 2030
Overview 2
Business Strategies
① Domestic Asset Business 15
② International Asset Business 23
③ Non-asset Business 30
ESG Initiatives 37
Appendices 46
MITSUBISHI ESTATE CO., LTD. 1 Long-Term Management Plan 2030 Overview
MITSUBISHI ESTATE CO., LTD. 2 Overview of Management Plan
1. Management Plan: Objective
Mitsubishi Estate Group’s Mission: Creation of a truly meaningful society through urban development
2030 Target (P40) 2030 Target (P5) A pair of driving wheels Address Four key themes* to realize a sustainable ROA ROE EPS society 5% 10% ¥200 *「Environment」「Diversity & Inclusion」 「Innovation」「Resilience」 Increasing Increasing Social Shareholder Fundamental Approach value value Fundamental Approach
Create value for every Transformational improvements to the stakeholder including visitors business portfolio's efficiency and employees Synergy and market resilience
Realize our mission and sustainable growth by increasing both social value and shareholder value
MITSUBISHI ESTATE CO., LTD. 3 Overview of Management Plan
2. Strengths and Growth Strategy
“Long-term view on Urban Development” and “Forward-looking DNA” Strengths “Extensive user reach” and “abundant real estate asset touchpoints”
Leverage Grow international existing strengths business Adapt to a changing future
①Domestic Asset Business ②International Asset Business ③Non-asset Business
Advance “Marunouchi NEXT Asia: Enhance development Grow Fee Business Stage” project business Delve into new technologies, Increase NOI with long-term Europe: Advance development e.g. AI/Robotics development projects business and Enhance revenue base New B2B and B2B2C Businesses Optimize capital recycling business for market conditions US: Enhance and diversify capital recycling business
Build a more efficient and market-resilient business portfolio Goal Improve ROA and ROE by expanding revenue via mainly market-resilient non asset business in combination with flexible capital policy
Value Sustainability Quality Of Life Propositions Social issue solutions Innovative services & experiences
MITSUBISHI ESTATE CO., LTD. 4 Quantitative Target
3. Quantitative Target – 2030 Target
2030 Target ROA*1 ROE EPS 5％ 10％ ¥200 *1 ROA＝Business Profit*2 / Total Asset (average of opening/closing balances)
Key Assumptions Profit Growth Shareholders Return Financial Stability
* Current framework Maintain • Payout ratio: current level of Business Profit*2 Approx. 30% + credit ratings ¥350–400 bn 【Reference】 • Share buybacks R＆I ：AA- (when determined to be S＆P ：A＋ optimal use of funds) Moody‘s ：A2
* Will adjust to business conditions *2 Business Profit= Operating Income + Equity in earnings (loss) unconsolidated subsidiaries and affiliates
MITSUBISHI ESTATE CO., LTD. 5 Reaching Targets
4. Approach to improve ROE
Improve ROE: Focus on ROA while maintaining current level of credit ratings
ROE ≒ ROA × Leverage Optimize leverage ROA enhancement while maintaining current level of credit ratings Key Initiatives Interest-bearing debt Respond to market conditions Grow NOI with development Adapt capital recycling business push (P13,17-20) to market conditions (P21) Equity Superior ROE through Manage it via share buyback, etc. stronger ROA Optimize residential business' Grow capital gains profit structure (P22) internationally (P23-29)
Dispose underperforming assets Expand non-asset business and strategic-holding stocks (P30-36) (P9,14,44)
Improved ROA
MITSUBISHI ESTATE CO., LTD. 6 Reaching Targets
5. 2030 Targets: Realization Plan (ROA・ROE・EPS)
Current (FY20) 2030 Target
Increase of ¥120–170 bn
Approx. ¥50bn growth from each of: domestic asset, international asset, non-asset business ¥350-400 bn
¥230.5 bn (EPS: ¥200)
Business Profit Business (EPS: ¥100.2)
【 Flexible capital policy 】 Optimize investments, assets sales, shareholder return and financing according to market ¥5.9 tn conditions Approx. ¥7-8 tn
Total Asset Total Expected net increase: ¥1-2tn
Business Profit Increase Net investment: Approx. ¥2–3 tn ＝ ROA : 3.9% ROA : 5% Total Asset Decrease Depreciation: Approx. ¥1 tn With current leverage
ROE : 7.8％ ROE : 10％
MITSUBISHI ESTATE CO., LTD. 7 Flexible Capital Policy
6. Capital Policy – Responsive to market conditions * From IR Presentation FY2019 with some translational adjustments Flexible capital policy – Responsive to market conditions (Value creation through BS management)
Optimize mix of investment, asset sales, shareholders returns and financing in response to the market
Sellers' market
Asset Sales :
Profits :
Shareholder return :
Buyers' market Active acquisition : /investment To maximize mid-to-long value, we combine: Capital gain : stable CF from long-term development PJs and asset holdings capital recycling business in response to the market Shareholders return :
MITSUBISHI ESTATE CO., LTD. 8 Flexible Capital Policy
7. Value creation through BS management * From IR Presentation FY2019 with some translational adjustments(Additional statements are underlined) Flexible Capital Policy – Responsive to market conditions (Value creation through BS management)
Asset Shareholders’ Equity and Liability
Capital recycling business optimized for market conditions Maintaining Financial Stability In seller's market: expedite asset sales Financial reserves for seizing buyer's market opportunities
