Revamped city of Adrian zoning ordinance 'is far from being a ready to publish product'
ADRIAN — The process of revamping and completely overhauling Adrian's zoning ordinance is expected to continue over the next several months and could prolong all the way through the summer and possibly into the fall.
Earlier this month, Adrian's planning commission conducted somewhat of a read-through of the city's zoning ordinance, which has been rewritten, stylized and reformatted with the help from consulting firm SmithGroup.
The partnership between the city of Adrian and SmithGroup for the purpose of rewriting the zoning ordinance and bringing it into alignment with the city's comprehensive plan, is approaching two years.
In the spring of 2023, the city and SmithGroup agreed on the rewriting process and through grant funding from the Redevelopment Ready Communities program, which is part of the Michigan Economic Development Corp., Adrian secured financial support to put toward the endeavor to the tune of $25,000 — or at least half of the $50,000 fixed fee for services.
At the time, then Adrian City Administrator Greg Elliott, said the decision to update the zoning ordinance was to bring it 'into line with good practice and modern ways of thinking.'
'(The ordinance) is quite outdated and internally conflicting in a number of ways,' Elliott told The Daily Telegram in April 2023. 'It makes sense to just kind of scrap what we have and start fresh, and that's what this proposal does.'
From April 2023: Adrian City Commission to consider complete overhaul of 'outdated' zoning ordinance
Now at such a stage to review and consider the reworked zoning ordinance proposal, Adrian planning commissioners are still finding clerical errors and issues. A discussion of the draft ordinance at the planning commission's Feb. 4 meeting resulted in several members of the commission finding 'a number of issues' relative to the proposed ordinance.
Adrian's planning commission meets monthly on the first Tuesday of the month to establish and enforce regulations for the use of public and private land.
Planning commission Chairman Mike Jacobitz was among the commissioners critical of the reworked ordinance, saying what was reviewed at the Feb. 4 meeting 'is far from being a ready to publish product.'
'There is a lot of work yet to be done on this for a whole bunch of issues. In fact, I'm kind of disappointed that it's not close to being a finished product,' he said.
Other inconsistencies were voiced by commissioners Robert Love and Nancy Weatherby.
The updated zoning ordinance proposal seeks to reduce the number of residential districts in the city of Adrian from six to four. The industrial districts are proposed to be reduced from three to two. The proposal also eliminates a chapter known as the 'parking district,' which is now covered under the 'development standards' chapter.
In Adrian's current zoning ordinance, which was last modified in January 2024, the ordinance districts were defined by enumerating all individual parcels. In the newly proposed ordinance, they are defined as part of the zoning map.
Whether for better or worse, Jacobitz said, many of the changes made to the ordinance are to simplify the previous document. The general approach of updating the zoning ordinance 'has been solid,' he commented.
'It's greatly simplified,' Jacobitz said, adding the number of pages in the ordinance has been reduced from more than 270 to less than 200 pages.
More: Adrian City Commission takes initial step in recruitment, finding new city administrator
Rezoning was slimmed down, which eliminated multiple pages from the ordinance and opened the potential for more housing options, said Adrian planning and zoning Administrator Jeremiah Klemann.
For example, it would become easier for residential-zoned properties in the city to build accessory dwelling units (ADUs), such as apartments above a garage.
The intent for updating the zoning ordinance was to make the document rewrite based on the form and function of how everything is today instead of the way the old ordinance was. One of the proposed changes in the ordinance is to enforce less parking near/on business frontages to make business exteriors more attractive for customers.
'It can be confusing to read through this, and I can say that as someone who's going to have to administer this. It is very confusing,' Klemann said.
Commissioners were tasked at the Feb. 4 meeting with sending all comments/feedback about necessary fixes to SmithGroup so that continued refinement of the ordinance takes place.
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'I think this has many more meetings, and I think we need to curtail that and focus that,' Love said.
Jacobitz estimated the planning commission would be approaching the summer or fall at the earliest before the new zoning ordinance could be adopted. Until then, the rules and regulations in Adrian's current zoning ordinance remain in effect.
Before the rewritten ordinance is finalized and adopted, a public hearing and presentation would be held prior to the final draft's presentation for consideration by the Adrian City Commission.
— Contact reporter Brad Heineman at bheineman@lenconnect.com or follow him on X, formerly Twitter: @LenaweeHeineman.
