Document and Entity Information
Document and Entity Information | 12 Months Ended |
Jun. 30, 2023 shares | |
Entity Addresses [Line Items] | |
Document Type | 20-F |
Document Registration Statement | false |
Document Annual Report | true |
Document Period End Date | Jun. 30, 2023 |
Document Transition Report | false |
Document Shell Company Report | false |
Entity File Number | 001-41814 |
Entity Registrant Name | LEAD REAL ESTATE CO., LTD |
Entity Incorporation, State or Country Code | M0 |
Entity Address, Address Line One | 6F, MFPR Shibuya Nanpeidai Building 16-11 |
Entity Address, Address Line Two | Nampeidai-cho, Shibuya-ku |
Entity Address, City or Town | Tokyo |
Entity Address, Postal Zip Code | 150-0036 |
Entity Address, Country | JP |
Entity Well-known Seasoned Issuer | No |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Interactive Data Current | Yes |
Entity Filer Category | Non-accelerated Filer |
Entity Emerging Growth Company | true |
Entity Ex Transition Period | false |
ICFR Auditor Attestation Flag | false |
Document Financial Statement Error Correction [Flag] | false |
Document Accounting Standard | U.S. GAAP |
Entity Shell Company | false |
Entity Common Stock, Shares Outstanding | 13,641,900 |
Entity Central Index Key | 0001888980 |
Current Fiscal Year End Date | --06-30 |
Document Fiscal Year Focus | 2023 |
Document Fiscal Period Focus | FY |
Amendment Flag | false |
Auditor Name | BF Borgers CPA PC |
Auditor Location | Lakewood, CO |
Auditor Firm ID | 5041 |
Common Stock | |
Entity Addresses [Line Items] | |
Title of 12(b) Security | Ordinary shares |
No Trading Symbol Flag | true |
Security Exchange Name | NASDAQ |
ADR | |
Entity Addresses [Line Items] | |
Title of 12(b) Security | American depositary shares |
Trading Symbol | LRE |
Security Exchange Name | NASDAQ |
Business Contact | |
Entity Addresses [Line Items] | |
Entity Address State Or Province | MO |
Entity Address, Address Line One | 6F, MFPR Shibuya Nanpeidai Building 16-11 |
Entity Address, Address Line Two | Nampeidai-cho, Shibuya-ku |
Entity Address, City or Town | Tokyo |
Entity Address, Postal Zip Code | 150-0036 |
Contact Personnel Name | Eiji Nagahara |
City Area Code | 81 3 |
Local Phone Number | 5784-5127 |
Contact Personnel Email Address | nagahara@lead-real.co.jp |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - JPY (¥) ¥ in Thousands | Jun. 30, 2023 | Jun. 30, 2022 |
Current assets: | ||
Cash and cash equivalents | ¥ 786,373 | ¥ 403,108 |
Accounts receivable, net | 467,634 | 261,068 |
Real estate inventory | 10,401,640 | 8,845,779 |
Prepaid and other current assets | 236,918 | 266,042 |
Total current assets | 11,892,565 | 9,775,997 |
Property and equipment, net | 3,236,291 | 2,049,056 |
Intangible asset, net | 97,382 | 115,546 |
Investments in marketable securities | 31,561 | 31,657 |
Right-of-use assets, operating lease, net | 204,029 | 155,886 |
Investments | 20,831 | 16,850 |
Other assets | 332,586 | 271,751 |
Total assets | 15,815,245 | 12,416,743 |
Current liabilities: | ||
Accounts payable | 645,680 | 602,435 |
Current portion of notes payable | 5,899,156 | 6,361,415 |
Customer deposits | 298,956 | 284,975 |
Current portion of lease liabilities | 88,755 | 58,696 |
Accrued expenses and other current liabilities | 249,348 | 305,354 |
Total current liabilities | 7,181,895 | 7,612,875 |
Notes payable, net of current portion | 5,437,668 | 2,231,544 |
Deferred tax liabilities, net | 75,320 | 66,576 |
Lease liabilities, net of current portion | 187,473 | 148,224 |
Other liabilities | 189,956 | 156,457 |
Total liabilities | 13,072,312 | 10,215,676 |
SHAREHOLDERS' EQUITY | ||
Common stock, 50,000,000 shares authorized, 14,485,000 shares issued and 12,498,900 shares outstanding as of June 30, 2023 and June 30, 2022 | 344,145 | 344,145 |
Retained earnings | 2,538,053 | 2,001,048 |
Treasury stock, at cost, 1,986,100 as of June 30, 2023 and June 30, 2022 | (154,121) | (154,121) |
Non-controlling interest | (6,767) | (6,244) |
Accumulated translation gain | 21,623 | 16,239 |
Total shareholders' equity | 2,742,933 | 2,201,067 |
Total liabilities and shareholders' equity | ¥ 15,815,245 | ¥ 12,416,743 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - shares | Jun. 30, 2023 | Jun. 30, 2022 |
CONSOLIDATED BALANCE SHEETS | ||
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 14,485,000 | 14,485,000 |
Common stock, shares outstanding | 12,498,900 | 12,498,900 |
Treasury stock, shares | 1,986,100 | 1,986,100 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - JPY (¥) ¥ in Thousands | 12 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2021 | |
Revenue: | |||
Total revenue | ¥ 17,442,248 | ¥ 14,321,186 | ¥ 11,255,275 |
Expenses: | |||
Selling, general and administrative | 1,886,530 | 1,786,614 | 1,033,402 |
Total expenses | 16,572,330 | 13,671,998 | 10,801,628 |
Operating income | 869,918 | 649,188 | 453,647 |
Other income (expense): | |||
Interest expenses | (16,731) | (23,333) | (56,650) |
Other, net | 6,060 | 186,007 | (9,770) |
Total other income (expense), net | (10,671) | 162,674 | (66,420) |
Income before income taxes | 859,247 | 811,862 | 387,227 |
Income taxes | 322,765 | 283,479 | 134,869 |
Net income | 536,482 | 528,383 | 252,358 |
Net loss attributable to the noncontrolling interests | 523 | 370 | 27,132 |
Net income attributable to common stockholders | 537,005 | 528,753 | 279,490 |
Foreign currency translation gain (loss) | 5,384 | 19,056 | (1,062) |
Total Comprehensive income | ¥ 542,389 | ¥ 547,809 | ¥ 278,428 |
Earnings per share: | |||
Basic (in dollars per share) | ¥ 43.39 | ¥ 43.83 | ¥ 22.30 |
Diluted (in dollars per share) | ¥ 43.39 | ¥ 43.83 | ¥ 22.30 |
Weighted average shares outstanding: | |||
Basic (in shares) | 12,498,900 | 12,498,900 | 12,485,000 |
Diluted (in shares) | 12,498,900 | 12,498,900 | 12,485,000 |
Real estate | |||
Revenue: | |||
Total revenue | ¥ 17,125,308 | ¥ 14,108,455 | ¥ 11,090,778 |
Expenses: | |||
Cost of sales | 14,494,256 | 11,812,347 | 9,652,072 |
Other revenue | |||
Revenue: | |||
Total revenue | 316,940 | 212,731 | 164,497 |
Expenses: | |||
Cost of sales | ¥ 191,544 | ¥ 73,037 | ¥ 116,154 |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - JPY (¥) ¥ in Thousands | Common Stock | Retained Earnings | Treasury Stock | Non controlling interest | Translation gain / (loss) | Total |
BALANCE at the beginning at Jun. 30, 2020 | ¥ 229,920 | ¥ 1,192,805 | ¥ (155,200) | ¥ 21,258 | ¥ (1,755) | ¥ 1,287,028 |
BALANCE at the beginning (in shares) at Jun. 30, 2020 | 12,360,000 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net Income (Loss) | 279,490 | 279,490 | ||||
Issuance of shares | ¥ 100,000 | 100,000 | ||||
Issuance of shares (in shares) | 125,000 | |||||
Loss attributable to the non controlling interests | (27,132) | (27,132) | ||||
Translation Gain (loss) | (1,062) | (1,062) | ||||
BALANCE at the end at Jun. 30, 2021 | ¥ 329,920 | 1,472,295 | (155,200) | (5,874) | (2,817) | 1,638,324 |
BALANCE at the end (in shares) at Jun. 30, 2021 | 12,485,000 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net Income (Loss) | 528,753 | 528,753 | ||||
Issuance of shares | ¥ 14,225 | 1,079 | 15,304 | |||
Issuance of shares (in shares) | 13,900 | |||||
Loss attributable to the non controlling interests | (370) | (370) | ||||
Translation Gain (loss) | 19,056 | 19,056 | ||||
BALANCE at the end at Jun. 30, 2022 | ¥ 344,145 | 2,001,048 | (154,121) | (6,244) | 16,239 | ¥ 2,201,067 |
BALANCE at the end (in shares) at Jun. 30, 2022 | 12,498,900 | 12,498,900 | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net Income (Loss) | 537,005 | ¥ 537,005 | ||||
Loss attributable to the non controlling interests | (523) | (523) | ||||
Translation Gain (loss) | 5,384 | 5,384 | ||||
BALANCE at the end at Jun. 30, 2023 | ¥ 344,145 | ¥ 2,538,053 | ¥ (154,121) | ¥ (6,767) | ¥ 21,623 | ¥ 2,742,933 |
BALANCE at the end (in shares) at Jun. 30, 2023 | 12,498,900 | 12,498,900 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - JPY (¥) ¥ in Thousands | 12 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2021 | |
Cash flows from operating activities: | |||
Net income | ¥ 536,482 | ¥ 528,383 | ¥ 252,358 |
Adjustments to reconcile net income to net cash used in operating activities: | |||
Depreciation and amortization | 76,522 | 43,945 | 37,326 |
Loss on disposal of assets | 1,106,677 | 966 | |
Deferred income taxes, net | 8,744 | (10,939) | 6,766 |
Changes in assets and liabilities: | |||
Accounts receivable, net | (206,566) | 171,985 | 244,692 |
Real estate inventory | (1,555,861) | (4,306,865) | (591,778) |
Prepaid and other current assets | 29,124 | 62,130 | (100,265) |
Intangible asset, net | (1,477) | (54,735) | (48,426) |
Operating lease, net | 21,165 | 45,966 | (804) |
Other assets | (60,835) | (59,201) | 303,928 |
Accounts payable | 43,245 | 105,567 | 180,822 |
Customer deposits | 13,981 | 61,928 | 58,133 |
Accrued expenses and other current liabilities | (22,507) | (625,720) | (588,373) |
Net cash used in operating activities | (1,117,983) | (2,930,879) | (244,655) |
Cash flows from investing activities: | |||
Purchases of property and equipment | (1,244,116) | (537,294) | (170,231) |
Proceeds from sale of property and equipment | 510,091 | ||
Purchase of investments | (4,126) | (3,670) | (10,700) |
Proceeds from sale of investments in marketable securities | 11,789 | 42,039 | |
Other - net investing | 702 | (21,541) | |
Net cash used in investing activities | (1,247,540) | (19,084) | (160,433) |
Cash flows from financing activities: | |||
Proceeds from notes payable | 14,688,192 | 5,649,300 | 8,046,791 |
Payments on notes payable | (11,944,327) | (2,811,364) | (7,626,187) |
Proceeds from common stock issuance | 14,225 | 100,000 | |
Proceeds from sale of treasury stocks | 1,079 | ||
Other - net financing | 461 | (453) | 35,000 |
Net cash provided by financing activities | 2,744,326 | 2,852,787 | 555,604 |
Effect of exchange rate change on cash and cash equivalents | 4,462 | 19,962 | 271 |
Net increase (decrease) in cash and cash equivalents | 383,265 | (77,214) | 150,787 |
Cash and cash equivalents, beginning of year | 403,108 | 480,322 | 329,535 |
Cash and cash equivalents, end of year | 786,373 | 403,108 | 480,322 |
Cash paid during the year for | |||
Interest | 100,314 | 163,314 | 193,655 |
Income taxes | ¥ 238,032 | ¥ 206,529 | ¥ 51,305 |
ORGANIZATION AND BUSINESS
ORGANIZATION AND BUSINESS | 12 Months Ended |
Jun. 30, 2023 | |
ORGANIZATION AND BUSINESS | |
ORGANIZATION AND BUSINESS | 1. Organization and Description of the Business Lead Real Estate Co., Ltd, together with its wholly owned subsidiaries (the “Company” or “Lead Real Estate”), is headquartered in Tokyo, Japan. The Company is a developer of luxury residential properties, including single-family homes and condominiums, across Tokyo, Kanagawa prefecture, and Sapporo. In addition, the Company operates hotels in Tokyo and leases apartment building units to individual customers in Japan and Dallas, Texas. The consolidated financial statements of the Company include Lead Real Estate and the entities below: Percentage of Date of Incorporation or Place of direct or indirect Name Acquisition Incorporation economic ownership Subsidiaries Lead Real Estate Global Co., Ltd (“LRE Dallas”) September 2017 Texas 100% by Lead Real Estate Lead Real Estate HK Co., Limited (“LRE HK”) February 2014 Hong Kong 100% by Lead Real Estate Real Vision Co., Ltd. (“Real Vision”) July 2006 Japan 100% by Lead Real Estate Consolidated VIEs Lead Real Estate Cayman Limited (“LRE Cayman”) August 2019 Cayman Islands 100% by CEO Sojiya Japan K.K. January 2020 Japan 50% by Lead Real Estate and 50% by CEO Unconsolidated VIE JP Shuhan Co., Ltd. (“JP Shuhan”) January 2020 Japan 100% by CEO, deconsolidated |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Jun. 30, 2023 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. Basis of Presentation The accompanying consolidated financial statements are presented in Japanese yen, the currency of the country in which the Company is incorporated and principally operates. The accompanying consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and include the accounts of the Company and its subsidiaries. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Lead Real Estate, its wholly owned subsidiaries, and the Company’s consolidated variable interest entities (“VIEs”) as described in the domestic and foreign operations above. All intercompany accounts and transactions have been eliminated in consolidation. Investments in companies over which the Company has significant influence, but not control, are accounted for by the equity method. The Company evaluates its investments and other significant relationships to determine whether any investee is a VIE. If the Company concludes that an investee is a VIE, the Company evaluates its power to direct the activities of the investees, its obligation to absorb the expected losses of the investee, and its right to receive the expected residual returns of the investee to determine whether the Company is the primary beneficiary of the investee. If the Company is the primary beneficiary of a VIE, the Company consolidates such entity and reflects the noncontrolling interest of other beneficiaries of that entity. See Note 10. Use of Estimates The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates, and these differences could have a significant impact on the financial statements. The significant accounting estimates include real estate inventory and cost of sales, impairment of real estate inventory and property and equipment, warranty reserves, loss contingencies, incentive compensation expenses, and deferred income taxes. Revenue Recognition The Company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company applies a five-step model that requires entities to exercise judgment when considering the terms of the contract(s), which include (i) identifying the contract(s) with the customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (vi) allocating the transaction price to the separate performance obligations, and (v) recognizing revenue when each performance obligation is satisfied. Revenue from real estate sales is recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company generates revenue primarily from real estate sales, which includes the sale and development of land parcels and their respective single-family home and condominium buildings. Revenue from real estate sales is recorded at the time each sale is closed, title and possession are transferred to the customer and the Company has no significant continuing involvement with the real estate. The remaining sources of revenue, deemed insignificant as a percentage of total revenue or operating profits, consist of leasing, property and building management, hotel, and other miscellaneous revenue streams. Real Estate Sales The Company’s primary source of revenue is the development and sale of luxury single-family homes and condominiums, including land, in its principal market, Japan. Transactions in this segment are conducted through two contracts, a land sales contract (the “Land Sales Contract”) and a construction contract (the “Construction Contract”), which demarcate two distinct performance obligations, delivering a land parcel and delivering the completed building, respectively. The Land Sales Contract outlines the terms and condition of the land sale, while the Construction Contract summarizes the terms of the construction which the Company is to perform for the customer. When entering into a new build-to-suit transaction, the Land Sales Contract and the Construction Contract are executed concurrently. Under the Land Sales Contract, the Company bills customers (i) upon the execution of the contract and (ii) when control of the land is transferred to the customer, and customers generally pay within the same day of each billing. The Company does not record receivables under its Land Sales Contracts as the Company collects land sales revenue recognized within the same day. Under the Construction Contract, the Company bills customers (i) upon the execution of the contract and (ii) upon the transfer of a completed building to a buyer on the closing date, and customers generally pay within the same day of each billing. The Company records receivables under its Construction Contracts since construction development revenue is recognized over time based on the input method. The deposit made by the customer at the time of contract execution varies by contract and is generally either a fixed percentage of the aggregate sale price or a flat fee. Advances received are recorded under customer deposits. The Company generally sells the land based on market price plus a minor markup and sets the selling price per home based on cost plus margin. The Company has performed an assessment and its contracts do not contain significant financing terms. Performance obligations are satisfied at the point in time when control of the asset is transferred to the customer, which is generally when title to and possession of the land parcel or the completed building and the risks and rewards of ownership are transferred to the buyer on the closing date. Land sales revenue is recognized at the point in time when control of the land is transferred to the customer, which is generally when title and possession of the land parcel and the risks and rewards of ownership are transferred to the buyer on the closing date. When the transfer of a completed building to a buyer on the closing date is related to work as part of the Construction Contract the Company entered into with the buyer, construction development revenue is recognized over time based on the input method. In applying the input method, the Company utilizes costs incurred through the construction process relative to the total expected costs of construction to recognize revenue. The measures of progress during this construction process include: ● design meeting: where the customer decides on the floor plan and selects interior and exterior materials to be used for construction; ● construction preparation: where we begin site survey and project management assignments with subcontractors; ● completion of framework (basic building structure): where we complete the foundations of the home along with the basic structure; ● completion of remaining building elements: where each of the remaining building elements are completed and interim inspections are conducted; ● demolition of scaffolding: completion of exterior wall work and the start of home interior work; ● confirmation meeting with customer: completion of interior and exterior work and all outstanding work related to the home; and ● property delivery: delivery of the home, including final modification work as requested by the customer. The Company uses these measures of progress to delineate costs incurred by it during the home construction process. The amount of costs incurred in each stage of the construction process are divided against the Company’s total expected construction costs and the ratios from such calculation are applied against the total contract value to recognize revenue over time according to the input method. With the land title transferred to the buyer upon the closing of the Land Sales Contract, the Company’s construction of the building on the land both creates and enhances a customer-controlled asset and leads to the buyer receiving and benefiting from the Company’s performance obligation as the work under the Construction Contract is conducted. When the transfer of a completed building to a buyer on the closing date is related to sales of existing fully constructed single-family homes and condominiums the Company did not develop, non-development revenue is recognized at a point in time, upon the execution of the sales contract. The Company’s contract liabilities, consisting of deposits received from customers for sold but undelivered homes, totaled ¥298,956 thousand and ¥284,975 thousand as of June 30, 2023 and 2022, respectively. Out of the outstanding customer deposits held as of June 30, 2023 and 2022, the Company recognized ¥255,300 thousand and ¥143,043 thousand in real estate sales during the fiscal years ended June 30, 2023 and 2022, respectively. Revenue includes forfeited deposits, which occur when home sale or land sale contracts that include a nonrefundable deposit are cancelled. Sales and broker commissions are incremental costs incurred to obtain a contract with a customer that would not have been incurred if the contract had not been obtained. Sales and broker commissions are expensed upon fulfillment of a home closing. Advertising costs are costs to obtain a contract that would have been incurred regardless of whether the contract was obtained and are recognized as an expense when incurred. Sales and broker commissions and advertising costs are recorded within sales and marketing expenses presented in the Company’s consolidated statements of comprehensive income as selling expenses. The Company issues a standard industry warranty against defects for period of 10 years for its single-family homes and condominiums. This warranty requirement against defects is not a performance obligation as it exists to protect customers from the risk of purchasing defective products and is not an additional service provided to the customer. Disaggregation of Revenue Revenue is disaggregated among land and non-development, construction development, and other revenue. Land sales and non-development revenue includes (i) sales of land for single-family homes and condominiums and (ii) sales of already completed single-family homes and condominiums that the Company did not develop, where delivery is recorded, and subsequent revenue recognized, through a signed sales contract with the end buyer. Construction development revenue reflects revenue from the Company’s Construction Contracts for which the Company actually performs. The Company’s revenue, disaggregated by revenue stream for the fiscal years ended June 30, 2023, 2022, and 2021 was as follows (in thousands): For the Fiscal Years Ended June 30, 2023 2022 2021 Land sale and non-development ¥ 15,730,839 ¥ 12,147,506 ¥ 9,624,106 Construction development 1,394,469 1,960,949 1,466,672 Real estate sales revenue ¥ 17,125,308 ¥ 14,108,455 ¥ 11,090,778 Other Revenue The Company generates other revenue, which includes leasing income, property and building management income, and revenue from other miscellaneous sources. The primary components of revenue for the fiscal years ended June 30, 2023, 2022, and 2021 were as follows (in thousands): For the Fiscal Years Ended June 30, 2023 2022 2021 Lease 75,775 65,391 87,436 Property management 22,544 30,426 36,244 Other 218,621 116,914 40,817 Other revenue ¥ 316,940 ¥ 212,731 ¥ 164,497 Foreign Operations The Company’s reporting and functional currency is the Japanese yen. The functional currency of the Company’s wholly owned subsidiary, Real Vision, is the Japanese yen, whereas the functional currency of LRE Dallas and LRE Cayman is the United States dollar. The functional currency of LRE HK is the Hong Kong Dollar. The functional currency of the Company’s consolidated VIE, Sojiya Japan, and unconsolidated VIE, JP Shuhan, is the Japanese yen. Assets and liabilities are translated using the fiscal year end foreign exchange rate, and income and expenses are translated using the weighted average exchange rate for the period. Foreign currency translation adjustments related to the financial statements of foreign subsidiaries, net of related income tax effects, are credited or charged directly to the foreign currency translation adjustment account, a component of accumulated other comprehensive gain (loss). The tax effects related to the foreign currency translation of financial statements of the consolidated subsidiaries and VIEs are not recognized unless it is apparent that the temporary differences will reverse in the foreseeable future. Monetary assets and liabilities denominated in currencies other than the functional currency are remeasured into the functional currency of the respective entity at the fiscal year-end foreign exchange rate, and gains and losses resulting from such remeasurement are included in foreign exchange gain (loss). Foreign currency denominated income and expenses are remeasured using the average exchange rate for the period. The effects of translation and remeasurement related to foreign currency transactions are recorded in the statements of comprehensive income. Emerging Growth Company Status The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. Concentration of Credit Risk and Significant Vendors Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains its cash and cash equivalents at high-quality and accredited financial institutions. Generally, these deposits may be redeemed upon demand and, therefore, bear minimal risk. The Company has not experienced any losses of such amounts and management believes it is not exposed to any significant credit risk beyond the normal credit risk associated with its cash and cash equivalents. No single customer accounted for 10% or more of the Company’s total revenue for the fiscal years ended June 30, 2023, 2022, and 2021. No single contractor accounted for 10% or more of the Company’s total cost for the fiscal year ended June 30, 2023. Approximately 20% of the Company’s outstanding accounts payable was attributable to Kabushiki Kaisha Kenshin for the fiscal years ended June 30, 2022 and 2021. Segment Reporting ASC Topic 280, Segment Reporting The Company’s primary and sole operating segment is real estate sales, with the balance of revenue categorized under real estate sales. Noncontrolling Interest The Company’s noncontrolling interests reflect consolidation effects of LRE Cayman and Sojiya Japan. Losses attributable to these noncontrolling interests are presented in the consolidated statements of comprehensive income as net loss attributable to the noncontrolling interests. Cash and Cash Equivalents and Concentration of Credit Risk Cash and cash equivalents are defined as cash on hand, demand deposits with financial institutions, and short-term liquid investments with an initial maturity date of less than three months. The Company’s cash and cash equivalents accounts may exceed Japanese government insured limits, up to ¥10,000 thousand, from time to time and could be negatively impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or diminished access to cash in its demand deposit accounts. Accounts Receivable The Company’s accounts receivable consists primarily of receivables from general contractors and subcontractors, and receivables resulting from the implementation of Accounting Standards Codification 606, Revenue from Contracts with Customers Real Estate Inventory Inventories consist of raw entitled land, finished lots, and construction in process (“CIP”), including capitalized interest. Inventory is stated at cost unless the carrying amount is determined not to be recoverable, in which case the affected inventory is written down to fair value. Inventories include the costs of direct land acquisition, land development, construction, capitalized interest, real estate taxes, and direct overhead costs incurred related to land acquisition and development and single-family home and condominium construction. Indirect overhead costs are charged to selling, general, and administrative expenses as incurred. Land and development costs are typically allocated to individual lots on a pro rata basis based on the number of lots in the development, and the costs of lots are transferred to construction work in progress when construction begins. Sold units are expensed on a specific identification basis as cost of contract revenue earned. Cost of contract revenue earned for single-family homes and condominiums closed includes the specific construction costs of each single-family home or condominium and all applicable land acquisition, land development, and related costs allocated to each residential lot. Inventories are carried at the lower of accumulated cost or net realizable value. Land, development, and other project costs, including interest and property taxes incurred during development and home construction, net of expected reimbursable development costs, are capitalized to real estate inventory. Land development and other common costs that benefit the entire community, including field construction supervision and related direct overhead, are allocated to individual lots or homes, as appropriate. The