Nomura Real Estate Stock

Without further ado, let me begin the explanation. First, I'd like to explain the consolidated financial results. Please refer to Page 4 of the materials. For the first quarter, operating revenue was JPY 191 billion. Business profit was JPY 27.1 billion, and net profit attributable to owners of parent was JPY 14.7 billion. Compared to the same period last year, revenue and each profit line figure decreased. However, progress toward achieving the full year forecast is on the right track.

Next, I'll explain the performance by segment. Please look at Page 5. The development area saw a decrease in revenue and profit due to a decrease in the number of housing units sold in the Residential Development business unit and the decrease in the property sale in the Commercial Real Estate business unit. The property brokerage and CRE business unit saw increased revenue due to an increase in brokerage transaction volume and the Property and Facility Management business unit also saw increased revenue as property and facility management and construction order increased. However, as mentioned since the beginning of the fiscal year, profits of these 2 business units decreased due to increased expenses.

Next, I'll explain the performance forecast for the fiscal year ending March 2027. Please look at Page 6. As mentioned earlier, revenue and profits decreased in the first quarter year-on-year. However, this is mainly due to the timing of recording housing sales and property sales on a full year basis. Both housing sales and property sales are making steady progress in line with the full year plan. So our full year performance forecast remains unchanged from the one announced at the beginning of the fiscal year, and revenue and profits are expected to renew to record highs.

Next, I'll explain the performance by business unit. Please look at Page 12. In the Residential Development business unit, revenue and profits decreased due to a decrease in the recorded number of housing units sold. For the full year, we anticipate an increase in the number of housing units sold, resulting in increased sales and profits.

Please look at Page 13. Revenue from housing sales in the first quarter was JPY 69.8 billion, and the gross profit margin was 26.9%. As sales continue to proceed smoothly, gross profit margin is expected to remain in the order of 26%, which was indicated in full year forecast.

Please turn to Page 14. Our contract progress is 71.8% against our projected full year sales of JPY 350 billion. While this percentage may seem a bit lower compared to the previous year, but it is a result of our sales policy of proceeding steadily and without rushing given market conditions, and we are making progress in line with our plan.

Please turn to Page 15. In the first quarter, we acquired JPY 39 billion worth of land for residential development. As shown in the table on the right, we have a land bank worth about JPY 2.5 trillion, which is equivalent to about 7 years of projected volume. In this land bank, Tokyo 23 wards account for about 40% in terms of number of units and about 70% in terms of sales.

For information on projects to be completed in the future, please refer to Page 16 and 17.

Now please turn to Page 18. Regarding property sales, as outlined in the business plan, we have positioned rental housing, senior housing and hotels as growth areas, and we are expanding business in these areas. In the first quarter, we sold rental housing and senior housing, resulting in increased sales and gross profit compared to the same period last year.

Next, please turn to Page 19. In the first quarter, we acquired land worth JPY 12 billion for rental housing. For land bank worth about JPY 120 billion, projects are already completed and projects under development combined, we have secured land bank worth about JPY 410 billion.

Now let's look at the Commercial Real Estate business unit. Please turn to Page 21. In the Commercial Real Estate segment, both operating revenue and business profit decreased due to the decrease in property sales, et cetera. For the full year, we anticipate that property sales will be at the same level as last fiscal year. On the other hand, for leasing revenues, rent will decline at some projects. As a result, we anticipate operating revenue to increase and profit to go down.

Please go to Page 22. For property sale in this first quarter, the asset types of the properties sold are logistics, et cetera, recording operating revenue of JPY 20.2 billion and gross profit of JPY 5.1 billion.

Please go to Page 23. There was no land acquisition in the first quarter, but this is progressing steadily in line with the full year plan with approximately JPY 70 billion of acquisition projects expected to be constructed. As for the land bank, including projects under development, total invested amount is around JPY 1 trillion, which means we have secured 5 to 6 years' worth of business volume.

Please go to Page 24. The vacancy rate of leasing assets we hold as noncurrent assets is 7.1% of total floor space, including BLUE FRONT SHIBAURA. As we have been communicating, BLUE FRONT SHIBAURA. This asset is 100% leased up and full occupancy is scheduled in September 2026.

Page 27 and 28 shows major development plans for office and logistics facilities under the Commercial Real Estate segment. Going forward, these types of projects will be completed.