This article originally appeared on The Daily Telegram: Adrian's zoning ordinance needs more attention from planning commission
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Elliott Calls for Further Action to Enhance Corporate Value and Strengthen Corporate Governance Ahead of Sumitomo Realty's 2025 Annual General Meeting
Elliott plans to vote against members of Sumitomo Realty's senior management at the 2025 AGM absent further corporate-governance and value-enhancement initiatives LONDON, June 8, 2025 /CNW/ -- Elliott Investment Management, L.P. and Elliott Advisors (UK) Limited ("Elliott"), which advise funds that together have a more than 3% ownership stake in Sumitomo Realty & Development Co., Ltd. ("Sumitomo Realty" or the "Company"), making it one of the Company's largest shareholders, today released an open letter to the Company's shareholders. In the letter, Elliott encouraged fellow shareholders to actively engage with Sumitomo Realty's management ahead of the upcoming 2025 Annual General Meeting of Shareholders ("AGM") and to hold the Company accountable for not addressing its long-standing valuation discount and weak corporate governance. The letter outlines four key areas of concern – poor shareholder returns, excessive cross shareholdings, declining capital efficiency and subpar governance – and urges the Company to implement tangible reforms. These include increasing its shareholder payout, reducing cross shareholdings, issuing a credible return target and enhancing governance. Elliott also emphasized that without meaningful progress from Sumitomo Realty, it intends to vote against the reappointment of senior management at the upcoming AGM. The full text of the letter can be read at and is included below: Dear Fellow Sumitomo Realty Shareholders, Elliott Investment Management, L.P. and Elliott Advisors (UK) Limited ("Elliott," or "we") advise funds that together have a more than 3% ownership stake in Sumitomo Realty & Development Co., Ltd. ("Sumitomo Realty", or the "Company"), which makes us one of the Company's largest shareholders. For months, we have engaged in private discussions with Sumitomo Realty management to express our conviction in the value-creation opportunity at the Company and to outline tangible actions to realize this potential. With the 2025 Annual General Meeting of Shareholders ("AGM") approaching, we are now making our views public because these issues are critical to the Company's future success, and we want our fellow shareholders to be able to assess the same views we have presented to the Company ahead of the 2025 AGM. We believe the 2025 AGM marks a critical juncture for evaluating management's performance over the past two years. We are encouraging investors to actively engage with Sumitomo Realty management ahead of the 2025 AGM and to use their voting rights to express their satisfaction or dissatisfaction with the Company's current strategy. We highlight recent opinions from ISS and Glass Lewis, who both recommended a vote against the reappointment of Sumitomo Realty's Chairman, due to the Company's high levels of cross shareholdings and lack of board independence. Sumitomo Realty is one of Japan's leading real estate developers, with a dominant position in Tokyo office real estate, an attractive business mix and a high-quality portfolio of assets. Our substantial investment reflects our conviction, based on months of thorough diligence, in Sumitomo Realty's strengths. However, despite these advantages, Sumitomo Realty trades at just half of the post-tax market value of its real estate ("PNAV"),1 making it the most undervalued real estate developer in Japan. Sumitomo Realty also trades at a depressed multiple of earnings, despite its stable, high-quality core office leasing business. Sumitomo Realty's persistent stock underperformance and valuation discount are not coincidental. The Company is an outlier in several areas: it holds a large portfolio of cross shareholdings, it has a unique policy of not selling property assets or managing REIT assets, and its board and governance structure rank near the bottom of all TOPIX 100 companies on several metrics2. In our view, these self-imposed problems and others we highlight below are responsible for the Company's significant undervaluation. We see a clear opportunity for Sumitomo Realty to close its discount to fair value by taking steps to resolve these issues. The upside potential is significant: Applying a peer-average PNAV multiple – a conservative approach given Sumitomo Realty's superior asset quality – would imply a share price of just under ¥8,000, over 40% higher than the current level. See Chart 1 – PNAV and Price Target Bridge. The Case for Change The market's negative sentiment toward Sumitomo Realty reflects deep shareholder concerns with the Company's performance. In 2024, Elliott commissioned a third-party shareholder perception study to better understand investor views on the Japanese real estate developer sector, including Sumitomo Realty and its large-cap peers. This study surveyed large and mostly long-term institutional investors, both in Japan and abroad, on topics including the Company's strategy, its shareholder-return policy and its cross-shareholding policy. The study's findings – as well as sell-side analyst ratings, expert commentary and AGM voting results – show consistently poor investor sentiment toward Sumitomo Realty and highlight meaningful opportunities for improvement. See Chart 2 – Shareholder Survey. Evidence of shareholder dissatisfaction is also clearly visible in the AGM approval rate for Sumitomo Realty's Board. Approval rates have steadily declined since 2017, with the Chairman's approval rating falling from 95% to a record-low 77% by 2023 – the lowest among peers. See Chart 3 – AGM Approval Rating. Publicly available proxy voting data shows that many of Sumitomo Realty's largest investors have already voted against management at previous AGMs. Their concerns center on Sumitomo Realty's excessive cross shareholdings and its