Overview of Intertechs <8940> Business.

(2) Solution Business Field

The Solution Business Field includes the development, sales, rental, management, brokerage of other income-generating real estate (1 building, land, etc.), as well as the development and sales of newly-built condominiums, leaseback business, asset sharing business, and hotel business, etc.

a) Leaseback Business

Leaseback business is a service where Intertechs purchases the real estate property (residence, residential cum commercial building, 1 building, etc.) owned by the user, simultaneously enters into a new fixed-term building lease contract (2 years), and rents (leases) it. When the contract period is reached, the user has the option to either renew the contract and continue living, move out, or repurchase the property. In recent years, the market has been expanding as people require a large amount of funds for inheritance tax, retirement funds, loan repayment, etc., and they can continue living by selling their owned real estate.

In terms of revenue, both the contract fee at the time of property acquisition and the monthly rental income received, as well as the sales revenue when the property is sold, are recorded, resulting in a hybrid business model combining stock revenue and flow revenue. In terms of expenses, in addition to the acquisition tax and registration fees at the time of property acquisition, depreciation costs are also recorded. Therefore, the costs are incurred upfront for a certain period of time after the property acquisition, but the profit margin becomes higher as depreciation progresses at the time of property sale. In some cases, sales are handled individually, but by consolidating multiple properties into real estate investment trusts (REITs), they can improve fund efficiency.

The leaseback business was initiated by And Do Holdings <3457> in 2013, ahead of the industry, and now more companies, including finance companies, have entered the market. Therefore, the company's strategy is to expand its business by strengthening collaboration with major real estate companies (such as Century 21 Japan <8898>) and expanding procurement and sales routes.

b) Asset Sharing Business

The asset sharing business refers to the sales of real estate fractionalization products using the utilization of the 'voluntary association' within the Act on Specific Joint Ventures for Real Estate (commonly known as the Special Act). The features of the product are the ability to acquire high-quality real estate properties, whether new or used, in units of 1 million yen per share by shared ownership among multiple investors, the ability to diversify vacancy and delinquency risks through shared ownership and expect stable income, and the significant reduction of asset valuation for inheritance and gifting purposes.

The management of real estate properties is mainly carried out by Intelix Property Co., Ltd., a subsidiary. As a group, in addition to the income flow from sales through fractionalization, the chairman's fees of the voluntary association and stock income through property management can also be obtained. As a guideline for investors' expected yield, it is planned to structure the products with a distribution expected yield of 3% or more after deducting actual expenses (management fees, etc.) from the annual income divided by the investment amount.

* Annual income after deducting actual expenses (management fees, etc.) from rental income ÷ investment amount.

Although there are already leading companies in the same business, such as Aoyama Asset Networks <8929> and FPG <7148>, the company's strength lies in leveraging the network and know-how it has built as a real estate agent to develop a wide range of products, from new and used properties to residential and commercial properties. Sales channels include seminars, the company's website, professional routes such as tax accountants, various channels such as financial institutions.

(Written by FISCO guest analyst, Jo Sato)