Next, in the Overseas segment, please go to Page 30. In the overseas segment, both operating revenue and business profit declined as we settled the exit cost of the projects in Vietnam, with the project already recognized in the financial statement. For the full year, as we are going to adjust the supply of units based on the business environment of each country, business profit will decline.

Next is the Investment Management business. Please go to Page 33. Both operating revenue and business profit decreased in the Investment Management business. As shown in the chart in the lower part of the slide, the balance of assets under management in Japan is steadily increasing, mainly in private REITs and private funds. We anticipate an increase of AUM for the full year and expect both operating revenue and business profit to increase.

Next is the Property Brokerage and CRE segment. Please go to Page 34. In the Property Brokerage and CRE segment, operating revenue grew due to the increase in transaction value in the retail and middle business. As we have spent more for advertisement than initially planned, business profit declined. For the full year, we are planning to strategically invest in advertisement and digital transformation-related areas. Accordingly, we anticipate business profit to be flat year-over-year.

Next is the Property and Facility Management business. Please go to Page 36. In the Property and Facility Management business, operating revenue for both Property and Facilities Management and construction ordered has increased. On the other hand, due to an increase in expenses in digital transformation and personnel that has been already planned, we saw an increase in operating revenue and decline in profit. For the full year, although operating revenue will grow, but as expenses are expected to go up, we anticipate an increase in operating revenue but decline in profit. This ends the explanation of each segment.

Next, I will explain about shareholder return. Please go to Page 10. Dividend outlook for fiscal year 2027 is unchanged from what we have announced in the beginning of the year. As operating profit and each profit items is expected to be at a record high level, dividends are expected to increase for 15 years in a row. Under the financial guidance of total return ratio of 40% to 50% and a dividend floor of DOE 4%, we will continue to deliver profit growth and conduct shareholder return based on profit growth.

Lastly, I would like to explain about our response to interest rate hikes and the Middle East situation, which recently comes up recently with our conversation with our investors.

Please go to Page 39. Although interest rates are rising, we are implementing initiatives to realize growth that exceeds that of interest costs. In terms of funding, we will strive to control the increase of interest costs through flexible and diverse funding methods and funding sources and through the control of our balance sheet. At the same time, on the business side, as there is a structural shift from a deflationary environment to that of an inflationary one, which is the background of the rise of interest rates, we are proceeding on initiatives to reflect this change to pricing and rent levels and link it to our profit growth. Furthermore, by expanding business areas which we can expect high profitability and expanding to non-asset businesses, we will realize profit growth that exceeds the increase of costs coming from higher interest rates.

Please turn to Page 40. Against the backdrop of the situation in the Middle East, there are concerns about delays in construction schedules and project handover and cost increases. I would like to explain what measures we are taking and the potential impact on our business performance. Lack of materials, which was once a source of concern, has started to settle down as there has been advancement in securing procurement through alternative routes. There's still delays in delivery in some materials, but the delay is only about several weeks. By adjusting the schedule, we anticipate that there will be no major impact on the completion of projects and delivery to customers. Although there are signs of increase in material cost, we have contingency reserves in our investment plan, which takes into account a certain level of cost increase. We expect we can absorb the increase of material costs by these contingency reserves.

Accordingly, we have decided that there is no need to revise our full year outlook. We will continue to strive to achieve our initial plan. This is all from me. We'll continue to achieve growth as a group company to satisfy our investors.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

This is Arai, I thank you very much for joining our financial results briefing for the fiscal year ended in March 31, 2026. Given the interest of time, I will go straight into my presentation. Please proceed to Page 4 of the results presentation material.

For FY March '26, operating revenue was JPY 942.5 billion with JPY 147.3 billion of business profit and JPY 82.8 billion of profit attributable to owners of parent. We were able to achieve record highs for growth operating revenue in each profit items. Business profit was well above the 8% growth target set forth in the management plan announced last year. Net profit also achieved a significant increase despite the extraordinary loss related to the demolition of Hamamatsucho building during FY March 2026. ROA and ROE was 5.4% and 10.7%, respectively, as shown on a different page, achieving high asset and capital efficiency. In sum, we evaluate that we have made good progress in the first year of the 3-year business plan.

