FPG Q3 FY2026: Leasing Record Offset by Real Estate Slide, Revenue Falls 43%

FPG's revenue for the nine months ended June 30, 2026, plunged 43.3% year-on-year to ¥51.42 billion, as real estate product sales dried up. Gross profit dipped only 3.2% to ¥26.36 billion, cushioned by a 29.3% jump in leasing fund gross profit to ¥22.30 billion and incentive fees from past property disposals in the domestic real estate fund business. Operating profit fell 8.6% to ¥17.62 billion, recurring profit dropped 12.6% to ¥17.65 billion, and net income attributable to owners declined 12.0% to ¥12.10 billion. A ¥114 million impairment loss on the private jet business also weighed on the bottom line. Despite the decline, the leasing fund arm set a new quarterly record for equity sales, underlining the strength of the core business.

Clear divergence marked FPG's segments.

Leasing Fund Business: The star performer, with arrangement volume surging 50.8% to ¥367.29 billion and equity sales up 8.3% to ¥183.31 billion, a cumulative nine-month record. High-profit deals and US investor arrangement fees lifted revenue 23.6% to ¥25.37 billion and gross profit 29.3% to ¥22.30 billion.

Domestic Real Estate Fund Business: Despite an 81.1% jump in arrangement volume to ¥75.14 billion, sales of small-lot real estate products cratered 64.0% to ¥23.61 billion amid tax reform uncertainty. Revenue fell 61.5% to ¥25.57 billion, while gross profit dropped 40.2% to ¥4.22 billion; without incentive fees from past disposals, the decline would have been steeper.

Overseas Real Estate Fund Business: Virtually dormant, with revenue of just ¥46 million and gross profit ¥45 million, down over 98% each, though the company is actively exploring new mandates for the first time in about two years.

Other businesses posted a gross loss of ¥213 million, dragged by upfront costs in the private jet venture.

Total assets edged down to ¥125.99 billion, with lease-fund inventories shrinking sharply: equity interests dropped ¥29.86 billion from the prior year-end to ¥22.08 billion, reflecting brisk sales. Interest-bearing debt fell ¥4.43 billion to ¥49.58 billion, while cash rose to ¥15.21 billion. Together with ¥148.30 billion in committed credit lines, liquidity remains robust. Net assets climbed to ¥60.16 billion, lifting the equity ratio to 47.6%. Dividends paid totaled ¥9.34 billion for the prior year (interim ¥46.35 and year-end ¥65.20 per share). The company projects a full-year payout of ¥92.70 per share, down from ¥130.40 last year, reflecting lower earnings and investment needs. No notable capital actions, such as buybacks, were announced this fiscal year.

The primary risk remains the FY2026 tax reform outline, which trimmed the tax advantages of small-lot real estate products. This triggered a Q1 sales freeze and cancellations, and the recovery has been gradual, posing downside risk to full-year targets. The offshore real estate fund business remains inactive, and the private jet venture wrote down assets, highlighting the challenges of new initiatives. Geopolitical tensions could affect aircraft leasing. Over-reliance on the leasing fund business is a portfolio diversification concern; revitalizing real estate product sales and broadening the lineup are urgent priorities.

Management left its FY2026 guidance untouched: revenue of ¥82.88 billion (down 36.1% YoY), operating profit of ¥23.16 billion (down 8.9%), and net profit of ¥15.51 billion (down 14.6%). As of nine months, revenue is 62.1% achieved, while operating profit stands at 76.1% and net profit at 78.0%.

The fourth quarter is set to benefit from a bulk sale of the Shirokanedai property and aggressive marketing of FPG links Omotesando V. Leasing fund equity sales have already reached 87.1% of the full-year ¥210.51 billion target, suggesting a high likelihood of meeting the top-line forecast.

FPG is transitioning its small-lot real estate sales strategy in the wake of the tax reform. The company stresses that some inheritance tax compression benefits will persist beyond 2027, and it is deepening ties with accounting offices and regional banks to push prime-location large properties. After ¥11.93 billion in Q2 sales, Q3 slipped to ¥6.96 billion, but underlying investor demand is said to be solid. Beyond inheritance-driven products, FPG is developing yield-oriented and development-type properties, aiming to eventually recapture the ¥100 billion revenue mark. The overseas real estate fund arm is making concrete preparations for its first new mandates in about two years. Meanwhile, the leasing fund business is turning arrangement fees from US investors into a recurring revenue stream, adding diversification.