costs of lots are transferred to homes in progress when home construction begins. Home construction costs and related carrying charges are allocated to the cost of individual homes using the specific identification method. Costs that are not specifically identifiable to a home are allocated on a pro rata basis, which the Company believes approximate the costs that would be determined using an allocation method based on relative sales values since the individual lots or homes within a community are similar in value. Inventory costs for completed homes are expensed to cost of sales as homes are closed. Changes to estimated total development costs subsequent to initial home closings in a community are generally allocated to the remaining unsold lots and homes in the community on a pro rata basis. In accordance with ASC Topic 360, Property, Plant, and Equipment Capitalized Interest Interest and other financing costs are capitalized as cost of inventory during community development and home construction activities, in accordance with ASC Topic 835, Interest Impairment of Long-Lived Assets Long-lived assets, such as property and equipment and finite-lived intangible assets are reviewed for impairment whenever events and circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. In making these determinations, the Company uses certain assumptions, including, but not limited to: (i) estimated fair value of the assets; and (ii) estimated, undiscounted future cash flows expected to be generated by these assets, which are based on additional assumptions such as asset utilization, length of service, the asset will be used in the Company’s operations, and (iii) estimated residual values. Fair value is determined using various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. There were no events or circumstances identified during the fiscal years ended June 30, 2023, 2022, and 2021 that required the Company to perform a quantitative impairment assessment. The Company’s assumptions about future conditions important to its assessment of potential impairment of its long-lived assets are subject to uncertainty, and the Company will continue to monitor these conditions in future periods as new information becomes available. There were no impairments of property, equipment, intangible assets, and leasehold improvements during the fiscal years ended June 30, 2023, 2022, and 2021. Investment at cost The equity method is generally used to account for equity investments over which significant influence, but not majority equity interest or control, is exerted in an investee company. Generally, the accompanying shareholding is between 20% and 50% of the voting rights. The share of earnings or losses of the investee are recognized in the consolidated statements of comprehensive income. The Company did not have any investment that would be accounted for under the equity method in the fiscal years ended June 30, 2023, 2022, and 2021. Investments in equity securities in which the Company does not have significant influence, and for which there is not a readily determinable fair value, are recorded at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments in the same issuer. When the Company evaluates whether these non-marketable equity securities are impaired, the Company evaluates first whether an event or change in circumstances has occurred in the period that may have a significant adverse effect on the fair value of the securities (an impairment indicator). The Company uses such impairment indicators as follows: 1) a significant deterioration in the earnings performance or business prospects of the investee; 2) a significant adverse change in the regulatory, economic, or technological environment of the investee; 3) a significant adverse change in the general market condition of either the geographic area or the industry in which the investee operates; and 4) a recent example of the new issuance of a security, in which the issue price is less than its cost. The Company estimates the fair value of the non-marketable equity securities when an impairment indicator is present. The fair value is determined by considering various unobservable inputs which are available to the Company, including expectation of future income of the investees, net asset value of the investees, and material unrealized losses to be considered in assets and liabilities held by the investees. The Company recognizes impairment of non-marketable equity securities when the fair value is below the carrying amount and the decline in fair value is considered to be other-than-temporary. The carrying amount of non-marketable securities is recorded at cost as fair value is not readily determinable. The investment at cost amount was ¥20,831 thousand and ¥16,850 thousand as of June 30, 2023 and 2022, respectively. The Company did not recognize any impairment during these periods. Warranty Reserve Future direct warranty costs are accrued and charged to cost of sales in the period when the related home is closed. The Company provides a limited warranty for its single-family homes and condominiums for a period of 10 years. The Company’s standard warranty requires the Company or its subcontractors to repair or replace defective construction during such warranty period at no cost to the homebuyer. At the time a home is sold, the Company records an estimate of warranty expense based on historical warranty costs. An analysis of the warranty reserve is performed periodically to ensure the adequacy of the reserve. The warranty reserve was ¥46,116 thousand and ¥54,302 thousand as of June 30, 2023 and 2022, respectively, and was included in accrued expenses and other current liabilities on the consolidated balance sheets. Customer Deposits Customer deposits are amounts collected from customers in conjunction with the execution of the single-family home or condominium sales contract. Customer deposits represent advances received on construction contracts in progress and are applied against the final settlement due at the home closing. In the event of contract default or termination, the customer deposit is forfeited and recognized as revenue. The customer deposits were ¥298,956 thousand and ¥284,975 thousand as of June 30, 2023 and 2022, respectively. Cost of Sales Cost of sales includes the lot purchase costs and demolition costs associated with each lot, construction costs of each home, capitalized interest, building permits and other local municipality related costs, internal and external realtor commissions, and warranty costs (both incurred and estimated to be incurred). Land, development, and other allocated costs, including interest and property taxes, incurred during development and construction are capitalized and expensed to cost of sales when the sale of a single-family home or condominium is closed, and revenue is recognized. Selling and Commission Costs Sales commissions are paid and expensed based on homes closed. Other selling costs are expensed in the period incurred. Advertising Costs Advertising costs are expensed as incurred. Advertising costs were ¥30,507 thousand, ¥39,341 thousand, and ¥28,374 thousand recorded as selling, general and administrative expenses in the Consolidated Statements of Comprehensive Income for the fiscal years ended June 30, 2023, 2022, and 2021, respectively. Income Taxes Income taxes are computed in accordance with the provision of ASC Topic, 740, Income Taxes The Company recognizes deferred tax assets to the extent that these assets are believed to be more likely than not to be realized. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are more likely than not expected to be realized. In making such a determination, all available positive and negative evidence is considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. Tax benefits for uncertain tax positions are based upon management’s evaluation of the information available at the reporting date. To be recognized in the consolidated financial statements, a tax benefit must be at least more likely than not of being sustained based on technical merits. The benefit for positions meeting the recognition threshold is measured as the largest benefit more likely than not of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. Earnings Per Share In accordance with ASC 260-10, Earnings Per Share Recently Announced Accounting Standards Income Taxes In December 2019, the FASB issued ASU 2019-12, Income Taxes — Simplifying the Accounting for Income Taxes Credit Losses In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses Measurement of Credit Losses on Financial Instruments Acquired Contract Assets and Contract Liabilities In October 2021, the FASB issued ASU 2021-08, Business Combinations Accounting for Acquired Contract Assets and Contract Liabilities Investments In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topics 321, 323 and 815. The new standard addresses accounting for the transition into and out of the equity method and measurement of certain purchased options and forward contracts to acquire investments. The standard is effective for the Company for fiscal years and interim periods beginning after December 15, 2021, with early adoption permitted. Adoption of the standard requires changes to be made prospectively. The adoption of the standard did not have a material effect on the Company’s consolidated financial statements. Reference Rate Reform On January 7, 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope Reference Rate Reform |
REAL ESTATE INVENTORY
REAL ESTATE INVENTORY | 12 Months Ended |
Jun. 30, 2023 | |
REAL ESTATE INVENTORY | |
REAL ESTATE INVENTORY | 3. Inventories consist of raw entitled land, finished lots, and construction in process (“CIP”), including capitalized interest. Raw land is purchased with the intent to develop such land into finished lots. Finished lots are held with the intent of building and selling a single-family home or condominium. The asset is owned by the Company either as a result of developing purchased raw land or purchasing developed lots. CIP represents the homebuilding activity associated with both single-family homes and condominiums to be sold and existing speculative inventory, which primarily consists of condominiums. CIP includes the cost of the developed lot as well as all of the direct costs incurred to build the home. The cost of the home is expensed on a specific identification basis. Real estate inventory consisted of the following as of June 30, 2023 and 2022 (in thousands): June 30, 2023 2022 Real estate, including land ¥ 10,089,739 ¥ 8,192,861 Construction in progress 311,901 652,918 Real estate inventory ¥ 10,401,640 ¥ 8,845,779 Interest is capitalized and included within each inventory category above. Interest and financing costs incurred under the Company’s debt obligations, as more fully discussed in Note 7, are capitalized to qualifying real estate projects under development and homes under construction. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Jun. 30, 2023 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | 4. As of June 30, 2023 and 2022, property and equipment consisted of the following (in thousands): June 30, Useful Life 2023 2022 (years) Land Infinite 1,792,025 1,006,622 Property and Buildings 4-47 ¥ 1,273,946 ¥ 669,102 Machinery and Equipment 10-17 156,580 158,104 Tools, Furniture, and Fixtures 4-20 32,738 22,945 Construction in progress 147,147 300,035 Less: Accumulated depreciation (166,145) (107,752) Property and equipment, net ¥ 3,236,291 ¥ 2,049,056 The Company recorded depreciation expenses on property and equipment of ¥56,881 thousand, ¥30,263 thousand, and ¥30,226 thousand for the fiscal years ended June 30, 2023, 2022, and 2021, respectively. The Company records depreciation expense in selling, general, and administrative expenses on the consolidated statements of comprehensive income. |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 12 Months Ended |
Jun. 30, 2023 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 5. Accrued expenses and other current liabilities consisted of the following as of June 30, 2023 and 2022 (in thousands): June 30, 2023 2022 Income taxes payable ¥ 190,453 ¥ 241,245 Warranty reserves 46,116 54,302 Other deposits received 4,029 4,716 Accrued vacation 3,442 1,561 Other current liabilities 5,308 3,530 Accrued expenses and other current liabilities ¥ 249,348 ¥ 305,354 |
WARRANTY RESERVES
WARRANTY RESERVES | 12 Months Ended |
Jun. 30, 2023 | |
WARRANTY RESERVES | |
WARRANTY RESERVES | 6. The Company establishes warranty reserves to provide for estimated future expenses as a result of construction and product defects, product recalls, and litigation incidental to its homebuilding business. Estimates are determined based on management’s judgment, considering factors such as historical spending and sales pace. The table below presents the activity related to warranty reserves, which are included in accrued expenses and other current liabilities on the accompanying consolidated balance sheets. Actual realized payments for warranty claims are expensed through cost of sales. The Company generally provides homebuyers with a one-year warranty on the house and a 10-year limited warranty for major defects in structural elements, such as framing components and foundation systems. Changes to warranty reserves were as follows for the fiscal years ended June 30, 2023, 2022, and 2021 (in thousands): For the Fiscal Years Ended June 30, 2023 2022 2021 Warranty reserves, beginning of period ¥ 54,302 ¥ 24,009 ¥ 27,500 Warranty provision 6,489 47,899 201 Warranty expenditures (14,675) (17,606) (3,692) Warranty reserves, end of period ¥ 46,116 ¥ 54,302 ¥ 24,009 |
NOTES PAYABLE
NOTES PAYABLE | 12 Months Ended |
Jun. 30, 2023 | |
NOTES PAYABLE | |
