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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Thank you for waiting. We will now start the TKP's financial result briefing for the third quarter of the fiscal year ending in February 2023. First, we would like to introduce the participants on the front, from the left-hand side, CEO and Representative Director, Takateru Kawano, next is Director and CFO, Koji Nakamura.
Today, we have just announced the financial results for the third quarter, and we would like to cover that as well as the business strategy to be followed by a Q&A session. We are planning to end the meeting at 17:00, Japan time. First, Mr. Nakamura, please.
Good afternoon. Ladies and gentlemen, my name is Nakamura. I'd like to take you through the third quarter financial results for the year ending in February 2023. As usual, for myself, I would like to take you through the figures. And also for this time, there is a sale of the Regus business, which is a highlight topic. So I would like to go through that. And after that, for the business strategy, Mr. Kawano will explain.
Let me begin. First of all, here is the financial results summary. There are 4 points, at the beginning, as was mentioned, on December 6, Regus Japan and Regus Taiwan sale of these businesses have been announced. And the transfer will be conducted on February 1, 2023. That's the first point. And related to this topic is the revision to the financial forecast we have announced.
Well, the business conditions are very strong. OP and ordinary profit are now revised upward. But on the other hand, because of the sale, there are some extraordinary losses, so because of these 2 points, we have conducted the upward revision.
The third is the TKP rental meeting room and the hotel business and accommodation business. Those are doing very well. And as of Q3, YTD EBITDA is twice to 136%, and OP is 978%. So we are seeing a very significant recovery. And another is about the finance. The eighth series of [indiscernible], we have decided to acquire and cancel those rights. This is for quarter 4, we are planning to execute the transaction.
So going into the specific results, first on a consolidated basis. As you can see at the top line, with the Regus sale, there was a goodwill related impairment losses a JPY 2.8 billion for quarter 3, this was recognized for quarter 3. So this is one of the major topics.
On the other hand, for the TKP business and other businesses, we have very bullish trends, and the sales are trending very strongly. Compared with the last year, in terms of the sales as well as various different lines of profits, we are seeing positive year-on-year growth.
In terms of the impairment losses related to goodwill. As I mentioned, the announcement of the Regus sale was quarter 3, December 8. And the transaction is quarter 4. So we are going beyond different quarters. So some of the losses related to sale have been recognized for quarter 3 as impairment losses in consultation with the accounting auditor.
So for quarter 4, so the -- this will be replaced with the loss from sale of assets. So it's no additional event. Part of the losses are already recognized in Q3 and the rest for Q4.
These consolidated results for the sales and the EBITDA. As was mentioned earlier, the reception on the party businesses are not back to normal yet, but we have a recovery trend, both for sales and EBITDA. This is consolidated balance sheet. As you can see here, the interest-bearing debt balance is down JPY 6.6 billion, which means the interest-bearing that is much lighter. The cash is more than JPY 10 billion. It is kept at that level for many months. So the cash is kept, but debt is reduced.
And the equity ratio of 35% or more is being kept as well -- maintained as well. I will mention later, but on top of this, because of the sale of the Regus business, there's another level of reduction in the interest-bearing debt. So we will have a very, very stable balance sheet in the end. That is what we are expecting.
Now for the business trends for the Q3, we would like to give you some breakdown by each company entity. First, the facility openings and closings, for TKP and Regus separately, we are explaining as usual. For quarter 3, major movements in terms of openings and closings were not recorded. But as you can see, there were some changes as shown on the slide.
Specifically, for the TKP core business, which is the rental meeting room and hotel business, this is the quarter 3 results. And as you can see on this table, the sales was 7.4% for quarter 3. Last year was JPY 5.9 billion. So there was a 24% or so increase year-on-year, and also YTD as well, there was an increase -- significant increase. And the profits up as well, quarter 3 to quarter 3, we had JPY 1.1 billion. And last year, we had JPY 140 million or so. So it is more than 10x.
As mentioned several times, in quarter 2 for the last fiscal year, because of the vaccine center, the sales are brought up, but the actual demand was a bottom at that time. Ever since we have been seeing an improving trend for 6 quarters in a row, operating profit positive. And the level of operating profits are increasing as well.
So we have seen a complete recovery. So we are now wondering which way to go in terms of the strategy. This is the number of meeting rooms by grade. We have 240 facilities and 130,000 per Tsubo of floor space for conference rooms as well as the total area, we are maintaining these levels. And these are the sales trends by service offering.
