Keihanshin Building : CORPORATE REPORT 2021

For the scal year ended March 31, 2021

Connect People,

Communities, and the Future1 Corporate Philosophy/Code of Conduct/Information Disclosure System

					3		About Keihanshin Building
							3	The History of Value Creation
							5	At a Glance
							7	Financial and Non-financial Highlights
C o r p o r a t e	1	To provide valuable commercial space to customers so as to contribute to the community	C O N T E N T S	9		The Value Creation Story of Keihanshin Building
P h i l o s o p h y		through the advancement of customers' and our businesses.	C O R P O R A T E			9	Business Model and Sources of Competitive Advantage
	2	To earn and value our customers', shareholders' and employees' trust by operating our company			11	The Value Creation Process
		according to quality-first values.		R E P O R T 2 0 2 1			13	Risks and Opportunities
	3	To act efficiently, evolve, and create	a vital corporate atmosphere.				15	Message from the President
							21	Overview and Progress on the Mid-Term Business Plan
C o d e o f	１	The customer comes first					23	Financial Capital Strategies
C o n d u c t	2	We will earn our customers' trust, meet their needs and provide them with safe, high-quality environments and services.		25		Features
Practicing compliance
		We will always adhere strictly to laws, ordinances and regulations, and act with a strong social conscience rooted				25	Keihanshin OBP Building Completed
		in high ethical standards.
						27	Keihanshin Toranomon Building Completed
		In addition, we will conduct business fairly, transparently and appropriately, and maintain healthy and normal
		relationships with political and administrative persons and organizations.		29		Business Overview
		We will have nothing to do with anti-social forces and organizations and resolutely deal with them.
	3	Social contribution					29	Office Buildings
		We will establish a good relationship with the community and actively engage in social contribution activities as				31	Datacenter Buildings
		a good citizen.
						33	WINS Buildings
	4	Disclosure of information
					34	Commercial Buildings and Logistics Warehouses
		We will communicate openly not only with our shareholders, but also with the community widely, and disclose
					35	List of Owned Properties
		corporate information timely, accurately, and properly.
	5	Protecting the environment			37		Foundation for Value Creation and Resources
		We will maintain our awareness that environmental protection is an important facet of business management, and
		will serve to be proactive in protecting the natural environment in a positive manner.				37	Sustainability Initiatives
	6	Respect for the individual					39	Relations with Partner Companies, Tenants, Local
		We will maintain our safe and comfortable workplaces in a manner that inspires employees in their work and					Communities, Shareholders, and Investors
		encourages their self-actualization, and we will appropriately respect each employee's individuality and personality.				43	Human Resources Development and Workstyle Reforms
I n f o r m a t i o n		Consolidated				44	Protecting the Environment
				45	Interview with Board Chairman and Outside Director
D i s c l o s u r e	S y s t e m					49	Corporate Governance
							55	Compliance
		CORPORATE REPORT 2021				56	Risk Management
		Reports (to shareholders)				57	Directors/Audit & Supervisory Board Members and
						Executive Officers
Financial information	Non-financial information		59		Financial and Corporate Data
		Shareholders/	CSR Information
		Investors Information

https://www.keihanshin.co.jp/	https://www.keihanshin.co.jp/	59	Main Consolidated Financial/Non-financial Data
english/ir/	english/csr/	61	Analysis of Operating Results and Financial Condition, etc.
FACT BOOK		63	Consolidated Balance Sheets
	Comprehensive	65	Consolidated Statements of Income and
		Consolidated Statements of Comprehensive Income
		66	Consolidated Statements of Changes in Equity
		67	Consolidated Statements of Cash Flows
		68	Company Overview and Stock Information

Editorial Policy

The CORPORATE REPORT 2021 is based on the business operations, strategy and ESG information of Kei- hanshin Building Co., Ltd., and it is compiled as a comprehensible report for our stakeholders.

Through this report, we will continue to provide our financial and non- financial information in good faith.

This report was prepared based on the International Integrated Reporting Framework released by the International Integrated Reporting Council (IIRC), as well as the Guidance for Collaborative Value Creation issued by Ministry of Economy, Trade and Industry of Japan in May 2017.

Target Scope

The business report and ESG information introduce major activities of Keihanshin Building Co., Ltd.