antiquated board structure. With proxy voting guidelines from asset managers growing more stringent since the Board last stood for election in 2023, and with independent proxy advisory firms recently making recommendations to vote against the reappointment of Sumitomo Realty's Chairman at the 2025 AGM, it appears that continued inaction could lead to Sumitomo Realty's Board facing even broader disapproval from major asset managers this year. Diagnosing the Key Issues Four core issues underlie Sumitomo Realty's deep undervaluation and poor investor sentiment: Weak shareholder returns: Sumitomo Realty's dividend payout was just 17% of net income in the last fiscal year – half the peer group average. Larger peers have moved more aggressively on shareholder returns, with one key peer expecting its shareholder payout to exceed 80% of net income this fiscal year. Even with Sumitomo Realty's recently outlined plans to increase its shareholder payout, the pace of increase is too slow: we estimate it could take almost a decade to achieve the Company's target dividend payout ratio of 35%. Excessive cross shareholdings: At 26% of net assets as of March 31, 2025, Sumitomo Realty's cross shareholdings far exceed those of its peers as well as the maximum levels set by independent proxy advisory firms and key Japanese asset managers. The Company's high level of cross shareholdings was a major cause of shareholder disapproval at the 2023 AGM and will likely be a decisive issue again in 2025. Declining capital efficiency: Sumitomo Realty is the only company in its peer group that does not have a Return on Equity ("ROE") target, nor any clear strategy for maintaining or improving its ROE, such as by selling mature assets into a REIT structure. As a result, the Company's ROE has declined for six consecutive years and is forecast to continue Chart 4 – ROE. Poor corporate governance and board structure: Sumitomo Realty ranks near the bottom of the TOPIX 100 on corporate-governance metrics. A global company with the size and stature of Sumitomo Realty should aspire to market-leading governance standards. While the Company has recently outlined plans to gradually improve its governance, progress on these reforms can and should be accelerated. See Chart 5 – Corporate Governance Comparison. Setting the Right Course These issues are largely self-imposed and can be addressed quickly and decisively by management. Specifically, we believe that the Company should take the following steps: Shareholder return: Immediately increase its shareholder payout ratio to 50% or more, a level that is in-line with its peers, via a higher dividend payout and larger and more regular share repurchases; Cross shareholding: Decrease its cross-shareholdings portfolio, which we believe is worth more than ¥500 billion on a post-tax basis, to below 10% of net assets (based on current market value) by the end of its current medium-term management plan ("MTMP") period; ROE target: Set a ROE target of at least 10% and outline clear plans to achieve this target, such as by shifting capital from mature projects to growth projects. For instance, the Company could unlock ¥500 billion of capital by transferring rental apartment assets into a REIT structure; and Governance: Strengthen governance by adding independent directors and establishing a nomination and remuneration committee. The time to implement a more ambitious policy to unwind cross shareholdings is now. Several large holders of Sumitomo Realty shares – including Taisei Corp, Obayashi, Shimizu and Kajima, which collectively own more than ¥160 billion worth – have announced plans to aggressively sell their cross shareholdings. Sumitomo Realty reciprocally owns more than ¥60 billion worth of shares in these four construction companies. This dynamic presents a compelling opportunity for Sumitomo Realty: It can unlock significant capital by selling shares in these four firms and use the proceeds to repurchase a portion of the Sumitomo Realty shares they currently hold. Such a transaction would reduce cross shareholdings and deploy capital back into the Company's own shares at extremely attractive levels. While cross shareholdings have historically been seen as promoting business relationships across Japanese companies, they are now viewed as a poor use of capital and an enabler of corporate leadership entrenchment. Sumitomo Realty and its key cross shareholders are meant to adhere to the Corporate Governance Code, which requires Japanese companies to scrutinize the purpose and benefits of cross shareholdings, particularly those held for business relationships, which are increasingly viewed as inappropriate. We believe the Company should act decisively and expeditiously to unwind its cross-shareholdings portfolio. See Chart 6 – Key Corporate Cross Shareholding. The steps we have outlined would not only raise management's standing at the 2025 AGM, but also improve Sumitomo Realty's valuation. In the Japanese real estate developer sector, there is a clear relationship between valuation (PNAV), capital efficiency (ROE) and shareholder returns. We are confident that taking the steps above – particularly on improving shareholder payout and capital efficiency – will unlock significant value for Sumitomo Realty shareholders and increase management's credibility with shareholders ahead of the 2025 AGM. See Chart 7 – ROE and Shareholder Returns Explain Valuation. Companies that have proactively embraced Japan's ongoing corporate reforms – by unwinding cross shareholdings, improving capital efficiency, increasing shareholder returns and strengthening governance – have been rewarded with higher valuations and greater shareholder support. Examples from the general construction, non-life insurance, and real estate developer sectors show how such reforms can successfully unlock value and transform investor perception at previously underperforming companies. Conclusion We appreciate that in recent months, Sumitomo Realty management has taken several initial steps in the right