In terms of the room charges and the option and food and beverage, quarter-on-quarter or year-on-year, it is increasing and also accommodation under COVID, we have opened up several new facilities, including those we have a strong trend, and we have the strongest ever sales level. So the accommodation mix is increasing, but excluding that, compared with the pre-COVID, our sales mix is getting closer to the pre-COVID level. And then F&B is coming back, so with the bottom in Q2 last year, we are seeing a very steady recovery. Next, for the TKP KPI this is sales per Tsubo. For Q3, we had JPY 28,658. So stably, we are getting closer and closer to JPY 30,000 level. And from now and the next year, when the demands are coming back, we would like to achieve more than 30,000.
Next is the breakdown of rental meeting room sales by usage. Well, previously, we talked about the breakdown by service offering. So the mix is getting closer to the pre-COVID pattern. That means the business is getting normalized for us to get to the next stage.
Training seminar and other demands are becoming solid. Therefore, we would like to further expand the business in these sectors.
Lastly, this is about the Regus business or Regus, on December 6, sale of the business was announced. And on February 1, there will be an official transfer. So for this year, we will have 11 months until the beginning of February. So that's the period for consolidation. And for Q3, we have full 3 months. So let me review the business just briefly. You can see the numbers here.
In terms of sales, JPY 4.8 billion. So steadily, our sales have been improving every quarter, every fiscal year. And for the quarter, we were able to renew the record high sales in Q3. So in terms of the financial performance, they are performing very well. If you look at the red box around in the middle of this page, [indiscernible] has been going up and down, and there's a goodwill amortization. So it's a busy piece.
So for you to see the normalized underlying performance, please look at after adjustment EBITDA, after adjustment OP, if you look at those 2 lines, those performance has been very steady.
Now let's take a look at the overview of the sale of Regus business which was announced in December. This is just to recap our announcement. On December 6, this is what we have announced. Regus Japan and Regus Taiwan are both of the Regus businesses that we decided to sell. And we are going to sell them to, as you can see on this page, Japan Regus is going to be sold to Mitsubishi Estate and Taiwan Regus, we are going to sell to Master Franchise, IWG Group. So we decided to sell those operations to those companies.
As was discussed in the public release, as a matter of course, Japan Regus and Regus Taiwan, the rental meeting room business was acquired because we wanted to generate synergies. Then COVID hit the business. So for the whole group, we troubled in terms of the financial performance and looking at Regus business versus the rental room business, the CapEx burden is heavier for Regus business. So we have been taking that as a challenge that we needed to address. So we did decide to optimize the allocation of the business resources and the management resources.
As a result, we decided to focus on our regional business or highly profitable business. the hotel business and the rental meeting room business. And the keyword rebirth, we would like to focus our business resources in those core areas. And the financial base is very stable for Mitsubishi Estate, so they can pursue growth opportunities by investing in Regus Japan because the financial base is very stable.
Now regarding Regus Taiwan, having Regus Taiwan on a stand-alone basis, there are geopolitical risks as well as COVID-related risks. So it didn't really make sense for us to have Regain alone because of the significant amount of risk. And as I mentioned earlier, we wanted to focus on concentrate our focus on the core business, rental meeting room business and accommodation business. That's why we decided to sell both Regus Japan and Regus Taiwan.
And as you can see on this page, on February 1, next month, we are going to transfer the shares of those 2 entities to the buyers, respectively. On the right-hand side, you see the estimated amount of the potential extraordinary loss which is JPY 6.7 billion. And a part of this estimated loss is going to be accounted for as the impairment loss in Q3 was recognized in Q3 to be replaced by the loss in the future.
So as a result, this revised guidance, which was announced on December 6, including after-tax impact is going to be around the number that we included in the revised guidance, and impact on our financial results from the sale of Regus business. As you can imagine, between Japan and Taiwan are two entities generated about JPY 20 billion, which are quite large entities. So there is a significant impact expected. As you can see from those bar graphs in terms of the impact on sales and impact on OP, this is the simplified simulation on the potential impact.
On the left-hand side, impact on sales on the right-hand side, impact on OP or OPM. And if you look at left bar for each graph, this is the device guidance on December 6. OP or sales after the revision of guidance, so JPY 49.5 billion and JPY 3.1 billion OP, and for February 2023, without Regus business, what would be the figure? What would have been the figure for this fiscal year ending February 2023. That's the right-hand side graph.
On sales, the revenue would be lower by about JPY 20 billion to around JPY 30 billion. And as you know, there's amortization of goodwill and amortization of customer-related assets or intangible assets, and amortization burden is going to be lessened due to the sale of Regus. So excluding Regus, OP and operating profit margin is going to be improved quite significantly. And this is the impact in this fiscal year. So this impact is going to continue in the next fiscal year onward.
On sales, in terms of sales, our sales are going to be less. But each profit level and a profit margin are expected to improve as a result of this sale.
