JSB’s main business is subleasing and managing student apartments in the Property Leasing and Management segment (93.8% of revenue, 97.3% of operating profit in FY10/21). The company proposes apartment building plans to property owners. Then, once construction is complete, JSB leases the properties from the owners (guaranteeing them a fixed rental revenue stream) and subleases the apartments to students. Its main sources of revenue are tenant rents and property management fees.
JSB’s student apartments are usually near universities or in areas that offer an easy commute. Typical floor space is 25sqm, comprising a main room, bath, toilet, and kitchen. Monthly rents vary by area but average JPY64,000 in the Tokyo metropolitan area and JPY54,000 nationwide. As of April 2021, JSB managed and operated properties (student dormitories, senior residences, and tenant buildings) with 76,612 rooms, up from 73,150 in April 2020. The company leads the market in number of student apartments under management.
Because JSB focuses on student accommodation, the timing of when tenants will leave (e.g., due to graduation) is more predictable than for general rental apartments. This helps keep its occupancy rates high (99.9% as of April 2021), as it can find tenants for the upcoming academic year. Because its tenants are mostly students, JSB says its business is largely immune to swings in the economy.
Founded in 1976, JSB started designing apartments specifically for students in 1988, when Japan’s economic bubble was bursting, and higher-end apartments were considered too luxurious for students. The relationships the company has developed with universities and university co-ops over more than 40 years now serve as barriers to entry.
JSB says property owners who construct student apartments can receive a gross yield of around 8%, or a net yield of 5–6%, and gain property and inheritance tax advantages. The company keeps its upfront design and construction-related charges low, and instead creates a system where both the property owners and JSB can gain long-term benefits.
JSB anticipates that demand for student apartments will shrink at an annual rate of about 1.1% from 2019 to 2040 but believes it can grow its business by expanding market share. From 2000 through 2019, the company boosted its share of demand for student apartments under management by 2.3pp to 3.5%. Shared Research thinks that the company grew its market share through several advantages: specialization in student apartments and accumulation of operational expertise, good understanding of student needs, and relationships with universities and student co-ops. At last count, the company's exact market share was unclear, but Shared Research thinks that long-term growth through expanding market share is eminently feasible, as the company still holds these advantages as of 2021.
FY10/21 results: For FY10/20, JSB reported full-year consolidated revenue of JPY52.8bn (+9.8% YoY), operating profit of JPY5.3bn (+23.0% YoY), recurring profit of JPY5.2bn (+22.5% YoY), and net income of JPY3.3bn (+17.8% YoY). Revenues and earnings were up at the company's mainstay Property Leasing and Management as well as at its Housing for Seniors business. Property Leasing and Management business posted strong gains in additions to its property portfolio that increased units under management while keeping its overall occupancy rate above 99%.
FY10/22 forecast: For FY10/22, the company is projecting full-year consolidated revenue of JPY57.3bn (+8.5% YoY), operating profit of JPY5.9bn (+10.2% YoY), recurring profit of JPY5.7bn (+10.3% YoY), and net income of JPY3.8bn (+17.3% YoY). Having moved away from in-person sales in favor of a mainly contactless approach (via online conferencing) during FY10/21 and being generally satisfied with the results, the company has decided to go with a dual approach to sales going forward in FY10/22, using in-person sales as well as online conferencing to help guard against the ongoing threat from new coronavirus variants. At the same time, the company will continue striving to improve the efficiency of its property management.
Medium-term business plan: The company is currently operating under the first of three medium-term business plans that were formulated to help it reach the goals set out under its long-term vision (Grow Together 2030) that was announced in December 2020. At the time of its FY10/21 results announcement in December 2021, the company raised its end-year targets for this medium-term plan, raising its FY10/23 target for consolidated revenues to JPY62.3bn (+17.9% versus FY10/21), its operating profit target to JPY6.7bn (+26.3%), its recurring profit target to JPY6.6bn (+26.1%), and its target for net income to JPY4.4 (+34.0%).The reason for upward revision is that occupancy rates have been favorable compared to the assumptions made when the initial plan was formulated, and cost reduction has been progressing steadily. During the medium-term management plan period, the company will strive to achieve earnings growth primarily by increasing the number of units under management and improving the added value of properties, mainly in the Property Leasing and Management business and Housing for Seniors business. The company also plans to promote digital transformation in all its areas of business.
Shared Research thinks the company’s strengths are: high occupancy rates due to specialization in subleasing student apartments; relationships with universities and university co-ops that help it reach potential tenants; and stable growth due to accumulated contracts. Among JSB’s weaknesses are a limited scope for market growth in its core student apartment business; in the Housing for Seniors business, a limited track record, lack of uniqueness, and few synergies with the core business; and, its impact on the industry in terms of overall management of residential rental properties is limited, and it therefore cannot become a price leader. (See the “Strengths and weaknesses” section.)
|Gross profit margin||11.3%||12.1%||14.0%||15.4%||15.2%||15.3%||16.1%||17.1%||17.6%|
|Operating profit margin||3.7%||4.7%||6.4%||7.6%||7.6%||8.0%||9.0%||10.1%||10.3%|
|Recurring profit margin||2.3%||4.4%||6.1%||7.2%||7.4%||7.8%||8.8%||9.9%||10.0%|
|Per-share data (split-adjusted; JPY)|
|Shares issued (year-end)||-||80,740||80,740||4,438,100||4,721,300||4,837,500||9,785,400||10,747,400|
|EPS (fully diluted)||-||-||-||185.6||219.8||234.0||281.7||325.1|
|Dividend per share||-||16.3||16.3||18.5||20.0||27.5||34.0||35.0||36.0|
|Book value per share||-||672.8||806.8||1,048.6||1,341.9||1,542.6||1,790.2||2,205.1|
|Balance sheet (JPYmn)|
|Cash and cash equivalents||4,754||5,214||5,450||7,424||8,189||8,693||9,387||12,771|
|Total current assets||6,606||7,165||7,284||8,682||9,434||10,074||10,840||14,371|
|Tangible fixed assets||9,788||10,086||12,627||14,656||15,975||19,269||23,143||29,209|
|Investments and other assets||3,845||3,722||3,607||3,607||3,544||4,254||5,080||5,869|
|Total current liabilities||5,949||6,323||6,853||6,896||6,600||7,000||8,360||9,245|
|Total fixed liabilities||9,638||9,347||10,306||11,059||10,712||12,785||14,650||17,891|
|Total net assets||4,777||5,432||6,484||9,267||12,621||14,793||17,236||23,200|
|Total interest-bearing debt||8,596||8,350||9,600||9,715||9,189||10,978||12,694||15,942|
|Cash flow statement (JPYmn)|
|Cash flows from operating activities||-||1,699||2,064||2,872||2,188||3,449||5,004||4,911|
|Cash flows from investing activities||-||-851||-2,847||-1,621||-2,275||-4,295||-5,542||-7,222|
|Cash flows from financing activities||-||-392||1,069||1,137||852||1,350||1,233||5,694|
|Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||% of Est.||FY Est.|
|Gross profit margin||4.4%||22.1%||18.9%||16.1%||4.4%||22.5%||19.4%||17.1%||5.5%|
|Operating profit margin||-||15.6%||12.5%||9.0%||-||16.3%||13.1%||10.1%||-||10.3%|
|Recurring profit margin||-||15.3%||12.3%||8.8%||-||16.2%||12.9%||9.9%||-||10.0%|
|Gross profit margin||4.4%||33.0%||11.4%||6.8%||4.4%||33.6%||12.1%||9.1%||5.5%|
|Operating profit margin||-||27.0%||5.2%||-||-||28.2%||5.6%||-||-|
|Recurring profit margin||-||26.7%||5.2%||-||-||28.0%||5.4%||-||-|
|(JPYmn)||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||% of Est.||FY Est.|
|Property Leasing and Management||9,060||24,295||34,677||44,933||10,003||26,908||38,251||49,519||10,837|
|Housing for Seniors||648||1,318||2,009||2,714||696||1,399||2,103||2,802||696|
|Operating profit margin||-||15.6%||12.5%||9.0%||-||16.3%||13.1%||10.1%||-||10.3%|
|Property Leasing and Management||-70||4,557||5,375||5,464||-103||5,170||6,108||6,643||90|
|Operating profit margin||-||18.8%||15.5%||12.2%||-||19.2%||16.0%||13.4%||0.8%|
|Housing for Seniors||73||158||248||306||106||213||299||354||62|
|Operating profit margin||11.3%||12.0%||12.3%||11.3%||15.2%||15.3%||14.2%||12.6%||8.9%|
|Operating profit margin||-||-||-||-||-||-||-||-||-|
|Property Leasing and Management||9,060||15,235||10,382||10,256||10,003||16,905||11,343||11,268||10,837|
|Housing for Seniors||648||670||691||705||696||704||704||699||696|
|Operating profit margin||-||27.0%||5.2%||-||-||28.2%||5.6%||-||-|
|Property Leasing and Management||-70||4,628||817||89||-103||5,273||939||535||90|
|Operating profit margin||-||30.4%||7.9%||0.9%||-||31.2%||8.3%||4.7%||0.8%|
|Housing for Seniors||73||85||90||58||106||108||85||55||62|
|Operating profit margin||11.3%||12.7%||13.0%||8.2%||15.2%||15.3%||12.1%||7.9%||8.9%|
|Operating profit margin||-||-||-||-||-||-||-||-||-|
In the company’s mainstay Property Leasing and Management business, revenue tends to concentrate in 1H (November to April), especially in Q2 (February to April), which is the peak demand season for leasing properties when the number of new contracts increases. Operating profit also tends to concentrate in Q2. The company adopts a key money system, in which it receives contract fees (a lump sum worth one to three months’ rent) from its tenants at the start of each lease agreement. Most of the revenue from this system is booked in April, when new contracts concentrate.
