Tosei : Results for the First Six Months of the Fiscal Year 2023

This English document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translation and the Japanese original, the Japanese original shall prevail. Tosei Corporation assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translation.

Consolidated Financial Results

for the First Six Months of the Fiscal Year Ending November 30, 2023

					July 5, 2023
Company name: TOSEI CORPORATION		Stock listing:	TSE / SGX
Securities code number: 8923 / S2D
Representative: Seiichiro Yamaguchi, President and CEO	URL:	https://www.toseicorp.co.jp/english/
Contact:	Noboru Hirano, Director and CFO		Phone:	[phone]
Submission of Quarterly Securities Report (Shihanki-Houkokusho):	July 7, 2023 (scheduled)
Commencement of dividend payments:				―
Preparation of supplementary materials for quarterly financial results:	Yes
Holding of quarterly financial results meeting:	Yes (for institutional investors and analysts)

Note: All amounts are rounded down to the nearest million yen.

1. Consolidated Financial Results for the Six Months Ended May 31, 2023 (December 1, 2022 - May 31, 2023)

(1) Consolidated Operating Results (cumulative)			(Percentages indicate year-on-year changes)
	Revenue	Operating profit	Profit before tax	Profit for the period
	(¥ million)	(%)	(¥ million)	(%)		(¥ million)	(%)	(¥ million)	(%)
Six months ended	52,861	21.4	12,516	33.8		12,072	34.1	8,163	33.7
May 31, 2023
Six months ended	43,552	6.4	9,357	1.4		9,000	0.5	6,107	(0.3)
May 31, 2022
	Profit attributable to	Total comprehensive	Basic earnings	Diluted earnings
	owners of the parent	income for the period	per share	per share
	(¥ million)	(%)	(¥ million)	(%)			(¥)		(¥)
Six months ended	8,164	33.7	8,045	29.3			172.35	172.00
May 31, 2023
Six months ended	6,107	(0.2)	6,222	(7.9)			128.56	128.46
May 31, 2022
(2) Consolidated Financial Position
						Equity attributable to	Ratio of equity
	Total assets	Total equity		attributable to owners of
		owners of the parent
						the parent to total assets
	(¥ million)	(¥ million)		(¥ million)		(%)
As of		224,553		79,578			79,463		35.4
May 31, 2023
As of		210,955		72,290			72,290		34.3
November 30, 2022

2.	Dividends
				Annual dividends per share
			1Q-end	2Q-end	3Q-end	Year-end	Total
			(¥)	(¥)	(¥)	(¥)	(¥)
Fiscal year ended November 30, 2022	-	0.00	-	51.00	51.00
Fiscal year ending November 30, 2023	-	0.00
Fiscal year ending November 30, 2023			-	60.00	60.00
(Forecast)
Note:	Revision to the most recently released dividend forecasts: No

3. Consolidated Earnings Forecasts for the Fiscal Year Ending November 30, 2023 (December 1, 2022 - November 30, 2023)

(Percentages indicate year-on-year changes)

								Profit attributable to	Basic earnings
	Revenue		Operating profit		Profit before tax	owners of the
			per share
								parent
	(¥ million)	(%)	(¥ million)	(%)		(¥ million)	(%)	(¥ million)	(%)	(¥)
Fiscal year ending	85,000	19.8	14,824	9.7		14,000	9.8	9,388	9.1	198.66
November 30, 2023
Note: Revision to the most recently released earnings forecasts: No

• Notes
• 1. Changes in significant subsidiaries during the period
     (changes in specified subsidiaries resulting in changes in the scope of consolidation): No

Newly added: -Excluded: -

(2) Changes in accounting policies and changes in accounting estimates

(a) Changes in accounting policies required by IFRS:

No

1. Changes in accounting policies due to other reasons: No

(c) Changes in accounting estimates:

No

(3) Number of issued shares (ordinary shares)

(a) Number of issued shares at the end of the period (including treasury shares)

As of May 31, 2023	48,683,800 shares
As of November 30, 2022	48,683,800 shares

(b) Number of treasury shares at the end of the period

As of May 31, 2023	393,422 shares
As of November 30, 2022	1,424,122 shares

(c) Average number of outstanding shares during the period (cumulative)

Six months ended May 31, 2023	47,370,964 shares
Six months ended May 31, 2022	47,504,621 shares

• These consolidated Financial Results are not subject to quarterly review procedures by a certified public accountant or an audit corporation.
• Proper use of earnings forecasts and other notes

The forward-looking statements, including outlook of future performance, contained in these materials are based on information currently available to the Company and on certain assumptions deemed to be reasonable by the Company. Actual performance and other results may differ substantially from these statements due to various factors. For the assumptions on which the earnings forecasts are based and cautions concerning the use thereof, please refer to "1. Qualitative Information on Quarterly Consolidated Financial Performance (3) Qualitative Information Regarding Consolidated Earnings Forecasts" on page 5 of the attached materials.

