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Innovation 2017 (Stage Ⅱ) :  The Mitsui Fudosan Group’s 
Medium-Term Business Plan for FY2015 through FY2017

The Mitsui Fudosan Group is pleased to announce its new medium-term business plan for FY2015 through FY2017, Innovation 2017 (Stage Ⅱ).

1.Background and objectives of Innovation 2017

In FY2012, the Mitsui Fudosan Group established its long-term business plan, Innovation 2017. Aiming to achieve strong growth and profitability for the Mitsui Fudosan Group, we have accelerated initiatives to strengthen the competitiveness of our domestic business and develop global operations. We have made strong advances in quantitative terms over the first three years of the plan, achieving our FY2014 targets a year early and a record-high profit in FY2014.

Three years have passed since the formulation of Innovation 2017. Japan’s domestic economic environment is now undergoing tremendous change. Growing recognition of diversity, the accelerating evolution of ICT and other factors are driving ongoing change in work- and lifestyles. Overseas, while the overall global economy has continued to grow, concerns are arising over geopolitical risks and market fluctuations potentially triggered by excess financial liquidity.

In this context and with these challenges in mind, aiming to ensure continued growth in the 2020s, Mitsui Fudosan has established a new medium-term business plan for FY2015 through FY2017, Innovation 2017 (Stage Ⅱ).

2.Vision for the next decade

The Mitsui Fudosan Group aims to be a leader that creates markets and grows continuously in Japan and secure a solid position globally.

3.Key tasks

In order to achieve our vision for the next decade, we are working to create value by implementing three strategies: customer-centered management, business model innovation, and full implementation of Group management.

Domestically, the Group will pursue business model innovation to meet changing customer needs by providing not only facilities, but also services that offer richness and comfort. By evolving from a real estate solutions partner to a business and lifestyle solutions partner, we aim to further enhance the Group’s competitiveness.

Overseas, aiming to achieve dramatic growth, the Group will combine its strengths as a comprehensive developer with the strengths of partners who know the markets in their respective countries to build a highly stable portfolio with abundant growth potential.

4.Growth strategies

(1) Create neighborhoods

We will maximize the value of our development pipeline by utilizing the Group’s strengths in capturing business opportunities, creating development concepts and advancing business, and leveraging its management prowess to create neighborhoods that get better with age. To achieve this goal, we will also make optimal use of the Group customer base.

We aim to generate new demand by evolving our Smart City initiatives, promoting mixed-use developments that combine a wide array of functions, and further advancing efforts to combine facilities and services to enhance customer satisfaction. By doing so, we will create attractive neighborhoods that serve as a magnet for people, information, and investment from around the world.

Key projects

  • Hibiya Project (tentative name)
  • Nihonbashi 2-Chome Urban Redevelopment Project
  • OH-1 (Otemachi 1-Chome Block 2) Project

Furthermore, in addition to the existing pipeline, the Group is aggressively working to capture new business opportunities in high-potential locations.

(2) Evolve the office building business

We will evolve this business to go beyond merely leasing office space to facilitating comfortable, efficient business activity for clients. We are strengthening initiatives aimed at being a business partner that helps solve our corporate customers’ problems.

(3) Further develop the retail facility business

We will steadily advance our rich pipeline and use our expertise in tackling demanding projects to capture additional business opportunities.

By continuously evolving facilities, we will stay ahead of changes in the business environment, including changing customer needs and the development of e-commerce, thus creating next-generation retail facilities that play an indispensible role in daily living.

(4) Expand the logistics facility business

Mitsui Fudosan will utilize its extensive networks and expand its business scale, primarily in the metropolitan areas of Tokyo, Nagoya, and Osaka as well as other key cities.

By establishing a logistics REIT, we will evolve our model for joint value creation with investors and develop this business as a balanced combination of leasing (holding) with trading and management.

(5) Strengthen the competitiveness of the housing business

The Mitsui Fudosan Group will steadily advance its pipeline comprising mainly large-scale urban redevelopment projects. At the same time, we are planning products to meet increasingly diverse and sophisticated customer needs though such means as developing products for the global market and engaging in business related to housing with nursing services for elderly residents.

We regard the buildup of quality housing stock in Japan as an opportunity and are continuing to grow businesses related to existing homes, primarily in the areas of previously owned home brokerage and remodeling.

In addition, we are working to offer one-stop services that spans the Group housing business and to seamlessly provide diverse products and services related to living. By doing so, we will evolve this business to be more service-oriented and thus seamlessly capture and meet diversifying housing-related needs.

(6) Expand the hotel and resort business

To capture the increased leisure-related demand generated by the maturing society and the opportunities presented by the rising numbers of inbound tourists to Japan, we aim to expand the number of hotel rooms operated by the Group to 10,000 in 2020. At the same time, we are working to develop NemunoSato and other sites into Asia’s top resorts.

(7) Implement a model for joint value creation with investors

We will expand our asset classes, such as with the logistics REIT, and evolve our business model to grow in step with the real estate investment market.

(8) Dramatic growth in the overseas business

We will combine our strengths with those of our business partners, aiming to achieve further growth by building on the platform we have constructed thus far.

In North America and Europe, where real estate markets are highly transparent, stable, and large scale, the Mitsui Fudosan group will continuously secure excellent business opportunities to build a stable earnings base.

In Asia, the Group will capture rapidly growing demand for quality housing and expanding consumption to quickly grow profit.

5.Quantitative targets

(1) Target income levels and other benchmarks

Quantitative targets for FY2017 are as follows.

  FY2017 Targets
Operating income ¥245.0 billion or higher
  Overseas income1 ¥30.0 billion or higher
  Overseas income ratio Approx. 12%
Profit attributable to owners of parent ¥130.0 billion or higher
Interest-bearing debt Approx. ¥2,500.0 billion
Debt/equity ratio Approx. 1.3
ROA2 Approx. 5%

(Reference)

ROE3 Approx. 7%

Notes:
1. Overseas income = overseas operating income + equity in earnings of overseas affiliates
2. ROA = (operating income + interest, dividends and miscellaneous revenues) / average total assets over the period
3. ROE = profit attributable to owners of parent
/ average shareholders' equity over the period

(2) Investment plan (FY2015–FY2017 three-year totals)

  Investment Recovery Net investment1
Domestic:
Capital expenditures
¥550 billion - ¥550 billion
Domestic: Property for sale ¥1,300 billion ¥1,250 billion ¥50 billion
Overseas: North America & Europe, Asia ¥550 billion ¥100 billion ¥450 billion
  Net total investment: ¥1,050 billion

Note: 1. Net investment = investment - recovery

6.Basic policy for shareholder returns

  • Mitsui Fudosan reinvests earnings to increase shareholder value over the medium-to-long term and returns profits to shareholders based on comprehensive consideration of such factors as the business environment and the Company’s performance and finances.
  • Mitsui Fudosan aims to pay approximately 25% of annual profit attributable to owners of parent in dividends on a consolidated basis.