NOTES PAYABLE | 7. The Company’s short-term borrowings consist primarily of land loans collateralized on specific lots for real estate sales typically paid upon delivery of the lot. The Company’s long-term borrowings are used for working capital and other general corporate purposes. Debt issuance costs related to these borrowings are immaterial . Notes payable consisted of the following as of June 30, 2023 (in thousands): Original Annual Amount Interest Borrowed Loan Duration Rate Amount Lender 1 2,124,821 1/15/2020-5/31/2057 2.753 % ¥ 1,719,187 Lender 2 2,220,400 9/27/2018-6/4/2025 3.727 % 1,632,000 Lender 3 977,000 1/30/2023-7/29/2023 2.700 % 957,000 Lender 4 872,400 10/21/2022-4/30/2025 3.500 % 872,400 Lender 5 874,800 7/7/2022-5/30/2025 1.674 % 813,800 Other lenders 7,672,402 3/23/2016-4/30/2052 0.46%-6.00 % 5,401,037 Aggregate outstanding principal balances 11,336,824 Less: current portion and short-term notes payable 5,899,156 Long-term portion of notes payable ¥ 5,437,668 Notes payable consisted of the following as of June 30, 2022 (in thousands): Original Annual Amount Interest Borrowed Loan Duration Rate Amount Lender 1 ¥ 1,988,100 8/24/2018-6/5/2023 3.45-3.60 % ¥ 1,869,100 Lender 2 ¥ 1,441,200 1/15/2020-12/31/2029 2.60-3.00 % 1,176,290 Lender 3 ¥ 340,000 12/27/2017-8/25/2032 1.65-2.35 % 569,250 Lender 4 ¥ 485,000 10/30/2020-7/31/2024 2.80 % 482,915 Lender 5 ¥ 480,000 6/10/2022-6/17/2024 2.50 % 480,000 Other lenders ¥ 4,285,366 3/23/2016-4/30/2052 0.46-6.00 % 4,015,404 Aggregate outstanding principal balances 8,592,959 Less: current portion and short-term note payable 6,361,415 Long-term portion of notes payable ¥ 2,231,544 As of June 30, 2023, the annual aggregate maturities of notes payable during each of the next five years were as follows (in thousands): Amount 2024 ¥ 5,899,156 2025 3,137,152 2026 688,647 2027 100,332 2028 100,674 Thereafter 1,410,863 Total notes payable ¥ 11,336,824 Included in real estate inventory was capitalized interest of ¥250,151 thousand, ¥304,545 thousand, and ¥138,983 thousand for the fiscal years ended June 30, 2023, 2022, and 2021, respectively. Interest activity, including other financing costs for notes payable for the periods presented is as follows (in thousands): For the Fiscal Years Ended June 30, 2023 2022 2021 Interest incurred ¥ 191,612 ¥ 211,206 ¥ 177,232 Less: Amounts capitalized (174,881) (187,873) (120,582) Interest expense ¥ 16,731 ¥ 23,333 ¥ 56,650 |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Jun. 30, 2023 | |
INCOME TAXES | |
INCOME TAXES | 8. The Company generates taxable income primarily in Japan. Income taxes in Japan applicable to the Company are imposed by the national, prefectural, and municipal governments, and in the aggregate resulted in an effective statutory rate of approximately 30.6% for the fiscal years ended June 30, 2023, 2022, and 2021. The components of income tax expenses were as follows as of June 30, 2023, 2022, and 2021 (in thousands): For the Fiscal Years Ended June 30, 2023 2022 2021 Current ¥ 314,021 ¥ 294,418 ¥ 128,103 Deferred 8,744 (10,939) 6,766 Total ¥ 322,765 ¥ 283,479 ¥ 134,869 A reconciliation of income tax expenses to the amount of income tax benefit at the statutory rate in Japan for the fiscal years ended June 30, 2023, 2022, and 2021 is as follows: For the Fiscal Years Ended June 30, 2023 2022 2021 Statutory tax rate 30.6 % 30.6 % 30.6 % Deductions and other adjustments 6.9 % 5.5 % 2.2 % Effective tax rate 37.5 % 36.1 % 32.8 % The statutory tax rate in effect for the fiscal year in which the temporary differences are expected to reverse are used to calculate the tax effects of temporary differences that are expected to reverse in the future years. The primary components of deferred tax assets and liabilities were as follows as of June 30, 2023 and 2022 (in thousands): June 30, 2023 2022 Deferred tax assets: Reserves and Allowances ¥ 61,842 ¥ 56,349 Intangibles 11,331 14,393 Inventories — 5,291 Investments in securities 14,646 14,719 Asset retirement obligation 2,495 1,862 Leases 944 1,275 Other 16,711 14,039 Total deferred tax assets 107,969 107,928 Deferred tax liabilities: Inventories 150,082 138,445 Property and equipment 26,377 29,341 Prepaid Expenses 108 107 Intangible assets, including software 5,118 6,611 Leases 723 — Advances received — — Other 881 — Total deferred tax liabilities 183,289 174,504 Net deferred tax liabilities ¥ 75,320 ¥ 66,576 The Company recorded a net deferred tax liability of ¥75,320 thousand and ¥66,576 thousand as of June 30, 2023 and 2022, respectively. There was no valuation allowance for deferred tax assets as of June 30, 2023 and 2022. Based on the level of historical taxable income and projections for the future taxable income over the periods in which the deferred tax assets become deductible, management believes all deferred tax assets at June 30, 2023 and 2022, are fully realizable. Interest and penalties related to income tax matters are recognized as a component of selling, general, and administrative expenses in the consolidated statements of comprehensive income, if applicable. The Company did not have any interest or penalties associated with any uncertain tax benefits that have been accrued or recognized as of and for the fiscal years ended June 30, 2023, 2022, and 2021. |
EQUITY
EQUITY | 12 Months Ended |
Jun. 30, 2023 | |
EQUITY | |
EQUITY | 9. As of June 30, 2023 and 2022, the Company had 50,000,000 ordinary shares authorized (reflecting the effect of an increase in the number of authorized ordinary shares of the Company from 1,000,000 to 50,000,000 on August 31, 2021). Each holder of ordinary shares is entitled to one vote for each share held as of the record date and is entitled to receive dividends, when, and if declared by the shareholders’ meeting or the board of directors of the Company. The number of total ordinary shares outstanding was 12,498,900 as of June 30, 2023 and 2022. Lead Real Estate is subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the Companies Act that affect financial and accounting matters are summarized below: Ordinary Shares Under the Companies Act, issuances of ordinary shares are required to be credited to the ordinary shares account for at least 50% of the proceeds and to the additional paid-in capital account for the remaining amounts. Dividends Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders meeting. The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject to certain limitations and additional requirements. Semi-annual interim dividends may also be paid once a year upon resolution by the board of directors if the articles of incorporation of the company stipulates so. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury shares. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million. Increases/decreases and transfer of ordinary shares, reserve, and surplus The Companies Act requires that an amount equal to 10% of dividends must be appropriated as legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total of the aggregate amount of legal reserve and additional paid-in capital equals 25% of ordinary shares. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that ordinary shares, legal reserve, additional paid-in capital, and other capital surplus and retained earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders. Treasury Shares The Companies Act also provides for companies to purchase treasury shares and dispose of such treasury shares by resolution of the board of directors. The amount of treasury shares purchased cannot exceed the amount available for distribution to the shareholders which is determined by a specific formula. |
VARIABLE INTEREST ENTITIES
VARIABLE INTEREST ENTITIES | 12 Months Ended |
Jun. 30, 2023 | |
VARIABLE INTEREST ENTITIES | |
VARIABLE INTEREST ENTITIES | 10. The Company is required to consolidate VIEs in which it has a controlling financial interest in accordance with ASC 810, Consolidation The Company’s variable interest in VIEs may be in the form of equity ownership, contracts to purchase assets, management services and development agreements between the Company and a VIE, loans provided by the Company to a VIE or other member, and/or guarantees provided by members to banks and other parties. Based on its analysis, the Company has consolidated LRE Cayman and Sojiya Japan in the fiscal years ended June 30, 2023, 2022, and 2021, along with the wholly-owned subsidiaries LRE Dallas, LRE HK, and Real Vision. The Company has one unconsolidated VIE, JP Shuhan, during these periods. Consolidated VIEs For VIEs that the Company does consolidate, management has the power to direct the activities that most significantly impact the VIE’s economic performance. The Company does not guarantee the debts of the VIEs, and creditors of the VIEs have no recourse against the Company. LRE Cayman and Sojiya Japan were consolidated VIEs during the fiscal years ended June 30, 2023, 2022, and 2021. There were no other consolidated VIEs during these periods. The table below displays the carrying amounts of the assets and liabilities related to the consolidated VIEs as of June 30, 2023 and 2022 (in thousands): June 30, Consolidated – LRE Cayman 2023 2022 Assets ¥ — ¥ — Liabilities 6,969 6,481 Equity (6,969) (6,481) Total liabilities and equity ¥ — ¥ — June 30, Consolidated – Sojiya Japan 2023 2022 Assets ¥ 401 ¥ 472 Liabilities — — Equity 401 472 Total liabilities and equity ¥ 401 ¥ 472 Investment in Unconsolidated VIE and Other Equity Method Investments For the VIE that the Company does not consolidate, the power to direct the activities that most significantly impact the VIE’s economic performance is held by a third party. These entities are accounted for as equity method investments. The Company’s maximum exposure to loss is limited to its investment in the entities because the Company is not obligated to provide any additional capital to or guarantee any of the unconsolidated VIE’s debt. JP Shuhan is the only entity deemed an unconsolidated VIE and was deconsolidated for the fiscal years ended June 30, 2023 and 2022. The Company owned 66.7% of the entity prior to the deconsolidation. The Company did not have any other entities that would qualify under the equity method accounting. (Japanese yen in thousands) June 30, Unconsolidated – JP Shuhan 2023 2022 Assets ¥ 12,773 ¥ 10,511 Liabilities 4,015 3,428 Equity 8,758 7,083 Total liabilities and equity ¥ 12,773 ¥ 10,511 |
FAIR VALUE DISCLOSURES
FAIR VALUE DISCLOSURES | 12 Months Ended |
Jun. 30, 2023 | |
FAIR VALUE DISCLOSURES | |
FAIR VALUE DISCLOSURES | 11. ASC Topic 820, Fair Value Measurements , ASC 820 provides a framework for measuring fair value under U.S. GAAP, expands disclosures about fair value measurements, and establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the fair value hierarchy are summarized as follows: Level 1 – Level 2 – Level 3 – The Company utilizes fair value measurements to account for certain items and account balances within the consolidated financial statements. Fair value measurements may also be utilized on a non-recurring basis, such as for the impairment of long-lived assets. The fair value of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and certain accrued liabilities approximate their carrying amounts due to the short-term nature of these instruments. The Company’s Level 1 assets consist of cash and cash equivalents and investments in marketable securities in the accompanying consolidated balance sheets. The value of accounts payable and accrued expenses approximate fair value due to the short-term nature of these liabilities, and the carrying value of the Company’s long-term debt approximates fair value at each balance sheet date because the stated rate of interest of the debt approximates the market interest rate at which the Company can borrow similar debt. As of June 30, 2023 and 2022, the Company did not have any assets or liabilities measured at fair value classified as Level 2 or Level 3. The Company held investments in marketable securities of ¥31,561 thousand and ¥31,657 thousand as of June 30, 2023 and 2022, respectively. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Jun. 30, 2023 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | 12. On June 30, 2021, the Company borrowed ¥41,868 thousand from Mr. Eiji Nagahara, the Company’s chief executive officer, president, director, and representative director, with no interest rate. The Company repaid the debt in 2022 and there have been no other related party transactions since then. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Jun. 30, 2023 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 13. Contingencies In the ordinary course of business, the Company often includes standard indemnification provisions in its arrangements with third parties, including vendors, customers, investors, and the Company’s directors and officers. Pursuant to these provisions, the Company may be obligated to indemnify such parties for losses or claims suffered or incurred in connection with its activities or non-compliance with certain representations and warranties made by the Company. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. The Company is subject to claims or proceedings from time to time relating to the purchase, development and sale of real estate and homes and other aspects of its homebuilding operations. Management believes that these claims include usual obligations incurred by real estate developers and residential home builders in the normal course of business. In the opinion of management, these matters will not have a material effect on the Company’s consolidated financial position, results of operations or cash flows. Borrowings The Company has borrowings that are primarily made under general agreements. Refer to “Note 7. Notes Payable” for information about future debt payments. Legal Matters From time to time in the normal course of business, the Company may be subject to various legal matters, such as threatened or pending claims or proceedings. There were no such material matters as of and for the fiscal years ended June 30, 2023, 2022, and 2021. The Company has land purchase contracts, generally through cash deposits, for the right to purchase land or lots at a future point in time with predetermined terms. The Company does not have title to the property, and obligations with respect to the land purchase contracts are generally limited to the forfeiture of the related nonrefundable cash deposits. Lease Obligations Operating Leases The Company recognizes lease obligations and associated right-of-use assets for its existing non-cancelable leases. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company has non-cancelable operating leases primarily associated with its corporate and regional office facilities. Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. Variable lease costs such as common area costs and property taxes are expensed as incurred. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets. The lease term may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Right-of-use assets, as included in the consolidated balance sheets, were ¥204,029 thousand and ¥155,886 thousand as of June 30, 2023 and 2022, respectively. Lease obligations, as included in the consolidated balance sheets, were ¥276,228 thousand and ¥206,920 thousand as of June 30, 2023 and 2022, respectively. Operating lease cost, as included in general and administrative expenses in the Company’s consolidated statements of comprehensive income, totaled ¥61,848 thousand, ¥40,733 thousand, and ¥30,743 thousand for the fiscal years ended June 30, 2023, 2022, and 2021, respectively. Cash paid for the amounts included in the measurement of lease liabilities for operating leases for the fiscal years ended June 30, 2023, 2022, and 2021 was ¥62,652 thousand, ¥42,985 thousand, and ¥31,547 thousand, respectively. As of June 30, 2023 and 2022, the weighted-average discount rate was 3% and the Company’s weighted-average remaining life was 3.1 and 2.9 years, respectively. The Company did not have any significant lease contracts that had not yet commenced as of June 30, 2023 and 2022. The Company conducts its operations in leased facilities and recognizes rent expenses on a straight-line basis over the term of the lease. The Company entered into operating lease agreements for offices in Tokyo, Yokohama, and Sapporo, Japan. The following table (in thousands) presents the operating lease related assets and liabilities recorded on the Company’s balance sheets as of June 30, 2023 and 2022: June 30, 2023 2022 Right-of-use assets - non current ¥ 204,029 ¥ 155,886 Total operating lease assets ¥ 204,029 ¥ 155,886 Operating lease liabilities - current ¥ 88,755 ¥ 58,696 Operating lease liabilities – long-term 187,473 148,224 Total operating lease liabilities ¥ 276,228 ¥ 206,920 The table below shows the future minimum payments under non-cancelable operating leases at June 30, 2023 (in thousands): Year Ending December 31, Operating Leases 2024 ¥ 94,427 2025 79,464 2026 76,014 2027 34,036 2028 3,901 Thereafter 373 Total 288,215 Less: lease amount representing interest (11,987) Present value of lease liabilities ¥ 276,228 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Jun. 30, 2023 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 14. The Company has evaluated subsequent events after the consolidated balance sheet date through November 15, 2023, the date the consolidated financial statements were available for issuance. Management has determined that no significant events or transactions have occurred subsequent to the consolidated balance sheet date that require both recognition and disclosure in the consolidated financial statements, other than the following: Initial Public Offering On September 29, 2023, the Company completed its initial public offering of 1,143,000 American Depositary Shares (“ADSs”) at a price to the public of $7.00 per ADS. Each ADS represents one ordinary share of the Company. The ADSs are traded on the Nasdaq Global Market. The Company recognized aggregate net proceeds of approximately ¥1,092,434 thousand after deducting the underwriting discounts of ¥94,994 thousand, which net amount was credited to shareholders' equity. Dividend Payments On September 29, 2023, the Company paid an aggregate of ¥24,998 thousand (approximately $173,031) as cash dividends to shareholders. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Jun. 30, 2023 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements are presented in Japanese yen, the currency of the country in which the Company is incorporated and principally operates. The accompanying consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and include the accounts of the Company and its subsidiaries. |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of Lead Real Estate, its wholly owned subsidiaries, and the Company’s consolidated variable interest entities (“VIEs”) as described in the domestic and foreign operations above. All intercompany accounts and transactions have been eliminated in consolidation. Investments in companies over which the Company has significant influence, but not control, are accounted for by the equity method. The Company evaluates its investments and other significant relationships to determine whether any investee is a VIE. If the Company concludes that an investee is a VIE, the Company evaluates its power to direct the activities of the investees, its obligation to absorb the expected losses of the investee, and its right to receive the expected residual returns of the investee to determine whether the Company is the primary beneficiary of the investee. If the Company is the primary beneficiary of a VIE, the Company consolidates such entity and reflects the noncontrolling interest of other beneficiaries of that entity. See Note 10. |
Use of Estimates | Use of Estimates The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates, and these differences could have a significant impact on the financial statements. The significant accounting estimates include real estate inventory and cost of sales, impairment of real estate inventory and property and equipment, warranty reserves, loss contingencies, incentive compensation expenses, and deferred income taxes. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company applies a five-step model that requires entities to exercise judgment when considering the terms of the contract(s), which include (i) identifying the contract(s) with the customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (vi) allocating the transaction price to the separate performance obligations, and (v) recognizing revenue when each performance obligation is satisfied. Revenue from real estate sales is recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company generates revenue primarily from real estate sales, which includes the sale and development of land parcels and their respective single-family home and condominium buildings. Revenue from real estate sales is recorded at the time each sale is closed, title and possession are transferred to the customer and the Company has no significant continuing involvement with the real estate. The remaining sources of revenue, deemed insignificant as a percentage of total revenue or operating profits, consist of leasing, property and building management, hotel, and other miscellaneous revenue streams. Real Estate Sales The Company’s primary source of revenue is the development and sale of luxury single-family homes and condominiums, including land, in its principal market, Japan. Transactions in this segment are conducted through two contracts, a land sales contract (the “Land Sales Contract”) and a construction contract (the “Construction Contract”), which demarcate two distinct performance obligations, delivering a land parcel and delivering the completed building, respectively. The Land Sales Contract outlines the terms and condition of the land sale, while the Construction Contract summarizes the terms of the construction which the Company is to perform for the customer. When entering into a new build-to-suit transaction, the Land Sales Contract and the Construction Contract are executed concurrently. Under the Land Sales Contract, the Company bills customers (i) upon the execution of the contract and (ii) when control of the land is transferred to the customer, and customers generally pay within the same day of each billing. The Company does not record receivables under its Land Sales Contracts as the Company collects land sales revenue recognized within the same day. Under the Construction Contract, the Company bills customers (i) upon the execution of the contract and (ii) upon the transfer of a completed building to a buyer on the closing date, and customers generally pay within the same day of each billing. The Company records receivables under its Construction Contracts since construction development revenue is recognized over time based on the input method. The deposit made by the customer at the time of contract execution varies by contract and is generally either a fixed percentage of the aggregate sale price or a flat fee. Advances received are recorded under customer deposits. The Company generally sells the land based on market price plus a minor markup and sets the selling price per home based on cost plus margin. The Company has performed an assessment and its contracts do not contain significant financing terms. Performance obligations are satisfied at the point in time when control of the asset is transferred to the customer, which is generally when title to and possession of the land parcel or the completed building and the risks and rewards of ownership are transferred to the buyer on the closing date. Land sales revenue is recognized at the point in time when control of the land is transferred to the customer, which is generally when title and possession of the land parcel and the risks and rewards of ownership are transferred to the buyer on the closing date. When the transfer of a completed building to a buyer on the closing date is related to work as part of the Construction Contract the Company entered into with the buyer, construction development revenue is recognized over time based on the input method. In applying the input method, the Company utilizes costs incurred through the construction process relative to the total expected costs of construction to recognize revenue. The measures of progress during this construction process include: ● design meeting: where the customer decides on the floor plan and selects interior and exterior materials to be used for construction; ● construction preparation: where we begin site survey and project management assignments with subcontractors; ● completion of framework (basic building structure): where we complete the foundations of the home along with the basic structure; ● completion of remaining building elements: where each of the remaining building elements are completed and interim inspections are conducted; ● demolition of scaffolding: completion of exterior wall work and the start of home interior work; ● confirmation meeting with customer: completion of interior and exterior work and all outstanding work related to the home; and ● property delivery: delivery of the home, including final modification work as requested by the customer. The Company uses these measures of progress to delineate costs incurred by it during the home construction process. The amount of costs incurred in each stage of the construction process are divided against the Company’s total expected construction costs and the ratios from such calculation are applied against the total contract value to recognize revenue over time according to the input method. With the land title transferred to the buyer upon the closing of the Land Sales Contract, the Company’s construction of the building on the land both creates and enhances a customer-controlled asset and leads to the buyer receiving and benefiting from the Company’s performance obligation as the work under the Construction Contract is conducted. When the transfer of a completed building to a buyer on the closing date is related to sales of existing fully constructed single-family homes and condominiums the Company did not develop, non-development revenue is recognized at a point in time, upon the execution of the sales contract. The Company’s contract liabilities, consisting of deposits received from customers for sold but undelivered homes, totaled ¥298,956 thousand and ¥284,975 thousand as of June 30, 2023 and 2022, respectively. Out of the outstanding customer deposits held as of June 30, 2023 and 2022, the Company recognized ¥255,300 thousand and ¥143,043 thousand in real estate sales during the fiscal years ended June 30, 2023 and 2022, respectively. Revenue includes forfeited deposits, which occur when home sale or land sale contracts that include a nonrefundable deposit are cancelled. Sales and broker commissions are incremental costs incurred to obtain a contract with a customer that would not have been incurred if the contract had not been obtained. Sales and broker commissions are expensed upon fulfillment of a home closing. Advertising costs are costs to obtain a contract that would have been incurred regardless of whether the contract was obtained and are recognized as an expense when incurred. Sales and broker commissions and advertising costs are recorded within sales and marketing expenses presented in the Company’s consolidated statements of comprehensive income as selling expenses. The Company issues a standard industry warranty against defects for period of 10 years for its single-family homes and condominiums. This warranty requirement against defects is not a performance obligation as it exists to protect customers from the risk of purchasing defective products and is not an additional service provided to the customer. Disaggregation of Revenue Revenue is disaggregated among land and non-development, construction development, and other revenue. Land sales and non-development revenue includes (i) sales of land for single-family homes and condominiums and (ii) sales of already completed single-family homes and condominiums that the Company did not develop, where delivery is recorded, and subsequent revenue recognized, through a signed sales contract with the end buyer. Construction development revenue reflects revenue from the Company’s Construction Contracts for which the Company actually performs. The Company’s revenue, disaggregated by revenue stream for the fiscal years ended June 30, 2023, 2022, and 2021 was as follows (in thousands): For the Fiscal Years Ended June 30, 2023 2022 2021 Land sale and non-development ¥ 15,730,839 ¥ 12,147,506 ¥ 9,624,106 Construction development 1,394,469 1,960,949 1,466,672 Real estate sales revenue ¥ 17,125,308 ¥ 14,108,455 ¥ 11,090,778 Other Revenue The Company generates other revenue, which includes leasing income, property and building management income, and revenue from other miscellaneous sources. The primary components of revenue for the fiscal years ended June 30, 2023, 2022, and 2021 were as follows (in thousands): For the Fiscal Years Ended June 30, 2023 2022 2021 Lease 75,775 65,391 87,436 Property management 22,544 30,426 36,244 Other 218,621 116,914 40,817 Other revenue ¥ 316,940 ¥ 212,731 ¥ 164,497 |
