This Company was built by a founder with strong leadership, and for many years, it was run top-down, so a culture in which employees think and act on their own initiative never took hold. When the construction defects problem came to light, the same underlying corporate character was identified as one of the reasons it was not picked up and corrected sooner. A company’s underlying character does not change the moment its leadership does. Even after I became Representative Director in 2019, it could not be said that a culture of employees acting on their own initiative and their own judgment had taken root.

Wanting to change that and build an “employee-centered” culture in which each person thinks and acts of their own accord, in fiscal year 2024, we established our MVVC—Mission, Vision, Values, and Credo—as the basis for moving forward as the new Leopalace21. The drafting process itself, led by employees, was part of what set this in motion. It is now widely understood that the Company wants its employees to take the initiative, and employees are actively putting proposals forward. Managers across our departments use the MVVC as a way into a conversation, and dialogue grounded in shared values is increasing. There is still some way to go, but a readiness to speak up and to act is steadily beginning to take root.

Through the rental housing we provide for people living alone, we support our tenants as they embark on new beginnings in their lives—starting university, starting a job, relocating for work, etc. Our business meets the need to live alone at various stages of life and provides a living environment where people can feel at ease. It is a piece of social infrastructure, and that, I believe, is precisely where our reason for being lies.

That role is also evident in the widespread use of our services by corporate customers. When a company transfers staff or opens a new site, it has to secure housing for its employees quickly, in the area where it is needed. At the same time, companies are increasingly reviewing their ownership of company housing and turning to rented housing instead. Against that background, our nationwide network of properties and a consistent standard of living environment, with furniture and appliances included, lightens corporate customers’ burden of arranging housing and supports the smooth placement of their staff.

And as housing costs rise, employer-sponsored housing support matters not only as a benefit but increasingly as a means of attracting and retaining people and of building a foundation on which employees can work with peace of mind. We meet the needs of both companies and employees.

We have a duty to owners: to protect their valuable assets, to maintain their value into the future, and to help pass them smoothly to the next generation. Properly maintaining and managing those assets and putting them to use as homes for people living alone delivers value to owners and tenants alike.

Meeting local rental demand, moreover, depends on having the right properties in the places where it is needed, kept in good condition. By building, operating, and managing properties in line with local demand, we help underpin the daily lives of the people who work there and contribute to local economic activity.

In management decisions, we take profitability as a given and, alongside it, value a forward-looking view that leads to future value creation and sustainable growth. Raising corporate value depends on reconciling economic value—profitability and growth potential—with the social value our business generates. We therefore place weight on clearly defining the social value we should create and on translating the measures needed to achieve it into concrete business activities.

One such area is raising the sophistication of how we operate and manage housing for people living alone. Digital transformation (DX) is a key priority in providing tenants with a safe environment where they can live with peace of mind while also raising the productivity of our property management business. In apartments without a resident caretaker, for example, the initial response when something goes wrong is a weak point. By applying digital technology here to make our management function more sophisticated, so that problems are identified early and dealt with quickly, I believe we can build a more efficient management structure.

Business progressed well in fiscal year 2025, and we finished with results ahead of the targets set in the “New Growth 2028” Medium-Term Management Plan. In the Leasing Business, the occupancy rate fell slightly short of plan but broadly tracked our expectations. I believe what strengthened our earnings power and raised productivity above all was accurately reading changes in the business environment, particularly inflation, and attracting tenants while maintaining rent levels.

The Development Business, restarted in earnest to maintain and grow the number of units under management in the years ahead, also came in well above plan in its first year. Almost all the orders came from owners of existing properties, which I take as a sign that we responded well to their needs in managing the assets they hold, including planning for inheritance tax. We expect that demand to continue for the time being.

In both the Leasing Business and the Development Business, first-year progress was broadly in line with plan or ahead of it. On the strength of those results, we have revised the second- and third-year targets of the Medium-Term Management Plan upward from the original figures. We will hold to our basic policy of growing both revenue and profit as we work to deliver the revised plan.