Investment in promising PJs to enhance corporate value High credit rating enables long-term and low-cost financing
Long-term development and asset holdings In sellers' market, use asset sale proceeds for shareholder (core focus: Marunouchi redevelopment) returns and to maintain financial stability Steady capital investment in core business enables stable, cycle-proof rental cashflow
Timely asset sales judged by expected yields and external environment Capital Efficiency Improvement Sale of underperforming properties and Targets: ROA 5%, ROE 10%, EPS ¥200 strategic-holding stocks Increase numerator (net income) and decrease denominator Disposal of underperforming assets, including core asset (shareholders’ equity)
Ongoing disposal of strategic-holding stocks Choose measures to manage shareholders’ equity according to market conditions Expansion of Non-asset Business
MITSUBISHI ESTATE CO., LTD. 9 Flexible Capital Policy
8. Capital Allocation Policy
Cash in Cash out Strategic allocation to improve medium- to long- Strategic term capital efficiency Financial Allocation Allocate capitals based on market conditions capacity investment/ Select projects which help to increase the shareholder value shareholders Capital recycling business expected returns (pre-tax IRR) return/ suppression of Domestic : 6～8％ debt International (developed countries) : 8～10％ International (developing countries) : 10+％ *Expected return from total investment in each business
Cash flow Planned from investment & Planned projects – return through asset sale (book value) operating return activities * Including undetermined projects. See p.14 for the next three-year forecast
Base Payout ratio: Approx. 30％ shareholders * Shareholder returns method and scale will be adjusted return with real estate and financial market conditions, stock price and ROE/EPS
MITSUBISHI ESTATE CO., LTD. 10 Reaching Targets
9. Profit Growth Strategy - 2030 Vision
Profit changes vs FY2020* Growth Strategy
① Advance “Marunouchi NEXT Stage” project P17-19 ① Domestic Asset ② Increase NOI with development projects P13 Business P20 ③ Optimize capital recycling business to market conditions Approx. +¥50 bn P21 (FY20E * : Approx. ¥ 201.0 bn) ④ Optimize residential business profit structure P22
① Expand development business in Asia ② International Asset P24-28
Business ② Enhance development business and revenue base in Europe P24-27 Approx. +¥50 bn P29 (FY20E * : Approx. ¥ 36 bn) ③ Enhance and diversify US capital recycling business P24-27 P29 ① Steady profit growth in existing businesses ③ Non-asset Business P31-32 ② Utilization of technology P31 Approx. +¥50 bn P33-35 (FY20E * : Approx. ¥ 16 bn) ③ Provision of service contents focusing on B2C/B2B2C P31, P33-34,36
④ Fluctuation Factors ・Asset sales control in response to market conditions Approx. ±¥20–30 bn ・Capital gain and rental profit fluctuation due to investment opportunities * Composition of FY20 Business Profit= ① Domestic Asset + ② International Asset + ③ Non-asset Business + Eliminations or corporate (Round number) (¥ 201.0 bn) (¥ 36 bn) (¥ 16 bn) (▲ ¥ 23 bn)
MITSUBISHI ESTATE CO., LTD. 11 Reaching Targets
10. Roadmap for Profit Growth
Early stage Middle stage Late stage
Advance Redevelopment projects Redevelopment Projects' Contribution Domestic • Complete Tokiwabashi A Bldg. • Long-term developments, e.g. Tokiwabashi B Bldg. Asset • Open & expand outlet mall • Residential redevelopments • Asset sales and reconstruction of existing buildings (will Business lower rental profit) • Temporary decline in the condominium units sold
Profits scale with asset accumulation Stabilize profit via capital recycling • 1271 Ave. of the Americas renewal, 8 Bishopsgate • Shift from asset expansion to recycling International completion • Stabilize capital recycling business in Asia Asset • Stabilize Asia condominium business Business • Expand assets in Asia capital recycling business
Promoting commercialization in new domains Accelerate profits in new domains Non-asset • Stable growth in existing businesses • Stable growth in existing businesses • Promoting commercialization in new domains • Accelerate profits in new domains Business
MITSUBISHI ESTATE CO., LTD. 12 Reaching Targets
11. Pipelines
Project name*1 FY2021 FY2022 FY2023 2024 ～ 2030 Marunouchi 1-3 ● Tokyo Tokiwabashi Bldg. A ● Marunouchi Uchikanda 1-chome ★ ● Yurakucho Redevelopment (TBD) Tokyo Tokiwabashi Bldg. B ★ ● GOTEMBA PO (Phase 4 expansion) ● RINKU PO (Phase 5 expansion) ● Outlet Mall FUKAYA HANAZONO PO ● KYOTO JOYO PO ● Domestic Link Square Shinjuku*2 CO・MO・RE YOTSUYA*2 Kita Aoyama 2-chome ● Other TRC Distribution A Bldg. (reconstruction) ★ ● Umekita Phase 2 Development (Osaka) IMS redevelopment (Fukuoka) Kokusai Shin-Akasaka Bldg. Redevelopment CapitaSpring (Singapore) ● Mixed Use Development in ● Hangzhou (China) Daswin (Indonesia) ● Asia Phase 3 of Singapore-Hangzhou ● Science & Technology Park (China) Yoma Central (Myanmar) ● 180 George Street (Australia) ● One City Centre (Thailand) ● International 245 Hammersmith Road (London)*2 8 Bishopsgate (London) ● Europe 60-72 Upper Ground (London) ● (ITV The London Television Centre) US 1271 Avenue of the Americas (NY)*2 …International projects approved for the previous management plan (FY18-FY20) ★…Start Construction *1 For some projects, start/completion date is provisional …Construction period ●…Completion *2 To be completed in FY 2020