direction – some of which are aligned with our recommendations. However, progress has been insufficient and too slow. The market reacted negatively to the uninspiring MTMP released in late March, which failed to address core issues. Many of our suggestions remain ignored. The 2025 AGM is a critical opportunity for shareholders to express their satisfaction or dissatisfaction with Sumitomo Realty's current strategy. Management's approval rating is the clearest and most effective way for shareholders to catalyse change. Despite the modest shareholder-friendly actions taken to date, there remains deep skepticism, including from Elliott, about management's genuine commitment to ambitiously and decisively address the Company's key issues. As such, absent further value- and governance-enhancing measures from Sumitomo Realty, Elliott plans to vote against the reappointment of senior management at the 2025 AGM. We urge all shareholders to carefully consider their voting decisions and engage with Sumitomo Realty management in the lead up to the AGM. Your vote can shape the Company's future. We are hopeful management will be attentive to shareholder viewpoints and will take decisive steps to raise Sumitomo Realty's corporate value and enhance its governance. Sincerely, Aaron TaiPortfolio Manager Elliott Investment Management, L.P. About ElliottElliott Investment Management L.P. (together with its affiliates, "Elliott") manages approximately $72.7 billion in assets as of December 31, 2024. Founded in 1977, it is one of the oldest funds under continuous management. The Elliott funds' investors include pension plans, sovereign wealth funds, endowments, foundations, funds-of-funds, high net worth individuals and families, and employees of the firm. Elliott Advisors (UK) Limited is an affiliate of Elliott Investment Management L.P. Media Contacts: LondonAlice BestElliott Advisors (UK) LimitedT: +44 203 009 1715abest@ TokyoBrett WallbuttonAshton ConsultingT: +81 (0) 3 DISCLAIMER THIS DOCUMENT HAS BEEN ISSUED BY ELLIOTT ADVISORS (UK) LIMITED ("EAUK"), WHICH IS AUTHORISED AND REGULATED BY THE UNITED KINGDOM'S FINANCIAL CONDUCT AUTHORITY ("FCA") AND ELLIOTT INVESTMENT MANAGEMENT L.P. ("EIMLP"). NOTHING WITHIN THIS DOCUMENT PROMOTES, OR IS INTENDED TO PROMOTE, AND MAY NOT BE CONSTRUED AS PROMOTING, ANY FUNDS ADVISED DIRECTLY OR INDIRECTLY BY EAUK AND EIMLP (THE "ELLIOTT FUNDS"). THIS DOCUMENT IS FOR DISCUSSION AND INFORMATIONAL PURPOSES ONLY. THE VIEWS EXPRESSED HEREIN REPRESENT THE OPINIONS OF EAUK, EIMLP AND THEIR AFFILIATES (COLLECTIVELY, "ELLIOTT MANAGEMENT") AS OF THE DATE HEREOF. ELLIOTT MANAGEMENT RESERVES THE RIGHT TO CHANGE OR MODIFY ANY OF ITS OPINIONS EXPRESSED HEREIN AT ANY TIME AND FOR ANY REASON AND EXPRESSLY DISCLAIMS ANY OBLIGATION TO CORRECT, UPDATE OR REVISE THE INFORMATION CONTAINED HEREIN OR TO OTHERWISE PROVIDE ANY ADDITIONAL MATERIALS. ALL OF THE INFORMATION CONTAINED HEREIN IS BASED ON PUBLICLY AVAILABLE INFORMATION WITH RESPECT TO SUMITOMO REALTY & DEVELOPMENT CO., LTD. (THE "COMPANY"), INCLUDING PUBLIC FILINGS AND DISCLOSURES MADE BY THE COMPANY AND OTHER SOURCES, AS WELL AS ELLIOTT MANAGEMENT'S ANALYSIS OF SUCH PUBLICLY AVAILABLE INFORMATION. ELLIOTT MANAGEMENT HAS RELIED UPON AND ASSUMED, WITHOUT INDEPENDENT VERIFICATION, THE ACCURACY AND COMPLETENESS OF ALL DATA AND INFORMATION AVAILABLE FROM PUBLIC SOURCES, AND NO REPRESENTATION OR WARRANTY IS MADE THAT ANY SUCH DATA OR INFORMATION IS ACCURATE. ELLIOTT MANAGEMENT RECOGNISES THAT THERE MAY BE CONFIDENTIAL OR OTHERWISE NON-PUBLIC INFORMATION WITH RESPECT TO THE COMPANY THAT COULD ALTER THE OPINIONS OF ELLIOTT MANAGEMENT WERE SUCH INFORMATION KNOWN. THIS DOCUMENT REFERS TO THE 92ND ORDINARY GENERAL MEETING OF SHAREHOLDERS OF THE COMPANY (THE "AGM"). NOTHING IN THIS DOCUMENT SEEKS ANY FORM OF AGREEMENT OR UNDERSTANDING FROM ANY RECIPIENT OF THIS DOCUMENT ABOUT VOTING IN RELATION TO ANY MATTER AT THE AGM OR THE EXERCISING OF SHAREHOLDERS' RIGHTS. YOU SHALL RETAIN AND EXERCISE DISCRETION TO VOTE IN ANY MANNER OR NOT TO VOTE AS DETERMINED BY YOU IN YOUR SOLE DISCRETION. THIS DOCUMENT IS NOT FOR OUR SOLICITATION OF YOUR PROXY IN CONNECTION WITH ANY MATTER AT THE AGM. NO REPRESENTATION, WARRANTY OR UNDERTAKING, EXPRESS OR IMPLIED, IS GIVEN AND NO RESPONSIBILITY OR LIABILITY OR DUTY OF CARE IS OR WILL BE ACCEPTED BY ELLIOTT MANAGEMENT OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, OR ADVISORS (EACH AN "ELLIOTT PERSON") CONCERNING: (I) THIS DOCUMENT AND ITS CONTENTS, INCLUDING WHETHER THE INFORMATION AND OPINIONS CONTAINED HEREIN ARE ACCURATE, FAIR, COMPLETE OR CURRENT; (II) THE PROVISION OF ANY FURTHER INFORMATION, WHETHER BY WAY OF UPDATE TO THE INFORMATION AND OPINIONS CONTAINED IN THIS DOCUMENT OR OTHERWISE TO THE RECIPIENT AFTER THE DATE OF THIS DOCUMENT; OR (III) THAT ELLIOTT MANAGEMENT'S INVESTMENT PROCESSES OR INVESTMENT OBJECTIVES WILL OR ARE LIKELY TO BE ACHIEVED OR SUCCESSFUL OR THAT ELLIOTT MANAGEMENT'S INVESTMENTS WILL MAKE ANY PROFIT OR WILL NOT SUSTAIN LOSSES. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. 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ELLIOTT MANAGEMENT INTENDS TO REVIEW ITS INVESTMENTS IN THE COMPANY ON A CONTINUING BASIS AND DEPENDING UPON VARIOUS FACTORS, INCLUDING WITHOUT LIMITATION, THE COMPANY'S FINANCIAL POSITION AND STRATEGIC DIRECTION, THE OUTCOME OF ANY DISCUSSIONS WITH THE COMPANY, OVERALL MARKET CONDITIONS, OTHER INVESTMENT OPPORTUNITIES AVAILABLE TO ELLIOTT MANAGEMENT, AND THE AVAILABILITY OF COMPANY SECURITIES AT PRICES THAT WOULD MAKE THE PURCHASE OR SALE OF COMPANY SECURITIES DESIRABLE, ELLIOTT MANAGEMENT MAY FROM TIME TO TIME (IN THE OPEN MARKET OR IN PRIVATE TRANSACTIONS, INCLUDING SINCE THE INCEPTION OF ELLIOTT MANAGEMENT'S POSITION) BUY, SELL, COVER, HEDGE OR OTHERWISE CHANGE THE FORM OR SUBSTANCE OF ANY OF ITS INVESTMENTS (INCLUDING COMPANY SECURITIES) TO ANY DEGREE IN ANY MANNER PERMITTED BY LAW AND EXPRESSLY DISCLAIMS ANY OBLIGATION TO NOTIFY OTHERS OF ANY SUCH CHANGES. ELLIOTT MANAGEMENT ALSO RESERVES THE RIGHT TO TAKE ANY ACTIONS WITH RESPECT TO ITS INVESTMENTS IN THE COMPANY AS IT MAY DEEM APPROPRIATE. ELLIOTT MANAGEMENT HAS NOT SOUGHT OR OBTAINED CONSENT FROM ANY THIRD PARTY TO USE ANY STATEMENTS OR INFORMATION CONTAINED HEREIN. ANY SUCH STATEMENTS OR INFORMATION SHOULD NOT BE VIEWED AS INDICATING THE SUPPORT OF SUCH THIRD PARTY FOR THE VIEWS EXPRESSED HEREIN. ALL TRADEMARKS AND TRADE NAMES USED HEREIN ARE THE EXCLUSIVE PROPERTY OF THEIR RESPECTIVE OWNERS. 