Next, performance by segment. Please proceed to Page 5. By segment, the domestic business performed well. The top line and profit growth was driven primarily by the Housing Sales Business under Residential Development segment and Property Sales Business under the Commercial Real Estate segment. The Investment Management business, a property brokerage and CRE business as well as property and facility management achieved operating revenue and business profit growth. On the other hand, the Overseas segment posted declines in both operating revenue and business profit due to a lower housing units sold in Vietnam.

Next, the earnings forecast for FY March '27 on Page 6, please. Before going into the numbers, let me first explain about the overall business environment. First, we expect the housing market to remain strong for both new and existing homes. We expect investment demand to remain strong in the property for sale market.

Rents continue to rise for all asset types, including office buildings, and we expect the overall business environment in Japan to remain positive. On the other hand, we expect lingering uncertainty over the Overseas business as the conflict in the Middle East creates instability in the economic and financial environment. Against such backdrop, we are guiding for JPY 1 trillion and JPY 80 billion for operating revenue, with business profit of JPY 150 billion and net profit of JPY 86 billion for the current fiscal year, all of which will be a record high. The main drivers for growth in business profit were strong performance in Housing Sales business and higher management fees and Investment Management. On the other hand, we project the business profit for the Overseas segment to decline due to revision of the property supply plan in light of heightened geopolitical risks. In addition, the business profit for the property and facility management is expected to drop due to an increase in DX and other spending for future growth. Although the profit growth is not expected to be high compared to FY March '26, as the first two years of the 3-year business plan, the average annual growth rate is expected to be 9.5%, exceeding the 8.5% target. We are on track to achieve the business profit target of JPY 160 billion under the 3-year business plan.

Next, the business performance of each segment on Page 12. The Residential Development segment achieved growth both in operating revenue and profit, owing to higher average housing prices and an increase in property sale. For FY March '27, we expect revenue and profit growth driven by increase in the number of housing sales units.

Please move to Page 13. Housing sales for FY March '26 totaled JPY 311.1 billion, with gross profit ratio of 26.6%. For FY March '27, we project the housing sales to grow by JPY 40 billion year-on-year to JPY 350 billion, with number of units sold going up by roughly 300 units to 3,800 units.

Now please proceed to Page 14. Contract progress rate is approximately 60% against the housing sales target of JPY 350 billion for FY March '27. Although this level appears low compared to the past few years, the market environment is favorable. And we believe that we will be able to enjoy steady progress in this ratio to achieve the plan for this fiscal year.

Next, Page 15. As shown on the right, we have a medium- to long-term land bank of approximately JPY 2.5 trillion for houses for sale, which is roughly equivalent to 7 years of business. The 23 wards of Tokyo accounts for approximately 60% of this total or JPY 1.6 trillion in terms of operating revenue.

Next, Page 18. In the Property Sales business, the growth strategy set forth in the 3-year midterm business plan and to expand the rental housing for seniors and how hotel assets is making progress. In FY March '26, thanks partially to the sales of senior housing and hotel assets, gross profit marked JPY 13.4 billion, a level higher than the previous track record.

Page 19, please. In terms of the land bank, as investment towards senior housing and hotels have progressed, we have been able to acquire on a total of 19 projects or equivalent of around JPY 140 billion of investment for land for development. In addition to new acquisitions, including projects that have been recategorized from noncurrent assets to current assets, the total land bank is about JPY 370 billion.

Next is the Commercial Real Estate segment. Please turn to Page 21. In the Commercial Real Estate segment, both operating revenue and business profit increased due to increased property sale. For the year ending in March 2027, we anticipate property sale to be equivalent to that of last year. On the other hand, due to the decline in leasing revenue from individual projects overall, while operating revenue will grow, business profit is expected to decrease.

Please turn to Page 22. In the property sales business, as we saw properties mainly in office assets and logistics facilities, operating revenue was JPY 218.3 billion, and gross profit was JPY 60 billion.

Please go to Page 23. Land acquisition for property sale was JPY 73 billion. Due to the progress of land bank acquisition in the past few years, we have secured a total investment amount of about JPY 1.1 trillion, including projects under development which is equivalent to 5 to 6 years' worth of land bank.

Please turn to Page 24. The vacancy rate of leasing assets held as noncurrent assets was on average 6.4% excluding BLUE FRONT SHIBAURA. BLUE FRONT SHIBAURA is fully leased up and is planned to start operation with 100% occupancy in 2026, second half of 2026.