We regard New Growth 2028 as a turnaround plan that secures the business recovery achieved so far and lays the management foundation for the Company to move on to the next stage of growth. Now that we have navigated the construction defects problem and our results are recovering, what matters is making both our business and management foundations unshakeable. The first year’s results give me a real sense that these foundations are steadily taking shape.

As for this year’s business environment, there is uncertainty around tariff policy and exchange rate movements, but the effect on our operations is likely to be limited. We will therefore essentially continue last year’s approach and pursue steady growth. Responding to inflation, on the other hand, is a significant challenge for management going forward. We need to handle cost increases appropriately while bringing rents to appropriate levels and improving productivity and operational efficiency, so as to maintain and strengthen our earnings power.

In the Leasing Business, we continue to expect corporate demand from graduate recruitment, staff transfers, and the expansion of business sites, as well as the need to secure housing for foreign nationals. With the recruitment market continuing to favor candidates and with companies securing company housing as part of their benefit packages, we forecast that demand for housing for people living alone will remain firm. This fiscal year, we will again work to expand our corporate customer base while, on the individual customer segment, focusing on expanding adoption among foreign nationals and university students.

In the Development Business, inflation may affect owners’ appetite for investment to some degree, but with asset values shifting and inheritance to plan for, the need to protect wealth through real estate should persist. Gauging that environment accurately, we will put forward proposals matched to owners’ needs in building and passing on their assets.

For the past several years, restoring our financial base has been the top management priority. I believe we have now put in place at least the minimum foundation for sustainable growth. To make that foundation firmer, we will now focus on advancing the Leasing Business and strengthening our people and organizational capability.

A great deal of work in the Leasing Business requires people, such as handling problems, performing maintenance, and communicating with owners. It is important, then, to value the work people should be doing while clearly allocating roles between people and digital technology, so as to raise both service quality and productivity. In particular, we will actively apply DX to build systems that remotely identify and manage problems within an apartment and the condition of its equipment. We aim to build a more efficient management structure by making good use of existing infrastructure, such as LEONET, the proprietary communications line installed in our properties.

However far digital technology and AI advance, though, it is still people who run a business and build trust with customers. Achieving sustainable growth depends on creating an organization where each person understands the direction the Company is heading and can make decisions and act independently. By embedding the MVVC, we will continue to enhance the human capability of our employees and build a stronger, fitter organization.

When I speak of human capability, I weigh frontline capability most heavily. Frontline capability might be described as the knowledge and experience built up through the work, plus the ability to imagine the other person’s position and the consequences of one’s own decisions, and to act accordingly. Developing that capability requires accumulating practical experience, deepening what one learns through reflection and feedback from others, and carrying it into what one does next. We will therefore continue to review the content of our training and development programs in line with the business environment and issues arising on the ground.

It is also essential to regard our stakeholders as customers—not only tenants and owners, but also business partners and contractor partners—and to respect each of their positions. Building better working relationships with our stakeholders is ultimately what raises the value we deliver to the people who use our services.

To turn that human strength into higher corporate value, we are also investing effort in human capital management and well-being management. What these come down to is improving employees’ physical and mental health and the ease with which they can work, and connecting each person’s motivation and ability to results for the organization. In fiscal year 2025, we were selected as a Health & Productivity Stock for the first time and were certified as a Top 500 Outstanding Health & Productivity Management Organization for the first time in six years. I take this as recognition of the measures we have taken and of the organization’s changes. Encouraged by that recognition, we will continue building an environment where employees take pride in their work and in the Company and can perform to their fullest.

One concrete step toward an organization where every employee can make decisions and act on their own initiative, with a client-first outlook, is the regional branch structure, which we plan to transition to fully in fiscal year 2027. Changes in economic activity and in what each region needs cannot be adequately grasped from the Tokyo head office alone. We are delegating authority to the regions in stages so that people on the ground, who know local conditions, can think for themselves, make quick decisions, and implement the right measures.