1 Defined by dividing share price by book value per share adjusted for the post-tax difference between market value of leasing properties and the book value of leasing properties as disclosed in Sumitomo Realty's yuho. 2 Sumitomo Realty ranks at the bottom of the TOPIX 100 on its ISS Governance Score, director independence ratio and its usage of independent board committees (e.g. nomination, remuneration and audit committees). 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Elliott Calls for Further Action to Enhance Corporate Value and Strengthen Corporate Governance Ahead of Sumitomo Realty's 2025 Annual General Meeting
Elliott plans to vote against members of Sumitomo Realty's senior management at the 2025 AGM absent further corporate-governance and value-enhancement initiatives LONDON, June 8, 2025 /CNW/ -- Elliott Investment Management, L.P. and Elliott Advisors (UK) Limited ("Elliott"), which advise funds that together have a more than 3% ownership stake in Sumitomo Realty & Development Co., Ltd. ("Sumitomo Realty" or the "Company"), making it one of the Company's largest shareholders, today released an open letter to the Company's shareholders. In the letter, Elliott encouraged fellow shareholders to actively engage with Sumitomo Realty's management ahead of the upcoming 2025 Annual General Meeting of Shareholders ("AGM") and to hold the Company accountable for not addressing its long-standing valuation discount and weak corporate governance. The letter outlines four key areas of concern – poor shareholder returns, excessive cross shareholdings, declining capital efficiency and subpar governance – and urges the Company to implement tangible reforms. These include increasing its shareholder payout, reducing cross shareholdings, issuing a credible return target and enhancing governance. Elliott also emphasized that without meaningful progress from Sumitomo Realty, it intends to vote against the reappointment of senior management at the upcoming AGM. The full text of the letter can be read at and is included below: Dear Fellow Sumitomo Realty Shareholders, Elliott Investment Management, L.P. and Elliott Advisors (UK) Limited ("Elliott," or "we") advise funds that together have a more than 3% ownership stake in Sumitomo Realty & Development Co., Ltd. ("Sumitomo Realty", or the "Company"), which makes us one of the Company's largest shareholders. For months, we have engaged in private discussions with Sumitomo Realty management to express our conviction in the value-creation opportunity at the Company and to outline tangible actions to realize this potential. With the 2025 Annual General Meeting of Shareholders ("AGM") approaching, we are now making our views public because these issues are critical to the Company's future success, and we want our fellow shareholders to be able to assess the same views we have presented to the Company ahead of the 2025 AGM. We believe the 2025 AGM marks a critical juncture for evaluating management's performance over the past two years. We are encouraging investors to actively engage with Sumitomo Realty management ahead of the 2025 AGM and to use their voting rights to express their satisfaction or dissatisfaction with the Company's current strategy. We highlight recent opinions from ISS and Glass Lewis, who both recommended a vote against the reappointment of Sumitomo Realty's Chairman, due to the Company's high levels of cross shareholdings and lack of board independence. Sumitomo Realty is one of Japan's leading real estate developers, with a dominant position in Tokyo office real estate, an attractive business mix and a high-quality portfolio of assets. Our substantial investment reflects our conviction, based on months of thorough diligence, in Sumitomo Realty's strengths. However, despite these advantages, Sumitomo Realty trades at just half of the post-tax market value of its real estate ("PNAV"),1 making it the most undervalued real estate developer in Japan. Sumitomo Realty also trades at a depressed multiple of earnings, despite its stable, high-quality core office leasing business. Sumitomo Realty's persistent stock underperformance and valuation discount are not coincidental. The Company is an outlier in several areas: it holds a large portfolio of cross shareholdings, it has a unique policy of not selling property assets or managing REIT assets, and its board and governance structure rank near the bottom of all TOPIX 100 companies on several metrics2. In our view, these self-imposed problems and others we highlight below are responsible for the Company's significant undervaluation. We see a clear opportunity for Sumitomo Realty to close its discount to fair value by taking steps to resolve these issues. The upside potential is significant: Applying a peer-average PNAV multiple – a conservative approach given Sumitomo Realty's superior asset quality – would imply a share price of just under ¥8,000, over 40% higher than the current level. See Chart 1 – PNAV and Price Target Bridge. The Case for Change The market's negative sentiment toward Sumitomo Realty reflects deep shareholder concerns with the Company's performance. In 2024, Elliott commissioned a third-party shareholder perception study to better understand investor views on the Japanese real estate developer sector, including Sumitomo Realty and its large-cap peers. This study surveyed large and mostly long-term institutional investors, both in Japan and abroad, on topics including the Company's strategy, its shareholder-return policy and its cross-shareholding policy. The study's findings – as well as sell-side analyst ratings, expert