|Tangible fixed assets||20,953||22,374||22,986||23,143||24,701||26,631||27,424||29,209||30,158|
|Leasehold and guarantee deposits||2,856||3,092||3,133||3,147||3,144||3,293||3,321||3,390||3,384|
|Advances received, Contract liabilities||-||-||-||-||-||-||-||-||10,594|
|Advances and operating deposits received||8,202||4,222||3,788||3,842||9,108||4,358||3,980||4,326||-|
Revenue increased 7.8% YoY, amounting to 20.3% of the company's full-year forecast. Revenue was up YoY at all three segments: the mainstay Property Leasing and Management segment as well as the Housing for Seniors segment and Other segment. The gross margin rose 1.1pp YoY to 5.5% and the ratio of SG&A expenses to sales narrowed 0.3pp YoY to 7.2%, resulting in a YoY contraction in losses at all levels. By segment, the Property Leasing and Management segment turned to profitability after posting an operating loss in Q1 FY10/21, and although the Housing for Seniors segment posted a YoY decline in operating profit, losses at the Other segment shrank.
In the company’s mainstay Property Leasing and Management business, revenue tends to concentrate in 1H (November to April), especially in Q2 (February to April), which is the peak demand season for leasing properties when the number of new contracts increases. Operating profit also tends to concentrate in Q2. The company adopts a system in which it receives key money (a lump sum worth one to three months’ rent) from tenants when they move in. Most of the revenue from this system is booked in April, when many tenants move in.
Breakdown of Q1 FY10/22 results by segment:
In the student apartment business, the company opened Gakusei Kaikan Uni E'meal Mie Daigakumae and Gakusei Kaikan Uni E'meal Toyama Daigakumae, expanding its network of high-end student apartments offering added security into new regions ahead of the peak demand period in spring 2022. In Morioka City, the company also opened LiViSta Morioka, a "regional revitalization rental condominium" located at the West Exit of Morioka Station, in collaboration with JR East Morioka Branch and JR East Tohoku Sougou Service Co., Ltd.
These initiatives contributed to an increase in units under management, in turn boosting revenue from the company's various property leasing services including rental revenue from student apartments. In FY10/20–21, the company offered a special support plan for students affected by the COVID-19 pandemic. This temporarily depressed sales but that factor has now dropped out, contributing to the OPM improving YoY in Q1 FY10/22.
In Q1 FY10/22, business activities seem to have picked up compared with Q1 FY10/21. The company cites, as a contributing factor, progress in operational efficiency tied to the implementation of a customer relationship management (CRM) system. The company explains that the number of units under management is increasing as expected and that the occupancy rate remains as high as ever (99.9% at end-April 2021).
Regarding how properties are managed, there appears to be a relatively
large increase in leased properties and company-owned properties in accordance
with company strategies. Many of the company-owned properties that have been developed recently
are located near national or public universities in regional cities. Many projects take place in such locations probably because of the
amount of information available regarding the land suitable for development, in addition to various conditions such as land prices and construction costs. JSB explains that land information is often presented to the
company by those seeking to hire the company. For this reason, JSB does not usually have to compete with other real estate developers when it comes to land acquisition. The company uses an
internal benchmark for net operating income (NOI) in evaluating land purchases
(although decisions are made flexibly depending on the project). The company
plans to gradually expand into all 47 prefectures through new development
projects and other means.
The company has been acquiring tenants at a steady pace. The effects of COVID-19 may have become less of a concern compared with the previous year now that many universities are resuming face-to-face classes. The number of customers visiting the company’s shops has not fully recovered to the pre-pandemic level. However, the company has been responding to the situation by deploying non-face-to-face customer-service software and a CRM system to streamline operations.
In Q1 FY10/22, the discontinuation of special support for students affected by the pandemic had a positive impact on earnings. However, this impact is expected to disappear in Q2.
In this segment, there was a boost to revenue from Grand Maison Geihinkan Toyonaka-Toneyama, a new facility opened in October 2021, however occupancy rates at senior housing facilities managed by JSB were weak overall amid a tendency for seniors to delay their move into these facilities out of concern over rising COVID-19 infections. On the cost front, personnel expenses increased as the company added to its workforce and made increased use of temporary staffing.
In Q1 FY10/22, JBS also undertook community interaction and environmental initiatives based on its business concept of becoming a platform for addressing regional issues in Japan, using Grand Maison Rondokan Kyoto Hazukashi, a senior housing facility that it manages, as venue for a one-day "toy hospital" offering instant repairs for broken toys, and a second-hand clothing exchange.
The number of units under management and the occupancy rate were probably in line with the company projection.The company
is recruiting tenants for Grand Maison Geihinkan Toyonaka-Toneyama, which
opened in October 2021. The company wants to achieve full occupancy within
one year to one and a half years after its opening, a typical duration for senior housing facilities to be fully occupied. As for the opening of other facilities, there seem to be no specific projects
at this time, even though some discussions may be underway.
Some people are postponing a plan to move into senior housing
facilities because of the pandemic. This may have affected the
company as it seeks to attract tenants to new facilities and to existing
facilities with vacancies (vacancies created after previous occupants moved out). However, the impact appears to be moderate and does not seem to have raised any serious concerns. There has been no increase in the number of tenants
moving out because of the pandemic.
For 1Q FY10/22, operating profit declined YoY in part because of an increase in personnel expenses. Personnel expenses seem to have risen for nursing care services. Such expenses may include the cost of hiring help to cover for employees who contracted COVID-19. The company, in an effort to improve efficiency and reduce costs in the future, is experimenting with cleaning robots that have a sensor and with a monitoring system that uses radar technology at some of its facilities.
Among the businesses covered by the Other segment, the Japanese language school business has been hit by prolonged restrictions on the entry of foreign nationals amid ongoing concerns about the spread of COVID-19. The associated wait-listing of incoming international students has caused delays in new student enrollment. However,
there are signs that the business environment may soon turn around because travel
restrictions are gradually being eased.
On the other hand, the internship placement service Dai-Zero Shinsotsu, operated by subsidiary Style Garden, is trending ahead of initial targets. The company continues to work on generating group synergies, as it sees this business complementing other group businesses in the area of student support services. The service is now offered in Osaka, Nagoya, and Hiroshima.