MITSUBISHI ESTATE CO., LTD. 13 Investment Return Plan
12. Three Year Investment Return Plan (FY2021-FY2023)
(Billions of Yen) 3-year Total Composition
Strategic Planned Investments and Return Strategic Return Allocation
Dispose Vary investment allocation underperforming assets for medium- to long-term Domestic Asset International Asset for capital efficiency capital efficiency Strategic Allocation 600 600 (investment/shareholders return Europe and US /suppression of debt) Outlet mall, Capital Recycling asset, Asia 200 And Others 100 Invest Aim for international profit ment Planned 550 growth investments Condominium 1,500
Marunouchi 500 area 150 0 500 Return Return 1,100 300 Asset sales plan assumes 100 market conditions of previous 200 100～200 three years
Strategic Return Net 100～200 Invest ment 150 0 250 0 0 -100～-200 ～600
MITSUBISHI ESTATE CO., LTD. 14 Long-Term Management Plan 2030 Business Strategy ① Domestic Asset Business
MITSUBISHI ESTATE CO., LTD. 15 Domestic Asset Business
1. Domestic Asset Business Growth Strategy
Profit Growth (vs FY2020) Investment & Return Plan (FY2021-FY2023) (Billions of Yen) Investment Return Net Investment Marunouchi 150 0 150 <2030 Goal> Outlet Mall, etc. 100 0 100 Approx. +¥50 bn Condominium 500 500 0 (FY20E : Approx. ¥201.0 bn) Other 450 300 150 Total 1,200 800 400
Growth Roadmap
Early stage Middle stage Late stage
Advance and commercialize redevelopment PJ, including Achieve sizeable profit contribution from large PJ including Rental Marunouchi Tokiwabashi B bldg. (P20) Domestic Capital Asset Recycling Optimize the balance of new investment & capital return in response to market conditions (P21) Business Resid Increase the number of unit sold and realize profits of Secure and commercialize redevelopment PJ ential redevelopment PJ(P22)
MITSUBISHI ESTATE CO., LTD. 16 Domestic Asset Business
2. Future of Marunouchi (Marunouchi NEXT Stage: Overview)
Marunouchi Redevelopment To-date Marunouchi NEXT Stage
Theme Theme The world‘s most interaction-inspiring neighborhood Marunouchi Re-design Main Redevelopment Area Increase in Operating Floor Area*1 Completed Projects (‘02-’19) Existing building Tokiwabashi and Yurakucho (Unit: k sq. m.) New (Redevelopment) 3,500 13 Towards Redevelopment Projects*4 2030 3,000 2,915 Marunouchi 1-3, Tokyo Tokiwabashi PJ Number of Offices Uchikanda 1-chome, Yurakucho Redev. ＋1,238 k sq m. 2,500 Floor Area of Total Redevelopment PJs*5 1,079 4,300*2 2,000 (Before reconstruction*3: 3,523) sq. m 1,677 1,100-1,300 k
1,500 Working Population MEC’s Total Investment by 2030
1,000 bn 1,421 *2 ¥600–700 1,836 280,000 (Before Redevelopment *3：Approx.227,000) 500 ESG Goal
256 Future 0 Goal Zero CO2 Emissions 2003/3 2019/3 100% Waste Recycling
*1 MEC only: total floor area of MEC‘s holding + leased floor *2 Marunouchi Total *3 As of 1996 before former Maru bldg. close *4 Some project names are provisional *5 Total floor area on construction confirmation application
MITSUBISHI ESTATE CO., LTD. 17 Domestic Asset Business
3. Future of Marunouchi
Marunouchi Re-design Co-creation Platform for Innovation through Companies, Employees, and Visitors
Strategy① Innovation of Marunouchi- Ecosystem
Set key themes Promote co-creation opportunities
Support innovation through Marunouchi business resources City-wide experimentation
Program② Strengthen Business Ecosystem updating digital infrastructure
①Place for ②Network ③Comfort ④Environment ⑤Security Interaction Public square Underground passage Data analysis leads to Zero CO₂ emission BCP enhancement Use of space for garden Wharf new services (Future goal) Human traffic data Advanced area energy Shared space New mobility services Robotization Collaboration with local management government
Rooftop of building in Otemachi Uchikanda 1-chome PJ Security robot Fuel cell installed in Marunouchi Bldg. Cable tunnel network
MITSUBISHI ESTATE CO., LTD. 18 Domestic Asset Business
4. Future of Marunouchi
Value creation through Tokiwabashi and Yurakucho redevelopment
＜Place for interaction＞ ＜Marunouchi area map＞ ＜Pipelines＞ Marunouchi 1-3 Tokiwabashi Bldg. A Tokiwabashi Bldg. B Serviced office Kanda facilities
Nihonbashi Fintech innovation lab
Floor area:181,000㎡ Floor area:146,000㎡ Floor area: 490,000㎡ Completion: Sep. 2020 Completion: Jun. 2021 Completion: FY2028 Social innovation Tokiwabashi lab
FY2021 FY2022 2030 Co-Creation Tokyo community for a sustainable Station Otemachi Bldg. Uchikanda 1-chome Yurakucho society Redevelopment Yaesu Renovation (TBD)
Space to find a variety of ideas Yurakucho ＜Legend＞ Marunouchi area Intrapreneur community Ginza Key redevelopment凡例 area Hibiya Floor area: 111,300㎡ Floor area: 84,500㎡ Interaction facilities Completion: Mar. 2021 Completion: 2025
MITSUBISHI ESTATE CO., LTD. 19 Domestic Asset Business
5. Expected NOI Contribution
New and expanding asset projects will increase by ¥60 bn on net NOI basis in Domestic Asset Business (Billions of Yen) ＜Key projects＞ +80 FUKAYA- HANAZONO +70 PREMIUM OUTLETS® PJ +60 GOTEMBA PREMIUM OUTLETS® +40 Tokyo Tokiwabashi Phase 4 Tokyo Tokiwabashi NOI (Net) Bldg. A Expansion Uchikanda 1-chome Bldg. B +¥ bn +20 60
+0
