Haseko - Company History

An Itochu apartment order, and the plant bought to build in fireproof concrete

In February 1937[1] Hasegawa Takehiko (長谷川武彦) started Hasegawa Komuten as a sole proprietorship in Amagasaki, Hyogo Prefecture[2]. The business set out as a contractor for timber buildings; in August 1946, alongside the opening of a Kobe branch office, it was reorganised as a joint-stock company[3] with capital of ¥195,000, its head office in Himeji[4]. An Osaka branch office followed that September[5], and in May 1949 the firm was registered with the Minister of Construction under the newly enacted Construction Business Act[6]. In February 1951 it opened a Tokyo branch office and moved into the Kanto region[7]. In August 1953 the head office was moved from Himeji to the site of the former Osaka branch office[8], and capital was raised to $27,778 (¥10m)[9].

What changed the character of the business was the Ashiya Uchide-so apartment block, ordered in 1950 by Itochu Corporation[10]. This reinforced-concrete job[11] prompted the firm to build up the plant and machinery needed for fireproof construction[12]. Capital was increased to $138,889 (¥50m) in August 1956[13], and in August 1957 the company completed its Osaka Head Office No. 1 Building and entered the office-letting business in earnest[14]. In 1963 it completed the Hasegawa Skyline Building in Shibuya, Tokyo, moved the Tokyo branch there and set up a real-estate department at the same time[15]. The Hasegawa No. 10 Building, completed in 1964, drew attention as the world's first structure framed entirely in cast-steel tube[16].

Going public at 96.2% general construction, 3.8% property letting

In 1961, when capital was raised to $153,125 (¥55m), the shares were offered to the public on the Osaka market[17], and on 5 March 1962 the company listed on the Second Section of the Tokyo Stock Exchange[18]. At listing its capital stood at $388,889 (¥140m)[19] and it employed 284 people[20]; completed construction revenue for the term to November 1961 was about $3.6M (¥1bn)[21], close to double the $1.9M (¥700m) of the term to May that year[22]. The business split 96.2% general construction and 3.8% property letting[23], and building orders came 72.8% by negotiated award against 27.2% by competitive tender[24]. It had no keiretsu affiliation feeding it work[25]; the order book stood at about $7.2M (¥3bn), up 42% on the previous term[26]. In April 1965 it was promoted to the First Section of the Tokyo, Osaka and Nagoya markets[27].

Half-year revenue grew from $583,333 (¥210m) in the term to November 1958 to $11M (¥4bn) in the term to May 1965[28], but the pre-tax margin, having peaked at 11.1% in the term to May 1963[29], fell to 2.8% by the term to November 1965[30]. Revenue rose nearly nineteenfold while the margin shrank to a quarter of its peak[31]: the profitability of contract building widened its swings in the years either side of listing. Underpinning it was the office-letting business, whose rental income in the term to November 1961 was $144,444 (¥52m), up 13% on the previous term[32]. By 1968 the company owned eight buildings in Tokyo and Osaka for letting[33], with capital of $3.5M (¥1bn) and 527 employees[34].

Selling the scheme to the trading houses: the 'land brought in' model takes shape

The condominium business began in 1967 with Ashiya Matsuhama Heights, 83 units in Ashiya, Hyogo Prefecture[35]. National condominium supply at the time was under 2,000 units[36], and the market was dominated by luxury blocks built in the deluxe style foreign residents favoured[37]. Hasegawa Komuten broke ground on its own first condominium in April 1968[38], under a sales tie-up with Mitsui Trust Bank[39]. In December 1969 it signed a business alliance with Nissho Iwai, which gave it a route by which a trading house's land information became a condominium proposal and then an order. The negotiated-award method built on bringing in the land — finding a site, selling it together with a scheme to a trading house or other developer, and taking on the project — settled here as the shape of the business[40].

In February 1970 the company set up Haseko Real Estate to handle sales, and that December moved its head office from Osaka to Shibuya, Tokyo[41]. In September 1973 it established a local subsidiary in Hawaii, its first move abroad. Early in 1974 it made the first private developer loan of its kind in the Tokyo metropolitan area[42], and an analysis of buyers' ages put people in their twenties at the top for the first time[43]. Young buyers earning $6,826 (¥2m) to $10,239 (¥3m) a year had become the settled market for condominiums[44], and units priced at $51,195 (¥15m) to $58,020 (¥17m) sold out on the first day, or drew six or seven applicants apiece, provided the location was not poor[45]. Revenue rose ninefold in five years, from $30.6M (¥11bn) in the year to March 1971 to $343.8M (¥100bn) in the year to March 1976[46]. In September 1978 the company established Haseko Community to manage the buildings it put up[47].