Next, let's review the impact on the financial performance. So this is a graph of the balance sheet. On the left-hand side, this is the state of the balance sheet as of the end of Q2, which is the end of August before the sale of Regus. On the right-hand side, we are showing the state of the balance sheet. After the sale of the Regus business, and we get paid on February 1, and there's loan associated with Regus. So we are going to repay that loan. And assuming that we are in Q4, this will be how the balance sheet will look like.
As you can see, the balance sheet is going to be slimmer because interest-bearing debt is going to be much less. On the other hand, amount of cash is going to be increased.
So virtually, it's going to be the balance sheet without any debt -- interest-bearing debt almost. And net asset is JPY 36.5 billion on the right-hand side. So equity ratio is going to be about 50%, almost half. So the balance sheet is going to be extremely stable as a result of sale of Regus. On the other hand, cash is JPY 32 billion, which is quite ample amount of cash. So as I touched upon when we announced sales, we can focus on highly profitable rental meeting room business, and we can invest in accommodation business and the keyword reproduction of the spaces. So we can utilize this amount of cash quite positively for those highly profitable businesses.
And relating to that, last point I'd like to make is the ACE tranche of the new share subscription rights. So together with the sale of Regus, we decided to acquire and cancel a tranche of new share subscription rights. And because of the balance sheet that you have just reviewed, we have a better financial performance and the financial fundamentals are extremely stable. So just to be safe, we had this ACE tranche of the brand, but now is the time for us to buy back and cancel. And the impact from that is estimated, as you can see at the bottom of this page, dilution ratio has been a little bit less than 10%, precisely 9.5%, but this dilution is going to go away. And our EPS is going to be estimated to be improved, as you can see on the right-hand side. So without Regus business, this would be the financial performance to look like to pages before that. Looking at profit, which is guided, then EPS is going to be improved by JPY 6.6 or so.
So in the next fiscal year onward, I think we can improve EPS even further more. This completes my part of my presentation explaining about the financial performance of the third quarter and the major topics, including the sale of Regus business.
From the next page onward, we are going to explain the business strategy. Mr. Kawano is going to explain.
Let me explain about our business strategy. First, let me talk about the sale of Regus business. When we bought Regus business back in April 2019, we didn't expect an outbreak of COVID-19. This was unexpected, which had long-lasting impact, which was a large reason for the sale. And TKP is a profitable business to begin with, but due to the direct hit from COVID, the amortization of goodwill or Regus couldn't be offset by the highly profitable TKP business. That's why we posted a loss. So under that circumstance, it became difficult to invest CapEx in opening new facilities. If the business is profitable, we can invest for CapEx, but because it posted a loss. So CapEx burden became quite heavy burden. And furthermore, IWG master franchise was the format structure of the contract.
So even though I wanted to really change and improve the business fundamentally, but we couldn't do that because of the master franchise contract. The franchise is something that we have to do what we are told to do. And I had a passion to really improve and the change, but I didn't have the flexibility to change and they told us to just pay to them, which was not my policy.
I could not really redirect the direction of Regus business. In this space, we wanted to focus on our core business, which is the TKP business. That's why we decided to sell. So that's why last year towards the sale of Regus, we have prepared ourselves. On the other hand, on TKP, during the COVID-19 pandemic, we were able to make significant progress structure reform, and we were able to increase the sales activities, procurement and peripheral business development activities, and we concentrated our management resources on those future-looking businesses.
And now once again, let me review with you the positioning of TKP, we have asset-light structure. We have a robust foundation. We have diversified services and we have brand equity. Those are the 4 strengths. First, in terms of the asset-light structure, TKP asset light is the slogan without taking the real estate risk, we were able to generate high profitability and revenue.
And in terms of the strong foundation, we have 240 facilities nationwide and a strong customer base. And in terms of the diversified services, we are not just selling the services by period. We are using hourly charges. So as a service industry business, in a flexible manner, we could conduct the business because hourly charges can be flexibly changed and we can also add on different services.
And number 4 is brand equity. The newly born TKP brand, we recognized the importance of the appeal of the brand, and we have a nationwide recognition in Japan for this brand. So with this, M&A DX sharing economy, space service and regional revitalization M&A.
Those are the further business development directions that we have identified for the long term. And the existing business foundation in order to strengthen that further, we needed DX strategy. In that case, highly value-added sales activities was the purpose of the DX strategy. And also the expansion of space service, we wanted to expand the content business and capital alliance and M&A are included in this segment.
We have cash of more than JPY 30 billion. So we would like to tap into that. So that further going forward, we would like to do more effective M&As for TKP. And also idle asset sharing and the regional revitalization and other peripheral businesses and new businesses, we would like to expand those as well.