Target Period

This report covers information on corporate activities in the fiscal year ended March 31, 2021 (April 1, 2020 to March 31, 2021). However, some parts may include past information or information on factors beyond April 1, 2021.

Note on forward-looking projections

This report contains descriptions of future plans, estimates and projec- tions. Such information is based on the information currently available to the Company. Actual results may differ due to various factors that may arise in the future. We appreciate your understanding on this matter.

1		Keihanshin Building Co., Ltd. CORPORATE REPORT 2021	Keihanshin Building Co., Ltd. CORPORATE REPORT 2021	2

About Keihanshin Building

The History of Value Creation

Innovation to Capture the Future Needs of the Times

Shortly after World War II, the Company was founded when the Hanshin Racecourse reconstruction project started. Since then, the Company has been developing WINS buildings, office buildings, commercial buildings and logistics warehouses, and datacenter buildings according to the needs of the times.

We will strive to provide valuable commercial space and expand the assets to be carried over to the next generation.

1948		Reconstruction of the Hanshin Racecourse
		The Company was founded by the Kansai business com-
		munity and horse owners with the goal of reconstruct-
		ing the Hanshin Racecourse. The Company's name at
		the time of its founding was Keihanshin Horse Racing
		Co., Ltd. Thanks to the relationships with the Hanshin
		Racecourse, we created an off-track betting parlor in the
		Keihanshin (Kyoto, Osaka, and Kobe) downtown areas
		and rented them to the then Ministry of Agriculture and	Hanshin Racecourse (Completed in 1949)	Off-track betting parlor (in Osaka-shi)
		Forestry at that time (currently the Ministry of Agriculture,
			(Completed in 1949)
		Forestry and Fisheries).
1956		Transition to a real estate corporation
		The racecourse was sold to the newly launched Japan
		Racing Association (JRA). With the land and funds ac-
		quired from this sale, we started lot sales of housings
		and leasing of office buildings. In 1956, the corporate
		name was changed to Keihanshin Real Estate Co., Ltd.,
		marking a fresh start as a full-fledged real estate corpo-
		ration.	Keihanshin Kawaramachi Building
				(Completed in 1962)
1976		Entering the commercial buildings and
		logistics warehouses business

Reflecting the lifestyle changes from expansion of mo- torization, we pursued development and acquisition of suburban roadside commercial facilities across Japan. In the 1980s, leasing of warehouses started, taking advantage of our expertise in leasing commercial facilities.

WINS Umeda A Building	Hirakata Warehouse (Completed in 1983)
(Completed in 1982)

1988		Entering the datacenter building business
		With the completion of the first datacenter building, the
		Shinmachi 1 Building, in 1988, the leasing business for
		datacenter buildings kicked off. Since then, we have
		evolved our buildings according to the needs of the
		times, such as the spread of mobile phones and IT, and
		have expanded the datacenter building business.

Keihanshin Shinmachi 1 Building	Nagano Shopping Facility (Nagano-shi)
(Completed in 1988)	(Acquired in 1998)

2009	Advance into the Tokyo metropolitan area

The Company started advancing into the Tokyo metropolitan area with the completion of its Onarimon Building in 2009. Furthermore, with its management resources concentrated on leasing commercial space, the corporate name was changed to Keihanshin Building Co., Ltd., in 2011. The Company opened the Tokyo Branch Office (currently Tokyo Branch Office) in 2014 and has been pursuing to acquire properties in the metropolitan area.

Keihanshin Onarimon Building	Keihanshin Nishishinsaibashi Building
(Completed in 2009)	(Completed in 2012)

2021	Into the new stage of growth

In November 2020, the Toranomon Building was completed, making it the sixth property in the Tokyo metropolitan area. In April 2021, the OBP Building was completed, making it our eighth datacenter building.

To fulfill the goals of the Mid-Term Business Plan for the fiscal year ending March 2026, we will strive to further expand our assets and expedite the process of taking on challenges into the new stage.