Next is Overseas segment. Please turn to Page 29. In the overseas segment, as we review the timing of the property sale, both operating revenue and business profit declined. In the year ending March 2027, as we are going to adjust property supply, taking into consideration the recent economic and financial environment amid geopolitical risks. And as we are going to book upfront expense, operating revenue will increase while business profit is expected to decline.

Next is the Investment Management segment. Please turn to Page 32. In the Investment Management segment, assets under management in the private REITs and private funds have steadily increased, leading to an increase in both operating revenue and business profit. In the year ending March 2027, we anticipate both operating revenue and business profit to grow through the increase in the funds property sales and AUM.

Next is the Property Brokerage and CRE segment. Please turn to Page 33. In the Property Brokerage and CRE segment, transaction value in retail, middle and wholesale businesses grew, leading to an increase for both operating revenue and business profit. For the year ending March 2027, as we are going to record advertisement promotional expenses as well as DX-related expenses for future growth, we anticipate operating revenue will go up, but business profit to stay flat.

Next is the Property and Facility Management segment. Please turn to Page 35. For the Property and Facility Management segment, as both Construction Ordered and Property and Facility Management saw an increase in revenue, operating revenue and business profit increased. This specifically is due to the situation in BLUE FRONT SHIBAURA as construction work for incoming tenants led to an increased revenue for construction ordered. In the year ending March 2027, due to the increased DX-related cost and labor costs, operating revenue is expected to go up while business profit will go down. This is my explanation of each segment.

Lastly, I would like to explain about shareholder return. Please turn to Page 10. Our shareholder return policy is a total shareholder return ratio of 40% to 50%, but the minimum level for dividends is DOE 4%. Dividend from March 2026 is as already announced JPY 40, JPY 6 higher year-over-year. We are planning to pay JPY 44 per dividend from March 2027, which will be JPY 4 higher than the previous year. This means that dividends are going to increase for 15 years in a row. We consider that from the viewpoint of enhancing corporate value and increasing our share price, our basic policy superbly realized profit growth and pay out dividends in line with the profit growth.

This is all from me. We'll continue to strive for the growth of the overall group to be able to satisfy our shareholders.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Let me start with the presentation. First, turn to Page 3 of the presentation material. As for the results for the third quarter, operating revenue was JPY 581.5 billion. Business profit was JPY 86.2 billion. Profit attributable to owners of parent, JPY 42.9 billion. Business profit and profit attributable to owners of parent declined year-over-year.

Details by business unit will be explained later, but the decline in business profit was mainly due to the sales of residential development and property sales tending to be recognized more in the fourth quarter compared to the previous year. The decline in profit attributable to owners of parent is primarily because as we have started to rebuild the Hamamatsucho Building, impairment losses and demolishment costs of the existing building was booked as extraordinary loss. This has been already anticipated at the beginning of the year. The progress is in line with our forecast.

Based on these results, for the full year forecast, we have made an upward revision from our initial forecast for business profit and ordinary profit. We have conducted an upward revision for dividends as well. I will explain about the revised forecast on Page 6.

So by business unit, in the overseas business, we have made a downward revision for business profit as we have changed the timing for property sales located in London, U.K. On the other hand, the business units in the domestic business showed a strong performance in each of the business units such as Residential Development, Commercial Real Estate, Property Brokerage & CRE and Property & Facility Management, we made an upward revision for business profit. As a result, consolidated business profit is JPY 137 billion. We expect we'll be able to realize growth that exceeds the 8% level that we have set as a target.

As the amount of extraordinary loss related to Hamamatsucho Building has been determined and as we have visibility in recognizing extraordinary profit from the sales of non-current assets in Japan, we are fairly confident that we'll be able to achieve JPY 75 billion of profit attributable to parent as we have forecasted it.

Next, I will explain about the performance of each business unit. Please go to Page 12. Under the Residential Development business, due to the number of housing units being booked more in the fourth quarter compared to the previous year, both operating revenue and profit declined. However, the sales situation is robust among a wide range of locations and product types, leading to an improvement of gross profit ratio. Under this condition, we have revised the business profit full year forecast upward. We forecast both operating revenue and profit to go up year-over-year.

Please go to Page 13. As shown on the graph on the left-hand side, gross profit ratio on a quarterly cumulative basis was 26.3%. We are assuming this to be at the 25% range for the full year.

Please turn to Page 14. Housing sales has progressed smoothly. The contract progress rate was 99.6% against the scheduled housing sales for the full year of JPY 310 billion.