Going forward, each region will set its own targets and budget, and act on the issues specific to it, thereby enabling self-directed operations to take root. The earnings data for each location is already in place. We will shift to a structure in which employees on the ground use that data to determine how to raise productivity and which initiatives to pursue, and they will carry the responsibility for it.

The sustainability management we aim for means not treating environmental and social issues as separate from our business but rather generating both social and economic value through our day-to-day operations. Results here do not appear quickly, so we believe the important thing is to keep at it with a medium- to long-term view. We are starting in areas closely connected to our own business, such as the Leopalace Green Energy Project and the promotion of ZEH-M. Efforts of this kind do more than reduce environmental impact; they also prompt us to rethink our existing businesses and established ways of working, and to move toward creating new value. By starting from environmental and social issues and rethinking the value we offer customers, we will develop services that support more efficient ways of working and create new businesses.

If we are to remain needed by society and local communities, it is important that we use our housing and management base to continuously address local issues. A thriving region is good for our business too, so we need to think about what support we can offer.

One part of this is providing housing to foreign nationals in partnership with local government bodies. Labor shortages mean more and more organizations need to hire foreign nationals, yet securing housing and settling into life locally present a range of difficulties. The daily-living support services we provide help foster acceptance of foreign nationals and make government workforce policy more effective in practice. By working with government bodies, companies, and those involved in Japanese language education to create an environment where foreign nationals can live with peace of mind, we will also help local businesses secure staff and help local economies thrive.

Providing temporary housing during disasters is another role I believe we should play. We have done so before, offering temporary accommodation after disasters and taking in evacuees from Ukraine. These do not translate into direct economic value, but putting our housing to use in supporting people’s lives in local communities carries, I believe, significant social value.

Over the past year, I have noticed that discussion at the Board of Directors has become considerably more active. When the Company was in crisis, discussion centered on immediate problems, cash flow above all. Now there are more occasions to consider sustainable growth and how to raise corporate value from a medium- to long-term perspective, including where the business should go in five and ten years. In discussions of this kind, the views of our Non-Executive Directors are extremely valuable. I find it particularly significant that we can debate capital efficiency and capital allocation—subjects on which discussion inside an operating company tends not to go deep—from a range of perspectives.

Most recently, how to use AI to improve operational efficiency and productivity has become a key topic, and we are sharing examples from other companies alongside our own work as we discuss both the possibilities and the risks of using AI. What matters, I recognize, is how the perspectives gained at the Board of Directors are reflected in how the Company is actually run.

The importance of governance lies, I believe, in properly managing business risk while also taking on the risks that future growth requires and backing people who take on new challenges. The same thinking applies not only at the management level but to decision-making and delegation within each division. As we delegate authority to the front line, it is important to reconcile risk management through proper oversight with self-directed operation.

Regarding the effectiveness of the Board of Directors, we survey Directors annually to assess it, and we have a structure in place to identify issues from the results and feed them into continuous improvement.

Moving forward, the Board of Directors will need the participation of people with a still wider range of experience and backgrounds. Preventing thinking and perspectives from becoming fixed, drawing out the views of Directors whose experience lies in other fields, and putting those views to work in management decisions—that, I believe, is what the Board of Directors should be.

We have, for now, completed the recovery stage, including on the financial side. We are now strengthening our business foundation for new growth and preparing for what comes next. With the property management business at our core, we will continue to raise the sophistication of our operations and management while expanding the business’s possibilities into adjacent areas.

What the new Leopalace21 is aiming to be is a company that grows sustainably while fulfilling its role as social infrastructure. My own role in achieving that, as I see it, is to strengthen the business foundation and to put in place an organizational foundation on which every employee can perform to their fullest.

On that foundation, the individual employees will carry the Company forward and shape what it becomes. I will create an environment where employees generate new ideas, take on one challenge after another, and turn those initiatives into business growth. I also want to expand our possibilities by increasing the diversity of our people and by converting specialist knowledge and insight from other industries and fields into organizational strength.

There is still a great deal of room for us to grow. Building on the foundation we have laid, we will pursue sustained improvement in corporate value. I hope you will look forward to our next stage.