Here's the future growth story with M&A up to IPO, we have expanded our alliances with these companies. And today, under the theme of rebirth, we have been focusing on the new businesses. And going forward, without taking the real estate risk and taking the business risk instead we will promote the strategy.
In this case of Regus, we had to lease real estate property for 10 years or 20 years.
Even if the property price goes down and we had to pay rents, so we are taking the risk. But for TKP business, we are not taking the real estate risks because we can procure properties depending on the timing and that is what is whatever is right for that time. And then we can turn from fixed cost to variable cost at any given time.
So for TKP, we are taking the management risk and other business risks, so that is the inherent competence of TKP business. That will stay the same going forward, and that's how we like to grow.
Now for the midterm business plan, we have reformulated this and for February 2023 fiscal year, full year results meeting, we would like to announce for the next fiscal year, if I could give you some ideas, including pre-COVID for next year, we will have a record high profit. That is the plan. I think we are almost certain we can do that because we have gone through all these difficulties. Now we have the cash and we are now enhancing the capital alliances and the structural reform, and I'm sure that we can succeed in these efforts going forward.
Now for the third quarter, we have announced several new developments.
First of all, this is the first owned hotel brand. TKP Sunlife Hotel. This is the first self-owned hotel for TKP. For this hotel, well, Fukuoka state was operating in this hotel, and we took that over, so the initial cost is almost 0, and we took over the customers as well. So in a very clean manner, we are operating this hotel continuously.
At TKP business, we are now getting the orders for accommodation combined training programs. So there is the meeting room as well as the hotel rooms compared with the pre-COVID period, these types of demands or orders are getting 120% compared with the pre-COVID. And when meeting room demand is almost 100% now compared with the pre-COVID, but for the accommodation combined training, it is more than 120%.
So the accommodation facilities that we have opened during COVID-19 are operating at a very high utilization rate. So we are proposing a bundled service of training and accommodation. So including [indiscernible] APA Hotel and others and as well as Makuhari, the reception facility, which used to be the Makuhari Prince Hotel. We have 2000 capacity there. So we would like to continue to promote these bundled offering.
Next is something that I want to show by movie. In Beppu City Oita Prefecture, we have participated in a bit bidding process of [indiscernible]. This is showing [indiscernible] operation business project. This is in Beppu City Oita Prefecture, so there is some mentioning about how the local area is being utilized. So please enjoy the video.
[Presentation]
So, so far at TKP, we were focusing on the renewal of office spaces. That's where we have conducted a business. And at Regus, new building and London Mark building were incorporated, but we would like to go back to the basics. And based on the same theme we would like to do our business. So this time, we are going to renovate the parks so that we can contribute to the regional community and the regional revitalization as well. So please look forward to that. And the construction will start this week and it will be opened in the beginning of May next year, so please visit the site when it's ready.
TKP, based on the renewal theme, we would like to continue to promote our business and expansion of the business. In the past, we were renewing the space like office buildings, department stores and medical facilities and commercial facilities. So we have renewed many places like this. And we will continue to do so. We will continue to innovate these places and convert them into different facilities with higher value. And on top of that, we would like to now go into the renewal of regional economies such as parks and traditional onsen or spa in order to convert them into more high value-added and user friendly facilities like training facilities and so forth. And after that, on the next stage, we would like to renew also the businesses as well as companies.
Just the other day, we have converted bridal facility into a reception facility for companies and also renewed some of the idle land of companies into profitable assets. Well, last time, we said it is 8:30 in the morning. Finally, it is 9:00 a.m. so the kids are already at school. So we are now just beginning to do the [indiscernible] activities of TKP so that we can maximize our earnings. The interest-bearing debt and cash deposits are almost the same amount. So we have no debt business today.
And for the long-term plan, we are going to announce our new medium-term management plan, but we had the winter season for the past 3 years. Now spring is coming, and summer is awaiting to us. So we'd like to be very active and aggressive to capture opportunities. And in the next fiscal year, we'd like to really totally recover from COVID by renewing the record high profits are getting into the level that we have not achieved before.
Now I'd like to start the Q&A session. There is no limitation as to the number of questions, but please limit the number of questions that you asked at that time to just one. Would you please start your question by mentioning your name and the company's name. Is there anybody who has a question? So let's go to the person who is sitting at the front.
Thank you so much for presentation. My name is Tazawa from SMBC Nikko Securities. I have 2 questions. I'm going to go one by one. My first question is very short-term related. Page 4. In the third quarter, up to Q3, OP, JPY 2.7 billion, JPY 2.8 billion. The progress has been very good so far. And in December last year, when you announced your full year guidance, did you put out your guidance conservatively. Last year, I don't know. But if this pace continues, then I think there is an upside to our guidance. But what is your take on the progress towards the full year guidance? Or do you see any significant risks in Q4? Do you see any risks at all in Q4?