Foreign Operations | Foreign Operations The Company’s reporting and functional currency is the Japanese yen. The functional currency of the Company’s wholly owned subsidiary, Real Vision, is the Japanese yen, whereas the functional currency of LRE Dallas and LRE Cayman is the United States dollar. The functional currency of LRE HK is the Hong Kong Dollar. The functional currency of the Company’s consolidated VIE, Sojiya Japan, and unconsolidated VIE, JP Shuhan, is the Japanese yen. Assets and liabilities are translated using the fiscal year end foreign exchange rate, and income and expenses are translated using the weighted average exchange rate for the period. Foreign currency translation adjustments related to the financial statements of foreign subsidiaries, net of related income tax effects, are credited or charged directly to the foreign currency translation adjustment account, a component of accumulated other comprehensive gain (loss). The tax effects related to the foreign currency translation of financial statements of the consolidated subsidiaries and VIEs are not recognized unless it is apparent that the temporary differences will reverse in the foreseeable future. Monetary assets and liabilities denominated in currencies other than the functional currency are remeasured into the functional currency of the respective entity at the fiscal year-end foreign exchange rate, and gains and losses resulting from such remeasurement are included in foreign exchange gain (loss). Foreign currency denominated income and expenses are remeasured using the average exchange rate for the period. The effects of translation and remeasurement related to foreign currency transactions are recorded in the statements of comprehensive income. |
Emerging Growth Company Status | Emerging Growth Company Status The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. |
Concentration of Credit Risk and Significant Vendors | Concentration of Credit Risk and Significant Vendors Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains its cash and cash equivalents at high-quality and accredited financial institutions. Generally, these deposits may be redeemed upon demand and, therefore, bear minimal risk. The Company has not experienced any losses of such amounts and management believes it is not exposed to any significant credit risk beyond the normal credit risk associated with its cash and cash equivalents. No single customer accounted for 10% or more of the Company’s total revenue for the fiscal years ended June 30, 2023, 2022, and 2021. No single contractor accounted for 10% or more of the Company’s total cost for the fiscal year ended June 30, 2023. Approximately 20% of the Company’s outstanding accounts payable was attributable to Kabushiki Kaisha Kenshin for the fiscal years ended June 30, 2022 and 2021. |
Segment Reporting | Segment Reporting ASC Topic 280, Segment Reporting The Company’s primary and sole operating segment is real estate sales, with the balance of revenue categorized under real estate sales. |
Noncontrolling Interest | Noncontrolling Interest The Company’s noncontrolling interests reflect consolidation effects of LRE Cayman and Sojiya Japan. Losses attributable to these noncontrolling interests are presented in the consolidated statements of comprehensive income as net loss attributable to the noncontrolling interests. |
Cash and Cash Equivalents and Concentration of Credit Risk | Cash and Cash Equivalents and Concentration of Credit Risk Cash and cash equivalents are defined as cash on hand, demand deposits with financial institutions, and short-term liquid investments with an initial maturity date of less than three months. The Company’s cash and cash equivalents accounts may exceed Japanese government insured limits, up to ¥10,000 thousand, from time to time and could be negatively impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or diminished access to cash in its demand deposit accounts. |
Accounts Receivable | Accounts Receivable The Company’s accounts receivable consists primarily of receivables from general contractors and subcontractors, and receivables resulting from the implementation of Accounting Standards Codification 606, Revenue from Contracts with Customers |
Real Estate Inventory | Real Estate Inventory Inventories consist of raw entitled land, finished lots, and construction in process (“CIP”), including capitalized interest. Inventory is stated at cost unless the carrying amount is determined not to be recoverable, in which case the affected inventory is written down to fair value. Inventories include the costs of direct land acquisition, land development, construction, capitalized interest, real estate taxes, and direct overhead costs incurred related to land acquisition and development and single-family home and condominium construction. Indirect overhead costs are charged to selling, general, and administrative expenses as incurred. Land and development costs are typically allocated to individual lots on a pro rata basis based on the number of lots in the development, and the costs of lots are transferred to construction work in progress when construction begins. Sold units are expensed on a specific identification basis as cost of contract revenue earned. Cost of contract revenue earned for single-family homes and condominiums closed includes the specific construction costs of each single-family home or condominium and all applicable land acquisition, land development, and related costs allocated to each residential lot. Inventories are carried at the lower of accumulated cost or net realizable value. Land, development, and other project costs, including interest and property taxes incurred during development and home construction, net of expected reimbursable development costs, are capitalized to real estate inventory. Land development and other common costs that benefit the entire community, including field construction supervision and related direct overhead, are allocated to individual lots or homes, as appropriate. The costs of lots are transferred to homes in progress when home construction begins. Home construction costs and related carrying charges are allocated to the cost of individual homes using the specific identification method. Costs that are not specifically identifiable to a home are allocated on a pro rata basis, which the Company believes approximate the costs that would be determined using an allocation method based on relative sales values since the individual lots or homes within a community are similar in value. Inventory costs for completed homes are expensed to cost of sales as homes are closed. Changes to estimated total development costs subsequent to initial home closings in a community are generally allocated to the remaining unsold lots and homes in the community on a pro rata basis. In accordance with ASC Topic 360, Property, Plant, and Equipment |
Capitalized Interest | Capitalized Interest Interest and other financing costs are capitalized as cost of inventory during community development and home construction activities, in accordance with ASC Topic 835, Interest |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets Long-lived assets, such as property and equipment and finite-lived intangible assets are reviewed for impairment whenever events and circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. In making these determinations, the Company uses certain assumptions, including, but not limited to: (i) estimated fair value of the assets; and (ii) estimated, undiscounted future cash flows expected to be generated by these assets, which are based on additional assumptions such as asset utilization, length of service, the asset will be used in the Company’s operations, and (iii) estimated residual values. Fair value is determined using various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. There were no events or circumstances identified during the fiscal years ended June 30, 2023, 2022, and 2021 that required the Company to perform a quantitative impairment assessment. The Company’s assumptions about future conditions important to its assessment of potential impairment of its long-lived assets are subject to uncertainty, and the Company will continue to monitor these conditions in future periods as new information becomes available. There were no impairments of property, equipment, intangible assets, and leasehold improvements during the fiscal years ended June 30, 2023, 2022, and 2021. |
Investment at cost | Investment at cost The equity method is generally used to account for equity investments over which significant influence, but not majority equity interest or control, is exerted in an investee company. Generally, the accompanying shareholding is between 20% and 50% of the voting rights. The share of earnings or losses of the investee are recognized in the consolidated statements of comprehensive income. The Company did not have any investment that would be accounted for under the equity method in the fiscal years ended June 30, 2023, 2022, and 2021. Investments in equity securities in which the Company does not have significant influence, and for which there is not a readily determinable fair value, are recorded at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments in the same issuer. When the Company evaluates whether these non-marketable equity securities are impaired, the Company evaluates first whether an event or change in circumstances has occurred in the period that may have a significant adverse effect on the fair value of the securities (an impairment indicator). The Company uses such impairment indicators as follows: 1) a significant deterioration in the earnings performance or business prospects of the investee; 2) a significant adverse change in the regulatory, economic, or technological environment of the investee; 3) a significant adverse change in the general market condition of either the geographic area or the industry in which the investee operates; and 4) a recent example of the new issuance of a security, in which the issue price is less than its cost. The Company estimates the fair value of the non-marketable equity securities when an impairment indicator is present. The fair value is determined by considering various unobservable inputs which are available to the Company, including expectation of future income of the investees, net asset value of the investees, and material unrealized losses to be considered in assets and liabilities held by the investees. The Company recognizes impairment of non-marketable equity securities when the fair value is below the carrying amount and the decline in fair value is considered to be other-than-temporary. The carrying amount of non-marketable securities is recorded at cost as fair value is not readily determinable. The investment at cost amount was ¥20,831 thousand and ¥16,850 thousand as of June 30, 2023 and 2022, respectively. The Company did not recognize any impairment during these periods. |
Warranty Reserve | Warranty Reserve Future direct warranty costs are accrued and charged to cost of sales in the period when the related home is closed. The Company provides a limited warranty for its single-family homes and condominiums for a period of 10 years. The Company’s standard warranty requires the Company or its subcontractors to repair or replace defective construction during such warranty period at no cost to the homebuyer. At the time a home is sold, the Company records an estimate of warranty expense based on historical warranty costs. An analysis of the warranty reserve is performed periodically to ensure the adequacy of the reserve. The warranty reserve was ¥46,116 thousand and ¥54,302 thousand as of June 30, 2023 and 2022, respectively, and was included in accrued expenses and other current liabilities on the consolidated balance sheets. |
Customer Deposits | Customer Deposits Customer deposits are amounts collected from customers in conjunction with the execution of the single-family home or condominium sales contract. Customer deposits represent advances received on construction contracts in progress and are applied against the final settlement due at the home closing. In the event of contract default or termination, the customer deposit is forfeited and recognized as revenue. The customer deposits were ¥298,956 thousand and ¥284,975 thousand as of June 30, 2023 and 2022, respectively. |
Cost of Sales | Cost of Sales Cost of sales includes the lot purchase costs and demolition costs associated with each lot, construction costs of each home, capitalized interest, building permits and other local municipality related costs, internal and external realtor commissions, and warranty costs (both incurred and estimated to be incurred). Land, development, and other allocated costs, including interest and property taxes, incurred during development and construction are capitalized and expensed to cost of sales when the sale of a single-family home or condominium is closed, and revenue is recognized. |
Selling and Commission Costs | Selling and Commission Costs Sales commissions are paid and expensed based on homes closed. Other selling costs are expensed in the period incurred. |
Advertising Costs | Advertising Costs Advertising costs are expensed as incurred. Advertising costs were ¥30,507 thousand, ¥39,341 thousand, and ¥28,374 thousand recorded as selling, general and administrative expenses in the Consolidated Statements of Comprehensive Income for the fiscal years ended June 30, 2023, 2022, and 2021, respectively. |
