Hulic : Integrated Report 2023

Saburo

Takaya

Nishiura

Maeda

Chairman,

President,

Representative Director

Representative Director

CONTENTS

Corporate Philosophy, Sustainability Vision and

2

Medium-andLong-term Management Plan

About Hulic Group

History of Hulic Group

4

Profile of Hulic

6

Message from the Chairman,

8

Representative Director

Message from the President,

18

Representative Director

Financial and Non-financial Highlights

24

Hulic Group's Value Creation Story

Hulic Group's Value Creation Process

26

Materiality Assessment

28

KPIs for Non-financial Information

32

Business Strategies

Progress of Medium- and Long-Term Management Plan (2020-2029)

34

and New Medium-Term Management Plan (2023-2025)

Financial Strategy and Capital Management, Message

38

from the Executive Officer in Charge of Finance

Hulic Growth Strategies by Business Segment

42

Sustainability Initiatives

Environmental Initiatives

54

Social Initiatives

62

Corporate Governance Initiatives

70

Financial and Corporate Information, etc.

Financial Information

84

Stock Information

94

Corporate Information

95

External Evaluation

96

Third-party Assurance

97

    This report references a range of materials to ensure that

the editorial process and the content meet our standards. These

reference materials include the International Integrated Reporting

Framework recommended by the International Financial Reporting

Standards (IFRS) Foundation and the Guidance for Collaborative

Value Creation 2.0 issued by Japan's Ministry of Economy, Trade

and Industry.

    We would like to use the Report as one of our communication

tools with our shareholders, investors, and our stakeholders.

Basic Stance

Ideal

We aim to be a company that grows each day by utilizing stable corporate

Company

infrastructures.

Corporate

We always conduct business from a new viewpoint in an effort to increase our

Culture

corporate value.

Stance to

We are committed to providing optimal products and services to customers, placing

Customers

customer satisfaction as our top priority.

Ideal

Each of Hulic's employees strives to provide high quality value as a professional.

Employees

Financial Targets

Non-financial Targets

(see details on page 35, Medium- and Long-Term Management Plan)

(see details on page 32, KPIs/Targets and Results for Non-financial Information)

Business

Basic

1

Further evolve the

2

3

Strategies

Strengthen

  Create unique new

business model and

business domains

restructure the leasing

development and

and improve Group

value-added businesses

portfolio

strengths

4

5

    Strengthen the management

    Implement management that

foundation and implement stringent

emphasizes sustainable co-creation and

risk management

co-existence with society

Consolidated Ordinary Income (Unit: JPY bln)

■ Initial forecast ■ Results (difference over initial forecast) ■ Plan/targets

In 2019

123.2

CO., LTD., a subsidiary

109.5

95.6

Medium-Term

Management Plan

• Established Nihonbashi Kogyo Co., Ltd.

Started property management for

the former Fuji Bank (now Mizuho

In 2010

In 2012

In 2015

• Merged with Simplex

• Completed Hulic head office building

• Spun off insurance agency business as Hulic Insurance Service Co., Ltd.

Investment Advisors Inc.

• Merged with Senshu Shoji Co., Ltd. and Fuyo General Development

• Merged with Shoei Co., Ltd. (a real estate

(a real estate company)

and Finance Co., Ltd. (real estate leasing companies)

company)

84.6

Phase II (2023-2025)

• Changed corporate

name to Hulic Co., Ltd.

Co., Ltd. [full-scale entry into J-REIT

51.4

business (real estate investment

42.5

business)]

Financial Crisis

Great East Japan Earthquake

1957

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2029 Fiscal Year

Long-Term Management Plan before the previous plan (2009-2018)

Previous Long-Term Management Plan (2014-2023)

Launch of Long-Term Management Plan (2020-2029)

Record of Business and Sustainability Initiatives

Achieved the plan's targets four years ahead of schedule

Achieved the plan's targets four years ahead of schedule

Building on the leasing business as a foundation, grew through M&As in addition to taking on property development/reconstruction and new businesses

Advancement of development and reconstruction business

Business Initiatives

Started PPP business

&New

• Completion of HULIC &New SHIBUYA, the first property under our &New brand of medium-sized commercial buildings, in 2017

Progress on initiatives for senior citizen-related businesses

Tourism-relate

d businesses

• Opened THE GATE HOTEL KAMINARIMON by HULIC, the first in THE GATE HOTEL series, in 2012

Started new businesses (children's education and Bizflex)

General

• Established CSR Vision

• Issued first CSR Report, and continued to publish reports until 2019

• Issued first Integrated Report

• Established a CSR Committee

• Established Sustainability Vision and a Sustainability Committee

• Conducted three years of joint research with the Massachusetts Institute of Technology (MIT) on natural ventilation and natural lighting systems; patented Natural Lighting System in 2016

• Joined RE100 and aims for substantially achieving RE100 in 2023

• Disclosed SBT-approvednear-term GHG emissions reduction targets (by 2030)

• Established the Hulic Guidelines for Longer Life Buildings as standard specifications for 100-year offices

• Started disclosing information in line with TCFD recommendations

Environment

• Ranked first in the real estate/warehouse industry in the Environmental Management Survey conducted by Nikkei Inc. (ranked top every year until the survey • Declared converting to 100% renewable energy sourced electricity for electricity

ended in 2019)

consumption at all company-owned buildings by 2030

• Completed fireproof wooden commercial building (HULIC &New GINZA 8)