commentary and AGM voting results – show consistently poor investor sentiment toward Sumitomo Realty and highlight meaningful opportunities for improvement. See Chart 2 – Shareholder Survey. Evidence of shareholder dissatisfaction is also clearly visible in the AGM approval rate for Sumitomo Realty's Board. Approval rates have steadily declined since 2017, with the Chairman's approval rating falling from 95% to a record-low 77% by 2023 – the lowest among peers. See Chart 3 – AGM Approval Rating. Publicly available proxy voting data shows that many of Sumitomo Realty's largest investors have already voted against management at previous AGMs. Their concerns center on Sumitomo Realty's excessive cross shareholdings and its antiquated board structure. With proxy voting guidelines from asset managers growing more stringent since the Board last stood for election in 2023, and with independent proxy advisory firms recently making recommendations to vote against the reappointment of Sumitomo Realty's Chairman at the 2025 AGM, it appears that continued inaction could lead to Sumitomo Realty's Board facing even broader disapproval from major asset managers this year. Diagnosing the Key Issues Four core issues underlie Sumitomo Realty's deep undervaluation and poor investor sentiment: Weak shareholder returns: Sumitomo Realty's dividend payout was just 17% of net income in the last fiscal year – half the peer group average. Larger peers have moved more aggressively on shareholder returns, with one key peer expecting its shareholder payout to exceed 80% of net income this fiscal year. Even with Sumitomo Realty's recently outlined plans to increase its shareholder payout, the pace of increase is too slow: we estimate it could take almost a decade to achieve the Company's target dividend payout ratio of 35%. Excessive cross shareholdings: At 26% of net assets as of March 31, 2025, Sumitomo Realty's cross shareholdings far exceed those of its peers as well as the maximum levels set by independent proxy advisory firms and key Japanese asset managers. The Company's high level of cross shareholdings was a major cause of shareholder disapproval at the 2023 AGM and will likely be a decisive issue again in 2025. Declining capital efficiency: Sumitomo Realty is the only company in its peer group that does not have a Return on Equity ("ROE") target, nor any clear strategy for maintaining or improving its ROE, such as by selling mature assets into a REIT structure. As a result, the Company's ROE has declined for six consecutive years and is forecast to continue Chart 4 – ROE. Poor corporate governance and board structure: Sumitomo Realty ranks near the bottom of the TOPIX 100 on corporate-governance metrics. A global company with the size and stature of Sumitomo Realty should aspire to market-leading governance standards. While the Company has recently outlined plans to gradually improve its governance, progress on these reforms can and should be accelerated. See Chart 5 – Corporate Governance Comparison. Setting the Right Course These issues are largely self-imposed and can be addressed quickly and decisively by management. Specifically, we believe that the Company should take the following steps: Shareholder return: Immediately increase its shareholder payout ratio to 50% or more, a level that is in-line with its peers, via a higher dividend payout and larger and more regular share repurchases; Cross shareholding: Decrease its cross-shareholdings portfolio, which we believe is worth more than ¥500 billion on a post-tax basis, to below 10% of net assets (based on current market value) by the end of its current medium-term management plan ("MTMP") period; ROE target: Set a ROE target of at least 10% and outline clear plans to achieve this target, such as by shifting capital from mature projects to growth projects. For instance, the Company could unlock ¥500 billion of capital by transferring rental apartment assets into a REIT structure; and Governance: Strengthen governance by adding independent directors and establishing a nomination and remuneration committee. The time to implement a more ambitious policy to unwind cross shareholdings is now. Several large holders of Sumitomo Realty shares – including Taisei Corp, Obayashi, Shimizu and Kajima, which collectively own more than ¥160 billion worth – have announced plans to aggressively sell their cross shareholdings. Sumitomo Realty reciprocally owns more than ¥60 billion worth of shares in these four construction companies. This dynamic presents a compelling opportunity for Sumitomo Realty: It can unlock significant capital by selling shares in these four firms and use the proceeds to repurchase a portion of the Sumitomo Realty shares they currently hold. Such a transaction would reduce cross shareholdings and deploy capital back into the Company's own shares at extremely attractive levels. While cross shareholdings have historically been seen as promoting business relationships across Japanese companies, they are now viewed as a poor use of capital and an enabler of corporate leadership entrenchment. Sumitomo Realty and its key cross shareholders are meant to adhere to the Corporate Governance Code, which requires Japanese companies to scrutinize the purpose and benefits of cross shareholdings, particularly those held for business relationships, which are increasingly viewed as inappropriate. We believe the Company should act decisively and expeditiously to unwind its cross-shareholdings portfolio. See Chart 6 – Key Corporate Cross Shareholding. The steps we have outlined would not only raise management's standing at the 2025 AGM, but also improve Sumitomo Realty's valuation. In the Japanese real estate developer sector, there is a clear relationship between valuation (PNAV), capital efficiency (ROE) and shareholder returns. We are confident that taking the steps above – particularly on improving shareholder payout and capital efficiency – will unlock significant value for Sumitomo Realty shareholders and increase management's credibility