Thank you so much for that question. As you mentioned correctly, yes, this guidance was made conservatively. So we do not see any large risk in Q4, differently from Q3. There's no such a risk. So things are making a very good progress. There is one particular item, which is related to sale of Regus, which is going to be separated from us on February 1. So the impact is going to be included only for two months. But other than that, things are going very well.
Second question down the road in the future, you're going to have the busy season, and I'd like to know the order situation. You said orders are looking very good. And you said that you think you can renew the record high profit in the next fiscal year based upon the orders that you see, but would you please give us more details? For example, on Page 12, you are showing the trend of sales possible, which is improving, but there is a big breakthrough that you have to make, which is JPY 30,000 per Tsubo that you haven't been able to achieve. So the key points for you to achieve JPY 30,000 or JPY 40,000 per Tsubo would be food and beverage business. And the orders for meeting rooms and orders for food and beverage. Would you please give us more color on the orders -- order book that you see -- that gives you such confidence.
The denominator includes many things like [indiscernible]. But looking at TKP rental business on only -- rental meeting room business only, the unit price is improving. And the difference that we see now compared to the past is the recovery of food and business is only 20%, 30%. But for the meeting room rental business, the recovery is full, almost full, 100%.
Furthermore, accommodation and training services demand is improving. And the cost is becoming slimmer and slimmer, which is a significant factor for the improvement of the profit.
And for the meeting room business, we have larger demand for larger meeting rooms than before. And we have not really seen the full recovery to pre-COVID. If we see the full recovery, then our sales should be increased by 1.5x or more, so the number of clients has recovered to 70% to 80%. But in terms of net sales, in terms of room rent, it has recovered to 100%. So there's a little bit more to go.
And in April this year, we saw a strong recovery of the employee trainings. Some companies who did not really recover or resume the trainings for the employees are coming back this fiscal year. So the picture is totally different this year from last year, we see much stronger recovery looking at actual orders. And food and beverage, well, having said, it hasn't been fully recovered. I think it's improving. Even without the full recovery of F&B, I think we see a significant improvement.
And if we see the full recovery of food and beverage, then profit is going to be much better. We outsourced the food and beverage, and we decided to bring it back in-house, so that will contribute not only to the profit, but also we have other risks if we outsource food and beverage because of the labor issue and the quality of food and beverage, and customers may see a cheap quality of food and beverage, if you outsource.
So we'd like to improve the quality of food and beverage services by bringing back to in-house. So in-house food and beverage is there any secret to succeed in-house operation of food and beverage without seeing so much increase in cost sourcing purchasing should be well controlled.
So there are central kitchens, which are not operating, but we are paying rent. So we have to be efficient, and rather than outsourcing food and beverage, we should really utilize dormant underutilized facilities by installing kitchen facilities. And we should be efficient in sourcing ingredients and raw materials. And labor cost and ingredient production costs are the major 2 costs. And we don't want to see the volatility. So when we see the stability of orders, then I think it's better for us to operate the food and beverage in-house.
My third question, so you are going to receive JPY 40 billion or so from the sale of Regus, so what is the usage of the process from the sale of Regus?
So the keyword of reproduction rebirth, you said, but are you not spending that for large investments like Regus. But are you planning to spend that proceed in smaller deals like Oita's operation project? So are you going to spend that on better profitability projects? So I'd like to confirm, like, are you planning to make large investments like the unit of JPY 10 billion type of investment? Why not, and because of the sale of Regus, you don't have strong presence in high premium segment like garden premium. But are there any possibilities that you're going to invest in the high premium segment? or you have just started a new brand, but do you have the scheme so that you don't have to make a large amount of investment? And if so, then cash is going to be quite lucrative or self-generating. So what is the stance on increase in dividends or share buyback potentially? Thank you.
In terms of the size of the investments, it doesn't really matter. But if we are to invest, I would like to reinvest in deals so that we don't have a negative impact from the goodwill amortization, which is -- there is a large lesson we learned from Regus case. So we don't really care the size of the investment.
If there is an attractive opportunity, then I would like to invest. We would like to be contrarian if it makes sense. But we didn't have the quota to invest. We have no intention to invest because there's a budget. If there are opportunities, then we'd like to invest because of the size, like JPY 50 billion, JPY 10 billion, doesn't matter. But I would like to make a good investment, which can offset the burdening of the amount of goodwill amortization. So this is a good lesson we learned from the Regus case, so the unit of JPY 10 billion type of sizable opportunity, if we see great opportunities, then of course, I'd like to make those investments if opportunities make sense.