As a company providing student housing, JSB seeks to offer not only a "safe, secure, and comfortable place to live" but also a "variety of learnings, discoveries, and experiences," and to that end in April 2022 it plans to launch a new "Learning Apartment" project, with the aim of enhancing young people's potential and their basic skills as members of society. Through this project, JSB hopes that resident students will lead a richer and more fruitful student life. This is a noteworthy endeavor in that it could add more value to the
company’s properties once its merit is recognized.
The company will maintain various efforts in this segment to identify businesses that could become a future mainstay.
Under the "Preparatory Course" offered by the company, securing a work visa required the student to go to another school after graduation. However, students taking the “General Course” can find a job after graduation if they take and pass the Japanese Language Proficiency Test and the relevant technical proficiency test, and meet certain other requirements.
|(JPYmn)||1H Act.||2H Act.||FY Act.||1H Act.||2H Act.||FY Act.||1H Est.||2H Est.||FY Est.|
|Cost of revenue||20,121||20,193||40,314||22,119||21,667||43,786||47,227|
|Gross profit margin||22.1%||9.1%||16.1%||22.5%||10.6%||17.1%||17.6%|
|Operating profit margin||15.6%||1.4%||9.0%||16.3%||2.8%||10.1%||16.8%||2.4%||10.3%|
|Recurring profit margin||15.3%||1.3%||8.8%||16.2%||2.4%||9.9%||16.6%||2.1%||10.0%|
|Property Leasing and Management||44,933||49,519||53,773|
|Housing for Seniors||2,714||2,802||2,852|
|Operating profit margin||9.0%||10.1%||10.3%|
|Property Leasing and Management||5,464||6,643||7,162|
|Segment profit margin||12.2%||13.4%||13.3%|
|Housing for Seniors||306||354||371|
|Segment profit margin||11.3%||12.6%||13.0%|
|Segment profit margin||-||-||-|
For FY10/22, the company is projecting full-year consolidated revenue of JPY57.3bn (+8.5% YoY), operating profit of JPY5.9bn (+10.2% YoY), recurring profit of JPY5.7bn (+10.3% YoY), and net income of JPY3.8bn (+17.3% YoY).
The company projects a YoY revenue increase of 8.5%. In its core Property Leasing and Management segment, the company anticipates an increase in properties under management and expects that the segment's occupancy rate will remain high. Meanwhile, in its Housing for Seniors segment, the company projects growth in rental revenue and revenue associated with nursing care services stemming from an increase in its number of business locations. In addition, the company forecasts improvement in the business environment surrounding its Other segment thanks primarily to recovery in terms of human activity.
JSB forecasts a YoY operating profit increase of 10.2%. At the same time, it projects that OPM will rise to 10.3%, up 0.2pp YoY. It anticipates increases in properties under management within both the Property Leasing and Management and Housing for Seniors segments while also forecasting commensurate rises in rent payments, personnel expenses, and depreciation. On the other hand, JSB intends to continue striving to improve its operational efficiency and expects its OPM to grow. It predicts that recurring profit will grow at roughly the same YoY rate as operating profit.
The company plans to pay a year-end dividend of JPY36, up JPY1 from FY10/21.
The company forecasts revenue of JPY53.8bn (+8.6% YoY) and operating profit of JPY7.2bn (+7.8% YoY).
The company projects a revenue increase of 8.6% YoY. It also anticipates that units under management will grow by approximately 4,400 units YoY (up about 5.8% compared to April 30, 2021). Furthermore, it projects that its occupancy rate will remain high. At the beginning of FY10/21, forecasting impact from the COVID-19 pandemic was prohibitively difficult, but this impact is currently more predictable, and the company is avoiding overly cautious projections concerning occupancy rate. In view of the COVID-19 pandemic's progression, the company predicts that the efforts it has conducted to enhance its contactless sales activities (e.g., telephone and web-based negotiations and unaccompanied private property viewings for customers) will have a positive impact on results in FY10/22.
JSB projects that operating profit will increase 7.8% YoY and also projects OPM of 13.3%, roughly on par with the 13.4% reported in FY10/21. However, the company also forecasts that units under management will grow by approximately 4,400 units. If the ratios of company-owned (associated with relatively high profit margins) and leased properties rise by a wider margin than expected as a result of this growth, this rise could push up the company's projections for OPM. Moving forward, the company also intends to push forward with efforts aimed at improving its operational efficiency.
JSB projects that the following factors will contribute to a YoY operating profit increase of JPY520mn.
Increase in units under management and the maintaining of a high occupancy rate: upward impact of JPY960mn (increase in revenue - increase in cost of sales)
Increase in SG&A expenses: downward impact of JPY440mn
JSB forecasts revenue of JPY2.9bn (+1.8% YoY) and operating profit of JPY371mn (+4.9% YoY).
The company projects that segment revenue will grow 1.8% YoY while also forecasting increases in rental revenue and revenue associated with nursing care services. As of April 2021, the company reported 666 units under management and 14 properties within this segment (both level YoY). However, in FY10/22, the company will add Grand Maison Geihinkan Toyonaka-Toneyama (newly opened in October 2021) to this list of properties and may add additional properties as well.
JSB forecasts a YoY increase of 4.9% in segment operating profit while also projecting that segment OPM will rise 0.4pp to 13.0%. It expects that both rent payments and personnel expenses will rise along with its facility count, but it also plans to continue conducting efforts aimed at improving operational efficiency at existing facilities and reducing costs, which proved successful during FY10/21. Overall, the company forecasts that segment SG&A expenses will decline slightly thanks to these efforts.
The company projects that the following factors will contribute to a YoY operating profit increase of JPY17mn.
Increases in rental revenue and revenue associated with nursing care services: upward impact JPY14mn (increase in net sales - increase in cost of sales)
Decrease in SG&A expenses: JPY3mn
JSB projects JPY664mn in segment revenue (+42.3% YoY) and segment operating loss of JPY94mn (versus operating loss of JPY172mn in FY10/21).
Although the future extent of COVID-19-related impact remains uncertain, the company believes that the operating environments surrounding its Japanese language school business and other operations will improve thanks to overall recovery in human activity. In FY10/21, the company recorded impairment losses on goodwill and other assets related to Mewcket Inc., but these losses will decline in scale during FY10/22.
In December 2020, the company released its vision for 2030 dubbed “Grow Together 2030.” It has grown earnings by going beyond merely supplying residences to students and providing a space where they can live in safety and comfort. Under its new vision, JSB is expanding the educational content available under its student apartment brand, UniLife, and aims to provide an environment where students can launch businesses while studying and thrive after they join the workforce. This will promote students’ development and success in society while facilitating the resolution of societal issues and enhancing the value of the UniLife brand in the eyes of companies that recruit students. The company maintains that through this cycle, the brand will become admired by schools and students alike. JSB's ultimately aims to make UniLife a top global brand.
The company has divided "Grow Together 2030" into three periods (GT01, GT02, and GT03) and will pursue targets included within the plan by conducting the segment-specific measures indicated in the table below. During GT01, the company will focus on digital transformation while striving to increase units under management in its core Property Leasing and Management and Housing for Seniors segments. In GT02, the company plans to begin supporting student ventures, building a comprehensive service platform for students, establishing and managing various funds, providing HR services, and constructing an HR platform.
|GT01 (FY10/21 - FY10/23)||GT02 (FY10/24 - FY10/26)||GT03 (FY10/27 - FY10/30)|
|Student apartment(Property Leasing and Management)||Post-pandemic digital transformation: □Overseas market research□Strengthen collaboration with education institutions□Incorporation of AI robot tech||□New business model related to online class □Collaboration of humans and technology □Management of real estate investment fund, provide support for student ventures||□Collaboration with overseas branches on utilization of technology □ Rebuilding post-pandemic business model □Launch of student service platform □ Utilize food-technology to save manpower in restaurants |
|Housing for Seniors||□Promotion of online□ Support system for property owners on counseling of selling properties□Improve productivity by using health technology||□Launch Well-being project □Support operation of fund related to revitalize house vacancy □Examine potential for university related CCRC multi-generational communities ||□Combine GT01, GT02, build smart community □Examine potential for university related CCRC multi-generational communities |
|New businesses (Others)||□New service launch related to supporting youth□Launch HR business platform□Support foreign exchange students||□Start offering youth growth support business model □Offer HR service nationwide ||□ Build business model related to growth support of youth □Aim to be the top runner in HR platform business |
When the company first announced its medium-term business plan, it projected revenue of JPY62.0bn (+17.4% YoY), operating profit of JPY6.1bn (+13.8% year on year), recurring profit of JPY5.8bn (+12.3% YoY), and net income of JPY3.8bn (+17.0% YoY) for FY10/23, the final year of GT01 (FY10/2021–FY10/2023). It based these projections on the assumption that units under management in its Property Leasing and Management and Housing for Seniors segments would amount to 85,000 units in total as of April 2023 (+10.9% compared to April 2021).