Combus, the standardised block, and a 19% gross margin

What turned scale into profit was standardised design. Hasegawa Komuten prepared about a hundred patterns within a housing production system called Combus (コンバス)[48] and narrowed down the main specifications, structural calculations among them[49]. Common window frames and common lifts were used, and the design made as uniform as it could be[50]. Lecturing in 1980, vice-president Goda Kohei (合田耕平)[51] said that builders were firms that prized individuality, and that what set his company apart was having changed its employees' thinking so as to standardise it instead[52]. Subcontractors working from the same drawings grew more precise the more often they repeated them, and shortened the programme[53]. Materials were bought in gross at about 40% of the usual market price[54], and window frames at less than half[55].

The integrated model showed in the accounts as well: because the company took an advance at the point of introducing a scheme to a client and reserving the contract, the term to May 1978 showed $365.2M (¥73bn) of advances received on construction in progress against $163.7M (¥33bn) of costs incurred[56], a net inflow of about $199M (¥40bn)[57]. That was 26% of liabilities, and it carried no interest[58]. The gross margin on construction work rose from 12.6% in 1977 to 19.2% in 1980[59], widening the gap against the barely 10% earned by contractors generally[60]. President Mizukami Yoshimi (水上芳美)[61] said in a 1980 lecture that not one order had been won by tender, and that the company had no choice but to proceed by refusing to build to any design but its own[62]. In fiscal 1979 it built 17,200 units[63], more than the 15,000 units of housing for sale built by the Japan Housing Corporation[64].

Its position in the market showed in units built: 7,781 in 1976 and 11,461 in 1977[65], giving it 15.6% and 14.4% of the domestic condominium market[66]. Across those same two years about 1.5 million new dwellings were started nationwide[67], and the condominium share of them rose from 3.3% to 5.3%[68]. In 1979 Hasegawa Komuten built 10,247 of the 53,772 units built in the Tokyo metropolitan area[69] and 5,100 of the 24,203 built in the Kinki region[70], shares of 19.1% and 21.3%[71]. The 15,400 units across the two regions were equivalent to 45% of the roughly 34,000 built that year by the Japan Housing Corporation[72].

From buying land ahead of demand to a ¥100bn move out of condominiums

In 1979 Hasegawa Komuten changed its sales policy and acquired about $65.2M (¥15bn) of land ahead of demand in order to secure condominium sites[73]. Revenue reached $820.3M (¥204bn) in the year to March 1982, and the ordinary profit margin peaked at 12.9%[74]. The housing slump running from the term to May 1980 to the term to May 1985 hit the results directly[75], and by the year to March 1985 revenue was $810.8M (¥193bn) with an ordinary margin of 5.4%[76]. Condominium sites were also becoming scarce in the Tokyo area[77]. Even so, by January 1981 the company's share of condominium construction in the metropolitan area had reached about 20%[78], and in June 1983 it established Haseko Urbest to take on sales agency work[79]. In August 1987 Goda Kohei became representative director and president[80], and in May 1988 a Creative Business Division was set up to run new ventures[81] and begin building a pillar to stand alongside condominiums.

In July 1988 the company opened the Kyoto Brighton Hotel, wholly funded by itself, on the western side of the Kyoto Imperial Palace[82]. All 183 rooms[83] were built to a size that in an ordinary hotel would have been a suite. Kikuchi Yukio (菊地幸雄), the director who also served as president of the operating company[84], said the Haseko name had been kept off the hotel because it would have attached the image of a building contractor[85]. At Tateshina in Nagano Prefecture the company planned a development of about 3.6 million square metres with total investment of a little over $780.5M (¥100bn)[86], and on Awaji Island in Hyogo Prefecture a project due to start on site in 1991 and finish in 2003[87]; total investment in the hotel and resort business was set to pass $780.5M (¥100bn)[88]. That October it changed its trade name from Hasegawa Komuten to Haseko Corporation[89]. In the year to March 1989, its first year open, the Kyoto Brighton Hotel produced revenue of $16.9M (¥2bn), about 30% above target[90], and operating profit of twice the target[91].