Income Taxes | Income Taxes Income taxes are computed in accordance with the provision of ASC Topic, 740, Income Taxes The Company recognizes deferred tax assets to the extent that these assets are believed to be more likely than not to be realized. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are more likely than not expected to be realized. In making such a determination, all available positive and negative evidence is considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. Tax benefits for uncertain tax positions are based upon management’s evaluation of the information available at the reporting date. To be recognized in the consolidated financial statements, a tax benefit must be at least more likely than not of being sustained based on technical merits. The benefit for positions meeting the recognition threshold is measured as the largest benefit more likely than not of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. |
Earnings Per Share | Earnings Per Share In accordance with ASC 260-10, Earnings Per Share |
Recently Announced Accounting Standards | Recently Announced Accounting Standards Income Taxes In December 2019, the FASB issued ASU 2019-12, Income Taxes — Simplifying the Accounting for Income Taxes Credit Losses In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses Measurement of Credit Losses on Financial Instruments Acquired Contract Assets and Contract Liabilities In October 2021, the FASB issued ASU 2021-08, Business Combinations Accounting for Acquired Contract Assets and Contract Liabilities Investments In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topics 321, 323 and 815. The new standard addresses accounting for the transition into and out of the equity method and measurement of certain purchased options and forward contracts to acquire investments. The standard is effective for the Company for fiscal years and interim periods beginning after December 15, 2021, with early adoption permitted. Adoption of the standard requires changes to be made prospectively. The adoption of the standard did not have a material effect on the Company’s consolidated financial statements. Reference Rate Reform On January 7, 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope Reference Rate Reform |
ORGANIZATION AND BUSINESS (Tabl
ORGANIZATION AND BUSINESS (Tables) | 12 Months Ended |
Jun. 30, 2023 | |
ORGANIZATION AND BUSINESS | |
Schedule of consolidated financial statements of the Company and the entities | Percentage of Date of Incorporation or Place of direct or indirect Name Acquisition Incorporation economic ownership Subsidiaries Lead Real Estate Global Co., Ltd (“LRE Dallas”) September 2017 Texas 100% by Lead Real Estate Lead Real Estate HK Co., Limited (“LRE HK”) February 2014 Hong Kong 100% by Lead Real Estate Real Vision Co., Ltd. (“Real Vision”) July 2006 Japan 100% by Lead Real Estate Consolidated VIEs Lead Real Estate Cayman Limited (“LRE Cayman”) August 2019 Cayman Islands 100% by CEO Sojiya Japan K.K. January 2020 Japan 50% by Lead Real Estate and 50% by CEO Unconsolidated VIE JP Shuhan Co., Ltd. (“JP Shuhan”) January 2020 Japan 100% by CEO, deconsolidated |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Jun. 30, 2023 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of revenue | The Company’s revenue, disaggregated by revenue stream for the fiscal years ended June 30, 2023, 2022, and 2021 was as follows (in thousands): For the Fiscal Years Ended June 30, 2023 2022 2021 Land sale and non-development ¥ 15,730,839 ¥ 12,147,506 ¥ 9,624,106 Construction development 1,394,469 1,960,949 1,466,672 Real estate sales revenue ¥ 17,125,308 ¥ 14,108,455 ¥ 11,090,778 For the Fiscal Years Ended June 30, 2023 2022 2021 Lease 75,775 65,391 87,436 Property management 22,544 30,426 36,244 Other 218,621 116,914 40,817 Other revenue ¥ 316,940 ¥ 212,731 ¥ 164,497 |
REAL ESTATE INVENTORY (Tables)
REAL ESTATE INVENTORY (Tables) | 12 Months Ended |
Jun. 30, 2023 | |
REAL ESTATE INVENTORY | |
Schedule of real estate inventory | Real estate inventory consisted of the following as of June 30, 2023 and 2022 (in thousands): June 30, 2023 2022 Real estate, including land ¥ 10,089,739 ¥ 8,192,861 Construction in progress 311,901 652,918 Real estate inventory ¥ 10,401,640 ¥ 8,845,779 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Jun. 30, 2023 | |
PROPERTY AND EQUIPMENT | |
Schedule of property and equipment | As of June 30, 2023 and 2022, property and equipment consisted of the following (in thousands): June 30, Useful Life 2023 2022 (years) Land Infinite 1,792,025 1,006,622 Property and Buildings 4-47 ¥ 1,273,946 ¥ 669,102 Machinery and Equipment 10-17 156,580 158,104 Tools, Furniture, and Fixtures 4-20 32,738 22,945 Construction in progress 147,147 300,035 Less: Accumulated depreciation (166,145) (107,752) Property and equipment, net ¥ 3,236,291 ¥ 2,049,056 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended |
Jun. 30, 2023 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
Schedule of accrued and other current liabilities | Accrued expenses and other current liabilities consisted of the following as of June 30, 2023 and 2022 (in thousands): June 30, 2023 2022 Income taxes payable ¥ 190,453 ¥ 241,245 Warranty reserves 46,116 54,302 Other deposits received 4,029 4,716 Accrued vacation 3,442 1,561 Other current liabilities 5,308 3,530 Accrued expenses and other current liabilities ¥ 249,348 ¥ 305,354 |
WARRANTY RESERVES (Tables)
WARRANTY RESERVES (Tables) | 12 Months Ended |
Jun. 30, 2023 | |
WARRANTY RESERVES | |
Schedule of changes to warranty reserves | Changes to warranty reserves were as follows for the fiscal years ended June 30, 2023, 2022, and 2021 (in thousands): For the Fiscal Years Ended June 30, 2023 2022 2021 Warranty reserves, beginning of period ¥ 54,302 ¥ 24,009 ¥ 27,500 Warranty provision 6,489 47,899 201 Warranty expenditures (14,675) (17,606) (3,692) Warranty reserves, end of period ¥ 46,116 ¥ 54,302 ¥ 24,009 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 12 Months Ended |
Jun. 30, 2023 | |
NOTES PAYABLE | |
Schedule of notes payable | Notes payable consisted of the following as of June 30, 2023 (in thousands): Original Annual Amount Interest Borrowed Loan Duration Rate Amount Lender 1 2,124,821 1/15/2020-5/31/2057 2.753 % ¥ 1,719,187 Lender 2 2,220,400 9/27/2018-6/4/2025 3.727 % 1,632,000 Lender 3 977,000 1/30/2023-7/29/2023 2.700 % 957,000 Lender 4 872,400 10/21/2022-4/30/2025 3.500 % 872,400 Lender 5 874,800 7/7/2022-5/30/2025 1.674 % 813,800 Other lenders 7,672,402 3/23/2016-4/30/2052 0.46%-6.00 % 5,401,037 Aggregate outstanding principal balances 11,336,824 Less: current portion and short-term notes payable 5,899,156 Long-term portion of notes payable ¥ 5,437,668 Notes payable consisted of the following as of June 30, 2022 (in thousands): Original Annual Amount Interest Borrowed Loan Duration Rate Amount Lender 1 ¥ 1,988,100 8/24/2018-6/5/2023 3.45-3.60 % ¥ 1,869,100 Lender 2 ¥ 1,441,200 1/15/2020-12/31/2029 2.60-3.00 % 1,176,290 Lender 3 ¥ 340,000 12/27/2017-8/25/2032 1.65-2.35 % 569,250 Lender 4 ¥ 485,000 10/30/2020-7/31/2024 2.80 % 482,915 Lender 5 ¥ 480,000 6/10/2022-6/17/2024 2.50 % 480,000 Other lenders ¥ 4,285,366 3/23/2016-4/30/2052 0.46-6.00 % 4,015,404 Aggregate outstanding principal balances 8,592,959 Less: current portion and short-term note payable 6,361,415 Long-term portion of notes payable ¥ 2,231,544 |
Schedule of annual aggregate maturities of notes payable during each of the next five years | As of June 30, 2023, the annual aggregate maturities of notes payable during each of the next five years were as follows (in thousands): Amount 2024 ¥ 5,899,156 2025 3,137,152 2026 688,647 2027 100,332 2028 100,674 Thereafter 1,410,863 Total notes payable ¥ 11,336,824 |
Schedule of interest activity, including other financing costs for notes payable | Interest activity, including other financing costs for notes payable for the periods presented is as follows (in thousands): For the Fiscal Years Ended June 30, 2023 2022 2021 Interest incurred ¥ 191,612 ¥ 211,206 ¥ 177,232 Less: Amounts capitalized (174,881) (187,873) (120,582) Interest expense ¥ 16,731 ¥ 23,333 ¥ 56,650 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Jun. 30, 2023 | |
INCOME TAXES | |
Schedule of components of income tax expenses | The components of income tax expenses were as follows as of June 30, 2023, 2022, and 2021 (in thousands): For the Fiscal Years Ended June 30, 2023 2022 2021 Current ¥ 314,021 ¥ 294,418 ¥ 128,103 Deferred 8,744 (10,939) 6,766 Total ¥ 322,765 ¥ 283,479 ¥ 134,869 |
Schedule of reconciliation of income tax expenses to the amount of income tax benefit at the statutory rate | For the Fiscal Years Ended June 30, 2023 2022 2021 Statutory tax rate 30.6 % 30.6 % 30.6 % Deductions and other adjustments 6.9 % 5.5 % 2.2 % Effective tax rate 37.5 % 36.1 % 32.8 % |
Schedule of primary components of deferred tax assets and liabilities | The primary components of deferred tax assets and liabilities were as follows as of June 30, 2023 and 2022 (in thousands): June 30, 2023 2022 Deferred tax assets: Reserves and Allowances ¥ 61,842 ¥ 56,349 Intangibles 11,331 14,393 Inventories — 5,291 Investments in securities 14,646 14,719 Asset retirement obligation 2,495 1,862 Leases 944 1,275 Other 16,711 14,039 Total deferred tax assets 107,969 107,928 Deferred tax liabilities: Inventories 150,082 138,445 Property and equipment 26,377 29,341 Prepaid Expenses 108 107 Intangible assets, including software 5,118 6,611 Leases 723 — Advances received — — Other 881 — Total deferred tax liabilities 183,289 174,504 Net deferred tax liabilities ¥ 75,320 ¥ 66,576 |
VARIABLE INTEREST ENTITIES (Tab
VARIABLE INTEREST ENTITIES (Tables) | 12 Months Ended |
Jun. 30, 2023 | |
VARIABLE INTEREST ENTITIES | |
Schedule of carrying amounts of the assets and liabilities related to the consolidated and unconsolidated VIEs | The table below displays the carrying amounts of the assets and liabilities related to the consolidated VIEs as of June 30, 2023 and 2022 (in thousands): June 30, Consolidated – LRE Cayman 2023 2022 Assets ¥ — ¥ — Liabilities 6,969 6,481 Equity (6,969) (6,481) Total liabilities and equity ¥ — ¥ — June 30, Consolidated – Sojiya Japan 2023 2022 Assets ¥ 401 ¥ 472 Liabilities — — Equity 401 472 Total liabilities and equity ¥ 401 ¥ 472 (Japanese yen in thousands) June 30, Unconsolidated – JP Shuhan 2023 2022 Assets ¥ 12,773 ¥ 10,511 Liabilities 4,015 3,428 Equity 8,758 7,083 Total liabilities and equity ¥ 12,773 ¥ 10,511 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Jun. 30, 2023 | |
COMMITMENTS AND CONTINGENCIES | |
Schedule of operating lease related assets and liabilities recorded on the Company's balance sheets | The following table (in thousands) presents the operating lease related assets and liabilities recorded on the Company’s balance sheets as of June 30, 2023 and 2022: June 30, 2023 2022 Right-of-use assets - non current ¥ 204,029 ¥ 155,886 Total operating lease assets ¥ 204,029 ¥ 155,886 Operating lease liabilities - current ¥ 88,755 ¥ 58,696 Operating lease liabilities – long-term 187,473 148,224 Total operating lease liabilities ¥ 276,228 ¥ 206,920 |
Schedule of future minimum payments under non-cancelable operating leases | The table below shows the future minimum payments under non-cancelable operating leases at June 30, 2023 (in thousands): Year Ending December 31, Operating Leases 2024 ¥ 94,427 2025 79,464 2026 76,014 2027 34,036 2028 3,901 Thereafter 373 Total 288,215 Less: lease amount representing interest (11,987) Present value of lease liabilities ¥ 276,228 |
ORGANIZATION AND BUSINESS (Deta
ORGANIZATION AND BUSINESS (Details) | 12 Months Ended |
Jun. 30, 2023 | |
JP Shuhan Co., Ltd. ("JP Shuhan") | CEO | |
ORGANIZATION AND BUSINESS | |
Percentage of direct or indirect economic ownership interest in Unconsolidated VIEs and CEO | 100% |
Lead Real Estate Cayman Limited ("LRE Cayman") | CEO | |
ORGANIZATION AND BUSINESS | |
Percentage of direct or indirect economic ownership interest in Consolidated VIEs | 100% |
Sojiya Japan K.K. | |
ORGANIZATION AND BUSINESS | |
Percentage of direct or indirect economic ownership interest in Consolidated VIEs | 50% |
Sojiya Japan K.K. | CEO | |
ORGANIZATION AND BUSINESS | |
Percentage of direct or indirect economic ownership interest in Consolidated VIEs | 50% |
Lead Real Estate Global Co., Ltd ("LRE Dallas") | |
ORGANIZATION AND BUSINESS | |
Percentage of direct or indirect economic ownership interest in Subsidiaries | 100% |
Lead Real Estate HK Co., Limited ("LRE HK") | |
ORGANIZATION AND BUSINESS | |
Percentage of direct or indirect economic ownership interest in Subsidiaries | 100% |
Real Vision Co., Ltd. ("Real Vision") | |
ORGANIZATION AND BUSINESS | |
Percentage of direct or indirect economic ownership interest in Subsidiaries | 100% |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition (Details) ¥ in Thousands | 12 Months Ended | ||
Jun. 30, 2023 JPY (¥) item contract | Jun. 30, 2022 JPY (¥) | Jun. 30, 2021 JPY (¥) | |
Revenue Recognition | |||
Number of contracts conducted | contract | 2 | ||
Number of distinct performance obligations | item | 2 | ||
Contract liabilities, consisting of deposits received from customers for sold but undelivered homes | ¥ 298,956 | ¥ 284,975 | |
Amount of revenue recognized | ¥ 255,300 | 143,043 | |
Standard industry warranty period (in years) | 10 years | ||
Limited Warranty Term | 10 years | ||
Revenue | ¥ 17,442,248 | 14,321,186 | ¥ 11,255,275 |
Real estate sales revenue | |||
Revenue Recognition | |||
Revenue | 17,125,308 | 14,108,455 | 11,090,778 |
Land sale and non-development | |||
Revenue Recognition | |||
Revenue | 15,730,839 | 12,147,506 | 9,624,106 |
Construction development | |||
Revenue Recognition | |||
Revenue | 1,394,469 | 1,960,949 | 1,466,672 |
Other revenue | |||
Revenue Recognition | |||
Revenue | 316,940 | 212,731 | 164,497 |
Lease | |||
Revenue Recognition | |||
Revenue | 75,775 | 65,391 | 87,436 |
Property management | |||
Revenue Recognition | |||
Revenue | 22,544 | 30,426 | 36,244 |
Other | |||
Revenue Recognition | |||
Revenue | ¥ 218,621 | ¥ 116,914 | ¥ 40,817 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concentration of Credit Risk and Significant Vendors (Details) | 12 Months Ended |
Jun. 30, 2022 | |
Accounts payable | Vendor concentration risk | Kabushiki Kaisha Kenshin | |
Concentration of Credit Risk and Significant Vendors | |