with shareholders ahead of the 2025 AGM. See Chart 7 – ROE and Shareholder Returns Explain Valuation. Companies that have proactively embraced Japan's ongoing corporate reforms – by unwinding cross shareholdings, improving capital efficiency, increasing shareholder returns and strengthening governance – have been rewarded with higher valuations and greater shareholder support. Examples from the general construction, non-life insurance, and real estate developer sectors show how such reforms can successfully unlock value and transform investor perception at previously underperforming companies. Conclusion We appreciate that in recent months, Sumitomo Realty management has taken several initial steps in the right direction – some of which are aligned with our recommendations. However, progress has been insufficient and too slow. The market reacted negatively to the uninspiring MTMP released in late March, which failed to address core issues. Many of our suggestions remain ignored. The 2025 AGM is a critical opportunity for shareholders to express their satisfaction or dissatisfaction with Sumitomo Realty's current strategy. Management's approval rating is the clearest and most effective way for shareholders to catalyse change. Despite the modest shareholder-friendly actions taken to date, there remains deep skepticism, including from Elliott, about management's genuine commitment to ambitiously and decisively address the Company's key issues. As such, absent further value- and governance-enhancing measures from Sumitomo Realty, Elliott plans to vote against the reappointment of senior management at the 2025 AGM. We urge all shareholders to carefully consider their voting decisions and engage with Sumitomo Realty management in the lead up to the AGM. Your vote can shape the Company's future. We are hopeful management will be attentive to shareholder viewpoints and will take decisive steps to raise Sumitomo Realty's corporate value and enhance its governance. Sincerely, Aaron TaiPortfolio Manager Elliott Investment Management, L.P. About ElliottElliott Investment Management L.P. (together with its affiliates, "Elliott") manages approximately $72.7 billion in assets as of December 31, 2024. Founded in 1977, it is one of the oldest funds under continuous management. The Elliott funds' investors include pension plans, sovereign wealth funds, endowments, foundations, funds-of-funds, high net worth individuals and families, and employees of the firm. Elliott Advisors (UK) Limited is an affiliate of Elliott Investment Management L.P. Media Contacts: LondonAlice BestElliott Advisors (UK) LimitedT: +44 203 009 1715abest@ TokyoBrett WallbuttonAshton ConsultingT: +81 (0) 3 DISCLAIMER THIS DOCUMENT HAS BEEN ISSUED BY ELLIOTT ADVISORS (UK) LIMITED ("EAUK"), WHICH IS AUTHORISED AND REGULATED BY THE UNITED KINGDOM'S FINANCIAL CONDUCT AUTHORITY ("FCA") AND ELLIOTT INVESTMENT MANAGEMENT L.P. ("EIMLP"). NOTHING WITHIN THIS DOCUMENT PROMOTES, OR IS INTENDED TO PROMOTE, AND MAY NOT BE CONSTRUED AS PROMOTING, ANY FUNDS ADVISED DIRECTLY OR INDIRECTLY BY EAUK AND EIMLP (THE "ELLIOTT FUNDS"). THIS DOCUMENT IS FOR DISCUSSION AND INFORMATIONAL PURPOSES ONLY. THE VIEWS EXPRESSED HEREIN REPRESENT THE OPINIONS OF EAUK, EIMLP AND THEIR AFFILIATES (COLLECTIVELY, "ELLIOTT MANAGEMENT") AS OF THE DATE HEREOF. ELLIOTT MANAGEMENT RESERVES THE RIGHT TO CHANGE OR MODIFY ANY OF ITS OPINIONS EXPRESSED HEREIN AT ANY TIME AND FOR ANY REASON AND EXPRESSLY DISCLAIMS ANY OBLIGATION TO CORRECT, UPDATE OR REVISE THE INFORMATION CONTAINED HEREIN OR TO OTHERWISE PROVIDE ANY ADDITIONAL MATERIALS. ALL OF THE INFORMATION CONTAINED HEREIN IS BASED ON PUBLICLY AVAILABLE INFORMATION WITH RESPECT TO SUMITOMO REALTY & DEVELOPMENT CO., LTD. (THE "COMPANY"), INCLUDING PUBLIC FILINGS AND DISCLOSURES MADE BY THE COMPANY AND OTHER SOURCES, AS WELL AS ELLIOTT MANAGEMENT'S ANALYSIS OF SUCH PUBLICLY AVAILABLE INFORMATION. ELLIOTT MANAGEMENT HAS RELIED UPON AND ASSUMED, WITHOUT INDEPENDENT VERIFICATION, THE ACCURACY AND COMPLETENESS OF ALL DATA AND INFORMATION AVAILABLE FROM PUBLIC SOURCES, AND NO REPRESENTATION OR WARRANTY IS MADE THAT ANY SUCH DATA OR INFORMATION IS ACCURATE. ELLIOTT MANAGEMENT RECOGNISES THAT THERE MAY BE CONFIDENTIAL OR OTHERWISE NON-PUBLIC INFORMATION WITH RESPECT TO THE COMPANY THAT COULD ALTER THE OPINIONS OF ELLIOTT MANAGEMENT WERE SUCH INFORMATION KNOWN. THIS DOCUMENT REFERS TO THE 92ND ORDINARY GENERAL MEETING OF SHAREHOLDERS OF THE COMPANY (THE "AGM"). NOTHING IN THIS DOCUMENT SEEKS ANY FORM OF AGREEMENT OR UNDERSTANDING FROM ANY RECIPIENT OF THIS DOCUMENT ABOUT VOTING IN RELATION TO ANY MATTER AT THE AGM OR THE EXERCISING OF SHAREHOLDERS' RIGHTS. YOU SHALL RETAIN AND EXERCISE DISCRETION TO VOTE IN ANY MANNER OR NOT TO VOTE AS DETERMINED BY YOU IN YOUR SOLE DISCRETION. THIS DOCUMENT IS NOT FOR OUR SOLICITATION OF YOUR PROXY IN CONNECTION WITH ANY MATTER AT THE AGM. 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TO THE FULLEST EXTENT PERMITTED BY LAW, NONE OF THE ELLIOTT PERSONS WILL BE RESPONSIBLE FOR ANY LOSSES, WHETHER DIRECT, INDIRECT OR CONSEQUENTIAL, INCLUDING LOSS OF PROFITS, DAMAGES, COSTS, CLAIMS OR EXPENSES RELATING TO OR ARISING FROM THE RECIPIENT'S OR ANY PERSON'S RELIANCE ON THIS DOCUMENT. EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE INFORMATION AND OPINIONS INCLUDED IN THIS DOCUMENT CONSTITUTE FORWARD-LOOKING STATEMENTS, INCLUDING ESTIMATES AND PROJECTIONS PREPARED WITH RESPECT TO, AMONG OTHER THINGS, THE COMPANY'S ANTICIPATED OPERATING PERFORMANCE, THE VALUE OF THE COMPANY'S SECURITIES, DEBT OR ANY RELATED FINANCIAL INSTRUMENTS THAT ARE BASED UPON OR RELATE TO THE VALUE OF SECURITIES OF THE COMPANY (COLLECTIVELY, "COMPANY SECURITIES"), GENERAL ECONOMIC AND MARKET CONDITIONS AND OTHER FUTURE EVENTS. YOU SHOULD BE AWARE THAT ALL FORWARD-LOOKING STATEMENTS, ESTIMATES AND PROJECTIONS ARE INHERENTLY UNCERTAIN AND SUBJECT TO SIGNIFICANT ECONOMIC, COMPETITIVE, AND OTHER UNCERTAINTIES AND CONTINGENCIES AND HAVE BEEN INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE INFORMATION CONTAINED HEREIN DUE TO REASONS THAT MAY OR MAY NOT BE FORESEEABLE. THERE CAN BE NO ASSURANCE THAT THE COMPANY SECURITIES WILL TRADE AT THE PRICES THAT MAY BE IMPLIED HEREIN, AND THERE CAN BE NO ASSURANCE THAT ANY ESTIMATE, PROJECTION OR ASSUMPTION HEREIN IS, OR WILL BE PROVEN, CORRECT. 