Keihanshin Toranomon Building	Keihanshin OBP Building
(Completed in 2020)	(Completed in 2021)

Trend in net sales by segment

Trend in net sales (million yen)

1990/3

2000/3

2010/3

2021/3

				12,656	9,801	12,488	15,333
1950/3	1960/3	1970/3	1980/3	1990/3	2000/3	2010/3	2020/3

Responded to

Responded to offices

Provided

Provided infrastructure to meet

6.4%

0.1%

post-World War II

shortage during the era

new suburban

the information processing

housing shortage

of high economic growth

lifestyles

needs of IT society

22.6%

24.5%

1957/3

1966/3

1986/3

2008/3

2021/3

46.4%

Office buildings

Datacenter buildings

WINS buildings

Commercial buildings/

Lot sales

Others

logistics warehouses

Building Keihanshin of Story Creation Value The Building Keihanshin About

Features

Overview Business

Data Corporate and Financial Resources and Creation Value for Foundation

3

Keihanshin Building Co., Ltd. CORPORATE REPORT 2021

Keihanshin Building Co., Ltd. CORPORATE REPORT 2021

4

About Keihanshin Building

At a Glance

We develop four leasing businesses - office buildings, datacenter buildings, WINS buildings (off-track betting parlors), and commercial buildings and logistics warehouses - across Japan, with a focus on the Kansai region and the Tokyo metropolitan area.

Based on the corporate philosophy, "to provide valuable commercial space to customers so as to contribute to the community through the advancement of customers' and our businesses," the Company is working to respond to the needs of the times and develop buildings that are environment- and people-friendly.

Performance Summary for the Fiscal Year Ended March 31, 2021

Total of 26facilities

As of June 2021

Value The Building Keihanshin About

Net salesOperating profitProfit attributable to owners of parent

15,333

Year-on-Year

5,295

Year-on-Year

8,251

Year-on-Year

million yen +0.1%

million yen -2.2%

million yen +110.6%

Total assets

Capital adequacy ratio

Vacancy rates

154,043

Year-on-Year

45.7

Year-on-Year

0.2

Year-on-Year

million yen +12.8%

%-1.3pointspercentage

%

+0.2pointspercentage

Number of facilities operated

8facilities

Office Buildings

Operation mainly in the business areas of Tokyo and Osaka

Planned renovations and repairs

Advanced BCP functions gained through datacenter building business Meticulous building management

Average vacancy rates as of March 2021

Tokyo business areas

5.42%	Month-on-Month
+0.18 pointspercentage
Osaka business areas
3.91%
Month-on-Month
+0.17 pointspercentage

Source: Miki Shoji Co., Ltd.

Building Keihanshin of Story Creation

Net Sales Ratio / Ratio of Rental Floor Space

Trend in the size of datacenter market

Features

Net sales ratio		Ratio of rental floor space
6.4%	0.1%
22.6%	24.5%	28.7%	33.9%		Office buildings
Net sales			Rental floor space		Datacenter buildings
15,333			239,075
			WINS buildings
(million yen)			(m2)		Commercial buildings/
2021/3	46.4%	13.0 %	2021/3		logistics warehouses
	24.4%		Others

Number of facilities operated

8facilities

Datacenter Buildings

Urban-type datacenter buildings with full communication and transportation infrastructures

Advanced BCP functions such as seismic isolation structure

Stable revenue through high-quality building construction and maintenance

Hosting		IaaS/PaaS		Housing	(hundred million yen)
Communications line services		Shared use		Others

		28,633	30,444	31,908	33,367
	26,644
24,461

2020	2021	2022	2023	2024	2025
estimate	projection	projection	projection	projection projection

Source: Comprehensive Survey of Data Center Business Market 2021: Edition of Market (Fuji Chimera Research Institute, Inc.)

Business

Trend in the total proceed* of Japan Racing Association (JRA)

Overview

Business Characteristics of the Company

Focus on the leasing business

We achieve business efficiency
and stable profitability by focusing
on commercial real estate leasing	Brokerage		Leasing	Lot sales
business, among various types busi-
nesses in real estate.

Achieve a high operation rate through a diversified business portfolio

In addition to office buildings, we own datacenter buildings and WINS buildings, which are relatively unaffected by the economy, enabling us to diversify our business portfolio and stably maintain a low vacancy rate.

	Vacancy rate for Keihanshin Building (consolidated)		Vacancy rate for Keihanshin offices	(%)
	Vacancy rate for Tokyo business areas		Vacancy rate for Osaka business areas

Number of facilities operated

5facilities

WINS Buildings

Over 70 years of business together with our tenants

Operation in the Keihanshin (Kyoto, Osaka, and Kobe) downtown areas High-efficiency and high-income business with little competition

(hundred million yen)

25,833	26,708	27,476	27,950	28,817	29,834
2015	2016	2017	2018	2019	2020

*Total proceed: total ticket sales minus payouts for winning horses.

