In addition to promoting both EPS and ROE
growth through proper financial management
and the allocation of cash,
I will actively engage in dialogue
with investors in order to increase
the Company’s corporate value
and share price.
Chiharu Fujioka
Executive Managing Officer
In my role as CFO, I was involved in deliberations and the formulation of our new long-term vision & INNOVATION 2030. Under this long-term vision, we set numerical targets for a variety of key indicators, including growth potential, efficiency, and shareholder returns for fiscal 2026, as milestones in the leadup to our fiscal 2030 vision, in a bid to deepen interactive dialogue with investors and other stakeholders. I am confident that results for the first fiscal year of the vision, fiscal 2024, the fiscal year ended March 31, 2025, and forecasts for the second fiscal year, fiscal 2025, the fiscal year ending March 31, 2026 demonstrated the steady progress made toward achieving the fiscal 2026 numerical targets.
For fiscal 2024, each of the Company’s performance metrics, including revenue from operations, operating income, business income, a new profit indicator identified under & INNOVATION 2030, ordinary income, and profit attributable to owners of parent (net income) exceeded forecasts coming in at record highs.
In accordance with the Company’s efforts to bolster its & INNOVATION 2030 shareholder returns policy and secure a total payout return ratio 50% or higher and a dividend payout ratio of around 35%, Mitsui Fudosan decided to repurchase ¥45 billion of its own shares. At the same time, the Company decided to increase its annual dividend from the original forecast of ¥30 per share to ¥31 per share (an increase of ¥3 per share on an adjusted basis after the stock split*). As a result, the total payout return ratio came in at 52.7% on net income of ¥248.7 billion.
* Mitsui Fudosan conducted a 3-for-1 stock split of its common stock on April 1, 2024 in an effort to create an environment in which individuals and other investors can more easily invest in the Company, to increase the liquidity of its shares, and to expand its investor base.
Turning to forecasts for fiscal 2025, the Company has factored in revenue and earnings growth in each of the robust Property Sales to Individuals (Domestic), Facility Operations, and Management segments. On this basis, revenues, operating income, business income, and net incomes are again projected to come in at record highs. Looking at specifics, business income is forecast to reach ¥425 billion, up ¥26.3 billion compared with the previous fiscal year. Net income is anticipated to climb ¥11.2 billion year on year, to ¥260 billion.
As far as the Company’s EPS growth rate, an indicator of growth potential, is concerned, and as an important KPI that reflects the growth of net income (source of shareholder returns) in terms of “value per share,” we have identified a compound annual growth rate (CAGR) target of +8% or higher over the three-year period from fiscal 2024 to fiscal 2026 starting from the EPS of ¥78.5 based on the forecast net income of ¥220 billion for fiscal 2023. Against this target, Mitsui Fudosan’s EPS came in at ¥89.3 in fiscal 2024 for an annual growth rate of +13.7%.
Furthermore, based on forecast net income of ¥260 billion in fiscal 2025, EPS is projected to come in at approximately ¥94. Accounting for each of the aforementioned, Mitsui Fudosan is making steady progress toward its target with the CAGR over the two-year period from fiscal 2024 to fiscal 2025 expected to come in at +9.6%.
While Group-wide energies are being directed toward achieving the business income, net income, and EPS growth rate profit, growth potential, and efficiency indicators by realizing growth through the three business strategy paths identified under & INNOVATION 2030, as CFO, I will continue to support the efforts of the Group especially through financial management and the allocation of cash.
*1 Starting from the fiscal 2023 forecasted EPS: ¥78.5.
*2 Calculated based on certain assumptions.
Mitsui Fudosan has put forward a cash allocation plan, covering the three-year period from fiscal 2024 to fiscal 2026, within its long-term vision & INNOVATION 2030, in order to help investors better understand its various activities, including how the Company generates cash, how that cash is applied, and our approach to financial management thereby deepening communication.
In fiscal 2024, the first fiscal year of the plan, both cash inflows and outflows came to approximately ¥1.1 trillion. This represents one-third of the plan with the breakdown within each category also progressing steadily at roughly one-third.
Basic cash flow from operating activities
Mitsui Fudosan identified “basic cash flow from operating activities” as a measure to better demonstrate the expansion of its mainstay business cash generation capabilities. Results in fiscal 2024 amounted to roughly ¥490 billion. This is around 1.3 times results in fiscal 2022 of ¥370.7 billion, which served as a base for deliberations when formulating & INNOVATION 2030, and was driven by growth in the operating income and business income of each segment.
Proceeds from asset turnover
In line with its policy to accelerate asset turnover, Mitsui Fudosan plans to generate roughly ¥2 trillion over the three-year period from fiscal 2024 to fiscal 2026, which is around 1.4 times the proceeds recovered over the past three years (fiscal 2021 to fiscal 2023). In addition to the proceeds from real property for sale, the Company has taken steps to recover funds through various means, including the sale of fixed assets and investment securities. As a result, proceeds from asset turnover in fiscal 2024 totaled approximately ¥610 billion, which represents around 30% progress compared with the plan.