Sustainability

• Opened the Hulic Suginami Office in the Ogikubo area of Suginami ward, Tokyo, creating a conducive working environment for

• Obtained the highest "Eruboshi" rank

• Certified as a Health & Productivity Management Outstanding Organization (Small-

Initiatives

employees with disabilities

and Medium-sized Enterprises Category) for five consecutive years from 2019

• Declared ensuring all company-owned buildings can withstand a seismic intensity of 7 level by 2029

Society

• Established a Diversity Promotion Project Team (formerly the Women's Career Promotion Project Team)

• Concluded an Official Gold Partner Agreement with the Japan Para-Badminton Federation

• Started to take preventive measures against Mt. Fuji volcanic ash

• In order to enable continuous use and prompt resumption of activities in the event of a major earthquake, adopted an optimal structural format • Started special sponsorship of the Hulic Cup Kisei Championships

fallout

• Established the Hulic Cup Hakurei Championships and women's rank-deciding competition

• Organized a Risk Management Committee, a Fund ALM Committee, and a Compliance Committee

• Appointed a female external director

• Established Corporate Governance Guidelines, a Remuneration Committee and a Nominating Committee

• Transitioned to a system where a non-executive director serves as chairperson of the Board of Directors

Corporate

• Introduced the Board Benefit Trust (BBT), a stock compensation system for directors, etc.

• Appointed 2 additional external directors (Ratio of female among

Governance

• Made all external officers (directors and auditors) independent officers

directors and auditors: 30%)

P/L Growth

B/S Soundness

Posted continued earnings growth since listing on TSE

Credit rating: AA- (stable)

Average rate of growth of Consolidated Ordinary Income: 20.6%

Equity Ratio (December 31, 2022): 37.1%*

Profitability

Productivity (Efficiency)

Maintained higher profitability than competitors

Putting emphasis on income per employee and ROE

Ordinary Income to Sales Ratio (FY2022): 23.5%

ROE (FY2022): 11.9%

*50% (JPY175 Bln) of hybrid finance (JPY350 Bln) was calculated as nominal equity.

For company-owned properties whose floor area could be increased in accordance with zoning laws, we systematically

Story

carry out reconstruction suitable for the location with optimal floor area ratio. This enables us to increase leasing

Creation

revenue while making qualitative improvements to our portfolio.

    In addition, we promote development and redevelopment business drawing on the expertise built in the

Value

reconstruction of owned properties. Furthermore, we pursue opportunities in PPP business*1 and development of

urban type data centers and logistics facilities.

Group's

*1 We are participating in projects to support the efficient use and operation of public assets (national and local government-owned land) by providing the know-how cultivated through the

Hulic

development and reconstruction of office buildings and commercial & lodging facilities.

Current Businesses

Leasing Business

Development Business

Value-added Business

New Acquisitions (including M&As)

assetsof

Publicly offered REIT

Private REIT

Diversification

Initiatives in growth fields in line

with the needs of the times

Seniors / Tourism

"&New" (urban-style commercial facilities)

Data Centers, etc.

Value-added Business

P. 47

We are engaged in the business of using various value adding methods including as renewal, renovation and

Strategies

conversion to increase the asset value of properties we own and those we have recently purchased or invested in for

resale. We take profits by sales of these properties once we have maximized a property's value.

    We also hold assets for short-term warehousing purposes with the aim of helping distribution of real estate in

Business

response to the diverse needs in the real estate market.

New and Other Businesses

P. 48-51

We launched several new businesses in recent years on the back of our corporate culture which allows us to constantly

challenge in progressive new business fields. We will continue to create new businesses in targeted fields that

have

Initiatives

unmet market needs and good growth prospects by employing various methods including business collaboration and

alliance, as well as M&As.

Sustainability

• Senior citizen-related business

As the aging of society proceeds, we anticipate that social demands for nursing and medical care will increase.

Therefore, we are actively promoting the development of nursing homes, hospitals, and burial pavilions, as well as

1

Stable revenue structure centered

2

The majority of properties is in

3

Selection and concentration

prime locations of central Tokyo

on leasing business

strategy

and/or near stations

Core Fields

Non-core Fields

• Tokyo and/or near stations

• Regional office buildings

• Medium-sized office buildings

• Large-scale office buildings

• Reconstructions, and small to medium-sized developments

• Large-scale developments

• Nursing homes

• Condominiums for sale

• Hotels, Ryokans (Japanese style luxury inns)

• Overseas businesses

businesses to promote wellness and QOL of healthy and active seniors.

• Tourism-related business

To capture demand for tourism, which is expected to increase over the medium- to long-term, Hulic operates own-brand hotels (THE

etc.

GATE brand) and luxury ryokans (FUFU brand), and owns leasing hotels.

• Bizflex business

Information,

We will provide a series of medium-sized flexible offices called "Bizflex" to respond the diversified office needs.

• Children's education business

Corporate

We will promote businesses that provide education-related services for children.

• Other businesses

Our Group companies are in various businesses including operation of REITs (both publicly offered and private), building management,

and

insurance, and contracting for construction work among other opportunities.

Financial

Hulic Co., Ltd. Integrated Report 2023

7