-20 FY21-FY23 FY24-FY26 FY27- -10 NOIFY21 from–FY23 Newly NOIFY24 from–FY26 Newly NOI FY27from– Newly ContributingTotal Plan Projects period (Total) ContributingNOI from Projects Newly (Total) ContributingNOI from Projects Newly (Total) ContributingNOI from Projects Newly (Total) NOI from Newly Contributing Projects Office building and complex facility Outlet mall and Logistics Decrease from closure * NOI＝Rental Income ー Rental Cost(excluding Depreciation) * Total contribution to NOI from domestic pipelines shown on Page 13. Subject to change (future property sales)
MITSUBISHI ESTATE CO., LTD. 20 Domestic Asset Business
6. Promoting Capital Recycling Business
Change in Capital Gains (incl. Int’l) Capital Recycling — Policy (Billions of Yen) 50.0 46.0 Domestic International Optimize the balance between new investment and return 40.0 16.0 31.3 (asset sales) to market conditions 30.0 11.0 Joint projects for improved efficiency (see below) 20.0 Asset sale based 30.0 on market Expected return for domestic capital recycling business*: 6～8％ 10.0 20.3 conditions
0.0 * Expected return of total capital recycling business (pre-tax IRR) Avg. FY15-17 Avg. FY18-20
Domestic Asset* Joint Project Concept Outline
Book value at end of Mar. 2019 Improve investment efficiency by earning project related fees (development, design, and property management) ¥1.1 tn Composition of Asset Independent 1.2% :Investment by MEC 1.3% Project Joint Project 5.6% :Investment by Office 3rd party 7.0% Retail
Rental apartment 10.9% Investment Investment Logistics Investment Return Return Return 74.0% Hotel *Total income-generating assets x-Marunouchi, Outlet Other malls, and assets of particular consolidated subsidiaries MEC Group MEC Group Fees 3rd Party Investor
MITSUBISHI ESTATE CO., LTD. 21 Domestic Asset Business
7. Optimize residential business profit structure
Residential Business Strategy
• Sales of condos will decrease due to careful selection of investments in current market Early to mid 2020s • Focus is ①development/sale of rentals and ②securing residential redevelopment projects
• Regain condominium sales with completion of redevelopment projects Mid to late 2020s • Maximize gains from rental property sales by timing to market conditions
Rental Apartment Business Condominium Business Book value of rental apartment • Sales will trend down for the next few years Approx. ¥80.0 bn • Increase profits by focusing on property in central Tokyo (March 2019) • Current focus on redevelopment projects will contribute to profits after mid 2020s (Composition by value)
assets under development Land Bank* by period 31% (September 2019) Major Redevelopment Projects (25 units) assets in operation Project name* Total units Completion 69% Togoshi 5-chome 200 Early-2020s (25 units) 3,300 Oppama District 300 Mid-2020s (Billions 5,300 Higashikanamachi 1-chome 700 Late 2020s of Yen) Capital gain from rental apartment 25 Koyama 3-chome 800 Late 2020s 20 Musashikosugi District 1,400 Late 2020s 15 21 (15 properties) 10,100 There will be approx.15 more projects (total of approx. 10,000 10 units) to be completed after mid-2020s. 11 5 9 1 * 0 Project names are abbreviated.. FY17 FY18 FY19 3-year total FY20 FY21-25 FY26 * # of unit MEC owns.
MITSUBISHI ESTATE CO., LTD. 22 Long-Term Management Plan 2030 Business Strategy ② International Asset Business
MITSUBISHI ESTATE CO., LTD. 23 International Asset Business
1. Growth Strategy
Profit growth (vs FY2020) Investment & Return Plan (FY2021-FY2023) (Billions of Yen) Net Investment Return Investment <2030 Goal> Asia 100 100 0 Europe/US 200 200 0 Approx. +¥50 bn Strategic Allocation* 300～450 0 300～450 (FY20E : Approx. ¥36 bn) Total 600～750 300 300～450 * Aiming to invest ¥100-150 bn/year in addition to planned investment for coming 3 years to expand international business
Growth Roadmap
Early stage Middle stage Late stage
・Secure development opportunities and accumulate asset Asia ・Optimize investment and capital return ・Realize profit (from Residential and ongoing projects) International ・Approach to investment and return: ① Stabilizing revenue ② Enhancing capital efficiency Europe Asset ・Advance large-scale development projects (8 Bishopsgate, 60-72 Upper Ground) Business ・Strengthen capital recycling business with local resources US ・Joint project development with local partners
MITSUBISHI ESTATE CO., LTD. 24 International Asset Business
2. Change in Asset and Profit Structure
Current Asia Europe US 2030 Target
5% Towards 2030 Target 28% Expand Asia development business 35% Business Profit: Business Profit: Annual investment: around ¥200– 28% ¥30.4 bn Approx. ¥90 bn 250 bn (FY18–FY20 Average) (2030 target) 40% 50% 45% Total Asset: 1st half of 2020s : Profit increase 45% Total Asset: ¥713.0 bn with asset accumulation Approx. ¥1.5 tn (Mar. 2019) 67% (2030 forecast) 2nd half of 2020s: Balance investment and return 22% 15% 20%
ROA：Around 4% ROA：Around 6%
Strategy
①Asia ②Europe ③US Increase investment, build capital recycling Investment and return to optimize profit Strengthen capital recycling business, portfolio stability and capital efficiency making the most of RGII* know-how Two approaches: Advance mainly large-scale* Joint venture with local partners ①Development with major stake ②Joint businesses with local partners * 8 Bishopsgate, 60-72 Upper Ground * Rockefeller Group International, Inc.