Cash out and capital allocation
Drawing from the roughly ¥1.1 trillion attributable to the Company’s basic cash flow from operating activities as well as proceeds from asset turnover, Mitsui Fudosan allocated capital to growth investments, strategic funds, and shareholder returns while controlling increases in outstanding debt in fiscal 2024 in accordance with its policy identified when formulating its cash allocation plan. This allowed the Company to avoid incurring new debt or raising additional capital.
Turning to growth investments in particular, we are making steady progress, including the acquisition of prime investment properties that were not originally scheduled when formulating & INNOVATION 2030. Notable examples include large-scale retail facility development plans in Tokyo and Fuchu City, the rental lab and office buildings businesses’ “Innovation Square Phase III” project in Boston in the United States, the office buildings business’s “55 Pitt Street” project in the CBD area of Sydney, Australia, and the rental lab and office buildings businesses’ “British Library Redevelopment Project (tentative name)” in London in the United Kingdom.
In our pursuit of new business opportunities, we have historically used the NOI yield of each asset type as an investment criterion. In light of the recent upswing in business opportunities overseas and signs that interest rates are beginning to climb in Japan, we have initiated discussions and are reexamining our investment criteria by area as well as asset type.
Moving forward, we will continue to disclose to investors the progress made in our management approach that places an equal focus on the three key objectives: enhance growth, efficiency, and shareholder returns, which is consistent with our understanding that “there can be no return without growth” and that “growth must be efficient” through the allocation of cash.
Real estate development and neighborhood creation–type businesses are characterized by the heavy long-term use of the balance sheet. Impacted by recent fluctuations in foreign currency exchange rates, Mitsui Fudosan’s total assets and interest-bearing debt stood at roughly ¥9.8 trillion and ¥4.4 trillion, respectively, as of the end of fiscal 2024. Against this backdrop, we are working to manage our balance sheet from a medium- to long-term perspective by accelerating asset turnover and realizing added value (valuation gains) as well as other means while remaining conscious of both leasing income and sales profit growth under & INNOVATION 2030. Recognizing that fluctuations in foreign currency exchange rates remain a factor, Mitsui Fudosan will work diligently to further enhance the quality and efficiency of its asset portfolio not only through the sale of fixed assets and real property for sale without exception, but also the turnover of assets taking into consideration investment securities in their totality.
Within the Company’s investment securities held, Mitsui Fudosan plans to reduce strategic shareholdings by 50% over the three-year period from fiscal 2024 to fiscal 2026 under & INNOVATION 2030 and will continue to actively reduce holdings thereafter. After reducing strategic shareholdings by approximately 23% in fiscal 2024, we estimate a cumulative reduction of roughly 40% in fiscal 2025. This would suggest a faster-than-planned reduction.
In the case of shares held purely for investment purposes, we have decided to undertake their sales on an ongoing and proactive basis while continuing to take into consideration our track record to date and other factors, including future share prices with the aim of allocating proceeds to investments for future growth. Moving forward, we will continue to undertake timely sales in line with market conditions.
Despite initial steps to cut interest rates overseas, we recognize the critical need to build and maintain a sound financial position and to manage the Company’s net interest burden in order to ensure the stable continuation of our business. This recognition reflects the start of an upswing in interest rates in Japan and the persistently high interest rate environment.
Under & INNOVATION 2030, our policy is to manage the D/E ratio at around 1.2 to 1.5 times in order to maintain an “A” rating from the major credit ratings agencies. In line with this policy, the Company’s D/E ratio came in at 1.4 times in fiscal 2024. Going forward, trends are expected to fall within target levels with the D/E ratio forecast to remain in the lower 1.4 times range in fiscal 2025. Looking ahead, Mitsui Fudosan will continue to control its financial leverage in an appropriate manner while prioritizing the maintenance of financial soundness.
In light of recent interest rate trends in Japan and overseas, we have received a growing number of inquiries from investors regarding our forecast net interest burden and funding policies. With this in mind, Mitsui Fudosan adopts a strategic approach toward the procurement of funds in order to mitigate the risks associated with such factors as fluctuations in financial markets during the period of property development and to minimize the impact of any increases in interest rates in Japan. Accordingly, roughly 90% of our yen-denominated borrowings are procured an a long-term, fixed-rate interest basis.
In fiscal 2024, our net interest burden increased compared with initial forecasts owing to the yen’s depreciation. Under these circumstances, we put in place a variety of interest reduction measures, including the stringent selection of funding sources and methods and took advantage of the interest rate differential between the yen and the dollar when procuring funds while taking into consideration foreign currency exchange rate risks. Thanks to these endeavors, our net interest burden stood at ¥79.3 billion, around the level (¥79 billion) initially forecast.
As far as interest rates in fiscal 2025 are concerned, we are expecting a gradual increase in Japan and decrease in the United States within the fiscal year. In overall terms, we anticipate that interest rates will continue to hover at a high level for the foreseeable future. Factoring in the effects of ongoing interest reduction measures, we estimate that our net interest burden will come in at ¥80 billion, roughly the same level as fiscal 2024.