Source: Japan Racing Association

and Creation Value for Foundation

Diversify asset portfolio around the Kansai Region and Tokyo metropolitan area

	5.4
4.7
3.6	3.9
	3.4

Number of facilities operated

Commercial Buildings and Logistics Warehouses

Excellent locations near terminal

Trend in size of BtoC-EC market in Japan

Size of EC market	(hundred million yen)
EC ratio (%)

	5.79	6.22	6.76
5.43
4.75

Resources

Starting with the completion of the Onarimon Building in 2 0 0 9, we promote investment in the Tokyo metropolitan area to diversify the concentration risk of owned assets in the Kansai region. In November

Tokyo metropolitan area

29%

Kansai

57%

	2.8	2.5
		2.0
2.2
	1.8
2.1
1.5		1.5
	0.5	0.8		0.6
		0.0

5facilities

stations for commercial facilities and trunk roads for logistics warehouses Strengths in build-to-suit warehouses such as cooling and freezing warehouses, etc.

4.37													193,609
										165,054	179,845
127,970	137,746	151,358
2014	2015	2016	2017	2018	2019

Corporate and Financial

2 0 2 0, the Toranomon Building was completed, making it the sixth property in the Tokyo metropolitan area.

Rental floor space as of March 31, 2021

		0.0	0.0	0.2
17/3	18/3	19/3	20/3	21/3
				Source: Miki Shoji Co., Ltd.

Source: "FY2019 E-Commerce Market Survey" (Ministry of Economy, Trade and Industry) (https://www.meti.go.jp/policy/it_policy/statistics/outlook/200722_new_hokokusho.pdf) The chart is created based on data from above.

Data

5

Keihanshin Building Co., Ltd. CORPORATE REPORT 2021

Keihanshin Building Co., Ltd. CORPORATE REPORT 2021

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About Keihanshin Building

Financial and Non-financial Highlights

Financial data

								Ordinary income after tax before depreciation/profit
Net sales/operating profit/operating profit to net sales ratio	attributable to owners of parent/basic earnings per share (EPS)
			Net sales (million yen)				Operating profit (million yen)				Ordinary income after tax before depreciation (million yen)
									Profit attributable to owners of parent (million yen)

Operating profit to net sales ratio (%)	Basic earnings per share (EPS) (yen)

						Net interest-bearing debt/EBITDA ratio
Interest-bearing debt/capital adequacy ratio	D/E ratio
			Interest-bearing debt (hundred million yen)		Capital adequacy ratio (%)			Net interest-bearing debt/EBITDA ratio (times)		D/E ratio (times)

The Building Keihanshin About

14,380	14,799	14,995	15,319	15,333
									8,251			666
	35.8	36.4
	35.3									557	584
34.6
			34.5			5,923			5,796		482
				5,819		5,829	5,802	430
										158.8
										52.0
4,969	5,298	5,451	5,414	5,295		3,272	3,585	3,998	3,919		50.5
												48.3

4.8

5.9 6.0

5.35.2

of Story Creation Value

60.7

66.6

74.6

74.6

47.0

45.7

17/3

18/3

19/3

20/3

21/3

17/3

18/3

19/3

20/3

21/3

17/3

18/3

19/3

20/3

21/3

0.7	0.8	0.9	0.9	0.9
17/3	18/3	19/3	20/3	21/3

Building Keihanshin

Net sales have been steadily increasing in recent years reflecting factors such as the higher occupancy rates of the properties we own. The completion of the Toranomon Building and the OBP Building is expected to bring a further rise in revenues. Operating profit is expected to be on an upward trend in the future, despite some ups and downs due to the initial cost of the newly constructed buildings.