Please turn to Page 15. As you can see from the slide on the right-hand side, we have a land bank for housing sales of approximately JPY 2.5 trillion for the mid- to long term. This means that roughly speaking, we have a stock for 6 to 7 years of business. Of this land bank, 60% is in the Tokyo 23 wards, which is equivalent of JPY 1.6 trillion of sales.

Please turn to Page 19. In the Property Sales business unit, progress has been made on the expansion strategy of Property Sales business, including senior housing and hotels, which is in our 3-year plan. On a quarterly cumulative basis, due to the sales of senior housing and hotels, revenue reached JPY 8.7 billion and gross profit was JPY 5.1 billion.

Please go to Page 20. In terms of our land bank, for this quarter, we have been able to acquire land for development for 13 properties, a total investment amount of JPY 88.6 billion. This is due to the progress we have made in investing in land bank in Property Sales, including senior housing and hotels. We have secured approximately JPY 90 billion worth of land bank that have already been completed. If we include those that are under development, the amount will be approximately JPY 270 billion.

Next, I will explain about the Commercial Real Estate business unit. Please turn to Page 22. In the Commercial Real Estate business unit, while Property Sales has exceeded last year's numbers, as opening costs were booked for BLUE FRONT SHIBAURA S Building, it was one of the factors for the decline in the profit for this third quarter. However, as we anticipate Property Sales will progress steadily going forward, we have made an upward revision for the full year for both operating revenue and business profit.

Please go to Page 23. Under the Property Sales business, total operating revenue was JPY 119.2 billion, while gross profit was JPY 36.6 billion on a quarterly cumulative basis coming from sales of properties. For the full year, we are forecasting over JPY 50 billion of gross profit coming from this business.

Please turn to Page 24. Land acquisition for Property Sales business has been JPY 47 billion for the 3 quarters for this fiscal year. Due to the progress of land acquisition in recent years, we have been able to secure land bank equivalent to total investment amount of JPY 1.1 trillion worth 5 to 6 years of business, including projects under development, mainly in office and logistics facilities.

Next, please turn to Page 25. The vacancy rate for leasing assets held as non-current assets averaged 5.9% across all areas, up 1.2 points from the second quarter. However, most of this was due to the group's move from the building in the Shinjuku area due to the relocation of our headquarters. Leasing of these vacated space is progressing smoothly with about half of the vacated space in the core Shinjuku Nomura Building already contracted or pre-leased. Leasing activities for the remaining space are also progressing smoothly, driven by the recent decline in vacancy rates and rising rents.

Looking at the office market as a whole, new rent levels are on an upward trend, not only for the Shinjuku Nomura Building mentioned earlier, but also for our flagship office product, PMO. Regarding rent revisions, 70% of the existing tenants had their rents revised up by about 5% to 10%.

Next, we look at Overseas business unit on Page 31. In Overseas business, both operating revenue and business profit booked a reactionary decline after posting large housing sales project in Vietnam in the same period last year. In addition, we have revised downward our full year business profit forecast, mainly due to the timing of the sales of the office building in London, U.K. postponed from the beginning of the year to next fiscal year or later. Housing sales in Vietnam this fiscal year varied by property, while the Grand Park in Ho Chi Minh City progressed strongly. The Royal Island in Hai Phong is slightly sluggish against the plan due to increased supply in the area.

Please turn to Page 33. Our Overseas total project cost is JPY 840 billion. During the third quarter, we decided to participate in one new housing sales project in Vietnam and one new rental housing project in the United States.

Now for Investment Management, please turn to Page 34. In the Business Management business unit, assets under management for private REITs and private funds are steadily increasing. We also launched our first overseas development fund in Houston U.S.A. This fund provides domestic institutional investors with investment opportunities in high-rise rental housing development projects.

Next, Property Brokerage & CRE on Page 35. In the Property Brokerage & CRE business unit, operating revenue and business profit increased due to increased transaction value in retail for individuals, middle market for corporate owners and wealthy individuals and wholesale for large corporations and investors. Reflecting this strong performance, we have revised up our full year operating revenue and business profit forecasts.

Next, for Property & Facility Management, please turn to Page 37. In the Property & Facility Management business unit, both operating revenue and business profit increased driven by increases in both property and facility management and construction ordered. This is mainly due to increased revenue from construction ordered by tenants moving into BLUE FRONT SHIBAURA. In light of this, we have revised our full year operating revenue and business profit forecast upward. This concludes explanation about our business units.