At the time of its FY10/21 results announcement on December 14, 2021, the company raised its end-year targets under GT01, raising its FY10/23 target for consolidated revenues to JPY62.3bn (+17.9% versus FY10/21), its operating profit target to JPY6.7bn (+26.3%), its recurring profit target to JPY6.6bn (+26.1% versus FY10/21), and its target for net income to JPY4.4 (+34.0% versus FY10/21). The company said it had initially expected the overall occupancy rates for properties under its mainstay Property Leasing and Management business to slightly come down in the wake of the pandemic. However, since then the occupancy rates have consistently trended higher while it has been able to lower costs by more than expected thanks to improved operating efficiency. Based on these factors, the company reached the decision to raise its numerical projections for GT01.
As a broad strategy moving forward, the company will continue targeting earnings growth by increasing units under management in its core Property Leasing and Management and Housing for Seniors segments and raising value added to its properties. In addition, the company will pursue earnings growth in its Other segment primarily by providing youth development support services and HR services.
JSB projects that units under management in its Property Leasing and Management and Housing for Seniors will amount to 85,000 units in total in April 2023 (an increase of 11,850 units, or 16.2%, over the three years following 2020, when the projection was made). During the three years ended April 30, 2021, the company increased its units under management by 13,892 units, or 22.1%. Based on this reality, Shared Research believes that the company's projected increase of 11,850 units, or 16.2%, over the three years ending April 30, 2023 is achievable.
|(JPYmn)||Act.||Act.||Est.||Initial Est.||Revised plan|
|Property Leasing and Management||44,933||49,519||53,773||57,036||58,486|
|Housing for Seniors||2,714||2,802||2,852||3,234||3,015|
|Operating profit margin||9.0%||10.1%||10.3%||9.8%||10.8%|
|Property Leasing and Management||5,464||6,643||7,162||7,413||8,175|
|Segment profit margin||12.2%||13.4%||13.3%||13.0%||14.0%|
|Housing for Seniors||306||354||371||360||392|
|Segment profit margin||11.3%||12.6%||13.0%||11.1%||13.0%|
|Segment profit margin||-||-||-||6.4%||-|
|Recurring profit margin||8.8%||9.9%||10.0%||9.4%||10.5%|
In terms of other targets, the company projects ROE of at least 15% in FY10/23 (versus 16.1% in FY10/21) and ROIC of at least 8% (versus 10.5% in FY10/21). It predicts that its capital efficiency will decline slightly as it strategically promotes the development of new company-owned properties. JSB will certainly consider impact from its development and accumulation of company-owned properties, but at the same time, it also intends to maintain a proper balance between its sale of, and subsequent leasing activities associated with, these properties and its reinvestment of recovered funds. From a financial perspective, the company aims to achieve an equity ratio of 40% or higher (versus 46.0% in FY10/21) and a current ratio of at least 120% (versus 155.4% in FY10/21).
During GT01, JSB plans to invest JPY25.0bn in the development of company-owned properties. It had originally planned to spend JPY20.0bn on this objective but later raised this figure. The company's sole goal in developing company-owned properties is to increase its leased unit count. Basically, the company will utilize its unique expertise to develop properties primarily in strategic areas where it aims to increase its units under management and then, while monitoring relevant conditions, sell these properties to third parties, thereby generating opportunities to perform corresponding leasing activities. Through these efforts, the company will be able to increase its number of highly competitive leased units that it developed independently.
JSB also plans to invest JPY700mn in systems during GT01. It originally planned to spend JPY600mn on this objective, but later raised this figure as well. The company will use its system investment budget to facilitate digital transformation (DX), new business development, and infrastructure enhancement. For example, the company plans to promote digital transformation (DX) in its core Property Leasing and Management by implementing the following measures.
DX in apartment planning: The company plans to use sales force automation (SFA) systems to aggregate and use information to streamline the sales process while developing properties with equipped with real estate tech and properties with ZEB and ZEH specs.
DX in rental: Utilization of CRM and electronic contracting systems in customer interactions (achieving integrated customer management through their linkage), development of contactless customer service tools (forming of tools through which all processes spanning from room introduction to application procedures can be completed online), etc.
DX in maintenance: Adoption of apps for property owners, tenants, and personnel in charge of property patrols (improving customer support and procedural streamlining and facilitating cost reduction through the introduction of apps), etc.
JSB’s main business segments are the Property Leasing and Management (93.8% of revenue and 97.3% of operating profit in FY10/21 before eliminations and adjustments) and Housing for Seniors (5.3% of revenue and 5.2% of operating profit in FY10/21) segments.
|Property Leasing and Management||Proposes projects for student apartments to property owners, leases those properties upon completion, guarantees owners a fixed rental stream, and subleases apartments to students|
|Housing for Seniors||Proposes projects such as group housing or housing with services for the elderly, to property owners, leases those properties upon completion, and manages properties under contract|
|Property Leasing and Management||32,027||34,074||36,614||39,849||44,933||49,519|
|% of total||94.0%||93.5%||94.0%||93.4%||93.5%||93.8%|
|Housing for Seniors||1,671||1,671||1,849||2,320||2,714||2,802|
|% of total||4.9%||4.6%||4.7%||5.4%||5.6%||5.3%|
|% of total||1.1%||1.9%||1.2%||1.2%||0.9%||0.9%|
|Operating profit margin||6.4%||7.6%||7.6%||8.0%||9.0%||10.1%|
|Property Leasing and Management||3,805||4,098||4,231||4,440||5,464||6,643|
|Operating profit margin||11.9%||12.0%||11.6%||11.1%||12.2%||13.4%|
|Housing for Seniors||-236||147||108||154||306||354|
|Operating profit margin||-||8.8%||5.8%||6.6%||11.3%||12.6%|
|Operating profit margin||-||-||-||-||-||-|
In this segment, JSB provides property owners with construction and operating plans, leases the buildings from the owners upon completion (guaranteeing a stream of rental income to owners), and subleases units to students. The company earns revenue from rents, as well as agency fees, sales of ancillary products, and internet service provision fees. Most revenues come from subleasing; the company earns little for planning and construction. JSB offers separate services for planning, operating and renovating student dormitories.
JSB Network, a consolidated subsidiary, provides brokerage and tenant management services (rent invoicing, access control, security deposit settlement, and complaint handling) for buildings the company has leased and those it operates under management contracts.
As of April 2021, the company managed 75,946 student apartment units and reported a corresponding occupancy rate of 99.9%.
A typical student apartment is located near a university (or in an area that provides an easy commute) and is aimed at students who commute to a university, graduate school, or technical school. The tenant’s parents usually take out the tenant lease and pay rent, and the lease period is fixed (four years for a university student). Consequently, the company can predict when students will graduate and vacate the unit, and mid-contract cancellations or relocations are few. Shared Research understands that student apartments often offer better security than other rental condominiums, and neighboring occupants are also students. As a result, rents tend to be higher.
|Normal rental||Student apartment||Student dormitory||Student dormitories|
|Tenants||Occupation, gender, age not specified||Students only||Students only||Only students from that institution|
|Rent||Depends on location, size, furnishings, and building age||Depends on location, size, furnishings, and building age (tends to be higher due to extra security equipment)||Cheaper than condominiums and apartments||Cheaper than condominiums and apartments|
|Security||Varies by property||Varies by property, but often extensive to alleviate parents’ concerns||Manager on duty||Manager on duty|
|Other||Set curfews and mealtimes||Set curfews and mealtimes|
A typical student apartment the company rents out is 25sqm, with a main room, bath, toilet, and kitchen. Rents vary depending on area, but average around JPY64,000 for the Tokyo metropolitan area and around JPY54,000 nationwide. The company explains that apartment sizes and furnishings reflect surveys of existing tenants and the results of marketing to prospective tenants.