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ELLIOTT MANAGEMENT INTENDS TO REVIEW ITS INVESTMENTS IN THE COMPANY ON A CONTINUING BASIS AND DEPENDING UPON VARIOUS FACTORS, INCLUDING WITHOUT LIMITATION, THE COMPANY'S FINANCIAL POSITION AND STRATEGIC DIRECTION, THE OUTCOME OF ANY DISCUSSIONS WITH THE COMPANY, OVERALL MARKET CONDITIONS, OTHER INVESTMENT OPPORTUNITIES AVAILABLE TO ELLIOTT MANAGEMENT, AND THE AVAILABILITY OF COMPANY SECURITIES AT PRICES THAT WOULD MAKE THE PURCHASE OR SALE OF COMPANY SECURITIES DESIRABLE, ELLIOTT MANAGEMENT MAY FROM TIME TO TIME (IN THE OPEN MARKET OR IN PRIVATE TRANSACTIONS, INCLUDING SINCE THE INCEPTION OF ELLIOTT MANAGEMENT'S POSITION) BUY, SELL, COVER, HEDGE OR OTHERWISE CHANGE THE FORM OR SUBSTANCE OF ANY OF ITS INVESTMENTS (INCLUDING COMPANY SECURITIES) TO ANY DEGREE IN ANY MANNER PERMITTED BY LAW AND EXPRESSLY DISCLAIMS ANY OBLIGATION TO NOTIFY OTHERS OF ANY SUCH CHANGES. ELLIOTT MANAGEMENT ALSO RESERVES THE RIGHT TO TAKE ANY ACTIONS WITH RESPECT TO ITS INVESTMENTS IN THE COMPANY AS IT MAY DEEM APPROPRIATE. ELLIOTT MANAGEMENT HAS NOT SOUGHT OR OBTAINED CONSENT FROM ANY THIRD PARTY TO USE ANY STATEMENTS OR INFORMATION CONTAINED HEREIN. ANY SUCH STATEMENTS OR INFORMATION SHOULD NOT BE VIEWED AS INDICATING THE SUPPORT OF SUCH THIRD PARTY FOR THE VIEWS EXPRESSED HEREIN. ALL TRADEMARKS AND TRADE NAMES USED HEREIN ARE THE EXCLUSIVE PROPERTY OF THEIR RESPECTIVE OWNERS. 1 Defined by dividing share price by book value per share adjusted for the post-tax difference between market value of leasing properties and the book value of leasing properties as disclosed in Sumitomo Realty's yuho. 2 Sumitomo Realty ranks at the bottom of the TOPIX 100 on its ISS Governance Score, director independence ratio and its usage of independent board committees (e.g. nomination, remuneration and audit committees). 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Report: Bayer Leverkusen Eye Liverpool Player While £126.5m Deal Looms
Liverpool and Leverkusen Summer Transfer Talks Heat Up Liverpool and Bayer Leverkusen are poised for a busy summer window, with transfer talks intensifying around several high-profile players. As Jeremie Frimpong finalises his move to Anfield, focus now shifts to Florian Wirtz and Liverpool's Harvey Elliott, who could be heading in the opposite direction. Frimpong Arrival and Wirtz Pursuit Jeremie Frimpong has already completed his medical with Liverpool and will soon officially join the Reds. His arrival strengthens a position that required immediate attention, but Liverpool's ambition doesn't end there. According to Fussball Transfers, Liverpool remain locked in a fierce battle with Bayern Munich for Bayer Leverkusen's star midfielder Florian Wirtz. Photo: IMAGO Wirtz, expected to announce his future within ten days, recently visited Liverpool alongside his family. The Reds have reportedly prepared a staggering £126.5 million offer, a clear indication of their determination to secure one of Europe's most exciting talents. Manchester City's withdrawal simplifies the scenario, turning it essentially into a straight duel between Liverpool and Bayern. Leverkusen Eye Elliott While Liverpool's focus might be firmly on Wirtz, Leverkusen are keen on conducting business in the opposite direction. Harvey Elliott is prominently featured on their transfer wishlist, alongside Manchester City's James McAtee. Elliott, who has endured limited opportunities at Anfield this season, accumulating just 821 minutes across all competitions, expressed emotional uncertainty after Liverpool's recent defeat against Brighton: 'I think I've done it this season. It's been hard with how much I've played. I've tried as hard as I could, and whatever happens, happens. It's about what's best for my career.' Advertisement At 22, Elliott is at a crossroads. Despite his evident talent, a more prominent role elsewhere could serve his development better. Bayer Leverkusen, armed with a €200 million budget, appear poised to offer him exactly that. Mutual Benefit for Clubs and Players This scenario could be mutually beneficial. Elliott would gain invaluable experience and regular football in one of Europe's most dynamic leagues, while Leverkusen could capitalise on his creativity and versatility. For Liverpool, leveraging Elliott's potential departure might help smooth negotiations for Wirtz, paving the way for one of their biggest-ever transfers. In football, nothing is certain, but this summer promises significant activity between Anfield and Leverkusen, setting the stage for compelling narratives heading into next season. Our View – Anfield Index Analysis As a Liverpool supporter, the possibility of losing Harvey Elliott feels bittersweet. Elliott's potential has never been questioned; his creativity and youthful energy have frequently brightened matches during his limited appearances. However, it is evident he's struggled to fully convince the coaching staff he deserves regular starts. The emotional post-match comments after Brighton underscore a player contemplating his future and perhaps accepting the need for a fresh start. Advertisement If Leverkusen were to secure Elliott, it could genuinely be a positive move for his career, offering him regular first-team football and a platform to mature into a more consistent performer. Simultaneously, Florian Wirtz's potential arrival would be a statement of Liverpool's ambition, an upgrade that might justify sacrificing a talented but currently underused player like Elliott. Ultimately, this transfer saga represents Liverpool's relentless pursuit of excellence. While Elliott's departure would be disappointing emotionally, strategically, it aligns with Liverpool's broader ambitions of consistently challenging at the top.