Finally, I would like to explain about shareholder returns. Please turn to Page 10. We have raised our full year DPS forecast from JPY 36 to JPY 40, resulting in shareholder return equivalent to dividend payout ratio of 45.7%. I would like to reiterate our approach to shareholder return and explain why we have made this decision. Our company has traditionally placed emphasis on achieving a high ROE, thereby achieving both profit growth through investment and increased shareholder value through shareholder returns.

Based on this fundamental principle, we have set total shareholders' return ratio of 40% to 50%. Until fiscal year ended March 2024, given our undervalued stock price, we achieved a total payout ratio of about 45% by combining dividends with share buybacks. Subsequently, in the previous fiscal year ended March 2025, we placed greater emphasis on dividends, introduced 4% DOE floor and raised our dividend payout ratio, which had previously been in the 30% range to about 40%.

However, as our stock price remained undervalued, we also conducted share buybacks in the previous fiscal year. Our initial dividend forecast for FY '25 was JPY 36 per share, representing a dividend payout ratio of 41.1% However, with business progressing smoothly during the fiscal year and even taking into account the special factor for this fiscal year, namely the extraordinary loss recorded for the development of BLUE FRONT SHIBAURA TOWER N, we are now more likely to achieve our performance targets. Thus, we have decided to make additional returns to our shareholders. As a result of this increase, the dividend per share of JPY 40 will represent a total payout ratio of 45.7%, which we believe is appropriate when considering the balance between investment and returns.

As an additional return measure, we also considered the share buyback we have been implementing since 2018. However, as our stock price is approaching our adjusted EPS, we believe the relative advantage of share buybacks has diminished, and we have decided to use dividends. However, I would like to reiterate that in our recognition, there is still room for improvement in our current share price.

Going forward, we believe that we basically remain -- maintain profit growth at the 8% level, pay dividends in line with profit growth from the perspective of increasing our corporate value and stock price.

That's all I have today. We will continue to strive for growth across the entire group to satisfy our shareholders.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Thank you very much for attending Nomura Real Estate Holdings Second Quarter Financial Results Briefing for the fiscal year ending March 2026. Without further ado, let me start my presentation. Please turn to Page 4. Operating revenue for the first 6 months was JPY 397.7 billion, business profit JPY 60.7 billion, profit attributable to owners of parent, JPY 31.3 billion.

Operating revenue increased, but profits decreased year-on-year. In preparation for the start of construction of Blue Front Shibaura Tower and we decided in the second quarter to demolish the Hamamatsucho building, resulting in an extraordinary loss. Demolition began in October. We plan to record an extraordinary loss of JPY 13.9 billion in the third quarter of demolition costs and so on.

Those extraordinary losses were already factored in the plans announced at the beginning of the fiscal year. Page 5, second quarter results per business unit. In Residential Development business unit, operating revenue and business profit decreased due to the number of housing sales units being mainly booked in the first and fourth quarters this fiscal year. In Commercial Real Estate business unit, operating revenue increased due to an increase in property sales, but business profit decreased due to opening expenses for Blue Front Shibaura, among others.

In the overseas business unit, operating revenue and profit booked reactionally decreased after the booking of a large property in Vietnam in the first quarter of the previous fiscal year, Page 6. The earnings forecast for this fiscal year remains unchanged from the initial forecast. Steady progress is being made toward achieving the forecast. Next, we will move on to an explanation for each business unit on Page 12. In Residential Development business unit, operating revenue and business profit decreased due to a decrease in the number of housing sales units year-on-year.

But as I mentioned earlier, for the full year basis, both revenue and profit are expected to increase due to an increase in housing sales and property sales. Next, Page 13. Cumulative gross profit ratio as of the second quarter was 25.8%. Full year gross profit ratio is expected to be in the high 24% range. Page 14. This is the contract progress rate. As of the end of the second quarter, the contract progress rate for the planned full year sales was 86.5%.

Sales activities, particularly in the 23 wards have been strong and progressed in line with the initial plan, including completed properties. Please turn to Page 15. On a cumulative basis, as of the second quarter, we acquired land was JPY 96 billion, equivalent to 780 units. Our land bank is equivalent to about JPY 2.5 trillion in sales.