Contents of Attached Materials
1. Qualitative Information on Quarterly Consolidated Financial Performance	2
(1)	Qualitative Information Regarding Consolidated Operating Results	2
(2)	Qualitative Information Regarding Consolidated Financial Positions	4
(3)	Qualitative Information Regarding Consolidated Earnings Forecasts	5
2. Matters Related to Summary Information (Notes)	5
(1)	Changes in Significant Subsidiaries during the Period	5
(2)	Changes in Accounting Policies and Changes in Accounting Estimates	5
(3)	Additional information	5
3. Condensed Quarterly Consolidated Financial Statements and notes	6
(1)	Condensed Quarterly Consolidated Statement of Financial Position	6
(2)	Condensed Quarterly Consolidated Statement of Comprehensive Income	7
(3)	Condensed Quarterly Consolidated Statement of Changes in Equity	8
(4)	Condensed Quarterly Consolidated Statement of Cash Flows	9
(5)	Notes on Going Concern Assumption	10
(6)	Notes on Condensed Quarterly Consolidated Financial Statements	10
(7)	Notes on Significant Subsequent Events	12

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1. Qualitative Information on Quarterly Consolidated Financial Performance

1. Qualitative Information Regarding Consolidated Operating Results

1. Recognition, analysis and contents for discussion of business environment and business performance

During the six months ended May 31, 2023, the Japanese economy showed signs of moderate recovery, as it took the path of coexistence with COVID-19 and economic activities returned to normal. Meanwhile, concerns have been raised over the risk of a slowdown of the global economy reflecting the prolonged Russian invasion of Ukraine and the global credit tightening, as well as the risk of a downturn in the economy due to high crude oil prices and rising consumer prices, and it will be necessary to monitor economic trends going forward.

In the real estate industry where Tosei Group operates, domestic real estate investments for the three months from January to March 2023 increased 61% year on year to ¥1,174.8 billion, ranking second in the world for real estate investment by city (ranked 16th for the full year of 2022). Despite the global uncertainty surrounding banks and the unpredictability of the financial markets, the general preference for Japanese real estate backed by a low-interest rate environment and the weak yen continues, and expectations are high for even more transactions in the latter half of 2023 (according to a survey by a private research institute).

In the Tokyo metropolitan area condominium market, the number of newly built units from January to April 2023 decreased by 20.1% year on year to 6,660 units due to the developers adjusting their supplies as a result of the continuing high prices of land lots and rising construction costs. Prices continue to rise with the average price per unit at ¥77.47 million (up 23.1% year on year) in April 2023, as the high-priced condominiums in the center of Tokyo drive up prices and the city centers make a return in general residential preference. In the Tokyo metropolitan area pre-owned condominium market, while the number of units contracted from January to April 2023 declined slightly by 1.5% year on year to 12,217 units, the market is booming as indicated by the continuing high level of prices with the average price per unit at ¥42.01 million (up 5.0% year on year). Additionally, in the build-for-sale detached house market, housing starts for the four months from January to April 2023 remained strong at 19,000 units (up 1.2% year on year) (according to a survey by a private research institute).

The average costs per tsubo in terms of construction costs for the four months from January to April 2023 were ¥1,145 thousand per tsubo (1 tsubo = 3.30 square meters) (a decrease of 15.7% year on year) for steel reinforced concrete structures and ¥620 thousand per tsubo (an increase of 8.0% year on year) for wooden structures. In terms of the prices of building materials, while steel prices remain high, the price of timber, which had previously skyrocketed as a result of the "wood shock," has been gradually coming down (according to a survey by the Ministry of Land, Infrastructure, Transport and Tourism).

In the office leasing market of Tokyo's five business wards, the average vacancy rate as of April 2023 was 6.1% (a decrease of 0.3 percentage points year on year), and the average asking rent was ¥19,896 per tsubo (a decrease of 2.1% year on year). Although the vacancy rate seems to have bottomed out, the declining trend in rent continues. As a massive supply of new and large office buildings is also expected in the second half of the year, it remains necessary to continue monitoring market trends (according to a survey by a private research institute).

The condominium leasing market remained robust and the average asking rent of apartments in the

Tokyo metropolitan area as of April 2023 was ¥11,550 per tsubo (an increase of 3.7% year on year) and the average occupancy rate at condominiums held by J-REIT in the Tokyo Area as of January 31, 2023 was 96.6% (an increase of 0.1 percentage points year on year). Demand for apartments in the Tokyo metropolitan area remains high and the rent and occupancy rates have begun to rise at a moderate pace. Additionally, apartments for singles, which had been in low demand during the COVID-19 pandemic, are also showing signs of recovery (according to a survey by a private research institute).