MITSUBISHI ESTATE CO., LTD. 25 International Asset Business
3. International Asset/Ongoing Projects
Many ongoing developments (rentals and condos) are expected to make early profit contribution International Asset (Mar. 2019) Major Ongoing Projects Book Value: Property Name Location Use Completion Area / Units*1 ¥643.4 bn Phase 3 of Singapore-Hangzhou China (Hangzhou) Office 2020 52,500㎡ Science & Technology Park CapitaSpring Singapore Office 2021 59,000㎡ 20% China (Hangzhou) 27% Mixed Use Development in Hangzhou Office 2021 51,750㎡ Asia Daswin Indonesia (Jakarta) Office 2021 75,000㎡ Yoma Central Myanmar (Yangon) Multi-use 2021 212,670㎡*2 Savya Financial Center North Tower The Philippines (Manila) Office 2021 24,600㎡*3 32% 21% 180 George Street Australia (Sydney) Office 2022 55,000㎡ One City Centre Thailand (Bangkok) Office 2022 66,000㎡ 8 Bishopsgate UK (London) Office 2022 53,000㎡ (London) Rental US (Manhattan) US (Other) Europe Asia Nine Elms Park UK apartment 2022 196 units Europe 60-72 Upper Ground (ITV The 2020s 2nd UK (London) TBD TBD London Television Centre) half 1271 Avenue of the Americas US (Manhattan) Office Dec. 2019 195,000㎡ US Boro Tower US (Virginia) Office Jan. 2019 41,000㎡ Rose Hill US (Manhattan) Condominiums Spring 2021 123 units *1 Leasable area or # of units *2 Total floor area *3 Area for sale Land Bank in Asia (Condominiums) 1271 Avenue of the Americas Daswin Project Total: 8,200 units* 3,400 2,300 2,500
8 Bishopsgate project Yoma Central FY2021 FY2022 FY2023- * # of unit MEC owns
MITSUBISHI ESTATE CO., LTD. 26 International Asset Business
4. International Business Profit Forecast
(Billions of Yen) Steady development of asset portfolio will lead to achievement of 2030 target 2030 Target
Around 90.0 Contribution from Capital Gain Income Gain Avg. FY18–FY20 ongoing projects ⑤ 60.0-70.0
③
Avg. FY08–FY17 30.4 ④ ① 17.3 16.0 6.7 10.7 ② 14.4
①Capital recycling business ③On-going projects in Asia
Number of ongoing projects: Continue investment (rental property) ⑤ Steady profit of 16 PJs opportunities for capital Expand Asia recycling business in Asia Approx. bn/year (US) Land Bank: (Condos) development ¥10 business Approx. 8,200 units ②Hybrid model investment ④Large-scale renovation and Continue work on development projects 60-72 Upper Income gain (US and Europe) Ground (London) Approx. ¥4 bn/year
MITSUBISHI ESTATE CO., LTD. 27 International Asset Business
5. Business Strategy and Development Cases in Asia and Oceania Expected Return from Investment Business Strategy IRR Developed countries 8～10 % Increasing in capital recycling asset portfolio Developing countries Two wheels of business: 10+ % ①Development with major stake *Expected return from total investment business in each area (pre-tax IRR) ②Joint businesses with local partners
Detailed Area Strategy in the Region Development Project Cases
Vietnam and Indonesia ⇒ ①Development with major stake ②Joint businesses with local partners
Thailand, Malaysia, The Philippines, Singapore, China, Taiwan, Australia ⇒ Mainly joint businesses with local partners
CapitaGreen Daswin Life one Wireless (Singapore, Office) (Indonesia, Office) (Thailand, Condominium)
MITSUBISHI ESTATE CO., LTD. 28 International Asset Business
6. Business Strategy and Development Cases in US and Europe Expected Return from Investment Key Projects IRR 8～10 % ①8 Bishopsgate (London) *Expected return from total investment business in each area (pre-tax IRR) ②60-72 Upper Ground Business Strategy (London) 【Europe】 Approach to investment & return: ③Capital Recycling ①Stabilizing revenue ②Enhancing capital efficiency Business in US 【US】 Strengthen capital recycling business with local resources Joint venture with local partners 8 Bishopsgate Project
Selected Track record 8 Finsbury Circus Tri City Industrial Complex Liv Goodyear Redevelopment PJ (US, Logistics facility) (US, Rental Apartment) (London, Office)
IRR Approx. 8% IRR over 10% IRR over 10%
MITSUBISHI ESTATE CO., LTD. 29 Long-Term Management Plan 2030 Business Strategy ③ Non-asset Business
MITSUBISHI ESTATE CO., LTD. 30 Non-asset Business
1. Non-asset Business Growth Strategy
Profit Growth (vs FY2020) Investment Policy
Aim for profit growth without affecting BS <2030 Goal> However, investment for M&A and capital alliance would Approx. +¥50 bn be considered for rapid growth and acquiring external (FY20E : Approx. ¥16 bn) know-how
Growth Roadmap
Early stage Middle stage Late stage
Existi Investment management business: AUM growth (aim for ¥5 tn by the mid-2020s) ng Hotel management business: Expanding number of hotel rooms (open 3-4 hotels/year) Non-asset Business Select new domain Launch Business Pilot Scale up businesses New Identify business partner Achieve early profits Achieve sizeable profit contribution Conduct POC
MITSUBISHI ESTATE CO., LTD. 31 Non-asset Business
2. Steady Growth in Existing Business
Steady Growth in Existing Business (Approx. +¥20–25 bn) Steady profit increase mainly through investment management and hotel management businesses
Profit Growth Scenario 2030 Target +¥20–25 bn
Stable growth
Present condition
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Investment Management Business Hotel Management Business Property Management Residential-related fee business ＜Growth Strategy＞ ＜Growth Strategy＞ (management, brokerage, renovation) • AUM balance of ¥5 tn by the mid-2020s • Continue to open 3–4 new hotels/year. Architectural Design & Engineering (currently ¥3.1 tn) Rooms - Royal Park Hotel Real Estate Services • Goodwill fully amortized (+¥2 bn) (published) 6,000 4,359 4,359 4,609 3,649 3,999 ＜Growth Strategy＞ 4,000 2,688 3,047 • Improved efficiency using IT 2,000 • Stronger alliance within MEC Group 0 • 2018 2019 2020 2021 2022 2023 2024 Staff talent on growth areas