In terms of the high-end segment, we'd like to have the good quality of services at a reasonable price. And if you can provide high-end services or facilities at the reasonable price, of course, I'd like to have a presence in the premium segment. So I have no intention to really separate high end from other segments. If we can source at very competitive cost then we can provide good services at a reasonable price to customers, which is good because we have a strong competitiveness. So we have to really source cheaply or low cost and then definitely provide high-end or high-quality of services, definitely.
And in Italy, is selling not high end but high-quality high-functional products at very reasonable prices. So in Italy is a one good example. In terms of the hotel business, I would like to see possibilities, including resorts, location, which can be used by corporates for the training needs and as hotels or individuals for resort. This is something that only TKP can do in terms of accommodation hotel structure, so TKP would like to provide facilities of accommodation, which are hybrid type, and like to increase the number of those more in the future.
So as a training hotel, as I said, demand is increasing by 120% compared to pre-COVID. The key point is can we see more demand. If we see more demand, then we can increase the number of such facilities more and the number of meeting rooms accordingly. So hotel business and the meeting room business, those are the 2 wheels to drive TKP. We'd like to increase the meeting rooms, we'd like to increase the hotels for the meeting room business.
So in the future the minimum 10,000 increase. And we like the market and do sales activities to increase the unit price to achieve 120%, 130% increase, which is the original growth pace that we were seeing before COVID.
So we are heading into Q4 in this fiscal year and Q1 of the next fiscal year. When we see more sourcing opportunities at a reasonable cost. And the office market is going to be very distressed as a possibility in the future. So we'd like to be offensive, we'd like to be active, sourcing actively, and we have financial status and also sales capabilities to source competitively.
And ahead of this functionality is going to be lean and lean for Japanese corporates and the Japanese corporates lease out only the spaces that they need, then when this trend expands then Japanese corporations would like to see flexible office spaces. And the Regus offered only small rooms like for accommodating 1 or 2 people. But TKP sales larger conference rooms. And we don't sell at high price, and we are selling at a reasonable price because we like to offer those spaces to Japanese companies as infrastructure at reasonable cost.
If that's the case, what about the dividend rather than paying dividend, would you like to use cash to invest for growth? Definitely, I'd like to think about dividend in the future, and in all areas, comprehensively, I'd like to strike a good balance to grow the company overall. So I'd like to think flexibly considering various factors, including dividend. So much.
Any other questions? The third row from the front, the person in the third row from the front, please.
My name is Ozawa from SBI Securities. The second question is related to the last person's question. 3 months ago, there were large demand coming, therefore, you had to focus on the in-sourcing and the procurement. And for the fourth quarter and for the first quarter, the demand will emerge, you said. But in the financial results, there was not such a significant movement in Q1. After Makuhari, we didn't see such large facilities. But what is the current progress so far? And other than office, are there any large-sized demand and inquiries coming to the company?
Well, compared with the past, it's changed, the offices are not occupied. We are getting a lot of inquiries, at a list we are bidding to 50 or so. So after now in the fourth quarter and first quarter, we should be seeing those orders coming in, so the procurement is JPY 10,000 Tsubo We have to procure quickly and at a low cost. That is something we are focusing at the moment. And so as soon as possible, we would like to procure these spaces. And there is a timing issue when to buy and when not to buy. And this year is buyers market, we should procure more this year.
And the prices, well, compared with the last year, in the same type of places, the price is 30%, 40%, 50% cheaper in some cases. So in that sense, from now on for TKP, we will have very good opportunities to strengthen our business.
The second question is about Beppu. You showed us the video of the Beppu City. And [indiscernible] and others appeared in the video as well from the hotel business, but Hoshino Resort and APA Hotel, are they involved in this project?
Or because of the relationship with APA, are you going to do something with them because you have a tie-up in Makuhari in, so in Oita and in other areas like Minatomirai, I think that you have a very friendly relationship with APA. And with Hoshino with the micro sourcing, in their areas, they are expecting some synergy from your facility? Or are you doing some projects jointly with Hoshino going forward, can we expect that to happen in the future as far as you can share, please?
With Hoshino, well, he is much older than I am by more than 10 years. But in the travel committee, we were together on the board. And they are focusing on Oita, including Beppu, [indiscernible] in Oita Prefecture, there are 3 hotel resorts by Hoshino, there are [indiscernible], on the same cost line, there is a KAI facility of Hoshino. At the Beppu station, there is a APA hotel, and in Oita, there is a APA hotel in Beppu. So in the [indiscernible] area, we have Hoshino and APA in the vicinity as well. And this facility is supposed to be experiential. So we like to become a hub of different experiences.