In the Tokyo metropolitan area's logistics facility leasing market, leasable stock as of April 2023 was

8.90 million tsubo (an increase of 15.7% year on year), the vacancy rate was 5.4% (an increase of 2.5 percentage points year on year), and the asking rent was ¥4,600 per tsubo (a decrease of 1.1% year on year). While the vacancy rate is currently rising due to the increase in the supply of new facilities, demand for logistics facilities remains solid, and in the medium to long term, an increase in demand is expected in conjunction with the expanding e-commerce market (according to a survey by a private research institute).

The real estate fund market remains robust, and the market scale continues to expand. J-REIT assets under management in April 2023 totaled ¥22.2 trillion (an increase of ¥0.6 trillion year on year) and assets under management in private placement funds totaled ¥29.7 trillion (as of December 31, 2022, an increase of ¥5.6 trillion year on year). Combining the two, the real estate securitization market scale grew to ¥51.9

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trillion (according to a survey by a private research institute).

In the Tokyo business hotel market, in the three months from January to March 2023, the average guest room occupancy rate was 74.4% (an increase of 27.3 percentage points year on year) and the total number of hotel guests in Tokyo encompassing all types of accommodation amounted to 21.02 million (an increase of 90.4% year on year). Domestic demand is on pre-COVID-19 levels and given the increase in inbound demand, further market recovery is expected going forward (according to a survey by the Japan Tourism Agency).

As a result, consolidated revenue for the six months ended May 31, 2023 totaled ¥52,861 million (up 21.4% year on year), operating profit was ¥12,516 million (up 33.8%), profit before tax was ¥12,072 million (up 34.1%), and profit attributable to owners of the parent was ¥8,164 million (up 33.7%).

Performance by business segment is shown below.

Revitalization Business

During the six months ended May 31, 2023, the segment sold 26 properties it had renovated and 64 pre- owned condominium units, including Otsuka Tosei BuildingⅡ(Toshima-ku, Tokyo), Kashiwa Tosei Building (Kashiwa-shi, Chiba), Stellar Court Higashi-kojiya(Ota-ku, Tokyo).

During the six months ended May 31, 2023, it also acquired a total of 31 income-generating office buildings, rental apartments, 10 land lots and 47 pre-owned condominium units.

In addition, the Group reviewed the valuation of its income-generating properties, recording a reversal of Inventories valuation loss of ¥344 million.

As a result, revenue in this segment was ¥34,017 million (up 17.5% year on year) and the segment profit was ¥7,165 million (up 18.1%).

Development Business

During the six months ended May 31, 2023, the segment sold THE PALMS Machida (Machida-shi, Tokyo) which is a rental apartment sold 44 detached houses at such properties as THE Palms Court Mitaka Veil (Mitaka-shi, Tokyo) and THE Palms Court Tsunashima (Yokohama-shi, Kanagawa).

During the six months ended May 31, 2023, it also acquired five land lots for rental apartment project, two land lots for rental wooden apartment project, a land lot for condominium project and land lots for 141 detached houses.

As a result, revenue in this segment was ¥6,396 million (up 26.5% year on year) and the segment profit was ¥1,296 million (up 62.6% year on year).

Rental Business

During the six months ended May 31, 2023, the Company focused on leasing out its rental properties.

As of May 31, 2023, the number of rental properties increased by 11 from 91 at the end of the previous fiscal year to 102, as the segment acquired 30 properties, and begin offering for rental of three properties, sold 20 properties, and terminated the leasing of two properties.

As a result, revenue in this segment was ¥3,164 million (up 9.7% year on year) and the segment profit was ¥1,525 million (up 5.4%).

Fund and Consulting Business

During the three months ended May 31, 2023, while ¥118,235 million was subtracted due mainly to property dispositions by funds, ¥729,567 million added due to new asset management contracts, from the balance of assets under management (Note) ¥1,722,896 million for the end of the previous fiscal year. The balance of assets under management as of May 31, 2023, was ¥2,334,229 million.

As a result, revenue in this segment was ¥4,185 million (up 54.4% year on year) and the segment profit was ¥2,978 million (up 69.1%).

Note: The balance of assets under management includes the balance of assets that were subject to consulting contracts, etc.

Property Management Business

During the six months ended May 31, 2023, the segment made efforts to win new contracts and maintain existing contracts. Consequently, the total number of properties under management was 841 as of May 31,

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