And there will be other description after this, but we have secured highly competitive properties in Central Tokyo for the period beyond March '28 as well, as you can see on the right-hand side, of about JPY 1 trillion in redevelopment and reconstruction projects, the portion corresponding to about JPY 70 million has either been completed or under construction. Page 19. Gross sales profit of rental housing, senior housing, hotels in the first and the second quarters was JPY 3.5 billion.

We have been selling properties to achieve the full year gross profit target of at least JPY 10 billion. Please turn to Page 20. With respect to land acquisitions for property sales in the second quarter, there were 6 deals worth JPY 35.6 billion. In addition to rental housing, we have acquired assets that were designated as priority investment targets in our management plan such as senior housing and hotels.

Now I'll move on to Commercial Real Estate business unit, Page 22. In the Commercial Real Estate business unit, we have been able to conduct property sales in line with the plan. As I said previously, Blue Front Shibaura started operation. Up to now, as there has been upfront costs such as depreciation, business profit declined for the Blue Front Shibaura properties. Although there are costs related to Blue Front Shibaura as a business unit, we forecast an increase for both operating revenue and profit.

Please turn to Page 23. So this is property sales in the commercial real estate business unit. In the first 6 months of this fiscal year, we booked sales of JPY 79 billion with a gross profit of JPY 25.9 billion. Furthermore, on a gross profit basis, approximately JPY 15 billion is confirmed, making steady progress towards our target. Please turn to Page 24. So this is about the stock of property sales. JPY 22 billion worth of land acquisitions was made in the first quarter and the second quarter.

Although it is at a low level, we have been able to secure approximately JPY 1 trillion for land bank. Going forward, we will proceed in investing in logistics facilities and offices, which are our key investment targets that we have been focusing on. Please turn to Page 25. The vacancy rate of rental assets held as current assets has risen by 0.9 points in all areas. Please confirm that on the graph on the left-hand side.

So this is because we acquired a building from Nomura Real Estate Master Fund, which we are considering adding value through renovation, et cetera. But leasing activities and rent renewal is going smoothly. We were able to raise rents in 70% of the tenants that renewed their contract. The rent renewal rate is about 5% to 10% increase. So the lettable area has declined. This is due to the fact that we started demolition of Hamamatsucho Building.

Please go to Page 27. Blue Front Shibaura Tower S opened in September. Leasing activity has been going very well with floors already fully leased of those contracted and fully contracted. Tenants are moving in by phases. We have started demolition towards starting construction of Tower N. Please go to Page 31. I would like to talk about overseas business unit. For the overseas business unit, due to the reaction of large housing sales project in Vietnam in the same quarter of the previous year, both operating revenue and business profit declined.

Please go to Page 33. So we have participated in 2 new housing projects in Asia in the first 2 quarters of this fiscal year. As a result, we have been able to secure approximately JPY 820 billion in total project cost. Next is the Investment Management business unit. Please turn to Page 34. The purple portion in the graph, so the AUM of our private REIT has increased. In September, we raised about JPY 20 billion to conduct a capital increase.

Needs from corporate pension funds, public pension funds and educational institutions has increased. In the private REIT market, there is a difference between funds. That is what I hear. But for our fund, we have been able to show competitiveness in property quality and yield. Next is the Property Brokerage and CRE business unit. Please go to Page 35. So both operating revenue and business profit increased for the property brokerage and CRE business unit.

Due to the favorable market condition, operating revenue increased in the retail business targeting individuals and the middle business targeting business owners and high net worth individuals. In the retail business, needs for condominiums in the Tokyo metropolitan area for actual demand was robust. In the middle business, investment needs for properties for sales from domestic high net worth individuals expanded.

Next is the Property and Facility Management business unit. Please turn to Page 37. In the Property and Facility Management business unit, operating revenue from Property and Facility Management and Construction ordered increased. This led to an overall increase of both operating revenue and business profit. An increase in construction orders led to an increase in operating revenue as constructions took place for the tenants moving into Blue Front Shibaura.

This ends my explanation about the financial results. Lastly, I would once again like to explain that the major reason why operating revenue and profit declined year-over-year is that the timing of booking revenue for the housing sales and property sales business is unevenly distributed through the fiscal year. The actual sales activity for housing sales and property sales is proceeding steadily. The group as a whole will be committed to achieving the target of 8% level of growth of business profit that we have announced at the beginning of the fiscal year.

Thank you for your attention.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]