So we have accommodation facilities and it's an experiential cottage. So together with Hoshino and APA, we would like to invite more guests, and APA does not have a spa or onsen, so people can come to our facility. It's not only with APA or Hon but there are other players without entertainment capabilities, there are so many in Beppu area which are attractive as facilities, but not so entertaining. Therefore, we like to become a hub for them as well.
And with Hoshino and APA, with APA, we are promoting our franchise scheme and which is generating earnings. This is a stock business rather than flow business. So it is supporting our earnings, so for the APA franchise business, it's going very well. So if there are more opportunities, we would like to increase the exposure.
As for Hoshino, the scope is very different, but our philosophy is close. They don't take real estate risk. They take the management risk. So this is very close as a philosophy of TKP. Therefore, myself and Hoshino-san, I think that I can learn a great deal from him and underpin of the year 2017, I became the representative in Japan, and I went to the global competition in Monaco several years ago. In the last month, there was a 2022 competition, and I was on the screening board.
And the winner was Hoshino-san from Hoshino Resort. So after myself, Hoshino-san is now going to the global competition. And he told me that he's going to win the prize, although I couldn't. So we have the similar model. We have done B2B business, but Hoshino is doing something similar in B2C model. So I hope that he can do well and expand it to the global stage. He's going to the U.S. very often these days, he is observing some spa areas in the U.S. He said he wanted to do some Japanese style hotel in overseas countries as well. So I'm looking forward to that.
Are there anybody else who have questions. Let's go to the person who is sitting on the back.
My name is Suzuki from Bell Investment. I have some questions regarding sale of Regus and you have explained our almost all about this transaction. But my impression was kind of the bold decision was made to sell. And I had the impression that burden from Regus operation was quite heavy, but I thought you could handle well. But from Mitsubishi Estate perspective, I think this is a great shopping for them. In terms of the price of sale, and when you negotiated with Mitsubishi Estate, Mr. Kawano, you wanted to sell this company to Mitsubishi Estate and Mitsubishi Estate was quite happy to have this Regus entity. Would you please brief us on the communication and the negotiation, which are held between the 2 companies?
Well, we bought at JPY 42 billion for Regus Japan. And over 3.5 years, we have managed Regus Japan. And every year, we had amortization of goodwill of about JPY 2.5 billion, JPY 7.5 billion over 3 years and for total JPY 10 billion.
So we were able to sell at JPY 32.8 billion when we bought up for JPY 42 billion.
So on the surface, in terms of the sales price, it's not that I am not happy with the sales price. And that's the comment on the sales price. And the buyer was to be tested. There were other candidates. And the reason why we picked Mitsubishi Estate as a buyer is because Mitsubishi Estate has a large presence in Otemachi, Marunouchi having offices and their OP as large as JPY 300 billion that they would like to protect and defend, so Regus has unoccupied space of 20%, 30% unoccupied basis.
So they can buy Regus to secure spaces. So I think Mitsubishi Estate is a better owner, making a better use of spaces of Regus Japan. And the second point, this is not a simple sale. And meeting rooms will be managed by TKP, so think Mitsubishi Estate and TKP are going to work together towards the announcement of the business alliance we are coordinating right now.
So how can TKP better utilized basis held by Mitsubishi Estate converting to meeting rooms or conference centers and meeting rooms held by think Mitsubishi Estate can be better utilized by TKP, how can we incorporate with each other? that is the biggest point of my interest for the future. And we had a very good relationship with think Mitsubishi Estate from before. But in the future, we are hoping that we can even solidify our partnership with think Mitsubishi Estate.
My next question is on the master franchise, franchisee, in principle, you needed to do what they told you to do in accordance with manual because of the master franchisee agreement. And there are other examples like [indiscernible] or other overseas transactions. And under certain constraints, you need to work, so Mr. Kawano, you mentioned that you need to work with limitations and constraints. And if you had free hand, then what other things that you wanted to do, if you were able to operate, we just plan more freely, what freedom of flexibility did you want to have, which you didn't have, which made operation of Japan Regus very difficult. How should I understand that?
We're buying the parent company is something that we see in other transactions nowadays. But the head office of Regus buying the parent company Regus, of course, there was such an option. But the parent company of Japan Regus is actually larger than TKP. So realistically, it was difficult for us to buy Japan Regus parent company. And if I were able to operate the main Regus freely then I would invest in new buildings with Regus brand, but without Regus brand, I want to do better space utilization, a co-working space rental meeting rooms. I wanted to really use basis for those purposes. Because we have to really provide quality services, because we have to pay royalty. If we create cheap spaces, then they do not pay off. So to protect the brand, there were some requirements that we need to defend and comply. So -- and the same goes for WeWork.