Concentration risk (in percent) | 20% |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Accounts Receivable (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2023 | Jun. 30, 2022 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Allowance for doubtful accounts related to accounts receivable | ¥ 6,009 | ¥ 1,200 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Real Estate Inventory (Details) - JPY (¥) ¥ in Thousands | 12 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Amount of impairment recognized | ¥ 0 | ¥ 0 | |
Other expenses | |||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Amount of impairment recognized | ¥ 18,092 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Impairment of Long-Lived Assets (Details) - JPY (¥) ¥ in Thousands | 12 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Impairment charges | ¥ 0 | ¥ 0 | ¥ 0 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Investment at cost (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2023 | Jun. 30, 2022 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Investments | ¥ 20,831 | ¥ 16,850 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Warranty Reserve (Details) - JPY (¥) ¥ in Thousands | 12 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Limited warranty term | 10 years | |
Warranty reserve | ¥ 46,116 | ¥ 54,302 |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Customer Deposits (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2023 | Jun. 30, 2022 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Customer deposits | ¥ 298,956 | ¥ 284,975 |
SUMMARY OF SIGNIFICANT ACCOU_12
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Advertising Costs (Details) - JPY (¥) ¥ in Thousands | 12 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2021 | |
Selling, general and administrative expenses | |||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Advertising costs | ¥ 30,507 | ¥ 39,341 | ¥ 28,374 |
REAL ESTATE INVENTORY (Details)
REAL ESTATE INVENTORY (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2023 | Jun. 30, 2022 |
REAL ESTATE INVENTORY | ||
Real estate, including land | ¥ 10,089,739 | ¥ 8,192,861 |
Construction in progress | 311,901 | 652,918 |
Real estate inventory | ¥ 10,401,640 | ¥ 8,845,779 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2023 | Jun. 30, 2022 |
PROPERTY AND EQUIPMENT | ||
Less: Accumulated depreciation | ¥ (166,145) | ¥ (107,752) |
Property and equipment, net | 3,236,291 | 2,049,056 |
Land | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | 1,792,025 | 1,006,622 |
Property and Buildings | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | ¥ 1,273,946 | 669,102 |
Property and Buildings | Minimum | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, useful life (in years) | 4 years | |
Property and Buildings | Maximum | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, useful life (in years) | 47 years | |
Machinery and Equipment | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | ¥ 156,580 | 158,104 |
Machinery and Equipment | Minimum | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, useful life (in years) | 10 years | |
Machinery and Equipment | Maximum | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, useful life (in years) | 17 years | |
Tools, Furniture, and Fixtures | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | ¥ 32,738 | 22,945 |
Tools, Furniture, and Fixtures | Minimum | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, useful life (in years) | 4 years | |
Tools, Furniture, and Fixtures | Maximum | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, useful life (in years) | 20 years | |
Construction in progress | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment, gross | ¥ 147,147 | ¥ 300,035 |
PROPERTY AND EQUIPMENT - Narrat
PROPERTY AND EQUIPMENT - Narrative (Details) - JPY (¥) ¥ in Thousands | 12 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2021 | |
PROPERTY AND EQUIPMENT | |||
Depreciation expenses | ¥ 56,881 | ¥ 30,263 | ¥ 30,226 |
ACCRUED EXPENSES AND OTHER CU_3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2023 | Jun. 30, 2022 |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | ||
Income taxes payable | ¥ 190,453 | ¥ 241,245 |
Warranty reserves | 46,116 | 54,302 |
Other deposits received | 4,029 | 4,716 |
Accrued vacation | 3,442 | 1,561 |
Other current liabilities | 5,308 | 3,530 |
Accrued expenses and other current liabilities | ¥ 249,348 | ¥ 305,354 |
WARRANTY RESERVES (Details)
WARRANTY RESERVES (Details) - JPY (¥) ¥ in Thousands | 12 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2021 | |
Changes to warranty reserves | |||
Warranty reserves, beginning of period | ¥ 54,302 | ¥ 24,009 | ¥ 27,500 |
Warranty provision | 6,489 | 47,899 | 201 |
Warranty expenditures | (14,675) | (17,606) | (3,692) |
Warranty reserves, end of period | ¥ 46,116 | ¥ 54,302 | ¥ 24,009 |
Warranty term of house | 1 year | ||
Limited warranty term for major defects in structural elements | 10 years |
NOTES PAYABLE - Outstanding amo
NOTES PAYABLE - Outstanding amounts (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2023 | Jun. 30, 2022 |
NOTES PAYABLE | ||
Aggregate outstanding principal balances | ¥ 11,336,824 | ¥ 8,592,959 |
Less: current portion and short-term notes payable | 5,899,156 | 6,361,415 |
Long-term portion of notes payable | 5,437,668 | 2,231,544 |
Lender 1 | ||
NOTES PAYABLE | ||
Original Amount Borrowed | ¥ 2,124,821 | 1,988,100 |
Annual Interest Rate | 2.753% | |
Aggregate outstanding principal balances | ¥ 1,719,187 | ¥ 1,869,100 |
Lender 1 | Minimum | ||
NOTES PAYABLE | ||
Annual Interest Rate | 3.45% | |
Lender 1 | Maximum | ||
NOTES PAYABLE | ||
Annual Interest Rate | 3.60% | |
Lender 2 | ||
NOTES PAYABLE | ||
Original Amount Borrowed | ¥ 2,220,400 | ¥ 1,441,200 |
Annual Interest Rate | 3.727% | |
Aggregate outstanding principal balances | ¥ 1,632,000 | ¥ 1,176,290 |
Lender 2 | Minimum | ||
NOTES PAYABLE | ||
Annual Interest Rate | 2.60% | |
Lender 2 | Maximum | ||
NOTES PAYABLE | ||
Annual Interest Rate | 3% | |
Lender 3 | ||
NOTES PAYABLE | ||
Original Amount Borrowed | ¥ 977,000 | ¥ 340,000 |
Annual Interest Rate | 2.70% | |
Aggregate outstanding principal balances | ¥ 957,000 | ¥ 569,250 |
Lender 3 | Minimum | ||
NOTES PAYABLE | ||
Annual Interest Rate | 1.65% | |
Lender 3 | Maximum | ||
NOTES PAYABLE | ||
Annual Interest Rate | 2.35% | |
Lender 4 | ||
NOTES PAYABLE | ||
Original Amount Borrowed | ¥ 872,400 | ¥ 485,000 |
Annual Interest Rate | 3.50% | 2.80% |
Aggregate outstanding principal balances | ¥ 872,400 | ¥ 482,915 |
Lender 5 | ||
NOTES PAYABLE | ||
Original Amount Borrowed | ¥ 874,800 | ¥ 480,000 |
Annual Interest Rate | 1.674% | 2.50% |
Aggregate outstanding principal balances | ¥ 813,800 | ¥ 480,000 |
Other lenders | ||
NOTES PAYABLE | ||
Original Amount Borrowed | 7,672,402 | 4,285,366 |
Aggregate outstanding principal balances | ¥ 5,401,037 | ¥ 4,015,404 |
Other lenders | Minimum | ||
NOTES PAYABLE | ||
Annual Interest Rate | 0.46% | 0.46% |
Other lenders | Maximum | ||
NOTES PAYABLE | ||
Annual Interest Rate | 6% | 6% |
NOTES PAYABLE - Annual aggregat
NOTES PAYABLE - Annual aggregate maturities of notes payable (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2023 | Jun. 30, 2022 |
NOTES PAYABLE | ||
2024 | ¥ 5,899,156 | |
2025 | 3,137,152 | |
2026 | 688,647 | |
2027 | 100,332 | |
2028 | 100,674 | |
Thereafter | 1,410,863 | |
Total notes payable | ¥ 11,336,824 | ¥ 8,592,959 |
NOTES PAYABLE - Interest activi
NOTES PAYABLE - Interest activity (Details) - JPY (¥) ¥ in Thousands | 12 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2021 | |
NOTES PAYABLE | |||
Capitalized interest included in real estate inventory | ¥ 250,151 | ¥ 304,545 | ¥ 138,983 |
Interest incurred | 191,612 | 211,206 | 177,232 |
Less: Amounts capitalized | (174,881) | (187,873) | (120,582) |
Interest expense | ¥ 16,731 | ¥ 23,333 | ¥ 56,650 |
INCOME TAXES (Details)
INCOME TAXES (Details) - JPY (¥) ¥ in Thousands | 12 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2021 | |
INCOME TAXES | |||
Statutory tax rate | 30.60% | 30.60% | 30.60% |
Current | ¥ 314,021 | ¥ 294,418 | ¥ 128,103 |
Deferred income taxes, net | 8,744 | (10,939) | 6,766 |
Total | ¥ 322,765 | ¥ 283,479 | ¥ 134,869 |
INCOME TAXES - Reconciliation o
INCOME TAXES - Reconciliation of income tax expenses to the amount of income tax benefit (Details) | 12 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2021 | |
INCOME TAXES | |||
Statutory tax rate | 30.60% | 30.60% | 30.60% |
Deductions and other adjustments | 6.90% | 5.50% | 2.20% |
Effective tax rate | 37.50% | 36.10% | 32.80% |
INCOME TAXES - Components of de
INCOME TAXES - Components of deferred tax assets and liabilities (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2023 | Jun. 30, 2022 |
Deferred tax assets: | ||
Reserves and Allowances | ¥ 61,842 | ¥ 56,349 |
Intangibles | 11,331 | 14,393 |
Inventories | 5,291 | |
Investments in securities | 14,646 | 14,719 |
Asset retirement obligation | 2,495 | 1,862 |
Leases | 944 | 1,275 |
Other | 16,711 | 14,039 |
Total deferred tax assets | 107,969 | 107,928 |
Deferred tax liabilities: | ||
Inventories | 150,082 | 138,445 |
Property and equipment | 26,377 | 29,341 |
Prepaid Expenses | 108 | 107 |
Intangible assets, including software | 5,118 | 6,611 |
Leases | 723 | |
Other | 881 | |
Total deferred tax liabilities | 183,289 | 174,504 |
Net deferred tax liabilities | 75,320 | 66,576 |
Valuation allowance for deferred tax assets | ¥ 0 | ¥ 0 |
EQUITY (Details)
EQUITY (Details) | Jun. 30, 2023 Vote shares | Jun. 30, 2022 shares | Aug. 31, 2021 shares |
EQUITY | |||
Common stock, shares authorized | 50,000,000 | 50,000,000 | |
Number of vote | Vote | 1 | ||
Common stock, shares outstanding | 12,498,900 | 12,498,900 | |
Minimum | |||
EQUITY | |||
Common stock, shares authorized | 1,000,000 | ||
Maximum | |||
EQUITY | |||
Common stock, shares authorized | 50,000,000 |
VARIABLE INTEREST ENTITIES (Det
VARIABLE INTEREST ENTITIES (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 |
VARIABLE INTEREST ENTITIES | ||||
Assets | ¥ 15,815,245 | ¥ 12,416,743 | ||
Liabilities | 13,072,312 | 10,215,676 | ||
Equity | 2,742,933 | 2,201,067 | ¥ 1,638,324 | ¥ 1,287,028 |
Total liabilities and equity | 15,815,245 | 12,416,743 | ||
LRE Cayman | ||||
VARIABLE INTEREST ENTITIES | ||||
Liabilities | 6,969 | 6,481 | ||
Equity | (6,969) | (6,481) | ||
Sojiya Japan | ||||
VARIABLE INTEREST ENTITIES | ||||
Assets | 401 | 472 | ||
Equity | 401 | 472 | ||
Total liabilities and equity | ¥ 401 | ¥ 472 |
VARIABLE INTEREST ENTITIES - Un
VARIABLE INTEREST ENTITIES - Unconsolidated VIEs and Other Equity Method Investments (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 |
Unconsolidated VIE | ||||
Assets | ¥ 15,815,245 | ¥ 12,416,743 | ||
Liabilities | 13,072,312 | 10,215,676 | ||
Equity | 2,742,933 | 2,201,067 | ¥ 1,638,324 | ¥ 1,287,028 |
Total liabilities and equity | 15,815,245 | 12,416,743 | ||
JP Shuhan | ||||
Unconsolidated VIE | ||||
Assets | 12,773 | 10,511 | ||
Liabilities | 4,015 | 3,428 | ||
Equity | 8,758 | 7,083 | ||
Total liabilities and equity | ¥ 12,773 | ¥ 10,511 | ||
JP Shuhan | ||||
Equity method investments | ||||
Ownership interest held | 66.70% |
FAIR VALUE DISCLOSURES (Details
FAIR VALUE DISCLOSURES (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2023 | Jun. 30, 2022 |
FAIR VALUE DISCLOSURES | ||
Investments in marketable securities | ¥ 31,561 | ¥ 31,657 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) ¥ in Thousands | Jun. 30, 2021 JPY (¥) |
RELATED PARTY TRANSACTIONS | |
Amount borrowed from related party | ¥ 41,868 |
Interest rate | 0% |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Lease Obligations (Details) - JPY (¥) ¥ in Thousands | 12 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2021 | |
COMMITMENTS AND CONTINGENCIES | |||
Right-of-use assets, operating lease, net | ¥ 204,029 | ¥ 155,886 | |
Lease obligations | 276,228 | 206,920 | |
Cash paid for the amounts included in the measurement of lease liabilities for operating leases | ¥ 62,652 | ¥ 42,985 | ¥ 31,547 |
Weighted-average discount rate (as a percent) | 3% | 3% | |
Weighted-average remaining life (years0 | 3 years 1 month 6 days | 2 years 10 months 24 days | |
General and administrative expense | |||
COMMITMENTS AND CONTINGENCIES | |||
Operating lease cost | ¥ 61,848 | ¥ 40,733 | ¥ 30,743 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES - Operating lease related assets and liabilities (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2023 | Jun. 30, 2022 |
COMMITMENTS AND CONTINGENCIES | ||
Total operating lease assets | ¥ 204,029 | ¥ 155,886 |
Operating lease liabilities - current | 88,755 | 58,696 |
Lease liabilities, net of current portion | 187,473 | 148,224 |
Present value of lease liabilities | ¥ 276,228 | ¥ 206,920 |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES - Future minimum payments under non-cancelable operating leases (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2023 | Jun. 30, 2022 |
COMMITMENTS AND CONTINGENCIES | ||
2024 | ¥ 94,427 | |
2025 | 79,464 | |
2026 | 76,014 | |
2027 | 34,036 | |
2028 | 3,901 | |
Thereafter | 373 | |
Total | 288,215 | |
Less: lease amount representing interest | (11,987) | |
Present value of lease liabilities | ¥ 276,228 | ¥ 206,920 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) $ / shares in Units, ¥ in Thousands, $ in Thousands | 12 Months Ended | |||
Sep. 29, 2023 JPY (¥) shares | Sep. 29, 2023 USD ($) $ / shares shares | Jun. 30, 2022 JPY (¥) | Jun. 30, 2021 JPY (¥) | |
SUBSEQUENT EVENTS | ||||
Issuance of shares | ¥ 15,304 | ¥ 100,000 | ||
SUBSEQUENT EVENTS | ||||
SUBSEQUENT EVENTS | ||||
Number of ordinary shares represented in each ADS | shares | 1 | 1 | ||
Cash dividends paid to shareholders | ¥ 24,998 | $ 173,031 | ||
SUBSEQUENT EVENTS | Initial Public Offering | ADR | ||||
SUBSEQUENT EVENTS | ||||
Issuance of shares (in shares) | shares | 1,143,000 | 1,143,000 | ||
Share price per ADS | $ / shares | $ 7 | |||
Issuance of shares | ¥ 1,092,434 | |||
Underwriting discounts | ¥ 94,994 |
Pay vs Performance Disclosure
Pay vs Performance Disclosure - JPY (¥) ¥ in Thousands | 12 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2021 | |
Pay vs Performance Disclosure | |||
Net Income (Loss) | ¥ 537,005 | ¥ 528,753 | ¥ 279,490 |
Insider Trading Policies and Pr
Insider Trading Policies and Procedures | 12 Months Ended |
Jun. 30, 2023 | |
Insider Trading Policies and Procedures [Line Items] | |
Insider Trading Policies and Procedures Adopted | true |