Facilities often include automatic locks, a separate vanity, a toilet with warm-water bidet, a bathroom dryer-function, and a kitchen with a two-burner stove. To reduce crime, main building entrances are fitted with automatic locks, and entrances to individual units employ dimple keys or security-code access to prevent key duplication or unauthorized entry. Security cameras are in place to monitor common areas. Entry monitors allow tenants to see visitors before allowing them inside, and cameras monitor the property entrance and parking lot. JSB has agreements in place with security companies. If a tenant discovers something amiss in the building, the tenant can push an emergency button in the common area to sound an alarm. The control center at the security company can check on the situation through video and voice calls. If necessary, a security guard can be dispatched to the location at any time.
The company says it is working to make properties more competitive long-term. Efforts include designing furnished rooms according to certain themes, fitting units with certain consumer appliances and daily necessities, and providing on-site dining facilities with menus supervised by registered dietitians. JSB says student properties have advantages for students (safe and easy to live in), their parents (peace of mind), and property owners (high asset value).
Shared Research thinks demand for student apartments will remain solid, despite a moderate decline in student numbers due to more spending on education per student as Japan’s birth rate falls. Despite a falling number of 18–24-year-olds, the main age group for university and graduate school students, a higher percentage of this demographic is moving on to higher education. (See the “Market and value chain” section.) As parents have fewer children, they tend to spend more to educate each child and prioritize the safety and security of student housing.
JSB leases apartment buildings from owners and subleases them to students. The property owners may be individuals or development companies. Alternatively, properties may have been acquired by JSB.
When an owner leases a property to JSB, the company guarantees the owner a fixed income stream, regardless of occupancy rates. Shared Research estimates that the company pays the real estate owner around 90% of the total rental revenue from a fully occupied building. JSB says student apartments provide owners a gross yield of about 8%, and a net yield of 5–6%. Furthermore, constructing a building on vacant land earns the property owner breaks on property and city planning taxes, as well as inheritance taxes.
Property and city planning taxes on land and buildings are based on assessed value. Property taxes are levied at 1.4% of the assessed value and city planning taxes at 0.3%. (Tax rates vary by municipality.)
Assessed value forms the basis for property taxes calculated by the municipality. This value is benchmarked at 70% of the official land prices published once a year by the MLIT.
Land taxes are reduced if a residential property is built on the land. For example, for residences under 200sqm (per unit), property taxes are reduced to 1/6 and city planning taxes to 1/3, and for residences over 200sqm, property taxes (per unit) are reduced to 1/3 and city planning taxes to 2/3 their original level. For newly built residences, property taxes are reduced to 1/2 for the residential portion up to 120sqm (five years for condominiums and other fire-resistant /semi-fire-resistant buildings of more than three stories) for three years from the first year the taxes apply.
Example of reduced property taxes
Property tax on vacant land (area: 150sqm, assessed value: JPY40mn)
Property tax on land: JPY40mn x 1.4% = JPY560,000
Property tax on residential building (floor space: 120sqm, assessed value: JPY10mn) constructed on vacant land (area: 150sqm, assessed value: JPY40mn)
Property tax on land: JPY40mn x 1.4% x 1/6 = JPY93,000
Property tax on building: JPY10mn x 1.4% x 1/2 = JPY70,000 (during tax-break period), JPY10mn x 1.4% = JPY140,000 (after tax-break period)
Inheritance tax is calculated by multiplying the value of total assets after basic deductions by the tax rate. Basic deductions were reduced in 2015 from JPY50mn + JPY10mn x number of legal heirs to JPY30mn + JPY6mn x number of legal heirs.
Inheritance tax rates are progressive, increasing in line with how much the legal heir receives: 10% up to JPY10mn, 30% up to JPY100mn, and 55% for amounts over JPY600mn.
The inheritance is the value of assets left after subtracting liabilities, such as loan debt. Financial assets are counted at 100% of face value, but land is valued at around 80% of the purchase price. Furthermore, the assessed value of land is reduced by around 20% when an apartment or condominium is built on it. For inheritance tax calculations, the assessed value of the building is based on the property tax assessed value, which is lower than the construction cost, and may be reduced further depending on the leasehold interest.
There are two methods of assessing land values in inheritance tax calculations: a market value-based approach in urban areas and a simple multiple in other areas. In either case, the result is around 80% of official land prices.
Market value-based (roadside) approach: The land area is multiplied by the value of land along the roadside the land adjoins. Market values are assessed values of residential land per sqm, and are calculated based on official land prices determined by the National Tax Agency, values assessed by real estate appraisers, and actual transaction prices. Values are benchmarked at roughly 80% of the official land values published by the MLIT.
The second approach is used where land does not have a fixed market price. This applies a fixed percentage to the assessed value of the land according to the area and type of land. Shared Research understands that a multiple of 1.1x is typical, and as the assessed value for property tax purposes is benchmarked at 70% of the official land price, the assessed value is roughly 80% of the official price under this method as well.
Other conditions apply when a building is constructed on the land and the owner leases it out. This scenario counts as a residential lot with rental housing, which reduces the assessment by around 20%. (Strictly speaking, the amount is reduced by the proportion leased [varies by region but usually 60–70%], multiplied by the leasehold interest [30%]).
The property tax value is used for the assessed value of a building for inheritance tax purposes. The assessed value of the building for property tax is based on the estimated cost of rebuilding, which Shared Research understands is 50–70% of construction costs. When a building is leased, a further 30% of the leasehold interest is deducted from the value for property tax purposes. Therefore, when a building is constructed using borrowed funds, some 51–65% of construction costs can be deducted from the inheritance.
Example of assessed value reduction for inheritance tax
In an open-air parking lot that has an assessed value for inheritance tax purposes of JPY50mn, borrowing JPY50mn to build a JPY50mn apartment building (assessed value for property taxes: JPY30mn)
Before apartment construction
Assessed value for inheritance tax: JPY50mn
After apartment construction
1) Assessed value of land for inheritance tax: JPY50mn x (1 – leasehold proportion [60%] x leasehold interest [30%]) = JPY41mn
2) Assessed value of building for inheritance tax: assessed value for property taxes JPY30mn x (1 – leasehold proportion (30%)) = JPY21mn
3) Increase in borrowings: JPY50mn
Assessed value for inheritance tax: 1+2–3 = JPY12mn
JSB offers plans for student apartments to owners of land near universities or near stations in commuting distance of universities. The company obtains referrals, which account for 70% of the agreements it receives, from its suppliers (construction companies, architecture firms, and homebuilders), through inquiries from existing customers regarding new projects, or from friends or acquaintances of property owners. The company also gets referrals from partner financial institutions and accountants and conducts its own market research.
Two types of contract exist between the company and property owners: fixed rent contracts (for leased properties) and outsourcing contracts (for properties under management). As of April 2021, 41,317 units were under fixed rent contracts (+7.1% YoY) and 31,167 units were under outsourcing contracts (+0.3% YoY). The company also owned 3,462 units (+22.3% YoY).
|Units under management||56,037||59,685||62,183||66,064||72,484||75,946|
|% of total||48.8%||49.8%||50.8%||52.1%||53.2%||54.4%|
|% of total||48.2%||47.1%||46.0%||44.3%||42.9%||41.0%|
|% of total||2.9%||3.1%||3.3%||3.6%||3.9%||4.6%|
Under these agreements, the company leases a property, guarantees the owner a fixed rental stream, and subleases apartments to students.
The company receives rent from students and pays a fixed monthly amount (guaranteed rent) to the property owner regardless of occupancy rates. Rent multiplied by occupancy rates is the company’s revenue, while guaranteed rents are costs. Generally, contract periods are 10 years, and rents remain fixed for a predetermined period of time, after which they are renewed every two to three years.