The cost can be quite expensive. Initial cost is very high. CapEx is very heavy. And this is a matter of course, because the business has to continue for 10 years, 20 years, paying so much cost at the beginning and renting a space where the rent is so expensive. And there are values, of course, and that's why they are charging high rents because they have the brand, and I wanted to like fundamental business, which does not depend on the bran .
Any other questions? The person in the third row from the front, please.
[indiscernible], my name is [indiscernible]. Earlier, there was a similar question. But earlier, Kawano, you said that you want to do M&A, which is effective more on TKP. What kind of M&A are you thinking about? And also, as you mentioned, in terms of Regus, at the time of acquisition, you said that there was a possible synergy. This is related to the earlier question, but what is it that -- didn't go well. And Still, during COVID pandemic, they were still opening new facilities where you were still opening new facilities. Does that mean that you are still believing in the potential, so if you could look back and tell us what happened, that would be great.
So M&A, which is effective for TKP that is related to the strength of TKP. We want to maximize the strength of NT KP. So there should be more synergy in terms of the content and the sharing economy. And those are the areas and also local tourism and local revitalization. Those are the areas which can have synergy with the TKP.
And the second question, the facility opening is something you cannot easily stop once you plan. For TKP, we stopped everything. But for Regus, we were already building new buildings. We have committed, especially for spaces, we couldn't stop. So the facility openings. But after a while, we stopped completely after year 1, I said stop. So even after that, facility opening direction or numbers came from IWG. So the negotiation was very, very tough.
So I couldn't control facility opening by myself. That was a very difficult point during the pandemic. There were some negotiations I have done so that I can get some exception. But going forward, are we going to continue to do with the new buildings. Even if there is another global financial crisis, we cannot stop. So it is too risky, I thought. And I don't want to take any more real estate risk anymore. That's why I decided to split that part of the business from the main business. So did I answer your question?
Yes. Thank you. Second question is about TKP's rental office business. You said you want to procure 10,000 Tsubo of space. Do you have already potential spaces already, some time ago, Kawano, you said that you had some problem with the expansion. That's why the unit price expansion or unit price improvement did not go so well. But in order to become more lean as a business, I think that was your intention. But in terms of that, again, you seem to be expanding the business once again. Are you going back to that direction again? So I thought that the utilization was the problem. But what is the purpose of expanding the exposure? It is the relationship between axle and the brake.
Well, when there is a high penetration when it's nearly 100% of the pre-COVID level, that's what we are seeing today compared with the pre-COVID for the rental office business. Unless we procure more space, it means that we can't expand anymore. So of course, we will increase the prices. But at the same time, we have to make more accommodation places -- spaces. So we will do so. But at the same time, for the meeting room, there is a lot of demand compared with the food and beverage while cantering reception. There are more demands for meeting rooms. So now is the time for us to procure more spaces. Up until last year, it was not the case. We were trying to become more and more lean during that pandemic, but if we only continue to do so and then we will -- our growth will slow down. We have to now switch our gear -- change our gear to expand.
From Malaysia, I even procure desks and chairs and it takes time, TKP's chairs are special chairs. So you can't buy them anywhere in the market. Those are in-house developed products. It is made of aluminum. It's very light, and then even if we exit from the business, we can sell without any recycling cost.
So I say 10,000 or 20,000. At the same time, it's not only the space. We have to get the seats and the desks, and we have to start producing those equipment this year. Otherwise, next year or the year after next year, we cannot provide enough supply and expand the supply, and then with more supply, there will be -- we can also stimulate demand if people see TKP offices everywhere. And then when they are coming to the end of the office lease contract, and then they will make a decision based on that.
And then they will decide whether to pay higher rents and then they will naturally decide to reduce the office space, and instead, may decide to use the Tokyo area TKP office, rental office instead. If you go to [indiscernible] area in Tokyo under the TKP building, we occupy almost the whole space. And on the next area and next year in the back area, there are different buildings being constructed. But TKP building is the rental building. That will be a very strong earnings driver, I believe.
So we would like to procure the new office spaces in areas which are convenient and landmark areas, so that the companies can start using those spaces as temporary offices.
Some time ago, you told us that probably for Q3 or today, for content, in terms of price revision, upward revision, probably you said you could share more details for Q3. But this time, I didn't hear about that. Maybe you had to explain about the Regus, that's why you didn't have time. But could you talk a little bit about that? Has there been any progress on this front?
Sooner or later, we can announce probably for Q4. Anybody who has other questions. If not, I would like to conclude the Q&A session.
This concludes the earnings presentation for the third quarter of the fiscal year ending February 2023 of TKP Corporation. [Statements in English on this transcript were spoken by an interpreter present on the live call.]