Company history

The company was created in December 1949 as Izumi Real Estate, one of the successor firms carved out when the occupation broke up the zaibatsu and Sumitomo Honsha — the holding company at the centre of a house whose businesses reached back more than four centuries — was wound up. Its inheritance was the property division, and that inheritance was thin. Mitsubishi Estate already held Marunouchi; Mitsui Fudosan already held Nihonbashi. What passed to Izumi was a cluster of buildings centred on the old Sumitomo head office in Osaka, plus scattered offices to rent in Tokyo, Kobe and Kyoto.

Being late to the best addresses set the terms of everything that followed. Unable to buy its way into the districts its rivals had held since before the war, the company could only work the property it did have, and work it deeply. It renamed itself Sumitomo Realty & Development in May 1957, absorbed the still-liquidating Sumitomo Honsha in April 1963 to close out the postwar reorganization, and opened an Osaka branch in 1964. Housing came alongside: residential lots at Chofu in 1962, its first condominium in Kobe in 1964.

The 1970 listing on the first sections of the Tokyo and Osaka exchanges finally gave it access to capital, and in March 1974 it completed the Shinjuku Sumitomo Building — a pioneer among the skyscrapers of Tokyo’s new western subcentre and the true beginning of its office-leasing business. Within months the first oil shock broke the property market and the company fell into loss. A weak balance sheet that the growth years had covered over was suddenly the whole question.

In 1974 Ando Taro, a deputy president of Sumitomo Bank, was sent in as president. He arrived at a company he would later describe simply as a wreck: loss-making, thinly capitalized, and regarded inside the group as the weakest firm carrying the Sumitomo name. The oil shock had ended the high-growth era and land prices were falling nationwide. Central Tokyo was emptying out — by 1973 newspapers were reporting inner-city primary schools graduating a few dozen children — and the industry’s attention had moved to the suburbs, where residential lots were the fashionable business.

Ando went the other way. In 1976 he withdrew from the Osaka Business Park development, and in 1982 he cut back the condominium and housing-lot division that generated 80% of sales, redirecting the money into new buildings and land in central Tokyo. Rental offices, he argued plainly, were the one pillar that did not swing with the cycle. By the completion of the Shinjuku NS Building in September 1982 — which became the head office that October — the company was operating twelve rental buildings in the Tokyo area throwing off $40.6M (¥10bn) a year in steady income. It ranked fourth in buildings owned, behind Mitsubishi Estate, Mitsui Fudosan and Mori Building, but it had got to Shinjuku first.

Housing was not abandoned so much as pushed upmarket: from the 1964 Kobe project onward the company built a reputation as a pioneer of high-rise living, capped by Hiroo Garden Hills in 1982. Around the core it assembled the affiliates that still surround it — building services (1973), the brokerage arm Sumitomo Real Estate Sales (1975), and in the 1980s renovation, custom homes, fitness and group finance. Ando remained the company’s centre of gravity long after handing over the presidency: chairman until 1994, on the board until 2008, when he retired at 98. The two-part formula he set — concentrate on central Tokyo offices, keep housing subordinate — held for the next thirty years.

The bubble’s collapse hit the company hard. Land values fell through the 1990s; in the year to March 1998 it booked $520.3M (¥68bn) of extraordinary losses and the shares sank to ¥206. The response, from 1997, was a rolling series of three-year medium-term plans that stripped out what the bubble years had added — while leaving untouched the one thing that mattered. Even in loss, it kept developing and buying offices in central Tokyo, on the reading that a falling market is when good locations become affordable.

It also widened the product line so that rents were not the only earnings. The regulated-price house American Comfort came in 1995, and in April 1996 the renovation product 新築そっくりさん — a fixed-price whole-house refit sold at less than half the cost of rebuilding, which grew into a business of more than 150,000 orders. In 1998 the brokerage subsidiary listed on the TSE; in 1999 the company ran Japan’s first public securitization of commercial property and launched small-lot property funds.

The defining choice came in the 2000s. Mitsui Fudosan and Mitsubishi Estate used the new J-REIT market to sell completed buildings and recycle the capital. Sumitomo Realty did the opposite — it kept its buildings, funded them with bank debt, and serviced that debt out of the rents. Izumi Garden Tower (2002), WORLD CITY TOWERS (2004) and a run of towers after them were built to be held, not sold. The interest-bearing debt this required would become the standing argument against the company; the compounding rental income was the argument for it.

Housing found its own scale advantage in 2011, when the company gathered its showrooms into a handful of consolidated condominium galleries in Akihabara, Shinjuku, Shibuya, Ikebukuro and Tamachi. Putting every model room in one place made comparison easy for buyers and turned volume into a selling point: in 2014 Sumitomo Realty supplied more condominiums than any other developer in Japan, and held first place for six consecutive years to 2019.

Nishima Hiroyori took over as president in June 2013 and said at the outset that a member of the industry’s big three had no business running safely — its job was to accelerate. The brokerage arm was bought in fully in 2017, folding the sales channel into the group. Revenue passed ¥1 trillion for the first time in the year to March 2019, and ordinary profit reached ¥220.5 billion.

The leasing business was doing exactly what the strategy promised: segment operating profit roughly doubled from ¥89.6 billion in the year to March 2012 to ¥169.4 billion by March 2020, on segment assets that grew from ¥2.84 trillion to ¥3.92 trillion. But the same policy of holding everything meant interest-bearing debt of $26.9B (¥2.87tn) by March 2020. Stable rents against heavy leverage — that trade-off was now the central management question.

The company set up an Indian operating arm, Goisu Realty, in January 2019 and bought its first office site that July in Mumbai’s new business district, BKC. The reasoning was that Mumbai’s rental office market stood roughly where Tokyo stood in the late 1950s: existing buildings are mostly sold floor-by-floor to separate owners, and almost no developer holds and operates a whole building as a leasing business. The model built over half a century in central Tokyo would therefore be the competitive advantage. A second BKC site followed in 2022, a Worli site of more than a million square metres in October 2023, and two more in 2025 — five projects, some 1.5 million square metres of floor area, and a planned total investment of about $6.7B (¥1tn). Few local rivals can commit hundreds of millions of dollars to land alone, and the foreign funds present mostly build for their own use.

The financial half of the shift came with the tenth medium-term plan, published in March 2025. Operating cash flow, the company declared, had grown large enough to fund both growth investment and shareholder returns without adding debt — ¥260 billion of discretionary capital over three years, an ordinary-profit target of ¥300 billion reached a year early, and the progressive dividend raised from ¥10 to ¥15 a year. After half a century of buying buildings with borrowed money, capital allocation now starts from cash flow. The year to March 2025 set records across the board: revenue of ¥1,014.2 billion, ordinary profit of $1.8B (¥268bn), net profit of ¥191.6 billion. Debt remains about ¥3.89 trillion, but equity has built to ¥2.17 trillion.

The pressure to go further came from outside. In 2025 the activist investor Elliott filed shareholder proposals demanding higher payouts, disposal of cross-shareholdings, an explicit ROE target and governance change; management carried every item at the meeting but saw support for some directors slip. Seventy-five years after Izumi Real Estate inherited a handful of Osaka buildings, the company runs roughly 230 offices in central Tokyo, supplies condominiums at national scale, and is building a second portfolio in India — with the open question being whether Ando’s doctrine of holding everything can coexist with the cash-flow discipline it has just adopted.