Under outsourcing contracts, property owners directly sign leases with lessees. Under these agreements, JSB receives management fees from the property owner in return for providing such services as building maintenance, tenant management, and rent collection.
The company builds student apartments on land it owns or leases, and then operates the units. With respect to developing company owned units, the company selects potential sites by conducting its own market research and by turning to partner financial institutions and other facilitators. Before making investment decisions, the company’s internal investment committee looks into respective investment opportunities which involves scrutinizing potential profitability on the basis of factors such as the presence of schools located nearby potential sites of development, as well as occupancy rates and rents of student apartments in such vicinities.
As with fixed rent contracts, the company’s revenue is rent multiplied by occupancy rates. However, as JSB owns the properties and thus pays no rent, costs are limited to building ownership costs and depreciation.
The company looks to eventually sell its properties once it learns how to manage them. It then aims to put the funds it recovers from property sales to use in new development of its own properties, increasing capital efficiency.
|Uni E'meal Niigata Daigaku Mae||Niigata|
|College House Fuso||Tokyo|
|Uni E'meal Meidaimae Global House||Tokyo|
|Karasumaoike Medical Mall||Kyoto|
|Uni E'meal Kyototakano||Kyoto|
|Uni E'meal Kyoto Fushimi||Kyoto|
|Uni E'terna Kusatsunoji||Shiga|
|Uni E'meal Kanazawa Kodai Mae III||Ishikawa|
|Uni E'terna Tokushima Sumiyoshi||Tokushima|
In addition to planning and managing student apartments, the company recruits tenants, brokers units, maintains buildings, manages tenants, and provides rental guarantees.
JSB Network, a consolidated subsidiary, recruits tenants. This company has 82 branches nationwide. Under typical agreements, multiple companies may act as agents for a single property. However, JSB often acts as the exclusive tenant recruiter for an entire property.
The company mostly manages student apartments, which enables it to predict tenant exit timing (graduation). Students benefit from being able to reserve a room ahead of time, even before it is vacant.
The company says its relationships with universities and university co-ops allow it to recruit tenants though routes unavailable to other companies.
The company has agreements in place with around 1,000 of Japan’s universities and other educational institutions, introducing student apartments and holding on-campus accommodation seminars for new students.
The company has business alliances with two of the business associations in the National Federation of University Co-operative Associations (the Kansai-Hokuriku, Kyushu, Hokkaido, Tokai, Chugoku-Shikoku, Tokyo, and Tohoku associations). These associations cooperate in development, construction, and tenant placement/management for student-only rental properties. The company uses associations’ survey data on student lifestyles to jointly produce tenant recruitment pamphlets.
University co-ops use funds from their members (undergraduate and graduate students, university lecturers, university employees, and co-op employees) to provide on-campus services such as procurement, book sales, and cafeteria operations. Japan has seven regional business associations, which run based on joint investments from individual university co-ops and officers seconded from the institutions.
As a specialist in student apartments, the company:
Places pamphlets at roughly 3,000 high schools nationwide,
Distributes pamphlets at university entrance exam sites,
Distributes pamphlets at campus open houses and schools with admissions office/referral entrance exams or areas near schools frequented by students,
Partners with around 1,000 universities and other educational institutions nationwide and helps with promotions,
Holds summer events to celebrate university admissions for high school students and currently enrolled students,
Inserts pamphlets in partner schools’ admission notices and offers room tours during campus open houses, and
Holds lectures at high schools on living alone.
To meet tenant demands and distinguish itself from other companies, JSB:
Accepts room reservations from prospective students as they await entrance exam results,
Allows double applications (when a student has been accepted at and contracted for a room near their second-choice school, also reserving a room near their first-choice school while waiting to learn whether they have been accepted), and
Uses a “sliding” system. (When a student decides to attend a school other than one they had initially been accepted to and has already contracted a room nearby, the student can apply the contract money from the previous contract toward the new property.)
The company publishes the Apartment Yearbook for Students (Digest version: Living Alone Guidebook), an advertising medium to recruit tenants. The publication series list all properties nationwide that JSB manages and for which it is the agent. Around 1.6mn copies are printed annually and distributed to 3,000 high schools and about 1,000 universities, two-year colleges, technical schools, and prep schools across Japan. They are also distributed at entrance exam locations and directly to students taking exams at halls where the company promotes its services.
Building maintenance includes cleaning, facility management, and minor repairs. Tenant management comprises rent invoicing, management of tenant access, settlement of guarantee deposits, and complaint handling. The company signs agreements with property owners to provide these services, which it subcontracts to JSB Network.
Living Network Service, a subsidiary, provides rent guarantee services (acts as a guarantor), mainly to tenants of student apartments.
The company proposes group housing and serviced housing for seniors as a way for property owners to utilize their land. Once buildings are completed, JSB operates properties under management agreements. Tenancy is limited to seniors, and facilities are adapted to their needs (including wheelchair accessibility). The company also offers support services, such as safety checks and lifestyle consultation. Group housing specializes in shared living accommodation for seniors with cognitive impairment. Residents share housework to help them remain settled and slow the progress of dementia symptoms.
For properties under management, the company leases entire buildings from owners and subleases them to tenants. As of end-April 2021, JSB operated and managed 666 of these units at 14 properties (roughly level YoY). The occupancy rate at stabilized properties, i.e., those that have been in operation for more than a year or those acquired through M&A more than a year ago, was 94.1% (+0.3pp YoY), while the occupancy rate for all properties was 94.1% (+2.4pp YoY).
The company’s serviced housing for seniors includes on-site nursing care facilities. Grand Unilife Care Service, a subsidiary with operations in northern Japan, Tokyo, Kansai, and Kyushu, provides nursing care services (in-home nursing, day care, home nursing support, and regular patrols and occasional in-home nursing). The company also offers nursing care services to nearby residents, as well as at residences it operates.
JSB operates residences for seniors aged 60 or older, with living space of around 25sqm and a bath, toilet, and kitchen. Monthly fees are about JPY150,000–200,000 (covering rent, service support, and meals).
Government support for constructing serviced residences for seniors is available in the form of subsidies, tax incentives, and financing arrangements, which benefit property owners.
Property owners receive subsidies from the MLIT’s secretariat to provide serviced residences for seniors. Business operators receive 1/10 of construction costs for new buildings, and 1/3 of construction costs for renovations.
Tax benefits include accelerated depreciation (10–14%), which lowers profit and allows savings on income tax and corporate tax. Property taxes are also reduced on serviced residences for seniors, by between 1/2 and 5/6 depending on rates set by individual municipalities.
Financing schemes from the Japan Housing Finance Agency provide favorable interest rates and funds for the construction and renovation of serviced residences for seniors. Under these arrangements, property owners can borrow at fixed rates for long periods (up to 35 years) and can borrow the entire amount for a project.
The main revenue streams in Property Leasing and Management are guaranteed property revenue (70.9% of segment revenue in FY10/21), rental revenue from owned properties (5.4%), and property management revenue (3.8%). The company also receives revenue from maintenance, internet-related charges, and student insurance policies (comprehensive coverage that pays benefits if a student is injured or involved in an accident). Rental brokerage and renewal fees each account for around 1% of revenue.
|Guaranteed property revenue||22,982||23,828||25,286||27,148||30,044||32,452||35,132|
|% of total||75.0%||74.4%||74.2%||74.1%||75.4%||72.2%||70.9%|
|Property management revenue||1,620||1,688||1,725||1,799||1,871||1,866||1,873|
|% of total||5.3%||5.3%||5.1%||4.9%||4.7%||4.2%||3.8%|
|Revenue from owned properties||1,058||1,334||1,573||1,702||1,998||2,192||2,652|
|% of total||3.5%||4.2%||4.6%||4.6%||5.0%||4.9%||5.4%|
|General maintenance revenue||824||886||788||940||854||937||1,174|
|% of total||2.7%||2.8%||2.3%||2.6%||2.1%||2.1%||2.4%|
|Post-departure maintenance revenue||974||932||977||1,044||1,105||1,320||1,432|
|% of total||3.2%||2.9%||2.9%||2.9%||2.8%||2.9%||2.9%|
|% of total||2.5%||2.6%||2.7%||2.7%||2.8%||2.7%||2.7%|
|Revenue from student compensation schemes||612||653||702||764||838||931||1,038|
|% of total||2.0%||2.0%||2.1%||2.1%||2.1%||2.1%||2.1%|
Guaranteed property revenue is rent revenue received by the company from residents in fixed-rent student apartments (leased properties). This revenue depends on the number of rental units under management, occupancy rates, and annual rent per unit. In FY10/21, JSB managed 41,317 units (as of end-April 2021, +7.1% YoY), the occupancy rate was 99.9% (as of end-April 2021; reference figure including impact from company-owned properties), and annual estimated rent per unit was about JPY882,000 (Shared Research estimated annual rent as: guaranteed property revenue ÷ occupancy rate ÷ average number of units for rent [at the beginning and end of fiscal year]).