ROE/ROA

ROE (Return on equity) (%) ROA (Return on total assets) (%)

				12.3
5.8	5.9	6.3	6.1
				3.6
4.4	4.5	4.3	4.0
17/3	18/3	19/3	20/3	21/3

Profit for the fiscal year ended March 2021 rose significantly due to the recording of extraordi-	Interest-bearing debt is trending upward due to issuing bonds to finance development projects.	Our financial position remains sound. We believe that a certain leverage will be necessary for
nary income from sales of investment securities. Ordinary income after tax before depreciation,	The capital adequacy ratio is on a downtrend as a result, but, as our financial discipline, we will	aggressive investment in the future, but the fundamental management policy of the Company
one of our key indicators, is expected to grow steadily in the future, thanks to the earnings	continue to secure the ratio of 30% or more and maintain the soundness of the financial bal-	is to avoid excessive leverage and to maintain a stable financial foundation.
contribution from the Toranomon Building and the OBP Building.	ance, while actively seeking new investments.

EBITDA/capital expenditure

Appraised value of investment and rental properties

Annual dividend per share/dividend payout ratio

EBITDA (million yen)

Capital expenditure (million yen)

Unrealized gain (hundred million yen)

Balance at end of period (book value) (hundred million yen)

Annual dividend per share (yen)

Dividend payout ratio (%)

10,840	11,236		10,639	11,504
						1,705
					1,633	1,673				36.2
						1,610
					1,467					30.8
	7,731			7,565					28.0	27.0		31.0
7,507	7,661	7,598			680		738
	635	725			27.0
					581
											23.0
													19.5
		3,734								17.0	18.0
					886	974	952	947	967
17/3	18/3	19/3	20/3	21/3	17/3	18/3	19/3	20/3	21/3	17/3	18/3	19/3	20/3	21/3

Features

Overview Business

ROE as of March 31, 2021 rose significantly year-on-year, due to the recording of a large amount	EBITDA has remained about 7.0 billion yen each year, and we are generating stable cash flow	We own properties on a long-term basis due to the nature of our business, so the amount of	With the policy focusing mainly on stable and continuous dividend payments, we also place
of extraordinary income. ROA figures are particularly important to us, and our goal is to main-	in our core business. Capital investment has been on the rise over the past several years, in	unrealized gains or losses is highly dependent on the market at the time. Under such circum-	emphasis on increasing the amount of dividend per share, with a target dividend payout ratio
tain an ROA in the 4% range. We strive to improve the ROA, aiming for a better ROE. (ROE:	line with the Toranomon Building and the OBP Building development. We will continue to take	stances, we will strive to secure stable cash flows by effectively utilizing our assets, including	set at 35% to 40%. The dividend for the fiscal year ended March 2021 fell significantly below
Profit/equity, ROA: Operating profit/total asset)	a proactive approach to investments in new construction and renovation projects.	reshuffling of assets.	the target level due to the recording of extraordinary income, but the dividend amount in-
			creased by 4 yen year-on-year, resulting in increased dividends for seven consecutive years.

ESG-related data

Investments in renovations and repairs

Number of employees/percentage of female employees

Paid holiday utilization ratio

Monthly average overtime (hours per person)

Renovations (million yen)

Repairs (million yen)

Number of employees (persons)

Percentage of female employees (%)

Paid holiday utilization ratio (%)

Monthly average overtime (hours)

																				14
				1,654		43	45	43	45	46				64.7	63.8
														11
						30.2		30.2			47.5	44.6	48.8					8
						28.9	28.9		30.4				7
													6
				790
			642	525 658
238 356	527 527	495
17/3	18/3	19/3	20/3	21/3	17/3	18/3	19/3	20/3	21/3	17/3	18/3	19/3	20/3	21/3	17/3	18/3	19/3	20/3	21/3

During the fiscal year ended March 2020, we carried out a large-scale renovation of power	We have gradually increased the number of employees as our business has expanded. In order	Paid holiday of up to 20 days plus 2 days of special leave are granted annually. We also offer	We are striving to create a healthy and active workplace for all employees by achieving a
substations. In addition to planned renovations and repairs, we strive to continue increasing the	to continue expanding our business and accelerate the Company's growth, we will continue to	several different types of holiday plans to encourage employees to take quarterly or anniversary	healthy work-life balance through efforts such as optimally allocating personnel and creating an
longevity of our assets into the future based on the concept of "preventive maintenance."	further strengthen our workforce while encouraging female employees to play an active role.	leaves. The paid holiday utilization ratio thus reaches over 60%.	environment where each person can maximize his or her abilities.

Data Corporate and Financial Resources and Creation Value for Foundation

7

Keihanshin Building Co., Ltd. CORPORATE REPORT 2021

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