MITSUBISHI ESTATE CO., LTD. 32 Non-asset Business
3. New Initiatives for the 2030s: Key Concept
New Initiatives for the 2030s and Beyond (＋¥25～30 bn) Utilize technology for sophistication of current business and new business development Seek new business opportunities in B2C/B2B2C that match potential social needs
Fast-changing external environment and diversified real estate needs
Value proposition based on social challenges and potential customer needs Sustainability Quality Of Life Environment Innovation Convenience Fun Resilience Diversity & Inclusion Health (Well-Being) Community Involvement
Extensive user reach and Abundant real estate asset touchpoints
② Promote new service/ ① Utilization of technology contents on B2C/B2B2C domain
MITSUBISHI ESTATE CO., LTD. 33 Non-asset Business
4. New Initiatives for the 2030s: Business Domain Expansion
Expand business domains through technology and partnerships, offering new services and contents
Extensive user reach and Collaboration with abundant real estate asset ①Utilization of technology external partner touchpoints Business sophistication New business development
Partner Offices areas Workers Group manages Company in Marunouchi Approx. Approx. 2.6 mn 280K tsubo Accelerate the expansion of ② Promote new business domain service/contents Strengths of our Group Visitors to the Group’s Facilities/year, & (commercial, on B2C/B2B2C hotels, airports) Partner customer reach Company domain Approx. 200 mn
Cumulative Condos sold Residence Club (To-date) Memberships Approx. Approx. Partner 200K 600K units households Company
MITSUBISHI ESTATE CO., LTD. 34 Non-asset Business
5. New Initiatives for the 2030s: Utilization of technology
①Utilization of technology Enhance efficiency and sophisticate real estate services by utilizing technology Create new value and function of real estate by utilizing technology
Issues and needs Solutions Goal
Serious Labor shortage Enhance efficiency and sophisticate Provide know-how to Office areas managed Work complexity services & operation using AI and robots Creating earning opportunities by adding by our Group external parties and create Work style reform new digital functions to properties Approx. mn tsubo new business opportunities Property owners’ desire 2.6 for increasing asset MEC’s Bldg. • Provide property management value Management cost utilizing technology Approx. bn/year ¥50 • Create new business chances by ©SoftBank Robotics Our Group manages ▲Autonomous ▲ Detect abnormality ▲ AI cleaning robots making digitalized real estate security robots via AI's video analysis 5,000 condos available to external partners Generate synergy by ＜ Examples of business in progress ＞ collaborating with other Projector ■ Issues and Needs ■ Solutions Effective use of time Provide new services Elevator media & space customer experience • “ELE-CINEMA” by video distribution Provide value-added information Door Needs for effective ad media in elevator utilizing cross-cutting customer Lack of Distribute various data communication information with • means in buildings superior viewing Collaborate with our existing experience business domains (e.g. media) ▲Actual screen
MITSUBISHI ESTATE CO., LTD. 35 Non-asset Business
6. New Initiatives for the 2030s: Provision of service contents
② Provision of service contents focusing on B2C/B2B2C Provide services for diverse personal/social issues and needs Take new business opportunities by analyzing data and discovering new needs
Issues and needs Solution Goal
Diversified life-style Provide flexible services addressing Discover personal/social needs Enhancement of value each consumer’s issues and needs by collecting and analyzing of experience Minimize efforts in services and provide behavioral data and visitors’ data Change of consumer pleasant service experience from customers of MEC & partners behavior Provide new services to solve the Stress from needs discontinuous services ▲Information ▲Health-awareness service for ▲Web service program for female MEC’s customers Partners’ customers Marunouchi enabling for workers workers convenient use
＜ Examples of business in progress ＞ ■ Issues and Needs ■ Solutions Communication booth Collect & for tele-work Change in work Provide workplace and analyze data environment and style “TELECUBE” support flexible work style Needs for child and Discover family care Provide secure and quiet personal/social needs Improvement of workplace to improve productivity workers’ efficiency Reduce travel Provide new exhaustion service contents
MITSUBISHI ESTATE CO., LTD. 36 Long-Term Management Plan 2030 ESG Initiatives
MITSUBISHI ESTATE CO., LTD. 37 ESG Initiatives
1. ESG Initiatives (Overview)
Mitsubishi Estate Group’s Creation of a truly meaningful society through urban development Mission Identify 7 materialities considering environmental shift surrounding the Group
Group’s Materialities (P39)
Establish key themes and KPIs for the 2030s
Mitsubishi Estate Group Sustainable Development Goals 2030
Key Themes 1. Environment 2. Diversity & Inclusion 3. Innovation 4. Resilience (P40)
Environment (P41) Social (P42) Governance (P43～44)
Protecting the environment Human resource and resilience Corporate governance system
ESG value-creation initiatives through business
Value Propositions Sustainability Quality Of Life Social issue solutions Innovative services & experiences
"Materialities = the degree of relevance of an ESG initiative to the company's domain; also, such an initiative that is deemed highly material”