The number of rental properties increases along with growth in the number of buildings leased and units subleased, and annual rents depend on the local rental market and the company’s own initiatives. JSB says that through FY10/13 it prioritized growth in the number of units under management and offered widespread rent discounts, which lowered margins in the student apartment subleasing business. It says it has raised margins in this business since FY10/14 by revising rents and adopting a no-discount policy.
|Guaranteed property revenue (JPYmn)||22,982||23,828||25,286||27,148||30,044||32,452||35,132|
|Number of leased properties (units)||26,586||27,371||29,694||31,569||34,438||38,590||41,317|
|Average annual rent (JPY'000)||878||884||887||887||911||890||881|
Property management revenue refers to revenue derived from the management of student apartments (properties under management). The amount depends on the number of properties under management and annual management revenue per unit. In FY10/21, the company had 31,167 units under management (at end-April 2021; +0.3% YoY), and annual management revenue was about JPY60,000 per unit (annual property management revenue per unit calculated as: annual management revenue ÷ average number of units under management [at the beginning and end of fiscal year]).
Revenue from owned properties comes from student apartments JSB owns. As with guaranteed property revenue, the amount depends on the number of properties owned, occupancy rates, and annual rent per unit. In FY10/21, JSB owned 3,462 units (at end-April 2021; +22.3% YoY), the occupancy rate was 99.9% (at end-April 2021; reference figure including impact from leased properties), and annual rent per unit was about JPY844,000 (annual rent calculated as: rental revenue from owned buildings ÷ occupancy rate ÷ average number of units owned [at the beginning and end of fiscal year]).
Maintenance revenue includes general maintenance revenue (repairs and cleaning during occupancy) and revenue received for repairs when a unit is vacated. These revenues vary in line with units under management.
Internet-related revenue comes from the fiber-optic internet service (UniLife-net Hikari) JSB provides tenants (JPY2,980 per month). Shared Research estimates that over 40% of tenants use this service. Internet-related revenue depends on the number of units under management and subscription rates.
Student compensation scheme revenue comes from sales of insurance policies covering a suite of services the company offers. These include coverage for a 24-hour support service, 24-hour medical service, damage compensation, and injury compensation. This revenue depends on the number of units under management and subscription rates.
The main costs in the Property Leasing and Management business are guaranteed property costs, property management costs, property ownership costs, and depreciation. Other costs include those associated with maintenance, internet, and student insurance.
|Cost of guaranteed properties and property management||20,718||21,126||22,041||23,322||25,461||27,604||29,946|
|% of rent (subleasing) and management revenues||84.2%||82.8%||81.6%||80.6%||79.8%||80.4%||80.9%|
|Cost of owned properties||194||272||249||272||406||281||342|
|% of revenue from owned properties||18.3%||20.4%||15.8%||16.0%||20.3%||12.8%||12.9%|
|% of revenue from owned properties||49.9%||39.9%||34.9%||33.2%||31.5%||33.2%||32.8%|
|Cost of outsourcing general maintenance||721||819||762||926||833||959||1,130|
|% of general maintenance revenue||87.5%||92.5%||96.7%||98.5%||97.5%||102.3%||96.3%|
|Cost of outsourcing post-departure maintenance||602||579||647||725||840||987||1,047|
|% of post-departure maintenance revenue||61.8%||62.1%||66.2%||69.4%||76.1%||74.8%||73.1%|
|% of internet-related charges||47.9%||48.1%||45.7%||42.9%||40.9%||39.4%||39.0%|
|Cost of student compensation schemes||149||155||138||141||217||228||261|
|% of student compensation scheme revenue||24.3%||23.8%||19.7%||18.4%||25.9%||24.5%||25.2%|
Guaranteed property costs are fixed rents paid to property owners on leased properties by the company regardless of occupancy rates. These expenses depend on the number of properties leased and annual rent paid per unit. Generally, contracts between the company and property owners are 10 years in length, and associated rents remain unchanged for a predetermined period of time, after which they are usually reviewed every two to three years.
In FY10/21, the cost of revenue ratio for guaranteed properties (guaranteed property costs ÷ guaranteed property revenue) was 80.9% (+0.5pp YoY). According to the company, costs had been declining since FY10/14 due to its revision of rents and its avoidance of discounts.
This is the cost of providing management services in managed student apartments under contract.
Property ownership costs and depreciation apply to student apartment properties the company owns.
Expenses tied to maintenance, the internet, and student insurance are incurred when earning maintenance revenue, internet-related revenue, and revenue on student insurance.
SG&A expenses comprise mainly personnel, directors’ compensation, taxes and dues, and commission fees.
|% of total||48.3%||45.7%||46.4%||47.2%||44.8%||41.5%||39.3%|
|Directors' compensations, Stock compensation expense and provision for directors' bonuses||138||231||247||138||174||226||387|
|% of total||5.8%||8.9%||8.7%||4.6%||5.7%||6.6%||10.6%|
|Taxes and dues||216||275||311||332||366||455||553|
|% of total||9.1%||10.6%||10.9%||11.1%||11.9%||13.4%||15.1%|
|% of total||7.5%||8.3%||7.0%||10.2%||11.4%||9.7%||9.2%|
As of October 2021, the company had 1,093 employees on a consolidated basis (1,056 in FY10/20), of whom 789 were in the Property Leasing and Management business (763). Many of the latter figure are employed at branches: around 70% of employees work at subsidiary JSB Network. Under its medium-term plan, JSB plans to increase the number of branches and personnel in this business.
As of October 2021, the Housing for Seniors business had 191 employees (191 in FY10/20). Most provided nursing care services for tenants in senior housing and group homes (in-home nursing, day care, and home nursing support). Employee count tends to increase in line with the number of properties under management.
High occupancy rates due to specialization in subleasing student apartments: The company has maintained high occupancy rates (99.9% as of end-April 2021) by renting to students and building secure properties in locations convenient for commuting to school. The Property Leasing and Management segment’s operating profit margin was 13.4% (FY10/21). This is higher than the 6.2% margin in the property business segment of Daito Trust Construction (FY03/21), the largest company in the industry, and the 7.8% (FY01/21 generated by Sekisui House’s real estate management fees business segment.
Relationships with universities and university co-ops: The company says its relationships with universities and university co-ops enable it to recruit tenants in ways not available to peers. JSB has agency agreements on student apartments with roughly 1,000 of Japan’s universities and other educational institutions. The company inserts pamphlets into university admission notifications, holds room tours on university open house days, and runs on-campus housing seminars for new students. JSB publishes tenant recruitment brochures jointly with university co-op federation members nationwide, using student lifestyle survey data. The company says its ties with universities and co-ops are based on its track record in developing and operating student apartments since establishment, as well as in the joint development and operation of student dormitories and residences. JSB thinks it would be difficult for other companies to build similar relationships from scratch.
Stable growth due to accumulated contracts: In the company’s student apartment business, annual turnover is just 25%. The company has measures in place to attract new tenants to replace those leaving and thus maintain high occupancy rates. Contracts with property owners are long-term, and property owners rarely cancel contracts. The number of new units under management relates to the size and experience of the company’s sales force, so rapid growth is difficult. Still, JSB’s system generates steady growth at a CAGR of 5–10%.