Uncertainty and instability surrounded the market environment in May 2025 owing to the impact of the Trump administration’s trade and tariff policies on the global economy. As a part of the Company’s funding endeavors that take advantage of the interest rate differential between the yen and the dollar, Mitsui Fudosan issued 5- and 10-year green bonds totaling ¥100 billion in Japan. A portion of the funds were used for refinancing purposes concerning 50 Hudson Yards in New York in the United States. Buoyed by these and other initiatives, I believe we have kicked off fiscal 2025 engaging in sound financial operations.
At the same time, I recognize the need to closely monitor the interest rate trends of each country, including Japan. As one of my key responsibilities as CFO, I will continue to address a flexible approach toward borrowing terms and conditions, including maturities and procurement methods. I will work diligently to manage our interest rate exposure while maintaining and enhancing financial soundness.
Note: As of August 5, 2025
ROE is an important KPI that is used to measure efficiency when working to achieve profit growth through the use of capital placed with the Company by investors. Recognizing that we continue to face challenges regarding the level of our ROE, we set quantitative targets of 8.5% or higher in fiscal 2026 and 10% or higher around fiscal 2030 under & INNOVATION 2030. As a part of efforts to achieve these targets, we initially projected an ROE around the mid-7% range for fiscal 2024. Buoyed by the growth in net income, ROE in fiscal 2024 came in at 8%. Looking ahead, we expect ROE will continue to improve steadily and reach the low 8% range in fiscal 2025.
Promoting initiatives that focus on expanding net income growth, as the numerator, and controlling shareholders’ equity, as the denominator, are vital to improving ROE. Turning first to the numerator, we have made progress in changing mindsets to focus on reflecting the added value we create in our prices by decoupling from the markets as outlined in & INNOVATION 2030. As a result, we reported record high business income in each of our four core “Leasing,” “Property Sales,” “Management,” and “Facility Operations” segments in fiscal 2024. Especially in the “Management” and “Facility Operations” segments, we achieved our fiscal 2026 targets ahead of schedule in fiscal 2024. At the same time, we are within reach of fiscal 2026 business income and net income targets of ¥440 billion or higher and ¥270 billion or higher, respectively, through progress in the sale of investment securities.
Moving on to shareholders’ equity, mentioned above as the denominator, we are working to control the accumulation of capital through various means, including the repurchase of own shares in line with our new shareholder returns policy outlined in & INNOVATION 2030 under which we have increased our total payout return ratio from the previous level of approximately 45% to 50% or higher.
In addition, we have initiated steps to link a portion of the compensation paid to such executives as directors and corporate officers to EPS and ROE. To further enhance corporate value and the Company’s share price, the management team, including myself as CFO, is committed to securing EPS growth and achieving our ROE targets.（P.85）
While conscious of the wide-ranging discussions surrounding the cost of shareholders’ equity, I recognize that the calculated cost of capital is exhibiting an upward trend based on the Capital Asset Pricing Model (CAPM), which is the most commonly used calculation method. Despite the slight fluctuation of late, this is largely due to the increase in interest rates since last year. Meanwhile, taking into consideration the stability of our performance and our resilience toward risks I am confident that the Company’s capital cost is lower than any mechanical calculation.
In any case, as CFO, I recognize the critical need to expand the equity spread between our ROE and cost of shareholders’ equity in order to enhance our corporate value and share price.
Moving forward, Mitsui Fudosan will continue to devote all of its energies toward achieving and improving each of its quantitative targets, including ROE, identified under & INNOVATION 2030. At the same time, we will work diligently to lower our capital cost through a variety of means, including proactive IR dialogue.
I recognize that in raising our corporate value and increasing our share price it is essential that investors have a deep understanding of our company. For that reason, I consider dialogue with investors to be one of my most important tasks as CFO.
Since becoming CFO in fiscal 2023, I have kept mutual dialogue very much in mind, holding numerous meetings with investors, listening directly and frankly to their opinions, and explaining the Company’s thinking. The content of these dialogues was actively provided as feedback within the Company and to the management team, leading to discussions within management, and was reflected in & INNOVATION 2030.
To help investors better understand its content, as CFO, I have spearheaded efforts to explain & INNOVATION 2030. In fiscal 2024, I met with investors and conducted approximately 85 interviews for this purpose. This was a substantial increase from the roughly 50 interviews held in fiscal 2023. In addition, we are strengthening initiatives targeting individual investors. This includes briefings as well as the disclosure of information using online tools. Looking ahead, we will bolster our communication with investors, focusing in particular on our efforts to create both social and economic value, our competitive advantage and differentiation strategy, initiatives aimed at addressing ESG concerned, the resilience of our asset portfolio, and the stability and continuity of our future performance.
In this my third year as CFO, I will continue to steadily promote management that integrates the three key objectives—enhance growth, efficiency, and shareholder returns—set out in & INNOVATION 2030 and improve each of the KPIs to achieve our numerical targets. By proactively engaging in IR dialogue, I will work diligently to gain and maintain the trust and sense of security of our investors and other stakeholders, thereby contributing to raising our corporate value and increasing our stock price.