MITSUBISHI ESTATE CO., LTD. 38 ESG Initiatives
2. Materialities (Important Issues for Sustainable Management)
Identifying 7 Materialities’ Opportunities and Risks
Materialities Opportunities Risks
Real estate with lower environmental impact and natural Environmental regulations' impact on development disaster resilience opportunities
Response to foreign workers and foreign visitors needs Increased country, compliance, and supply chain risks
Real estate / development that protects against terrorism Aging and vacant buildings causing security issues and crime
Growing demand for facilities or services which meet New work styles (e.g. telecommuting) reducing demand various styles of life, work and consumption for fixed offices
Working age population decline changes demand for Facilities that best serve the aging population fixed offices
Redevelopment and renovation of existing stock in major New condominium needs changing cities
Smart-city/home/office technology Reduced demand for physical facilities
MITSUBISHI ESTATE CO., LTD. 39 ESG Initiatives
3. Sustainable Development Goals 2030
Mitsubishi Estate Group’s Sustainable Development Goals 2030 Four key themes chosen:
1. Environment Develop sustainable communities to address climate change and environmental problems
2. Diversity & Inclusion Enable people of all backgrounds to thrive by building communities adaptive to varying lifestyle needs
3. Innovation Create innovative cities that birth innovative ideas
4. Resilience Build strong and resilient communities that prioritize security, peace, and disaster protection
MITSUBISHI ESTATE CO., LTD. 40 ESG Initiatives
4. Initiatives to Protect Environment (ESG's "E")
Key KPIs and Targets ■ CO₂ emissions ■ Waste disposal ■ Renewable energy rate ■ Waste recycle rate ■ Water recycle rate ■ # of renovated buildings and condos ■ Domestic lumber usage rate
CO₂ Emissions Waste Recycle Rate CO2 Reduction ⁃ Increase electricity storage facilities ⁃ Raise awareness and distribute information for Case Study ⁃ Optimize thermal circulation tenants, visitors, and guests ⁃ Employ demand response system Use of a fuel cell system manufactured by ⁃ System/measures to facilitate waste Mitsubishi Hitachi Power Systems 2030 Target separation Installed in the Marunouchi Building 35％ reduction (vs. FY2018) Mar. 2019 2050 Target 2030 Target CO2 emission reduced by 50% vs grid 87％ reduction (vs. FY2018) power ％ *These targets were approved by 90 SBT Initiative in April 2019 【Actual : 45.5％ (FY2019)】 【Actual: 3,336,000t (FY2018)】
Renewable Energy Rate Waste Disposal 2030 Target 2030 Target 25％ 2050 Target 20％ reduction (vs. FY2020) 100％ 【Referential figures: 0.01t/sq m. (FY2019)】 【Actual : 1.3％ (FY2019)】 Marunouchi Bldg. Fuel Cell System installed
MITSUBISHI ESTATE CO., LTD. 41 ESG Initiatives
5. Initiatives to Human Resources and Resilience (ESG's “S”)
＜Human Resource＞Key KPIs and Targets ＜Resilience＞Key KPIs and Targets
■ PTO utilization ■ Rate of buildings that are to take in stranded commuters ■ Paternity leave utilization ■ Rate of people with first aid training course qualifications ■ Retention post-parental-leave
Rate of Buildings That are PTO Utilization to Take in Stranded Commuters FY2021 Goal Actual (FY2019)
5％ increase (VS FY2018) Rate of such facilities*3 ％ 【Actual*1：66.0％ (FY2018)】 92 Rate of People with First Aid Seismic Performance of New Paternity Leave Utilization Training Course Qqualifications Building (Marunouchi Area) FY2030 Goal FY2030 Goal × ％ 100％ 1.5 100 *4 *2 【Actual ：64.0％ (FY2019)】 of a standard skyscraper 【 Actual ：12.6％ (FY2019) (=withstand a level 7 earthquake)
Retention Post-parental-Leave Emergency Generator for BCP in New Buildings (Marunouchi Area) FY2030 Goal
％ 100 hr*5 【Actual*2：96.7％ (FY2019) 72
*3 *1 Office building: Large buildings completed in 2002 onward. Commercial facilities: Large facilities completed in 2008 onward Mitsubishi Estate only *4 Average of 3 companies (Mitsubishi Estate, Mitsubishi Jisho Property Management, Mitsubishi Jisho Retail Property *2 Average of 5 companies (Mitsubishi Estate, Mitsubishi Estate Residence, Management) Mitsubishi Jisho Property Management, Mitsubishi Jisho Sekkei, Mitsubishi Real Estate Services) *5 There are certain exceptions
MITSUBISHI ESTATE CO., LTD. 42 ESG Initiatives
6. Corporate Governance (ESG’s “G”) -1
Establish effective governance that ensures long-term enhancement of corporate value (as of Jan 2020) Corporate Structure • Transitioned to a “Company with Nominating Committee, etc.” in June 2016
Structure of the Board of Directors Committee Members • • 15 directors: 8 company directors and 7 independent outside Chairpersons of all committees are independent outside directors directors (10 of which are non-executive directors) • Remuneration and Nominating Committees comprised of • 6 of 7 independent outside directors are male and 1 is female. independent outside directors only Nominating Committee Exclusively outside directors
Board Structure Composition of male/female
1 5 Audit Committee Remuneration Committee 7 Chairperson is outside director Exclusively outside directors
3 14
Company Director(Executive) Company Director(Non-executive) Male Femal Independent/Outside Director (Non-executive) : Outside Director : Company Director : Chairperson (Non-executive)
MITSUBISHI ESTATE CO., LTD. 43 ESG Initiatives
7. Corporate Governance (ESG’s “G”) -2
Non-Renewal of Anti-takeover Measure
• The Board of Directors did not renew the anti-takeover program which would provide countermeasures against hostile takeover attempts. It expired in June 2019.