Limited scope for market growth in core student apartment business in the long term: In FY10/21, the company’s core Property Leasing and Management business accounted for over 90% of revenue and operating profit. According to the company’s own estimates based on demand, JSB managed just 3.5% of all units occupied by students in 2019, so Shared Research believes the company has room to grow market share in the medium term. However, in the long term, Japan’s birth rate is declining, reducing the population of 18-year-olds. Even though more students are opting for higher education, we see little scope for overall student count to increase. Shared Research thinks the count will probably decline gradually. (See the “Market and value chain” section.)
In Housing for Seniors, limited track record, lack of uniqueness, and few synergies with the core business: With little scope for long-term market growth in the core business, JSB aims to drive growth by diversifying into Housing for Seniors. However, as of FY10/21 this business accounted for only 6.6% of operating profit. Shared Research understands that the company’s expertise and relationships differentiate it in the student apartment business. In the Housing for Seniors business, however, the company’s track record is relatively short, its offerings are not unique, and synergies with the core business are few.
Impact on the industry in terms of overall management of residential rental properties is limited: By number of units under management, the company is a leader in student apartments, but ranks 18th in overall residential rental management. (Daito Trust Construction, the largest, managed 1.2mn units [FY03/20], compared with JSB’s 76,000 [FY10/21].) Because students can also choose ordinary one-room studio apartments, JSB competes with all one-room rental accommodation. Because of its size and relative ranking, JSB cannot be a price leader, so Shared Research thinks the company is influenced by larger companies’ pricing strategies.
The JSB group comprises the company and ten subsidiaries (figures in parentheses indicate share of ownership).
Tenant agency and tenant management services for JSB group student apartments
Building maintenance under contract
Liability guarantees for tenants of the company’s student apartments
Outsourced recruitment services
Nursing care services
Planning, management, and operation of student rental apartments
Consulting in vocational abilities and skills development
Human resources platform for AI professionals
The target market is students about to start living independently and commuting to university after graduating from high school. The main variables are the 18-year-old population, rates of advancement to university, and the percentage of students who live away from home.
The population of the company’s key customer base, university undergraduate and graduate students aged 18–24, is declining due to Japan’s falling birth rate.
In the first post-World War II baby boom, from 1947 to 1949, Japan had more than 2.5mn births per annum. The second baby boom, from 1971 until 1974, when the baby boomers’ offspring were of childbearing age, saw over 2mn births per annum. Numbers have declined consistently since then, and in 2020, the number fell to 841,000 (-2.8% YoY).
The number of children a woman will bear over her lifetime (total fertility rate) has been in a long-term downtrend since peaking at 4.54 in 1947. However, the figure has risen gradually after bottoming out at 1.26 in 2005, with the total fertility rate reaching 1.34 in 2020 (-0.02 YoY).
|Number of births (mn)||1.73||1.61||1.82||1.93||1.90||1.58||1.43||1.22||1.19||1.19||1.06||1.07||1.01||0.84|
|Total fertility rate||2.37||2.00||2.14||2.13||1.91||1.75||1.76||1.54||1.42||1.36||1.26||1.39||1.45||1.34|
The population of 18-year-olds was over 2mn in the early 1990s, due to the second baby-boomer generation. Since then, the figure has declined to 1.17mn in 2020 (-0.6% YoY) and to 1.14mn in 2021 (-2.2% YoY).
As the previous figure shows, the number of births declined sharply from the late 1970s until the late 1980s before the pace of decline leveled off in the 1990s. As the population of 18-year-olds lags the number of births, the population of 18-year-olds fell sharply from the late 1990s through the late 2000s, before the slowing in the 2010s.
Despite a declining population of 18-year-olds, the number of university students has not fallen substantially.
The university advancement rate was below 30% until the early 1990s, but climbed continuously in the 1990s and the 2000s, before flattening out in the 2010s, although it reached 54.4% in 2020 and an all-time high of 54.9% in 2021. Driving the climb is the education-based wage gap and an increasing number of universities. The university advancement rate is over 70% in the US and more than 60% in the UK, suggesting ample opportunity for further increase in Japan's advancement rate.
|University advancement rate||24.6%||32.1%||39.7%||44.2%||50.9%||51.5%||54.9%|
According to the Basic Survey on Wage Structure by the MHLW, the wage gap between university and high school graduates widens from age 30 onward. Shared Research estimates that the lifetime wage gap between the two groups is around JPY70mn. Considering that national universities charge around JPY500,000 in annual fees and private universities around JPY1mn, a university education offers an attractive return on investment.
|Junior high school||222.8||247.2||273.6||302.0||310.8||322.6||322.1||325.2||256.4||230.7|
As stated above, despite an ongoing decline in the population of 18-year-olds, the percentage of students in Japan who go on to higher education continues to rise, and the number of university students in Japan has accordingly not declined to a significant extent.
University students numbered 2.74mn in 2000, up 20% from 2.13mn in 1990. This growth slowed subsequently, due to a decreasing 18-year-old population and a decelerating advancement rate. In 2020, there were roughly 2.92mn university students (including graduate students), down 0.1% YoY, and in 2021, this figure essentially remained level at roughly 2.92mn (+0.1% YoY). Including two-year colleges and technical schools, the 2020 figure was about 3.08mn students (-0.3% YoY) and the 2021 figure was roughly level at approximately 3.08mn students (-0.1% YoY).
|No. of university students||2.13||2.55||2.74||2.87||2.89||2.86||2.92|
Student living arrangements have been changing. Until the 1980s, most students living away from home lived either in dormitories providing meals or in apartments. In the 1990s and 2000s, the share of dormitories and two- or three-story wooden apartments declined, and that of high-rise condominiums increased. Students nowadays are accustomed to having their own room, so tend to prefer the privacy offered by condominiums over dormitories or shared apartments. Properties with individual baths and toilets and with air-conditioning are now mainstream. JSB says an increased awareness of crime has led to greater demand for security from students and their parents.
From the 1980s to the 2000s, expenditure patterns show that students curtailed spending on meals but spent more on accommodation. From the 2010s, meal spending trended upward while outlays on accommodation abated slightly.
According to the “Loans and Bills Discounted by Sector” published by the Bank of Japan, new loans by domestic banks, credit unions, and other financial institutions to rental housing business run by individuals have been trending downward since 2017, reaching JPY2.9tn in 2020 (-14.2% YoY). On the other hand, according to JSB the lending stance of financial institutions toward the owners of properties it manages has remained positive. Shared Research believes that this is because the company is restrained in booking upfront profits from construction and design work done for planned projects, but instead has an arrangement with property owners that benefits both sides long term.
|New loans for fixed investment||2,916||2,885||3,269||3,687||3,755||4,294||5,148||4,548||3,877||3,367||2,889|
Other companies operating student apartments include National Students Information Center (not listed, a subsidiary of Tokyu Fudosan Holdings Corporation), Mainichi Comnet (TSE Standard: 8908), and Kyoritsu Maintenance (TSE Prime: 9616).
|Sinanen||National Students Information Center||Mainichi Comnet||Kyoritsu Maintenance|
|Segment profit (JPYmn)||6,643||-||2,394||-|
Although they do not specialize in student housing, Daito Trust Construction (TSE Prime: 1878) and Sekisui House (TSE Prime: 1928) provide property management services after the development and construction of a building are completed.
Established in Kyoto in 1975, National Students Information Center became a consolidated subsidiary of Tokyu Fudosan Holdings group in November 2016. According to JSB, student apartment management and operation is a core business for National Students Information Center. Managing 48,200 units, this company ranks second in the industry after JSB. FY03/21 revenue was JPY16.8bn.
Established in 1979, Mainichi Comnet got its start as a travel business specializing in training camps for university students in the Tokyo metropolitan area. In 1994, it launched a student apartment business. This business comprises real estate solutions, where it develops and manages rental accommodation for students in the greater Tokyo area, and student lifestyle solutions, where it arranges extracurricular activities. In FY05/21, the company managed 10,975 units (+3.0% YoY) with an occupancy rate of 100%.
|Gross profit margin||33.1%||31.8%||33.1%||33.1%||29.1%|