The Executive Compensation Plan Aims to Align Shareholders and Executives’ Interests
Medium- to Composition of Compensation Short-term Incentive Long-term Incentive Singe-year RS PS Base Salary Performance-based Incentive Incentive Incentive 50％ 25％ 12.5％ 12.5％
Fixed Component Variable Component
* Nomura Real Estate Holdings, Inc., Tokyu Fudosan Holdings Corporation, Mitsui Fudosan Co., Ltd., Tokyo Tatemono Co., Ltd., and Sumitomo Realty & Development Co., Ltd
Strategic-holding Stock Policies
• Sold 28 entities* with total value of approx. 31.5 bn yen in the past four years (FY16–19). • Current market value of the holdings is approx. 230 bn yen; routinely review strategic objectives and dispose of stocks as necessary. * Including partial sale
MITSUBISHI ESTATE CO., LTD. 44 ESG Initiatives
8. External Evaluation
As of January 2020, reputations or ratings below have been given.
• FTSE4Good Global Index (18 years in a row) • FTSE Blossom Japan Index (Adopted by GPIF)(3 years in a row) • MSCI Japan ESG Select Leaders Index (Adopted by GPIF) (3 years in a row) • MSCI Japan Empowering Women Select Index (Adopted by GPIF) • S&P/JPX Carbon Efficient Index (Adopted by GPIF) • SNAM Sustainability Index (8 years in a row) • GRESB Public Disclosure (3 years in a row) • GRESB Real Estate 2019: Three Stars/Green Star • CDP Climate Change 2019 Questionnaire: A- rating
MITSUBISHI ESTATE CO., LTD. 45 Appendices
MITSUBISHI ESTATE CO., LTD. 46 Appendices
1. Expected Results and Review of Previous Medium-term Management Plan
①Expected results vs targets (in brackets)
Operating income: ¥230 bn(¥220 bn) , ROA: 3.9％ (around 3.5%) , Net interest-bearing debt / EBITDA: 7.4×(around 8.5×)
②Efforts to improve financial efficiency Significant progress in improving both the numerator (profit) and the denominator (asset and equity)
Increase • Advance long-term redevelopment projects • Enhance rental profit on existing asset numerator • Increase in capital gains • Secure development projects
• Develop hybrid model investment business • M&A: realty business, parking management Expand business business without asset • Public listing of logistics REIT company • Expand hotel operations business
Control • Executed ¥100 bn share buyback • Disposal of underperforming asset denominator • Disposal of strategic-holding stocks • Replacement of assets
③Efforts to enhance corporate value • Transformation of capital policy • Change in the composition of Committees Reinforcement of Independent outside directors only for Nominating • No renewal of anti-takeover measures capital policy Committee and governance • Disposal of strategic-holding stocks Independent outside director for the chairman of Audit Committee
MITSUBISHI ESTATE CO., LTD. 47 Appendices
2. Quantitative Target (Rationale of index selection)
Formula Rationale
This is an index that demonstrates the importance of continuous * improvement of asset efficiency for our asset business which continues to ROA Business Profit ÷ Total Asset be our core activity. It is also used to monitor the progress of non-asset (See below) business.
The index is introduced for the first time in the Management Plan to ensure Profit Attributable to Owners of Parent improvement of capital efficiency and enhancement of shareholder value. The basic idea is improvement of ROE through improvement of ROA. ROE * ÷ Equity Leverage will be properly managed, including share buyback, while maintaining current credit ratings
The index is introduced for the first time in the Management Plan to ensure Profit Attributable to Owners of Parent improvement of business efficiency and enhancement of shareholder value. EPS ÷ Average Number of Stocks during The basic idea is improvement of EPS through the improvement of profits. the Year The denominator will be properly managed through share buyback, while maintaining current debt ratings.
Operating Profit + Equity in earnings (loss) Strategic alliance with third parties will become more critical than ever for Business Profit the continuing growth of our business. This index is introduced to monitor unconsolidated subsidiaries and profits including returns from these joint ventures. affiliates
* Average of the amount at the beginning and end of the period
MITSUBISHI ESTATE CO., LTD. 48 Appendices
3. Segmentation Change from April 1, 2020
Current Segments ①:Integration of From FY2021 Commercial Property three businesses Commercial Property Business Group Office Building Business Business Office Building Business Lifestyle Property ②:Integration of international Residential Business Outlet Mall Business Business residential business into International Business Retail Facility Business Residential Business International Business Logistics Facility Business Investment Management Hotel Development Business International Business Business ③:Integration of disclosure Hotel Operation Business Investment Management segments Architectural Design & Business Engineering Business and Airport Operation Business Real Estate Services Hotel & Airport Business Business
Architectural Design & Other Businesses International Engineering Business Business Group Real Estate Services International Commercial Property Business Business Other Businesses International Residential Business
MITSUBISHI ESTATE CO., LTD. 49 Contact Information
Investor Relations Office, Corporate Communications Department Mitsubishi Estate Co., LTD.
+81-3-3287-5200
https://www.mec.co.jp/
Regarding information on the properties of this material, it is based on judgment obtained from information available at the presentation date of this material. Please be aware that actual information can result in different results depending on various factors.
MITSUBISHI ESTATE CO., LTD.